U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: August 19, 1997
ZABA INTERNATIONAL, INC.
(f/k/a HA SPINNAKER, INC.)
(Exact name of registrant as specified in its charter)
COLORADO
(State or other jurisdiction of incorporation)
0-21099 84-112830
(Commission File No.) (IRS Employer
Identification No.)
2963 Glen Drive
Suite 308
Coquitlam, British Columbia, Canada V3B 2P7
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:
(604) 607-8827
<PAGE>
Item 1(a). Change in Control of Registrant.
Effective August 4, 1997, pursuant to a definitive agreement
(attached hereto and incorporated herein as Exhibit 2.0) (the
"Agreement") HA Spinnaker, Inc. (the "Company") acquired all of the
issued and outstanding securities of Zaba International Holdings
USA, Inc., ("Zaba"), a Nevada corporation. The terms of the
transaction involved the Company undertaking a "reverse stock
split", wherein one share of common stock was issued in exchange
for every 12 shares of common stock issued and outstanding as of
the Closing Date and thereafter, issuing an aggregate of 9,628,660
shares of its "restricted" common stock to the former shareholders
of Zaba in exchange for all of the issued and outstanding stock of
Zaba. Zaba did not survive the transaction. The Company also
changed its name to "Zaba International, Inc."
Pursuant to the terms of the Agreement the Company's officers
and directors, Gregory W. Skufca, William L. Skufca and Barney E.
Carlson, resigned their respective positions in the Company and the
following persons were appointed as new officers and/or directors
of the Company:
NAME OFFICE
------------------ --------------------------
Robert Zaba Chairman of Board,
President and Director
Michael D. Cohen Vice President, Director
Carmine Montemariano Vice President - Operations
and Director
Deeran Rambaran Vice President - Marketing
and Director
Gordon A. Meugens Treasurer and Director
Ronald M. Bell Director
The percentage of voting securities of the Company now
beneficially owned directly or indirectly by the entity who
acquired control and the identity of the entities who acquired
control are as follows:
Percent
Name of Amount and Nature of of
Beneficial Owner Beneficial Ownership Class
- - - ---------------- -------------------- -------
Robert Zaba 7,154,995 59.0%
2963 Glen Dr.
Coquitlam, B.C.
Canada
2
<PAGE>
Deeran Rambaran 2,407,165 20.0%
308-2941 Delahaye Dr.
Coquitham, B.C.
Canada
All Directors 9,562,160 79.0%
and Officers as a
Group (6 persons)
Item 2. Acquisition or Disposition of Assets.
Effective August 4, 1997, the Company acquired all of the
issued and outstanding securities of Zaba, consisting of 100 shares
of common stock, par value $.01 per share. The nature and amount
of consideration given in connection with the agreement was the
issuance of 9,628,660 shares of "restricted" common stock of the
Company to the former Zaba shareholders. The consideration given
and received was determined by arms-length negotiations between the
principals of the Company and principals of Zaba. No material
relationship existed or presently exists between management of the
companies.
As a result of this transaction, the Company, through its
three (3) wholly owned subsidiary companies, is now engaged in the
business of manufacturing tillage and seeding agricultural
equipment ("Riteway"), street sweepers ("Sweeprite") and what
current management views as a new asphalt surface pothole patcher
("Patchrite"). Zaba and its subsidiaries (hereinafter jointly
referred to as the "Company") have been engaged in its business
since 1969. Current management assumed control of the Company's
business in 1985.
The Company's businesses include (i) the manufacturing,
distribution and marketing of agricultural tillage and seeding
equipment; (ii) the manufacturing, distribution and marketing of
road sweepers. In addition, the Company has also recently
undertaken to expand into the business of manufacturing,
distribution and marketing of pothole patchers.
Both the agricultural and road maintenance markets are growing
at a rapid rate. The annual market for the Company's agricultural
equipment amounts to over $1 billion in sales. The road
maintenance industry for sweepers is in excess of $500 million per
year. During Zaba's last fiscal year, it obtained annual revenues
of approximately $10 million, an increase of 30% over the previous
year.
The Company's sales are made primarily to dealers, who
accounted for approximately 95% of the Company's sales in its last
fiscal year, with the balance of 5% made as direct sales. The
Company's relationship with its dealers are usually established at
large trade shows, as well as through efforts undertaken by the
3
<PAGE>
Company's in-house representatives. Since its inception, the
Company has built up a system of distributors and dealers in 5
provinces in Canada, 13 states in the US and 10 other countries
located throughout the world.
Following is a brief description of the Company's current
products:
Agricultural Tillage & Seeding Equipment
The agricultural equipment division of the Company has a
dealership network of 100+ dealers throughout Western canada and
the US. As of the date of this report, approximately 85% of sales
are in Canada, with the 15% balance in the US. Its principal
products include (i) jumbo harrows, which is a conventional tilling
that requires nominal tilling operations by breaking and
distributing straw. This device also incorporates herbicide more
efficiently than traditional harrows; (ii) air seeders (Accu-
Seeder), which seeds, fertilizes and packs in one operation and
includes a floating shank that delivers seek and fertilizer at a
uniform depth, regardless of the unevenness of the ground, and a
rock picker. Management believes that the market for these
products is expanding and anticipates that the Company will
continue to increase revenues during the next few fiscal years.
However, there can be no assurances that this will occur.
Road Sweepers
The Company's Sweeprite brand sweepers have been sold to
communities in every province across canada, as well as the
Canadian Dept. of National Defense. Approximately half of the
Company's sales of its sweepers have been sold to US customers,
including the US Dept. of Defense's military bases throughout the
world. Sales have also been made in Australia, Taiwan, Indonesia
and the Czech Republic. The Company presently produces its
sweepers in a plant located in Saskatchewan, Canada. The Company
has undertaken preliminary efforts to also open an assembly plant
in Staten Island, New York, in order to assist the Company's
planned US expansion. However, there can be no assurances that
such a plant will be constructed in the future.
The Company intends to increase its sweeper business through
acquisitions of contractor companies and small to mid-size sweeping
companies, especially those sweeping companies which are located in
close proximity to the Company's NY plant. As of the date of this
report, the Company is negotiating to acquire three separate
sweeping companies. However, there can be no assurances that the
Company will be able to successfully consummate these acquisitions,
or that the acquisition of any or all of these companies will
result in increased profitability to the Company. It is
anticipated that the total cost of these acquisitions will be
approximately $1 million (US).
4
<PAGE>
Pothole Patchers
The Company intends to market this product under the tradename
"Patchrite Pothole Patcher". As of the date of this report, only
nominal activity has been undertaken in this regard. However, based
upon minimal marketing efforts, management of the Company believes
that its concept of combining the entire process into a self-
sustaining one person unit which technology has been developed by
the Company is unsurpassed in the industry. There can be no
assurances that the Company will successfully market this product
in the future.
Facilities
The Company's principal business location is in Saskatchewan,
where it operates two facilities, including (i) a plant including
34,000 sq. foot facility located on approximately 10 acres, which
is fully equipped to handle all the metal fabricating, welding,
assembly and painting requirements of the Company and has a
productive capacity in excess of 200 sweepers per year; and (ii)
Imperial, Saskatchewan, where all of the Company's agricultural
equipment is manufactured. The plant is fully equipped to handle
all of the metal fabricating, welding, assembly and painting
requirements applicable to the Company's agricultural products
described hereinabove. Its manufacturing production capacity is in
excess of $10 million in equipment per year (400 units). This
plant is located on 4.5 acres of land and consists of 32,000 square
feet, including 960 square feet of office space and a 2,400 square
foot paint shop. Management believes that the Company's current
space is sufficient for the present, but that such space will need
to be expanded to meet the increased productions demands which
management anticipates to be occurring in the next year.
Competition
There are many existing companies who are engaged in similar
businesses to that of the Company, including Elgin Sweeper Company,
Johnston Sweeper, Flex-Coil and Summers Industries. These companies
have greater resources, both financial and otherwise, a larger
distribution of their products and a more recognizable product than
the Company. Management believes that the quality of the Company's
products will allow the Company to successfully compete in the
international and domestic marketplace. There are no assurances
that the Company's efforts in this regard will be successful.
Item 6. Resignation of Registrant's Directors.
Gregory W. Skufca, William L. Skufca and Barney E. Carlson
resigned as officers and directors of the Company, as applicable,
effective August 4, 1997, all of whom constituted the complete
Board of Directors of the Company as of said date.
5
<PAGE>
Item 7(a) and 7(b). Financial Statements and Pro Forma Financial
Statements
The Registrant hereby undertakes to file an amendment to this
Form 8-K within sixty (60) days from the date of this filing, to
include the audited financial statements for the fiscal years ended
March 31, 1997 and 1996 and unaudited financial statements for the
three (3) month periods ended June 30, 1997 and 1996.
Item 7(c). Exhibits.
Number Exhibit
------ -------
2.0 Agreement and Plan of Merger between the
Company and Zaba International Holdings USA,
Inc..
6
<PAGE>
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.
ZABA INTERNATIONAL, INC.
By:/s/ Robert Zaba
---------------------------
Robert Zaba,
President
Dated: August 19, 1997
7
<PAGE>
ZABA INTERNATIONAL, INC.
----------------------------------
EXHIBIT 2.0 TO FORM 8-K
----------------------------------
AGREEMENT AND PLAN OF MERGER
BETWEEN THE COMPANY AND
ZABA INTERNATIONAL HOLDINGS USA, INC.
----------------------------------
<PAGE>
AGREEMENT AND PLAN OF MERGER
by and among
HA SPINNAKER, INC.
a Colorado corporation
and
ZABA USA HOLDINGS, INC.
a Nevada corporation
effective as of August 4, 1997
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, made and entered into this
4th day of August 1997, by and between HA SPINNAKER, INC., a
Colorado corporation with its principal place of business located
at 5650 Greenwood Plaza Blvd., Suite 216, Englewood, Colorado 80111
("Spinnaker") and Zaba International Holdings USA, Inc., a Nevada
corporation with its principal place of business located at 2963
Glen Drive, Suite 308, Coquitlam, British Columbia, Canada V3B 2P7
("Zaba").
Premises
A. This Agreement provides for the reorganization of Zaba
with and into Spinnaker and in connection therewith, the conversion
of the outstanding common stock of Zaba into shares of common
voting stock of Spinnaker, all for the purpose of effecting a tax-
free reorganization pursuant to sections 354 and 368(a) of the
Internal Revenue Code of 1986, as amended.
B. The boards of directors of Zaba and Spinnaker have
determined, subject to the terms and conditions set forth in this
Agreement, that the exchange contemplated hereby is desirable and
in the best interests of their stockholders. This Agreement is
being entered into for the purpose of setting forth the terms and
conditions of the proposed exchange.
Agreement
NOW, THEREFORE, on the stated premises and for and in
consideration of the mutual covenants and agreements hereinafter
set forth and the mutual benefits to the parties to be derived
herefrom, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS AND WARRANTIES OF
ZABA
As an inducement to and to obtain the reliance of Spinnaker,
Zaba represents and warrants as follows:
Section 1.1 Organization. Zaba is a corporation duly
organized, validly existing, and in good standing under the laws of
Nevada and has the corporate power and is duly authorized,
qualified, franchised and licensed under all applicable laws,
regulations, ordinances and orders of public authorities to own all
of its properties and assets and to carry on its business in all
material respects as it is now being conducted, including
qualification to do business as a foreign corporation in the
jurisdiction in which the character and location of the assets
owned by it or the nature of the business transacted by it requires
1
<PAGE>
qualification. Included in the Zaba Schedules (as hereinafter
defined) are complete and correct copies of the articles of
incorporation, bylaws and amendments thereto of Zaba as in effect
on the date hereof. The execution and delivery of this Agreement
does not and the consummation of the transactions contemplated by
this Agreement in accordance with the terms hereof will not violate
any provision of Zaba's articles of incorporation or bylaws. Zaba
has full power, authority and legal right and has taken all action
required by law, its articles of incorporation, its bylaws or
otherwise to authorize the execution and delivery of this
Agreement.
Section 1.2 Capitalization. The authorized capitalization of
Zaba consists of 100,000 Common Shares, par value $0.01 per share.
As of the Closing date hereof, Zaba will have no more than 100
common shares issued and outstanding. All issued and outstanding
shares are legally issued, fully paid and nonassessable and are not
issued in violation of the preemptive or other rights of any
person. Zaba has no other securities, warrants or options
authorized or issued.
Section 1.3 Subsidiaries and Predecessor Corporations. Except
as otherwise set forth in the Zaba Schedules or as previously
provided to Spinnaker, Zaba does not have any other subsidiaries
and does not own, beneficially or of record, any shares of any
other corporation.
Section 1.4 Financial Statements. Included in the Zaba
Schedules is Zaba's audited financial statement (including any
predecessor companies), including a balance sheet, statement of
operations, shareholder equity and cash flows and notes thereto,
dated as of March 31, 1997 and Zaba's unaudited balance sheet,
statement of operations, shareholder equity and cash flows and
notes thereto dated June 30, 1997. Relevant thereto:
(a) the Zaba balance sheets present fairly as of
their date the financial condition of Zaba. Zaba does
not have, as of the date of such balance sheet, except as
noted and to the extent reflected or reserved against
therein, any liabilities or obligations (absolute or
contingent) which should be reflected in a balance sheet
or the notes thereto and all assets reflected therein are
properly reported and present fairly the value of the
assets of Zaba, in accordance with generally accepted
accounting principles;
(b) Zaba has no liabilities with respect to the
payment of any federal, state, county, local or other
taxes (including any deficiencies, interest or
penalties), except for taxes accrued but not yet due and
payable;
2
<PAGE>
(c) Zaba has filed all state, federal and local
income tax returns required to be filed by it from
inception to the date hereof, if any;
(d) The books and records, financial and others, of
Zaba are in all material respects complete and correct
and have been maintained in accordance with good business
accounting practices; and
(e) except as and to the extent disclosed in the
most recent Zaba balance sheet and the Zaba Schedules,
Zaba has no material contingent liabilities, direct or
indirect, matured or unmatured.
Section 1.5 Information. The information concerning Zaba set
forth in this Agreement and in the Zaba Schedules is complete and
accurate in all material respects and does not contain any untrue
statement of a material fact or omit to state a material fact
required to make the statements made, in light of the circumstances
under which they were made, not misleading.
Section 1.6 Options and Warrants. There are no existing
options, warrants, calls or commitments of any character to which
Zaba is a party and by which it is bound.
Section 1.7 Absence of Certain Changes or Events. Except as
set forth in this Agreement, the Zaba Schedules, or as otherwise
disclosed to Spinnaker, since June 30, 1997:
(a) there has not been: (i) any material adverse
change in the business, operations, properties, assets or
condition of Zaba; or (ii) any damage, destruction or
loss to Zaba (whether or not covered by insurance)
materially and adversely affecting the business,
operations, properties, assets or condition of Zaba;
(b) Zaba has not: (i) amended its articles of
incorporation or bylaws; (ii) declared or made, or agreed
to declare or make, any payment of dividends or
distributions of any assets of any kind whatsoever to
stockholders or purchased or redeemed or agreed to
purchase or redeem any of its capital stock; (iii) waived
any rights of value which in the aggregate are
extraordinary or material considering the business of
Zaba; (iv) made any material change in its method of
management, operation or accounting; (v) entered into any
other material transaction; (vi) made any accrual or
arrangement for or payment of bonuses or special
compensation of any kind or any severance or termination
pay to any present or former officer or employee; (vii)
increased the rate of compensation payable or to become
payable by it to any of its officers or directors or any
3
<PAGE>
of its employees whose monthly compensation exceeds
$5,000; or (viii) made any increase in any profit
sharing, bonus, deferred compensation, insurance,
pension, retirement or other employee benefit plan,
payment or arrangement made to, for, or with its
officers, directors or employees.
(c) Zaba has not: (i) granted or agreed to grant
any options, warrants or other rights for its stocks,
bonds or other corporate securities calling for the
issuance thereof; (ii) borrowed or agreed to borrow any
funds or incurred or become subject to, any material
obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business;
(iii) paid any material obligation or liability (absolute
or contingent) other than current liabilities reflected
in or shown on the most recent Zaba balance sheet and
current liabilities incurred since that date in the
ordinary course of business; (iv) sold or transferred, or
agreed to sell or transfer, any of its assets, properties
or rights (except assets, properties or rights not used
or useful in its business which, in the aggregate have a
value of less than $10,000); (v) made or permitted any
amendment or termination of any contract, agreement or
license to which it is a party if such amendment or
termination is material, considering the business of
Zaba; or (vi) issued, delivered or agreed to issue or
deliver any stock, bonds or other corporate securities,
including debentures (whether authorized and unissued or
held as treasury stock); and
(d) to the best knowledge of Zaba, it has not
become subject to any law or regulation which materially
and adversely affects, or in the future may adversely
affect, the business, operations, properties, assets or
condition of Zaba.
Section 1.8 Title and Related Matters. Zaba has good and
marketable title to and is the sole and exclusive owner of all of
its properties, inventory, interests in properties and assets, real
and personal (collectively, the "Assets") which are reflected in
the most recent Zaba unaudited balance sheet and the Zaba Schedules
or acquired after that date (except properties, interests in
properties and assets sold or otherwise disposed of since such date
in the ordinary course of business), free and clear of all liens,
pledges, charges or encumbrances except: (a) statutory liens or
claims not yet delinquent; (b) such imperfections of title and
easements as do not and will not, materially detract from or
interfere with the present or proposed use of the properties
subject thereto or affected thereby or otherwise materially impair
present business operations on such properties; and (c) as
described in the Zaba Schedules. Except as set forth in the Zaba
4
<PAGE>
Schedules, Zaba owns free and clear of any liens, claims,
encumbrances, royalty interests or other restrictions or
limitations of any nature whatsoever and all procedures,
techniques, marketing plans, business plans, methods of management
or other information utilized in connection with Zaba's business.
Except as set forth in the Zaba Schedules, no third party has any
right to, and Zaba has not received any notice of infringement of
or conflict with asserted rights of others with respect to any
product, technology, data, trade secrets, know-how, proprietary
techniques, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a materially adverse affect
on the business, operations, financial conditions or income of Zaba
or any material portion of its properties, assets or rights.
Section 1.9 Litigation and Proceedings. To the best of
Zaba's knowledge and belief, there are no actions, suits,
proceedings or investigations pending or threatened by or against
Zaba or affecting Zaba or its properties, at law or in equity,
before any court or other governmental agency or instrumentality,
domestic or foreign or before any arbitrator of any kind that would
have a material adverse affect on the business, operations,
financial condition or income of Zaba. Zaba does not have any
knowledge of any default on its part with respect to any judgment,
order, writ, injunction, decree, award, rule or regulation of any
court, arbitrator or governmental agency or instrumentality or of
any circumstances which, after reasonable investigation, would
result in the discovery of such a default.
Section 1.10 Contracts.
(a) Except as included or described in the Zaba
Schedules, there are no material contracts, agreements,
franchises, license agreements or other commitments to
which Zaba is a party or by which it or any of its
assets, products, technology or properties are bound;
(b) Except as included or described in the Zaba
Schedules or reflected in the most recent Zaba balance
sheet, Zaba is not a party to any oral or written: (i)
contract for the employment of any officer or employee
which is not terminable on thirty (30) days or less
notice; (ii) profit sharing, bonus, deferred
compensation, stock option, severance pay, pension
benefit or retirement plan, agreement or arrangement
covered by Title IV of the Employee Retirement Income
Security Act, as amended; (iii) agreement, contract or
indenture relating to the borrowing of money; (iv)
guaranty of any obligation, other than one on which Zaba
is a primary obligor, for collection and other guaranties
of obligations, which, in the aggregate do not exceed
more than one year or providing for payments in excess of
5
<PAGE>
$10,000 in the aggregate; (v) consulting or other similar
contracts with an unexpired term of more than one year or
providing for payments in excess of $10,000 in the
aggregate; (vi) collective bargaining agreements; (vii)
agreement with any present or former officer or director
of Zaba; or (viii) contract, agreement or other
commitment involving payments by it of more than $10,000
in the aggregate; and
(c) To Zaba's knowledge, all contracts, agreements,
franchises, license agreements and other commitments to
which Zaba is a party or by which its properties are
bound and which are material to the operations of Zaba
taken as a whole, are valid and enforceable by Zaba in
all respects, except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of
creditors generally.
Section 1.11 Material Contract Defaults. Except as set forth
in the Zaba Schedules, to the best of Zaba's knowledge and belief,
Zaba is not in default in any material respect under the terms of
any outstanding contract, agreement, lease or other commitment
which is material to the business, operations, properties, assets
or condition of Zaba, and there is no event of default in any
material respect under any such contract, agreement, lease or other
commitment in respect of which Zaba has not taken adequate steps to
prevent such a default from occurring.
Section 1.12 No Conflict With Other Instruments. The
execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in the
breach of any term or provision of, or constitute an event of
default under, any material indenture, mortgage, deed of trust or
other material contract, agreement or instrument to which Zaba is
a party or to which any of its properties or operations are
subject.
Section 1.13 Governmental Authorizations. To the best of
Zaba's knowledge, Zaba has all licenses, franchises, permits or
other governmental authorizations legally required to enable Zaba
to conduct its business in all material respects as conducted on
the date hereof. Except for compliance with federal and state
securities and corporation laws, as hereinafter provided, no
authorization, approval, consent or order of, or registration,
declaration or filing with, any court or other governmental body is
required in connection with the execution and delivery by Zaba of
this Agreement and the consummation by Zaba of the transactions
contemplated hereby.
Section 1.14 Compliance With Laws and Regulations. To the
best of Zaba's knowledge, except as disclosed in the Zaba
Schedules, Zaba has complied with all applicable statutes and
6
<PAGE>
regulations of any federal, state or other governmental entity or
agency thereof, except to the extent that noncompliance would not
materially and adversely affect the business, operations,
properties, assets or condition of Zaba or would not result in
Zaba's incurring any material liability.
Section 1.15 Insurance. All of the insurable properties of
Zaba are insured for Zaba's benefit in accordance with the
insurance policies disclosed in the Zaba Schedules under valid and
enforceable policies issued by insurers of recognized
responsibility. Such policy or policies containing substantially
equivalent coverage will be outstanding and in full force at the
Closing Date.
Section 1.16 Approval of Agreement. The board of directors
of Zaba has authorized the execution and delivery of this Agreement
by Zaba, has approved the transactions contemplated hereby and
approved the submission of this Agreement and the transactions
contemplated hereby to the stockholders of Zaba for their unanimous
approval with the recommendation that the reorganization be
accepted.
Section 1.17 Material Transactions or Affiliations. Except
as disclosed herein and in the Zaba Schedules, there exists no
material contract, agreement or arrangement between Zaba and any
predecessor and any person who was at the time of such contract,
agreement or arrangement an officer, director or person owning of
record, or known by Zaba to own beneficially, ten percent (10%) or
more of the issued and outstanding Zaba Common Shares and which is
to be performed in whole or in part after the date hereof. In all
of such transactions, the amount paid or received, whether in cash,
in services or in kind, has been during the full term thereof, and
is required to be during the unexpired portion of the term thereof,
no less favorable to Zaba than terms available from otherwise
unrelated parties in arms length transactions. There are no
commitments by Zaba, whether written or oral, to lend any funds to,
borrow any money from or enter into any other material transactions
with, any such affiliated person.
Section 1.18 Labor Relations. Zaba has never had a work
stoppage resulting from labor problems. To the best knowledge of
Zaba, no union or other collective bargaining organization is
organizing or attempting to organize any employee of Zaba.
Section 1.19 Previous Sales of Securities. Since inception,
Zaba has sold Zaba Common Shares to investors in reliance upon
applicable exemptions from the registration requirements under the
laws of the United States and the State of Nevada and all such
sales (the "Sales") were made in accordance with the laws of said
jurisdictions.
Section 1.20 Zaba Schedules. Upon execution hereof, Zaba
7
<PAGE>
will deliver to Spinnaker the following schedules, which are
collectively referred to as the "Zaba Schedules" and which consist
of separate schedules dated as of the date of this Agreement and
instruments and data as of such date, all certified by the chief
executive officer of Zaba as complete, true and correct in all
material respects:
(a) copies of the articles of incorporation, bylaws
and all minutes of shareholders' and directors' meetings
of Zaba;
(b) the financial statements of Zaba referenced
hereinabove in Section 1.4;
(c) a list indicating the name and address of the
stockholders of Zaba, together with the number of shares
owned by them;
(d) copies of all licenses, permits and other
governmental authorizations, requests or applications
therefor, pursuant to which Zaba carries on or proposes
to carry on its business (except those which in the
aggregate, are immaterial to the present or proposed
business of Zaba);
(e) a list of every debt, mortgage, security
interest, pledge, lien, encumbrance or claim of any
nature whatsoever in excess of $10,000 as may affect
Zaba, its properties or assets;
(f) a list of all executive employees of Zaba,
including current compensation, with notation as to job
description and whether or not such employee is subject
to a written contract;
(g) a description of all real and personal property
owned by Zaba, together with a description of every
mortgage, deed of trust, pledge, lien, agreement,
encumbrance, claim or equity interest of any nature
whatsoever in such real and personal property;
(h) copies of all material contracts, leases,
agreements or other instruments to which Zaba is a party
or by which it or its properties are bound;
(i) the name and location of each bank or other
institution with which Zaba has an account or safety
deposit box and the names of all persons authorized to
draw thereon or having access thereto;
(j) a list of all patent applications, copyrights,
trademarks, service marks and trade names that are
8
<PAGE>
pertinent in any manner whatsoever to the development,
testing, registration, assembly, manufacture, use or sale
of any products or services used in the business of Zaba
and in which either Zaba or Zaba's stockholders has or
previously had any direct or indirect, equitable or legal
right or interest;
(k) a copy of all material documentation relating
to the sale of Zaba Common Shares by Zaba to its present
stockholders;
(l) a list of insurance policies referred to in
Section 1.15;
(m) a description of any material adverse change in
the business operations, property, inventory, assets or
condition of Zaba since the most recent Zaba balance
sheet required to be provided pursuant to Section 1.7;
(n) any other information, together with any
required copies of documents required to be disclosed in
the Zaba Schedules by Sections 1.1 through 1.19.
Zaba shall cause the Zaba Schedules and the instruments and
data delivered to Spinnaker hereunder to be updated after the date
hereof up to and including the Closing Date, as hereinafter
defined.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
OF SPINNAKER
As an inducement to, and to obtain the reliance of Zaba,
Spinnaker represents and warrants as follows:
Section 2.1 Organization. Spinnaker is a corporation duly
organized, validly existing and in good standing under the laws of
the state of Colorado and has the corporate power and is duly
authorized, qualified, franchised and licensed under all applicable
laws, regulations, ordinances and orders of public authorities to
own all of its properties and assets and to carry on its business
in all material respects as it are now being conducted, including
qualification to do business as a foreign corporation in the states
in which the character and location of the assets owned by it or
the nature of the business transacted by it requires qualification.
Included in the Spinnaker Schedules (as hereinafter defined) are
complete and correct copies of the articles of incorporation,
amended articles of incorporation (collectively, hereinafter
referred to as the "articles of incorporation") and bylaws of
Spinnaker as in effect on the date hereof. The execution and
delivery of this Agreement does not and the consummation of the
9
<PAGE>
transactions contemplated by this Agreement in accordance with the
terms hereof will not, violate any provision of Spinnaker's
articles of incorporation or bylaws. Spinnaker has taken all
action required by law, its articles of incorporation, its bylaws
or otherwise to authorize the execution and delivery of this
Agreement. Spinnaker has full power, authority and legal right and
has taken all action required by law, its articles of
incorporation, bylaws or otherwise to consummate the transactions
herein contemplate.
Section 2.2 Capitalization. The authorized capitalization of
Spinnaker consists of 1,000,000,000 shares of Common Stock, par
value $0.001 per share and 100,000,000 shares of Preferred Stock,
par value $0.001 per share. As of the date hereof there are
28,600,000 Common Shares of Spinnaker issued and outstanding.
There are no Preferred Shares issued or outstanding. As of the
Closing Date (as defined herein), there will be no more than
28,886,000 shares of Spinnaker' common stock issued or outstanding,
pre reverse split.
Simultaneous with the Closing Date, as defined hereinbelow, the
Board of Directors of Spinnaker has undertaken a reverse split of
the its issued and outstanding Common Stock, whereby 1 share of
Common Stock shall be issued in exchange for each 12 shares of
Common Stock presently issued and outstanding, in order to
establish the number of issued and outstanding Common Shares of
Spinnaker at the Closing Date to be 2,407,166 shares. (the
"Spinnaker Common Shares") held by the then existing securities
holders of Spinnaker. All issued and outstanding Spinnaker Common
Shares have been legally issued, fully paid and are nonassessable.
Section 2.3 Subsidiaries. Spinnaker has no subsidiary
companies.
Section 2.4 Financial Statements.
(a) Included in the Spinnaker Schedules are the
audited consolidated balance sheet of Spinnaker for the
fiscal years ended November 30, 1996 and 1995 and the
related statements of operations, stockholders' equity
and cash flows for the year then ended, which are
included in the schedules identified in Section 2.18(c).
(b) All such financial statements have been
prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods
involved. The Spinnaker balance sheets presents fairly
as of their respective dates the financial condition of
Spinnaker. Spinnaker did not have as of the date of any
of such Spinnaker balance sheets, any liabilities or
obligations (absolute or contingent) which should be
reflected in a balance sheet or the notes thereto
prepared in accordance with generally accepted accounting
10
<PAGE>
principles, and all assets reflected therein are properly
reported and present fairly the value of the assets of
Spinnaker, in accordance with generally accepted
accounting principles. The statements of operations,
stockholders' equity and changes in financial position
reflect fairly the information required to be set forth
therein by generally accepted accounting principles;
(c) The books and records, financial and others, of
Spinnaker are in all material respects complete and
correct and have been maintained in accordance with good
business accounting practices;
(d) Spinnaker has no liabilities with respect to
the payment of any federal, state, county, local or other
taxes (including any deficiencies, interest or
penalties);
(e) As of the Closing Date, as defined herein the
Spinnaker balance sheet and the notes thereto, shall
reflect that Spinnaker has: (i) no receivables; (ii) no
accounts payable; and (iii) no contingent liabilities,
direct or indirect, matured or unmatured.
Section 2.5 Information. The information concerning
Spinnaker as set forth in this Agreement and in the Spinnaker
Schedules is complete and accurate in all material respects and
does not contain any untrue statement of a material fact or omit to
state a material fact required to make the statements made, in
light of the circumstances under which they were made, not
misleading.
Section 2.6 Options and Warrants. Other than as previously
disclosed by Spinnaker to Zaba and as otherwise included in the
Spinnaker Schedules, there are no existing options, warrants, calls
or commitments of any character to which Spinnaker is a party and
by which it is bound.
Section 2.7 Absence of Certain Changes or Events. Except as
described herein or in the Spinnaker Schedules, since November 30,
1996:
(a) Spinnaker has not: (i) amended its articles of
incorporation or bylaws; (ii) waived any rights of value
which in the aggregate are extraordinary or material
considering the business of Spinnaker; (iii) made any
material change in its method of management, operation or
accounting; or (iv) made any accrual or arrangement for
or payment of bonuses or special compensation of any kind
or any severance or termination pay to any present or
former officer or employee;
11
<PAGE>
(b) Spinnaker has not: (i) granted or agreed to
grant any options, warrants or other rights for its
stocks, bonds or other corporate securities calling for
the issuance thereof, which option, warrant or other
right has not been cancelled as of the Closing Date; (ii)
borrowed or agreed to borrow any funds or incurred or
become subject to, any material obligation or liability
(absolute or contingent) except liabilities incurred in
the ordinary course of business; and
(c) to the best knowledge of Spinnaker, it has not
become subject to any law or regulation which materially
and adversely affects, or in the future may adversely
affect, the business, operations, properties, assets or
condition of Spinnaker.
Section 2.8 Title and Related Matters. As of the Closing
Date, Spinnaker will own no real, personal or intangible property.
Section 2.9 Litigation and Proceedings. There are no
actions, suits or proceedings pending or, to the best of
Spinnaker's knowledge and belief, threatened by or against or
affecting Spinnaker, at law or in equity, before any court or other
governmental agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind that would have a material
adverse effect on the business, operations, financial condition,
income or business prospects of Spinnaker. Spinnaker does not have
any knowledge of any default on its part with respect to any
judgment, order, writ, injunction, decree, award, rule or
regulation of any court, arbitrator or governmental agency or
instrumentality.
Section 2.10 Contracts. On the Closing Date:
(a) There are no material contracts, agreements,
franchises, license agreements, or other commitments to
which Spinnaker is a party or by which it or any of its
properties are bound;
(b) Spinnaker is not a party to any contract,
agreement, commitment or instrument or subject to any
charter or other corporate restriction or any judgment,
order, writ, injunction, decree or award which materially
and adversely affects, or in the future may (as far as
Spinnaker can now foresee) materially and adversely
affect, the business, operations, properties, assets or
conditions of Spinnaker; and
(c) Spinnaker is not a party to any material oral
or written: (i) contract for the employment of any
officer or employee; (ii) profit sharing, bonus, deferred
compensation, stock option, severance pay, pension,
12
<PAGE>
benefit or retirement plan, agreement or arrangement
covered by Title IV of the Employee Retirement Income
Security Act, as amended; (iii) agreement, contract or
indenture relating to the borrowing of money; (iv)
guaranty of any obligation for the borrowing of money or
otherwise, excluding endorsements made for collection and
other guaranties of obligations, which, in the aggregate
exceeds $1,000; (v) consulting or other similar contract
with an unexpired term of more than one year or providing
for payments in excess of $10,000 in the aggregate; (vi)
collective bargaining agreement; (vii) agreement with any
present or former officer or director of Spinnaker; or
(viii) contract, agreement, or other commitment involving
payments by it of more than $10,000 in the aggregate.
Section 2.11 No Conflict With Other Instruments. The
execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in the
breach of any term or provision of, or constitute an event of
default under, any material indenture, mortgage, deed of trust or
other material contract, agreement or instrument to which Spinnaker
is a party or to which any of its properties or operations are
subject.
Section 2.12 Material Contract Defaults. To the best of
Spinnaker's knowledge and belief, Spinnaker is not in default in
any material respect under the terms of any outstanding contract,
agreement, lease or other commitment which is material to the
business, operations, properties, assets or condition of Spinnaker,
and there is no event of default in any material respect under any
such contract, agreement, lease or other commitment in respect of
which Spinnaker has not taken adequate steps to prevent such a
default from occurring.
Section 2.13 Governmental Authorizations. To the best of
Spinnaker's knowledge, Spinnaker has all licenses, franchises,
permits and other governmental authorizations that are legally
required to enable it to conduct its business operations in all
material respects as conducted on the date hereof. Except for
compliance with federal and state securities or corporation laws,
no authorization, approval, consent or order of, or registration,
declaration or filing with, any court or other governmental body
is required in connection with the execution and delivery by
Spinnaker of the transactions contemplated hereby.
Section 2.14 Compliance With Laws and Regulations. To the
best of Spinnaker's knowledge and belief, Spinnaker has complied
with all applicable statutes and regulations of any federal, state
or other governmental entity or agency thereof, except to the
extent that noncompliance would not materially and adversely affect
the business, operations, properties, assets or condition of
Spinnaker or would not result in Spinnaker's incurring any material
13
<PAGE>
liability.
Section 2.15 Insurance. Spinnaker has no insurable
properties and no insurance policies will be in effect at the
Closing Date, as hereinafter defined.
Section 2.16 Approval of Agreement. The board of directors
and shareholders of Spinnaker have authorized the execution and
delivery of this Agreement by Spinnaker and have approved the
transactions contemplated hereby.
Section 2.17 Material Transactions or Affiliations. As of
the Closing Date there will exist no material contract, agreement
or arrangement between Spinnaker and any person who was at the time
of such contract, agreement or arrangement an officer, director or
person owning of record, or known by Spinnaker to own beneficially,
ten percent (10%) or more of the issued and outstanding common
stock of Spinnaker and which is to be performed in whole or in part
after the date hereof. Spinnaker has no commitment, whether
written or oral, to lend any funds to, borrow any money from or
enter into any other material transactions with, any such
affiliated person.
Section 2.18 Labor Relations. Spinnaker has never had a work
stoppage resulting from labor problems. Spinnaker has no employees
other than its officers and directors.
Section 2.19 Spinnaker Schedules. Upon execution hereof,
Spinnaker shall deliver to Zaba the following schedules, which are
collectively referred to as the "Spinnaker Schedules" which are
dated the date of this Agreement, all certified by an officer of
Spinnaker to be complete, true and accurate:
(a) complete and correct copies of the articles of
incorporation and bylaws of Spinnaker as in effect as of
the date of this Agreement;
(b) copies of all financial statements of Spinnaker
identified in Section 2.4(a);
(c) the description of any material adverse change
in the business, operations, property, assets, or
condition of Spinnaker since November 30, 1996 required
to be provided pursuant to Section 2.6; and
(d) any other information, together with any
required copies of documents, required to be disclosed in
the Spinnaker Schedules by Sections 2.1 through 2.18.
Spinnaker shall cause the Spinnaker Schedules and the
instruments to be delivered to Zaba hereunder to be updated after
the date hereof up to and including the Closing Date.
14
<PAGE>
ARTICLE III
EXCHANGE PROCEDURE
Section 3.1 Share Exchange/Delivery of Zaba Securities. On
the Closing Date, the holders of the Zaba Common Shares shall
deliver to Spinnaker (i) certificates or other documents evidencing
all of the issued and outstanding Zaba Common Shares, duly endorsed
in blank or with executed stock power attached thereto in
transferrable form and (ii) investment letters, the form of which
is attached hereto as Exhibit "B". On the Closing Date, all
previously issued and outstanding shares of common stock of Zaba
shall be canceled and all rights in respect thereof shall cease and
Zaba, the Nevada corporation, shall cease to exist.
Section 3.2 Issuance of Spinnaker Common Shares. (a) In
exchange for all of the Zaba Common Share tendered pursuant to
Section 3.1, Spinnaker shall issue an aggregate of 9,628,660
"restricted" Spinnaker Common Shares to the Zaba shareholders on a
pro rata basis to their existing ownership in Zaba.
(b) No fractional Spinnaker Common Shares shall be issued
pursuant to this Section 3.2. In lieu of such fractional shares,
all shares to be issued shall be rounded up or down to the nearest
whole share.
Section 3.3 Events Prior to Closing. Upon execution hereof
or as soon thereafter as practical, management of Spinnaker and
Zaba shall execute, acknowledge and deliver (or shall cause to be
executed, acknowledged and delivered) any and all certificates,
opinions, financial statements, schedules, agreements, resolutions,
rulings or other instruments required by this Agreement to be so
delivered, together with such other items as may be reasonably
requested by the parties hereto and their respective legal counsel
in order to effectuate or evidence the transactions contemplated
hereby, subject only to the conditions to Closing referenced
hereinbelow.
Section 3.4 Closing. The closing of the transaction
contemplated by this Agreement shall be as of the date in which (i)
each party hereto has executed this Agreement; and (ii) all of the
shareholders of Spinnaker and Zaba have approved the terms of this
Agreement; and (iii) all conditions to Closing referenced
hereinabove, as well as in Articles 5 and 6 below, have been
satisfied or waived by the appropriate party and all documentation
referenced herein is delivered to the respective party herein,
unless a different date is mutually agreed to in writing by the
parties hereto (the "Closing Date").
Section 3.5 Termination.
(a) This Agreement may be terminated by the board of
15
<PAGE>
directors of either Spinnaker or Zaba at any time prior to the
Closing Date if:
(i) there shall be any action or proceeding before
any court or any governmental body which shall seek to
restrain, prohibit or invalidate the transactions
contemplated by this Agreement and which, in the judgment
of such board of directors, made in good faith and based
on the advice of its legal counsel, makes it inadvisable
to proceed with the exchange contemplated by this
Agreement; or
(ii) any of the transactions contemplated hereby are
disapproved by any regulatory authority whose approval is
required to consummate such transactions; or
(iii) the conditions described in Articles 5 or 6,
below, as applicable, have not been satisfied in full.
In the event of termination pursuant to this paragraph (a) of
this Section 3.5, no obligation, right, or liability shall
arise hereunder and each party shall bear all of the expenses
incurred by it in connection with the negotiation, drafting
and execution of this Agreement and the transactions herein
contemplated;
(b) This Agreement may be terminated at any time prior
to the Closing Date by action of the board of directors of
Spinnaker if Zaba shall fail to comply in any material respect
with any of its covenants or agreements contained in this
Agreement or if any of the representations or warranties of
Zaba contained herein shall be inaccurate in any material
respect, which noncompliance or inaccuracy is not cured after
20 days' written notice thereof is given to Zaba. If this
Agreement is terminated pursuant to this paragraph (b) of this
Section 3.5, this Agreement shall be of no further force or
effect and no obligation, right or liability shall arise
hereunder; and
(c) This Agreement may be terminated at any time prior
to the Closing Date by action of the board of directors of
Zaba if Spinnaker shall fail to comply in any material respect
with any of its covenants or agreements contained in this
Agreement or if any of the representations or warranties of
Spinnaker contained herein shall be inaccurate in any material
respect, which noncompliance or inaccuracy is not cured after
20 days written notice thereof is given to Spinnaker. If this
Agreement is terminated pursuant to this paragraph (c) of
Section 3.5, this Agreement shall be of no further force or
effect and no obligation, right or liability shall arise
hereunder.
16
<PAGE>
Section 3.6 Directors of Spinnaker. Upon the Closing, the
present members of Spinnaker's Board of Directors shall tender
their resignations seriatim so that the following persons are
appointed directors of Spinnaker in accordance with procedures set
forth in the Spinnaker bylaws: Robert S. Zaba, Michael D. Cohen,
Carmine Montemariano, Deeran Rambaran, Gordon A. Meugens and Ronald
M. Bell. Each director shall hold office until his successor shall
have been duly elected and shall have qualified or until his or her
earlier death, resignation or removal.
Section 3.7 Officers of Spinnaker. Upon the Closing, the
present officers of Spinnaker shall tender their resignations and
simultaneous therewith, the following persons shall be elected as
officers of Spinnaker in accordance with procedures set forth in
the Spinnaker bylaws:
NAME OFFICE
---- ------
Robert S. Zaba President
Michael D. Cohen Vice President
Carmine Montemariano Vice President-Operations
Deeran Rambaran Vice President-Marketing,
Corporate Secretary
Gordon A. Meugens Treasurer
ARTICLE IV
SPECIAL COVENANTS
Section 4.1 Access to Properties and Records. Spinnaker and
Zaba will each afford to the officers and authorized
representatives of the other full access to the properties, books
and records of Spinnaker and Zaba, as the case may be, in order
that each may have full opportunity to make such reasonable
investigation as it shall desire to make of the affairs of the
other and each will furnish the other with such additional
financial and operating data and other information as to the
business and properties of Spinnaker and Zaba, as the case may be,
as the other shall from time to time reasonably request.
Section 4.2 Availability of Rule 144. Each of the parties
acknowledge that the stock of Spinnaker to be issued pursuant to
this Agreement will be "restricted securities," as that term is
defined in Rule 144 promulgated pursuant to the Securities Act.
Spinnaker is under no obligation to register such shares under the
Securities Act, or otherwise. Notwithstanding the foregoing,
however, following the Closing Date, Spinnaker will use its best
efforts to: (a) make publicly available on a regular basis not less
than semi-annually, business and financial information regarding
Spinnaker so as to make available to the shareholders of Spinnaker
the provisions of Rule 144 pursuant to subparagraph (c)(2) thereof;
and (b) within ten (10) days of any written request of any
stockholder of Spinnaker, Spinnaker will provide to such
17
<PAGE>
stockholder written confirmation of compliance with such of the
foregoing subparagraph as may then be applicable. The stockholders
of Spinnaker holding restricted securities of Spinnaker as of the
date of this Agreement and their respective heirs, administrators,
personal representatives, successors and assigns, are intended
third party beneficiaries of the provisions set forth herein. The
covenants set forth in this Section 4.2 shall survive the Closing
and the consummation of the transactions herein contemplated.
Section 4.3 Information for Spinnaker Public Reports. Zaba
will furnish Spinnaker with all information concerning Zaba and the
Zaba Stockholders, including all financial statements, required for
inclusion in any registration statement or public report intended
to be filed by Spinnaker pursuant to the Securities Act, the
Exchange Act, or any other applicable federal or state law. Zaba
covenants that all information so furnished for either such
registration statement or other public release by Spinnaker,
including the financial statements described in Section 1.4, shall
be true and correct in all material respects without omission of
any material fact required to make the information stated not
misleading.
Section 4.4 Special Covenants and Representations Regarding
the Spinnaker Common Shares to be Issued in the Exchange. The
consummation of this Agreement, including the issuance of the
Spinnaker Common Shares to the stockholders of Zaba as contemplated
hereby, constitutes the offer and sale of securities under the
Securities Act, and applicable state statutes. Such transaction
shall be consummated in reliance on exemptions from the
registration and prospectus delivery requirements of such statutes
which depend, inter alia, upon the circumstances under which the
Zaba stockholders acquire such securities. In connection with
reliance upon exemptions from the registration and prospectus
delivery requirements for such transactions, at the Closing, Zaba
shall cause to be delivered, and the Zaba stockholders shall
deliver to Spinnaker, the investment letter referenced in Section
3.1.
Section 4.5 Third Party Consents. Spinnaker and Zaba agree
to cooperate with each other in order to obtain any required third
party consents to this Agreement and the transactions herein
contemplated.
Section 4.6 Actions Prior to Closing.
(a) From and after the date of this Agreement until
the Closing Date and except as set forth in the Spinnaker
or Zaba Schedules or as permitted or contemplated by this
Agreement, Zaba will each use its best efforts to:
(i) carry on its business in substantially the
same manner as it has heretofore;
18
<PAGE>
(ii) maintain and keep its properties in
states of good repair and condition as at present,
except for depreciation due to ordinary wear and
tear and damage due to casualty;
(iii) maintain in full force and effect
insurance comparable in amount and in scope of
coverage to that now maintained by it;
(iv) perform in all material respects all of
its obligations under material contracts, leases and
instruments relating to or affecting its assets,
properties and business;
(v) maintain and preserve its business
organization intact, to retain its key employees and
to maintain its relationship with its material
suppliers and customers; and
(vi) fully comply with and perform in all
material respects all obligations and duties imposed
on it by all federal and state laws and all rules,
regulations and orders imposed by federal or state
governmental authorities.
(b) From and after the date of this Agreement until
the Closing Date, neither Spinnaker nor Zaba will,
without the prior consent of the other party:
(i) except as otherwise specifically set forth
herein, make any change in their respective
certificates or articles of incorporation or
bylaws;
(ii) declare or pay any dividend on its
outstanding shares of capital stock, except as may
otherwise be required by law, or effect any stock
split or otherwise change its capitalization,
except as provided herein;
(iii) enter into or amend any employment,
severance or similar agreements or arrangements
with any directors or officers;
(iv) grant, confer or award any options,
warrants, conversion rights or other rights not
existing on the date hereof to acquire any shares
of its capital stock; or
(v) purchase or redeem any shares of its
capital stock, except as disclosed herein.
19
<PAGE>
Section 4.9 Indemnification.
(a) Zaba hereby agrees to indemnify Spinnaker and
each of the officers, agents and directors of Spinnaker
as of the date of execution of this Agreement against any
loss, liability, claim, damage or expense (including, but
not limited to, any and all expense whatsoever reasonably
incurred in investigating, preparing or defending against
any litigation, commenced or threatened or any claim
whatsoever), to which it or they may become subject
arising out of or based on any inaccuracy appearing in or
misrepresentation made in this Agreement. The
indemnification provided for in this paragraph shall
survive the Closing and consummation of the transactions
contemplated hereby and termination of this Agreement for
a period of 18 months; and
(b) Spinnaker and its officers and directors hereby
agrees to indemnify Zaba and each of the officers,
agents, directors and current shareholders of Zaba as of
the Closing Date against any loss, liability, claim,
damage or expense (including, but not limited to, any and
all expense whatsoever reasonably incurred in
investigating, preparing or defending against any
litigation, commenced or threatened or any claim
whatsoever), to which it or they may become subject
arising out of or based on any inaccuracy appearing in or
misrepresentation made in this Agreement and particularly
the representation regarding no liabilities referred to
in Section 2.4(b). The indemnification provided for in
this Section shall survive the Closing and consummation
of the transactions contemplated hereby and termination
of this Agreement for a period of 18 months.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS
OF SPINNAKER
The obligations of Spinnaker under this Agreement are subject
to the satisfaction, at or before the Closing Date, of the
following conditions:
Section 5.1 Accuracy of Representations. The representations
and warranties made by Zaba in this Agreement were true when made
and shall be true at the Closing Date with the same force and
effect as if such representations and warranties were made at the
Closing Date (except for changes therein permitted by this
Agreement), and Zaba shall have performed or complied with all
covenants and conditions required by this Agreement to be performed
or complied with by Zaba prior to or at the Closing. Spinnaker
shall be furnished with a certificate, signed by a duly authorized
20
<PAGE>
officer of Zaba and dated the Closing Date, to the foregoing
effect.
Section 5.2 Stockholder Approval. The stockholders of Zaba
shall have unanimously approved this Agreement and the transactions
contemplated thereby as described in Section 4.1.
Section 5.3 Officer's Certificate. Spinnaker shall have been
furnished with a certificate dated the Closing Date and signed by
a duly authorized officer of Zaba to the effect that: (a) the
representations and warranties of Zaba set forth in the Agreement
and in all Exhibits, Schedules and other documents furnished in
connection herewith are in all material respects true and correct
as if made on the Effective Date; (b) Zaba has performed all
covenants, satisfied all conditions, and complied with all other
terms and provisions of this Agreement to be performed, satisfied
or complied with by it as of the Effective Date; (c) since the
date of Zaba's unaudited Balance Sheet of June 30, 1997, there has
not been any materially adverse change in the business, prospects,
properties or financial condition of Zaba; (d) since such date and
other than as previously disclosed to Spinnaker, Zaba has not
entered into any material transaction other than transactions which
are usual and in the ordinary course of its business; and (e) no
litigation, proceeding, investigation or inquiry is pending or, to
the best knowledge of Zaba, threatened, which might result in an
action to enjoin or prevent the consummation of the transactions
contemplated by this Agreement or, to the extent not disclosed in
the Zaba Schedules, by or against Zaba which might result in any
material adverse change in any of the assets, properties, business
or operations of Zaba.
Section 5.4 No Material Adverse Change. Prior to the Closing
Date, there shall not have occurred any material adverse change in
the financial condition, business or operations of nor shall any
event have occurred which, with the lapse of time or the giving of
notice, may cause or create any material adverse change in the
financial condition, business or operations of Zaba.
Section 5.5 Opinion of Counsel to Zaba. Spinnaker shall
receive an opinion dated the Closing Date of the Law Offices of
Gordon A. Meugens, counsel to Zaba, in substantially the following
form:
(a) Zaba is a corporation duly organized, validly
existing, and in good standing under the laws of Nevada
and has the corporate power and is duly authorized,
qualified, franchised and licensed under all material
applicable laws, regulations, ordinances and orders of
public authorities to own all of its properties and
assets and to conduct its business as now conducted,
including qualification to do business as a foreign
corporation in the states in which the character and
21
<PAGE>
location of the assets owned by it or the nature of the
business transacted by it requires qualification;
(b) To the best knowledge of such legal counsel,
the execution and delivery by Zaba of this Agreement and
the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not
conflict with or result in the breach of any term or
provision of Zaba's articles of incorporation or bylaws
or violate any court order, writ, injunction or decree
applicable to Zaba, or its properties or assets;
(c) The authorized capitalization of Zaba consists
of 100,000 Common Shares, par value $0.01 per share. As
of the date of Closing, there will be 100 shares of
Zaba's Common Stock issued and outstanding. All issued
and outstanding shares are legally issued, fully paid and
nonassessable and not issued in violation of the preemp-
tive rights of any person. Except as set forth in the
Zaba Schedules, to the best knowledge of such legal
counsel, there are no outstanding subscriptions, options,
rights, warrants, convertible securities or other
agreements or commitments obligating Zaba to issue any
additional shares of any class of its capital stock.
(d) This Agreement has been duly and validly
authorized, executed and delivered by Zaba;
(e) To the best knowledge of such legal counsel,
except as set forth in the Zaba Schedules, there are no
actions, suits or proceedings pending or threatened by or
against or affecting Zaba or its properties, at law or in
equity, before any court or other governmental agency or
instrumentality, domestic or foreign or before any
arbitrator of any kind;
(f) Zaba has taken all actions required by the
applicable laws of Nevada to permit the transfer of the
Zaba Common Shares to Spinnaker.
Section 5.6 Other Items. Spinnaker shall have received such
further documents, certificates or instruments relating to the
transactions contemplated hereby as Spinnaker may reasonably
request.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF ZABA
The obligations of Zaba under this Agreement are subject
to the satisfaction, at or before the Closing Date (unless
otherwise indicated herein), of the following conditions:
22
<PAGE>
Section 6.1 Accuracy of Representations. The representations
and warranties made by Spinnaker in this Agreement were true when
made and shall be true as of the Closing Date (except for changes
therein permitted by this Agreement) with the same force and effect
as if such representations and warranties were made at and as of
the Closing Date, and Spinnaker shall have performed and complied
with all covenants and conditions required by this Agreement to be
performed or complied with by Spinnaker prior to or at the Closing.
Zaba shall have been furnished with a certificate, signed by a duly
authorized executive officer of Spinnaker and dated the Closing
Date, to the foregoing effect.
Section 6.2 Officer's Certificate. Zaba shall be furnished
with a certificate dated the Closing Date and signed by a duly
authorized officer of Spinnaker to the effect that: (a) the
representations and warranties of Spinnaker set forth in the
Agreement and in all Exhibits, Schedules and other documents
furnished in connection herewith are in all material respects true
and correct as if made on the Effective Date; (b) Spinnaker has
performed all covenants, satisfied all conditions, and complied
with all other terms and provisions of the Agreement to be
performed, satisfied or complied with by it as of the Effective
Date; (c) since the date of Spinnaker's audited Balance Sheet of
November 30, 1996, there has not been any materially adverse change
in the business, prospects, properties or financial condition of
Spinnaker; (d) since such date, Spinnaker has not entered into any
material transaction other than transactions which are usual and in
the ordinary course of its business; and (e) no litigation,
proceeding, investigation or inquiry is pending or, to the best
knowledge of Spinnaker, threatened, which might result in an action
to enjoin or prevent the consummation of the transactions
contemplated by this Agreement or, to the extent not disclosed in
the Spinnaker Schedules, by or against Spinnaker which might result
in any material adverse change in any of the assets, properties,
business or operations of Spinnaker.
Section 6.3 No Material Adverse Change. Prior to the Closing
Date, there shall not have occurred any material adverse change in
the financial condition, business or operations of nor shall any
event have occurred which, with the lapse of time or the giving of
notice, may cause or create any material adverse change in the
financial condition, business or operations of Spinnaker.
Section 6.5 Opinion of Counsel to Spinnaker. Zaba shall
receive an opinion dated the Closing Date of Andrew I. Telsey,
P.C., counsel to Spinnaker, in substantially the following form:
(a) Spinnaker is a corporation duly organized,
validly existing, and in good standing under the laws of
the state of Colorado and has the corporate power and is
duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances and
23
<PAGE>
orders of public authorities to own all of its properties
and assets and to carry on its business in all material
respects as it is now being conducted, including qualifi-
cation to do business as a foreign corporation in the
states in which the character and location of the assets
owned by it or the nature of the business transacted by
it requires qualification;
(b) To the best knowledge of such legal counsel,
the execution and delivery by Spinnaker of this Agreement
and the consummation of the transactions contemplated by
this Agreement in accordance with the terms hereof will
not conflict with or result in the breach of any term or
provision of Spinnaker's articles of incorporation or
bylaws or constitute a default or give rise to a right of
termination, cancellation or acceleration under any
material mortgage, indenture, deed of trust, license
agreement or other obligation or violate any court order,
writ, injunction or decree applicable to Spinnaker or its
properties or assets;
(c) The authorized capitalization of Spinnaker
consists of 1,000,000,000 shares of Common Stock, par
value $0.001 per share and 100,000,000 shares of
Preferred Stock, par value $0.001 per share. As of the
Closing Date, there will be no more than 2,407,166 common
shares issued and outstanding and reserved for issuance
held by the then existing securities holders of
Spinnaker. All issued and outstanding shares are legally
issued, fully paid and nonassessable and not issued in
violation of the preemptive rights of any person.
(d) The Spinnaker Common Shares to be issued to the
Zaba stockholders pursuant to the terms of this Agreement
will be, when issued in accordance with the terms hereof,
legally issued, fully paid and non-assessable;
(e) This Agreement has been duly and validly
authorized, executed, and delivered and constitutes the
legal and binding obligation of Spinnaker, except as
limited by bankruptcy and insolvency laws and by other
laws affecting the rights of creditors generally;
(f) To the best knowledge of such counsel, except
as set forth in the Spinnaker Schedules, there are no
actions, suits or proceedings pending or threatened by or
against Spinnaker or affecting Spinnaker's properties, at
law or in equity, before any court or other governmental
agency or instrumentality, domestic or foreign or before
any arbitrator of any kind; and
(g) Spinnaker has taken all actions required by the
24
<PAGE>
applicable laws of the state of Colorado to permit the
issuance of the Spinnaker Common Shares to the Zaba
stockholders.
Section 6.6 Additional Conditions to Closing. In addition to
the obligations contained herein, a majority of Spinnaker's
shareholders shall adopt and approve amendments to the Spinnaker
Articles of Incorporation, changing the name of Spinnaker to "Zaba
International, Inc." (or such other name as may be available and
acceptable to management of Zaba).
Section 6.7 Compliance with Reporting Requirements. As of
the Closing Date, Spinnaker shall be current in and in compliance
with all requirements of all filings required to be tendered to the
Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934, as amended.
Section 6.8 Other Items. Zaba shall have received such
further documents, certificates, or instruments relating to the
transactions contemplated hereby as Zaba may reasonably request.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Brokers and Finders. Each party hereto hereby
represents and warrants that it is under no obligation, express or
implied, to pay certain finders in connection with the bringing of
the parties together in the negotiation, execution, or consummation
of this Agreement. The parties each agree to indemnify the other
against any claim by any third person not listed in Schedule 7.1
for any commission, brokerage or finder's fee or other payment with
respect to this Agreement or the transactions contemplated hereby
based on any alleged agreement or understanding between the
indemnifying party and such third person, whether express or
implied from the actions of the indemnifying party.
Section 7.2 Law. Forum and Jurisdiction. This Agreement
shall be construed and interpreted in accordance with the laws of
the State of Colorado, except as the corporate law of Nevada
applies to Zaba and as US federal law may be applicable.
Section 7.3 Notices. Any notices or other communications
required or permitted hereunder shall be sufficiently given if
personally delivered to it or sent by registered mail or certified
mail, postage prepaid, or by prepaid telegram addressed as follows:
If to Spinnaker: Gregory W. Scufca, President
HA Spinnaker, Inc.
5650 Greenwood Plaza Blvd.
Suite 216
Englewood, Colorado 80111
25
<PAGE>
If to Zaba: Robert Zaba, President
Zaba International Holdings USA, Inc.
2963 Glen Drive, Suite 308
Coquitlam, B.C., Canada V3B 2P7
or such other addresses as shall be furnished in writing by any
party in the manner for giving notices hereunder, and any such
notice or communication shall be deemed to have been given as of
the date so delivered, mailed, or telegraphed.
Section 7.4 Attorneys' Fees. In the event that any party
institutes any action or suit to enforce this Agreement or to
secure relief from any default hereunder or breach hereof, the
breaching party or parties shall reimburse the non-breaching party
or parties for all costs, including reasonable attorneys' fees,
incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.
Section 7.5 Confidentiality. Each party hereto agrees with
the other parties that, unless and until the reorganization contem-
plated by this Agreement has been consummated, they and their
representatives will hold in strict confidence all data and
information obtained with respect to another party or any
subsidiary thereof from any representative, officer, director or
employee, or from any books or records or from personal inspection,
of such other party, and shall not use such data or information or
disclose the same to others, except: (i) to the extent such data is
a matter of public knowledge or is required by law to be published;
and (ii) to the extent that such data or information must be used
or disclosed in order to consummate the transactions contemplated
by this Agreement.
Section 7.6 Schedules; Knowledge. Each party is presumed to
have full knowledge of all information set forth in the other
party's schedules delivered pursuant to this Agreement.
Section 7.7 Third Party Beneficiaries. This contract is
solely among Spinnaker and Zaba and, except as specifically
provided, no director, officer, stockholder, employee, agent,
independent contractor or any other person or entity shall be
deemed to be a third party beneficiary of this Agreement.
Section 7.8 Entire Agreement. This Agreement represents the
entire agreement between the parties relating to the subject matter
hereof. This Agreement alone fully and completely expresses the
agreement of the parties relating to the subject matter hereof.
There are no other courses of dealing, understandings, agreements,
representations or warranties, written or oral, except as set forth
herein. This Agreement may not be amended or modified, except by
a written agreement signed by all parties hereto.
Section 7.9 Survival; Termination. The representations,
warranties and covenants of the respective parties shall survive
26
<PAGE>
the Closing Date and the consummation of the transactions herein
contemplated for 18 months.
Section 7.10 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original
and all of which taken together shall be but a single instrument.
Section 7.11 Amendment or Waiver. Every right and remedy
provided herein shall be cumulative with every other right and
remedy, whether conferred herein, at law, or in equity, and may be
enforced concurrently herewith, and no waiver by any party of the
performance of any obligation by the other shall be construed as a
waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing
Date, this Agreement may be amended by a writing signed by all
parties hereto, with respect to any of the terms contained herein,
and any term or condition of this Agreement may be waived or the
time for performance hereof may be extended by a writing signed by
the party or parties for whose benefit the provision is intended.
Section 7.12 Incorporation of Recitals. All of the recitals
hereof are incorporated by this reference and are made a part
hereof as though set forth at length herein.
Section 7.13 Expenses. Each party herein shall bear all of
their respective costs and expenses incurred in connection with the
negotiation of this Agreement and in the consummation of the
transactions provided for herein and the preparation therefor.
Section 7.14 Headings; Context. The headings of the sections
and paragraphs contained in this Agreement are for convenience of
reference only and do not form a part hereof and in no way modify,
interpret or construe the meaning of this Agreement.
Section 7.15 Benefit. This Agreement shall be binding upon
and shall insure only to the benefit of the parties hereto, and
their permitted assigns hereunder. This Agreement shall not be
assigned by any party without the prior written consent of the
other party.
Section 7.16 Public Announcements. Except as may be required
by law, neither party shall make any public announcement or filing
with respect to the transactions provided for herein without the
prior consent of the other party hereto.
Section 7.17 Severability. In the event that any particular
provision or provisions of this Agreement or the other agreements
contained herein shall for any reason hereafter be determined to be
unenforceable, or in violation of any law, governmental order or
regulation, such unenforceability or violation shall not affect the
remaining provisions of such agreements, which shall continue in
full force and effect and be binding upon the respective parties
27
<PAGE>
hereto.
Section 7.18 Failure of Conditions; Termination. In the
event any of the conditions specified in this Agreement shall not
be fulfilled on or before the Closing Date, either of the parties
have the right either to proceed or, upon prompt written notice to
the other, to terminate and rescind this Agreement without
liability to any other party. The election to proceed shall not
affect the right of such electing party reasonably to require the
other party to continue to use its efforts to fulfill the unmet
conditions.
Section 7.19 No Strict Construction. The language of this
Agreement shall be construed as a whole, according to its fair
meaning and intendment, and not strictly for or against either
party hereto, regardless of who drafted or was principally
responsible for drafting the Agreement or terms or conditions
hereof.
Section 7.20 Execution Knowing and Voluntary. In executing
this Agreement, the parties severally acknowledge and represent
that each: (a) has fully and carefully read and considered this
Agreement; (b) has been or has had the opportunity to be fully
apprised of its attorneys of the legal effect and meaning of this
document and all terms and conditions hereof; and (c) is executing
this Agreement voluntarily, free from any influence, coercion or
duress of any kind.
IN WITNESS WHEREOF, the corporate parties hereto have caused
this Agreement to be executed by their respective officers,
hereunto duly authorized, and entered into as of the date first
above written.
HA SPINNAKER, INC.
ATTEST:
/s/ William L. Skufca By: /s/ Gregory W. Scufca
Secretary Gregory W. Scufca, President,
ATTEST: ZABA INTERNATIONAL HOLDINGS USA, INC.
/s/ Deeran Rambaran By: /s/ Robert Zaba
Secretary or Robert Zaba, President
Assistant Secretary
28
<PAGE>
EXHIBIT "B"
-------------------------------------
FORM OF INVESTMENT LETTER
-------------------------------------
<PAGE>
INVESTMENT LETTER
August , 1997
HA Spinnaker, Inc.
5650 Greenwood Plaza Blvd.
Suite 216
Englewood, Colorado 80111
Gentlemen:
The undersigned herewith deposits certificate(s) for shares of
common stock of Zaba International Holdings USA, Inc., a Nevada
corporation, ("Zaba"), as described below (endorsed, or having
executed stock powers attached) in acceptance of and subject to the
terms and conditions of that certain Agreement and Plan of Merger
(the "Agreement"), between HA Spinnaker, Inc. ("Spinnaker") and
Zaba, dated August , 1997, receipt of which is hereby
acknowledged, in exchange for shares of Common Stock of Spinnaker
(the "Exchange Shares"). If any condition precedent to the
Agreement is not satisfied within the relevant time parameters
established in the Agreement (or any extension thereof), the
certificate(s) are to be returned to the undersigned.
The undersigned hereby represents, warrants, covenants and agrees
with you that, in connection with the undersigned's acceptance of
the Exchange Shares and as of the date of this letter:
1. The undersigned is aware that his, her or its acceptance
of the Exchange Shares is irrevocable, absent an extension of the
Expiration Date of any material change to any of the terms and
conditions of the Agreement.
2. The undersigned warrants full authority to deposit all
shares refereed to above and Spinnaker will acquire a good and
unencumbered title thereto.
3. The undersigned has full power and authority to enter into
this Agreement and that this Agreement constitutes a valid and
legally binding obligation of the undersigned.
4. By execution hereof, the undersigned hereby confirms that
the Zaba common stock to be received in exchange for Spinnaker
common stock (the "Securities"), will be acquired for investment
for the undersigned's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof,
and that the undersigned has no present intention of selling,
granting any participation in, or otherwise distributing the same.
By execution hereof, the undersigned further represents the
undersigned does not have any contract, undertaking, agreement or
arrangement with any third party, with respect to any of the
<PAGE>
Securities.
5. The undersigned understands that the Securities are being
issued pursuant to available exemption thereto and have not been
registered under the Securities Act of 1933, as amended (the "1933
Act"), or under any state securities laws. The undersigned
understands that no registration statement has been filed with the
United States Securities and Exchange Commission nor with any other
regulatory authority and that, as a result, any benefit which might
normally accrue to a holder such as the undersigned by an impartial
review of such a registration statement by the Securities and
Exchange Commission or other regulatory authority will not be
forthcoming. The undersigned understands that he/she/it cannot
sell the Securities unless such sale is registered under the 1933
Act and applicable state securities laws or exemptions from such
registration become available. In this connection the undersigned
understands that the Company has advised the Transfer Agent for the
Common Shares that the Securities are "restricted securities" under
the 1933 Act and that they may not be transferred by the
undersigned to any person without the prior consent of the Company,
which consent of the Company will require an opinion of counsel to
the effect that, in the event the Securities are not registered
under the 1933 Act, any transfer as may be proposed by the
undersigned must be entitled to an exemption from the registration
provisions of the 1933 Act. To this end, the undersigned
acknowledges that a legend to the following effect will be placed
upon the certificate representing the Securities and that the
Transfer Agent has been advised of such facts:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
OFFERED AND SOLD ONLY IF REGISTERED PURSUANT TO
THE PROVISIONS OF THE ACT OR IF AN EXEMPTION FROM
REGISTRATION THEREUNDER IS AVAILABLE, THE AVAIL-
ABILITY OF WHICH MUST BE ESTABLISHED TO THE SATIS-
FACTION OF THE COMPANY.
The undersigned understands that the foregoing legend on
his/her its certificate for the Common Shares limits their value,
including their value as collateral.
6. The undersigned represents that he/she/it is experienced
in evaluation and investing in securities of companies in the
development stage and acknowledges that he/she it is able to fend
for itself, can bear the economic risk of this investment and has
such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of the
investment in the Securities.
<PAGE>
In Witness Whereof, the undersigned has duly executed this
Investment Letter as of the date indicated hereon.
Dated: August , 1997
Very truly yours,
____________________________
(signature)
____________________________
(print name in full)
____________________________
(street address)
____________________________
(city, state, zip)
____________________________
(social security number or
employer identification no.)
