<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 8, 1998
Bayou International, Ltd.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-16097 98-007697
-------- ------- ---------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation File Number) Identification No.)
210 Kings Way, South Melbourne, Victoria Australia 3205
- -------------------------------------------------- ----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, 613-9234 1100
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 8, 1998, pursuant to a Stock Purchase Agreement dated
as of June 5, 1998, as amended (the "Stock Purchase Agreement"), Bayou
International Ltd., a Delaware corporation ("Bayou") sold (the "Solmecs
Acquisition") all of the issued and outstanding shares (the "Solmecs Shares") of
its wholly owned subsidiary Solmecs Corporation NV, a Netherland, Antilles
corporation ("Solmecs"), to SCNV Acquisition Corp., a Delaware corporation
("SCNV"). In consideration for the receipt of the Solmecs Shares, SCNV issued to
Bayou 499,701 shares of common stock of SCNV (the "SCNV Shares"), representing
approximately 24% of the issued and outstanding shares of SCNV (prior to the
exercise of outstanding options and warrants).
Simultaneously with the closing of the Solmecs Acquisition,
SCNV completed an initial public offering of common stock and warrants which
resulted in gross proceeds of approximately $5,900,000.
In connection with the Solmecs Acquisition, Bayou converted
all inter-company indebtedness from Solmecs to Bayou (which aggregated
approximately $5,000,000) to a capital contribution to Solmecs.
The amount of consideration for the Solmecs Shares was
determined by arms length bargaining between Bayou and SCNV.
Bayou has been granted certain demand and "piggyback"
registration rights with respect to the SCNV Shares. Notwithstanding the
foregoing, Bayou has agreed not to sell, grant options for sale of, assign or
transfer any of the SCNV Shares, for a period of 24 months from the closing of
the Agreement, provided, however, that under certain circumstances Bayou shall
have the right to distribute the SCNV Shares pro rata to its stockholders and
provided further that the recipients will take such Shares subject to the
remaining term of the lock-up. Bayou does not currently have any plans to
distribute the SCNV Shares to its stockholders.
Bayou intends to pursue other business activities which may be
in the fields of energy conversion and conversation (however, such activities
will not be in competition with SCNV) and/or other industries including the
mineral exploration industry. There is no assurance that Bayou will be able to
locate or engage in an alternative business activity or that Bayou will have
access to sufficient funds to develop such businesses.
In connection with Bayou's future business activities, it is
the policy of Bayou's Board of Directors that Bayou will not engage in any
activities the scope and nature of which would
- 2 -
<PAGE> 3
subject Bayou to the registration and reporting requirements of the
Investment Company Act of 1940.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro Forma Financial Information
See Schedule A attached hereto.
(c) Exhibits
1. Form of Stock Purchase Agreement among Bayou,
Solmecs and SCNV.
- 3 -
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Bayou International, Ltd.
(Registrant)
Date: July 21, 1998 By: /s/ Peter Lee
---------------
Peter Lee
Chief Financial Officer
- 4 -
<PAGE> 5
Schedule A
UNAUDITED PRO FORMA SELECTED FINANCIAL DATA
The following unaudited pro forma selected financial data is based on the
historical consolidated financial statements of Bayou contained in Bayou's
Annual Report on Form 10-K for the fiscal year ended June 30, 1997 and the
unaudited consolidated financial statements of Bayou contained in Bayou's
Quarterly Report on Form 10-Q for the nine month period ended March 31, 1998,
giving effect to the disposition of the Solmecs Shares and the acquisition of
the SCNV Shares by Bayou pursuant to the Solmecs Acquisition in accordance with
the assumptions and adjustments described in the accompanying notes to the
unaudited pro forma financial statements. These unaudited pro forma selected
financial statements may not be indicative of the results that actually would
have occurred if the transaction contemplated by the Agreement had been effected
on the dates indicated or which may be obtained in the future. These unaudited
pro forma selected financial statements should be read in conjunction with the
audited consolidated financial statements, related notes and other financial
information of Bayou included elsewhere herein or incorporated by reference
herein.
1
<PAGE> 6
BAYOU INTERNATIONAL, LTD.
UNAUDITED PRO-FORMA BALANCE SHEET
JUNE 30, 1997
<TABLE>
<CAPTION>
PER PRO-FORMA ADJUSTMENTS
CONSOLIDATED -------------------------------- PRO-FORMA
STATEMENTS # DR # CR BALANCE
------------ --- ------ -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Current Assets
Cash.................................. $ 53 1 (52) $ 1
Accounts Receivable, net.............. 63 1 (63) 0
Investments........................... 0 0
-------- ------ ------ --------
Total Current Assets..................... 116 1
-------- ------ ------ --------
Other Assets
Property and Equipment, net........... 51 1 (51) 0
Goodwill, net......................... 0 0
Investment in SCNV.................... 0 1,5 8,469 4 (5,669) 2,800
-------- ------ ------ --------
Total Other Assets....................... 51 2,800
-------- ------ ------ --------
Total Assets..................... $ 167 5,669 (5,835) $ 2,801
======== ====== ====== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable & Accrued Expenses... $ 406 1 (265) $ 141
Total Current Liabilities................ 406 141
Long-Term Debt........................... 3,267 1 (268) 2,999
-------- ------ ------ --------
Total Liabilities................ 3,673 3,140
-------- ------ ------ --------
Stockholders' Equity (Deficit)
Common Stock.......................... 9,388 9,388
Additional Paid-In-Capital............ 11,592 11,592
Treasury Stock........................ 0 3 (635) (635)
Cumulative Translation
Adjustments......................... (435) 1 435 0
Retained Deficits..................... (24,051) 2,4 (6,202) 1,3,pl,5 9,569 (20,684)
-------- ------ ------ --------
Total Stockholders' Deficit.............. (3,506) (339)
-------- ------ ------ --------
Total Liabilities & Stockholders'
Equity......................... $ 167 (8,389) 8,223 $ 2,801
======== ====== ====== ========
</TABLE>
2
<PAGE> 7
BAYOU INTERNATIONAL, LTD.
UNAUDITED PRO-FORMA STATEMENT OF OPERATIONS
JUNE 30, 1997
<TABLE>
<CAPTION>
PER PRO-FORMA ADJUSTMENTS
CONSOLIDATED ---------------------- PRO-FORMA
STATEMENTS # DR # CR BALANCE
------------ --- ---- --- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Sales........................................... $ 66 (66) $ 0
Other Income.................................... 11 (11) 0
------- ---- ----- -------
77 0
------- ---- ----- -------
Cost and Expenses
Cost of Sales................................... 63 1 (63) 0
Interest Expense................................ 259 1 (3) 256
Legal, Accounting & Professional................ 89 1 (56) 33
Depreciation & Amortisation..................... 12 1 (12) 0
Amortisation of Goodwill........................ 533 2 (533) 0
Salaries & Wages................................ 393 1 (393) 0
Administrative.................................. 212 1 (121) 91
Research & Development.......................... 72 1 (72) 0
Travel & Accommodation.......................... 34 1 (34) 0
------- ---- ----- -------
1,667 380
------- ---- ----- -------
Loss from Operations.............................. (1,590) (380)
------- ---- ----- -------
Unrealised Gain (Loss) on Investments........... 0 0
Gain (Loss) on Disposition of Assets............ (2) (2)
Foreign Currency Exchange Gain.................. 332 1 (346) 1 14 0
Subsequent Advances forgiven.................... 0 1 (673) (673)
------- ---- ----- -------
330 (675)
------- ---- ----- -------
Loss before Income Tax............................ (1,260) (1,055)
Provision for Income Tax........................ 0 0
------- ---- ----- -------
Net Loss.......................................... $(1,260) $(1,055)
======= ==== ===== =======
Earnings (Loss) per Common Equivalent Share....... $ (0.03) $ (0.02)
======= ==== ===== =======
Weighted Number of Common Equivalent Shares
outstanding..................................... 46,942 46,942
======= ==== ===== =======
</TABLE>
3
<PAGE> 8
BAYOU INTERNATIONAL, LTD.
UNAUDITED PRO-FORMA ADJUSTMENTS
JUNE 30, 1997
NOTES
1 Remove Solmecs Assets, Liabilities and Operations
2 Write off balance of Goodwill of $553,000
3 Record Receipt of 50,000 shares of Bayou Stock, Treasury cost of $635,000
4 Forgive Note Receivable from Solmecs totaling $5,669,000
5 Receipt of 499,701 shares of SCNV in consideration for Sale of Solmecs for
$2,800,000
4
<PAGE> 9
BAYOU INTERNATIONAL, LTD.
UNAUDITED PRO-FORMA BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
PER PRO-FORMA ADJUSTMENTS
CONSOLIDATED -------------------------------- PRO-FORMA
STATEMENTS # DR # CR BALANCE
------------ --- ------ -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Current Assets
Cash................................. $ 9 1 (8) $ 1
Accounts Receivable, net............. 153 1 (153) 0
Investments.......................... 0 0
-------- ------ ------- --------
Total Current Assets.................... 162 1
-------- ------ ------- --------
Other Assets
Property and Equipment, net.......... 177 1 (177) 0
Goodwill, net........................ 0 0
Investment in SCNV................... 0 1,4 8,469 3 (5,669) 2,800
-------- ------ ------- --------
Total Other Assets...................... 177 2,800
-------- ------ ------- --------
Total Assets.................... $ 339 8,469 (6,007) $ 2,801
======== ====== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short Term Notes..................... $ 648 1 (648) $ --
Accounts Payable & Accrued
Expenses........................... 492 1 (333) 159
-------- ------ --------
Total Current Liabilities............... 1,140 159
-------- ------ --------
Long-Term Debt.......................... 3,753 1 (302) 3,451
-------- ------ ------- --------
Total Liabilities............... 4,893 3,610
-------- ------ ------- --------
Stockholders' Equity (Deficit)
Common Stock......................... 9,388 9,388
Additional Paid-In-Capital........... 11,592 11,592
Treasury Stock....................... 2 (635) (635)
Cumulative Translation Adjustments... (1,362) 1 1,362 0
Retained Deficits.................... (21,172) 3 (5,997) 1,2,pl,4 9,015 (21,154)
-------- ------ ------- --------
Total Stockholders' Deficit............. (4,554) (809)
-------- ------ ------- --------
Total Liabilities &
Stockholders' Equity.......... $ 339 (7,915) 10,377 $ 2,801
======== ====== ======= ========
</TABLE>
5
<PAGE> 10
BAYOU INTERNATIONAL, LTD.
UNAUDITED PRO-FORMA STATEMENT OF OPERATIONS
MARCH 31, 1998
<TABLE>
<CAPTION>
PER PRO-FORMA ADJUSTMENTS
CONSOLIDATED ------------------------ PRO-FORMA
STATEMENTS # DR # CR BALANCE
------------ --- ------ --- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Sales.......................................... $ 0 1 0 $ 0
Other Income................................... 48 1 (48) 0
------- ------ ---- -------
48 0
------- ------ ---- -------
Cost and Expenses
Cost of Sales.................................. 0 1 0 0
Interest Expense............................... 231 1 (16) 215
Legal, Accounting & Professional............... 97 1 (42) 55
Depreciation & Amortisation.................... 10 1 (10) 0
Amortisation of Goodwill....................... 0 1 0 0
Salaries & Wages............................... 0 1 0 0
Administrative................................. 606 1 (533) 73
Research & Development......................... 99 1 (99) 0
Travel & Accommodation......................... 0 1 0 0
------- ------ ---- -------
1,043 343
------- ------ ---- -------
Loss from Operations............................. (995) (343)
------- ------ ---- -------
Unrealised Gain (Loss) on Investments.......... 0 0
Gain (Loss) on Disposition of Assets........... 1 1 (1) 0
Foreign Currency Exchange Gain................. 873 1 (873) 0
Subsequent Advances forgiven................... 0 1 (127) (127)
------- ------ ---- -------
874 (127)
------- ------ ---- -------
Loss before Income Tax........................... 121 (470)
Provision for Income Tax....................... 0 0
------- ------ ---- -------
Net Loss......................................... $ (121) $ (470)
------- ------ ---- -------
Earnings (Loss) per Common Equivalent Share...... $ (0.01) $ (0.01)
======= ====== ==== =======
Weighted Number of Common Equivalent Shares
outstanding.................................... 46,942 46,942
======= ====== ==== =======
</TABLE>
6
<PAGE> 11
BAYOU INTERNATIONAL, LTD.
UNAUDITED PRO-FORMA ADJUSTMENTS
MARCH 31, 1998
NOTES
1 Remove Solmecs Assets, Liabilities and Operations
2 Record Receipt of 50,000 shares of Bayou Stock, Treasury cost of $635,000
3 Forgive Note Receivable from Solmecs totaling $5,669,000
4 Receipt of 499,701 shares of SCNV in consideration for Sale of Solmecs for
$2,800,000
7
<PAGE> 12
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
1 Form of Stock Purchase Agreement among Bayou,
Solmecs and SCNV.
<PAGE> 1
STOCK PURCHASE AGREEMENT
BY AND AMONG
SCNV ACQUISITION CORP.,
SOLMECS CORPORATION N.V.,
AND
BAYOU INTERNATIONAL LTD.
----------------------------------
JUNE 5, 1998
----------------------------------
<PAGE> 2
TABLE OF CONTENTS
PAGE
1. Purchase and Sale of Solmecs Stock..................................... 1
2. Purchase Price......................................................... 1
3. Representations and Warranties as to Solmecs........................... 2
3.1 Organization, Standing and Power............................. 2
3.2 Capitalization............................................... 2
3.3 Ownership of Solmecs Stock................................... 3
3.4 Interests in Other Entities.................................. 3
3.5 Authority.................................................... 3
3.6 Noncontravention............................................. 4
3.7 Financial Statements......................................... 4
3.8 Accounts Receivable; Inventories............................. 5
3.9 Absence of Undisclosed Liabilities........................... 5
3.10 Properties.................................................. 5
3.11 Absence of Changes.......................................... 6
3.12 Litigation.................................................. 7
3.13 No Violation of Law; Environmental Matters.................. 7
3.14 Intangibles................................................. 9
3.15 Tax Matters................................................. 10
3.16 Insurance................................................... 11
3.17 Banks; Powers of Attorney................................... 11
3.18 Employee Arrangements....................................... 12
3.19 Records..................................................... 13
3.20 Brokerage Fees.............................................. 13
3.21 Suppliers and Providers of Services......................... 13
3.22 Customers................................................... 14
3.23 Licenses.................................................... 14
3.24 Certain Business Matters.................................... 14
3.25 Certain Contracts........................................... 15
3.26 Business Practices and Commitments.......................... 17
3.27 Approvals/Consents.......................................... 17
3.28 No Illegal or Improper Transactions......................... 17
3.29 Restrictive Documents and Territorial
Restrictions................................................ 17
3.30 Information as to Solmecs................................... 18
4. Representations and Warranties as to SCNV.............................. 18
4.1 Organization, Standing and Power............................. 18
4.2 Incorporation Documents and By-Laws.......................... 19
4.3 Capitalization/Stock Consideration........................... 19
4.4 Authority.................................................... 20
4.5 Noncontravention............................................. 20
4.6 Information as to SCNV....................................... 21
i
<PAGE> 3
5. Indemnification........................................................ 21
5.1 Indemnification by the Solmecs Shareholder................... 21
5.2 Indemnification by SCNV...................................... 21
5.3 Third Party Claims........................................... 22
5.4 Assistance................................................... 23
5.5 Limitations.................................................. 23
6. Covenants.............................................................. 24
6.1 Investigation................................................ 24
6.2 Consummation of Transaction.................................. 24
6.3 Cooperation/Further Assurances............................... 24
6.4 Accuracy of Representations.................................. 25
6.5 Notification of Certain Matters.............................. 25
6.6 Broker....................................................... 25
6.7 No Solicitation of Transactions.............................. 25
6.8 Management and Administrative Matters........................ 26
6.9 Equity Financing............................................. 26
6.11 Prohibited Conduct........................................... 27
6.12 Public Announcements......................................... 29
6.13 Information Statement........................................ 29
7. Nondisclosure/Non-Compete.............................................. 30
7.1 Nondisclosure................................................ 30
7.2 Non-Compete Covenant......................................... 30
.................................................................. 31
7.3 No Disparagement............................................. 31
7.4 Injunctive Relief, etc....................................... 31
7.5 Scope of Restriction......................................... 31
8. Conditions of Purchase and Sale........................................ 31
8.1 Conditions to Obligations of SCNV to Purchase the
Solmecs Stock................................................ 31
(a) Accuracy of Representations and Warranties.......... 32
(b) Performance of Agreements........................... 32
(c) Opinion of Counsel for Solmecs and Solmecs
Shareholder......................................... 32
(d) Litigation.......................................... 32
(e) Consents and Approvals.............................. 32
(f) Validity of Transactions............................ 32
(g) No Material Adverse Change.......................... 33
(h) Equity Financing.................................... 33
(i) Employment Agreement................................ 33
(j) Lock-Up Agreement................................... 33
(k) Registration Rights Agreement....................... 33
(l) Solmecs Shareholder Consent......................... 33
(m) Capital Contribution................................ 33
(n) No Adverse Decision................................. 33
8.2 Conditions to Obligations of Solmecs and the
Solmecs Shareholder to Sell the Solmecs Stock................ 34
(a) Accuracy of Representations and Warranties.......... 34
(b) Performance of Agreements........................... 34
(c) Opinion of Counsel for SCNV......................... 34
ii
<PAGE> 4
(d) Litigation..................................... 34
(e) Consents and Approvals......................... 34
(f) Equity Financing............................... 35
(i) Validity of Transactions....................... 35
9. The Closing....................................................... 35
9.1 Deliveries by SCNV at the Closing....................... 35
.................................................... 35
9.2 Deliveries by Solmecs and/or the Solmecs
Shareholder at the Closing.............................. 36
.................................................... 36
9.3 Other Deliveries........................................ 36
10. Termination, Amendment and Waiver................................ 36
10.1 Termination............................................ 36
10.2 Effect of Termination.................................. 37
10.3 Fees and Expenses...................................... 37
10.4 Amendment.............................................. 37
10.5 Waiver................................................. 38
11. Survival of Representations and Warranties....................... 38
12. General Provisions............................................... 38
12.1 Notices................................................ 38
12.2 Severability........................................... 39
12.3 Entire Agreement....................................... 39
12.4 No Assignment.......................................... 39
12.5 Headings............................................... 40
12.6 Governing Law.......................................... 40
12.7 Counterparts........................................... 40
1. Purchase and Sale of Solmecs Stock.................................... 1
2. Purchase Price........................................................ 1
3. Representations and Warranties as to Solmecs.......................... 2
3.1 Organization, Standing and Power................................ 2
3.2 Capitalization.................................................. 2
3.3 Ownership of Solmecs Stock...................................... 3
3.4 Interests in Other Entities..................................... 3
3.5 Authority....................................................... 3
3.6 Noncontravention................................................ 4
3.7 Financial Statements............................................ 4
3.8 Accounts Receivable; Inventories................................ 5
3.9 Absence of Undisclosed Liabilities.............................. 5
3.10 Properties...................................................... 5
3.11 Absence of Changes.............................................. 6
3.12 Litigation...................................................... 7
3.13 No Violation of Law; Environmental Matters...................... 7
3.14 Intangibles..................................................... 9
3.15 Tax Matters..................................................... 10
3.16 Insurance....................................................... 11
iii
<PAGE> 5
3.17 Banks; Powers of Attorney................................ 11
3.18 Employee Arrangements.................................... 12
3.19 Records.................................................. 13
3.20 Brokerage Fees........................................... 13
3.21 Suppliers and Providers of Services...................... 13
3.22 Customers................................................ 14
3.23 Licenses................................................. 14
3.24 Certain Business Matters................................. 14
3.25 Certain Contracts........................................ 15
3.26 Business Practices and Commitments....................... 17
3.27 Approvals/Consents....................................... 17
3.28 No Illegal or Improper Transactions...................... 17
3.29 Restrictive Documents and Territorial Restrictions....... 17
3.30 Information as to Solmecs................................ 18
4. Representations and Warranties as to SCNV...................... 18
4.1 Organization, Standing and Power.......................... 18
4.2 Incorporation Documents and By-Laws....................... 19
4.3 Capitalization/Stock Consideration........................ 19
4.4 Authority................................................. 20
4.5 Noncontravention.......................................... 20
4.6 Information as to SCNV.................................... 21
5. Indemnification................................................ 21
5.1 Indemnification by the Solmecs Shareholder................ 21
5.2 Indemnification by SCNV................................... 21
5.3 Third Party Claims........................................ 22
5.4 Assistance................................................ 23
5.5 Limitations............................................... 23
6. Covenants...................................................... 24
6.1 Investigation............................................ 24
6.2 Consummation of Transaction.............................. 24
6.3 Cooperation/Further Assurances........................... 24
6.4 Accuracy of Representations.............................. 25
6.5 Notification of Certain Matters.......................... 25
6.6 Broker................................................... 25
6.7 No Solicitation of Transactions.......................... 25
6.8 Management and Administrative Matters.................... 26
6.9 Equity Financing......................................... 26
6.11 Prohibited Conduct....................................... 27
6.12 Public Announcements..................................... 29
6.13 Information Statement.................................... 29
7. Nondisclosure/Non-Compete...................................... 30
7.1 Nondisclosure............................................. 30
7.2 Non-Compete Covenant...................................... 30
7.3 No Disparagement.......................................... 31
7.4 Injunctive Relief, etc.................................... 31
7.5 Scope of Restriction...................................... 31
8. Conditions of Purchase and Sale................................ 31
iv
<PAGE> 6
<TABLE>
<S> <C>
8.1 Conditions to Obligations of SCNV to Purchase the
Solmecs Stock................................................................................. 31
(a) Accuracy of Representations and Warranties...................................... 31
(b) Performance of Agreements....................................................... 32
(c) Opinion of Counsel for Solmecs and Solmecs
Shareholder.......................................................................... 32
(d) Litigation...................................................................... 32
(e) Consents and Approvals.......................................................... 32
(f) Validity of Transactions........................................................ 32
(g) No Material Adverse Change...................................................... 33
(h) Equity Financing................................................................ 33
(i) Employment Agreement............................................................ 33
(j) Lock-Up Agreement............................................................... 33
(k) Registration Rights Agreement................................................... 33
(l) Solmecs Shareholder Consent..................................................... 33
(m) Capital Contribution............................................................ 33
(n) No Adverse Decision............................................................. 33
8.2 Conditions to Obligations of Solmecs and the Solmecs
Shareholder to Sell the Solmecs Stock......................................................... 34
(a) Accuracy of Representations and Warranties...................................... 34
(b) Performance of Agreements....................................................... 34
(c) Opinion of Counsel for SCNV..................................................... 34
(d) Litigation...................................................................... 34
(e) Consents and Approvals.......................................................... 34
(f) Equity Financing................................................................ 34
(i) Validity of Transactions........................................................ 35
9. The Closing............................................................................................ 35
9.1 Deliveries by SCNV at the Closing................................................................. 35
9.2 Deliveries by Solmecs and/or the Solmecs Shareholder
at the Closing................................................................................ 35
9.3 Other Deliveries.................................................................................. 36
10. Termination, Amendment and Waiver...................................................................... 36
10.1 Termination...................................................................................... 36
10.2 Effect of Termination............................................................................ 37
10.3 Fees and Expenses................................................................................ 37
10.4 Amendment........................................................................................ 37
10.5 Waiver........................................................................................... 37
11. Survival of Representations and Warranties................................................................. 38
12. General Provisions......................................................................................... 38
12.1 Notices.......................................................................................... 38
12.2 Severability..................................................................................... 39
12.3 Entire Agreement................................................................................. 39
12.4 No Assignment.................................................................................... 39
12.5 Headings......................................................................................... 39
12.6 Governing Law.................................................................................... 39
12.7 Counterparts..................................................................................... 40
</TABLE>
v
<PAGE> 7
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of June 5, 1998 (the "Agreement"), by and
among SCNV ACQUISITION CORP., a Delaware corporation ("SCNV"); SOLMECS
CORPORATION N.V., a company organized under the laws of the Netherlands Antilles
("Solmecs"); and BAYOU INTERNATIONAL LTD., a Delaware corporation and sole
shareholder of Solmecs (the "Solmecs Shareholder").
W I T N E S S E T H :
WHEREAS, the Solmecs Shareholder is the owner of all of the
issued and outstanding shares of capital stock of Solmecs (the "Solmecs Stock");
and
WHEREAS, Solmecs is in the business of research and
development of high efficiency, low pollution or pollution-free products and
technologies in the energy conversion and conservation fields (the "Business");
and
WHEREAS, SCNV wishes to purchase all of the Solmecs Stock from
the Solmecs Shareholder, upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, the parties hereto do hereby agree as follows:
1. Purchase and Sale of Solmecs Stock.
Subject to the terms and conditions set forth in this
Agreement and in reliance upon the representations, warranties, covenants and
conditions herein contained, on the Closing Date (as defined in Article 9
hereof) the Solmecs Shareholder shall sell, convey, assign, transfer and deliver
to SCNV all of the Solmecs Stock, free and clear of any and all liens, adverse
claims, security interests, pledges, mortgages, charges and encumbrances of any
nature whatsoever (except for United States and state securities law
restrictions of general applicability).
2. Purchase Price
The purchase price for the purchase and sale of the Solmecs
Stock by Solmecs shall be 499,701 shares (the "Stock Consideration") of Common
Stock, par value $.01 per share, of SCNV ("SCNV Common Stock").
<PAGE> 8
3. Representations and Warranties as to Solmecs. Subject to
the qualifications set forth in Section 3.32 below, Solmecs and the Solmecs
Shareholder, jointly and severally, represent and warrant to SCNV as follows:
3.1 Organization, Standing and Power.
(a) Solmecs is a company duly organized, validly existing
and in good standing under the laws of the Netherlands Antilles, with full power
and authority to (i) own, lease and operate its properties, (ii) carry on the
Business and (iii) execute and deliver, and perform under this Agreement and
each other agreement and instrument to be executed and delivered by it pursuant
hereto. There are no states or jurisdictions in which the character and location
of any of the properties owned or leased by Solmecs, or the conduct of the
Business makes it necessary for Solmecs to qualify to do business as a foreign
corporation or entity, where the failure to so qualify would have a material
adverse effect on the business, operations or financial condition of Solmecs.
True and complete copies of the organizational and other constituent documents
of Solmecs and all amendments thereof to date have heretofore been furnished to
SCNV. Solmecs's minute books heretofore exhibited to SCNV contain complete and
accurate records of all meetings and other corporate actions of Solmecs'
stockholders and Board of Directors (including committees of its Boards of
Directors).
(b) The Solmecs Shareholder is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with full corporate power and corporate authority to execute and deliver, and
perform under this Agreement and each other agreement and instrument to be
executed and delivered by it pursuant hereto.
3.2 Capitalization. The Solmecs Stock consists of 23,800
shares of authorized class B common stock, of which 7,286 shares are issued and
outstanding, and 1200 shares of authorized class A preferred stock, all of which
are issued and outstanding. All issued shares of the Solmecs Stock have been
duly authorized, validly issued and outstanding and are fully paid and
nonassessable and owned of record and beneficially by the Solmecs Shareholder.
There are no outstanding options, warrants, rights, puts, calls, commitments,
exchange, conversion rights, plans or other agreements of any character to which
Solmecs or the Solmecs Shareholder (individually or jointly) is a party or
otherwise bound which provide for the acquisition, disposition or issuance of
any issued but not outstanding, or authorized and unissued shares, of Solmecs
Stock. There is no personal liability, and there are no preemptive or similar
rights, attached to the Solmecs Stock. There are no outstanding obligations,
contingent or other, of Solmecs to purchase, redeem or otherwise acquire any
capital stock of Solmecs. There are no voting trust agreements or other
contracts,
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agreements, arrangements, commitments, plans or understandings restricting or
otherwise relating to voting, dividend or other rights with respect to the
capital stock of Solmecs.
3.3 Ownership of Solmecs Stock. The Solmecs Shareholder has
good and marketable title to all of the issued and outstanding shares of Solmecs
Stock, free and clear of any and all liens, adverse claims, security interests,
pledges, mortgages, charges and encumbrances of any nature whatsoever (except
for United States and the applicable foreign securities law restrictions of
general applicability), and on the Closing Date, will own all of the Solmecs
Stock and shall transfer the Solmecs Stock, free and clear of any and all liens,
adverse claims, security interests, pledges, mortgages, charges and encumbrances
of any nature whatsoever (except for United States and state securities law
restrictions of general applicability), including, but not limited to, any
claims by any present or former shareholders of Solmecs.
3.4 Interests in Other Entities.
(a) Except as set forth on Schedule 3.4(a), Solmecs does not
(i) own, directly or indirectly, of record or beneficially, any shares of voting
stock or other equity securities of any other corporation, (ii) have any
ownership interest, direct or indirect, of record or beneficially, in any
unincorporated entity, and (iii) have any obligation, direct or indirect,
present or contingent, (A) to purchase or subscribe for any interest in, advance
or loan monies to, or in any way make investments in, any other entity or
individual, or (B) to share any profits or capital investments or both.
3.5 Authority.
(a) The execution and delivery by Solmecs and the Solmecs
Shareholder of this Agreement and of all of the agreements to be executed and
delivered by either or both of them pursuant hereto (collectively, the "Solmecs
Documents"), the performance by each of Solmecs and the Solmecs Shareholder of
their respective obligations hereunder and thereunder, and the consummation of
the transactions contemplated hereby and thereby, have been (except for approval
of shareholders of Solmecs Shareholder), and at the Closing Date will be, duly
and validly authorized by all necessary corporate action on the part of each of
Solmecs and the Solmecs Shareholder (including, but not limited to, the
unanimous consent of the Boards of Directors of Solmecs and the Solmecs
Shareholder and the written consent of the Solmecs Shareholder and the holders
of the requisite percentage of shares of capital stock of the Solmecs
Shareholder) and each of Solmecs and the Solmecs Shareholder has (and at the
Closing Date will have) all necessary corporate power and corporate authority
with respect thereto.
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(b) This Agreement is, and when executed and delivered by
Solmecs and the Solmecs Shareholder, each of the other agreements to be
delivered by either or both of them pursuant hereto will be, the valid and
binding obligations of Solmecs and the Solmecs Shareholder, to the extent they
are parties thereto, in accordance with their respective terms.
3.6 Noncontravention. Neither the execution and delivery by
Solmecs or by the Solmecs Shareholder of this Agreement or of any other Solmecs
Documents to be executed and delivered by either or both of them, nor the
consummation of any of the transactions contemplated hereby or thereby, nor the
performance by either or both of them of any of their respective obligations
hereunder or thereunder, will (nor with the giving of notice or the lapse of
time or both would) (a) conflict with or result in a breach of any provision of
the organizational or other constituent documents of Solmecs or the Certificate
of Incorporation and ByLaws of the Solmecs Shareholder, each as amended to date,
or (b) give rise to a default, or any right of termination, cancellation or
acceleration, or otherwise be in conflict with or result in a loss of
contractual benefits to any of them, under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which either or both of them is a party or by which
either or both of them or any of their respective assets may be bound, or
require any consent, approval or notice under the terms of any such document or
instrument, or (c) violate any order, writ, injunction, decree, law, statute,
rule or regulation of any court or governmental authority which is applicable to
either or both of them, or (d) result in the creation or imposition of any lien,
adverse claim, restriction, charge or encumbrance upon any of the assets or
properties of Solmecs (the "Assets") or the Solmecs Stock, or (f) interfere with
or otherwise adversely affect the ability of SCNV to carry on the Business after
the Closing Date on substantially the same basis as is now conducted by Solmecs.
3.7 Financial Statements.
Solmecs has heretofore delivered SCNV correct and complete
copies of (a) its financial statements consisting of the audited balance sheet
for the year ended June 30, 1997 (the "Balance Sheet"), and the related
statements of income, stock- holders' equity and cash flows for the year ended
on such date, certified by Luboshitz Kasierer & Co., independent certified
public accountants, and (b) its unaudited statements of operations, statement of
retained earnings and cash flows as of and for the nine (9) month period ended
March 31, 1998 (collectively, the "Solmecs Financial Statements"). The Solmecs
Financial Statements were prepared in accordance with generally accepted
accounting principles in the United States ("GAAP"), consistently applied, and
present fairly the financial position of Solmecs as at the dates thereof and the
results of operations for the periods and the cash
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flow indicated. The books and records of Solmecs are complete and correct in all
material respects, have been maintained in accordance with good business
practices, and accurately reflect the basis for the financial condition, results
of operations and cash flow of Solmecs as set forth in the Solmecs Financial
Statements.
3.8 Accounts Receivable; Inventories.
(a) The accounts receivable of Solmecs, net of the allowance
for doubtful accounts applicable thereto (which allowance is established on a
basis consistent with GAAP) included in the latest balance sheets included in
the Solmecs Financial Statements are collectible in full over the period of
usual trade terms (by use of Solmecs' normal collection methods), and there do
not exist any defenses, counterclaims and set-offs which would materially
adversely affect such receivables, and all such receivables are actual and bona
fide receivables representing obligations for the total dollar amount thereof
shown on the books of Solmecs. Solmecs has fully performed all obligations with
respect thereto which they were obligated to perform to the date hereof.
(b) The inventories reflected on the Solmecs Financial
Statements, and to the extent thereafter added, consist of items of a quality
and quantity usable or saleable in the ordinary course of business, except for
obsolete materials, slow-moving items, materials of below standard quality and
not readily marketable items, all of which have been written down to net
realizable value or adequately reserved against on the books and records of
Solmecs. All inventories are stated at the lower of cost or market in accordance
with GAAP.
3.9 Absence of Undisclosed Liabilities. Solmecs has no
liabilities or obligations of any nature whatsoever, whether accrued, matured,
unmatured, absolute, contingent, direct or indirect or otherwise, which have not
been (a) in the case of liabilities and obligations of a type customarily
reflected on a corporate balance sheet, prepared in accordance with GAAP, set
forth on the Balance Sheet, or (b) incurred in the ordinary course of business
since June 30, 1997 or (c) in the case of other types of liabilities and
obligations, described in any of the schedules delivered pursuant hereto or
omitted from said schedules in accordance with the terms of this Agreement, or
arising under contracts or leases listed in such schedules or other contracts or
leases which are omitted from such schedules in accordance with the terms of
this Agreement, or (d) incurred, consistent with past practice, in the ordinary
course of business of Solmecs (in the case of liabilities and obligations of the
type referred to in clause (a) above).
3.10 Properties. Schedule 3.10 sets forth all (a) real
property which is owned or leased (whether as lessor or
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lessee) or subject to lease (whether as lessor or lessee) by Solmecs, or which
is subject to a title retention or conditional sales agreement or other security
device, and (b) tangible personal property which is owned, leased (whether as
lessor or lessee) or subject to contract or commitment of purchase or sale or
lease (whether as lessor or lessee) by Solmecs. Solmecs has marketable title to
all of the properties and assets, reflected on the Solmecs Financial Statements
as of June 30, 1997 or thereafter acquired, except properties or assets sold or
otherwise disposed of in the ordinary course of business, free and clear of any
and all mortgages, liens (including liens for current Taxes, as defined in
Section 3.15(b) hereof), pledges, claims, charges and encumbrances of any nature
whatsoever (hereinafter collectively, "Liens"), other than Liens not yet due and
payable or being contested in good faith by appropriate proceedings. All plants,
structures and equipment which are utilized in the Business, or are material to
the condition (financial or otherwise) of Solmecs, are owned or leased by
Solmecs and are in good operating condition and repair (ordinary wear and tear
excepted) and are adequate and suitable for the purposes for which they are
used.
3.11 Absence of Changes. Except for the return to the
Solmecs Shareholder of an aggregate of 50,000 shares of the Common Stock of the
Solmecs Shareholder (the "Bayou Stock") held by Solmecs, Solmecs has not since
June 30, 1996, (a) issued any stock, bond or other corporate or partnership
security (including without limitation securities convertible into or rights to
acquire capital stock of Solmecs); (b) borrowed any amount or incurred or become
subject to any liability (absolute, accrued or contingent), except current
liabilities incurred and liabilities under contracts entered into, all of which
were in the ordinary course of business; (c) discharged or satisfied any lien or
encumbrance or incurred or paid any obligation or liability (absolute, accrued
or contingent) other than current liabilities shown on the most recent balance
sheet included in the Solmecs Financial Statements and current liabilities
incurred in the ordinary course of business since the most recent balance sheet
included in the Solmecs Financial Statements; (d) declared or made any payment
or distribution (whether in cash, securities, other property or any combination
thereof) on or in respect of the capital stock of Solmecs or purchased or
redeemed any shares of its capital stock or other securities; (e) mortgaged,
pledged or subjected to lien any of its assets, tangible or intangible, (f)
sold, assigned or transferred any of its tangible assets except in the ordinary
course of business, or canceled any debt or claim; (g) sold, assigned,
transferred or granted any license with respect to any patent, trademark, trade
name, service mark, copyright, trade secret or other intangible asset; (h)
suffered any loss of property or waived any right of substantial value whether
or not in the ordinary course of business; (i) suffered any material adverse
change in its relations with, or any loss or threatened loss of, any of its
Suppliers (as defined in Section 3.21 hereof); (j) with respect to
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any of its directors, officers, partners or employees, (i) granted any severance
or termination pay, (ii) entered into any employment, deferred compensation or
other similar agreement (or any amendment to any such existing agreement) or
arrangement (iii) increased any benefits payable under any existing severance or
termination pay policies or employment agreements, or (iv) increased the
compensation, bonus or other benefits payable; (k) made any change in the manner
of its business or operations; (l) made any change in any method of accounting
or accounting practice; (m) written off as uncollectible any accounts or notes
receivable in excess of reserves; (n) entered into any transaction except in the
ordinary course of business or as otherwise contemplated hereby; or (o) entered
into any commitment (contingent or otherwise) to do any of the foregoing.
3.12 Litigation. There are no suits or actions, civil or
administrative, arbitration or other proceedings or governmental investigations,
pending or threatened, against or relating to Solmecs, the Solmecs Shareholder,
the Solmecs Stock, the Shares, this Agreement, the transactions contemplated
hereby, the Business or any of the Assets. There are no judgments, orders,
stipulations, injunctions, decrees or awards in effect which relate to Solmecs,
the Solmecs Shareholder, the Solmecs Stock, this Agreement, the transactions
contemplated hereby, the Business or any of the Assets, the effect of which is
(a) to limit, restrict, regulate, enjoin or prohibit any business practice of
Solmecs in any area, or the acquisition by Solmecs of any properties, assets or
businesses, or (b) otherwise materially adverse to the Business or any of the
Assets.
3.13 No Violation of Law; Environmental Matters.
(a) Solmecs is not engaging in any activity or omitting to
take any action as a result of which (A) it is in violation of any material law,
rule, regulation, zoning or other ordinance, statute, order, injunction or
decree, or any other requirement of any court or governmental or administrative
body or agency, applicable to Solmecs, the Business or any of the Assets,
including, but not limited to, those relating to anti-boycotting and the
transfer of technology and encrypted material under the Export Administration
Act (50 U.S.C. Sections 1201 and 2401) or equivalent foreign law;
bribery and other prohibited methods of obtaining and retaining business under
the Foreign Corrupt Practices Act (15 U.S.C. Sections 78dd and 78m) or
equivalent foreign law, occupational safety and health matters; issues of
environmental and ecological protection (e.g., the use, storage, handling,
transport or disposal of pollutants, contaminants or hazardous or toxic
materials or wastes, and the exposure of persons thereto); business practices
and operations; labor practices; employee benefits; and zoning and other land
use, and (B) Solmecs, the Business and/or any of the Assets have been, or may
be, materially adversely affected thereby.
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(b) Without limiting the representations contained in
subsection (a) hereof, no permits, licenses and other authorizations are
required of Solmecs to conduct the Business in the same manner conducted prior
to the Closing Date under any United States or foreign national, regional,
state, county or local statute, law, regulation, ordinance, rule, judgment,
order, decree, concession, grant, franchise, agreement or governmental
restriction relating to the environment or the general treatment, storage,
recycling, transportation, actual or potential release or disposal of any
Hazardous Materials (as defined below) into the environment ("Environmental
Law") and Solmecs is in compliance in all material respects with all
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any Environmental Law
applicable to it in connection with the conduct of the Business or in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved under any Environmental Law. No
notice, notification, demand, request for information, citation, summons or
order has been issued, no complaint has been filed, no penalty has been assessed
and no investigation or review is pending or threatened by any United States or
foreign national, regional, state, county or local government or any United
States or foreign executive, legislative, judicial, regulatory or administrative
entity or other governmental entity with respect to any alleged failure by
Solmecs to have any permit, license or authorization required in connection with
the generation, treatment, storage, recycling, transportation, release or
disposal of any pollutant, toxic or hazardous material, hazardous substance,
hazardous constituent or waste of any kind as defined under any Environmental
Law (collectively "Hazardous Materials") generated by or relating to Solmecs or
any of its properties (or any predecessor to the Business or Assets of Solmecs
with respect to the Business or the Assets) whether or not occurring at or on
property owned, leased or operated by Solmecs. Solmecs does not have, and its
properties are not subject to, any liability, contingent or otherwise, arising
out of or resulting from the release, leakage, pouring, emission, emptying,
injection, pumping, escaping, leaching, dumping, discharge, spillage, storage,
burying or other disposal, whether on its own premises or through other
individuals or entities, of any Hazardous Materials. There are no citations,
fines or penalties heretofore assessed against Solmecs or with respect to any of
its property under any United States or foreign national, regional, state,
county or local statute, law, regulation, ordinance, rule, judgment, order,
decree, concession, grant, franchise, agreement or governmental restriction that
remain unpaid, nor has Solmecs received any notices or any other communications
from the United States Environmental Protection Agency, Occupational Safety and
Health Administration and equivalent foreign regulatory agency or governmental
entity with respect to any violations or alleged violations of any United States
or foreign national, regional, state, county or local statute, law, regulation,
directive, guidance, ordinance, rule,
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judgment, order, decree, concession, grant, franchise, agreement or governmental
restriction or policy which has not been remedied prior to the date hereof.
(c) (i) there are no Hazardous Substances (as such term is
defined in the United States Comprehensive Environment Response, Compensation
and Liability Act of 1980 ("CERCLA") and equivalent foreign laws) upon, beneath
or migrating or threatening to migrate to or from the real property owned and/or
leased by Solmecs and (ii) there are no underground storage tanks for Hazardous
Substances, active or abandoned, at any property now or previously owned or
leased by Solmecs with respect to the Business.
(d) There are no encumbrances in favor of any governmental
entity for (i) any liability under Environmental Laws or (ii) damages arising
from or costs incurred by such governmental entity in response to a release or
threatened release of Hazardous Substances into the environment (collectively,
"Environmental Encumbrances") arising under or pursuant to any Environmental
Laws, and, no governmental actions have been taken or are threatened which could
reasonably be anticipated to subject the Business to such Environmental
Encumbrances and Solmecs is not required to place any notice or restriction
relating to the presence of Hazardous Substances at any facility owned or
managed by Solmecs in any deed to such property.
3.14 Intangibles/Inventions. Schedule 3.14 contains an
accurate and complete list of all United States and foreign patents, patent
registrations and applications, trade names, techniques, formula, know-how,
trademarks, software licenses, service marks, trademark registrations and
applications, service mark registrations and applications, and copyright
registrations and applications owned (in whole or in part), licensed to any
extent or used or anticipated to be used or utilized by Solmecs in the conduct
of the Business, whether in the name of Solmecs, any employee or otherwise,
together with all correspondence and filings with the United States Patent and
Trademark Office or equivalent foreign governmental or administrative office, as
are indicated on the Schedule 3.14 (collectively, the "Intellectual Property").
Except as set forth on Schedule 3.14, Solmecs either has full right, title and
interest in and to, or possesses the right to use, the Intellectual Property
used in the conduct of the Business (including without limitation the exclusive
right to use and license the same). Any item constituting part of the
Intellectual Property in which Solmecs has an ownership or license interest has
been, to the extent indicated on Schedule 3.14, duly registered with, filed in
or issued by, as the case may be, the United States Patent and Trademark Office
or such other governmental entities as are indicated on Schedule 3.14 and such
registrations, filing and issuances remain in full force and effect. No claim of
infringement or misappropriation of patents, trademarks, trade names, service
marks, copyrights or
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trade secrets of any other entity or individual has been made nor threatened
against Solmecs and, Solmecs is not infringing or misappropriating any patents,
trademarks, trade names, service marks, copyrights or trade secrets of any other
entity or individual. Except as set forth on Schedule 3.14, without limiting any
other provisions hereof, Solmecs has not granted any license, franchise or
permit to any entity or individual to use any of the Intellectual Property of
Solmecs and no other entity or individual has the right to use the same
trademarks, service marks or trade names used by Solmecs or any similar
trademarks, service marks or trade names likely to lead to confusion. No
proceedings have been instituted, are pending, or are threatened which challenge
the rights of Solmecs with respect to its Intellectual Property, or its use
thereof in connection with the Business and there is no valid basis for any such
proceedings. Solmecs has granted no license to third parties with regard to
Solmecs's Intellectual Property.
3.15 Tax Matters.
(a) Except as set forth on Schedule 3.15, Solmecs has filed
with the appropriate governmental agencies all tax returns and reports required
to be filed by it, and has paid in full or contested in good faith or made
adequate provision for the payment of, Taxes (as defined herein) shown to be due
or claimed to be due on such tax returns and reports. The provisions for Taxes
which will be set forth on the latest balance sheet included in the Solmecs
Financial Statements include adequate provisions for the payment in full of any
and all Taxes for which Solmecs is or could be liable, whether to any
governmental entity or to other entities or individuals (as, for example, under
tax allocation agreements), not yet due for any and all periods up to and
including the date of such balance sheet; and all Taxes for periods beginning
thereafter through the Closing Date have been, or will be, paid when due or
adequately reserved against on the books of Solmecs and an amount of cash equal
to the amount of such reserve will have been set aside for the payment of such
Taxes. Solmecs has duly withheld all payroll taxes and other United States or
foreign national, regional, state, county or local taxes and other items
requiring to be withheld by it from employer wages, and has duly deposited the
same in trust for or paid over to the proper taxing authorities. Solmecs has not
executed or filed with any taxing authority any agreement extending the periods
for the assessment or collection of any Taxes, and is not a party to any pending
or threatened, action or proceeding by any governmental authority for the
assessment or collection of Taxes. Within the past three years, the federal
income tax returns of Solmecs have not been examined by the United States
Internal Revenue Service nor has the Netherlands Antilles or other taxing
authority with jurisdictional authority examined any merchandize, personal
property, sales or use tax returns of Solmecs. There is no tax lien, whether
imposed by any United States or foreign national, regional, state, county or
local taxing authority, outstanding against the assets, properties or business
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of Solmecs. After the date hereof, no election or consent with respect to any
Tax (or the computation thereof) affecting Solmecs will be made without the
prior written consent of SCNV. Solmecs has not agreed to make or is required to
make any adjustment under any applicable United States or foreign national,
regional, state, county or local tax law (including without limitation Section
481(a) of the United States Internal Revenue Code) by reason of a change in
accounting method or otherwise. Solmecs is not a party to any tax sharing or
allocation agreement. Solmecs has not been a member of an affiliated group
filing a consolidated income tax return or has any liability for Taxes under any
United States or foreign national, regional, state, county or local tax law
(including without limitation Treas. Reg. Section 1.1502-6 or any similar
provision of foreign law), as a transferee or successor, by contract or
otherwise.
(b) As used herein, the term "Taxes" means all national,
regional, state, county or local taxes and governmental assessments of
Australia, Israel, the Netherlands Antilles and the United States, as the case
may be, including but not limited to income taxes, estimated taxes, withholding
taxes, excise taxes, ad valorem taxes, payroll related taxes (including but not
limited to premiums for worker's compensation insurance and statutory disability
insurance), employment taxes, franchise taxes and import duties, together with
any related liabilities, penalties, fines, additions to tax or interest.
3.16 Insurance. Schedule 3.16 contains a complete and
correct list and summary description of all contracts and policies of insurance
relating to any of the Assets, the Business and employees in which Solmecs is an
insured party, beneficiary or loss payable payee. Each such policy is in full
force and effect, is with responsible insurance carriers and is adequate in
coverage and amount to insure fully against risks to which Solmecs and its
employees, the Business, properties and other assets may be exposed in the
operation of the Business. All premiums with respect to such insurance policies
have been paid on a timely basis, and no notice of cancellation or termination
has been received with respect to any such policy. Solmecs has not failed to
give any notice or present any claim thereunder in due and timely fashion. There
are no pending claims against such insurance by Solmecs as to which the insurers
have denied coverage or otherwise reserved rights. Solmecs has not been refused
any insurance with respect to its assets or operations, nor has its coverage
been limited, by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance since the date it commenced
operations.
3.17 Banks; Powers of Attorney. Schedule 3.17 is a complete
and correct list showing (a) the names of each bank in which Solmecs has an
account or safe deposit box and the names of all persons authorized to draw
thereon or who have access thereto,
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and (b) the names of all persons, if any, holding powers of attorney from
Solmecs.
3.18 Employee Arrangements.
(a) Schedule 3.18 is a complete and correct list and summary
description of all (a) union, collective bargaining, employment, management,
termination and consulting agreements to which any of Solmecs is a party or
otherwise bound, and (b) compensation plans and arrangements; bonus and
incentive plans and arrangements; deferred compensation plans and arrangements;
pension and retirement plans and arrangements; profit-sharing and thrift plans
and arrangements; stock purchase and stock option plans and arrangements;
hospitalization and other life, health or disability insurance or reimbursement
programs; holiday, sick leave, severance, vacation, tuition reimbursement,
personal loan and product purchase discount policies and arrangements; and other
plans or arrangements providing for benefits for employees of Solmecs.
(b) The consummation of the transactions contemplated hereby
will not (either alone or in conjunction with another event, such as a
termination of employment or other services) entitle any employee or other
person to receive severance or other compensation which would not otherwise be
payable absent the consummation of the transactions contemplated hereby or cause
the acceleration of the time of payment or vesting of any award or entitlement
under any employee plan.
(c) Solmecs is not in default with respect to any of the
foregoing obligations. Solmecs is not in default with respect to any withholding
or other employment taxes or payments with respect to accrued vacation or
severance pay on behalf of any employee for which it is obligated on the date
hereof and will maintain and continue to make all such necessary payments or
adjustments arising through the Closing Date.
(d) There have been no audits of the equal employment
opportunity practices of Solmecs and no basis for any violation of equal
employment opportunity practices. No representation question exists respecting
the employees of Solmecs and no collective bargaining agreement is currently
being negotiated by Solmecs. Solmecs has not received notice from any union or
employees setting forth demands for representation, elections or for present or
future changes in wages, terms of employment or working conditions.
(e) Schedule 3.18 sets forth all outstanding loans and other
advances (other than travel advances in the ordinary course of business which do
not exceed $1,000 per individual) made by Solmecs to any of its officers,
directors, employees, stockholders, partners or consultants.
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3.19 Records. Solmecs has records that accurately and
validly reflect its transactions and accounting controls sufficient to insure
that such transactions are (i) in all material respects executed in accordance
with management's general or specific authorization and (ii) recorded in
conformity with generally accepted accounting principles.
3.20 Brokerage Fees. Neither Solmecs nor any of its
affiliates has retained any financial advisor, broker, agent or finder or paid
or agreed to pay any financial advisor, broker, agent or finder on account of
this Agreement or any transaction contemplated hereby or any transaction of like
nature that would be required to be paid by Solmecs.
3.21 Suppliers and Providers of Services.
(a) Schedule 3.21 sets forth a complete and correct list
setting forth, as of December 31, 1997, the twenty (20) largest suppliers of
goods to, and providers of services to, Solmecs (collectively, "Suppliers") to
which Solmecs made payments during the fiscal year ended June 30, 1997, or
expects to make payments during the year ending June 30, 1998, in excess of five
percent (5%) of Solmecs's operating expenses as reflected on its statement of
operations for such year.
(b) Neither Solmecs nor the Solmecs Shareholder has
information which might reasonably indicate that any of the Suppliers have any
disputes with Solmecs and the Business or intend to cease selling or rendering
services to, or dealing with, Solmecs on substantially the same basis as of the
date hereof, nor has any information been brought to their attention which might
reasonably lead them to believe any such Supplier intends to cease selling or
rendering services to Solmecs or to alter in any material respect the amount of
sales or service or the extent of dealings with Solmecs, or would alter in any
material respect the sales or service or dealings in the event of the
consummation of the transactions contemplated hereby. Neither Solmecs nor any
Solmecs Shareholder has information which might reasonably indicate, nor has any
information been brought to its attention which might reasonably lead them to
believe, that any Supplier will not be able to fulfill outstanding or currently
anticipated purchase orders placed by, or service obligations to, Solmecs.
(c) Except as set forth on Schedule 3.21(c), neither Solmecs
nor the Solmecs Shareholder, nor any entity controlled by one of more of the
foregoing: (i) owns, directly or indirectly, any interest in (excepting less
than 1% stock holdings for investment purposes in securities of publicly held
and traded companies), or is an officer, director, employee, partner or
consultant of, any entity or individual (1) which is, or is engaged in business
as, a competitor, lessor, lessee or Supplier of
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Solmecs, or (2) which is engaged in any business similar to that conducted by
Solmecs; (ii) owns, directly or indirectly, in whole or in part, any tangible or
intangible property that Solmecs uses in the conduct of the Business; or (iii)
has any cause of action or other claim whatsoever against, or owes any amount
to, Solmecs, except for claims in the ordinary course of business such as for
accrued vacation pay, accrued benefits under employee benefit plans, and similar
matters and agreements existing on the date hereof.
3.22 Customers. Schedule 3.22 sets forth a complete and
correct list setting forth, as of December 31, 1997, the twenty (20) largest
customers of the Business and the amount for which each such customer was
invoiced. There are no (i) threatened cancellations by the Customers with
respect to the Business, (ii) outstanding disputes by such Customers with
Solmecs and the Business, or (iii) material adverse changes in the business
relationship between the Business and any such Customer. Neither Solmecs nor the
Solmecs Shareholder has information which might reasonably indicate that any of
the Customers have any disputes with Solmecs and the Business or intend to cease
dealing with Solmecs on substantially the same basis as of the date hereof, nor
has any information been brought to their attention which might reasonably lead
them to believe any such Customer intends to alter in any material respect the
extent of dealings with Solmecs, or would alter in any material respect the
dealings in the event of the consummation of the transactions contemplated
hereby.
3.23 Licenses. Solmecs and its officers, directors, partners
and employees possess all material governmental registrations, certificates of
need, consents, qualifications and accreditations and other material licenses,
permits, authorizations and approvals that are required by every national and
local governmental entity or regulatory authority, whether domestic or foreign,
for the conduct of the Business and the use of the Assets presently conducted or
used (collectively, "Licenses"). Schedule 3.23 contains a true and complete list
of the Licenses, exclusive of any Licenses with respect to state or local sales,
use or other Taxes. All of the Licenses are in full force and effect and no
action or claim is pending nor is threatened to revoke or terminate any License
or declare any License invalid in any material respect. Neither Solmecs nor any
of its officers, directors, or employees is in default in any material respect
under any of such Licenses and no event has occurred and no condition exists
which, with the giving of notice, the passage of time, or both, would constitute
a default thereunder, which default could reasonably be expected to have a
material adverse effect on the business.
3.24 Certain Business Matters. Except as is set forth in
Schedule 3.24, (a) Solmecs is not a party to or bound by any distributorship,
dealership, sales agency, franchise or similar agreement which relates to the
sale or distribution of any of the
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products and services of the Business, (b) Solmecs has no sole-source supplier
of significant goods or services (other than utilities) with respect to which
practical alternative sources are not available on comparable terms and
conditions, (c) there are no pending or threatened labor negotiations, work
stoppages or work slowdowns involving or affecting the Business, and no union
representation questions exist, and there are no organizing activities, in
respect of any of the employees of Solmecs, (d) the product and service
warranties given by Solmecs or by which it is bound (complete and correct copies
or descriptions of which have heretofore been delivered by Solmecs to SCNV)
entail no greater obligations than are customary in the Business, (e) neither
Solmecs nor the Solmecs Shareholder is a party to or bound by any agreement
which limits its or his, as the case may be, freedom to compete in any line of
business or with any entity or individual, or which is otherwise materially
burdensome to Solmecs and (f) Solmecs is not a party to or bound by any
agreement in which any officer, director or stockholder of Solmecs (or any
affiliate of any such entity or individual) has, or had when made, a direct or
indirect material interest.
3.25 Certain Contracts.
(a) Except as set forth on Schedule 3.25, Solmecs has no
written or oral contract, obligation, commitment or quote outstanding of any
nature (other than obligations involving annual payments of less than $25,000
individually), including without limitation the following:
(i) Employment, bonus, severance or consulting
agreements, retirement, stock bonus, stock option, or similar plans;
(ii) Loan or other agreements, notes, indentures, or
instruments relating to or evidencing indebtedness for borrowed money or
mortgaging, pledging or granting or creating a lien or security interest or
other encumbrance on any of the Assets or any agreement or instrument evidencing
any guaranty by Solmecs of payment or performance by any other entity or
individual;
(iii) Any contract or series of contracts with the
same entity or individual for the furnishing or purchase of equipment, goods or
services;
(iv) Any joint venture contract or arrangement or
other agreement involving a sharing of profits or expenses to which Solmecs is a
party or by which it is bound;
(v) Agreements which would, after the Closing Date,
limit the freedom of SCNV or the Surviving
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Corporation to compete in any line of business or in any geographic area or with
any entity or individual;
(vi) Agreements providing for disposition of the
assets, businesses or a direct or indirect ownership interest in Solmecs;
(vii) Any lease under which Solmecs is either lessor
or lessee;
(viii) Any contract, commitment or arrangement not
made in the ordinary course of business of Solmecs, including without
limitation, any powers-of-attorney giving any entity or individual authority to
act on behalf of Solmecs;
(ix) Any contract or series of contracts, commitments
or arrangement relating to the provision of goods or services for Solmecs by any
entity or individual who is related to, or an affiliate of, Solmecs or any
officer, director, partner or stockholder of Solmecs, and any contract or series
of contracts, commitments or arrangement relating to the provision of goods or
services for Solmecs by any entity or individual the terms of which were not
determined on an arms' length basis; and
(x) Agreements with any governmental entity.
(b) Schedule 3.25 is a complete and correct list of all
material contracts, commitments, obligations and understandings which are not
set forth in any other schedule delivered hereunder and to which Solmecs is a
party or otherwise bound, except for (i) purchase orders from vendors or
customers and (ii) each of those which (A) were made in the ordinary course of
business and (B) either (1) are terminable by Solmecs without liability, expense
or other obligation on 30 days' notice or less, or (2) may be anticipated to
involve aggregate payments to or by Solmecs of $5,000 (or the equivalent) or
less calculated over the full term thereof, and (3) are not otherwise material
to the Business or Solmecs. Complete and correct copies of all contracts,
commitments, obligations and undertakings set forth on any of the schedules
delivered pursuant to this Agreement have been furnished by Solmecs to SCNV.
Except as expressly stated on any of such schedules, (i) each of them is in full
force and effect, no entity or individual which is a party thereto or otherwise
bound thereby is in default thereunder, and no event, occurrence, condition or
act exists which does (or which with the giving of notice or the lapse of time
or both would) give rise to a default or right of cancellation, acceleration or
loss of contractual benefits thereunder; (ii) there has been no threatened
cancellations thereof, and there are no outstanding disputes thereunder; (iii)
none of them is materially burdensome to Solmecs; and (iv) each of them is fully
assignable without the consent, approval, order or
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any waiver by, or any other action of or with any entity or individuals which
will not be obtained before the Closing Date, without the payment of any
penalty, the incurrence of any additional debt, liability or obligation of any
nature whatsoever or the change of any term.
(c) The continuation, validity and effectiveness of
all such contracts, commitments, obligations and understandings set forth on
Schedule 3.25 under the current material terms thereof, will in no way be
affected by the transactions contemplated hereby. There are no negotiations
pending or in progress to revise any material term of any such contract.
3.26 Business Practices and Commitments. Set forth on
Schedule 3.26 is a description of Solmecs's warranty practices and obligations,
as each of the foregoing relate to Solmecs's Customers and Suppliers.
3.27 Approvals/Consents. Solmecs currently holds all
material governmental and administrative consents, permits, appointments,
approvals, licenses, certificates and franchises which are necessary for the
operation of the Business, all of which are in full force and effect and are
transferable to SCNV without the payment of any penalty, the incurrence of any
additional debt, liability or obligation of any nature whatsoever or the change
of any term. No material violations of the terms thereof have heretofore
occurred or are known by the Solmecs Shareholder to exist as of the date of this
Agreement.
3.28 No Illegal or Improper Transactions. Neither Solmecs
has, nor have any of its directors, officers or employees, directly or
indirectly, used funds or other assets of Solmecs, or made any promise or
undertaking in such regard, for (a) illegal contributions, gifts, entertainment
or other expenses relating to political activity; (b) illegal payments to or for
the benefit of governmental officials or employees, whether domestic or foreign;
(c) illegal payments to or for the benefit of any person, firm, corporation or
other entity, or any director, officer, employee, agent or representative
thereof; or (d) the establishment or maintenance of a secret or unrecorded fund;
and there have been no false or fictitious entries made in the books or records
of Solmecs.
3.29 Restrictive Documents and Territorial Restrictions.
Solmecs is not subject to, or a party to, any charter, by-law, mortgage, lien,
lease, license, permit, agreement, contract, instrument, judgment or decree,
law, rule, ordinance, regulation, order, or any other restriction of any kind or
character, which materially adversely affects the Business, business prospects,
operations or condition (financial or otherwise) of Solmecs or any of its
respective assets or property,
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or which would prevent consummation of the transactions contemplated hereby, or
the continued operation of the Business after the date hereof on substantially
the same basis as heretofore operated or which would restrict the ability of
Solmecs to acquire any property or conduct business in any area.
3.30 Information as to Solmecs. None of the representations
or warranties made by the Solmecs Shareholder in this Agreement is, or contained
in any of the Solmecs Documents to be executed and delivered hereto will be,
false or misleading with respect to any material fact, or omits to state any
material fact necessary in order to make the statements therein contained not
misleading.
3.31 Securities. The Solmecs Shareholder understands that
the Stock Consideration received by it pursuant to this Agreement consists of
SCNV Common Stock which will not be registered under the Securities Act of 1933,
as amended (the "Act"), or under applicable state securities laws, in reliance
upon exemptions contained in the Act and such laws and any applicable
regulations promulgated thereunder or interpretations thereof, and cannot be
offered for sale, sold or otherwise transferred unless such SCNV Common Stock is
subsequently so registered or qualifies for exemption from registration under
the Act and such applicable state securities laws; and the certificates of such
SCNV Common Stock shall bear an appropriate legend to that effect.
3.32 Qualification of Representations and Warranties.
Notwithstanding anything to the contrary contained herein, all of the
representations and warranties of Solmecs and the Solmecs Shareholder set forth
in this Article 3 (except for the representations and warranties set forth in
Sections 3.1, 3.2, 3.3, 3.4, 3.5 and 3.31), whether or not qualified, are made
and qualified to the "actual knowledge" of the Solmecs Shareholder and to the
"best knowledge" of Solmecs. The "actual knowledge" of the Solmecs Shareholder
shall mean the actual knowledge (i.e. not constructive knowledge) of the
officers and directors of the Solmecs Shareholder without independent
investigation. The "best knowledge" of Solmecs shall mean the actual knowledge
of Solmecs' directors without independent investigation and the actual knowledge
(i.e. not constructive knowledge) of the management of Solmecs after due
investigation.
4. Representations and Warranties as to SCNV. SCNV
represents and warrants to Solmecs and the Solmecs Shareholder as follows:
4.1 Organization, Standing and Power. SCNV is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and authority to own, lease and
operate its properties and to carry on its businesses as presently conducted by
it. There are no
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states or jurisdictions in which the character and location of any of the
properties owned or leased by SCNV, or the conduct of its business, makes it
necessary for it to qualify to do business as a foreign corporation.
4.2 Incorporation Documents and By-Laws. SCNV has
heretofore furnished, or will furnish to Solmecs, a complete and correct copy of
its Certificate of Incorporation and the By-Laws, each as amended to date. Such
organizational documents are in full force and effect. SCNV is not in violation
of any of the provisions of any of the aforesaid organizational documents.
4.3 Capitalization/Stock Consideration.
(a) The authorized capital stock of SCNV consists of
10,000,000 shares of SCNV Common Stock and 1,000,000 shares of preferred stock,
par value $.01 per share (none of which are outstanding or held in the treasury
of SCNV). As of the date hereof, the following shares of SCNV Common Stock are
issued or reserved for issuance: (i) 541,343 shares of SCNV Common Stock are
issued and outstanding, all of which are duly authorized, validly issued, fully
paid and nonassessable; (ii) up to 1,041,044 shares of SCNV Common Stock to be
issued pursuant to the Equity Financing (as defined in Section 6.12); (iii) up
to 1,041,044 shares of SCNV Common Stock to be reserved for future issuance upon
exercise of warrants of SCNV to be granted pursuant to the Equity Financing;
(iv) up to 208,208 shares of SCNV Common Stock to be reserved for future
issuance upon exercise of Unit Purchase Options (104,104) shares and 104,104
warrants) to be granted to the underwriter in connection with the Equity
Financing; and (v) 200,000 shares of SCNV Common Stock reserved for future
issuance upon exercise of stock options reserved for grant pursuant to the
Option Plan (as defined in Section 6.11(b) hereof). Except as set forth herein
or as contemplated by the transactions herein and the Equity Financing, there
are no options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock of
SCNV or any of its subsidiaries or obligating SCNV or any of its subsidiaries to
issue or sell any shares of capital stock of or other equity interests in SCNV
or any of its subsidiaries.
(b) The Stock Consideration, when issued, will be duly
authorized and validly issued, fully paid and non-assessable, will be delivered
hereunder free and clear of any liens, adverse claims, security interests,
pledges, mortgages, charges and encumbrances of any nature whatsoever, except
that the shares of SCNV Common Stock constituting the Stock Consideration will
be subject to restrictions on transfer pursuant to the Act or the laws of
applicable states and the terms of the Lock-Up Agreement (as hereinafter
defined).
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(c) After giving effect to the consummation of the
transactions contemplated hereby and the Equity Financing, SCNV Common Stock
issued pursuant to the Stock Consideration shall represent no less than
twenty-four percent (24%) of the issued and outstanding Common Stock as of the
date of the Closing Date; provided, however, that SCNV may issue up to an
additional 1,000,000 shares of SCNV Common Stock or units (containing up to an
additional 1,000,000 shares of the SCNV Common Stock) in connection with or
simultaneously with, and at a substantially similar valuation as, the Equity
Financing, in which case the SCNV Common Stock (and other stock outstanding
prior to such offering) would represent a proportionately lower percentage of
the SCNV Common Stock.
4.4 Authority. The execution and delivery by SCNV of this
Agreement and of each agreement to be executed and delivered by it pursuant
hereto (collectively, the "SCNV Documents"), the compliance by it with the
provisions hereof and thereof, and the consummation of the transactions
contemplated hereby and thereby, have been (and at the Closing Date will be)
duly and validly authorized by all necessary corporate action on the part of
SCNV, and SCNV has (and at the Closing Date will have) all necessary corporate
power and corporate authority with respect thereto. This Agreement is, and when
executed and delivered by SCNV each other SCNV Document will be, the valid and
binding obligation of SCNV to the extent it is a party thereto, in accordance
with the respective terms, thereof, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
rights of creditors generally and subject to the rules of law governing (and all
limitations on) specific performance, injunctive relief, and other equitable
remedies.
4.5 Noncontravention. Neither the execution and delivery by
SCNV of any SCNV Document, nor the consummation of any of the transactions
contemplated hereby or thereby, nor the performance by it of any of its
respective obligations hereunder or thereunder, will (nor with the giving of
notice or the lapse of time or both would) (a) conflict with or result in a
breach of any provision of the Certificates of Incorporation or By-Laws of SCNV,
or (b) give rise to a default, or any right of termination, cancellation or
acceleration, or otherwise be in conflict with, or result in a loss of
contractual benefits to, either of them, under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which either of them is a party or by which either
of them or their respective assets may be bound, or require any consent,
approval or notice under the terms of any such document or instrument, or (c)
violate any order, writ, injunction, decree, law, statute, rule or regulation of
any court or governmental authority which is applicable to either of them, or
(d) result in the creation or imposition of any lien, adverse claim,
restriction,
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charge or encumbrance upon any of their assets, or (e) interfere with or
otherwise adversely affect the ability of SCNV to carry on its business after
the Closing Date on substantially the same basis as is now conducted by it.
4.6 Information as to SCNV. (a) None of the representations or
warranties made by SCNV in this Agreement, or contained in any of the SCNV
Documents to be executed and delivered hereto if any, is or will be, false or
misleading with respect to any material fact, or omits to state any material
fact necessary in order to make the statements therein contained not misleading.
5. Indemnification.
5.1 Indemnification by the Solmecs Shareholder. Solmecs and
the Solmecs Shareholder, jointly and severally, hereby indemnifies and agrees to
defend and hold harmless SCNV from and against any and all losses, obligations,
deficiencies, liabilities, claims, damages, costs and expenses (including,
without limitation, the amount of any settlement entered into pursuant hereto,
and all reasonable legal and other expenses incurred in connection with the
investigation, prosecution or defense of any matter indemnified pursuant hereto)
which it may sustain, suffer or incur and which arise out of, are caused by,
relate to, or result or occur from or in connection with (i) any
misrepresentation of a material fact contained in any representation of Solmecs
and/or the Solmecs Shareholder, (ii) the breach by Solmecs or the Solmecs
Shareholder of any warranty or covenant made by either or both of them in any
Solmecs Document, or (iii) any claim, demand, suit, action, proceeding or
investigation whatsoever by any creditor or security holder of Solmecs or the
Solmecs Shareholder or any administrative or governmental entity or agency
relating to the consummation of the transactions contemplated herein. The
foregoing indemnification shall also apply to direct claims by SCNV against
Solmecs or the Solmecs Shareholder.
5.2 Indemnification by SCNV. SCNV indemnifies and agrees to
defend and hold harmless the Solmecs Shareholder from and against any and all
losses, obligations, deficiencies, liabilities, claims, damages, costs and
expenses (including, without limitation, the amount of any settlement entered
into pursuant hereto, and all reasonable legal and other expenses incurred in
connection with the investigation, prosecution or defense of any matter
indemnified pursuant hereto), which it may sustain, suffer or incur and which
arise out of, are caused by, relate to, or result or occur from or in connection
with (i) any misrepresentation of a material fact contained in any
representation of SCNV contained in, or the material breach by SCNV of any
warranty or covenant made by it in, any SCNV Document (ii) the breach by SCNV of
any warranty or covenant made by it in any SCNV Document, OR (iii) any claim,
demand, suit, action, proceeding or investigation whatsoever by any creditor or
securityholder of SCNV or administrative or
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governmental entity or agency relating to the consummation of the transactions
contemplated herein. The foregoing indemnification shall also apply to direct
claims by Solmecs Shareholder against SCNV.
5.3 Third Party Claims. If a claim by a third party is made
against any party or parties hereto and the party or parties against whom said
claim is made intends to seek indemnification with respect thereto under
Sections 5.1 or 5.2, the party or parties seeking such indemnification shall
promptly notify the indemnifying party or parties, in writing, of such claim,
providing such details of the claim (including the claimed amount) as are then
known; provided, however, that the failure to give such notice shall not affect
the rights of the indemnified party or parties hereunder except to the extent
that such failure materially and adversely affects the indemnifying party or
parties due to the inability to timely defend such action. The indemnifying
party or parties shall have 10 business days after said notice is given to
elect, by written notice given to the indemnified party or parties, to
undertake, conduct and control, through counsel of their own choosing (subject
to the consent of the indemnified party or parties, such consent not to be
unreasonably withheld) and at their sole risk and expense, the good faith
settlement or defense of such claim, and the indemnified party or parties shall
cooperate with the indemnifying parties in connection therewith; provided: (a)
all settlements require the prior reasonable consultation with the indemnified
party and the prior written consent of the indemnified party, which consent
shall not be unreasonably withheld, and (b) the indemnified party or parties
shall be entitled to participate in such settlement or defense through counsel
chosen by the indemnified party or parties, provided that the fees and expenses
of such counsel shall be borne by the indemnified party or parties. So long as
the indemnifying party or parties are contesting any such claim in good faith,
the indemnified party or parties shall not pay or settle any such claim;
provided, however, that notwithstanding the foregoing, the indemnified party or
parties shall have the right to pay or settle any such claim at any time,
provided that in such event they shall waive any right of indemnification
therefor by the indemnifying party or parties. If the indemnifying party or
parties do not make a timely election to undertake the good faith defense or
settlement of the claim as aforesaid, or if the indemnifying parties fail to
proceed with the good faith defense or settlement of the matter after making
such election, then, in either such event, the indemnified party or parties
shall have the right to contest, settle or compromise (provided that all
settlements or compromises require the prior reasonable consultation with the
indemnifying party and the prior written consent of the indemnifying party,
which consent shall not be unreasonably withheld) the claim at their exclusive
discretion, at the risk and expense of the indemnifying parties.
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5.4 Assistance. Regardless of which party is controlling the
defense of any claim, each party shall act in good faith and shall provide
reasonable documents and cooperation to the party handling the defense.
5.5 Limitations.
(a) Notwithstanding anything to the contrary
contained herein, SCNV hereby agrees that:
(i) the sole remedy (at law or in equity) that
SCNV may pursue against the Solmecs Shareholder for any claims or
causes of action arising out of or based upon this Agreement or the
transactions contemplated hereby shall be pursuant to the
indemnification provisions of this Article 5;
(ii) the indemnification obligations of the
Solmecs Shareholder pursuant to this Article 5 are nonrecourse
against the Solmecs Shareholder, and are limited solely to the
surrender of shares of SCNV which comprise the Stock Consideration,
based on the market value (defined below) of SCNV shares as of the
surrender date; and
(iii) SCNV hereby waives any claim or cause of
action (at law or equity) arising out of or based upon this
Agreement and the transactions contemplated hereby that it may now
or hereafter have against any officer, director, employee or agent
of Solmecs and the Solmecs Shareholder.
(b) For the purpose of any computation under
Subsection (a) above, the market value of SCNV shares at any date shall be
deemed to be the average of the daily closing prices for 30 consecutive business
days before such date. The closing price for each day shall be the last sale
price regular way or, in case no such reported sale takes place on such day, the
average of the last reported bid and asked prices regular way, in either case on
the principal national securities exchange on which the SCNV share are admitted
to trading or listed, or if not listed or admitted to trading on such exchange,
the average of the highest report bid and lowest reported asked prices as
reported by the Nasdaq Stock Market, or other similar organization if the Nasdaq
Stock Market is no longer reporting such information, or if not so available,
the fair market price as determined by appraisal (without any discount for
minority interest) by an independent appraiser to be selected by mutual
agreement of SCNV and the Solmecs Shareholder.
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6. Covenants
6.1 Investigation. Between the date hereof and the earlier of
the Closing Date or the termination date of this Agreement, SCNV, on the one
hand, and Solmecs and/or the Solmecs Shareholder, on the other hand, may,
directly and through their representatives, make such investigation of each
other corporate party and their respective businesses and assets of the other
corporate party or parties as each deems necessary or advisable (the entity
and/or its representatives making such investigation being the "Investigating
Party"). In furtherance of the foregoing, the Investigating Party shall have
reasonable access, during normal business hours after the date hereof, to all
properties, books, contracts, commitments and records of each other, and shall
furnish to the other and their representatives such financial and operating data
and other information as may from time to time be reasonably requested relating
to the transactions contemplated by this Agreement. SCNV, on the one hand, and
Solmecs and the Solmecs Shareholder, on the other, and the respective
management, employees, accountants and attorneys of the corporate parties shall
cooperate fully with the Investigating Party in connection with such
investigation. Notwithstanding anything to the contrary contained herein, if the
Solmecs Shareholder conclusively demonstrates that any of the executive officers
of SCNV had actual knowledge that any of the representations and warranties of
Solmecs or the Solmecs Shareholder contained herein are not correct and elects
to close the transaction despite such knowledge, then SCNV shall be deemed to
have waived any claim or cause of action directly arising from such waived
representation and warranty.
6.2 Consummation of Transaction. Each of the parties hereto
hereby agrees to use all reasonable efforts to cause all conditions precedent to
its obligations (and to the obligations of the other parties hereto to
consummate the transactions contemplated hereby) to be satisfied, including, but
not limited to, using all reasonable efforts to obtain all required (if so
required by this Agreement) consents, waivers, amendments, modifications,
approvals, authorizations, novations and licenses; provided, however, that
nothing herein contained shall be deemed to modify any of the absolute
obligations imposed upon any of the parties hereto under this Agreement or any
agreement executed and delivered pursuant hereto.
6.3 Cooperation/Further Assurances.
(a) Each of the parties hereto hereby agrees
to fully cooperate with the other parties hereto in preparing and filing any
notices, applications, reports and other instruments and documents which are
required by, or which are desirable in the reasonable opinion of any of the
parties hereto, or their respective legal counsel, in respect of, any statute,
rule,
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regulation or order of any governmental or administrative body in connection
with the transactions contemplated by this Agreement.
(b) Each of the parties hereto hereby further
agrees to execute, acknowledge, deliver, file and/or record, or cause such other
parties to the extent permitted by law to execute, acknowledge, deliver, file
and/or record such other documents as may be required by this Agreement and as
SCNV, on the one hand, and/or Solmecs and/or the Solmecs Shareholder, on the
other, or their respective legal counsel may reasonably require in order to
document and carry out the transactions contemplated by this Agreement.
6.4 Accuracy of Representations. Each of the parties hereto
agrees that prior to the Closing Date it will enter into no transaction and take
no action, and will use its best efforts to prevent the occurrence of any event
(but excluding events which occur in the ordinary course of business and events
over which such party has no control), which would result in any of its
representations, warranties or covenants contained in this Agreement or in any
agreement, document or instrument executed and delivered by it pursuant hereto
not to be true and correct, or not to be performed as contemplated, at and as of
the time immediately after the occurrence of such transaction or event.
6.5 Notification of Certain Matters. Solmecs and the Solmecs
Shareholder shall give prompt notice to SCNV, and SCNV shall give prompt notice
to Solmecs and the Solmecs Shareholder, as the case may be, of any of the
following events that become know to such parties: (a) the occurrence, or
nonoccurrence, or any event the occurrence, or nonoccurrence, of which would be
likely to cause any representation contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing Date and (b) any
material failure of Solmecs and/or the Solmecs Shareholder, on the one hand, and
of SCNV, on the other, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by him or it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 6.5 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
6.6 Broker. Each of SCNV, Solmecs and the Solmecs Shareholder
represents and warrants to the other parties that no broker or finder was
engaged or dealt with in connection with any of the transactions contemplated by
this Agreement, and each of the parties shall indemnify and hold the other
harmless from and against any and all claims or liabilities asserted by or on
behalf of any alleged broker or finder for broker's fees, finder's fees,
commissions or like payments.
6.7 No Solicitation of Transactions. Prior to the earlier of
the Closing Date or the termination of this
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Agreement in accordance with its terms, neither Solmecs nor the Solmecs
Shareholder will, directly or indirectly, through any officer, director,
employee, investment banker, accountant, agent, other representative or
otherwise, solicit, initiate or encourage the submission of proposals or offers
from any entity or individual relating to any acquisition or purchase of all or
(other than in the ordinary course of business) any portion of the Assets or the
Business of, or any equity interest in, Solmecs (other than the transactions
contemplated hereby), or any business combination with Solmecs and other than
with SCNV, participate in any negotiations regarding, or furnish to any other
entity or individual any information with respect to, or otherwise cooperate in
any way with, or assist or participate in, facilitate or encourage, any effort
or attempt by any other person to do or seek any of the foregoing. Solmecs and
the Solmecs Shareholder shall immediately cease and cause to be terminated any
existing discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing (other than in respect of the transaction
contemplated hereby). Solmecs or the Solmecs Shareholder shall promptly notify
SCNV if any such proposal or offer, or any inquiry or contact with any entity or
individual with respect thereto, is made and shall, in any such notice to SCNV,
indicate in reasonable detail the identity of the offeror and the terms and
conditions of any proposal or offer.
6.8 Management and Administrative Matters. SCNV shall,
effective at the Closing, take any and all steps or actions reasonably necessary
to effect the following:
(a) an increase in the number of directors
constituting the board of directors of Solmecs to five (5) and the nomination
and appointment of Herman Branover, Emmanuel Althaus, each of the designees of
Batei Sefer Limlacher and Patterson Travis, Inc. and one (1) other director to
serve on the Board of Directors of Solmecs until their respective successors are
duly elected and qualified, with each to hold office in accordance with the
Certificate of Incorporation and By-Laws of Solmecs.
(b) adoption of a stock option plan (the
"Option Plan") permitting the issuance of options to purchase up to 200,000
shares of SCNV Common Stock to officers, directors, employees and other persons
eligible to receive options under such Option Plan.
6.9 Equity Financing. SCNV shall use its best reasonable
efforts to negotiate, prepare and enter into such agreements, as well as to take
or cause to be taken such actions, as are necessary and proper to promptly
effectuate a public offering of approximately fifty percent (50%) of the shares
of SCNV Common Stock (the "Equity Financing"), resulting in funding in the
amount of at least $5,900,000. Solmecs and the Solmecs Shareholder shall
cooperate on a reasonable basis with SCNV, at SCNV's expense,
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to provide information deemed necessary or advisable by SCNV to be included in
connection with the Equity Financing.
6.10 Capital Contribution. Prior to the Closing, the Solmecs
Shareholder shall have forgiven all indebtedness owing by Solmecs to the Solmecs
Shareholder as a capital contribution to Solmecs (the "Capital Contribution").
6.11 Prohibited Conduct. Each of Solmecs and the Solmecs
Shareholder covenants and agrees that, during the period from the date hereof to
the Closing Date, except pursuant to the terms hereof or unless SCNV shall
otherwise agree in writing, the Business shall be conducted only, and Solmecs
shall not take any action except, in the ordinary course of business and in a
manner consistent with past practice and in compliance with applicable laws; and
Solmecs shall use its reasonable efforts to preserve intact its Assets, the
Business and the business organization of Solmecs, to keep available the
services of the present officers, employees and consultants of Solmecs, and to
preserve the present relationships of Solmecs with customers, suppliers and
other entities or individuals with whom Solmecs has business relations. By way
of illustration, and not limitation, neither Solmecs or the Solmecs Shareholder
shall, between the date of this Agreement and the Closing Date, directly or
indirectly do, or propose or commit to do, any of the following without the
prior written consent of SCNV:
(a) (i) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of the Solmecs Stock, or (ii)
split, combine or reclassify any of the Solmecs Stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of the Solmecs Stock, or otherwise;
(b) authorize for issuance, issue, deliver, sell or
agree to commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase or
otherwise), pledge or otherwise encumber, any shares of Solmecs Stock, any other
voting securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities convertible securities or
any other securities or equity equivalents;
(c) (i) increase the compensation payable or to become
payable to any officer, director, employees or consultant of Solmecs, except
pursuant to the terms of contracts, policies or benefit arrangements in effect
on the date hereof, or (ii) grant any severance or termination pay to, or enter
into any employment or severance agreement with, any director, officer, other
employee or consultant of Solmecs or any of its subsidiaries, except pursuant to
the terms of contracts, policies and benefit
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arrangements in effect on the date hereof, or (iii) establish, adopt, enter into
or amend any collective bargaining (other than in accordance with past
practice), bonus, profit sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any directors, officers, employees or consultants of Solmecs;
(d) amend the organizational and charter documents of
Solmecs or alter through merger, liquidation, reorganization, restructuring, or
in any other fashion, the corporate structure or ownership of Solmecs;
(e) acquire, or agree to acquire, (i) by merging or
consolidating with, or by purchasing a substantial portion of the stock or
assets of, or by any other manner, any business or corporation, partnership,
joint venture, association or other business organization or division thereof,
or (ii) any assets that are material, individually or in the aggregate, to
Solmecs;
(f) sell, lease, license, mortgage or otherwise encumber
or subject to any lien, security interest, pledge or encumbrance or otherwise
dispose of any of the Assets, except sales in the ordinary course of business
consistent with past practice;
(g) permit (i) Solmecs to incur any indebtedness for
borrowed money or guarantee any such indebtedness of another entity or
individual, issue or sell any debt securities or warrants or other rights to
acquire any debt securities of Solmecs, guarantee any debt securities of another
entity or individual, or enter into any arrangement having the economic effect
of any of the foregoing, except for short-term borrowings incurred in the
ordinary course of business consistent with past practice, or (ii) the Solmecs
Shareholder to issue any guaranties of any indebtedness of Solmecs;
(h) except in the ordinary course of business, enter
into any agreement, contract, commitment, involving a commitment on the part of
Solmecs to purchase, sell, lease or otherwise dispose of assets or require
payment by Solmecs in excess of $25,000;
(i) adopt a plan of complete or partial liquidation of
Solmecs or resolutions providing for or authorizing such a liquidation or the
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization of Solmecs;
(j) cause Solmecs to recognize any labor union (unless
legally required to do so) or enter into or amend any collective bargaining
agreement;
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(k) change any accounting principles used by Solmecs;
(l) make any tax election of, or settle, compromise any
income tax liability of, or prescribed by law, in the case of any of the
foregoing, material to the business, financial condition or results of the
operations of Solmecs and its Subsidiaries, if any, taken as a whole;
(m) settle or compromise any litigation in which any of
Solmecs is a defendant (whether or not commenced prior to the date of this
Agreement) or settle, pay or compromise any claims not required to be paid,
which payments are individually in an amount in excess of $10,000 and in the
aggregate in an amount in excess of $30,000; and
(n) authorize any of, or commit or agree to take any of,
the foregoing actions.
Notwithstanding anything to the contrary contained herein, the
Solmecs Shareholder shall not be obligated to, and may discontinue at any time,
providing funds to Solmecs for its working capital or other requirements.
6.12 Public Announcements. SCNV and the Solmecs Shareholder
will consult with each other before issuing any press release or making any
public statement with respect to this Agreement and the transactions
contemplated hereby and, except as may be required by applicable law, will not
issue any such press release or make any such public statement (other than in
response to unsolicited inquiries) prior to such consultation. The Solmecs
Shareholder will consult with SCNV before issuing any other press release or
making any public statement relating to this Agreement or Solmecs and will not
issue any such press release or make any such public statement without SCNV's
prior consent.
6.13 Information Statement. SCNV shall cooperate with and
assist the Solmecs Shareholder in the preparation and processing of the Solmecs
Shareholder's preliminary information statement and the definitive information
statement and all amendments thereof or supplements thereto, if any, in all
reasonable respects requested by the Solmecs Shareholder and will furnish to the
Solmecs Shareholder information relating to SCNV and its affiliates, and SCNV's
plans for Solmecs after the Closing to the extent such information is required
to be set forth therein under the Securities Exchange Act or the rules and
regulations thereunder. If at any time prior to the Closing any event should
occur relating to SCNV or its affiliates which should be set forth in an
amendment of, or a supplement to, the definitive information statement, SCNV
will promptly inform the Solmecs Shareholders and will furnish all necessary
information with respect thereto. Prior to the completion of a definitive
information statement, SCNV shall
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have the right to conduct a reasonable review of the same, to request reasonable
changes and to approve portions of the information statement with respect to the
accuracy of information relating to SCNV.
7. Nondisclosure/Non-Compete.
7.1 Nondisclosure.
(a) As used herein, the term "Confidential Information"
shall mean any and all information (oral and written) relating to the Business
or the Assets, other than such information which can be shown by the Solmecs
Shareholder or SCNV, as the case may be, to be in the public domain (such
information not being deemed to be in the public domain merely because it is
embraced by more general information which is in the public domain) other than
as the result of a breach of the provisions of subparagraph below, including,
but not limited to, information relating to: identity and description of goods
and services used; technology; research; test procedures and results; formulae,
customers and prospects; marketing; and selling and servicing.
(b) Following the execution hereof, SCNV and the Solmecs
Shareholder hereby agree not to, at any time, directly or indirectly, use,
communicate, disclose or disseminate any Confidential Information in any manner
whatsoever.
7.2 Non-Compete Covenant. The Solmecs Shareholder shall not
without the prior written consent of SCNV, during the two (2) year period
commencing on the Closing Date, directly or indirectly, within any country,
state or community in which SCNV is engaged in the Business, (a) engage or
become interested in any entity (each, a "restricted entity") (whether as owner,
manager, operator, licensor, licensee, lender, partner, stockholder, joint
venturer, employee, consultant or otherwise) which primarily engages in,
commercial activities related to SCNV's Business, or for which SCNV engages in
research and development, during such two (2) year period or (b) take any other
action which constitutes an interference with or a disruption of SCNV's Business
including, without limitation, the solicitations of SCNV's customers or
employees or any independent contractors of SCNV. For the purpose of this
Agreement, restricted entity shall not include SCNV or its affiliates.
Notwithstanding the foregoing, the Solmecs Shareholders shall be permitted to
own not more than l% of any class of securities which is registered under the
Securities Exchange Act of 1934, as amended; provided, however, that said l%
limitation shall apply to the aggregate holdings of the Solmecs Shareholder and
those of all other persons and entities with whom it has agreed to act for the
purpose of acquiring, holding, voting or disposing of such securities.
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For purposes of clarification, but not of limitation, the Solmecs
Shareholder hereby acknowledges and agrees that the provisions of this Section
7.2 shall serve as a prohibition against it, during the period described
therein, directly or indirectly, hiring, offering to hire, enticing away or in
any other manner persuading or attempting to persuade any officer, employee,
agent, lessor, lessee, licensor, licensee, customer, prospective customer or
supplier of the Business to discontinue or alter its relationship with the
Business.
7.3 No Disparagement. At no time during the term of this
Agreement, or thereafter shall any party hereto directly or indirectly,
disparage the commercial, business or financial reputation of any other party.
7.4 Injunctive Relief, etc. The parties hereto hereby
acknowledge and agree that (a) SCNV would be irreparably injured in the event of
a breach by the Solmecs Shareholder of any of its obligations under this Section
7 with respect to unauthorized disclosure of Confidential Information or
engaging in activities in violation of this Section 7, (b) monetary damages
would not be an adequate remedy for any such breach, and (c) the applicable
party shall be entitled to injunctive relief, in addition to any other remedy
which it may have, in the event of any such breach. It is hereby also agreed
that the existence of any claims which the Solmecs Shareholder may have against
SCNV, whether under this Agreement or otherwise, shall not be a defense to the
enforcement by SCNV of any of its rights under this Section 7.
7.5 Scope of Restriction. It is the intent of the parties
hereto that the covenants contained in this Section 7 shall be enforced to the
fullest extent permissible under the laws of and public policies of each
jurisdiction in which enforcement is sought (the Solmecs Shareholder and SCNV
hereby acknowledging that said restrictions are reasonably necessary for the
protection of SCNV). Accordingly, it is hereby agreed that if any one or more of
the provisions of this Section 7 shall be adjudicated to be invalid or
unenforceable for any reason whatsoever, said provision shall be (only with
respect to the operation thereof in the particular jurisdiction in which such
adjudication is made) construed by limiting and reducing it so as to be
enforceable to the extent permissible.
8. Conditions of Purchase and Sale.
8.1 Conditions to Obligations of SCNV to Purchase the Solmecs
Stock. The obligations of SCNV to purchase the Solmecs Stock shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
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(a) Accuracy of Representations and Warranties. The
representations and warranties of each of Solmecs and the Solmecs Shareholder
contained in any Solmecs Document delivered by either or both of them shall have
been true when made, and, in addition, shall be true in all material respects on
and as of the Closing Date with the same force and effect as though made on and
as of the Closing Date.
(b) Performance of Agreements. Each of Solmecs and the
Solmecs Shareholder, as the case may be, shall have performed, observed and
complied in all material respects with all of their obligations, covenants and
agreements, and shall have satisfied or fulfilled in all material respects
conditions contained in any Solmecs Document and required to be performed,
observed or complied with, or to be satisfied or fulfilled, by Solmecs and/or
the Solmecs Shareholder at or prior to the Closing Date.
(c) Opinion of Counsel for Solmecs and Solmecs
Shareholder. SCNV shall have received opinions of Phillips Nizer Benjamin Krim &
Ballon LLP and local counsel, as applicable, for Solmecs and the Solmecs
Shareholder, dated the Closing Date, in substantially the form of Exhibit 8.1(c)
hereto.
(d) Litigation. No order of any court or administrative
agency shall be in effect which restrains or prohibits the transactions
contemplated hereby, and no claim, suit, action, inquiry, investigation or
proceeding in which it will be, or it is, sought to restrain, prohibit or change
the terms of or obtain damages or other relief in connection with this Agreement
or any of the transactions contemplated hereby, shall have been instituted or
threatened by any entity or individual, and which, in the reasonable judgment of
SCNV (based on the likelihood of success and material consequences of such
claim, suit, action, inquiry or proceeding), makes it inadvisable to proceed
with the consummation of such transactions.
(e) Consents and Approvals. All consents, waivers,
approvals, licenses and authorizations by third parties and governmental and
administrative authorities (and all amendments or modifications to existing
agreements with third parties) required as a precondition to the performance by
Solmecs and the Solmecs Shareholder of their respective obligations hereunder
and under any agreement delivered pursuant hereto, or which in SCNV's reasonable
judgment are necessary to continue unimpaired, subsequent to the Closing Date,
any rights in and to the Assets and/or the Business which could be impaired by
the transactions contemplated hereby, shall have been duly obtained and shall be
in full force and effect.
(f) Validity of Transactions. The validity of all
transactions contemplated hereby, as well as the form and
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substance of all agreements, instruments, opinions, certificates and other
documents delivered by Solmecs and Solmecs Shareholder pursuant hereto, shall be
satisfactory in all material respects to SCNV and its counsel.
(g) No Material Adverse Change. From June 30, 1996 to
the Closing Date, Solmecs shall not have suffered, in the reasonable judgment of
SCNV, a material adverse change in the financial or business condition of
Solmecs, taken as a whole.
(h) Equity Financing. Consummation of the Equity
Financing with gross proceeds in an amount not less than $5,900,000.
(i) Employment Agreement. Branover shall have executed
and delivered to SCNV an employment agreement substantially in the form of
Exhibit 8.1(i) hereto (the "Employment Agreement").
(j) Lock-Up Agreement. The Solmecs Shareholder shall
have executed a lock-up agreement substantially in the form of Exhibit 8.1(j)
hereto (the "Lock-Up Agreement").
(k) Registration Rights Agreement. The Solmecs
Shareholder shall have executed a registration rights agreement, substantially
in the form of Exhibit 8.1(k) hereto (the "Registration Rights Agreement"),
binding upon the stockholders of the Solmecs Shareholder in the event tax
considerations compel a "spin off" of the Stock Consideration.
(l) Solmecs Shareholder Consent. The Solmecs Shareholder
shall have consented to the resolutions of the Board of Directors of Solmecs
approving and authorizing such steps as necessary to consummate this Agreement.
(m) Capital Contribution. The Solmecs Shareholder shall
have forgiven Solmecs' indebtedness as a Capital Contribution.
(n) No Adverse Decision. There shall not be any action
taken or threatened, or any statute, rule, regulation or order enacted, entered,
threatened, or deemed applicable to the transactions contemplated hereby, by any
governmental entity or regulatory authority or court that, whether in connection
with the grant of a requisite regulatory approval, any agreement proposed by any
governmental entity or regulatory authority, or otherwise, which (i) requires or
could reasonably be expected to require any divestiture by Solmecs or SCNV of a
portion of the Business that SCNV, in its reasonable judgment, believes will
have materially adverse effect on SCNV or (ii) imposes any condition upon
Solmecs that in SCNV's reasonable judgment (x) would be materially burdensome to
Solmecs to (y) would materially increase the costs
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incurred or that will be incurred by SCNV as a result of consummating the
transactions contemplated hereby.
8.2 Conditions to Obligations of Solmecs and the Solmecs
Shareholder to Sell the Solmecs Stock. The obligations of Solmecs and the
Solmecs Shareholder to sale the Solmecs Stock shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of SCNV contained in any SCNV Documents delivered
by SCNV shall have been true when made, and, in addition, shall be true in all
material respects, on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date.
(b) Performance of Agreements. SCNV shall have
performed, observed and complied, in all material respects, with all
obligations, covenants and agreements, and shall have satisfied or fulfilled in
all material respects all conditions contained in any SCNV Document and required
to be performed, observed or complied with, or satisfied or fulfilled, by either
or both of them at or prior to the Closing Date.
(c) Opinion of Counsel for SCNV. Solmecs and the Solmecs
Shareholder shall have received an opinion of Tenzer Greenblatt LLP, counsel for
SCNV, dated the Closing Date, in substantially the form of Exhibit 8.2(c)
attached hereto and made a part hereof.
(d) Litigation. No order of any court or administrative
agency shall be in effect which restrains or prohibits the transactions
contemplated hereby, and no claim, suit, action, inquiry, investigation or
proceeding in which it will be, or it is, sought to restrain, prohibit or change
the terms of or obtain damages or other relief in connection with this Agreement
or any of the transactions contemplated hereby shall have been instituted or
threatened by any entity or individual, and which in the reasonable judgment of
Solmecs and the Solmecs Shareholder (based on the likelihood of success and
material consequences of such claim, suit, action, inquiry or proceeding), makes
it inadvisable to proceed with the consummation of such transactions.
(e) Consents and Approvals. All consents, waivers,
approvals, licenses and authorizations by third parties and governmental and
administrative authorities (and all amendments and modifications to existing
agreements with third parties) required as a precondition to the performance by
SCNV of its obligations hereunder and under any agreement delivered pursuant
hereto, shall have been duly obtained and shall be in full force and effect.
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(f) Equity Financing. Consummation of the Equity
Financing, resulting in the receipt by SCNV of gross proceeds in an amount not
less than $5,900,000.
(g) Registration Rights Agreement. SCNV shall have
executed and delivered the Registration Rights Agreement.
(h) Shareholder Approval. The shareholders of the
Solmecs Shareholder shall have consented to the transactions herein by the
affirmative vote of a majority of such shareholders.
(i) Validity of Transactions. The validity of all
transactions contemplated hereby, as well as the form and substance of all
agreements, instruments, opinions, certificates and other documents delivered by
SCNV pursuant hereto, shall be satisfactory in all material respects to Solmecs
and the Solmecs Shareholder and their counsel.
9. The Closing. Unless this Agreement shall have been terminated and
the transactions contemplated hereby shall have been abandoned pursuant to
Article 10, the closing of the Merger (the "Closing") will take place at the
offices of counsel for the underwriters utilized in connection with the Equity
Financing, having offices at 120 West 45th Street, New York, New York, as
promptly as practicable (and in any event within five business days) after
satisfaction or waiver of the conditions set forth in Article 8 hereof (the
"Closing Date"); or such later date as shall have been fixed by a written
instrument signed by the parties.
9.1 Deliveries by SCNV at the Closing. At the
Closing, SCNV shall deliver the following:
(a) stock certificate(s), registered in the name of the
Solmecs Shareholder, representing the Stock Consideration;
(b) closing certificate from SCNV, executed by their
respective presidents, dated the Closing Date, to the effect that all the
representations and warranties of SCNV are true and complete in all material
respects and all covenants to be performed by SCNV at or as of the Closing have
been performed in all material respects and conditions to be satisfied at or as
of the Closing have been waived or satisfied in all material respects;
(c) certificates of the Secretary or Assistant Secretary
of SCNV certifying as to the incumbency and specimen signatures of the officers
of SCNV executing the SCNV Documents on behalf of such corporation; and
(d) the Registration Rights Agreement, duly executed by
SCNV.
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9.2 Deliveries by Solmecs and/or the Solmecs Shareholder at
the Closing. At the Closing, Solmecs and/or the Solmecs Shareholder, as
applicable, shall deliver to SCNV the following:
(a) stock certificate(s) representing all of the Solmecs
Stock issued and outstanding, which certificates shall be endorsed in blank or
accompanied by stock powers endorsed in blank and accompanied by the requisite
stock transfer stamps;
(b) a copy of the resolutions of the Board of Directors
of Solmecs, and the written consent of the Solmecs Shareholder, authorizing
Solmecs to execute and deliver the Solmecs Documents, to perform its obligations
thereunder and to effect the Merger, duly certified by the Secretary or
assistant Secretary of Solmecs;
(c) closing certificates from each of Solmecs and the
Solmecs Shareholder, dated the Closing Date, to the effect that all the
representations and warranties of Solmecs and the Solmecs Shareholder are true
and complete in all material respects and all covenants to be performed by
Solmecs and the Solmecs Shareholder at or as of the Closing have been performed
in all material respects and conditions to be satisfied at or as of the Closing
have been waived or satisfied in all material respects;
(d) Certificates of the Secretary or Assistant Secretary
of Solmecs certifying as to the incumbency and specimen signatures of the
officers of Solmecs executing the Solmecs Documents on behalf of such
corporation;
(e) the Lock-up Agreement, duly executed by the Solmecs
Shareholder; and
(f) the minute books and other corporate records of
Solmecs as well as the bank account records and other information pertaining to
the banking activities of Solmecs.
9.3 Other Deliveries. In addition, the parties shall execute
and deliver such other documents as may be required by this Agreement and as
either of them or their respective counsel may reasonably require in order to
document and carry out the transactions contemplated by this Agreement, in the
form satisfactory to the parties hereto.
10. Termination, Amendment and Waiver.
10.1 Termination. Subject to the cure period provided for in
Section 10.1(e), this Agreement may be terminated at any time prior to the
Closing Date:
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(a) By mutual consent of the Boards of Directors of SCNV
and Solmecs; or
(b) By SCNV, on the one hand, or by Solmecs, on the
other hand, if, in the reasonable judgment of SCNV or Solmecs, as the case may
be, (and provided such parties are not then in material breach of their
respective obligations hereunder), it shall have been determined that the
transaction contemplated by this Agreement has become inadvisable or
impracticable by reason of the institution or threat by state, local or federal
governmental authorities or by any other entity or individual of material
litigation or proceedings against SCNV or Solmecs.
(c) By SCNV, if, in the reasonable judgment of SCNV, it
shall be determined that the business or assets or financial condition of
Solmecs has been materially and adversely affected since June 30, 1996, whether
by reason of changes, developments or operations in the normal course of
business or otherwise.
(d) In the event SCNV, on the one hand, or Solmecs, on
the other hand breaches or otherwise fails to perform any material part of this
Agreement, then the other party (or parties) hereto not in breach shall notify
in (writing) the party in material breach and demand that such material breach
or such material failure to perform be corrected within a stipulated period,
which period shall not be less than ten (10) days following notification. If the
party (or parties) in material breach fails to correct the material breach with
the period stated in the written notice of demand for correction, the other
party (or parties) may, in its (or their) sole discretion, immediately terminate
this Agreement by giving the party (or parties) in material breach written
notice of termination.
(e) By either SCNV or the Solmecs Shareholder, if the
closing shall not have occurred prior to June 30, 1998.
10.2 Effect of Termination. In the event of the termination of
this Agreement as provided in this Article 10, this Agreement shall, except with
respect to Section 10.3, forthwith become null and void and there shall be no
liability on the part of any party hereto and nothing herein shall relieve any
party from liability for any wilful breach hereof.
10.3 Fees and Expenses. Each of the parties hereto shall be
responsible for, and shall pay, its or his respective fees and expenses incurred
by such party in connection with the transactions contemplated by this
Agreement.
10.4 Amendment. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
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10.5 Waiver. At any time prior to the Closing Date, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
11. Survival of Representations and Warranties.
Each of the parties hereto hereby agrees that all representations
and warranties made by or on behalf of him or it in this Agreement or in any
document or instrument delivered pursuant hereto shall survive for eighteen (18)
months after the Closing Date and thereafter shall terminate, except for the
representations and warranties contained in Sections 3.13 and 3.15, which shall
survive for twenty-four (24) months after the Closing Date and thereafter shall
terminate.
12. General Provisions.
12.1 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered, if delivered personally, or one (1)
business day after having been deposited with courier, if sent by overnight
courier, or after being sent by telecopy, if sent by telecopy (receipt
confirmed), or as of the date delivered, if mailed by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows (or at
such other address for a party as shall be specified by like notice, except that
notices of change of address shall be effective upon receipt):
If to SCNV: SCNV Acquisition Corp.
Omer Industrial Park
P.O. Box 3026
Omer, Israel 84965
Attn: Herman Branover, President
Telecopier:
with a copy to: Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attn: Emanuel Adler, Esq.
Telecopier: (212) 885-5001
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If to Solmecs: Solmecs Corporation N.V.
c/o Bayou International Ltd.
Level 8, 580 St. Kilda Road
Melbourne, Victoria 3004
AUSTRALIA
Attn: Peter Lee
Telecopier: 011-61-39-95102248
with a copy to: Phillips Nizer Benjamin
Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103
Attn: Brian Brodrick, Esq.
Telecopier:
If to Solmecs Shareholder: Bayou International Ltd.
Level 8, 580 St. Kilda Road
Melbourne, Victoria 3004
AUSTRALIA
Attn: Peter Lee
Telecopier: 011-61-39-95102248
with a copy to: Phillips Nizer Benjamin
Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103
Attn: Brian Brodrick, Esq.
Telecopier:
12.2 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the greatest extent
possible.
12.3 Entire Agreement. This Agreement and the agreements
referred to herein constitute the entire agreement, and supersede all prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof.
12.4 No Assignment. This Agreement shall not be assigned by
operation of law or otherwise, and any assignment shall be null and void.
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12.5 Headings. Headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
12.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York, without regard
to its choice of law principles, except as Delaware General Corporation Law
mandatorily applies.
12.7 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original, but all of
which taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of SCNV and Solmecs, by their respective
officers thereunto duly authorized, and the Solmecs Shareholder, individually,
has caused this Agreement to be executed as of the date first written above.
SCNV ACQUISITION CORP.
By:___________________________
, President
SOLMECS CORPORATION N.V.
By:___________________________
, President
BAYOU INTERNATIONAL LTD.
By:___________________________
, President
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INDEX OF EXHIBITS AND SCHEDULES
PAGE
EXHIBITS
Exhibit 6.6 Lock-Up Agreement.............................................. 28
Exhibit 6.7 Registration Rights Agreement.................................. 28
Exhibit 6.11 Employment Agreement.......................................... 30
Exhibit 8.1(c) Opinion of Phillips Nizer .................................. 33
Exhibit 8.2(c) Opinion of Tenzer Greenblatt LLP............................ 35
Schedules
Schedule 3.9 Real and Tangible Property.................................... 8
Schedule 3.13 Intangibles.................................................. 11
Schedule 3.15 Insurance.................................................... 13
Schedule 3.16 Banks; Power of Attorneys.................................... 14
Schedule 3.17 Employee Agreements.......................................... 14
Schedule 3.20 Customers/Suppliers.......................................... 16
Schedule 3.21 Licenses..................................................... 17
Schedule 3.22 Certain Business Matters..................................... 17
Schedule 3.23 Contracts....................................................
Schedule 3.25 Business Practices and Commitments........................... 19
Schedule 3.26 Approvals/Consents........................................... 19
Schedule 4.2 Subsidiaries.................................................. 20
Schedule 4.3 Noncontravention.............................................. 22
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