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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) May 21, 1996
U.S. ALCOHOL TESTING OF AMERICA, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
33-90034 22-2806310
(Commission File Number) (I.R.S. Employee
Identification No.)
10410 Trademark Street, Rancho Cucamonga, California 91730
(Address of Principal Executive Offices) (Zip Code)
(909) 466-8378
(Registrant's Telephone Number, Including Area Code)
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INFORMATION TO BE INCLUDED IN REPORT
The Registrant U.S. Alcohol Testing of America, Inc. is referred to herein
as "USAT." USAT and its subsidiaries are collectively referred to herein as the
"Company".
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On May 21, 1996, USAT purchased all of the outstanding shares of Common
Stock (the "RSA Common Stock") of Robert Stutman & Associates, Inc., a
Massachusetts corporation ("RSA"), for $2,500,000, pursuant to a Stock Purchase
Agreement dated as of May 21, 1996 (the "Purchase Agreement"), a copy of which
Purchase Agreement is filed as Exhibit A to this Report and which is
incorporated herein by this reference. At the closing, USAT paid $2,100,000 to
the stockholders of RSA, including Robert Stutman, the Chairman and Chief
Executive Officer of USAT, who received $1,078,920 for his 42.2 shares of the
RSA Common Stock (there being 80 shares outstanding). Brian Stutman, the
Director of Sales and Marketing of USAT, received $721,080 for his 28.2 shares
of the RSA Common Stock. Robert Stutman and Brian Stutman, who are father and
son, also received at the closing secured promissory notes each due May 20,
1997, the former's in principal amount of $239,760 and the latter's in the
principal amount of $160,240, each bearing interest at the annual rate of seven
and one-half percent. If USAT receives, after April 17, 1996, $7,000,000 in
proceeds from the exercises of Common Stock purchase warrants, then the notes
must be prepaid. The form of the secured promissory notes is filed as Exhibit B
to this Report and is incorporated herein by this reference. The promissory
notes are secured by all of USAT's tangible and intangible personal property
except the following: (1) USAT's cash and cash equivalents; (2) USAT's
securities, including stock of its subsidiaries; and (3) certain contracts,
including USAT's license agreement with the United States Department of the
Navy. The form of security agreement is filed as Exhibit C to this Report and is
incorporated herein by this reference.
Pursuant to the Purchase Agreement, USAT issued to the stockholders of RSA
an aggregate of 500,000 shares of USAT's Common Stock, $.01 par value (the
"Common Stock"), and Warrants expiring May 21, 1999 (the "Acquisition Warrants")
to purchase an aggregate of 900,000 shares of the Common Stock at a price of
$3.125 per share. At the closing, Robert Stutman received 263,750 shares of the
Common Stock and an Acquisition Warrant to purchase 474,750 shares of the Common
Stock. Brian Stutman received 176,250 shares of the Common Stock and an
Acquisition Warrant to purchase 317,250 shares of the Common Stock. The form
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of Acquisition Warrant is filed as Exhibit D to this Report and is incorporated
herein by this reference.
USAT granted certain registration rights under the Securities Act of 1933,
as amended (the "Securities Act"), to the RSA stockholders. The form of
registration rights agreement is filed as Exhibit E to this Report and is
incorporated herein by this reference. However, the 500,000 shares issued at the
closing were allocated by USAT's Board of Directors from the 2,032,679 shares
which are reserved for acquisitions and which were registered in USAT's
Registration Statement on Form S-1, File No. 33-43337, under the Securities Act.
The Company used its own funds for this acquisition, including those derived
from the exercise of outstanding Common Stock purchase warrants. No funds were
borrowed in connection with this acquisition.
Robert Stutman, the Chairman and President of RSA, became the Chairman and
Chief Executive Officer of USAT on April 18, 1996. Prior thereto, he and RSA
were serving as consultants to USAT and its wholly-owned subsidiary ProActive
Synergies, Inc. ("ProActive") pursuant to a Consulting Agreement dated as of
December 14, 1996 by and among USAT, ProActive, RSA and Robert Stutman, a copy
of which Consulting Agreement is filed (by incorporation by reference) as
Exhibit F to this Report and which is incorporated herein by this reference. As
a result of the acquisition, the Consulting Agreement has been terminated.
At the closing, USAT entered into severance agreements with Robert Stutman
and Brian Stutman, copies of which are filed as Exhibit G and H, respectively,
to this Report and which are incorporated herein by this reference.
(b) As previously reported in (i) a Press Release dated May 1, 1996, a copy
of which is filed as Exhibit I to this Report and is incorporated herein by this
reference, (ii) USAT's Supplement dated May 6, 1996 to its Prospectus dated
January 31, 1996, which constitutes Part I of USAT's Registration Statement on
Form S-1, File Number 33-90034, a copy of which Supplement is filed (by
incorporation by reference) as Exhibit J to this Report and is incorporated
herein by this reference, and (iii) the preliminary prospectus constituting Part
I of USAT's Registration Statement on Form S-4, File No. 333-3734, on April 30,
1996, USAT's wholly- owned subsidiary U.S. Rubber Recycling, Inc. ("USRR") sold
substantially all of its assets to Reclamation Resources, Inc. ("RRI") for
$500,000. A copy of the Asset Purchase Agreement dated April 30, 1996 between
USRR and RRI is filed as Exhibit K to this Report and is incorporated herein by
this reference.
The $500,000 purchase price was paid as follows: (1) a $150,000 payment to
USRR at the closing; (2) a $50,000 credit for
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a closing adjustment; and (3) a promissory note from RRI to USRR in the
principal amount of $300,000, payable in six annual installments of $50,000,
together with interest thereon at an annual rate of seven percent. The
promissory note is prepayable to the extent that RRI's net sales exceed
$1,400,000. In the event that net sales exceed this amount, USRR will receive
12.5% of the excess. The promissory note is secured by a lien on all of RRI's
assets.
USRR generated approximately 21.2% of the Company's revenues for the
nine-month period ended December 31, 1995. USRR generated 25.3% of the Company's
revenues for the fiscal year ended March 31, 1995.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired:
Audited financial statements of RSA are not currently available, are in
the process of being prepared and will be filed as soon as practicable, but not
later than 60 days after the date this Report was due.
(b) Proforma financial information:
Proforma financial statements, if required, will be furnished when the
audited financial statements of RSA are filed.
(c) Exhibits
Number Exhibit
A Copy of Stock Purchase Agreement dated as of May 21, 1996 by and
among USAT, Robert Stutman, Brian Stutman, Sondra DeBow, Michael
Rochelle and Kimberly Rochelle.
B Form of Secured Promissory Note dated May 21, 1996 is Exhibit A to
Exhibit A hereto.
C Form of Security Agreement dated May 21, 1996 by and among USAT,
Robert Stutman and Brian Stutman is Exhibit C to Exhibit A hereto.
D Form of USAT Warrant expiring May 20, 1999 is Exhibit B to Exhibit A
hereto.
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Number Exhibit
E Form of Registration Rights Agreement dated as of May 21, 1996 by
and between USAT, Robert Stutman, Brian Stutman, Michael Rochelle,
Kimberly Rochelle and Sondra DeBow is Exhibit D to Exhibit A hereto.
F Copy of Consulting Agreement dated as of December 14, 1996 by and
between USAT, ProActive, RSA and Robert Stutman was filed as Exhibit
4(b) to USAT's Registration Statement on Form S-8 filed on March 11,
1996 and is incorporated herein by this reference.
G Copy of Severance Agreement dated May 21, 1996 by and between USAT
and Robert Stutman.
H Copy of Severance Agreement dated May 21, 1996 by and between USAT
and Brian Stutman.
I Copy of Press Release dated May 1, 1996 of USAT.
J Supplement dated May 6, 1996 to Prospectus dated January 31, 1996
constituted Part I of USAT's Registration Statement on Form S-1,
File 33-90034, and is incorporated herein by this reference.
K Copy of Asset Purchase Agreement dated April 30, 1996 by and between
USRR, USAT and RRA.
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.
U.S. Alcohol Testing of America, Inc.
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(Registrant)
Date May 31, 1996 By: /s/ Linda H. Masterson
---------------------------------
Linda H. Masterson
President
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EXHIBIT INDEX
Number Exhibit
A Copy of Stock Purchase Agreement dated as of May 21, 1996 by and
among USAT, Robert Stutman, Brian Stutman, Sondra DeBow, Michael
Rochelle and Kimberly Rochelle.
B Form of Secured Promissory Note dated May 21, 1996 is Exhibit A to
Exhibit A hereto.
C Form of Security Agreement dated May 21, 1996 by and among USAT,
Robert Stutman and Brian Stutman is Exhibit C to Exhibit A hereto.
D Form of USAT Warrant expiring May 20, 1999 is Exhibit B to Exhibit A
hereto.
E Form of Registration Rights Agreement dated as of May 21, 1996 by
and between USAT, Robert Stutman, Brian Stutman, Michael Rochelle,
Kimberly Rochelle and Sondra DeBow is Exhibit D to Exhibit A hereto.
F Copy of Consulting Agreement dated as of December 14, 1996 by and
between USAT, ProActive, RSA and Robert Stutman was filed as Exhibit
4(b) to USAT's Registration Statement on Form S-8 filed on March 11,
1996 and is incorporated herein by this reference.
G Copy of Severance Agreement dated May 21, 1996 by and between USAT
and Robert Stutman.
H Copy of Severance Agreement dated May 21, 1996 by and between USAT
and Brian Stutman.
I Copy of Press Release dated May 1, 1996 of USAT.
J Supplement dated May 6, 1996 to Prospectus dated January 31, 1996
constituted Part I of USAT's Registration Statement on Form S-1,
File 33-90034, and is incorporated herein by this reference.
K Copy of Asset Purchase Agreement dated April 30, 1996 by and between
USRR, USAT and RRA.
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STOCK PURCHASE AGREEMENT
AGREEMENT dated as of this 21st day of May, 1996 by and among U.S.
Alcohol Testing of America, Inc., a Delaware corporation (the "Purchaser"),
having its principal place of business at 10410 Trademark Street, Rancho
Cucamonga, California 91730, Robert Stutman ("R. Stutman") having an address at
7394 Panache Way, Boca Raton, Florida, Brian Stutman ("B. Stutman"), having an
address at 7394 Panache Way, Boca Raton, Florida, and Michael Rochelle ("M.
Rochelle"), having an address at 7394 Panache Way, Boca Raton, Florida, Sandra
DeBow ("DeBow") having an address at 119 Winthrop Road, Unit 5C, Brookline,
Massachusetts 02146 and Kimberly Rochelle ("K. Rochelle"), having an address at
7394 Panache Way, Boca Raton, Florida, (R. Stutman, B. Stutman, M. Rochelle, K.
Rochelle and DeBow are hereinafter collectively referred to as the "Sellers").
W I T N E S S E T H :
WHEREAS, the Sellers own all of the issued and outstanding shares of
common stock of Robert Stutman & Associates, Inc. (the "Company");
WHEREAS, the Sellers desire to transfer, convey and assign, and the
Purchaser desires to purchase and acquire, all of the issued and outstanding
shares of the common stock of the Company on the terms and conditions
hereinafter set forth; and
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WHEREAS, the Company is engaged in the business of providing consulting
services regarding substance abuse in the work place and designing and
implementing substance abuse programs (hereinafter referred to as the "Purchased
Business").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which is acknowledged, the parties hereto agree as
follows:
1. TRANSFER OF ASSETS
1.1 Purchased Assets. The Sellers hereby transfer,
convey, sell and assign to the Purchaser and the Purchaser hereby purchases from
each of the Sellers the shares of the common stock of the Company, no par value
per share (the "Common Stock"), set forth below:
R. Stutman - 42.2 shares of Common Stock
B. Stutman - 28.2 shares of Common Stock
M. Rochelle - 6 shares of Common Stock
K. Rochelle - 2 shares of Common Stock
DeBow - 1.6 shares of Common Stock (the shares of
the Common Stock owned by the Sellers are
hereinafter collectively referred to as the
"Shares")
1.2 Instruments of Conveyance. Upon the execution hereof, the
Sellers shall deliver to the Purchaser the
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certificate for the Shares, together with stock powers duly endorsed in blank.
2. PURCHASE PRICE
2.1 Amount of Purchase Price. In consideration of the transfer,
conveyance sale and assignment of the Shares, the Purchaser shall pay to the
Sellers in the aggregate the following:
(i) Two Million One Hundred Thousand ($2,100,000)
Dollars payable upon the execution hereof by certified or bank cashier's check;
(ii) Four Hundred Thousand ($400,000) Dollars payable
by the delivery of a promissory note to each of R. Stutman and B. Stutman in the
amounts set forth in Schedule 2.2 (the "Notes"). The Notes shall be in the form
of Exhibit "A" annexed hereto;
(iii) Five Hundred Thousand (500,000) Shares of the
Common Stock of the Purchaser, $.01 par value per share (the "USAT Common
Stock"), valued at $3.125 per share (the "Purchase Price Stock");
(iv) Warrants to purchase 900,000 Shares of the USAT
Common Stock (the "Purchase Price Warrants"). The Purchase Price Warrants shall
have an exercise price of $3.125 per share and shall have a term of three years.
The Purchase Price Warrants shall be in the form of Exhibit "B" annexed hereto.
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2.2 ALLOCATION. The Sellers hereby direct the Purchaser to
allocate the payment of the Purchase Price in accordance with Schedule 2.2
hereof.
2.3 TERMS OF NOTES. Each of the Notes shall be payable
on May 20, 1997, together with accrued interest at a rate of 7.5% per annum, and
shall be mandatorily prepayable in full upon the Purchaser's receipt of net
proceeds of Seven Million ($7,000,000) Dollars from the exercise, after April
17, 1996, of warrants of the Purchaser. The payment of the Notes shall be
secured by a first lien on certain assets of the Purchaser. The security
interest shall be granted pursuant to a security agreement in the form of
Exhibit "C" annexed hereto
2.4 REGISTRATION RIGHTS. The Purchaser shall grant
registration rights to the Sellers pursuant to which the Purchaser shall
register under the Securities Act of 1933, as amended, the Purchase Price Stock
and the shares of the USAT Common Stock underlying the Purchase Price Warrants
on the first registration statement filed by the Purchaser after the Closing
other than a registration statement on Form S-8 or S-4. The registration rights
shall be granted pursuant to Registration Rights Agreement in the form of
Exhibit "D" annexed hereto.
3. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place simultaneously with the execution
hereof on May 21, 1996, ("Closing Date"). The Closing shall be held on the
Closing Date at the offices of Gold
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& Wachtel, LLP 110 East 59th Street, New York, New York, or at such other place
as may be agreed to by the Purchaser and the Seller.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers, jointly
and severally, represent and warrant to the Purchaser as follows:
4.1 ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts and has all requisite power and authority, corporate or otherwise,
to own, lease and operate its properties and to carry on its business as and in
the places where such properties are now owned, leased or operated or such
business is now being conducted. Complete and correct copies of the Certificate
of Incorporation of the Company and all amendments thereto, certified in each
case by the Clerk of the State of the state of incorporation, and of the By-Laws
of the Company and all amendments thereto, certified by the Secretary of the
Company, have been heretofore delivered to the Purchaser. The Company is duly
qualified to do business and is in good standing in all jurisdictions (each such
jurisdiction is set forth in Schedule 4.1 hereto) in which such qualification is
necessary because of the character of the properties owned, leased or operated
by it or the nature of its activities. The Company has not taken any action and
has not failed to take any action, which action or failure would preclude or
prevent the
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Purchaser from conducting the business of the Company in the manner heretofore
conducted. The Seller does not have any subsidiaries.
4.2 CAPITALIZATION. The Company has no authorized or
outstanding securities other than the Common Stock, which consists of One
Hundred (100) authorized shares, of which Eighty (80) shares are issued and
outstanding. Twenty (20) shares of the Common Stock are reserved for issuance
and there are seventeen (17) shares in the treasury of the Company. All
outstanding shares of the Common Stock are duly authorized, validly issued,
fully paid and nonassessable, and, except as set forth on Schedule 4.2, there
are no authorized, issued or outstanding securities of the Seller convertible
into Common Stock nor are there any outstanding options, warrants, agreements,
rights or commitments of any kind relating to the authorized but unissued shares
of the Common Stock. All transfer taxes, if any, with respect to transfer of
securities of the Company made prior to the date hereof have been fully paid.
The eighty (80) issued and outstanding shares of the Common Stock are owned,
both beneficially and of record, by the Sellers as set forth in Section 1.1
hereof and are free and clear of any and all security interests, liens, pledges,
claims, charges, escrows, encumbrances, options, rights of first refusal,
mortgages, indentures, security agreements, shareholders agreements or other
contracts (whether or not relating in any way to credit or the
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borrowing of money) and the Sellers have the unrestricted right to sell the
Shares to the Purchaser.
4.3 AUTHORIZATION, VALIDITY AND ENFORCEABILITY. This
Agreement has been duly executed and delivered by each of the Sellers and
constitutes the legal, valid and binding obligation of each of the Sellers, and
each of the other Transaction Documents to which any of the Sellers is a party
will, upon due execution and delivery thereof, constitute the legal, valid and
binding obligation of each of the Sellers, in each case enforceable against each
of the Sellers in accordance with the terms hereof or thereof, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditor's rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or equity). "Transaction
Documents" means the Security Agreement, Registration Rights Agreement, Notes
and Purchase Price Warrants and any other agreements or instruments required to
be executed by the Sellers or Purchaser in connection with the transactions
contemplated in this Agreement.
4.4 NO VIOLATION OR BREACH BY THE SELLERS. The execution,
delivery and performance by each of the Sellers of this Agreement and the other
Transaction Documents to which any of the Sellers is a party, and the
consummation of the
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transactions contemplated hereby and thereby, do not and will not conflict with,
result in a violation or breach of, constitute a default (or an event which with
the giving of notice or the lapse of time or both would constitute a default) or
give rise to any right of termination or acceleration of any right or obligation
of any of the Sellers under, or result in the creation or imposition of any lien
or encumbrance of any kind upon any assets or properties of any of the Sellers,
by reason of the terms of, (a) any contract, agreement, lease, license,
mortgage, note, bond, debenture or other instrument or obligation to which any
of them is a party or by or to which any of them or their respective assets or
properties may be bound or subject, or (b) any order, writ, judgment,
injunction, award, decree, law, statute, rule or regulation applicable to any of
them.
4.5 CONSENTS AND APPROVALS. No consent, approval, authorization
license or order of, registration or filing with, or notice to, any foreign,
federal, state, local or other court, administrative agency or commission, other
governmental authority or regulatory body (each, a "Governmental Authority") or
any other Person is necessary to be obtained, made or given by any of the
Sellers in connection with the execution, delivery and performance by any of the
Sellers of this Agreement or any other Transaction Document to which any of the
Sellers is a party or in connection with the consummation by the Sellers of the
transactions contemplated hereby or thereby. For purposes of this Agreement
"Person" means any individual, corporation,
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partnership, limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or other entity or organization,
including any government or political subdivision or any agency or
instrumentality thereof.
4.6 LEGAL PROCEEDINGS. There is no pending or overtly
threatened action, suit, claim, proceeding or investigation before any
Governmental Authority against or involving any of the Sellers which, if
adversely determined, would, individually or in the aggregate together with all
such actions, suits, claims, proceedings or investigations, have a material
adverse effect on the ability of any of them to perform his obligations, or
consummate the transactions contemplated, hereunder or under any other
Transaction Document to which any of the Sellers is a party. None of the Sellers
is bound by or subject to any order, judgment, injunction, award or decree of
any Governmental Authority or arbitration tribunal which has had or is
reasonably likely to have a material adverse effect on the ability of any of
them to perform his obligations, or consummate the transactions contemplated,
hereunder or under any other Transaction Document to which any of the Sellers is
a party.
4.7 FINANCIAL STATEMENTS. The Sellers have heretofore delivered
to the Purchaser a copy of the Company's financial statements for the one year
period ended December 31, 1995 and the period commencing January 1, 1996 and
ended May 16, 1996 which have been prepared by the Company, and have been
prepared
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in accordance with generally accepted accounting principles consistently applied
throughout the periods indicated (the "Financial Statements"). The Financial
Statements (a) are true, correct and complete, (b) are in accordance with the
books and records of the Company, and (c) fairly, completely and accurately
present the financial condition of the Company at the dates specified or the
results of its operations for the periods covered. Except for (a) liabilities
reflected or reserved against in the Financial Statements, (b) liabilities
reflected in Schedule 4.7 hereto, or (c) liabilities incurred in the ordinary
course of business since May 16, 1996, the Company has no material liabilities
or obligations.
4.8 TITLE. Except as set forth on Schedule 4.8 hereto, the
Company owns outright, and has good and marketable title to, all of its assets,
free and clear of any mortgage, lien, security interest, pledge, charge, claim,
conditional sale or other agreement, lease, right or encumbrance of any sort.
Each such asset is in good operating condition and repair, is adequate and
suitable for the purposes for which it is being used and has been maintained and
repaired on a regular basis so as to preserve its utility and value and no
expenditure is required to put it in such condition and repair. The assets will
include all assets and properties (real, personal and mixed, tangible and
intangible) and all rights necessary or desirable to permit the Purchaser to
carry on the Purchased Business as presently conducted by the Company.
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4.9 ADVERSE CHANGES. Except as set forth in Schedule 4.9
hereto, since May 16, 1996, there have been no material adverse changes in the
condition (financial or otherwise), assets, liabilities, earnings, properties,
business or prospects of the Company and the Company has not;
4.9.1 authorized, issued, sold or converted any of its
securities, or entered into any agreement with respect thereto;
4.9.2 incurred any damage, destruction or similar loss,
whether or not covered by insurance, adversely affecting the business, assets or
properties of the Company;
4.9.3 other than in the ordinary course of business, sold,
assigned, transferred or otherwise disposed of any of its tangible or intangible
assets or intellectual properties, including, without limitation, any trademark,
trade name, copyright, license, franchise, design or other intangible asset or
intellectual property right;
4.9.4 other than in the ordinary course of business,
mortgaged, pledged, granted or suffered to exist any lien, security interest or
other encumbrance or charge on any of their assets or properties, tangible or
intangible;
4.9.5 other than in the ordinary course of business, waived
any rights of material value or canceled, discharged, satisfied or paid any
debt, claim, lien, security interest, encumbrance, liability or obligation,
whether absolute,
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accrued, contingent or otherwise and whether due or to become due;
4.9.6 incurred any obligation or liability (absolute or
contingent, liquidated or unliquidated, choate or inchoate), except current
obligations and liabilities incurred in the ordinary course of its business;
4.9.7 other than in the ordinary course of business, leased
or effected any transfer of any of the assets, properties or rights of the
Company;
4.9.8 other than in the ordinary course of business and
consistent with past practices, entered into, made any amendment of, or
terminated any lease, contract, license or other agreement to which the Company
is a party;
4.9.9 effected any change in the accounting practices or
procedures of the Company;
4.9.10 paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement, arrangement or
transaction of any nature with, any stockholder, any officer or any director of
the Company or any business or entity in which any stockholder, officer or
director of the Company or any "affiliate" (as such term is defined in the Rules
and Regulations of the Securities and Exchange Commission promulgated under the
Securities Act of 1933, as amended) of any such person has any direct or
indirect interest, except for
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regular compensation paid to the Sellers who are also employees of the Company;
4.9.11 increased the compensation payable to any of the
Company's directors, officers or employees or became obligated to increase any
such compensation; and
4.9.12 entered into any other transaction other than in the
ordinary course of business and consistent with past practices, or changed in
any way the business policies or practices of the Company.
4.10 TAXES. The Company has duly filed all foreign, federal,
state, county and local income, excise, sales, property, withholding, social
security, franchise, license, information returns and other tax returns and
reports required to have been filed by the Company prior to the date hereof.
Each such return is true, correct and complete and the Company has paid all
taxing authorities with respect to all periods prior to the date hereof required
to have been paid by the Company and created sufficient reserves or made
provision for all thereof accrued but not yet due and payable by it except as
set forth in Schedule 4.10 hereto. Except as set forth on Schedule 4.10 hereto,
the Company does not have any liability for any taxes, assessments, amounts,
interest or penalties of any nature whatsoever except as reserved against in the
Company's balance sheet dated as of May 16, 1996 (the "Balance Sheet") and there
is no basis for any additional claim or assessment other than with respect to
liabilities for taxes which may have accrued in the ordinary course of business
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since the date of the Balance Sheet. The Company has not been subject to
examination by any federal or state taxing authority. No government or
governmental authority is now asserting or threatening to assert any deficiency
or assessment for additional taxes or any interest, penalties or fines with
respect to the Company. Complete and correct copies of the federal income tax
returns of the Company for the year ended December 31, 1995, as well as any
other tax returns requested by the Purchaser, have been heretofore delivered to
the Purchaser. The Company has validly elected since inception, under the
Internal Revenue Code of 1986 as amended, to be taxed as an S-Corporation.
4.11 CONTRACTS. Except only those contracts, agreements and
commitments listed and described in Schedule 4.11 hereto (complete and correct
copies of each of which have been heretofore delivered to the Purchaser, except
for item 23 on Schedule 4.11), the Company is not a party to, and has no,
contract, agreement or commitment of any kind or nature whatsoever, written or
oral, formal or informal, including, without limitation, any (a) sales,
advertising, license, franchise, distribution, dealer, agency, manufacturer's
representative, or similar agreement, or any other contract relating to the
payment of a commission, (b) pension, profit-sharing, bonus, stock purchase,
stock option, retirement, severance, hospitalization, accident, insurance or
other similar plan, arrangement or agreement involving benefits to current or
former employees, (c) contract or commitment for the employment
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of any employee or consultant, (d) collective bargaining agreement or other
contract with any labor union, (e) contract or commitment for services,
materials, supplies, merchandise, inventory or equipment, (f) contract or
commitment for the sale or purchase of any of its services, products or assets,
(g) mortgage, indenture, promissory note, loan agreement, guaranty or other
contract or commitment for the borrowing of money or for a line or letter of
credit, (h) contract or commitment with any of the Sellers or any former
stockholder or any current or former director, officer or employee of the
Company which will be in effect on the Closing Date, (i) contract or commitment
with any government or governmental department, agency, bureau or
instrumentality thereof, (j) contract pursuant to which the right to compete
with any entity or person in the conduct of its business anywhere in the world
is restrained or restricted for any reason or in any way, (k) contract or
commitment guaranteeing the performance, liabilities or obligations of any
entity or person, (1) contract or commitment for capital improvements or
expenditures or with any contractor or subcontractor (m) contract or commitment
for charitable contributions, (n) lease or other agreement or commitment
pursuant to which it is a lessee of, or holds or operates, any real property,
machinery, equipment, motor vehicles, office furniture, fixtures or similar
personal property owned by any third party, or (o) any other contract or
commitment (including any periods covered by any options to renew by any party),
whether or not in the ordinary course of business.
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Except as set forth in Schedule 4.11, each of the contracts and commitments
referred to therein is valid and existing, in full force and effect, and
enforceable in accordance with its terms, and no party thereto is in default and
no claim of default by any party has been made or is now pending, and no event
exists which, with or without the lapse of time or the giving of notice, or
both, would constitute a breach or default, cause acceleration of any
obligation, would permit the termination or excuse the performance by any party
thereto, or would otherwise adversely affect the business and/or assets of the
Company. Except for item 1 of Schedule 4.11, no consent of the parties to the
contracts set forth on Schedule 4.11 is required as a result of the sale of the
Shares by the Sellers to the Purchaser for such contracts to remain enforceable,
valid and in full force and effect.
4.12 ACCOUNTS RECEIVABLE. Except as set forth in Schedule 4.12
hereto, each account receivable reflected on the Balance Sheet constitutes a
bona fide receivable resulting from a bona fide performance of services for a
customer in the ordinary course of business, the amount of which was actually
due on the date thereof and has been, or will be to the best of the Seller's
knowledge, collected in the ordinary course of business. The books and records
of the Company state correctly the facts with respect to each account receivable
of the Company and the balance due thereon. Each payment reflected in such books
and records as having been made on each such account receivable was made by the
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respective account debtor and not directly or indirectly by any director,
officer, employee or agent of the Company, as the case maybe, unless such person
is shown in said books and records as such account debtor and as set forth in
Schedule 4.12. There are no defenses, claims of disabilities, counterclaims,
offsets, refusals to pay or other rights of set-off against any accounts
receivable and there is no threatened, intended or proposed defense, claim of
disability, counterclaim, offset, refusal to pay or other right of set-off with
respect thereto. To the best of the Sellers' knowledge each account receivable
existing on the Closing Date will be paid in full.
4.13 REAL PROPERTY. The Company owns no real property. Schedule
4.13 hereto is a complete and correct list of all real property or premises
leased in whole or in part by the Company. The Company has legal and valid
occupancy permits and other required licenses or government approvals for each
of the properties and premises leased, used or occupied by the Company (copies
of which have been heretofore delivered to the Purchaser). Each lease or other
agreement of the Company for real property is in full force and effect and is a
legal, valid and binding obligation as between the Company, as the case maybe,
and the other party or parties thereto and the Company, as the case maybe, is a
tenant or possessor in good standing thereunder, free of any default or breach
whatsoever, and the Company has the legal right (without the consent or other
approval of any other party) to possess and quietly enjoy each of such premises
and
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properties under each of such leases or other agreements. Each rental and other
payment due thereunder has been duly made; each act required to be performed
which, if not performed, would constitute a material breach thereof has been
duly performed; no act forbidden to be performed has been performed thereunder
which, if protested, would constitute a material breach thereof; and there is
not under any such lease or other agreement any default or claim of default or
event which, with or without notice or the lapse of time, or both, would
constitute a breach or default thereunder. No improvement, fixture or equipment
in or on any such premises and properties, nor the occupation or leasehold with
respect thereto, is in violation of any law, including, without limitation, any
zoning, building, safety, health or environmental law, and each of such premises
or properties is currently being used.
4.14 PERSONAL PROPERTY. Schedule 4.14 hereto is a true and
complete list of (a) all tangible personal property owned by the Company having
a book value at the date hereof in excess of $1,000.00 per item and (b) all
personal property owned by a third party which is leased to, or otherwise used
by, the Company, together with a description of the lease or other agreement
relating to the lease, use or operation thereof, including, without limitation,
leases or other agreements relating to the use or operation of any machinery,
equipment, motor vehicles, office furniture or fixtures owned by any third party
(complete
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and correct copies of which leases or other agreements have been heretofore
delivered to the Purchaser).
4.15 INTANGIBLE PROPERTY. Schedule 4.15(a) hereto is a complete
and correct list, together with a brief description (including, if applicable,
date of application, filing or registration, as the case may be, and the
registration or application number), of each trade secret, copyright, trade
name, trademark, brand name, servicemark, or design, or representation or
expression of any thereof or registration or application therefor ("Trade
Rights"), whether or not registered in the name of, or applied for by, the
Company, in which the Company has any rights or interest, whether through any
contract or otherwise, and in each case a brief description of the nature of
such rights and interests. Except as otherwise listed in Schedule 4.15(b), the
Company is not a licensor or a licensee in respect of any Trade Right nor does
the Company either pay or receive royalty payments to or from any third party in
respect of any Trade Rights. The Company owns, or has the exclusive right to
use, each Trade Right necessary to conduct, or be used in, their respective
businesses as now operated and there are no conflicts with, or infringements of,
the rights of others in respect thereof or any unauthorized use or
misappropriation of any thereof.
4.16 INSURANCE. Schedule 4.16 hereto is a complete and correct
list, together with a brief description (including name of insurer, agent, type
of coverage, policy number, annual
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premium, amount of coverage, expiration date and any pending claims thereunder),
of all insurance policies, including, without limitation, liability, burglary,
theft, fidelity, life, fire, product liability, worker's compensation, health
and other forms of insurance of any kind held by the Company; each such policy
is valid and enforceable, outstanding and in full force and effect; the Company
is the sole beneficiary of each such policy; no such policy, or the future
proceeds thereof, has been assigned to any other person or entity; all premiums
and other payments due from the Company under, or on account of, any such policy
have been paid; there is no act or fact or failure to act which has caused or
might cause, any such policy to be canceled or terminated; the Company has given
each notice and presented each claim under each such policy and taken any other
required or appropriate action with respect thereto in due and timely fashion;
and each such policy is adequate for the business in which the Company is
engaged. Complete and correct copies of each policy have been heretofore
delivered to the Purchaser.
4.17 LITIGATION. Except as set forth in Schedule 4.17 hereto,
no action, suit, claim, arbitration, governmental, investigation or proceeding,
whether legal or administrative or in mediation or arbitration, is pending or,
to the best knowledge of the Sellers, threatened, at law or in equity or
admiralty, before or by any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
against or affecting the Company or any of the
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assets or business, operations, financial condition or prospects of the Company
or (ii) in which an unfavorable judgment, decree or order would restrain,
prohibit, invalidate, set aside, rescind, prevent or make unlawful this
Agreement or the carrying out of this Agreement or the transactions contemplated
hereby; nor is there any basis for any such action, suit, claim, investigation
or proceeding. Except as set forth in Schedule 4.17 hereto, there is no pending
action, suit or proceeding which has been brought by or on behalf of the Company
in any court, before any governmental agency or arbitration tribunal. The
Company is not in default with respect to any order, writ, information or decree
of any court or any federal, state, municipal or other governmental department,
bureau, agency or instrumentality.
4.18 PERMITS. The Company has all permits, licenses, orders and
approvals of all federal, state or local governmental regulatory bodies required
for them to conduct their respective businesses as presently conducted; all such
permits, licenses, orders and approvals are in full force and effect and no
suspension or cancellation of any of them is pending or threatened; and none of
such permits, licenses, orders or approvals will be adversely affected by the
consummation of the transactions contemplated by this Agreement. The Company is
in compliance with each law, rule and regulation applicable to their respective
businesses, including, without limitation, laws, rules and regulations
respecting occupational safety, environmental
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protection and employment practices. The conduct of the business of the Company
and all assets and properties utilized by the Company therein is in conformance
with the requirements and regulations of the Occupational Safety and Health
Administration.
4.19 DISCRIMINATION. Except as set forth in Schedule 4.19
hereto, the Company has not been found by any court or governmental department,
commission, board, agency or instrumentality to have committed any act of
sexual, religious, age or racial discrimination, any act of sexual harassment,
or any other similar act which violates any federal, state or local law or
regulation and there is not pending in any court or before any governmental
department, commission, board, agency or instrumentality, or threatened, any
claim with respect to any of the foregoing.
4.20 LABOR AGREEMENTS. The Company is not a party to any
representation or labor contract. The Company is not delinquent in payments to
any of its employees for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed by them to the date hereof or
amounts required to be reimbursed to such employees. In the event of termination
of the employment of any said employees, the Company will not, by reason of
anything done prior to the Closing Date, be liable to any of said employees for
so-called "severance pay" or any other payments. The Company is in compliance
with all federal, state and local laws and regulations respecting labor,
employment and wages and hours. There is no unfair labor
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practice complaint against the Company pending before the National Labor
Relations Board or any comparable state or local agency.
4.21 EMPLOYMENT ARRANGEMENTS. Schedule 4.21 hereto is a
complete and correct list of the names and current annual salary, bonus,
commission and perquisite arrangements, written or unwritten, for each director,
officer and employee of the Company. Except as set forth in Schedule 4.21, no
current or former director, officer or employee of the Company or any relative,
associate or agent of such director, officer or employee has any interest in any
property of the Company except as a stockholder, or is a party, directly or
indirectly, to any contract for employment or otherwise or any lease or has
entered into any transaction with the Company, including, without limitation,
any contract for the furnishing of services by, or the rental of real or
personal property from or to, or requiring payments to, any such director,
officer, employee, relative, associate or agent.
4.22 CUSTOMERS. Schedule 4.22 hereto is a complete and correct
list of the names and addresses of the ten (10) largest customers of the Company
during the last fiscal year and the total sales to such customers made by the
Company during the last fiscal year and the salesperson assigned to such
customers. The Company has advised all of the Company's customers who represent
in excess of one (1%) percent of the Company's sales during the last fiscal year
of this transaction and no customer of the
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Company representing in excess of one (1%) percent of the Company's sales during
the last fiscal year has advised the Company, formally or informally, that it
intends to terminate, discontinue or substantially modify or reduce its business
with the Company (i) by reason of the transactions contemplated by this
Agreement or (ii) otherwise.
4.23 EMPLOYEE PLANS. Schedule 4.23 hereto sets forth a complete
and correct list of all pension, profit sharing and other employee benefit plans
("Employee Plans") maintained by the Company. The Company each have no liability
on account of any such Employee Plan, except to the extent described in Schedule
4.23, including, but not limited to, liability for (a) additional contributions
accruing under said Employee Plans with respect to periods commencing on or
prior to the Closing Date; (b) fiduciary breaches by the Company, the trustees
under a trust created under any of said plans, or any other persons under the
ERISA, or any other applicable statute, regulation or rule; or (c) income taxes
by reason of non-qualification of said Employee Plans.
4.24 ILLEGAL TRANSACTIONS. Neither the Company nor any current
or former officer, director, employee or agent of the Company (nor any person
acting on behalf of any of the foregoing) has, directly or indirectly, given or
agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other person who is or may be in a position to help or
hinder the Company or assist the Company in connection with any actual or
proposed transaction, which, if not given in the past, might
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have had an adverse effect on the business or prospects of the Company, or
which, if not continued in the future, might adversely affect the business or
prospects, of the Company, or which might subject the Company to suit or penalty
in any private or governmental litigation or proceeding.
4.25 BANK ACCOUNTS. The Company has not and does not maintain a
bank account or other account of any kind, whether domestic or foreign, which
account was not reflected in the corporate books and records or which account
was not listed, titled or identified in the name of the Company.
4.26 INVESTMENT REPRESENTATION. The Sellers are acquiring the
Purchase Price Shares, the Purchase Price Warrants and the shares issuable upon
the exercise of the Purchase Price Warrants for investment purposes only and not
with a view toward any distribution thereof except in compliance with the
Securities Act of 1933, amended.
4.27 MATERIAL DISCLOSURES. Neither this Agreement nor the
representations and warranties by the Sellers contained herein or in any
documents, instruments, certificates or schedules furnished pursuant hereto or
in connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements or facts contained herein and therein not misleading. There is no
fact which adversely affects, or in the future may adversely affect, the
business, operations, affairs, condition or prospects of the Company which has
not been set
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forth in this Agreement or in the documents, instruments, certificates or
schedules furnished pursuant hereto.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Sellers as
follows:
5.1. ORGANIZATION. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority, corporate or otherwise, to
own, lease and operate its properties and carry on its business as and in the
places where such properties are now owned, leased or operated or such business
is now being conducted. Except as set forth on Schedule 5.1, the Purchaser does
not have any subsidiaries. Each such subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation and has requisite power and authority, corporate or otherwise, to
own, lease and operate its properties and carry out its business as and in the
places where such properties are now owned, leased or operated or such business
is now being conducted.
5.2 CAPITALIZATION. As of May 7, 1996, Except as set forth in
Schedule 5.2, the Purchaser has no authorized or outstanding securities.
5.3 AUTHORITY. The Purchaser has all requisite power and
authority, corporate or otherwise, to enter into this Agreement and to assume
and perform its obligations hereunder and
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under the Transaction Documents. The execution and delivery of this Agreement
and the Transaction Documents and the performance by the Purchaser of its
obligations hereunder and thereunder have been duly authorized by all necessary
corporate action of the Purchaser and no further action or approval, corporate
or otherwise, is required in order to constitute this Agreement and the
Transaction Documents as valid, binding and enforceable obligations of the
Purchaser enforceable against the Purchaser in accordance with the terms hereof
or thereof, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditor's rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
equity).
5.4 GOVERNMENT CONSENT. No consent, approval, authorization
license or order of, registration or filing with, or notice to, any Governmental
Authority or any other Person is necessary to be obtained, made or given by the
Purchaser in connection with the execution, delivery and performance by the
Purchaser of this Agreement or any other Transaction Document to which the
Purchaser is a party or in connection with the consummation by the Purchaser of
the transactions contemplated hereby or thereby.
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5.5 CONFLICT. The execution and delivery of this Agreement or
the Transaction Documents, the consummation of the transactions contemplated
hereby or thereby, the fulfillment of the terms, conditions or provisions hereof
or thereof and the compliance with the terms, conditions or provisions hereof
and thereof (a) do not and will not conflict with, or violate any provision of,
the Certificate of Incorporation or the By-Laws of the Purchaser or (b) do not
and will not conflict with, or result in any breach of, any condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration under (whether after the giving of
notice or lapse of time or both) any contract, mortgage, lien, lease, agreement,
indenture, license, franchise, instrument, order, judgment or decree to which
the Purchaser is a party or which is, or purports to be, binding upon the
Purchaser, or (c) will not be in violation of any statute, rule or regulation
applicable to the Purchaser.
5.6 PURCHASE FOR INVESTMENT. The Purchaser is acquiring the
Shares for investment purposes only and not with a view toward any distribution
thereof except in compliance with the Securities Act of 1933, as amended.
5.7 LEGAL PROCEEDINGS. Except as is set forth in Schedule 5.7,
there is no pending or overtly threatened action, suit, claim, proceeding or
investigation before any Governmental Authority against or involving the
Purchaser which, if adversely determined, would, individually or in the
aggregate together with
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all such actions, suits, claims, proceedings or investigations, have a material
adverse effect on the ability of the Purchaser to perform its obligations, or
consummate the transactions contemplated, hereunder or under any other
Transaction Document to which the Purchaser is a party. Purchaser is not bound
by or subject to any order, judgment, injunction, award or decree of any
Governmental Authority or arbitration tribunal which has had or is reasonably
likely to have a material adverse effect on the ability of any Purchaser to
perform its obligations, or consummate the transactions contemplated, hereunder
or under any other Transaction Document to which the Purchaser is a party.
5.8 FINANCIAL STATEMENTS. The Purchaser has heretofore
delivered to the Sellers a copy of the Purchaser's financial statements for the
nine-month period ended December 31, 1995 which have been prepared by the
Purchaser's independent certified public accountants, and have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods indicated (the "USAT Financial Statements"). The USAT
Financial Statements (a) are true, correct and complete, (b) are in accordance
with the books and records of the Purchaser, and (c) fairly, completely and
accurately present the financial condition of the Purchaser at the dates
specified or the results of its operations for the periods covered. Except for
(a) liabilities reflected or reserved against in the Financial Statements, (b)
liabilities reflected in Schedule 5.8 hereto, or (c) liabilities incurred in
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the ordinary course of business since December 31, 1995, the Purchaser has no
material liabilities or obligations.
5.9 TITLE. Except as set forth in the USAT Financial Statements
or on Schedule 5.9 hereto, the Company owns outright, and has good and
marketable title to, all of its assets, free and clear of any mortgage, lien,
security interest, pledge, charge, claim, conditional sale or other agreement,
lease, right or encumbrance of any sort.
5.10 TAXES. The Purchaser has duly filed all foreign, federal,
state, county and local income, excise, sales, property, withholding, social
security, franchise, license, information returns and other tax returns and
reports required to have been filed by the Purchaser prior to the date hereof.
Each such return is true, correct and complete and the Purchaser has paid all
taxing authorities with respect to all periods prior to the date hereof required
to have been paid by the Purchaser and created sufficient reserves or made
provision for all thereof accrued but not yet due and payable by it. The
Purchaser does not have any liability for any taxes, assessments, amounts,
interest or penalties of any nature whatsoever except as reserved against in the
Purchaser's balance sheet dated as of December 31, 1995 (the "USAT Balance
Sheet") and there is no basis for any additional claim or assessment other than
with respect to liabilities for taxes which may have accrued in the ordinary
course of business since the date of the USAT Balance Sheet. No government or
governmental authority is now asserting or
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threatening to assert any deficiency or assessment for additional taxes or any
interest, penalties or fines with respect to the Purchaser.
5.11 LITIGATION. Except as set forth in Schedule 5.11 hereto,
no material action, suit, claim, arbitration, governmental, investigation or
proceeding, whether legal or administrative or in mediation or arbitration, is
pending, at law or in equity or admiralty, before or by any court or federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, (i) against or affecting the Purchaser or any of the
assets or business, operations, financial condition or prospects of the
Purchaser or (ii) in which an unfavorable judgment, decree or order would
restrain, prohibit, invalidate, set aside, rescind, prevent or make unlawful
this Agreement or the carrying out of this Agreement or the transactions
contemplated hereby; nor is there any basis for any such action, suit, claim,
investigation or proceeding. Except as set forth in Schedule 5.11 hereto, there
is no pending action, suit or proceeding which has been brought by or on behalf
of the Purchaser in any court or before any governmental agency or arbitration
tribunal. The Purchaser is not in default with respect to any order, writ,
information or decree of any court or any federal, state, municipal or other
governmental department, bureau, agency or instrumentality.
5.12 MATERIAL REPRESENTATIONS. No representation or warranty by
the Purchaser in this Agreement or under any
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documents, instruments, certificates or schedules furnished pursuant hereto or
in connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements of fact contained herein and therein not misleading. There is no
fact which adversely affects, or in the future may adversely affect, the
business, operations, affairs, condition or prospects of the Company which has
not been set forth in this Agreement or in the documents, instruments,
certificates or schedules furnished pursuant hereto or in the Purchaser's
Registration Statement on Form S-4 which was filed with the Securities and
Exchange Commission on May 6, 1996.
6. RESTRICTIVE COVENANT. In consideration of a portion of the purchase
price, as set forth in Schedule 6.1, for a period of four (4) years after the
Closing Date, the R. Stutman and B. Stutman shall not:
6.1.1 directly or indirectly own any interest in, manage,
operate, join, control, participate in, invest in, or otherwise be connected in
any manner with, whether as an officer, director, employee, partner, investor or
otherwise, any business entity which is engaged in the United States, in any
business similar to the Purchased Business as conducted by the Company
immediately prior to the Closing. Nothing contained in this Section 6.1.1 shall
preclude R. Stutman or B. Stutman (a) while they are not employed by the
Purchaser, from owning not more than
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two (2%) percent of the issued and outstanding shares of publicly traded common
stock of a corporation engaged in the Purchased Business or (b) from owning
shares in a mutual fund.
6.1.2 for itself or on behalf of any other person,
partnership, corporation or entity, be in contact in any way with any customer
or employee of the Company for the purpose of soliciting, diverting or taking
away any customer or employee of the Company.
6.2 CONFIDENTIALITY. At all times after the Closing Date, the
Sellers shall hold in a fiduciary capacity for the benefit of the Purchaser all
confidential and proprietary information, trade secrets, knowledge and data
relating to, or concerned with, the Company which is not in the public domain,
and they shall not at any time after the Closing Date use any such information,
knowledge, trade secrets or data for the benefit of any Person other than the
Purchaser or its designees, or disclose or divulge any such information,
knowledge, trade secrets or data to any Person, other than to the Purchaser or
its designees.
6.3 EQUITABLE RELIEF. The Sellers agree that the remedy at law
for any breach of the provisions of Sections 6.1 and 6.2 hereof will be
inadequate and that the Purchaser shall be entitled to injunctive relief to
compel the Sellers to perform or refrain from action required or prohibited
hereunder. The necessity of protection against the competition of the Sellers
and the nature and scope of such protection has been carefully
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considered by the parties hereto. The parties hereby agree and acknowledge that
the duration, scope and geographic area applicable to the restrictions set forth
in this Section 6 are fair, reasonable and necessary. The consideration provided
for herein is sufficient and adequate to compensate the Sellers for agreeing to
the restrictions contained in this Section. If, however, any court determines
that the foregoing restrictions are not reasonable, such restrictions shall be
modified, rewritten or interpreted to include as much of their nature and scope
as will render them enforceable.
7. SURVIVAL OF REPRESENTATIONS. All of the representations, warranties,
covenants and agreements made by the parties to this Agreement shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder for a period of two (2) years.
8. INDEMNIFICATION
8.1 BY PURCHASER. The Purchaser shall defend and promptly
indemnify the Sellers and save the Sellers harmless from, against, for and in
respect of, and shall pay all damages, losses, obligations, liabilities, claims,
encumbrances, deficiencies, costs and expenses, including, without limitation,
reasonable attorneys' fees and other costs and expenses incident to, any action,
investigation, claim or proceeding (all
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hereinafter collectively referred to as "Losses") suffered, sustained, incurred
or required to be paid by the Sellers by reason of any breach or failure of
observance or performance of any representation, warranty, covenant, agreement
or commitment made by the Purchaser hereunder or relating hereto or as a result
of any such representation, warranty, covenant, agreement or commitment being
untrue or incorrect in any respect.
8.2 BY SELLERS. R. Stutman and B. Stutman shall, jointly and
severally, defend and promptly indemnify the Purchaser and save and hold the
Purchaser harmless from, against, for and in respect of, and pay any and all
damages, losses, obligations, liabilities, claims, encumbrances, deficiencies,
costs and expenses, including without limitation, reasonable attorneys' fees and
other costs and expenses incident to, any suit, action, investigation, claim or
proceeding (all hereinafter collectively referred to as "Losses") suffered,
sustained, incurred or required to be paid by the Purchaser by reason of any
breach or failure of observance or performance of any representation, warranty,
covenant, agreement or commitment made by the Sellers, hereunder or relating
hereto or as a result of any such representation, warranty, covenant, agreement
or commitment being untrue or incorrect in any respect.
8.3 CLAIM FOR INDEMNIFICATION. For purposes of this Article 8,
the party entitled to indemnification shall be known as the "Injured Party" and
the party required to indemnify shall be known as the "Other Party." In the
event that the Other Party
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shall be obligated to the Injured Party pursuant to this Article 8, or in the
event that a suit, action, investigation, claim or proceeding is begun, made or
instituted as a result of which the Other Party may become obligated to the
Injured Party hereunder, the Injured Party shall give prompt written notice to
the Other Party of the occurrence of such event. The Other Party agrees to
defend, contest or otherwise protect against any such suit, action,
investigation, claim or proceeding at the Other Party's own cost and expense.
The Injured Party shall have the right, but not the obligation, to participate
at its own expense in the defense thereof by counsel of its own choice. In the
event that the Other Party fails to timely defend, contest or otherwise protect
against any such suit, action, investigation, claim or proceeding, the Injured
Party shall have the right to defend, contest or otherwise protect against the
same and may make any compromise or settlement thereof and recover the entire
cost thereof from the Other Party, including, without limitation, reasonable
attorneys' fees, disbursements and all amounts paid as a result of such suit,
action, investigation, claim or proceeding or compromise or settlement thereof.
9. BROKERS. The Sellers and the Purchaser covenant and represent to
each other that they had no dealings with any broker or finder in connection
with this Agreement or the transactions contemplated hereby and no broker,
finder or other person is entitled to receive any broker's commission or
finder's fee or
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similar compensation in connection with any such transaction. Each of the
parties agrees to defend, indemnify and hold harmless the other from, against,
for and in respect of any and all losses sustained by the other as a result of
any liability or obligation to any broker or finder on the basis of any
arrangement, agreement or acts made by or on behalf of such other party with any
person or persons whatsoever.
10. MISCELLANEOUS
10.1 ENTIRE AGREEMENT. This Agreement (including the Schedules
which are made a part hereof) constitutes the entire agreement of the parties
with respect to the subject matter hereof. The representations, warranties,
covenants and agreements set forth in this Agreement and in any financial
statements, schedules or exhibits delivered pursuant hereto constitute all the
representations, warranties, covenants and agreements of the parties hereto and
upon which the parties have relied and, except as may be specifically provided
herein, no change, modification, amendment, addition or termination of this
Agreement or any part thereof shall be valid unless in writing and signed by, or
on behalf of, the party to be charged therewith.
10.2 NOTICES. Any and all notices or other communications or
deliveries required or permitted to be given or made shall be in writing and
delivered personally, or sent by
37
<PAGE> 38
certified or registered mail, return receipt requested and postage prepaid, or
sent by overnight courier service as follows:
If to the Purchaser, at:
U.S. Alcohol Testing of America, Inc.
10410 Trademark Street
Rancho Cucamonga, California 91730
Attention: President
With a copy to:
Gold & Wachtel, LLP
110 East 59th Street
New York, New York 10022
Attention: Robert Berend, Esq.
If to the Sellers, at:
c/o Roberts, Carroll, Feldstein & Peirce
10 Weybosset Street
Providence, Rhode Island 02903-2808
Attention: Edward D. Feldstein, Esq.
or at such other address as any party may specify by notice given to such other
party in accordance with this Section 10.2. The date of giving of any such
notice shall be the date of hand delivery, two days after the date of the
posting of the mail or the date when deposited with the overnight courier.
10.3 WAIVER. No waiver of the provisions hereof shall be
effective unless in writing and signed by the party to be charged with such
waiver. No waiver shall be deemed a continuing waiver or waiver in respect of
any subsequent breach or default, either of similar or different nature, unless
expressly so stated in writing.
38
<PAGE> 39
10.4 GOVERNING LAW. This Agreement shall be construed (both as
to validity and performance) and enforced in accordance with, and governed by,
the laws of the State of California applicable to contracts to be performed
entirely within that State, without giving effect to the principles of conflicts
of law. The parties hereto agree that any suit or proceeding arising out of this
Agreement or the consummation of the transactions contemplated hereby shall be
brought only in a federal or state court located in the County of San Bernadino,
State of California or County of Palm Beach, State of Florida; provided,
however, that neither party waives its right to request the removal of such
action or proceeding from the state court to a federal court in such
jurisdiction. The parties hereto each waive any claim that such jurisdiction is
not a convenient forum for any such suit or proceeding and the defense of lack
of personal jurisdiction.
10.5 SEVERABILITY. Should any clause, section or part of this
Agreement be held or declared to be void or illegal for any reason, all other
clauses, sections or parts of this Agreement which can be effected without such
illegal clause, section or part shall nevertheless continue in full force and
effect.
10.6 EXPENSES. Except as otherwise provided herein, the
Purchaser and the Sellers shall each bear their own expenses in connection with
this transaction.
39
<PAGE> 40
10.7 BINDING EFFECT. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns or heirs and personal representatives.
10.8 HEADINGS. The headings or captions under sections of this
Agreement are for convenience and reference only and do not in any way modify,
interpret or construe the intent of the parties or effect any of the provisions
of this Agreement.
10.9 PUBLICITY. All press releases, filings and other publicity
concerning the transactions contemplated hereby will be subject to review and
approval by both R. Stutman and the Purchaser, such approval not to be
unreasonably withheld. Such approval shall not be required if the person issuing
such publicity reasonably believes it to be necessary for compliance with law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed as of the date and year first above written.
U.S. ALCOHOL TESTING OF AMERICA, INC..
By:
----------------------------
President
-------------------------------
ROBERT STUTMAN
-------------------------------
BRIAN STUTMAN
-------------------------------
MICHAEL ROCHELLE
40
<PAGE> 41
-------------------------------
KIMBERLY ROCHELLE
-------------------------------
SANDRA DEBOW
41
<PAGE> 42
Exhibit A to
Stock Purchase Agreement
SECURED PROMISSORY NOTE
New York, New York
May 21, 1996
FOR VALUE RECEIVED, the undersigned U.S. Alcohol Testing of America,
Inc. (the "Maker"), hereby unconditionally promises to pay to the order of
Robert Stutman (the "Holder") the principal amount of Two Hundred Thirty Nine
Thousand Seven Hundred Sixty ($239,760) Dollars to be paid on May 20, 1997,
together with interest at a rate of 7.5% per annum. All payments of principal
hereunder shall be made in lawful money of the United States, in immediately
available funds at 7394 Panache Way, Boca Raton, Florida (or at such other place
as the Holder of this Note may designate in writing to the Maker).
In the event that any payment of principal or interest hereunder shall
become due on a Saturday, Sunday or legal or bank holiday under the laws of the
place of which such payment is to be made hereunder, such payment shall be made
on the next succeeding business day. All payments hereunder shall first be
applied to accrued interest and then to principal.
This Note is the promissory note referred to as the Note in the Stock
Purchase Agreement, dated as of May 21, 1996 (the "Stock Purchase Agreement"),
by and among the Holder, the Maker, Sandra DeBow, Michael Rochelle, Kimberly
Rochelle and Brian Stutman. This Note is secured by a lien on the Maker's assets
pursuant to a Security Agreement between the Holder and the Maker dated as of
May 21, 1996 (the "Security Agreement").
<PAGE> 43
1. Prepayment. The unpaid principal amount of this Note may be prepaid
at any time in whole, or in part, by the Maker without penalty.
2. Mandatory Prepayment The unpaid principal amount of this Note shall
be prepaid in accordance with Section 2.3 of the Stock Purchase Agreement.
3. Events of Default.
a. If any of the following events shall occur during the term
hereof, such event shall be deemed a default by the Maker hereunder ("Event of
Default"):
i) The Maker shall have defaulted on the payment of any principal
or interest hereunder when it shall have become due and payable; or
ii) The Maker shall have defaulted in the payment of principal or
interest due under the Promissory Note issued to Robert Stutman pursuant to the
Stock Purchase Agreement, as and when it shall have become due and payable; or
iii) There shall have been entered any order, judgment or decree
by a court of competent jurisdiction for relief in respect of the Maker under
any applicable federal, state or foreign bankruptcy law or other similar law, or
appointing a receiver, assignee, trustee of all or a substantial part of the
Maker's property, assets or revenues and that order, judgment or
2
<PAGE> 44
decree shall have been continued unstayed, unbonded and in effect
for a period of 120 days; or
iv) The filing by the Maker of a petition or consent to a
petition seeking relief under Title 11 of the United States Code, as now or
hereafter constituted, or any other applicable federal, state or foreign
bankruptcy, insolvency or other similar law, or the consent by the Maker to the
institution of proceedings thereunder or to the filing of any such petition or
to the appointment or taking of possession by a receiver, liquidator, assignee,
trustee, custodian, of any substantial part of the property, assets or revenues
of the Maker or the making by the Maker of an assignment for the benefit of
creditors; or
v) The occurrence of a default under the Security Agreement.
b. In the case of an Event of Default, without any demand,
presentment, protest or other notice whatsoever to the Maker, or other statutory
or other rights of redemption, or any other action by the Holder, all of which
are hereby expressly waived by the Maker, the unpaid principal amount hereof and
all accrued interest shall become immediately due and payable in full upon the
occurrence of any such event and the holder may exercise simultaneously or
seriatim any or all of such other rights and remedies as may be lawfully
permitted under Federal law or state law and any and all of the remedies of the
Holder set forth herein.
3
<PAGE> 45
4. Loss, etc., of Note. Upon receipt of evidence reasonably
satisfactory to the Maker of the loss, theft, destruction or mutilation of this
Note, and of indemnity reasonably satisfactory to the Maker, if lost, stolen,
destroyed or mutilated, the Maker shall execute and deliver to the Holder a new
note identical in all respects to this Note.
5. Waivers. The Maker hereby waives diligence, presentment, protest and
demand, and also notice of protest, of demand, of non- payment, of dishonor and
of maturity.
6. Governing Law. This Note shall be construed (both as to validity and
performance) and enforced in accordance with, and governed by, the laws of the
State of California applicable to contracts to be performed entirely within that
State, without giving effect to the principles of conflicts of law. Any suit or
proceeding arising out of this Note shall be brought only in a federal or state
court located in the County of Palm Beach, State of Florida or County of San
Bernadino, State of California; provided, however, that neither party waives its
right to request the removal of such action or proceeding from the state court
to a federal court in such jurisdiction. The parties hereto each waive any claim
that such jurisdiction is not a convenient forum for any such suit or proceeding
and the defense of lack of personal jurisdiction.
4
<PAGE> 46
7. Collection. The Maker hereby agrees to pay, upon demand, in lawful
money of the United States of America, all of the Holder's reasonable costs and
expenses of enforcement and collection of this Note, including reasonable
attorneys' fees and disbursements, in the event and to the extent that the
Holder seeks to enforce any of the terms or covenants of this Note, including,
without limitation, the Maker's obligations to pay the principal and interest
thereof pursuant to the terms hereof.
U.S. ALCOHOL TESTING OF AMERICA, INC.
By:______________________________
Title:
5
<PAGE> 47
Exhibit B to
Stock Purchase Agreement
Warrant No. 5 22,500 Shares
--------
NO SALE, OFFER OR TRANSFER OF THIS WARRANT OR THE SHARES ISSUABLE UPON
EXERCISE THEREOF SHALL BE MADE UNLESS A REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, WITH RESPECT TO SUCH
TRANSACTION IS THEN IN EFFECT OR THE ISSUER HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER DOES NOT REQUIRE
REGISTRATION UNDER SUCH ACT.
THIS WARRANT WILL BE VOID AFTER 5:00 P.M., NEW YORK TIME, ON MAY 20, 1999
WARRANT
TO SUBSCRIBE FOR AND PURCHASE SHARES OF
COMMON STOCK OF
U.S. ALCOHOL TESTING OF AMERICA, INC.
This certifies that, for value received, KIMBERLY ROCHELLE (hereinafter
called the "Holder"), or registered assigns, is entitled, at any time or from
time to time at or after May 21, 1996, with respect to the shares issuable upon
the exercise of this Warrant (the "Commencement Date") and at or before 5:00
P.M., New York time, on May 20, 1999 (the "Expiration Date"), to subscribe for
and purchase an aggregate of 22,500 fully paid and non-assessable shares of the
common stock, $.01 par value (the "Common Stock"), of U.S. Alcohol Testing of
America, Inc., (hereinafter called the "Corporation") at a purchase price of
$3.125 per share (the "Purchase Price"), subject to adjustment as provided in
Section 3 hereof, payable in lawful money of the United States of America, upon
surrender of this Warrant and payment of the Purchase Price to the Corporation
at its principal office (currently 10410 Trademark Street, Rancho Cucamonga,
California 91730) or at such other place as the Corporation may designate by
written notice to the Holder.
1. Exercise
The Warrant evidenced hereby may be exercised from time to time, in
whole or in part, from the Commencement Date until the Expiration Date, provided
that in no event may any fractional share of the Common Stock be issued. In the
event that a fractional share would otherwise be issued as a result of any
adjustment made pursuant to Section 3 hereof or otherwise, payment for such
fractional share shall be made on the basis of the Market Price on the date of
exercise. For the purpose of this Section 1, the term "Market Price" shall mean
(a) if the Common Stock is traded on a national securities exchange or on the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
System, the closing sales price (or, if no sales on that day, the high bid
price) or (b) if the Common Stock is not traded as provided in subsection (a),
the closing bid price as reported in the OTC Bulletin Board of the National
<PAGE> 48
Association of Securities Dealers, Inc. (the "NASD") or in the pink sheets by
the National Quotation Bureau, Inc.
Upon any exercise of the Warrant evidenced hereby, the form of election
to purchase set forth as Exhibit A hereto shall be properly completed, executed
and delivered to the Corporation, together with full payment to the Corporation
of the Purchase Price for the shares as to which the Warrant is exercised by
certified check or bank draft. In the event that there is only a partial
exercise of the Warrant evidenced hereby, there shall be issued to the Holder a
new Warrant Certificate, in all respects similar to this Warrant Certificate,
evidencing the number of shares of the Common Stock still available for
exercise.
Upon receipt of full payment and properly completed documentation, the
Corporation shall then cause the Transfer Agent for the Common Stock to issue
fully paid and nonassessable shares of the Common Stock as are represented by
the exercise.
If this Warrant shall be surrendered upon exercise within any period
during which the transfer books for the Common Stock are closed for any purpose,
the Corporation shall not be required to make delivery of certificates for
shares of the Common Stock until the date of the reopening of said transfer
books.
2. Expiration Date
The Warrant evidenced hereby may not be exercised before the
Commencement Date or after the Expiration Date with respect to the shares of the
Common Stock as to which the Warrant may be exercised and, to the extent not
exercised by the Expiration Date, the Warrant evidenced hereby shall become
void.
3. Adjustments
Subject to the provisions of this Section 3, the Purchase Price and the
shares of the Common Stock as to which the Warrant may be exercised shall be
subject to adjustment from time to time as hereinafter set forth:
(a) If at any time, or from time to time, the Corporation
shall, by subdivision, consolidation, or reclassification of shares, or
otherwise, change as a whole the outstanding shares of the Common Stock into a
different number or class of shares, the number and class of shares so changed
shall replace the shares outstanding immediately prior to such change and the
Purchase Price and the number of shares purchasable under this Warrant
immediately prior to the date on which such change shall become effective shall
be proportionately adjusted.
(b) Irrespective of any adjustments or change in the Purchase
Price or the number of securities actually purchasable under this Warrant, this
Warrant may continue to express the exercise price and the number of securities
purchasable thereunder as the Purchase
2
<PAGE> 49
Price and the number of securities purchasable were expressed in this Warrant
when initially issued.
(c) If at any time while this Warrant is outstanding, the
Corporation shall consolidate with, or merge into, another corporation, firm or
entity, or otherwise enter into a form of business combination, the Holder of
this Warrant shall thereafter be entitled upon exercise thereof to purchase,
with respect to each security purchasable thereunder immediately prior to the
date on which such consolidation or merger or other form of business combination
shall become effective, the securities or property to which a holder of one such
security would have been entitled upon such consolidation or merger or other
form of business combination, without any change in, or payment in addition to,
the Purchase Price in effect immediately prior to such consolidation or merger
or other form of business combination, and the Corporation shall take such steps
in connection with such consolidation or merger or other form of business
combination as may be necessary to assure that all this provisions of this
Warrant shall thereafter be applicable, as nearly as reasonably may be, in
relation to any securities or property thereafter deliverable upon the exercise
of this Warrant.
(d) The Board of Directors of the Corporation, in its
discretion, may, at any time during the exercise period of this Warrant, extend
the exercise period or reduce the Purchase Price for this Warrant.
(e) Upon the happening of any event requiring the adjustment
of the exercise price hereunder, the Corporation shall forthwith give written
notice thereof to the Holder of this Warrant stating the adjusted Purchase Price
and the adjusted number of securities purchasable upon the exercise thereof
resulting from such event and setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. The certificate
of the Corporation's independent public accountants shall be conclusive evidence
of the correctness of any computation made hereunder.
4. Notice to Holder
Nothing contained herein shall be construed as conferring
upon the Holder the right to vote or to consent or to receive notice as a
stockholder in respect of the meetings of stockholders for the election of
directors of the Corporation or any other matter, or any other rights whatsoever
as a stockholder of the Corporation; provided, however, that in the event that:
(a) the Corporation shall take action to make any
distribution (other than cash dividends payable out of earnings or earned
surplus) on the Common Stock;
(b) the Corporation shall take action to offer for
subscription pro rata to the holders of the Common Stock any additional shares
of stock of any class or other rights or securities convertible into the Common
Stock;
3
<PAGE> 50
(c) the Corporation shall take action to accomplish any
capital reorganization, or reclassification of the capital stock of the
Corporation (other than a change in par value, or a change from par value to no
par value, or a change from no par value to par value, or a subdivision or
combination of the Common Stock), or a consolidation or merger of the
Corporation into, or a sale of all or substantially all of its assets to,
another corporation; or
(d) the Corporation shall take action looking to a voluntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of such cases, the Corporation shall, (x) at least 10
days prior to the date on which the books of the Corporation shall close or a
record date shall be taken for such distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, cause notice thereof to be sent to the Holder at the address
appearing on the Warrant register of the Corporation and, (y) in the case of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, cause at least 10 days' prior written notice of the
date when the same shall take place to be given to the Holder in the same
manner. Such notice in accordance with the foregoing clause (x) shall also
specify, in the case of any such distribution or subscription rights, the date
on which the holders of the Common Stock shall be entitled thereto, and such
notice in accordance with the foregoing clause (y) shall also specify the date
on which the holders of the Common Stock shall be entitled to exchange their
shares of the Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. Failure to give such notice or
any defect therein shall not affect the legality or validity of any of the
matters set forth in this Section 4 inclusive.
5. Transfers and Exchanges
The Corporation shall transfer, from time to time, this Warrant upon
the books to be maintained by the Corporation for that purpose, upon surrender
thereof for transfer properly endorsed or accompanied by appropriate
instructions for transfer. Upon any such transfer, a new Warrant shall be issued
to the transferee and the surrendered Warrant shall be cancelled by the
Corporation. If this Warrant is so cancelled it shall be delivered to the
Corporation upon request. This Warrant may be exchanged at the option of the
holder thereof, when surrendered at the office of the Corporation, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the rights to purchase a like number of shares.
Anything in this Section 5 to the contrary notwithstanding, no transfer shall be
made if such transfer would violate Section 5 of the Securities Act of 1933, as
amended.
6. Payment of Taxes
The Corporation will pay any documentary stamp taxes attributable to
the initial issuance of the Common Stock issuable upon the exercise of this
Warrant; provided, however, that the Corporation shall not be required to pay
any tax or taxes which may be payable in respect of
4
<PAGE> 51
any transfer involved in the issue or delivery of any certificates for the
Common Stock in a name other than that of the registered holder of this Warrant
in respect of which such shares are issued, and in such case the Corporation
shall not be required to issue or deliver any certificates for the Common Stock
or any Warrant for remaining shares until the person requesting the same has
paid to the Corporation the amount of such tax or has established to the
Corporation's satisfaction that such tax has been paid.
7. Mutilated or Missing Warrants
In case that this Warrant shall be mutilated, lost, stolen or
destroyed, the Corporation may in its discretion issue and deliver in exchange
and substitution for, and upon cancellation of, the mutilated Warrant, or in
lieu of, and in substitution for, the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and representing an equivalent right or interest, but only
upon receipt of evidence satisfactory to the Corporation of such loss, theft or
destruction of such Warrant. Applicants for such substitute Warrant shall also
comply with such other reasonable regulations and pay such reasonable charges as
the Corporation may prescribe.
8. Reserve
The Corporation covenants and agrees that, from time to time, there
will be authorized and available for delivery a sufficient number of its shares
of the Common Stock or other securities into which this Warrant is then
exercisable to permit the exercise of all of this Warrant at the time
outstanding as and when the certificates shall, from time to time, be
deliverable in accordance with Section 1 hereof. In the event that there are
insufficient shares or other securities for such purpose, the Corporation shall
use its best efforts to seek stockholder approval for an Amendment to the
Corporation's Certificate of Incorporation and/or to take such other action as
is necessary or appropriate to cause such shares or other securities to be
authorized.
9. Governing Law
The Warrant evidenced hereby shall be construed and enforced in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed in that State, without giving effect to any principles of
conflicts of laws.
IN WITNESS WHEREOF, U.S. Alcohol Testing of America, Inc. has caused
this Warrant to be signed manually by a duly authorized officer of the
Corporation.
By:____________________________________
Robert Stutman
Chief Executive Officer
5
<PAGE> 52
EXHIBIT A
ELECTION TO PURCHASE
To U.S. Alcohol Testing of America, Inc.
___________________________________
___________________________________
___________________________________
The undersigned hereby irrevocably elects to exercise the Warrant
represented by the within Warrant Certificate to purchase ________________
shares of the Common Stock issuable upon the exercise of the Warrant and
requests that certificates for such shares shall be issued in the name of
_________________________________________________________________
(Name)
_________________________________________________________________
(Address)
_________________________________________________________________
(Taxpayer number)
and be delivered
to_______________________________________________________________
(Name)
at_______________________________________________________________
(Address)
and, if said number of shares of the Common Stock shall not be all the shares of
the Common Stock evidenced by the within Warrant Certificate, that a new Warrant
Certificate for the balance remaining of such said shares be registered in the
name of
_________________________________________________________________
(Name)
_________________________________________________________________
(Address)
_________________________________________________________________
(Taxpayer number)
and delivered to the undersigned at the address below stated.
Dated:________________, 19__
6
<PAGE> 53
Name of holder of Warrant Certificate:
_________________________________________________________________
(please print)
_________________________________________________________________
(Address)
_________________________________________________________________
(Signature)
Note: The above signature must
correspond with the name as
written upon the face of
this Warrant Certificate in
every particular, without
alteration or enlargement
or any change whatever.
7
<PAGE> 54
ASSIGNMENT
(to be executed by the registered holder
to effect a transfer of the within Warrant)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto______________________________________
______________________________________________________________________________
(Name)
______________________________________________________________________________
(Address)
______________________________________________________________________________
the right to purchase the __________ shares of Common Stock evidenced by this
Warrant, and does hereby irrevocably constitute and appoint _________________ to
transfer the said right on the books of the Corporation, with full power of
substitution.
Dated:_____________________
___________________________________________
(Signature)
Notice: The signature to this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement, or any change whatsoever and must be guaranteed by a
bank, other than a savings bank or trust company, having an office or
correspondent in New York, or by a firm having membership on a registered
national securities exchange or in the NASD.
<PAGE> 55
Exhibit C to
Stock Purchase Agreement
SECURITY AGREEMENT
SECURITY AGREEMENT, dated May 21, 1996 made by and among U.S. ALCOHOL
TESTING OF AMERICA, INC., a Delaware corporation (the "Grantor"), ROBERT STUTMAN
and BRIAN STUTMAN, (collectively the "Secured Parties").
W I T N E S S E T H :
WHEREAS, the Grantor and the Secured Parties are parties to a Stock
Purchase Agreement, dated as of May 21, 1996 (such Agreement, as amended or
otherwise modified from time to time, being hereinafter referred to as the
"Stock Purchase Agreement");
WHEREAS, pursuant to the Stock Purchase Agreement, the Grantor has
agreed to pay $400,000 in the aggregate to the Secured Parties by the delivery
to each of the Secured Parties of a promissory note, each dated May 21, 1996
(collectively the "Notes") each in the following amounts:
<TABLE>
<CAPTION>
<S> <C>
Robert Stutman - $ 239,760.00
Brian Stutman - $160,240.00; and
</TABLE>
WHEREAS, pursuant to the Stock Purchase Agreement the Grantor has
agreed to execute and deliver to the Secured Parties a security agreement
providing for the grant to the Secured Parties of a security interest in certain
of the personal property of the Grantor.
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in the Stock Purchase Agreement, the Grantor hereby agrees with the
Secured Parties as follows:
SECTION 1. DEFINITIONS. Reference is hereby made to the Stock Purchase
Agreement for a statement of the terms thereof. All terms used in this Agreement
which are defined in the Settlement Agreement or in Article 9 of the Uniform
Commercial Code currently in effect in the State of California (the "Code") and
which are not otherwise defined herein shall have the same meanings herein as
set forth therein.
SECTION 2. GRANT OF SECURITY INTEREST.
2.1 As collateral security for all of the Obligations (as defined
in Section 3 hereof), the Grantor hereby pledges and assigns to the Secured
Parties, and grants to the Secured Parties a continuing security interest in,
all tangible and intangible personal property and fixtures of the Grantor,
wherever located and whether now or hereafter existing and whether now owned or
hereafter acquired of every kind and description, (collectively, the
"Collateral"), including, without limitation, the following:
<PAGE> 56
(a) all of the Grantors, right, title and interest in and to all
equipment, vehicles, furniture, fixtures and machinery, together with all
substitutes, replacements, accessions and additions thereto, and all tools,
parts, accessories and attachments used in connection therewith (hereinafter
collectively referred to as the "Equipment");
(b) all of the Grantor's right, title and interest in and to all
inventory of any kind (including, without limitation, all types of goods,
property and other assets that are held by the Grantor for sale, lease or other
disposition in the ordinary course of the Grantor's business or to be furnished
under a contract for services, whether such goods, property and other assets are
raw, in process and finished, and materials and supplies used or consumed in the
business of the Grantor, and goods returned to or repossessed by the Grantor and
goods in which the Grantor has an interest in mass or a joint or other interest
or right of any kind), and all accessions thereto and products thereof (any and
all such inventory, accessions and products being hereinafter referred to as the
"Inventory");
(c) all of the Grantor's right, title and interest in and to (i)
all present and future accounts, contract rights, chattel paper, documents and
instruments (as such terms are defined in the Code), (ii) all of the Grantor's
right, title and interest, and all of the Grantor's rights, remedies, security
and liens, in, to and in respect of any credit, insurance, accounts (including,
without limitation, rights of stoppage in transit, replevin, repossession,
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party), guaranties or other contracts of suretyship with respect to accounts,
and deposits or other security for the obligation of any account debtor, (iii)
all rights relating to the sale or other transfer of property to, or the
construction, renovation or other improvement of property by or for the Grantor,
(iv) all rights now or hereafter existing in and to all security agreements,
leases and other contracts now or hereafter existing and securing or otherwise
relating to any accounts, contract rights, chattel paper, instruments, documents
or other rights or obligations, and (v) all of the Grantor's right, title and
interest in, to and in respect of all goods relating to, or which by sale have
resulted in, accounts, including, without limitation, all goods described in
invoices or other documents or instruments with respect to, or otherwise
representing or evidencing, any accounts, and all returned, reclaimed or
repossessed goods (any and all such accounts, contract rights, chatter paper,
instruments documents and rights and obligations being hereinafter referred to
as the "Receivables");
(d) (i) all of the Grantor's right, title and interest in and to
all general intangibles, (ii) all rights, interest, choses in action, causes of
action, claims and all other intangible property of every kind and nature, in
each instance whether now
2
<PAGE> 57
owned or hereafter acquired by the Grantor, including, without limitation, all
corporate and other business records, all loans, royalties, and all other forms
of obligations receivable whatsoever (other than Receivables); (iii) all
trademarks, patents, trade secrets, licenses, copyrights, goodwill, inventions,
designs, registrations, permits, franchises and licenses; (iv) all computer
programs, software, printouts and correspondence, and advertising materials; (v)
all customer and supplier contracts, sale orders, rights under license and
franchise agreements, and other contracts and contract rights; (vi) all
interests in partnerships and joint ventures, including all moneys due from time
to time in respect thereof; (vii) all federal, state and local tax refunds and
federal, state and local tax refund claims; (viii) all right, title and interest
under leases, subleases, licenses and concessions and other agreements relating
to personal property, including all moneys due from time to time in respect
thereof; (ix) all payments due or made to the Grantor in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of any property
by any person or governmental authority; (x) all credits with and other claims
against third parties (including carriers and shippers) other than Receivables);
(xi) all rights to indemnification; (xii) all reversionary interests in pension
and profit sharing plans and reversionary, beneficial and residual interests in
trusts; (xiii) all proceeds of insurance of which such Grantor is the
beneficiary; (xiv) all letters of credit, guaranties, liens, security interests
and other security held by or granted to such Grantor; and (xv) all other
intangible property, whether or not similar to the foregoing, in each instance,
however and wherever arising (hereinafter collectively referred to as "General
Intangibles").
(e) all of the Grantor's right, title and interest in and to all
instruments, files, records, ledger sheets and documents covering or relating to
any of the Collateral; and
(f) all proceeds of any and all of the foregoing Collateral and,
to the extent not otherwise included, all payments under insurance (whether or
not the Secured Parties are the loss payee thereof), and any indemnity, warranty
or guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral;
in each case, howsoever the Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
2.2 The Collateral shall not include any shares of stock or other
securities owned by the Grantor, cash, cash equivalents, contracts set forth on
Exhibit 2.2 hereof and the other assets set forth on Exhibit 2.2 hereof.
SECTION 3. SECURITY FOR OBLIGATIONS. The security interest
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created hereby in the Collateral constitutes continuing collateral security for
all of the following obligations (the "Obligations"): the prompt payment by the
Grantor, as and when due and payable, of all amounts from time to time owing by
the Grantor to the Secured Parties under the Notes.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Grantor
represents and warrants as follows:
(a) The Grantor (i) is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware, and (ii)
has all requisite power and authority to execute, deliver and perform this
Agreement.
(b) The execution, delivery and performance by the Grantor of this
Agreement (i) have been duly authorized by all necessary corporate action, (ii)
do not and will not contravene its charter or by-laws, law or any contractual
restriction binding or affecting the Grantor or any of its properties, and (iii)
do not and will not result in or require the creation of any lien, security
interest or other charge or encumbrance upon or with respect to any of its
properties.
(c) This Agreement is a legal, valid and binding obligation of the
Grantor, enforceable against the Grantor in accordance with its terms except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws and general equity principles affecting the enforcement of
creditors' rights generally.
(d) The Grantor is and will be at all times the owner of the
Collateral free and clear of any lien, security interest or other charge or
encumbrance, except for (i) the security interest created by this Agreement,
(ii) the security interests and other encumbrances described in Schedule I
hereto and (iii) any purchase money security interest granted by the Grantor
with respect to Equipment acquired after the date hereof. No effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any recording or filing office, except (i) such as may
have been filed in favor of the Secured Parties relating to this Agreement, and
(ii) such as may have been filed to perfect or protect any security interest or
encumbrance described in Schedule I hereto. The filing of UCC-1 Financing
Statements in the filing offices set forth on Schedule II is necessary to
perfect the security interest granted hereunder in the Collateral.
(e) The exercise by the Secured Parties of any of their rights and
remedies hereunder will not contravene any law or any contractual restriction
binding or affecting the Grantor or any of its properties and will not result in
or require the creation of any lien, security interest or other charge or
encumbrance upon or
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with respect to any of its properties.
SECTION 5. COVENANTS AS TO THE COLLATERAL. So long as any of the
Obligations shall remain outstanding, unless the Secured Parties shall otherwise
consent in writing:
(a) Further Assurances. The Grantor will at its expense, at any
time and from time to time, promptly execute and deliver all further instruments
and documents and take all further action that may be necessary or desirable or
that the Secured Parties may request in order (i) to perfect the security
interest purported to be created hereby, (ii) to enable the Secured Parties to
exercise and enforce their rights and remedies hereunder in respect of the
Collateral, or (iii) to effect otherwise the purposes of this Agreement.
(b) Transfers and Other Liens. The Grantor will not (i) sell,
assign (by operation of law or otherwise), exchange or otherwise dispose of any
of the Collateral (except for sales of Inventory in the ordinary course of
business), or (ii) create or suffer to exist any lien, security interest or
other charge or encumbrance upon or with respect to any Collateral, except for
(A) the security interest created hereby, (B) the security interests and other
encumbrances described in Schedule I hereto and (C) purchase money security
interests granted by the Grantor in Equipment acquired after the date hereof.
SECTION 6. ADDITIONAL PROVISIONS CONCERNING THE COLLATERAL.
The Grantor hereby authorizes the Secured Parties to file, without
the signature of the Grantor where permitted by law, one or more financing or
continuation statements, and amendments thereto, relating to the Collateral
which the Secured Parties may deem necessary or desirable.
SECTION 7. REMEDIES UPON DEFAULT. If any Event of Default
shall have occurred and be continuing:
(a) The Secured Parties may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party on default
under the Code (whether or not the Code applies to the affected Collateral), and
may also (i) require the Grantor to, and the Grantor hereby agrees that it will
at its expense and upon request of the Secured Parties forthwith assemble all or
part of the Collateral as directed by the Secured Parties and make it available
to the Secured Parties at a place to be designated by the Secured Parties which
is reasonably convenient to both parties, and (ii) without notice except as
specified below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of the Secured Parties's offices or elsewhere,
for cash, on credit or for future delivery, and at such
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price or prices and upon such other terms as the Secured Parties may deem
commercially reasonable. The Grantor agrees that, to the extent notice of sale
shall be required by law, at least 10 days notice to the Grantor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Secured Parties shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Secured Parties may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) All cash proceeds received by the Secured Parties in respect
of any sale of, collection from, or other realization upon, all or any part of
the Collateral shall be applied by the Secured Parties (after payment of any
amounts payable to the Secured Parties pursuant to Section 8 hereof) against,
all of the Obligations as is set forth in Section 7(d) below. Any surplus of
such cash or cash proceeds held by the Secured Parties and remaining after
payment in full of all of the Obligations shall be paid over to the Grantor or
to such person as may be lawfully entitled to receive such surplus.
(c) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Secured Parties are
legally entitled, the Grantor shall be liable for the deficiency, together with
interest thereon at the rate specified in the Notes, together with the costs of
collection and the reasonable fees and expenses of any attorneys employed by the
Secured Parties to collect such deficiency.
(d) All cash proceeds received by the Secured Parties in respect
of any sale of the Collateral shall be applied by the Secured Parties (after
payment of any amounts payable to the Secured Parties pursuant to Section 8
hereof) against the Obligations on a pro rata basis based upon the ratio that
the original principal amount of each Secured Parties Note bears to the
aggregate original principal amount of all of the Notes. All decisions to be
made by the Secured Parties under this Agreement with respect to the Collateral
and the security interest granted hereunder, including, without limitation,
whether to exercise the Secured Parties' rights upon an Event of Default, shall
be made solely by Robert Stutman, in his sole discretion, on behalf of all of
the Secured Parties. In the event Robert Stutman is deceased or incompetent, all
decisions shall be made by Brian Stutman, including, under Section 10(a) hereof.
SECTION 8. INDEMNITY AND EXPENSES.
(a) The Grantor agrees to indemnify the Secured Parties from and
against any and all claims, losses and liabilities growing out of or resulting
from this Agreement (including, without
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limitation, enforcement of this Agreement), except claims, losses or liabilities
resulting solely and directly from the Secured Parties' gross negligence or
willful misconduct.
(b) The Grantor will, upon demand, pay to the Secured Parties the
amount of any and all costs and expenses, including the reasonable fees and
disbursements of the Secured Parties' counsel and of any experts and agents,
which the Secured Parties may incur in connection with the exercise or
enforcement of any of the rights of the Secured Parties hereunder.
SECTION 9. NOTICES, ETC.
All notices and other communications provided for hereunder shall
be in writing and shall be sent by overnight courier service or hand delivered,
if to the Grantor, to it at: 10410 Trademark Street Rancho Cucamonga, California
91730; if to the Secured Parties, to them at: c/o Edward D. Feldstein, Esq.,
Roberts, Carroll, Feldstein & Peirce, 10 Weybosset Street, Providence, Rhode
Island 02903-2808. All such notices and other communications shall be effective
(i) if mailed, when received or three days after mailing, whichever occurs
first, (ii) if sent by overnight courier, one business day after sending; (iii)
if hand delivered, upon delivery, provided same is on a business day and, if
not, on the next business day.
SECTION 10. MISCELLANEOUS.
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Grantor and Robert Stutman,
and no waiver of any provision of this Agreement, and no consent to any
departure by the Grantor therefrom, shall be effective unless it is in writing
and signed by Robert Stutman, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
(b) No failure on the part of the Secured Parties to exercise, and
no delay in exercising, any right hereunder or under the Notes shall operate as
a waiver thereof; nor shall any single or partial exercise thereof preclude any
other or further exercise of any other right hereunder or under the Notes. The
rights and remedies of the Secured Parties provided herein and in the Notes are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Secured Parties under this Agreement and the
Notes are not conditional or contingent on any attempt by the Secured Parties to
exercise any of their rights against any other person.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or
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unenforceability without invalidating the remaining portions hereof or thereof
or affecting the validity or enforceability of such provision in any other
jurisdiction.
(d) This Agreement shall create a continuing security interest in
the Collateral and shall (i) remain in full force and effect until the payment
in full of the Obligations, (ii) be binding on and inure to the benefit of the
Grantor and the Secured Parties and their successors and assigns.
(e) Upon the satisfaction in full of the Obligations: (i) this
Agreement and the security interest created hereby shall terminate and all
rights to the Collateral shall revert to the Grantor, and (ii) the Secured
Parties will, upon the Grantor's request and at the Grantor's expense, (A)
return to the Grantor such of the Collateral as shall not have been sold or
otherwise disposed of or applied pursuant to the terms hereof, and (B) execute
and deliver to the Grantor such documents as the Grantor shall reasonably
request to evidence such termination.
(f) This Agreement shall be governed by, and construed and
interpreted in accordance with, the internal laws of the State of California
applicable to contracts made and to be performed herein without consideration as
to choice of law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
U.S. ALCOHOL TESTING OF AMERICA, INC.
By:____________________________
Name:
Title:
_______________________________
ROBERT STUTMAN
_______________________________
BRIAN STUTMAN
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Exhibit D to
Stock Purchase Agreement
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 21st day of May
1996, by and between U.S. Alcohol Testing of America, Inc., a Delaware
corporation (the "Company), Robert Stutman, Brian Stutman, Michael Rochelle,
Kimberly Rochelle and Sandra DeBow (collectively the "Sellers").
RECITALS
WHEREAS, the Company and the Sellers are parties to a Stock Purchase
Agreement, dated May 21, 1996 (the "Stock Purchase Agreement"), pursuant to
which the Company purchased from the Sellers all of their shares of common stock
of Robert Stutman Associates, Inc. (the "RSA Shares");
WHEREAS, a portion of the purchase price for the RSA Shares consists of
500,000 shares (the "Purchase Price Shares") of the Common Stock of the Company,
$.001 par value (the "Common Stock") and warrants (the "Warrants") to purchase
900,000 shares of the Common Stock (the share issuable upon the exercise of the
Warrants are hereinafter referred to as the "Underlying Shares");
WHEREAS, the Sellers are holders of Warrants and Purchase Price Shares
as is set forth in Exhibit A annexed hereto;
WHEREAS, each of the Sellers and the Company hereby agree that this
Agreement shall govern the rights of the Sellers to cause the Company to
register his Purchase Price Shares and Underlying Shares.
NOW, THEREFORE, the parties hereby agrees as follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Agreement:
(a) The term "register", "registered", and
"registration" refer to a registration affected by preparing and filing a
registration statement or similar document in compliance with the Securities Act
of 1933, as amended (the "Act") and the use, by the Company, of its best efforts
to cause the declaration or ordering of effectiveness of such registration
statement or document.
(b) The term "Registrable Securities" means (1) the
Purchase Price Shares and the Underlying Shares, and (2) any shares of the
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect
<PAGE> 64
to, or in exchange for or in replacement of, the Purchase Price Shares and
Underlying Shares, excluding in all cases, however, any Registrable Securities
sold by a person in a transaction in which his, her or its rights under this
Section 1 are not assigned.
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of the Common Stock
outstanding which are, and the number of shares of the Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(d) The term "Holder" means any person owning or having
the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.10 hereof.
1.2 Company Registration. If, at any time after the date of
the issuance of the Purchase Price Shares and the Warrants (but without any
obligation to do so), the Company proposes to register (including for this
purpose a registration effected by the Company for stockholders other than the
Holders) any of its stock or other securities under the Act in connection with
the public offering of such securities solely for cash (other than a
registration statement or Form S-8 or Form S-4 or any successor form thereto),
the Company shall, at such time, promptly give each Holder written notice of
such registration. The Company shall, subject to the provisions of Section 1.8,
cause to be registered under the Act all of the Registrable Securities owned by
each Holder to be registered under the Act under the proposed registration
statement unless within twenty (20) days after the mailing of the notice by the
Company a Holder gives the Company written notice in accordance with Section 2.5
that he does not want all or a portion of the Registrable Securities to be so
registered.
In the event that the Company does not by September 1,
1996 register (including for this purpose a registration effected by the Company
for stockholders other than the Holders) any of its stock or other securities
under the Act in connection with the public offering of such securities solely
for cash (other than a registration statement or Form S-8 or Form S-4 or any
successor form thereto), the Holder may demand that the Company register under
the Act, all or a portion of the Registrable Securities owned by each such
Holder. Such demand may only be made one time in the aggregate for all of the
Holders. Such demand may only be made if Robert Stutman consents thereto in
writing.
1.3 Obligations of the Company. Whenever undertaking under
this Section 1 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Commission a registration
statement with respect to such Registrable Securities
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and use its best efforts to cause such registration statement to become
effective and keep such registration statement effective for one hundred eighty
(180) days or such shorter period as requested by the Holders of a majority of
the Registrable Securities registered thereunder.
(b) Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and quality the
securities covered by such registration statement under such other securities or
Blue Sky laws of the States of Florida and New York and the Commonwealth of
Massachusetts, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of the Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an
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opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of the Registrable Securities
and (ii) a letter dated such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Holders
requesting registration of the Registrable Securities.
1.4 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
1.5 Expenses of Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification, to the extent set forth in Section 1.3, of the Registrable
Securities with respect to the first registration pursuant to Section 1.2 for
each Holder (which right may be assigned as provided in Section 1.10), including
(without limitation) all registration, filing, and qualification fees, printers
and accounting fees relating or apportionable thereto, but excluding
underwriting discounts and commissions relating to Registrable Securities.
1.6 Underwriting Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under Section 1.2 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by shareholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling shareholders according to
the total amount of securities entitled to be included therein
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owned by each selling shareholder or in such other proportions as shall mutually
be agreed to by such selling shareholders). For purposes of the preceding
parenthetical concerning apportionment, for any selling shareholder which is a
holder of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and shareholders of such holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
shareholder", and any pro rata reduction with respect to such "selling
shareholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling shareholder", as defined in this sentence.
1.7 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.8 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder who is not a director or executive
officer of the Company, any underwriter (as defined in the Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Act, or the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the Act, or the
1934 Act or any state securities law; and the Company will pay to each such
Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.8(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such
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settlement is effected without the consent of the Company, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability, or
action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act or other federal or state
law, insofar as such losses, claims, damage,s or liabilities (or actions in
respect thereto) arise out of or are based upon any violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 1.8(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.8(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.8 of notice of the commencement of any action (including any
governmental action) such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if
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prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.8, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.8.
(d) If the indemnification provided for in this Section
1.8 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under
this Section 1.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.9 Reports Under Securities Exchange Act of 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the Commission that may at any
time permit a Holder to sell securities of the Company to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Commission Rule 144 promulgated under the
Act;
7
<PAGE> 70
(b) file with the Commission in a timely manner all
reports and other documents required of the Company under the Act and the 1934
Act; and
(c) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of Rule 144
promulgated under the Act and the 1934 Act (at any time after it has become
subject to such reporting requirements), (ii) a copy of the most recent annual
and quarterly reports of the Company and such other report and documents so
filed by the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the Commission
which permits the selling of any such securities without registration.
1.10 Assignment of Registration Rights. The rights to cause
the Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities, provided the Company is, within a reasonable time
after such transfer, furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act.
1.11 Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Section 1 after May 20,
2001; provided that at least two registration statements of the Company have
been declared effective prior to such date with respect to which the Holders are
entitled to exercise the rights provided for in this Section 1.
2. Miscellaneous.
2.1 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of the Warrants, the Purchase Price Shares or any shares
issued or issuable upon the exercise of the Warrants). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
2.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California.
8
<PAGE> 71
2.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid or upon deposit with an express courier, addressed to the party
to be notified at the address indicated for such party on the signature page
hereof, or at such other address as such party may designate by ten (1) days
advance written notice to the other parties.
2.6 Expenses. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
2.7 Amendments and Waivers. The Company and Holders of 50% of
the Purchase Price Shares, the Warrants and the Underlying Shares can agree to
an amendment of, or a waiver to, the terms of this Agreement.
2.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
U.S. ALCOHOL TESTING OF AMERICA, INC.
By:_________________________________
____________________________________
ROBERT STUTMAN
9
<PAGE> 72
____________________________________
BRIAN STUTMAN
____________________________________
MICHAEL ROCHELLE
____________________________________
KIMBERLY ROCHELLE
____________________________________
SANDRA DEBOW
10
<PAGE> 73
<TABLE>
<CAPTION>
EXHIBIT A
Purchase Price
Sellers Warrants Shares
- ------- -------- ------
<S> <C> <C>
Robert Stutman 474,750 263,750
Brian Stutman 317,250 176,250
Sandra DeBow 18,000 10,000
Michael Rochelle 67,500 37,500
Kimberly Rochelle 22,500 12,500
</TABLE>
11
<PAGE> 1
SEVERANCE AGREEMENT
This Agreement ("Agreement") dated May 21, 1996 by and
between U.S. Alcohol Testing of America, Inc., a Delaware corporation (the
"Company") and Robert Stutman (the "Executive").
WITNESSETH:
WHEREAS, pursuant to a Stock Purchase Agreement of even date
hereof (the "Stock Purchase Agreement") the Company purchased all of the issued
and outstanding shares of common stock of Robert Stutman Associates, Inc.
("RSA");
WHEREAS, the Executive was the majority shareholder of RSA
and the President of RSA;
WHEREAS, a condition of the Company's agreeing to purchase
all of the issued and outstanding shares of the common stock of RSA was the
Executive agreeing to become employed as the Chief Executive Officer of the
Company;
WHEREAS, since April 17, 1996, the Executive has been
employed on an at-will basis by the Company as its Chief Executive Officer;
WHEREAS, a condition subsequent to the Executive accepting
the Company's offer of employment was that the Company and the Executive enter
into this Severance Agreement which provides for the Executive's right to
severance pay upon his termination as an employee of the Company without cause;
and
WHEREAS, the compensation to be paid to the Executive by the
Company for the services to be performed is as follows:
(i) a base salary of Two Hundred Twenty Five Thousand
($225,000) Dollars per annum (the "Base Salary");
(ii) a bonus payment of fifty thousand ($50,000) dollars
payable within 120 days of substantially all of RSA's customers becoming fully
integrated into the Company's subsidiary, ProActive Synergies, Inc., provided
that such event occurs prior to July 31, 1996;
(iii) an aggregate year end bonus in respect of the
Company's fiscal year ended March 31, 1997 equal to One Hundred Thousand
($100,000) Dollars if the Company, on a consolidated basis, breaks even or Two
Hundred Fifty Thousand ($250,000) Dollars if the Company, on a consolidated
basis, makes at least Two Million Forty Thousand ($2,000,040) Dollars in net
earnings; and
1
<PAGE> 2
(iv) bonuses in respect of subsequent fiscal years shall
be determined by the Company's Board of Directors or the Compensation Committee.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, the Company and the Executive hereby agree
as follows:
1. COMPANY'S RIGHT TO TERMINATE. Subject to the Company
fulfilling its obligations to the Executive relating to compensation and
benefits during the term of this Agreement, the Executive agrees that he will
not voluntarily leave the employ of the Company and will continue to perform the
Executive's regular duties as Chief Executive Officer of the Company.
Notwithstanding the foregoing, the Company may terminate the Executive's
employment at any time, subject to providing the benefits hereinafter specified
in accordance with the terms hereof.
2. TERMINATION OF EMPLOYMENT. The termination of the
Executive as an employee of the Company for Disability or Cause shall be on the
following terms and conditions:
(i) Disability.
Termination by the Company of the Executive's
employment based on "Disability" shall mean termination (a) because of the
Executive's inability to perform his duties with the Company on a full time
basis for four consecutive months or 180 days out of any twelve-month period, as
a result of the Executive's incapacity due to physical or mental illness; or (b)
as a result of the Executive being certified incompetent by a court of competent
jurisdiction and which appeals from such certification have expired.
(ii) Cause.
Termination by the Company of the Executive's
employment for "Cause" shall mean termination because of: (a) the Executive's
conviction of a felony; (b) any action by the Executive involving dishonesty,
fraud or gross or wilful misconduct in connection with his employment with the
Company; (c) the Executive's gross negligence in the performance of his duties
and obligations hereunder or habitual neglect of his duties; (d) the Executive's
substance abuse, including, without limitation, chronic alcoholism or drug
addiction; (e) the Executive's intentional refusal or failure to perform his
duties as the Chief Executive Officer of the Company, including, without
limitation, the intentional disregard of a lawful directive by the Board of
Directors of the Company or any committee thereof; (f) intentional conduct on
the part of the Executive which is knowingly detrimental to the best interests
of the Company; or (g) the Executive's
2
<PAGE> 3
failure to perform in a competent manner his duties as Chief
Executive Officer of the Company.
(iii) Notice of Termination.
Any purported termination by the Company pursuant to
Section (i) or (ii) above or for any other reason shall be communicated by
written Notice of Termination to the Executive from the President of the Company
at the direction of the Board of Directors of the Company. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
that it is without cause or the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
(iv) Date of Termination.
"Date of Termination" shall mean (a) if the
Executive's employment is terminated for Disability, the date specified in the
Notice of Termination, (b) if Executive's employment is terminated for Cause,
the date specified in the Notice of Termination, (c) if the Executive's
employment is terminated for death, the date of death, and (d) if the
Executive's employment is terminated, without cause, the date on which a Notice
of Termination is given.
3. CERTAIN BENEFITS UPON TERMINATION. (i) If the Executive's
employment is terminated by the Company other than for Cause, Disability or
death, then the Executive shall be entitled to the benefits provided below:
(a) the Company shall pay the Executive his full Base
Salary through the Date of Termination at the rate in effect at the time the
Notice of Termination is given plus credit for any vacation earned but not taken
and the amount, if any, of any bonus for a past fiscal year which has not yet
been awarded or paid to the Executive.
(b) in lieu of any further salary, bonuses or benefits
payments to the Executive for periods subsequent to the Date of Termination, the
Company shall pay as severance pay to the Executive on the 30th day following
the Date of Termination a lump sum amount equal to the total amount of the Base
Salary that would have been paid to the Executive had he not been terminated
during the period commencing on the Date of Termination and ending on May 20,
1999;
(c) the Company shall maintain in full force and effect,
for the Executive's continued benefit until the earlier of (A) May 20, 1999 or
(B) the Executive's commencement of full time
3
<PAGE> 4
employment with a new employer, his automobile allowance and all life insurance,
medical, health and accident, and disability plans, programs or arrangements in
which the Executive was entitled to participate immediately prior to the Date of
Termination, provided that the Executive's continued participation is possible
under the general terms and provisions of such plans and programs. In the event
that the Executive's participation in any such plan or program is barred, the
Company shall arrange to provide the Executive with benefits substantially
similar to those which the Executive was entitled to receive under such plans
and programs;
(ii) If the Executive's employment is terminated for
Disability under Section 2(i)(b) the Executive shall be entitled to the benefits
provided below:
(a) the Company shall pay the Executive his full Base
Salary through the Date of Termination at the rate in effect at the time the
Notice of Termination is given plus credit for any vacation earned but not taken
and the amount, if any, of any bonus for a past fiscal year which has not yet
been awarded or paid to the Executive;
(b) in lieu of any further salary, bonuses or benefits
payments to the Executive for periods subsequent to the Date of Termination, the
Company shall pay as severance pay to the Executive on the 30th day following
the Date of Termination a lump sum amount equal to the annual Base Salary that
would have been paid to the Executive had he not been terminated during the
period commencing on the Date of Termination and ending on the earlier of four
months after the Date of Termination or May 20, 1999;
(c) the Company shall maintain in full force and effect,
for the Executive's continued benefit until the earlier of four months after the
Date of Termination and May 20, 1999 his automobile allowance and all life
insurance, medical, health and accident, and disability plans, programs or
arrangements in which the Executive was entitled to participate immediately
prior to the Date of Termination, provided that the Executive's continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that the Executive's participation in any such plan
or program is barred, the Company shall arrange to provide the Executive with
benefits substantially similar to those which the Executive was entitled to
receive under such plans and programs;
(iii) If the Executive's employment is terminated for
Cause, Disability under Section 2(i)(a), death or the voluntary termination or
resignation of employment by the Executive, the Executive shall be paid his full
Base Salary through the Date of Termination at the rate in effect at the time
the Notice of Termination is given plus credit for any vacation earned but not
taken and the amount, if any, of any bonus for a past
4
<PAGE> 5
Richard A. Siracusa, Esq.
May 23, 1996
Page 5
fiscal year which has not yet been awarded or paid to the Executive.
(iv) The Executive shall not be required to mitigate the
amount of any payment provided for in this Section 3 by seeking other employment
or otherwise, nor shall the amount of any payment provided for in this Section 3
be reduced by any compensation earned by the Executive as the result of
employment by another employer after the Date of Termination, or otherwise.
4. TERM OF AGREEMENT. This Agreement shall terminate May 20,
1999.
5. RELEASE OF COVENANT NOT TO COMPETE. If the Executive is
terminated without Cause during the term of this Agreement or if the Company
ceases to exist other than by reason of a merger, consolidation, sale of assets
or similar transaction, the Executive shall no longer be bound by the terms of
Sections 6.1 and 6.2 of the Stock Purchase Agreement and the Executive shall
have the right to use his name in connection with any business he enters into.
6. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be
binding upon and shall inure to the benefit of the respective successors,
assigns, legal representatives and heirs of the parties hereto.
7. NOTICE. Any and all notices or other communications or
deliveries required or permitted to be given or made shall be in writing and
delivered personally, or sent by certified or registered mail, return receipt
requested and postage prepaid, or sent by overnight courier service as follows:
If to the Company, at:
U.S. Alcohol Testing of America, Inc.
10410 Trademark Street
Rancho Cucamonga, California 91730
Attention: President
with a copy to:
Gold & Wachtel, LLP
110 East 59th Street
New York, New York 10022
Attention: Robert Berend, Esq.
5
<PAGE> 6
Richard A. Siracusa, Esq.
May 23, 1996
Page 6
If to the Executive, at:
c/o Edward D. Feldstein, Esq.
Roberts, Carroll, Feldstein & Peirce
10 Weybosset Street
Providence, Rhode Island 02903-2808
or at such other address as any party may specify by notice given to such other
party in accordance with this Section 7. The date of giving of any such notice
shall be the date of hand delivery, two days after the date of the posting of
the mail or the date when deposited with the overnight courier.
8. WAIVER. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
9. ENTIRE AGREEMENT. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
10. VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
11. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
12. GOVERNING LAW. This Agreement shall be construed (both as
to validity and performance) and enforced in accordance with, and governed by,
the laws of the State of California applicable to contracts to be performed
entirely within that State, without giving effect to the principles of conflicts
of law. Any suit or proceeding arising out of this Agreement shall be brought
only in a federal or state court located in the County of Palm Beach, State of
Florida or County of San Bernadino, State of California; provided, however, that
neither party waives its right
6
<PAGE> 7
Richard A. Siracusa, Esq.
May 23, 1996
Page 7
to request the removal of such action or proceeding from the state court to a
federal court in such jurisdiction. The parties hereto each waive any claim that
such jurisdiction is not a convenient forum for any such suit or proceeding and
the defense of lack of personal jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed on May
21, 1996.
U.S. ALCOHOL TESTING OF AMERICA, INC.
By:__________________________________
_____________________________________
ROBERT STUTMAN
7
<PAGE> 1
SEVERANCE AGREEMENT
This Agreement ("Agreement") dated May 21, 1996 by and
between U.S. Alcohol Testing of America, Inc., a Delaware corporation (the
"Company") and Brian Stutman (the "Executive").
WITNESSETH:
WHEREAS, pursuant to a Stock Purchase Agreement of even date
hereof (the "Stock Purchase Agreement") the Company purchased all of the issued
and outstanding shares of Common Stock of Robert Stutman Associates, Inc.
("RSA");
WHEREAS, the Executive was an officer and shareholder of RSA;
WHEREAS, a condition of the Company's agreeing to purchase
all of the issued and outstanding shares of the common stock of RSA was the
Executive agreeing to become employed as the Director of Sales and Marketing of
the Company.
WHEREAS, since April 17, 1996, the Executive has been
employed on an at-will basis by the Company and effective as of the date hereof
is employed by the Company on an at-will basis as its Director of Sales and
Marketing;
WHEREAS, a condition subsequent to the Executive accepting
the Company's offer of employment was that the Company and the Executive enter
into this Severance Agreement which provides for the Executive's right to
severance pay upon his termination as an employee of the Company without cause
or his resignation as an employee of the Company; and
WHEREAS, the compensation to be paid to the Executive by the
Company for the services to be performed is as follows:
(i) a base salary of One Hundred Thirty Thousand
($130,000) Dollars per annum (the "Base Salary");
(ii) a bonus payment of Thirty Thousand ($30,000)
Dollars payable within 120 days of substantially all of RSA's customers becoming
fully integrated into the Company's subsidiary, ProActive Synergies, Inc.,
provided that such event occurs prior to July 31, 1996;
(iii) an aggregate year end bonus in respect of the
Company's fiscal year ended March 31, 1997 equal to Thirty Thousand ($30,000)
Dollars if the goals set forth in the business plan to be prepared by the
Executive, subject to approval by the Company's Board of Directors, are met; and
<PAGE> 2
(iv) bonuses in respect of subsequent fiscal years shall
be determined by the Company's Board of Directors or Compensation Committee.
NOW, THEREFORE, in consideration of the premises of the
mutual agreements contained herein, the Company and the Executive hereby agree
as follows:
1. COMPANY'S AND EXECUTIVE'S RIGHT TO TERMINATE. The Company
may terminate the Executive's employment at any time, subject to providing the
benefits hereinafter specified in accordance with the terms hereof. The
Executive may terminate his employment at any time.
2. TERMINATION OF EMPLOYMENT. The termination of the
Executive as an employee of the Company for Disability or Cause shall be on the
following terms and conditions:
(i) Disability.
Termination by the Company of the Executive's
employment based on "Disability" shall mean termination (a) because of the
Executive's inability to perform his duties with the Company on a full time
basis for four consecutive months or 180 days out of any twelve-month period, as
a result of the Executive's incapacity due to physical or mental illness; or (b)
as a result of the Executive being certified incompetent by a court of competent
jurisdiction and which appeals from such certification have expired.
(ii) Cause.
Termination by the Company of the Executive's
employment for "Cause" shall mean termination because of: (a) the Executive's
conviction of a felony; (b) any action by the Executive involving dishonesty,
fraud or gross or wilful misconduct in connection with his employment with the
Company; (c) the Executive's gross negligence in the performance of his duties
and obligations hereunder or habitual neglect of his duties; (d) the Executive's
substance abuse, including, without limitation, chronic alcoholism or drug
addiction; (e) the Executive's intentional refusal or failure to perform his
duties as an employee of the Company, including, without limitation, the
intentional disregard of a lawful directive by the Board of Directors of the
Company or any committee thereof; (f) intentional conduct on the part of the
Executive which is knowingly detrimental to the best interests of the Company;
or (g) the Executive's failure to perform his duties in a competent manner.
2
<PAGE> 3
(iii) Notice of Termination.
Any purported termination by the Company pursuant to
Section (i) or (ii) above or for any other reason shall be communicated by
written Notice of Termination to the Executive from the Chief Executive Officer
or President of the Company at the direction of the Board of Directors of the
Company. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate that it is without cause or the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
(iv) Date of Termination.
"Date of Termination" shall mean (a) if the
Executive's employment is terminated for Disability, the date specified in the
Notice of Termination, (b) if Executive's employment is terminated for Cause,
the date specified in the Notice of Termination, (c) if the Executive's
employment is terminated for death, the date of death, (d) if the Executive's
employment is terminated, without cause, the date on which a Notice of
Termination is given and (e) if the Executive voluntarily resigns his
employment, the effective date of such resignation.
3. CERTAIN BENEFITS UPON TERMINATION.
(i) If the Executive's employment is terminated by the
Company other than for Cause, Disability or death, then the Executive shall be
entitled to the benefits provided below:
(a) the Company shall pay the Executive his full
Base Salary through the Date of Termination at the rate in effect at the time
the Notice of Termination is given plus credit for any vacation earned but not
taken and the amount, if any, of any bonus for a past fiscal year which has not
yet been awarded or paid to the Executive.
(b) in lieu of any further salary, bonuses or
benefits payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay as severance pay to the Executive on the 30th
day following the Date of Termination a lump sum amount equal to the total
amount of the Base Salary that would have been paid to the Executive had he not
been terminated during the period commencing on the Date of Termination and
ending on May 20, 1999;
(c) the Company shall maintain in full force and
effect, for the Executive's continued benefit until the earlier of (A) May 20,
1999 or (B) the Executive's commencement of full time employment with a new
employer, his automobile allowance and
3
<PAGE> 4
all life insurance, medical, health and accident, and disability plans, programs
or arrangements in which the Executive was entitled to participate immediately
prior to the Date of Termination, provided that the Executive's continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that the Executive's participation in any such plan
or program is barred, the Company shall arrange to provide the Executive with
benefits substantially similar to those which the Executive was entitled to
receive under such plans and programs;
(ii) If the Executive's employment is terminated for
Disability under Section 2(i)(b) the Executive shall be entitled to the benefits
provided below:
(a) the Company shall pay the Executive his
full Base Salary through the Date of Termination at the rate in effect at the
time the Notice of Termination is given plus credit for any vacation earned but
not taken and the amount, if any, of any bonus for a past fiscal year which has
not yet been awarded or paid to the Executive.
(b) in lieu of any further salary, bonuses or
benefits payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay as severance pay to the Executive on the 30th
day following the Date of Termination a lump sum amount equal to the annual Base
Salary that would have been paid to the Executive had he not been terminated
during the period commencing on the Date of Termination and ending on the
earlier of four months after the Date of Termination or May 20, 1999;
(c) the Company shall maintain in full force
and effect, for the Executive's continued benefit until the earlier of four
months after the Date of Termination and May 20, 1999, his automobile allowance
and all life insurance, medical, health and accident, and disability plans,
programs or arrangements in which the Executive was entitled to participate
immediately prior to the Date of Termination, provided that the Executive's
continued participation is possible under the general terms and provisions of
such plans and programs. In the event that the Executive's participation in any
such plan or program is barred, the Company shall arrange to provide the
Executive with benefits substantially similar to those which the Executive was
entitled to receive under such plans and programs;
(iii) If the Executive's employment is terminated
for Cause, Disability under Section 2(i)(a) or death, the Executive shall be
paid his full Base Salary through the Date of Termination at the rate in effect
at the time the Notice of Termination is given plus credit for any vacation
earned but not taken and the amount, if any, of any bonus for a past fiscal year
which has not yet been awarded or paid to the Executive.
4
<PAGE> 5
(iv) If the Executive voluntarily terminates his
employment he shall be entitled to the benefits specified below:
(a) the Company shall pay the Executive his
full Base Salary through the Date of Termination at the rate in effect at the
time the Notice of Termination is given plus credit for any vacation earned but
not taken and the amount, if any, of any bonus for a past fiscal year which has
not yet been awarded or paid to the Executive; and
(b) If such termination takes place during the
period commencing August 21, 1996 and ending May 20, 1998 in lieu of any further
salary, bonuses or benefits payments to the Executive for periods subsequent to
the Date of Termination, the Company shall pay as severance pay to the Executive
on the 30th day following the Date of Termination a lump sum amount equal to
$130,000; or
(c) If such termination takes place during the
period commencing May 21, 1998 and ending May 20, 1999, in lieu of any further
salary, bonuses or benefits payments to the Executive for periods subsequent to
the Date of Termination, the Company shall pay as severance pay to the Executive
on the 30th day following the Date of Termination a lump sum amount equal to
fifty (50%) percent of the total amount of the Base Salary that would have been
paid to the Executive had he not been terminated during the period commencing on
the Date of Termination and ending May 20, 1999.
(v) The Executive shall not be required to mitigate
the amount of any payment provided for in this Section 3 by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
this Section 3 be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
4. TERM OF AGREEMENT. This Agreement shall terminate May 20,
1999.
5. RELEASE OF COVENANT NOT TO COMPETE. If the Executive is
terminated without Cause during the term of this Agreement or if the Company
ceases to exist other than by reason of a merger, consolidation, sale of assets
or similar transaction, the Executive shall no longer be bound by the terms of
Sections 6.1 and 6.2 of the Stock Purchase Agreement.
6. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be
binding upon and shall inure to the benefit of the respective successors,
assigns, legal representatives and heirs of the parties hereto.
5
<PAGE> 6
7. NOTICE. Any and all notices or other communications or
deliveries required or permitted to be given or made shall be in writing and
delivered personally, or sent by certified or registered mail, return receipt
requested and postage prepaid, or sent by overnight courier service as follows:
If to the Company, at:
U.S. Alcohol Testing of America, Inc.
10410 Trademark Street
Rancho Cucamonga, California 91730
Attention: President
With a copy to:
Gold & Wachtel, LLP
110 East 59th Street
New York, New York 10022
Attention: Robert Berend, Esq.
If to the Executive, at:
c/o Edward D. Feldstein, Esq.
Roberts, Carroll, Feldstein & Peirce
10 Weybosset Street
Providence, Rhode Island 02903-2808
or at such other address as any party may specify by notice given to such other
party in accordance with this Section 7. The date of giving of any such notice
shall be the date of hand delivery, two days after the date of the posting of
the mail or the date when deposited with the overnight courier.
8. WAIVER. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
9. ENTIRE AGREEMENT. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
10. VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
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<PAGE> 7
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
11. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
12. GOVERNING LAW. This Agreement shall be construed (both as
to validity and performance) and enforced in accordance with, and governed by,
the laws of the State of California applicable to contracts to be performed
entirely within that State, without giving effect to the principles of conflicts
of law. Any suit or proceeding arising out of this Agreement shall be brought
only in a federal or state court located in the County of Palm Beach, State of
Florida or County of San Bernadino, State of California; provided, however, that
neither party waives its right to request the removal of such action or
proceeding from the state court to a federal court in such jurisdiction. The
parties hereto each waive any claim that such jurisdiction is not a convenient
forum for any such suit or proceeding and the defense of lack of personal
jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed on May
21, 1996.
U.S. ALCOHOL TESTING OF AMERICA, INC.
By:______________________________________
_________________________________________
BRIAN STUTMAN
7
<PAGE> 1
FOR IMMEDIATE RELEASE
- ---------------------
Contact:
Robert Stutman, Chairman & CEO Carl Hymans/Danielle Della Pella
U.S. Alcohol Testing of America, Inc. G.S. Schwartz & Co. Inc.
(617) 320-8500 (212) 725-4500
U.S. ALCOHOL TESTING OF AMERICA ANNOUNCES FINALIZATION
OF ACQUISITION OF ROBERT STUTMAN & ASSOCIATES
RANCHO CUCAMONGA, CA, May 21, 1996--U.S. Alcohol Testing of America, Inc.
(AMEX:AAA) (USAT) today announced the closing of the Company's acquisition of
Robert Stutman & Associates (RSA), one of the country's leading providers of
corporate "Drug-Free Workplace" programs. Previously, Stutman & Associates had a
strategic alliance with USAT.
U. S. Alcohol Testing, Inc. acquired all shares of RSA, in exchange for $2.5
million in cash. Payment of $2.1 million in cash will be made at the closing,
with the remaining $400,000 paid in one year, with interest at 7.5%, secured by
a lien on all of the assets of USAT except for cash, cash equivalents,
securities and certain contracts, including a Cooperative Research and
Development Agreement, signed in 1992 with the Naval Research Lab, to develop
technology known as the flow immunosensor, to test for drugs of abuse.
In addition, Mr. Stutman will receive 500,000 shares of USAT restricted stock
values at $3 1/8 on April 17, 1996, the date the transaction was agreed to, and
a three-year warrant to purchase shares of USAT at $3 1/8. Warrant shares and
the 500,000 shares are subject to piggy-back and demand registration rights.
<PAGE> 2
According to Linda Masterson, President and Chief Operating Officer of USAT,
"The finalization of this sale marks the beginning of a new chapter in our
history. By adding the expertise of the RSA staff and the company's proven
success in the industry to USAT's operations and growth strategies, we hope to
penetrate a greater portion of the marketplace. Our goals have been to enhance
the services and technology of USAT and the acquisition of RSA facilitates our
restructuring efforts."
U.S. Alcohol Testing of America, Inc., through its wholly-owned subsidiaries,
provides comprehensive employment screening services to the public and private
sectors, including state-of-the-art, drug and alcohol testing, training and
consulting services and employee hotlines. The Company manufactures, markets and
distributes unique substance testing equipment for testing analysis used by law
enforcement agencies and industry and has an on-site toxicology laboratory
service. The Company's majority-owned subsidiary, U.S. Drug Testing, Inc., is
engaged in the research and development of devices which detect drugs of abuse
from urine and saliva samples.
# # #
<PAGE> 1
ASSET PURCHASE AGREEMENT
BETWEEN
U.S. RUBBER RECYCLING, INC., A DELAWARE CORPORATION
AND
RECLAMATION RESOURCES, INC., A CALIFORNIA CORPORATION
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
1. TERMS OF PURCHASE AND SALE............................................... 1
1.1 Transfer of Assets............................................. 1
1.3 Purchase Price................................................. 2
1.4 Closing Adjustment............................................. 3
1.5 Closing; Closing Date.......................................... 4
1.6 Business Name.................................................. 4
1.7 Access......................................................... 4
1.8 Design and Marketing........................................... 5
2. PURCHASER'S ASSUMPTIONS.................................................. 5
2.1 Assumed Debts.................................................. 5
2.2 Other Liabilities.............................................. 6
3. SELLER'S REPRESENTATIONS AND WARRANTIES.................................. 6
3.1 Corporate Existence of Seller, Etc................................ 6
3.2 Capitalization.................................................... 6
3.3 Financial Statements.............................................. 6
3.4 Absence of Undisclosed Liabilities................................ 7
3.5 Consents and Approvals............................................ 7
3.6 Title to Assets................................................... 7
3.7 Insurance......................................................... 7
3.8 Absence of Changes or Events...................................... 7
3.9 Litigation........................................................ 8
3.10 Taxes............................................................. 9
3.11 Licenses and Permits.............................................. 9
3.12 Interest in Competitors, Suppliers, Customers, Etc................ 9
3.13 Accounts Receivable............................................... 9
3.14 Inventory......................................................... 9
3.15 Patents, Trademarks, Service Marks, Corporate
Names, Trade Names and Copyrights................................. 10
3.16 Absence of Defaults............................................... 10
3.17 Compliance with Laws.............................................. 10
3.18 Employee Relations................................................ 10
3.19 Loss Contract..................................................... 11
3.20 Disclosure........................................................ 11
3.21 Hazardous Materials............................................... 11
4. PURCHASER'S REPRESENTATIONS AND WARRANTIES............................... 11
4.1 Organization and Authority........................................ 11
4.2 Authorization and No Conflicts.................................... 11
5. CERTAIN COVENANTS OF SELLER.............................................. 12
5.1 Conduct of Business............................................... 12
5.2 Undertakings...................................................... 13
5.3 Exclusivity....................................................... 13
6. CONDITIONS TO PURCHASER'S OBLIGATIONS................................... 13
6.1 Representations, Warranties and Covenants of Seller............... 13
6.2 Further Action.................................................... 14
6.3 No Governmental or Other Proceeding............................... 14
6.4 Permits and Exclusions............................................ 14
6.5 Assignment of Lease............................................... 14
6.6 Agreement with Richard Snyder..................................... 14
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
6.7 Accounts Receivable Aging Report...................................................... 14
6.8 Storage Lot........................................................................... 14
6.9 Goodyear Agreement.................................................................... 15
6.10 Johnson Lift/Hyster Lease............................................................. 15
6.11 Designer Information Services Contract................................................ 15
6.12 Inventory............................................................................. 15
7. CONDITIONS TO SELLER'S OBLIGATIONS.......................................................... 15
7.1 Representations, Warranties and Covenants of
Purchaser........................................................................... 15
7.2 Further Actions....................................................................... 15
7.3 No Governmental or Other Proceeding................................................... 15
7.4 Employment Agreement.................................................................. 16
7.5 Inventory............................................................................. 16
7.6 Release............................................................................... 16
7.7 Delivery of Documents................................................................. 16
8. SURVIVAL AND INDEMNIFICATION................................................................ 16
8.1 Survival.............................................................................. 16
8.2 Indemnification....................................................................... 16
8.3 Notice of Claim....................................................................... 17
8.4 Defense............................................................................... 17
8.5 Set-Off............................................................................... 18
9. TERMINATION PRIOR TO CLOSING................................................................ 19
9.1 Termination of Agreement.............................................................. 19
10. MISCELLANEOUS............................................................................... 19
10.1 Entire Agreement..................................................................... 19
10.2 Successors and Assigns............................................................... 19
10.3 Counterparts......................................................................... 20
10.4 Headings............................................................................. 20
10.5 No Waiver............................................................................ 20
10.6 Expenses............................................................................. 20
10.7 Notices.............................................................................. 20
10.8 Further Assurances................................................................... 21
10.9 Governing Law........................................................................ 21
10.10 Consent to Jurisdiction.............................................................. 21
10.11 Specific Performance................................................................. 21
10.12 Attorneys' Fees...................................................................... 21
10.13 Brokers.............................................................................. 21
Schedule 3.8
Schedule 6.8 - Lease
Exhibit A - Assets
Exhibit B - Liabilities
Exhibit C - Secured Promissory Note
Exhibit D - Security Agreement
</TABLE>
ii
<PAGE> 4
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 30th day of April, 1996, by and between U.S. Rubber Recycling,
Inc., a Delaware Corporation ) hereinafter referred to as "Seller") and
Reclamation Resources Inc., California corporation (hereinafter referred to as
"Purchaser").
R E C I T A L S
A. WHEREAS, Seller is engaged at those certain facilities located in
Rancho Cucamonga, California, in the business of manufacture of rubber floor
tiles from waste tires (the "Business"); and
B. WHEREAS, Seller desires to sell to Purchaser the assets, properties
and rights held, used in connection with, arising from and relating to the
Business subject to Purchaser's assumption of certain liabilities and
obligations of Seller owed, incurred in connection with, arising from or
relating to the Business and which are described on Exhibit B attached hereto
(the "Liabilities"), and Purchaser and Seller desire to make such sale, purchase
and assumption and to enter into such transactions, all upon the terms and
conditions set forth in this Agreement;
1. TERMS OF PURCHASE AND SALE.
1.1 TRANSFER OF ASSETS. Subject to the terms and conditions set
forth in this Agreement, Seller agrees to sell, convey, transfer, assign, and
deliver to Purchaser, and Purchaser agrees to purchase from Seller, all the
assets, properties, and business of Seller of every kind, character, and
description whether tangible, intangible, real, personal, or mixed, and wherever
located, all of which are sometimes collectively referred to in this Agreement
as "the Assets," including, but not without limitation to, the following:
(a) The asets described on Exhibit A attached hereto;
(b) The name, all telephone numbers, and advertising rights for
"U.S. Rubber Recycling, Inc.";
(c) All other supplies, materials (including all marketing
materials, files, computer programs, design programs and files),
work-in-process, finished goods, equipment, machinery, furniture, fixtures,
motor vehicles, claims and rights under leases, contracts, purchase and sales
orders, copyrights, service marks, trademarks, trade names, trade secrets,
patents, patent
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<PAGE> 5
applications, licenses, royalty rights, deposits, and rights and claims to
refunds and adjustments of any kind.
1.2 EXCLUDED ASSETS. The Assets shall not include any of the
Seller's cash, cash equivalents and inter-company notes and accounts receivable.
1.3 PURCHASE PRICE. The purchase price (the "Purchase Price") for
the Assets shall be the assumption of the Assumed Liabiltiies (herein defined)
and $500,000 to be payable at the Closing as follows:
(a) Cash in the amount of $200,000 at the Closing.
(b) Buyer's secured promissory note ("Secured Note"), dated as
of the Closing Date, in the principal amount of $300,000, bearing interest
at the rate of seven percent (7%) per annum, with annual payments of
$50,000 as a principal reduction plus interest of seven percent (7%) on the
anniversary date of the Closing. The Secured Note shall be secured by a
first priority security interest in the Purchaser's assets evidenced by a
Security Agreement and UCC-1 Financing Statement. Seller agrees to and
shall subordinate its security interest in the collateral to additional
institutional financing not to exceed $1 million at the request of
Purchaser provided that such financing is used to finance the Purchaser's
existing Business, or crumb rubber business and not to guaranty the
obligations of a third party or finance another type of business. Seller
agrees to sign additional documents as necessary to implement the
subordination. Purchaser shall use the additional financing to provide
working capital to the Business; however, if Purchaser uses the additional
financing to provide working capital to a crumb rubber business owned by
the Purchaser, the net sales from the other business shall be added to the
net sales of the Current Products under subparagraph (c) below for purposes
of calculating the additional payments to be made under the Secured Note.
The Secured Note and Security Agreement shall be in the form of Exhibits C
and D, respectively.
(c) For Contract Years (herein defined) in which net sales from
floor tiles and any other products currently manufactured by Seller
(collectively "Current Products") exceed $1.4 million, an additional
principal reduction shall be made on an annual basis in a sum equal to
twelve and one-half percent (12-1/2%) of the net sales of Current Products
which exceed $1.4 million. A Contract Year shall be each 12-month period
after the Closing Date commencing on the Closing Date or the anniversary of
the Closing Date and ending 12 months thereafter. Net Sales shall be
defined as gross sales less returns, allowances and sales discounts. The
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<PAGE> 6
Purchaser shall cause the Purchaser's regular independent certified public
accountants to make a written determination of the amount of the net sales
based upon an audit of the Purchaser's net sales. The Purchaser shall cause
a copy of such written determination to be furnished to each of the parties
hereto within forty-five (45) days of the end of the Contract Year and such
determination shall be final and binding upon the parties hereto unless the
Seller shall have notified the Purchaser in writing of any objections
thereto within thirty (30) days after the Seller's receipt of such
determination. Any notice of objection shall specify in reasonable detail
the items which are being disputed and shall include a summary of the
reason for such dispute. Any dispute relating to the determination of the
net sales which cannot be resolved by the parties within thirty (30) days
after receipt of any such notice of objections shall be referred for
decision to such internationally recognized firm of independent public
accountants as shall be mutually agreed upon by the Purchaser and the
Seller, or failing such agreement, such other internationally recognized
firm of independent public accountants as shall be selected in accordance
with the rules of the American Arbitration Association (such firm so agreed
upon or selected being referred to as the "Disputes Auditor"). A decision
of the Disputes Auditor with respect to any matter or matters in dispute
shall be final and binding on the parties hereto (absent fraud, bad faith,
undue influence or manifest error). The Disputes Auditor shall be required
to render its decision within thirty (30) days after referral of the
dispute to it for decision pursuant hereto. The fees of the Disputes
Auditor shall be borne by the Purchaser, on the one hand, and the Seller,
on the other hand, in proportion to a separate determination by the
Disputes Auditor of the relative merits of the Purchaser's and Seller's
positions in dispute. The additional payment based upon net sales shall be
made within ten (10) days of the determination of the amount of the net
sales becoming final.
Purchaser shall provide Seller with its year-end financial statements within 90
days of each anniversary of the Closing Date until the Secured Note is paid.
Allocation of the Purchase Price, and Form 8594 shall be prepared by Purchaser
within ninety (90) days of Closing and provided to Seller. It is expressly
understood and agreed that Purchaser shall not be liable for any of the
obligations or liabilities of Seller of any kind and nature other than those
specifically assumed by Purchaser.
1.4 CLOSING ADJUSTMENT. Within sixty (60) days after the Closing,
Purchaser shall prepare a statement which sets forth the net realized value of
the Assets purchased and assumed Liabilities as of the Closing Date. Purchaser
shall receive a cash adjustment from Seller in an aggregate amount equal to
$265,000
3
<PAGE> 7
minus the difference between (i) the aggregate amount of the realized value of
the Accounts Receivables (value to be determined on a 60-day aging period),
Inventory, Prepaid Property Taxes, and Security Deposit minus (ii) the amount of
the assumed Accounts Payable. The cash adjustment pursuant to this section shall
bear interest at the rate of one and one-half percent (1-1/2%) per month unless
Seller or Purchaser pays to Purchaser or Seller, as the case may be, the cash
adjustment within 30 days of receipt of the Closing Statement.
1.5 CLOSING; CLOSING DATE. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place on the earlier
of April 30, 1996, or three business days after all conditions set forth in
Sections 6 and 7 hereof have been satisfied at the offices of Robert J. Krup,
1301 Dove Street, Suite 1000, Newport Beach, California 92660, at 4:00 p.m. (the
"Closing Date"), or at such other place or time as Purchaser and Seller may
mutually agree. At the Closing (i) the transfer of the Assets shall be effected
by such bills of sale, assignments, certificates of title (duly endorsed) and
other instruments of transfer and conveyance which are sufficient to convey to
Purchaser all the title of Seller to the Assets, and (ii) the assumption of the
Liabilities shall be effected by such instruments of assumption and undertaking,
if any, as are necessary to cause the Liabilities to be fully and legally
assumed. All of the foregoing instruments and documents shall be in form and
substance consistent with the terms of this Agreement. At the Closing, the
various opinions, certificates and other documents required hereby shall be
delivered to the parties.
1.6 BUSINESS NAME. Immediately upon the Closing, Seller shall take
all actions necessary, including the filing of amended articles of incorporation
with the Secretary of State of California and Delaware, as necessary, to change
its name, and shall thereafter refrain from using "U.S. Rubber Recycling, Inc."
or any similar name as its corporate, trade, business or fictitious name. From
and after the Closing Date, Purchaser shall have the right to use "U.S. Rubber
Recycling, Inc." or any other lawfully permitted name as its corporate, trade,
or business and/or fictitious name.
1.7 ACCESS. Prior to the Closing Date, Seller shall provide
Purchaser and its employees, accountants, attorneys, advisors and other
representatives with full access to the properties, personnel and books and
records of the Business in order that Purchaser may make such investigation
during normal business hours as it shall reasonably require. From and after the
date hereof, Seller will permit such access to any other third party only after
notification of and an opportunity to consult with Purchaser. To the extent that
Seller permits any such third-party access, Seller will provide Purchaser with
copies of all written information or documentation supplied to such third party.
Unless and until the acquisition contemplated herein has been
consummated, the Purchaser shall hold in confidence all information obtained
pursuant to this Agreement and prior to the date hereof from the Seller during
the conducting of its due diligence and, if
4
<PAGE> 8
such acquisition is not consummated, the Purchaser shall return to the Seller
all documents and other materials received by it hereunder and from the Seller
during the conducting of its due diligence. If the acquisition contemplated
herein is consummated, the Purchaser covenants and agrees that it shall preserve
and keep the records of the Seller for a period of three years from the Closing
Date and shall make such records available to the Seller or its authorized
representatives as reasonably required by the Seller in connection with any
legal proceedings against, or governmental investigations of, the Seller or in
connection with any tax examination of the Seller.
1.8 DESIGN AND MARKETING. Seller shall provide, at no additional
cost to Purchaser, the services of Michael Dewhurst for 15 hours of Michael
Dewhurst's time at times that are mutually agreed upon by the Seller and
Purchaser. Any utilization of Mr. Dewhurst's time above the 15 hours shall be in
the discretion of the Seller and shall be paid at the rate of $75.00 per hour.
In consideration these design and marketing services, Purchaser shall allow
Seller utilization of the current storage room located in the offices of U.S.
Rubber Recycling, Inc. for a period of 90 days.
2. PURCHASER'S ASSUMPTIONS. Except for the Assumed Liabilities, and as
a further inducement to the Purchaser to purchase the above, Seller agrees and
promises to pay all accounts payable, all indebtedness to creditors accruing
from the above-described business, and to do all things necessary to relieve the
property and stock-in-trade of the premises from any security, lien, or
encumbrance in the name of the Seller, for loans or credit extended to same.
More specifically, except for the Assumed Liabilities, Seller shall
bring current as of the Closing Date all debts to creditors, payroll, payroll
taxes, business income taxes, sales taxes, franchise taxes, property taxes,
state disability taxes, insurance premiums, utilities, union dues, rent,
judgments, penalties, and all other similar debts, taxes, and liabilities,
accruing to the business. Seller shall bring current as of the Closing Date all
bonuses, performance incentives and benefits pursuant to the employment contract
with Richard Snyder.
2.1 ASSUMED DEBTS. Subject to the performance by the parties hereto
of their respective obligations hereunder, on the Closing Date, simultaneously
with the transfer, conveyance and assignment by the Seller to the Purchaser of
the Assets, the Purchaser shall assume and shall perform and pay or cause to be
paid or otherwise discharged when due, subject to the limitations contained
herein, all of the Seller's obligations under the agreements set forth on
Exhibit B hereto and the other liabilities of the Seller set forth on Exhibit B
hereto (hereinafter referred to as the "Assumed Liabilities."). The assumption
by the Purchaser of the Assumed Liabilities shall be effected by such instrument
or instruments of assumption delivered to the Seller on the Closing Date as
shall be reasonably requested by the Seller. The Purchaser shall, at any time
and from time to time after the Closing Date,
5
<PAGE> 9
execute and deliver such further instruments of assumption and do all such
further acts as may be reasonably requested by the Seller to implement the
assumption of each such liability and obligation. As of the Closing Date,
Purchaser shall be deemed to have assumed the Assumed Liabilities.
2.2 OTHER LIABILITIES. Except for the Assumed Liabilities, Purchaser
is not assuming, and shall not be deemed to have assumed or incurred any
liability (contingent or otherwise) with respect to, any other liabilities or
obligations of Seller or which arise out of or relate to the Business.
3. SELLER'S REPRESENTATIONS AND WARRANTIES.
Seller hereby represents and warrants to Purchaser:
3.1 CORPORATE EXISTENCE OF SELLER, ETC. The Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, has all requisite corporate power and authority to own or
lease and operate its properties and to carry on its business as presently
conducted. This Agreement has been duly executed and delivered on behalf of the
Seller and constitutes the valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, subject to the
general equitable principles and except as the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general application relating to creditors' rights.
3.2 CAPITALIZATION. The authorized capital stock of the Seller
consists of 50 million shares of Common Stock, all of one class. All outstanding
Shares have been duly authorized and validly issued, are fully paid and
non-assessable and were not issued in violation of any preemptive rights. There
is outstanding no security, option, warrant, right, call, subscription,
agreement, commitment or understanding of any nature whatsoever, fixed or
contingent, that directly or indirectly (i) calls for the issuance, sale, pledge
or other disposition of any Shares or of any other capital stock of the Seller
or any securities convertible into, or other rights to acquire, any such Share
or other capital stock of the Seller or (ii) obligates the Seller to grant,
offer or enter into any of the foregoing or (iii) relates to the voting or
control of such Shares, capital stock, securities or rights. No person has any
right to require the Seller to register any of its securities under the
Securities Act of 1933 (the "1933 Act").
3.3 FINANCIAL STATEMENTS. Except as noted therein, the Seller's
financial statements for the year ended March 31, 1995 and the eleven-month
period ended February 29, 1996 (collectively the "Financial Statements"), fairly
and accurately present the financial position of Seller on the dates specified
and the results of its operations for the periods indicated in conformity with
generally accepted accounting principles consistently applied for such period.
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<PAGE> 10
3.4 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
(a) reflected or reserved against in the Financial Statements, (b) disclosed in
this Agreement, or (c) trade payables incurred in the ordinary course of
business of Seller, as appropriate, since February 29, 1996 (the "Financial
Date"), Seller has no material liabilities, commitments, indebtedness or
obligations of any nature, whether absolute, accrued, contingent or otherwise,
and whether due or to become due, is not in breach or default with respect to
any terms or conditions of any liabilities, commitments, indebtedness or
obligations, and Seller does not know or have reasonable grounds to know of any
basis for the assertion against Seller of any other claim or liability.
3.5 CONSENTS AND APPROVALS. Except as set forth in Section 6 hereof,
there is no authorization, consent order or approval of, or notice to or filing
with, any governmental authority required to be obtained or given or waiting
period required to expire as a condition to the lawful consummation by the
Seller of the sale of the Assets pursuant to this Agreement.
3.6 TITLE TO ASSETS. The Seller has good and marketable title to all
of the Assets, free and clear, except for liens for current taxes not yet due
and payable or for taxes the validity of which is being contested in good faith
by appropriate proceedings.
3.7 INSURANCE. All insurance policies with respect to the
properties, assets, operations and business of the Seller (the "Insurance
Policies") are in full force and effect. Except as set forth in Exhibit E, there
are no pending claims against the Insurance Policies by the Seller as to which
the insurers have denied liability and with respect to which there is a
reasonable likelihood of a settlement or determination adverse the Seller. There
are no circumstances existing which would enable the insurers to avoid liability
under the Insurance Policies or no other parties having an interest under the
Insurance Policies.
3.8 ABSENCE OF CHANGES OR EVENTS. Except as set forth on Schedule
3.8, since the Financial Date, Seller has conducted its business only in the
ordinary course and has not:
(a) suffered any material adverse change in its assets,
businesses or prospects;
(b) incurred any obligation or liability affecting its
operations or business except in the ordinary course of business and consistent
with prior practices;
(c) purchased, sold, assigned, transferred, mortgaged, or
pledged any of its assets or subjected any of its assets to any lien, charge,
security interest or any other encumbrance or restriction, except for purchases
or sales of inventory in the ordinary course of business;
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<PAGE> 11
(d) suffered any labor trouble, or any damage, destruction or
loss which has materially adversely affected any of its assets or businesses;
(e) made or obligated itself in any way to make any increase in
the compensation payable to any officer or director, or, except in accordance
with its normal business policies, made or obligated itself in any way to make
any increase in the compensation payable to any employee, or, except in
accordance with its normal business policies, incurred any further employment
obligations or commitments to any current or prospective employee;
(f) suffered any material adverse change in the financial
condition or results of operations or incurred a net operating loss for the
period commencing on the Financial Date and terminating on the date hereof;
(g) entered into any transaction, contract or commitment in
connection with its businesses other than in the ordinary course of business;
(h) declared or paid any dividend or declared or made any
distribution of assets, in respect of its stock, or authorized the creation or
issuance of, or issued or otherwise caused any reclassification or
reorganization of, any securities of any class which would affect consummation
of the transactions contemplated hereby, or directly or indirectly redeemed,
purchased or otherwise acquired any outstanding securities, or agreed to take
any such action;
(i) loaned any monies to any person other than in the ordinary
course of business;
(j) incurred any indebtedness for borrowed money or issued or
sold any debt securities;
(k) forgiven or cancelled any debts or claims, or waived any
rights except in the ordinary course of business;
(l) repaid any loans to or entered into any other transactions,
agreements or understandings with any of its shareholders, officers or
directors, other than those regarding employee compensation and benefits entered
into in the ordinary course of business; or
(m) agreed to do any of the above.
3.9 LITIGATION. There is no action, proceeding or investigation in
any court or before any governmental or regulatory authority pending or
threatened in writing or orally (a) against the Seller or against its
shareholders or officers, in connection with the conduct of the businesses of
the Seller, (b) which seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated hereby. The actions or proceedings
described in clauses (a) and (b) are collectively referred to as
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"Litigation." The Seller is not subject to any outstanding order,
writ, judgment or decree.
3.10 TAXES.
(i) All federal, state, local and material foreign income,
franchise, excise, sales and use tax ("Taxes") returns required to be filed with
respect to the Seller have been filed in a timely manner (taking into account
all extensions of due dates);
(ii) the Seller has paid, or has made sufficient provision for,
or has set up adequate reserves for the payment of, all Taxes shown as due on
such returns;
(iii) no election under Section 341(f) or Section 338(g) of the
Internal Revenue Code of 1986 (the "Code") has been or will be filed by or on
behalf of the Seller;
(iv) the Seller has not executed any presently effective waiver
or extension of any statute of limitations against assessment and collection of
Taxes with respect to the Seller; and
(v) the proper amounts have been withheld by the Seller from
employees with respect to all cash compensation paid to employees for all
periods in compliance in all material respects with the tax and other
withholding provisions of all applicable laws.
3.11 LICENSES AND PERMITS. The Seller has all governmental licenses
and permits and other governmental authorizations and approvals required for the
conduct of the Business as presently conducted ("Material Permits"), including
but not limited to the manufacturing facility and all tire-storage sites.
3.12 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC. The Seller
does not have any ownership interest in any competitor, supplier or customer of
the Seller accounting for not less than 1 percent of the Seller's purchases from
Suppliers in the most recently ended fiscal year or any property used in the
operation of the business of the Seller.
3.13 ACCOUNTS RECEIVABLE. All accounts receivable reflected on the
Financial Statements represent sales actually made or services actually rendered
in the ordinary course of business; all accounts receivable of the Seller as of
the Closing Date will represent sales actually made or services actually
rendered in the ordinary course of business on or prior to the Closing Date.
3.14 INVENTORY. All of the inventory reflected on the Financial
Statements and all such inventory acquired or produced through the Closing Date
is and has been valued at the lower of cost or market. All of the inventory is
free of defect, usable in the ordinary course of business.
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3.15 PATENTS, TRADEMARKS, SERVICE MARKS, CORPORATE NAMES, TRADE
NAMES AND COPYRIGHTS.
(a) Seller owns the trademark/trade name "Sure-Step,"
"Sure-Bond." These trademarks are not registered.
(b) Seller has neither received notice nor is aware of any
alleged or possible claim of a violation of the rights of any third party in any
corporate name, trade name, trademark, service mark, trade secret or other
proprietary right utilized by Seller and there are no proceedings pending
relating to such a violation.
(c) Seller has the right, without the payment of any royalty,
license or similar fees and without violating the proprietary rights of any
third party, to conduct its current business, to sell its products and to use
its corporate name, trade names and its trademarks and service marks throughout
the entire United States.
3.16 ABSENCE OF DEFAULTS. Seller is not in default under or in
breach or violation of the terms of its Articles of Incorporation or Bylaws or
any judgment, order or decree. Seller is not in default under or in breach or
violation of the material terms of any mortgage, contract, agreement, lease,
deed of trust, indenture or other instrument to which it is a party or by which
it is bound or to which its property is subject, or any federal, state or local
statute or regulation applicable to such company.
3.17 COMPLIANCE WITH LAWS. Seller has and is operating its business
and owns its assets in compliance with all laws, regulations and orders,
including, but not limited to, statutes, rules, restrictions, laws, regulations,
orders, judgment or decrees respecting (i) employment and employment practices,
terms and conditions of employment, wages and hours, labor-management relations,
discrimination, work place safety, employee benefits, unemployment and workers'
compensation laws, the violation of which would have a material adverse impact
on its assets, business or operations,, and (ii) the removal, containment,
storage and disposal of scrap tires, hazardous and toxic waste materials and
substances, and other contaminants and pollutants. Seller has obtained all
governmental permits, authorizations, franchises or licenses, if any, required
for the operation of its business at the manufacturing facility in Rancho
Cucamonga and the tire-storage site in Fontana, and the ownership of its assets,
and Seller has not received any notice or warning from any governmental
authority with respect to any failure or alleged failure by it to comply with
any law, regulation or order.
3.18 EMPLOYEE RELATIONS. There are no pending material
controversies, disputes, grievances or proceedings or, to the best knowledge of
Seller, threatened against Seller or existing between Seller and its employees
(singularly or collectively). None of Seller's employees is represented by any
labor union or other collective bargaining agent, and to the best knowledge of
Seller,
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there has been no attempt to organize (or any organizing activity among) any of
such employees or any unit pursuant to any state or federal law such as, but not
limited to, the National Labor Relations Act.
3.19 LOSS CONTRACT. Seller is not a party to any contract, bid or
other offer to sell products or to provide services to third parties after the
Closing which is to be performed at a price which would result in a loss to
Seller.
3.20 DISCLOSURE. Neither this Agreement nor any written instrument,
list, exhibit, schedule or certificate furnished or to be furnished to Purchaser
pursuant hereto contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary in order to make the
statements made not misleading.
3.21 HAZARDOUS MATERIALS.
(a) There are no tanks on or below the surface of the real
property owned or leased by Seller or in any improvements thereon ("the subject
property");
(b) There are no asbestos or asbestos-related products in, on or
about the subject property; and
(c) There is no other hazardous or toxic waste material or
substance or other contaminant or pollutant (as these terms are defined under
California law, including but not limited to the California Health and Safety
Code, Division 20, at Section 25100, et seq., and the California Code of
Regulations (formerly known as the California Administrative Code, Title 22,
Chapter 30, at Sections 66680-66746) as of the Closing in existence on or below
the surface of the subject property, including, without limitation, in the soil,
sub-soil, ground water or surface water or which has been or is presently being
released into the environment which constitutes a violation of any law,
ordinance, rule or regulation of any governmental entity having jurisdiction
thereof, or which subjects Seller to liability to any of said governmental
entities or to any third parties.
4. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
Purchaser hereby represents and warrants to Seller:
4.1 ORGANIZATION AND AUTHORITY. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby.
4.2 AUTHORIZATION AND NO CONFLICTS. The execution, delivery and
performance of this Agreement by Purchaser and the consummation by Purchaser of
the transactions contemplated hereby
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have been duly authorized by all necessary corporate action on the part of
Purchaser, and do not and will not result in any conflict with, or breach or
violation of, or default under, the Articles of Incorporation or Bylaws of
Purchaser or violate, conflict with or result in the breach or material
modification of any provision of, or constitute (or with the giving of notice or
the lapse of time or both constitute) a default under, or give any other
contracting party the right to accelerate any obligation under or terminate, any
agreement, mortgage, lease, lien, judgment, decree or other instrument to which
Purchaser is a party or by which it may be bound or any statute or regulation
applicable to Purchaser. No consent or approval of any governmental or
regulatory body or any party to any contract, agreement, instrument, lease,
license, arrangement or understanding to which Purchaser is a party, or to which
any of the properties or assets of Purchaser are subject to otherwise affected,
is required for the execution, delivery or performance of this Agreement. This
Agreement constitutes the legal, valid and binding obligation of Purchaser,
enforceable in accordance with its terms.
5. CERTAIN COVENANTS OF SELLER.
Seller hereby covenants to and agrees as follows:
5.1 CONDUCT OF BUSINESS. Except as may be otherwise contemplated by
this Agreement or except as Purchaser may otherwise consent to in writing (which
consent shall not be unreasonably withheld), between the date hereof and the
Closing Date:
(a) Seller will (i) operate its business only in the ordinary
course; (ii) use its best efforts to preserve the business organization of the
company as a whole intact; (iii) maintain its properties, machinery and
equipment in sufficient operating condition and repair to enable the Seller to
operate its business in the manner in which it was operated immediately prior to
the date hereof, except for maintenance required by reason of fire, flood or
other acts of God (except that any insurance proceeds paid by reason of any such
casualty after the date hereof shall be applied towards such maintenance); (iv)
continue all of the Insurance Policies (or comparable insurance) in full force
and effect; (v) use its best efforts to keep available until the Closing Date
the services of its present officers and key employees; (vi) pay its accounts
payable and all other obligations in the ordinary course of business; and (vii)
use its best efforts to preserve its relationships with its material lenders,
suppliers, customers, licensors and licensees and others having material
business dealings with it such that the business will not be impaired; and
(b) Seller will not (i) make any change in its Certificate of
Incorporation, Bylaws or similar charter documents; (ii) make any change in its
issued or outstanding capital stock, or issue any warrant, option or other right
to purchase shares of its capital stock or any security convertible into shares
of its capital stock, or declare any dividends or make any other
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distribution in respect of its capital stock; (iii) voluntarily incur or assume,
whether directly or by way of guarantee or otherwise, any material obligation or
liability, except obligations and liabilities incurred in the ordinary course of
business; (iv) mortgage, pledge or encumber any material part of its properties
or assets, tangible or intangible; (v) sell or transfer any material part of its
assets, property or rights, or cancel any material debts or claims; (vi) amend
or terminate any contracts or any Material Permit to which it is a party, except
in the ordinary course of business pursuant to the terms of such Agreement;
(vii) make any changes in the accounting methods, principles or practices
employed by it, except as required by generally accepted accounting principles;
(viii) make any capital expenditure or enter into any commitment therefor; (ix)
incur any debt or make any borrowings, or enter into any commitment therefor; or
(x) enter into any other agreement, course of action or transaction material to
Seller except in the ordinary course of business.
5.2 UNDERTAKINGS. Seller will use its best efforts and will
cooperate to secure all necessary consents, approvals, authorizations and
exemptions from governmental agencies and other third parties, as shall be
required in order to enable Seller and Purchaser to effect the transactions
contemplated hereby in accordance with the terms and conditions hereof.
5.3 EXCLUSIVITY. Purchaser shall have the exclusive right through
the close of business on April 30, 1996 (or such later date as the term of this
Agreement may be extended by the parties hereto in writing) to consummate the
transactions contemplated herein, and during such exclusive period, neither
Seller nor any of its authorized representatives will solicit or accept any
other offer to purchase any of the capital stock or all or any significant part
of the assets of Seller or any similar transaction nor hold discussions or
negotiations with, or provide any information to, any other individual or
corporation, partnership or other entity concerning such purchase (other than
such discussions which are in furtherance of the transactions contemplated
herein).
6. CONDITIONS TO PURCHASER'S OBLIGATIONS.
The obligations of Purchaser to consummate the transactions
contemplated hereby shall be subject to the satisfaction on or prior to the
Closing Date of all of the following conditions, except such conditions as
Purchaser may waive:
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER. Seller
shall have complied in all material respects with all of its agreements and
covenants contained herein required to be complied with at or prior to the
Closing Date, and all the representations and warranties of Seller contained
herein shall be true in all material respects on and as of the Closing Date with
the same effect as though made on and as of the Closing Date, except as
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otherwise contemplated hereby, and except to the extent that such
representations and warranties expressly make reference to a specified date and
as to such representations and warranties the same shall continue on the Closing
Date to have been true as of the specified date.
6.2 FURTHER ACTION. All action (including notifications and filings)
that shall be required to be taken by Seller in order to consummate the
transactions contemplated hereby shall have been taken and all consents,
approvals, authorizations and exemptions from third parties that shall be
required in order to enable Seller to consummate the transactions contemplated
hereby shall have been duly obtained (except for such actions, consents,
approvals, authorizations and exemptions, the absence of which would not
prohibit consummation of such transactions or render such consummation illegal),
and, as of the Closing Date, the transactions contemplated hereby shall not
violate any applicable law or governmental regulation.
6.3 NO GOVERNMENTAL OR OTHER PROCEEDING. No order of any court or
governmental or regulatory authority body which restrains or prohibits the
transactions contemplated hereby shall be in effect on the Closing Date and no
suit or investigation by any governmental agency to enjoin the transactions
contemplated hereby or seek damages or other relief as a result thereof shall be
pending or threatened as of the Closing Date.
6.4 PERMITS AND EXCLUSIONS. Approval of this transaction, and the
continued approval of the qualification for exclusion by the California
Integrated Waste Management Board, or its successor, pursuant to the following
provisions of Title 14 of the California of Regulations 18420(a)(4) and 18420(c)
for all facility and tire storage sites.
6.5 ASSIGNMENT OF LEASE. Approval and assignment of Standard
Industrial/Commercial Single Tenant Lease dated February 14, 1992 by and between
Rancho Cucamonga Business Park, a limited partnership, and U.S. Rubber
Recycling, Inc., a Delaware corporation.
6.6 AGREEMENT WITH RICHARD SNYDER. Approval by Richard Snyder of the
assignment of Richard Snyder's employment agreement to the Purchaser with
exception to Paragraphs 1 (regarding Chief Operating Officer and Director) 3b
(regarding stock option plans and pension plans), 3c (entirety), 4a (regarding
Stock Purchase Agreement), and 5c (entirety).
6.7 ACCOUNTS RECEIVABLE AGING REPORT. Seller shall provide to
Purchaser Seller's Accounts Receivable aging report complete through March 29,
1996.
6.8 STORAGE LOT. Seller shall obtain all necessary leases, permits
or exclusions for a tire storage site on terms agreeable to Purchaser. The
Purchaser hereby agrees to a lease containing the terms set forth on Schedule
6.8 hereof. Seller
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shall pay all costs and expenses for permits, and moving of tires from existing
storage lots to new tire storage sites.
6.9 GOODYEAR AGREEMENT. Assignment to Purchaser of the Scrap Tire
Transportation and Disposal Agreement with Goodyear Tire dated May 17, 1993 with
or without Goodyear's consent thereto.
6.10 JOHNSON LIFT/HYSTER LEASE. Approval of and assignment to
Purchaser of Johnson Lift/Hyster Lease dated September 12, 1994 (UCC Filing
94187252).
6.11 DESIGNER INFORMATION SERVICES CONTRACT. Verification of the
termination of the agreement for Southern California Architectural Marketing
with Designer Information Services dated October 27, 1995.
6.12 INVENTORY. The Seller and the Purchaser shall agree on the
value of the Inventory for purposes of Section 1.4 hereof.
7. CONDITIONS TO SELLER'S OBLIGATIONS.
The obligations of Seller to consummate the transactions
contemplated hereby shall be subject to the satisfaction on or prior to the
Closing Date of all of the following conditions, except such conditions as
Seller may waive:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER.
Purchaser shall have complied in all material respects with all of its
agreements and covenants contained herein required to be complied with at or
prior to the Closing Date, and all of the representations and warranties of
Purchaser contained herein shall be true in all material respects on and as of
the Closing Date with the same effect as though made on and as of the Closing
Date, except as otherwise contemplated hereby, and except to the extent that
such representations and warranties expressly make reference to a specified date
and as to such representations and warranties the same shall continue on the
Closing Date to have been true as of the specified date.
7.2 FURTHER ACTIONS. All action (including notifications and
filings) that shall be required to be taken by Purchaser in order to consummate
the transactions contemplated hereby shall have been taken and all consents,
approvals, authorizations and exemptions from third parties that shall be
required in order to enable Seller to consummate the transactions contemplated
hereby shall have been duly obtained (except for such actions, consents,
approvals, authorizations and exemptions, the absence of which would not
prohibit consummation of such transactions or render such consummation illegal),
and, as of the Closing Date, the transactions contemplated hereby shall not
violate any applicable or governmental regulation.
7.3 NO GOVERNMENTAL OR OTHER PROCEEDING. No order of any court
or governmental or regulatory or body which restrains or prohibits the
transactions contemplated hereby shall be in effect
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on the Closing Date and no suit or investigation by any government agency to
enjoin the transactions contemplated hereby or seek damages or other relief as a
result thereof shall be pending or threatened in writing as of the Closing Date.
7.4 EMPLOYMENT AGREEMENT. All employment agreements and options to
extend have been terminated. All employees are "at-will."
7.5 INVENTORY. The Seller and the Purchaser shall agree on the value
of the Inventory for purposes of Section 1.4 hereof.
7.6 RELEASE. The release of the Seller by the parties to the
contracts that are being assigned to the Purchaser by the Seller as described in
Sections 6.6, and 6.10.
7.7 DELIVERY OF DOCUMENTS. The delivery to the Seller of the Secured
Note, Assumption Agreement, Security Agreement, UCC-1 Financing Statements,
resolutions and other closing documents.
8. SURVIVAL AND INDEMNIFICATION.
8.1 SURVIVAL. The representations, warranties, covenants and
agreements contained herein to be performed or complied with before or after the
Closing shall survive without limitation for three (3) years, or until the end
of the term of the Secured Note, whichever is longer, unless the covenant or
agreement specified a term, in which case such covenant or agreement shall
survive until the expiration of such specified term. After three (3) years, the
exclusive remedy for any claims under this Agreement relating to or arising
under a breach of a representation, warranty, covenant or agreement, including a
claim for indemnification under this Section 8, shall be an offset against the
balance due on the Secured Note. A claim for indemnification by a party against
the other under this Article 8 for inaccuracy in a representation or warranty or
breach of any covenants and agreements contained herein must be asserted in
writing and in accordance with Section 8.3 prior to the expiration of the
applicable time period referenced above, following which the same shall be
barred for all purposes. If written notice of a claim for indemnification is
given in accordance with Section 8.3 prior to the expiration of the applicable
time period referenced above, then the representation, warranty, covenant, or
agreement applicable to such claim shall survive until, but only for purposes
of, resolution of such claim for indemnification.
8.2 INDEMNIFICATION. Subject to the provisions of Section 8.1, from
and after the Closing, the Seller shall indemnify and hold Purchaser harmless
from and against any and all claims, losses, liabilities and damages, including,
without limitation, amounts paid in settlement, reasonable costs of
investigation and reasonable fees and disbursements of counsel, arising out of
or resulting from the operation, products, transportation and/or disposal of
tires or services of Seller's business prior to the Closing Date, or from the
inaccuracy of any representation or
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warranty, or the breach of any covenant or agreement, contained herein or in any
instrument or certificate delivered pursuant hereto, by the party against whom
indemnification is sought by the Seller. This indemnification shall include, but
is not limited to, indemnifying Purchaser from the following: (i) Hazardous
materials cleanup relating to the period prior to the Closing date; (ii) product
liability claims, and/or claims of damages arising therefrom relating to the
period prior to the Closing Date; (iii) workers' compensation claims relating to
the period prior to the Closing date; (iv) wrongful termination or discharge
claims relating to the period prior to the Closing date; (v) claims arising out
of the Asset Purchase Agreement between U.S. Alcohol Testing of America, Inc.
and Warren Montalto and Floyd Staggs, dated October 13, 1992; (vi) claims of
commissions or damages, or both by David Bingham relating to the period prior to
the Closing date; (vii) claims for money, benefits or other consideration or
compensation arising from agreements outside the parameters of the written
agreement with Richard Snyder relating to the period prior to the Closing date;
(viii) transportation and/or disposal of scrap tires prior to the Closing Date;
(ix) any claims of Designer Services Inc; (x) claims for damages or clean-up
costs at all tire storage sites (Ontario, Rancho Cucamonga or Fontana).
The Purchaser shall defend and promptly indemnify the Seller and U.S.
Alchohol Testing of America, Inc. and save the Seller harmless from, against,
for and in respect of, and shall pay all damages, losses, obligations,
liabilities, claims, encumbrances, deficiencies, costs and expenses, including,
without limitation, reasonable attorneys' fees and other costs and expenses
incident to, any action, investigation, claim or proceeding (all hereinafter
collectively referred to as "Losses" suffered, sustained, incurred or required
to be paid by the Seller by reason of (a) the Assumed Liabilities or (b) any
breach or failure of observance or performance of any representation, warranty,
covenant, agreement or commitment made by the Purchaser hereunder or relating
hereto or as a result of any such representation, warranty, covenant, agreement
or commitment being untrue or incorrect in any respect or (c) the conduct of the
Business after the Closing Date.
8.3 NOTICE OF CLAIM. The party seeking indemnification (the
"Indemnified Party") shall promptly notify the party entitled to indemnification
(the "Indemnifying Party") in writing of any claim for indemnification,
specifying in detail the basis of such claim, the facts pertaining thereto and,
if known, the amount, or an estimate of the amount, of the liability arising
therefrom. The Indemnified Party shall provide to the Indemnifying Party as
promptly as practicable thereafter all information and documentation necessary
to support and verify the claim asserted and the Indemnifying Party shall be
given reasonable access to all books and records in the possession or control of
the Indemnified party or its parent company which the Indemnifying Party
reasonably determines to be related to such claim.
8.4 DEFENSE. If the facts giving rise to a right to indemnification
arise out of the claim of any third party, the
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Indemnifying Party may assume the defense thereof, including the employment of
counsel, at its cost and expense. The Indemnified Party shall have the right to
employ counsel separate from counsel employed by the Indemnifying Party in any
such action and to participate therein, but the fees and expenses of such
counsel employed by the Indemnified Party shall be at its expense. The
Indemnifying Party shall not be liable for any settlement of any such claim
effected without its prior written consent. Whether or not the Indemnifying
Party does choose to so defend such claim, all the parties hereto shall
cooperate in the defense thereof and shall furnish such records, information and
testimony, and attend at such conferences, discovery proceedings, hearings,
trials and appeals, as may be reasonably requested in connection therewith. The
Indemnifying Party shall be subrogated to all rights and remedies of the
Indemnified Party to the extent of any indemnifications provided hereunder.
8.5 SET-OFF. In addition to any rights and remedies available to
Purchaser under this agreement or under applicable law, and not by way of
limitation of any such rights, in the event Seller is obligated to indemnify,
defend and hold Purchaser harmless, Purchaser is hereby irrevocably authorized
by Seller, at any time and from time to time, after 30 days written notice to
Seller, to set off and apply against Purchaser's obligation to make payments to
Seller under the terms of the Secured Note any amount owing to Purchaser in
connection with Seller's obligation to indemnify and hold harmless, and the
exercise of such right by Purchaser shall in no event affect, and each of Seller
and Purchaser shall not be excused from honoring or performing their respective
obligations under this agreement. Purchaser is not entitled to exercise its
right of setoff if Seller is fulfilling its obligation to defend the Seller from
a third-party claim.
Notwithstanding any to the contrary contained in Section 8.2, the
Indemnified Party shall not have any liability under Section 8.2 unless the
aggregate amount of damages under such Section exceeds $10,000 (in which event
the Indemnifying Party shall have liability, subject to clause (ii) below, for
the total amount of damages thereunder, including the first $10,000) and (ii)
the Indemnifying Party's aggregate liability under Section 8.2 shall not exceed
the Purchase Price paid to the Sellers or which would have been payable to the
Seller had (a) the Indemnifying Party not breached or failed to fulfill in any
material respect any covenant, agreement, or other obligation of the
Indemnifying Party under this Agreement or (B) there not been any inaccuracy in
any material respect in any representation of breach in any material respect of
any warranty of the Indemnifying Party; provided, however; in the event that,
after the Closing, the amount of the Seller's liability under Section 8.2
exceeds the sum of the Purchase Price actually paid to the Seller at the time
such liability is determined, the amount of such excess may only be collected
from the Seller by the Purchaser's set off of such excess amount against future
payments of the Purchase Price. The $10,000 limitation on liability under
Section 8.2 shall not apply to the Purchaser's breach of the payment of the
Secured Note, the
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Purchaser's failure to pay an Assumed Liability or the Seller's failure to pay a
liability that was not an Assumed Liability.
9. TERMINATION PRIOR TO CLOSING.
9.1 TERMINATION OF AGREEMENT. This Agreement may be terminated at
any time prior to the Closing:
(a) By the mutual written consent of Purchaser and the Seller;
or
(b) By Purchaser or Seller in writing for any reason if the
Closing shall not have occurred on or before April 30, 1996, or such other date
to which the Agreement has been extended; or
(c) By any party, against any other, if one or any other, as the
case may be, shall fail to perform in any material respect its agreements
contained herein required to be performed prior to the Closing Date, or
materially breach any of its representations, warranties, covenants or
agreements contained herein, which failure or breach is not cured within 5 days
after the party seeking to terminate has notified the other party of its intent
to terminate this Agreement pursuant to this clause; or
(d) The failure of any conditions remaining unsatisfied at time
of Closing.
10. MISCELLANEOUS.
10.1 ENTIRE AGREEMENT. This Agreement constitutes the sole
understanding of the parties with respect to the subject matter hereof. No
amendment, modification or alteration of the terms or provisions of this
Agreement shall be binding unless the same shall be in writing and duly executed
by the parties hereto.
10.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors of the parties hereto; provided, however, that this Agreement may not
be assigned by any party without the prior written consent of the other parties
hereto, except that the Purchaser or Seller may, at its election and without the
prior written consent of the other, assign this Agreement (but not delegate its
duties) to any direct or indirect wholly-owned subsidiary, parent company or any
other affiliate of Purchaser or Seller so long as the representations and
warranties of Purchaser made herein are equally true of such assignee. If this
Agreement is assigned with such consent or pursuant to such exceptions, the
terms and conditions hereof shall be binding upon and shall inure to the benefit
of the parties hereto and their respective assigns; provided, however, that no
assignment of this Agreement of any of the rights or obligations hereof shall
relieve any part of its obligations under this Agreement. With the exception of
the parties to this Agreement, there shall exist no right of any person
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to claim a beneficial interest in this Agreement or any rights occurring by
virtue of this Agreement.
10.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
10.4 HEADINGS. The headings of the sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
10.5 NO WAIVER. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party hereto, will be deemed
to constitute a waiver by the party taking any action of compliance with any
representation, warranty or agreement contained herein. The waiver by any party
hereto of any condition or of a breach of any other provision of this Agreement
will not operate or be construed as a waiver of any other condition or
subsequent breach. The waiver by any part of any of the conditions precedent to
its obligations under the Agreement will not preclude it from seeking redress
for beach of this Agreement other than with respect to the condition so waived.
10.6 EXPENSES. Seller and Purchaser shall each pay all costs and
expenses incurred by it or on its behalf in connection with this Agreement and
the transactions contemplated hereby, including, without limiting the generality
of the foregoing, fees and expenses of its own financial consultants,
accountants and counsel.
10.7 NOTICES. Any notice, request, instruction or other document to
be given hereunder by any party hereto to any other party hereto shall be in
writing and delivered personally or sent by first-class mail, postage prepaid,
or by Federal Express:
If to Purchaser to: Reclamation Resources, Inc.
c/o Mr. David T. Starr
George and Starr
1450 North Tustin Avenue, Suite 223
Santa Ana, California 92701
With a copy to: Robert J. Krup
Attorney at Law
1301 Dove Street, Suite 1000
Newport Beach, California 92660
If to Seller: U.S. Rubber Recycling, Inc.
10410 Trademark Street
Rancho Cucamonga, California 91730
Attention: Mr. James Witham
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With a copy to: Scott Lesser
Gold & Wachtel
110 East 59th Street, 27th Floor
New York, New York 10022
Any such notice shall be deemed effective upon delivery, if
personally delivered, three (3) business days after deposit with the United
States Post Office, if mailed, or one (1) business day after deposition with the
overnight courier service.
10.8 FURTHER ASSURANCES. From and after the Closing Date, any party,
at the request of another of the parties and at the requesting party's expense,
will each take all such action and deliver all such documents as shall be
reasonably necessary or appropriate to confirm and vest title to the Assets in
Purchaser and otherwise enable Purchaser and Seller to enjoy the respective
benefits contemplated by this Agreement.
10.9 GOVERNING LAW. The validity, performance and enforcement of
this Agreement and any agreement entered into pursuant hereto will be governed
by the Laws of California, without giving effect to the principles of conflicts
of law thereof.
10.10 CONSENT TO JURISDICTION. Both Purchaser and Seller consent and
submit to the jurisdiction of the Courts of California and of the Courts of the
United States for a judicial district within the territorial limits of
California for all purposes of this Agreement and any Ancillary Documents to
which either of them is a party, including without limitation, any action or
proceeding instituted for the enforcement of any right, remedy, obligation or
liability arising under or by reason hereof and thereof.
10.11 SPECIFIC PERFORMANCE. Seller and Purchaser each acknowledge
that the other will be irreparably harmed and that there will be no adequate
remedy at law in the event of a violation by it of any of its covenants or
agreements which are contained in this Agreement. It is accordingly agreed that,
in addition to any other remedies which may be available upon the breach of such
covenants and agreements, Seller or Purchaser, as the case may be, shall have
the right to obtain injunctive relief to restrain any breach or threatened
breach of, or otherwise to obtain specific performance of, the other's covenants
or agreements contained in this Agreement.
10.12 ATTORNEYS' FEES. In the event that any action or proceeding is
commenced by any party to interpret, define or enforce any provision of this
Agreement, the prevailing party shall be entitled to recover all costs and
expenses in connection therewith, including, without limitation, reasonable
attorneys' fees and court costs.
10.13 BROKERS. The Seller and the Purchaser covenant and represent
to each other that it had no dealings with any broker or finder in connection
with this Agreement or the transactions
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contemplated hereby and no broker, finder or other person is entitled to receive
any broker's commission or finder's fee or similar compensation in connection
with any such transaction. Each of the parties agrees to defend, indemnify and
hold harmless the other form, against, for and in respect of any and all losses
sustained by the other as a result of any liability or obligation to any broker
or finder on the basis of any arrangement, agreement or acts made by or on
behalf of such other party with any person or persons whatsoever.
IN WITNESS WHEREOF, Purchaser and Seller have caused this Agreement to
be executed on its behalf as the date first above written.
SELLER
U.S. RUBBER RECYCLING, INC., a
Delaware corporation
By:______________________________________
PURCHASER
RECLAMATION RESOURCES, INC.,
California corporation
By:______________________________________
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