SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8 KSB A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
June 15, 1998
(Date of Report)
CNH Holdings Company
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
0 17304 11 2867201
(Commission File Number) (IRS Employer Identification Number)
P.O. Box 832, Kilgore, Texas 75663
(Address of principal executive offices including zip code)
(903) 984 6425
(Registrant's telephone number including area code)
17659 Sun Meadow Drive, Dallas, Texas 75252
(Former name or former address, if changed since last report)
<PAGE>
Item 1. Change in Control of Registrant.
On June 15, 1998, CNH Holdings Company, a Nevada corporation (the Company),
entered into a reorganization agreement (the Reorganization Agreement) with
Southport Environmental and Development, Inc., a Texas corporation (SEDI), and
the shareholders of SEDI pursuant to which the Company acquired all of the
outstanding proprietary interest of SEDI in a share for share exchange which
resulted in SEDI becoming a wholly owned subsidiary of the Company and the
shareholders of SEDI acquiring control of the Company through their share
ownership. The Company issued 6,000,000 common shares and 200,000 shares of the
Class A: 10% Dividend Bearing Preferred Stock of the Company. Pursuant to the
Reorganization Agreement, the existing director, Mr. Paul M. Lionti, resigned,
and the Company appointed Messrs. Larry V. Tate, Gerald Pybas, H. Paul Estey, E.
Robert Barbee and Terry McFarland as directors. Mr. Tate was then appointed CEO,
Mr. Pybas President, and Ms. Helen Wallace Treasurer.
On June 15, 1998, and to the date of this report, SEDI owned and/or operated
working and other interests in oil and gas properties in east Texas. SEDI, at
June 15, 1998, also owned a 1/3rd interest in The Norm Services Group, LLC,
which interest was subsequently transferred to the Company. This Texas limited
liability company was involved in the remediation of normally occurring
readioactive materials along the gulf coast of Texas and Louisiana.
On July 20, 1998, the assets, liabilities and business of The Norm Services
Group, LLC, were rolled into a Texas corporation, NORM Services Group, Inc., in
a tax-free exchange. The interest holders in Norm Services Group, LLC, including
the Company, surrendered their interests in the limited liability company in
exchange for all of the outstanding stock of the corporation into which the
assets, liabilities and business of the limited liability company were rolled.
On August 7, 1998, NORM Services Group, Inc., acquired all of the outstanding
assets and liabilities of NSG Rentals, a Texas general partnership, in exchange
for common stock of NORM Services Group, Inc. NSG Rentals then ceased to exist.
The partnership was in the business of renting oil and gas equipment, and was
renting equipment first to The Norm Services Group, LLC, and then to NORM
Services Group, Inc., after the roll-up discussed in the preceding paragraph.
Also on August 7, 1998, the Company acquired the remaining 2/3rds interest in
NORM Services Group, Inc., which it did not previously own. The exchange was
made through the delivery of 244,210 shares of the Company's common stock.
SEDI is now, and has been since June 15, 1998, a wholly-owned subisidiary of the
Company. SEDI, on June 15, 1998, owned 1/3rd of the outstanding interest in The
Norm Services Group, LLC, which interest was assigned to the Company. The
Company continued to own this interest through the roll-up of this limited
liability company into NORM Services Group, Inc., afterwards owning 1/3rd of the
outstanding stock of the corporation. The Company acquired the remaining
outstanding stock of NORM Services Group, Inc., on August 7, 1998, in exchange
for 244,210 shares of common stock. Thus, NORM Services Group, Inc., as of
August 7, 1998, became, and remains, a wholly-owned subsidiary of the Company.
NORM Services Group, Inc., on August 7, 1998, immediately prior to this
<PAGE>
corporation becoming a wholly-owned subsidiary of the Company, acquired all of
the outstanding interest of NSG Rentals, a Texas partnership which ceased to
exist on the date of transfer. Thus, the business previously being conducted by
NSG Rentals is now being conducted by NORM Services Group, Inc.
The financial statements of the SEDI, The NORM Services Group, LLC, and NSG
Rentals required under this form are presented under Item 7, below.
Item 2. Acquisition or Disposition of Assets: See Item 1, above.
Item 3. Bankruptcy or Receivership: Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant: Not Applicable.
Item 5. Other Events: None.
Item 6. Resignation of Registrant's Directors: Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits:
<PAGE>
The Board of Directors and Stockholders
Southport Environmental & Development, Inc.
INDEPENDENT AUDITOR'S REPORT
We have audited the balance sheet of Southport Environmental & Development, Inc.
as of June 30, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Southport Environmental &
Development, Inc. as of June 30, 1998.
The Corporation did not commence operations until September 1, 1998 and
therefore the statements of income, retained earnings, and cash flows have been
omitted.
Littleton, Colorado
November 3, 1998
<PAGE>
SOUTHPORT ENVIRONMENTAL & DEVELOPMENT, INC.
Balance Sheet
June 30, 1998
Assets
------
Investment in oil and gas properties $144,146
Organization costs 1,000
---------
$ 145,146
=========
Liabilities and Stockholder's Equity
------------------------------------
Liabilities $ -0-
Stockholder's equity:
Common stock, no par value, authorized 100,000 shares
Issued and outstanding 40,000 shares 145,146
---------
$ 145,146
=========
See accompanying notes to financial statements
<PAGE>
SOUTHPORT ENVIRONMENTAL & DEVELOPMENT, INC.
Notes to Financial Statements
June 30, 1998
1. Organization:
-------------
The Company was incorporated on June 1 1998 and will be involved in the
exploration for and development of oil and gas properties.
Oil and gas properties with remaining cost basis of $144,146 were acquired
from two individuals and from a corporation in which the same two individuals
are the sole sharweholders in exchange for 40,000 shares of the Company's no-par
value stock.
The assignment of the oil and gas production will be effective September 1,
1998.
2. Reorganization:
---------------
Subsequently, the two shareholders exchanged their 40,000 shares of the
Company's common stock of CNH Holdings, Inc. in a Type B plan of reorganization
under IRC Section 368 (a)(1)(17).
3. Supplementary Oil and Gas Information (Unaudited):
--------------------------------------------------
Changes in present value of estimated future net
cash flows from proved oil and gas reserves:
Present value at beginning of period -0-
Additions and revisions, net of future estimated
development and productions costs and net of
properties sold $2,044,232
Sales of oil and gas, net of
lifting costs -0-
----------
Present value at end of period $2,044,232
==========
Changes in proved oil and gas reserves:
---------------------------------------
Oil (Bbls)
----------
Proved reserves:
Balance at beginning of year -0-
Properties sold -0-
Additions to and revisions of previous estimates 349,946
Production -0-
-------
Balance at end of period 349,946
=======
Proved developed reserves:
Balance at June 30, 1998 349,946
Future net cash flows from proved oil and gas reserves:
-------------------------------------------------------
Future net cash flows at
June 30, 1998
-------------
Total Proved Proved Developed
Reserves Reserves
-------- --------
March 31,
---------
1999 $ 53,191 $ 53,191
2000 169,384 169,384
2001 181,848 181,848
Remainder 1,866,943 1,866,943
---------- ----------
$2,271,367 $2,271,367
========== ==========
<PAGE>
SOUTHPORT ENVIRONMENTAL & DEVELOPMENT, INC.
Notes to Financial Statements (continued)
June 30, 1998
3. Supplementary Oil and Gas Information (Unaudited):
--------------------------------------------------
Present value of future net cash flows (discounted at 10%):
-----------------------------------------------------------
Proved
Proved Developed
------ ---------
March 31,
---------
1998 47,872 47,872
1999 152,450 152,450
2000 163,660 163,660
Thereafter 1,680,250 1,680,250
----------- -----------
$ 2,044,232 $ 2,044,232
=========== ===========
The following accounting policies have been used in preparing the Reserve
Recognition Accounting (RRA) presentation. The summary of oil and gas producing
activities on the basis of RRA was prepared based on the rules of the Securities
and Exchange Commission (SEC).
Under RRA, earnings are recognized as proved reserves are found based on
the estimated present value of such reserves, computed as described below.
Subsequent revisions to the RRA valuation of proved reserves are included in
earnings as they occur. Proved reserves are those quantities of oil and gas
which can be expected, with little doubt, to be recoverable commercially at
current prices and costs under existing operating methods.
The proved reserves and related valuations were computed by Company in
accordance with the rules of the SEC. Estimated future net revenues were
computed by applying current prices received by the Company to estimated future
production of reserves, less estimated future development and production costs
and windfall profit taxes based on current costs. A discount factor of 10% was
applied to the estimated future revenues to compute the estimated present value
of proved oil and gas reserves. This valuation procedure does not necessarily
result in an estimate of the fair market value of the Company's oil and gas
properties.
Totals of proved reserves are inherently imprecise estimates and are
continually subject to revision based on production history, results of
additional exploration and development, price changes, and other factors.
"Additions to reserves" are the result of current acquisitions and
development activities. Increases in prices are the approximate effect on the
RRA valuation of proved reserves due to price changes. Other revisions represent
the net effect of all revisions to estimated quantities of proved reserves.
Accretion of discount was computed by multiplying 10% times the present value of
future net revenues as of the beginning of the year, adjusted to reflect
downward revisions.
Evaluated acquisition, exploration, development, and production costs
include current and estimated future costs associated with the current year
reserve additions. Such expenses include property acquisitions, well costs,
lease rentals, and abandonments. The cost of acquiring unproved properties and
drilling exploratory wells are deferred until the properties are evaluated and
determined to be either productive or nonproductive, at which time they are
charged to expense. There were no deferred acquisition and exploration costs at
June 30, 1998.
The provision for income taxes is based on the "liability" method computed
by applying the current statutory income tax rate to the difference between the
year end RRA valuation of proved reserves and the tax basis in the properties
less estimated investment tax credits and statutory depletion associated with
future development costs.
4. Commitments and Contingencies:
------------------------------
There were no commitments or contingencies known to management at June 30,
1998.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Members
The Norm Group Services, LLC
We have audited the balance sheets of The Norm Services Group, LLC, (a Texas
limited liability corporation) as of March 31, 1998 and the related statements
of income, retained earnings, and cash flows for the period then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Norm Services Group, LLC as
of March 31, 1998, and the results of its operations for the period then ended
in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedules 1 and 2 are presented for the purposes of
additional analysis and are not a required part of the basic financial
statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
Littleton, Colorado
November 3, 1998
<PAGE>
THE NORM SERVICES GROUP, LLC
Balance Sheet
March 31, 1998
ASSETS
Current assets:
Cash $ 65,094
Accounts receivable, trade 280,001
---------
Total current assets 345,095
Fixed assets; at cost:
Land, farm and improvements $ 82,076
Machinery and equipment 25,716
---------
107,792
Less accumulated depreciations (3,347) 104,445
=========
Other assets:
Organization costs 1,000
Less amortization (183) 817
========= ---------
$ 450,357
=========
LIABILITIES AND MEMBERS EQUITY
Current liabilities:
Mortgage note payable $ 70,000
Accounts payable 266,405
Accrued interest 1,750
Other liabilities 2,804
---------
340,959
Members' equity:
Capital contribution 48,835
Less withdrawals (13,000)
---------
35,835
Retained earnings 73,563 109,398
========= ---------
$ 450,357
=========
See accompanying notes to financial statements
<PAGE>
THE NORM SERVICES GROUP, LLC
STATEMENT OF INCOME AND RETAINED EARNINGS
Eleven Months Ended March 31, 1998
Income:
Service income $ 1,110,718
Costs and expenses:
Direct costs $ 815,311
Depreciation and amortization 3,530
Selling, administration and general expenses 203,669 1,022,510
=========== -----------
Operating profit 88,208
Other income (expenses):
Interest income 83
Land lease 250
Other income 1,250
Interest expense (16,228) (14,645)
=========== -----------
Net earnings $ 73,563
===========
Retained earnings at beginning of period --
-----------
Retained earnings at end of period $ 73,563
===========
See accompanying notes to financial statements
<PAGE>
THE NORM SERVICES GROUP, LLC
STATEMENT OF CASH FLOWS
Eleven Months ended March 31, 1998
Cash flows from operating activities:
Net income $ 73,563
Add depreciation and amortization 3,530
Changes in assets and liabilities
(Increase) in receivables (280,001)
(Increase) in organization costs (1,000)
Increase in mortgage note payable 70,000
Increase in accounts payable 266,405
Increase in accrued interest 1,750
Increase in other liabilities 2,804
---------
Net cash provided by operating activities 137,051
---------
Cash flows used in investing activities:
Purchase of property and equipment (107,792)
---------
Net cash used in investing activities (107,792)
---------
Cash flows from financing activities:
Capital contributions 48,835
Capital withdrawals (13,000)
---------
Net cash from financing activities 35,835
---------
Increase in cash 65,094
Cash at beginning of period --
---------
Cash at end of period $ 65,094
=========
See accompanying notes to financial statements
<PAGE>
Schedule 1
----------
THE NORM SERVICES GROUP, LLC
DIRECT COSTS
Eleven Months ended March 31, 1998
Disposal fees $ 390,865
Trucking 238,615
Equipment rentals 107,248
Travel and entertainment 28,053
Supplies 20,596
Insurance 17,563
Repairs 14,660
Truck leasing 12,764
Telephone - mobil 10,101
Contract labor 4,695
Fuel and oil 3,491
Safety school 3,272
Licenses and permits 3,219
Crew boat 1,800
Reimbursement (41,631)
---------
$ 815,311
=========
<PAGE>
Schedule 2
----------
THE NORM SERVICES GROUP, LLC
SELLING, ADMINISTRATIVE & GENERAL EXPENSES
Eleven Months ended March 31, 1998
Members compensation $144,530
Payroll expenses 27,823
Per diem 7,205
Telephone 4,253
Printing and reporduction 4,091
Vehicle expenses 3,967
Professional fees 3,556
Office supplies 1,627
Rent 1,425
Advertising 1,375
Contributions 981
Utilities 770
Drug program 609
Dues and subscriptions 606
Postage and delivery 441
Bank charges 210
Other expenses 200
--------
$203,669
========
<PAGE>
THE NORM SERVICES GROUP, LLC
Notes to Consolidated Financial Statements
March 31, 1998
1. Summary of Significant Accounting Policies:
-------------------------------------------
Operations of the Company
- -------------------------
The Norm Services Group, LLC was incorporated as a Texas Limited Liability
Company on February 26, 1997 and commenced operations in May 1997. The Company
is involved in the remediation of naturally occurring radioactive and waste
materials along the gulf coast of Texas and Louisiana.
Property, equipment, and depreciation
- -------------------------------------
Property and equipment are depreciated using the straight-line method of
depreciation over the estimated lives of the assets.
Income taxes
- ------------
The Company is a Limited Liability Company and reports its income to its
members as a partnership. The members report their pro-rata share of income on
their individual income tax returns and pay any tax liabilities incurred.
The Company elected to report for income tax purposes on the calendar year
and also elected to be on a cash basis. Depreciation was reported on an
accelerated basis. The result of these elections resulted in a tax deferment of
$39,356 to the members.
2. Accounts receivable:
--------------------
The Company has elected to factor its accounts receivable for which a fee
of 3% is paid. The factoring agreement provides for a 10% reserve to be held
against all unpaid receivables.
3. Mortgage note payable:
----------------------
The mortgage note payable is secured by land, farm and improvements. The
note is for $70,000, due January 2, 1999 and bearing interest at 10% per annum.
The note is held by two members of the LLC.
4. Related party transactions:
---------------------------
The Company rents equipment from NSG Rentals at normal rental rates. NGS
Rentals is a partnership related through common capital ownership.
5. Subsequent events:
------------------
Effective June 15, 1998, two of the members of the LLC exchanged their
one-third interest for shares of CNH Holdings Company.
<PAGE>
THE NORM SERVICES GROUP, LLC
Notes to Consolidated Financial Statements (Continued)
March 31, 1998
5. Subsequent events (contrinued):
-------------------------------
On July 20, 1998 by resolution of the members of the Norm Services Group,
LLC, the Limited Liability Company was dissolved and a new C-type corporation
was formed under the provisions of IRC Sec. 351.
On August 7, 1998 at a special meeting of directors and shareholders it was
resolved to exchange all the company stock for shares of stock of CNH Holdings
Company, Inc., under IRC Sec. 368 (a)(1)(8). As a result the Company becomes a
wholly-owned subsidiary of CNH.
Also on August 7, 1998, the Company accepted an offer from NSG Rentals, a
partnership to transfer 100 percent and its assets and liabilities in exchange
for shares of Norm, shares then being exchanged for CNH shares. NSG Rentals now
operates as a division of Norm Services Group.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Partners
NSG Rentals
We have audited the balance sheets of NSG Rentals, partnership, as of March 31,
1998 and the related statements of income, partners capital, and cash flows for
the period then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NSG Rentals as of March 31,
1998, and the results of its operations for the period then ended in conformity
with generally accepted accounting principles.
Littleton, Colorado
November 3, 1998
<PAGE>
NSG RENTALS
(A Partnership)
Balance Sheet
March 31, 1998
ASSETS
Current Assets
Cash $ 1,119
Accounts receivable, trade 20,394
--------
Total current assets 21,513
Equipment at cost:
Rental equipment $ 38,277
Office equipment 2,658
--------
40,935
Less accumulated depreciations (488) 40,447
======== --------
$ 61,960
========
LIABILITIES AND PARTNERS EQUITY
Current liabilities:
Note payable, bank $ 42,750
Accounts payable, trade 8,300
Other liabilities 1,554
--------
$ 52,604
Partners' capital 9,356
--------
$ 61,960
========
See accompanying notes to financial statements
<PAGE>
NSG RENTALS
(A Partnership)
STATEMENT OF EARNINGS
From date of inception (March 4, 1998) to March 31, 1998
Gross receipts:
Rental income $17,116
Service income 1,725
-------
Total income 18,841
Cost of sales:
Outside services $ 1,970
Equipment rental 2,601
Equipment maintenance 1,245
Depreciation 488 6,304
======= -------
Gross profit 12,537
Administrative and general expenses:
Office supplies 645
Telephone 220
Travel and entertainment 2,252
All other expenses 64 3,181
======= -------
Net earnings $ 9,356
=======
See accompanying notes to financial statements
<PAGE>
NSG RENTALS
(A Partnership)
STATEMENT OF CASH FLOWS
From date of inception (March 4, 1998) to March 31, 1998
Cash flows from operating activities:
Net earnings $ 9,356
Add non-cash item:
Depreciation 488
Changes in accounts receivable (20,394)
Changes in accounts payable 8,300
Changes in other liabilities 1,554
--------
Net cash (used) in operating activities (696)
--------
Cash flows (used) in investing activities:
Purchase of equipment (40,935)
--------
Cash flows from financing activities:
Note payable, bank 42,750
--------
Net increase in cash 1,119
Cash at beginning of period --
--------
Cash at end of period $ 1,119
========
See accompanying notes to financial statements
<PAGE>
NSG RENTALS
(A Partnership)
Notes to Consolidated Financial Statements
March 31, 1998
1. Summary of Significant Accounting Policies:
-------------------------------------------
Operations of the Partnership
- -----------------------------
NSG Rentals was formed as a partnership on February 1, 1998 and commenced
operations on March 4, 1998. The Partnership rents and services oil field
equipment.
Income is recognized on the accrual method of accounting as equipment is
rented and services are performed.
On the 18th day of August 1998, the NORM Services Group, Inc. acquired all
of NSG Rental's assets and liabilities, and it now operates as a division of
that company.
Equipment and depreciation
- --------------------------
The Partnership depreciates its equipment using the straight-line method of
depreciation over the estimated useful lives of the assets.
Income taxes
- ------------
The Partnership reports for income taxes on the same basis as it reports
for financial accounting. Each partner reports his pro-rata share of the
Partnership income and personally pays any tax liabilities incurred.
2. Related Party Transactions:
---------------------------
The Partnership rents equipment to NORM Services, Inc. at the same rates as
charged to other entities. Some of NORM Services, Inc., stockholders are also
partners in NSG.
3. Commitments and Contingencies:
------------------------------
The Partnership has no known commitments or contingencies.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CNH HOLDINGS COMPANY
(Registrant)
By: /s/ Larry V. Tate
--------------------------------------
Larry V. Tate, Chief Executive Officer
Date: November 16, 1998
<PAGE>
EXHIBITS
Exhibit 1. Agreement of Purchase
Exhibit 2. Series A Preferred Stock
Exhibit 3. Recission Agreement
<PAGE>
EXHIBIT No. 1
AGREEMENT OF PURCHASE
This plan and agreement of purchase ("Plan") has been adopted as a
reorganization under Section 368(b) of the Internal Revenue Code and has been
entered into in Dallas, Texas, this 15th day of June, 1998 ("Closing Date"),
between CNH Holdings, Inc., a Nevada corporation sometimes referred to in this
Agreement as either the "Purchaser" or "CNH," Southport Environmental and
Development, Inc., a Texas corporation sometimes referred to in this Agreement
as either the "Acquired Corporation "or "SEDI" and the shareholders of the
Acquired Corporation, all of whom are sometimes collectively referred to in this
Agreement as the "Shareholders."
The Purchaser hereby acquires from the Shareholders all of issued and
outstanding capital stock of the Acquired Corporation in exchange solely for
shares of voting stock of the Purchaser. Under this Plan, the Acquired
Corporation has become a wholly-owned subsidiary of CNH.
ARTICLE I
EXCHANGE OF VOTING CAPITAL STOCK
1.01. Transfer and Delivery of SEDI Shares. Shareholders hereby transfer and
deliver to Purchaser certificates evidencing all of the issued and outstanding
capital stock of SEDI duly endorsed in blank so as to result in transfer upon
delivery.
1.02. Issuance and Delivery of CNH Shares. In exchange for the transfer by
Shareholders to Purchaser of all of the issued and outstanding Acquired
Corporation capital shares hereunder, Purchaser has (i) issued and delivered to
Shareholders 6,000,000 "restricted" common shares of CNH (the "CNH Shares"), and
(ii) 200,000 shares of Class A Preferred Stock.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND ACQUIRED CORPORATION
2.01. Organization and Standing. SEDI is a corporation duly organized, validly
existing and in good standing under the laws of Texas, with all corporate powers
to own property and carry on its business as it is now being conducted. Copies
of the articles of incorporation of SEDI delivered to Purchaser herewith are
complete and accurate as of the Closing Date. SEDI is qualified to transact
business as a foreign corporation and is in good standing in all jurisdictions
in which its principal properties are located or is not required to be qualified
as a foreign corporation to transact business in any other jurisdiction.
2.02. Balance Sheet. A balance sheet and related statements of operations, cash
flows and equity dated as of and for the three year or lesser period, if
inception occurred within three years, ended December 31, 1997 ("Balance
Sheet"), shall forthwith be delivered. The Purchaser and SEDI shall cause the
delivery of these financial statements (I) audited in accordance with Generally
Accepted Auditing Standards, (ii) prepared in accordance with Generally Accepted
Accounting Principles applied on a consistent basis and fairly presenting the
financial position of SEDI and (iii) complying with Regulation S-X and Form
8-KSB within 75 days after the Closing Date.
2.03. Capitalization. SEDI has an outstanding capitalization which is all in the
hands of the Shareholders, all of which are fully paid and non-assessable. There
are no outstanding subscriptions, options, contracts, commitments or demands
relating to the capital stock of SEDI or any other agreements of any character
under which SEDI or the Shareholders would be obligated to issue or purchase
shares of its capital stock.
2.04. Title to Assets. Acquired Corporation has good and marketable title to all
of its assets, all as set forth in the Balance Sheet, none of which are subject
to any mortgage, pledge, lien, charge, security interest, encumbrance or
<PAGE>
restriction whatsoever except those that: (a) are disclosed on the Balance Sheet
and/or the footnotes thereto or (b) do not materially and adversely affect the
use of the asset. Further, the assets of SEDI are in good condition and repair,
except for reasonable wear and tear.
2.05. Schedule of Assets. Acquired Corporation shall forthwith deliver to
Purchaser a separate schedule of assets, specifically referring to this
paragraph, containing, as of the Closing Date, a true and complete: (a) legal
description of all real property owned by SEDI and any real property in which
SEDI has a leasehold interest, including working interests, (b) list of all
capitalized machinery, tools, and equipment of SEDI that sets forth any liens,
claims, encumbrances, charges, restrictions, covenants and conditions concerning
the listed items, (C) list of all machinery, tools, and equipment in which SEDI
has a leasehold interest, with a description of each interest, (d) list of all
patents, patent licenses, trademarks, trademark registrations, trade names,
copyrights and copyright registrations owned by SEDI, and (f) list of all
interests in subsidiaries and/or joint ventures, including, without limitation,
NSG.
2.06. Liabilities. Except as set forth in the Balance Sheet, SEDI presently has
no outstanding indebtedness other than liabilities incurred in the ordinary
course of business or in connection with the Plan. SEDI is not in default with
respect to any terms or conditions of any indebtedness. Further, SEDI has not
made any assignment for the benefit of creditors, nor has any involuntary or
voluntary petition in bankruptcy been filed by or against SEDI.
2.07. Litigation. SEDI is not a party to, nor has it been threatened with, any
litigation or governmental proceeding that, if decided adversely to it, would
have a material and adverse effect on the Plan, or on the financial condition,
net worth, prospects or business of SEDI. To the best of the Acquired
Corporation's knowledge, it is not aware of any facts that might result in any
action, suit or other proceeding that would result in any material and adverse
change in the business or financial condition of SEDI.
2.08. Compliance with Law and Instruments. The business and operations of SEDI
are not infringing on or otherwise acting adversely to any copyrights, trademark
rights, patent rights or licenses owned by any other person, and there is not
any pending claim or threatened action with respect to such rights. SEDI is not
obligated to make any payments in the form of royalties, fees or otherwise to
any owner of any patent, trademark, trade name or copyright.
2.09. Contractual Obligations. SEDI is not a party to or bound by any written or
oral: (a) contract not made in the ordinary course of business, (b) contract
with any labor union other than in the ordinary course of business, (c) bonus,
pension, profit sharing, retirement, stock option, hospitalization, group
insurance or similar plan providing employee benefits other than in the ordinary
course of business, (d) any real or personal property lease other than in the
ordinary course of business, (e) advertising contract or contract for public
relations services other than in the ordinary course of business, (f) purchase,
supply or service contracts in excess of $10,000 each or in the aggregate of
$100,000 for all such contracts other than in the ordinary course of business,
(g) deed of trust, mortgage, conditional sales contract, security agreement,
pledge agreement, trust receipt or any other agreement subjecting any of the
assets or properties of SEDI to a lien, encumbrance or other restriction other
than in the ordinary course of business, (h) term contract continuing for a
period of more than one year that is not terminable at will without liability to
SEDI or its successors other than in the ordinary course of business, or (i) a
contract that contains a predetermination of price or similar type of provision,
or which provides for a fixed price for goods or services sold. SEDI has
performed all obligations required to be performed by it to the Closing Date and
is not in material default under any of the contracts, leases or other
arrangements by which it is bound. None of the parties with whom SEDI has
contractual arrangements are in default of their obligations.
2.10. Changes in Compensation. Since the date of the Balance sheet, SEDI has not
granted any general pay increase to employees or changed the rate of
compensation, commission or bonus payable to any officer, employee, director,
agent or stockholder other than in the normal course of business.
2.11. Records. All of the account books, minute books, stock certificate books
and stock transfer ledgers of SEDI are complete and accurate.
2.12. Authority. The execution and performance of this Agreement have been duly
authorized by all requisite corporate action. This Agreement constitutes a valid
and binding obligation of SEDI and Shareholders in accordance with its terms. No
provision of the articles of incorporation, bylaws, minutes, share certificates
or contracts prevents SEDI and Shareholders from delivering its shares of common
stock in the manner contemplated under the Plan.
<PAGE>
2.13. Taxes. SEDI has filed all income tax returns and, in each jurisdiction
where qualified or incorporated, all income tax and franchise tax returns that
are required to be filed. SEDI has paid all taxes as shown on the returns as
have become due, and has paid all assessments received that have become due.
2.14. Brokers. All negotiations on the part of Acquired Corporation and
Shareholders related to the Plan have been accomplished solely by Acquired
Corporation and Shareholders without the assistance of any person employed as a
broker or finder. Acquired Corporation and Shareholder have done nothing to give
rise to any valid claims for a broker's commission, finder's fee or any similar
charge.
2.15. Full Disclosure. As of the Closing Date, SEDI and Shareholders have
disclosed all events, conditions and facts materially affecting the business and
prospects of SEDI. Shareholders and SEDI have not withed knowledge of any event,
condition or fact that they have reasonable grounds to know may materially
affect the business and prospects of SEDI. None of the representations and
warranties made by Shareholders or SEDI in this Agreement or in any other
instrument furnished to Purchaser contains any untrue statement of a material
fact, or fails to state a material fact.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01. Organization and Standing. CNH is a corporation duly organized, validly
existing and in good standing under the laws of Nevada, with corporate powers to
own property and carry on its business as it is now being conducted. Copies of
the articles of incorporation of CNH delivered to Shareholders and SEDI herewith
are complete and accurate as of the Closing Date. CNH is qualified to transact
business as a foreign corporation and is in good standing in all jurisdictions
in which its principal properties are located or is not required to be qualified
as a foreign corporation to transact business in any other jurisdiction.
3.02. Subsidiaries. CNH has no subsidiaries.
3.03. Capitalization. CNH has an authorized capitalization consisting of
10,000,000 common shares, $.001 par value per share, and 1,000,000 preferred
shares, $.01 par value per share. As of the Closing Date, the number of common
shares outstanding is as set forth in the Form 10-QSB as of and for the nine
month period ended December 31, 1997, and, as of the Closing Date, no preferred
shares are issued and outstanding, all of which issued and outstanding shares
are fully paid and non-assessable. There are no outstanding warrants, options,
contracts, calls, commitments or demands relating to the unissued securities of
CNH, other than as required herein.
3.04. Due Delivery. The CNH Shares issued to Shareholders have been validly
authorized and issued and are fully paid and non-assessable. No CNH shareholder
has any preemptive right of subscription or purchase with respect to these
shares.
3.05. Authority. The execution and performance of this Agreement have been duly
authorized by all requisite corporate action. This Agreement constitutes a valid
and binding obligation of CNH in accordance with its terms. No provision of the
articles of incorporation, bylaws, minutes, share certificates or contracts
prevents CNH from delivering its shares of common stock in the manner
contemplated under the Plan.
3.06. Brokers. All negotiations on the part of CNH related to the Plan have been
accomplished solely by CNH without the assistance of any person employed as a
broker or finder. CNH has done nothing to give rise to any valid claims for a
broker's commission, finder's fee or any similar charge.
3.07. Full Disclosure. As of the Closing Date, CNH has disclosed all events,
conditions and facts materially affecting the business and prospects of CNH, and
CNH has not withed knowledge of any event, condition or fact that it has
<PAGE>
reasonable grounds to know may materially affect the business and prospects of
CNH. None of the representations and warranties made by CNH in this Agreement or
in any other instrument furnished to Shareholders or SEDI contains any untrue
statement of a material fact, or fails to state a material fact.
ARTICLE IV
SURVIVAL OF WARRANTIES AND WARRANTIES
4.01. Nature and Survival of Representations and Warranties. All statements of
fact contained in this Agreement or in any memorandum, certificate, letter,
document or other instrument delivered by or on behalf of any of the parties
hereto to any other party pursuant to this Agreement shall be deemed
representations and warranties made by the delivering party to the other parties
under this Agreement. The covenants, representations and warranties of the
parties shall survive the Closing Date for a period of one year, and then they
shall lapse and be of no further effect.
4.02. Expenses. The parties to this Agreement shall pay their own expenses
incurred hereunder and in regards of the transactions contemplated hereby,
including, but not limited to, all fees and expenses of their respective counsel
and accountants.
ARTICLE V
COMPLIANCE WITH SECURITIES LAWS
5.01. Acknowledgments of Shareholders. Shareholders acknowledge, understand and
agree that: (a) The certificates representing the CNH Shares will bear a legend
restricting transfer in accordance with the exemption from registration under
the Securities Act of 1933, as amended. (b) The CNH Shares have not been
registered under the Securities Act of 1933, as amended, or any applicable state
law (collectively, the "Securities Act"); further, the CNH Shares may not be
sold, offered for sale, transferred, pledged, hypothecated or otherwise disposed
of except in compliance with the Securities Act; and, further, the legal
consequences of the foregoing mean that Shareholders must bear the economic risk
of the investment in the CNH Shares for the requisite period of time. (C) No
federal or state agency has made any finding or determination as to the fairness
of an investment in CNH, or any recommendation or endorsement of this
investment.
5.02. Further Representations and Warranties of Shareholders. Shareholders each
individually represent and warrant to CNH as follows: (a) I have the financial
ability to bear the economic risks of my investment, have adequate means of
providing for my current needs and personal contingencies, and have no need for
liquidity in this investment; and, further, I have evaluated the high risks of
investing in CNH and have such knowledge and experience in financial and
business matters in general and in particular with respect to this type of
investment that I am capable of evaluating the merits and risks of any
investment in the CNH Shares. (b) I have been given the opportunity to ask
questions of and receive answers from CNH concerning the terms and conditions of
this investment, and to obtain additional information necessary to verify the
accuracy of the information I desired in order to evaluate my investment, and in
evaluating the suitability of this investment I have not relied upon any
representations or other information (whether oral or written), other than that
furnished to me by CNH or its representatives; further, I have had the
opportunity to discuss with my professional, legal, tax and financial advisers
the suitability of an investment in the CNH Shares for my particular tax and
financial situation; and, further, in making the decision to purchase the CNH
Shares, I have relied solely upon independent investigations made by me or on my
behalf. (c) I am acquiring the CNH Shares solely for my own personal account,
for investment purposes only, and am not purchasing with a view to, or for, the
resale, distribution, subdivision or fractionalization thereof.
ARTICLE VI
MISCELLANEOUS
6.01. Amendments. This Agreement may be amended or modified at any time and in
any manner only by an instrument in writing executed by the Presidents of SEDI
and CNH and by the Shareholders.
<PAGE>
6.02. Waiver. The Shareholders, SEDI and/or CNH may, in writing, (a) extend the
time for performance of any of the obligations of any other party to this
Agreement, (b) waive any inaccuracies or misrepresentations contained in this
Agreement or any document delivered pursuant to this Agreement by any other
party and/or (C) waive compliance with any of the covenants, or performance of
any obligations, contained in this Agreement by any other party.
6.03. Assignment. (a) Neither this Agreement nor any right created hereby shall
be assignable by any party without the prior written consent of the other
parties, except by the laws of succession. (b) Except as limited by subparagraph
(a), this Agreement shall be binding on and inure to the benefit of the
respective successors and assigns of the parties. (C) Nothing in this Agreement,
expressed or implied, is intended to confer upon any person, other than the
parties and their permitted successors, any rights or remedies under this
Agreement.
6.04. Notices. Any notice or other communication required or permitted by this
Agreement must be in writing and shall be deemed to be properly given when
delivered in person to an officer of the other party, when deposited in the U.S.
mails for transmittal by certified or registered mail, postage prepaid, or when
deposited with a public telegraph company for transmittal, charges prepaid,
provided that the communication is addressed as follows: (a) in case of SEDI and
the Shareholders: P.O. Box 832, Kilgore, Texas 75663; FAX: (903) 984-8296; and
(b) in case of CNH: 1999 Broadway, Ste. 3235, Denver, CO 80202; FAX (303)
292-2882.
6.05. Headings. Paragraph and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
6.06. Entire Agreement. This Agreement contains the entire agreement between the
parties relating to the subject matter hereof. It may be executed in any number
of counterparts, but the aggregate of such counterparts constitute only one and
the same instrument.
6.07. Partial Invalidity. In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if it never contained any such invalid, illegal or unenforceable
provisions.
6.08. Controlling Law. The validity, interpretation and performance of this
Agreement shall be controlled by and construed under the laws of the State of
Texas.
6.09. Attorney's Fees. If any action at law or in equity, including any action
for declaratory relief, is brought to enforce or interpret the provisions of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorney's fees from the other party. The attorney's fees may be ordered by the
court in the trial of any action described in this paragraph or may be enforced
in a separate action brought for determining attorney's fees.
6.10. Specific Performance. The parties declare that it is impossible to measure
in money the damages that will accrue to a party or its successors as a result
of any other parties' failure to perform any of the obligations under this
Agreement. Therefore, if a party or its successor institutes any action or
proceeding to enforce the provisions of this Agreement, any party opposing such
action or proceeding agrees that specific performance may be sought and obtained
for any breach of this Agreement.
Purchaser: CNH Holdings, Inc.:
By: /s/ Paul M. Lionti
-----------------------------
Paul M. Lionti, President
<PAGE>
Acquired Corporation: Southport Environmental and Development, Inc.:
By: /s/ Larry V. Tate
------------------------------
Larry V. Tate, President
Shareholders:
/s/ Larry V. Tate
- ---------------------------------
Larry V. Tate
/s/ Gerald Pybas
- ---------------------------------
Gerald Pybas
<PAGE>
EXHIBIT No. 2
SERIES A: 10% DIVIDEND BEARING PREFERRED STOCK
CERTIFICATE SETTING FORTH RESOLUTIONS
BY
THE BOARD OF DIRECTORS FOR
CNH HOLDINGS COMPANY, INC.
(Pursuant to the Nevada Corporation Code)
We, the undersigned, as the President and Secretary of CNH Holdings Company,
Inc., a Nevada corporation, the Articles of Incorporation of which are on file
in the office of the Secretary of State for the State of Nevada DO EACH HEREBY
CERTIFY AND VERIFY: that the Board of Directors of CNH Holdings Company, Inc.,
in accordance with said articles and pursuant to the laws of the State of
Nevada, duly adopted on June 15, 1998, the preambles and resolutions attached
hereto.
IN WITNESS WHEREOF: We have set our hands and the corporate seal this 15th day
of June, 1998.
CNH HOLDINGS COMPANY, INC.
By: /s/ Paul M. Lionti
-------------------------------
Paul M. Lionti, President [SEAL]
Attest: /s/ Mark S. Pierce
----------------------------
Mark S. Pierce, Secretary
<PAGE>
UNANIMOUS CONSENT IN LIEU OF SPECIAL MEETING
BOARD OF DIRECTORS
FOR
CNH HOLDINGS COMPANY, INC.
(June 15, 1998)
Pursuant to the provisions of the "Nevada Corporation Code"- which provide that
action required or permitted by said code to be taken at a meeting of the board
of directors of a corporation may be taken without a meeting with the same force
and effect as a unanimous vote of said board if the action is (I) evidenced by
one or more written consents describing the action taken, (ii) signed by each
director and (iii) delivered to the secretary of the corporation for filing with
the corporate records - the undersigned, being the sole members of the board of
directors of CNH Holdings Company, Inc., (the "Board of Directors" and the
"Company," respectively), do hereby waive any and all notice which may be
required to be given with respect to a meeting of the Board of Directors and do
hereby take, ratify, confirm and approve the following action this 15th day of
June, 1998.
WHEREAS, the Company has been presented with an opportunity to acquire as a
wholly-owned subsidiary Southport Environmental and Development, Inc. a Texas
corporation ("Southport"); WHEREAS, the Company has been presented with a
proposed Plan and Agreement of Purchase (the "Southport Purchase Agreement") by
and between the Company, Southport and the shareholders ("Shareholders") of
Southport; WHEREAS, the Southport Purchase Agreement requires the delivery to
the Shareholders of 6,000,000 shares of the common stock of the Company and
200,000 shares of a series of preferred stock in order to consummate said
agreement; WHEREAS, the execution and delivery of, and performance under, the
Southport Purchase Agreement and the delivery of the common and preferred shares
thereunder is in the best interests of the Company; WHEREAS, the Articles of
Incorporation governing the Company (the "Articles of Incorporation") permit the
issuance of preferred shares in series with such designations, preferences and
relative participating option or other rights and qualifications, limitations
and restrictions as may be fixed by the Board of Directors, including, without
limitation, the rate of dividends and redemption and conversion prices, all of
which are to be determined after giving consideration to the financial and
general condition of the Company and to the condition of the securities'
markets, if any, existing at the time of issuance; and WHEREAS, the directors
deem it advisable to establish and issue a new series of preferred stock at this
time to accomplish the consummation of the Southport Purchase Agreement and have
carefully investigated the financial and general condition of the Company and
the relation of the condition of the Company to the condition of the securities
markets, and have determined that it is in the best interests of the Company to
establish a new series of preferred stock to be denominated "Series A: Voting,
Convertible Preferred Stock" with the attributes set forth in this resolution
and to forthwith deliver a certificate evidencing the same to the Shareholders:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors authorizes Corporate
Stock Transfer to issue 6,000,000 "restricted" common shares of the Company to
the Shareholders in partial consummation of the Southport Purchase Agreement;
RESOLVED, that Mr. Mark S. Pierce shall instruct Corporate Stock Transfer in the
number and name of the Shareholders to whom the aforesaid shares shall be
issued; RESOLVED, that the Board of Directors hereby authorizes the Company to
issue for the purpose of consummating the Southport Purchase Agreement Two
Hundred Thousand (200,000) shares of its "Series A: 10% Dividend Bearing
Preferred Stock" at a price of $20 per share, which series shall have the
following features: (a) Dividends - the series shall pay a dividend of 10% per
annum computed and accrued quarterly in arrears, to be declared and paid only
when the Board of Directors deems such to be in the best interests of the
Company; (b) Conversion - the series shall not be convertible into any other
securities of the Company; (c) Redemption - neither the Company nor any one else
shall have any right to redeem the shares of this series at any time; (d)
Liquidation Preference - the holders of the series shall be entitled to a
liquidation preference over any existing or subsequently established class or
series of outstanding stock of the Company in the amount of $20 per share plus
all accrued and unpaid dividends; (e) Sinking Fund - the holders of this series
shall not be entitled to the establishment of any sinking fund for the purpose
or retiring the shares of the series or for any other purpose; (f) Voting Rights
- - the series shall have no voting rights other than those provided under Nevada
law; (g) Additional Provision - the series shall be issued, upon compliance with
<PAGE>
the laws of the State of Nevada, in accordance with those terms set forth on
Exhibit A hereto, which is specifically incorporated herein by this reference
and adopted as the act of the Company; RESOLVED FURTHER that the President and
the Secretary are hereby authorized and directed to cause to be filed under
corporate seal such certificates as shall be requisite to the end that the stock
shall be issued and delivered to the Shareholders as aforesaid; and RESOLVED
FINALLY that the President be, and he hereby is, authorized to (i) effectuate,
to the extent necessary and appropriate, those actions taken hereby, (ii) issue
a certificate or certificates for the shares, (iii) prepare a form of
certificate for the shares in accordance with the above resolutions and (iv)
provide for filing all necessary documentation with the Secretary of State for
the State of Nevada, applicable state securities authorities and the United
States Securities and Exchange Commission.
IN WITNESS WHEREOF, the undersigned, being the sole member of the Board of
Directors, have hereunto set their hands effective as of the date first
specified above.
/s/ Paul M. Lionti
- ---------------------------
Paul M. Lionti, Director
<PAGE>
EXHIBIT A
SERIES A: 10% DIVIDEND BEARING PREFERRED STOCK PROVISIONS
The Series A 10% Dividend Bearing Preferred Stock (the "Preferred Stock or the
"Series A Preferred Stock") shall consist of one (1) series of Two Hundred
Thousand (149,259) shares of the preferred stock of CNH Holdings Company, Inc.,
(the "Company"), with each share to be identical to every other in all respects.
The following sets forth the provisions of the Series A Preferred Stock.
Part 1: Dividends: The holders of the issued and outstanding Preferred Stock
shall be entitled to receive quarterly in arrears, as and when declared by the
Board of Directors, dividends amounting to 10% of the liquidation value on the
Preferred Stock. If a dividend is not paid, it shall accrue and be compounded
into the liquidation value of the Preferred Stock.
Part 2: Conversion: The holders of the Preferred Stock shall have no conversion
rights.
Part 3: Redemption: No one, including the Company, shall be entitled to redeem
the Preferred Stock under any circumstances at any time.
Part 4: Liquidation: The Preferred Stock shall not entitled to preferential
liquidation rights over any other class or series of stock previously or which
may subsequently be issued by the Company in the amount of $20, plus accrued and
unpaid dividends.
Part 5: Sinking Fund: The Preferred Stock shall not be entitled to the
establishment of any sinking fund for any purpose.
Part 6: Voting Rights: The Preferred Stock shall have no voting rights.
Part 7: Additional Provisions: The Preferred Stock may not be subordinated in
any respect to the terms and provisions of the Common Stock and to the terms and
provisions of any other series of the outstanding preferred stock of the Company
which may be issued and become outstanding subsequent to the Preferred Stock.
<PAGE>
EXHIBIT No. 3:
RECISION AGREEMENT
THIS AGREEMENT, made and entered into this 15th day of June, 1998, to be
effective as of the 9th day of December, 1997, by and between CNH Holdings,
Inc., a Nevada corporation ("CNH"), DRC, Inc., a Nevada corporation ("DRC"), and
GNC Corporation, a Nevada corporation ("GNC"),
WITNESSETH:
WHEREAS, CNH, DRC and GNC were each previously involved in certain transactions
that were consummated on December 9, 1997, under an Agreement of Purchase(the
"Purchase Agreement") pursuant to which CNH acquired all of the outstanding
proprietary interest of GNC from DRC (the "GNC Shares") in exchange for
2,500,000 common shares of CNH (the "CNH Shares"); WHEREAS, said transactions
have given rise to a right of recision of the Purchase Agreement between CNH,
DRC and GNC under the Securities Act of 1933, as amended (the "Securities Act"),
which allows for the return of the GNC and CNH Shares to their original owners
prior to the execution and delivery of the Purchase Agreement; WHEREAS, the
parties have agreed to compromise their claims against one another hereunder;
and WHEREAS, the transactions set forth herein are in the respective best
interests of CNH, DRC and GNC; NOW, THEREFORE, based upon the above and
foregoing premises, and such other and further consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
RESCISSION
1.1. Rescission. CNH hereby rescinds the Purchase Agreement and its purchase of
the GNC Shares from DRC and GNC effective December 9, 1997. DRC and GNC hereby
accept the surrender of the GNC Shares to them effective December 9, 1997. DRC
and GNC hereby rescind the Purchase Agreement and their purchase of the CNH
Shares from CNH effective December 9, 1997. CNH hereby accepts the surrender of
the CNH Shares to it effective December 9, 1997. CNH, GNC and DRC shall
forthwith execute any and all additional documents as may be reasonably
requested by any other party hereto to provide for the effective transfer of the
shares being surrendered hereunder.
1.2. Mutual General Releases between CNH, DRC and GNC. Upon execution and
delivery hereof, CNH, DRC and GNC (for themselves and their successors and
assigns) do each forever acquit, remise, release and forever discharge each
other and their respective directors, officers, employees, shareholders,
servants, agents, successors, affiliates and assigns from and against any and
all claims, demands, rights and causes of action of any kind or nature
whatsoever, whether now known or which may subsequently accrue, and whether such
relates to the Purchase Agreement, the purchase of the CNH and GNC Shares or
otherwise.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND DISCLAIMER
2.1. Representations and Warranties of CNH. CNH hereby represents and warrants
to DRC and GNC as follows:
a. All necessary action has been taken to make this Agreement a legal,
valid and binding obligation of CNH enforceable in accordance with its
terms and conditions. b. The execution and delivery of this Agreement and
the performance by CNH of its obligations hereunder will not result in any
material breach or violation of or material default under any material
agreement, indenture, lease, license, mortgage, instrument, or
understanding, nor result in any violation of any law, rule, regulation,
statute, order or decree of any kind to which CNH is a party.
2.2. Representations and Warranties of DRC and GNC. DRC and GNC each represent
and warrant, jointly and severally, to CNH as follows:
<PAGE>
a. All necessary action has been taken to make this Agreement a legal,
valid and binding obligation of DRC and GNC enforceable in accordance with
its terms and conditions. b. The execution and delivery of this Agreement,
and the performance by DRC and GNC of their respective obligations
hereunder will not result in any material breach or violation of or
material default under any material agreement, indenture, lease, license,
mortgage, instrument, or understanding, nor result in any violation of any
law, rule, regulation, statute, order or decree of any kind to which DRC
and GNC is or are a party.
ARTICLE III
INDEMNITY
CNH, DRC and GNC shall each indemnify, save, defend and hold every other party
hereto harmless from and against any and all damage, loss, cost or expense
(including reasonable attorneys' fees) arising from any breach of this Agreement
caused by any breach of any representation or warranty or failure in covenant on
its part set forth herein or the untruth or inaccuracy thereof. CNH, DRC and GNC
shall, jointly and severally and at their own expense, defend every other party
hereto from and against any and all claims resulting hereunder from its own act
or omission with counsel reasonably satisfactory to the other party or parties;
provided, however, that the defending party or parties shall allow the
non-defending party or parties to participate in any such action to the extent
such participation is reasonable and the defending party or parties deems it
appropriate; provided, further, that the defending party or parties shall not
agree to the settlement of any such action without the prior written consent of
the non-defending party or parties, which consent shall not be unreasonably
withheld.
ARTICLE IV
MISCELLANEOUS
4.1. Entire Agreement; Modification. This Agreement sets forth and constitutes
the entire agreement between the parties hereto with respect to transactions set
forth herein, and supersedes any and all prior agreements, understandings,
promises, and representations made by any party to any other party concerning
the subject matter hereof and the terms applicable thereto. This Agreement may
not be released, discharged, amended or modified in any manner except by an
instrument in writing signed by duly authorized representatives of the parties
hereto.
4.2. Governing Law. This Agreement shall be deemed to have been entered into and
shall be construed and enforced in accordance with the laws of the State of
Nevada.
4.3. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first above written.
CNH HOLDINGS, INC.
By: /s/
--------------------------------
Authorized Representative
DRC, INC.
By: /s/
--------------------------------
Authorized Representative
GNC CORPORATION
By: /s/
--------------------------------
Authorized Representative
