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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: OCTOBER 18, 1999
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(Date of earliest event reported)
POLYMER SOLUTIONS INC.
(Exact name of Registrant as specified in its charter)
Nevada. U.S.A 0-18583 88-0360526
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(State or other jurisdiction (Commission file number) (IRS Employer
of incorporation) Identification No.)
1569 Dempsey Road, North Vancouver, British Columbia, CANADA V7K 1S8
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(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (604) 683-3473
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not applicable
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Alternative Materials Technology, Inc. (the "Buyer"), a wholly-owned
subsidiary of Polymer Solutions, Inc. ("the Registrant") has purchased
from Frederick Parkinson (the "Seller") all of the capital stock of U.S.
Cellulose Co., a California corporation (the "Company") pursuant to a
Stock Purchase Agreement (the "Agreement") dated October 18, 1999
between Buyer, Seller and the Company. The purchase price for the
Company was $1,000,000 in cash.
Pursuant to the Agreement and as an inducement to the Seller, the
Registrant has entered into a Continuing Guaranty for performance
obligations under the Company's Severance Plan which provides certain
benefits to employees of the Company upon a change in ownership.
The Registrant entered into Consulting Agreements with the Seller and a
senior officer of the Company, in order to provide for continuity of
management and a smooth transition to new ownership. Each of these
consulting agreements provides, among other things, services based upon
a monthly fee of $10,000 and $5,000 respectively. Services shall be
provided for a term of 30 days, with two options to extend the term
further for another 30 days each or at the option of the Registrant, and
further provides for termination upon 30 days written notice.
Pursuant to the Agreement, and as a material inducement to Buyer, the
Seller has entered into an Agreement not to compete with the
Registrant's business for a period of five years.
The entire purchase price for the acquisition was funded through the
repricing of certain warrants to encourage their exercise and by way of
two private placements completed on July 5, 1999 through a Short Form
Offering Document and through an Offering Memorandum completed July 30,
1999, details of which are contained in Registrant's Current Report on
Form 8-K filed on August 20, 1999 which is incorporated herein by
reference.
The Company is engaged in the business of development, production and
sale of water-based and other coatings to industrial users. In
connection with the acquisition, the Registrant acquired the Company's
intellectual property rights, contracts, commitments and assets,
consisting primarily of personal property, inventory, equipment and
accounts receivable. The Registrant intends to use all the real property
leased by the Company, as well as all structures, fixtures and
improvements located on such property. The Registrant acknowledged and
consented to the assignment and assumption of the leased property.
No material relationship exists between either the Seller or the Company
and the Registrant or any of its affiliates, any director or officer of
the Registrant, or any associate of any such director or officer. The
consideration under the Stock Purchase
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Agreement, the Registrant's guaranty, and the consulting agreements were
each determined by arms' length negotiations between the Registrant and
the Seller.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) The Audited Financial Statements of U.S. Cellulose Co., Inc. for a
period one year ending June 30, 1999 will be disclosed as an Amendment
to this Form 8-K and will be available within the required 60 day time
period commencing November 1,1999.
(b) The Pro Forma Financial information will be disclosed as an Amendment to
this Form 8-K and will be available within the required 60 days time
period commencing November 1, 1999.
(c) Exhibit
2.1 Stock Purchase Agreement dated October 15, 1999, by and between
Alternative Materials Technology, Inc. ,U.S. Cellulose Co., and
Frederick Parkinson.
2.2 Continuing Guaranty dated October 19, 1999, by and between the
Registrant and the Seller.
2.3 U.S. Cellulose Employee Severance Plan effective October 15,
1999.
2.4 Assignment and Assumption of Lease; Acknowledgement and consent
thereto dated October 19, 1999, by and between Fred Yrueta and
U.S. Cellulose Co.
2.5 Consulting Agreement dated October 19, 1999, by and between
Alternative Materials Technology, Inc. and Frederick Parkinson.
2.6 Consulting Agreement dated October 19, 1999, by and between
Alternative Materials Technology, Inc. and Barbara Parkinson
2.7 Agreement Not To Complete dated October 19, 1999 between
Alternative Materials Technology, Inc., U.S. Cellulose Co. and
Frederick Parkinson.
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.
POLYMER SOLUTIONS, INC.
Date November 1, 1999 /s/ GORDON ELLIS
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Gordon L. Ellis, Chairman of the Board
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as of October 15,
1999, is by and among ALTERNATIVE MATERIALS TECHNOLOGY, a Nevada corporation
("BUYER"), U.S. CELLULOSE CO., a California corporation (the "COMPANY"), and
FREDERICK PARKINSON ("SELLER"). Hereafter, the Company and Seller are
collectively referred to herein as the "SELLER PARTIES."
RECITALS
1. The Company is engaged in the business of development, production and
sale of water-based and other coatings to industrial users (the "BUSINESS").
2. Seller owns twenty-six thousand two hundred fifty (26,250) shares of the
Company's capital stock, par value One Dollar ($1.00) per share, which
constitutes one hundred percent (100%) of the issued and outstanding shares of
capital stock of the Company (the "SHARES").
3. Buyer desires to purchase the Shares from Seller, and Seller desires to
sell the Shares to Purchaser, on the terms and conditions set forth in this
Agreement.
4. Seller desires that the Company's Employee Severance Plan (defined
below) is guaranteed upon sale of the Shares to Buyer.
5. Buyer is a wholly-owned subsidiary of POLYMER SOLUTIONS, INC., ("PSI") a
Nevada corporation.
NOW, THEREFORE, the parties hereto, in consideration of the agreement and
covenants contained herein and subject to the satisfaction of the conditions set
forth herein, hereby agree as follows:
ARTICLE I -- DEFINITIONS
1.1 "ACQUISITION DOCUMENTS" shall have the meaning set forth in Section 7.1.
1.2 "AFFILIATE" shall mean any other Person, directly or indirectly,
controlling or controlled by or under direct common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the meanings "controlling" and
"controlled" shall have meanings correlative to the foregoing.
1.3 "AGREEMENT" shall mean this Stock Purchase Agreement, by and among Buyer,
the Company and Seller, together with any and all exhibits and schedules hereto.
1.4 "AGREEMENT NOT TO COMPETE" shall have the meaning set forth in Section
6.1(n).
1.5 "AUDITED FINANCIAL STATEMENTS" shall have the meaning set forth in Section
4.1(e).
1.6 "BUSINESS" shall have the meaning set forth in Recital A.
1.7 "BUYER" shall mean Alternative Materials Technology, a California
corporation.
1.8 "BUYER'S DOCUMENTS" shall have the meaning set forth in Section 4.2(b).
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1.9 "BUYER'S LOSS" shall have the meaning set forth in Section 7.2.
1.10 "CLOSING" shall have the meaning set forth in Section 3.1.
1.11 "CLOSING DATE" shall have the meaning set forth in Section 3.1.
1.12 "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985.
1.13 "CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time, together with any and all rules and regulations promulgated thereunder.
1.14 "COMPANY" shall mean U.S. Cellulose Co., a California corporation.
1.15 "COMPANY INFORMATION" shall have the meaning set forth in Section 5.1.
1.16 "COMPANY'S INTELLECTUAL PROPERTY RIGHTS" shall have the meaning set forth
in Section 4.1(k)(2).
1.17 "COMPANY'S LOSS" shall have the meaning set forth in Section 7.3.
1.18 "CONSULTANTS" shall have the meaning set forth in Section 4.1(o).
1.19 "CONTRACTS" shall have the meaning set forth in Section 4.1(k).
1.20 "DOLLARS" or "$" shall mean the lawful currency of the United States of
America.
1.21 "EMPLOYEE PLANS" shall mean any "employee benefit plan", as that term is
defined in Section 3(3) of ERISA, as well as any other oral or written, formal
or informal plan, program, contract or arrangement involving direct or indirect
compensation, under which the Company or any other entity has any present or
future obligations or liability on behalf of the Company's present employees or
former employees or their dependents or beneficiaries, including without
limitation, each retirement, pension, profit sharing, thrift, savings, employee
stock ownership, cash or deferred arrangement, cafeteria, dependent care,
multiple employer, multi-employer or other similar plan, program or arrangement,
each deferred or incentive compensation, bonus, stock option, employee stock
purchase, phantom stock or stock appreciation right plan, program or
arrangement, each other program providing payment or reimbursement for or of
medical, dental or visual care, psychiatric counseling, or vacation, sick,
personal, disability or severance pay and each other "fringe benefit" plan,
program or arrangement.
1.22 "EMPLOYEES" shall have the meaning set forth in Section 4.1(o).
1.23 "ENVIRONMENTAL LAWS" shall mean any federal, state, county, district, or
local law, regulation, guideline, policy, code, ordinance, rule, resolution,
order or decree regulating the presence, use, generation, handling, storage,
treatment, transport, recycling, manufacture, maintaining, deposit, spill,
discharge, release, decontamination, cleanup, remediation, removal,
encapsulation, enclosure, abatement or disposal of or response to any Hazardous
Material, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901, et seq., the
Toxic Substance Control Act, 15 U.S.C. Sections 2601, et seq., the Clean Water
Act, 33 U.S.C. Sections 1251 et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. Sections 1801 et seq., the Clean Air Act, 42 U.S.C. Sections 7401
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et seq., the California Hazardous Waste Control Act, California Health and
Safety Code Sections 25100 et seq., the California Hazardous Substance Account
Act, California Health and Safety Code Sections 25330 et seq., the California
Safe Drinking Water and Toxic Enforcement Act, California Health and Safety Code
Sections 25249.5 et seq., California Health and Safety Code Sections 25280, et
seq. (Underground Storage of Hazardous Substances), the California Hazardous
Waste Management Act, California Health and Safety Code Sections 25170.1 et
seq., California Health and Safety Code Sections 25501 et seq. (Hazardous
Materials Release Response Plans and Inventory), the California Porter-Cologne
Water Quality Control Act, California Water Code Sections 13000 et seq.,
California Health and Safety Code Section 26316, and any other federal, state,
county, district, or local statute, law, regulation, guideline, policy, code,
ordinance, rule, resolution, order or decree relating to, or imposing liability
or standards of conduct concerning any Hazardous Material, as now or at any time
hereafter in effect, all as amended or hereafter amended.
1.24 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.25 "FINANCIAL STATEMENTS" shall have the meaning set forth in Section 4.1(e).
1.26 "GAAP" shall mean generally accepted accounting principles in the United
States as applied on a basis consistent with past practices of the entity or
entities in question.
1.27 "GOVERNMENTAL AUTHORITY" shall mean any federal, state, local, foreign or
other governmental, quasi-governmental, regulatory or administrative authority
or agency, including, without limitation, those created by statute, regulation,
ordinance, decree or otherwise.
1.28 "GOVERNMENT APPROVAL" shall mean any approval, authorization, consent,
order, waiver, permit, notice, filing, license, registration or other action
required to be obtained from or issued or granted by, filed with or taken by any
Governmental Authority in order to enable the parties legally to effect the
transactions contemplated by this Agreement, the performance of all material
obligations pursuant to this Agreement or the consummation of the transactions
contemplated hereby.
1.29 "HAZARDOUS MATERIAL" shall mean petroleum, any petroleum product or
fraction thereof, friable asbestos, or any material containing asbestos, any
substance, product, waste or other material of any nature whatsoever which is or
becomes regulated or listed by any local, state or federal governmental
authority, entity or agency pursuant to any Environmental Law, including,
without limitation, any substance defined as "hazardous substances," "hazardous
materials" or "toxic materials" by any Environmental Law, any substance,
product, waste or other material of any nature whatsoever which may give rise to
any liability under any Environmental Law and any substance, product, waste or
other material otherwise defined as a Hazardous Material that gives rise to
liability under any statutory or common law theory based on negligence,
trespass, intentional tort, nuisance or strict liability or under any reported
decisions of the California state or federal court.
1.30 "INCOME TAX RETURNS" shall have the meaning set forth in Section 4.1(i)(2).
1.31 "INDEMNITEE" shall have the meaning set forth in Section 7.4(a).
1.32 "INDEMNITOR" shall have the meaning set forth in Section 7.4(a).
1.33 "INTELLECTUAL PROPERTY" shall mean any and all interests in registered and
unregistered trademarks, trademark registrations and applications therefor,
registered and unregistered service marks, service mark registrations and
applications therefor, registered and unregistered trade names
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and applications therefor, registered and unregistered copyrights, copyright
registrations and applications therefor and patents and patent right
applications, inventions, processes, technical information, software, licenses,
designs, logos, customer and supplier lists and formulae owned by the Company.
1.34 "IRS" shall mean the United States Internal Revenue Service.
1.35 "LIABILITY" shall mean any debt, liability, commitment or obligation of any
kind, character or nature whatsoever, whether known or unknown, secured or
unsecured, accrued, fixed, absolute, potential, contingent, or otherwise, and
whether due or to become due.
1.36 "LICENSES" shall have the meaning set forth in Section 4.1(r).
1.37 "LIEN" shall mean all liens, security interests or agreements, mortgages,
deeds of trust, claims, charges, pledges, indentures, rights of first refusal,
options, restrictions, easements, rights of way, escrows, conditions, sale
agreements or other title retention agreements and any other encumbrance of
whatever kind or nature, recorded or unrecorded, and shall include, without
limitation, when used with respect to shares of capital stock or other
securities of a corporation, proxies, voting agreements, voting trusts,
subscriptions, preemption rights and any other limitations on such stock or
securities (other than any such limitations arising due to the absence of the
registration or qualification of such stock or securities under applicable
securities laws).
1.38 "LOSS" or "LOSSES" shall have the meaning set forth in Section 7.4(a).
1.39 "MATERIAL CONTRACT" shall mean any contract or agreement, whether written
or oral, to which the Company is a party that involves an amount greater than
Five Thousand Dollars ($5,000) (other than customer contracts or purchase orders
in the ordinary course of business), any customer contract providing for
revenues to the Company of more than Two Thousand Five Hundred Dollars ($2,500)
per month, any employment contract or employee benefit plan or agreement, any
guarantee, any noncompetition agreement or any other contract which is otherwise
material to the Company.
1.40 "PERSON" shall mean any individual, corporation, limited liability company,
association, partnership, trust, unincorporated association, business or other
legal entity.
1.41 "PLAN" shall have the meaning set forth in Section 4.1(p).
1.42 "PURCHASE PRICE" shall have the meaning set forth in Section 2.2.
1.43 "RELEASE" shall mean any release, issuance, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment or into or out of any property,
including the movement of Hazardous Substances through or in the air, soil,
surface water, groundwater or property other than in compliance with all
Environmental Laws.
1.44 "REPRESENTATIVES" shall have the meaning set forth in Section 5.1.
1.45 "REQUIRED CONSENT" shall mean any consent, waiver or approval required to
be obtained from or granted by any person or entity other than a Governmental
Authority in order to enable (a) the parties to effect the transactions
contemplated by this Agreement, to perform their respective obligations pursuant
to the terms of this Agreement or to consummate the transactions contemplated by
this Agreement, and/or (b) the Company to continue to enjoy the use, benefit and
possession of
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its assets and properties and all the rights and benefits relating thereto
immediately after the Closing without violating, breaching, conflicting with or
giving rise to any right of termination or acceleration or the imposition of any
Lien under the terms of any contract, lease, mortgage, deed of trust, indenture,
license or other agreement to which the Company is a party or subject or by
which it or its assets or properties are bound or affected.
1.46 "SAN JOSE PROPERTIES" shall mean the real properties located at the
following addresses, (a) 520 Parrott Street, San Jose, California 95112 which is
owned by Seller and leased to the Company (the "520 PARROTT PROPERTY"), and (b)
530 Parrott Street, San Jose, California 95112 which is leased by the Company
from a third-party (the "530 PARROTT PROPERTY").
1.47 "SELLER" shall mean Frederick Parkinson.
1.48 "SELLER DOCUMENTS" shall have the meaning set forth in Section 4.1(c).
1.49 "SELLER PARTIES" shall mean, collectively, the Company and Seller.
1.50 "SEVERANCE PLAN" shall mean the U.S. CELLULOSE CO. EMPLOYEE SEVERANCE PLAN,
dated as of the Closing Date [October 15, 1999].
1.51 "SHARES" shall have the meaning set forth in Recital B.
1.52 "SUNSET DATE" shall have the meaning set forth in Section 3.1.
1.53 "TAXES" or "TAX" or "TAXABLE" shall have the meaning set forth in Section
4.1(i)(1). "TAX RETURNS" shall mean any return, estimate, report, information
return or other document (including any related or supporting information) filed
or required to be filed with any Governmental Authority in connection with the
determination, assessment or collection of any Tax or the administration of any
laws, regulations or administrative requirements relating to any Tax.
1.54 "TAX RETURNS" shall have the meaning set forth in Section 5.3.
1.55 "THIRD PARTY CLAIM" shall have the meaning set forth in Section 7.4(c).
1.56 "UNAUDITED FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 4.1(e).
ARTICLE II -- PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of Shares. Subject to the terms and conditions set forth
in this Agreement and on the basis of and in reliance upon the representations,
warranties, obligations, covenants and agreements set forth in this Agreement,
on the Closing Date, Seller shall convey, sell, transfer, assign and deliver to
Buyer, and Buyer shall purchase and accept from Seller, all of Seller's right,
title and interest in and to the Shares.
2.2 Purchase Price. The total purchase price to be paid to Seller by Buyer for
the Shares acquired pursuant to this Agreement (the "PURCHASE PRICE") shall be
One Million Dollars ($1,000,000).
2.3 Payment of Purchase Price. The Purchase Price shall be paid by Buyer to
Seller in cash or by wire-transfer of immediately available funds on the Closing
Date.
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ARTICLE III -- CLOSING
3.1 Closing. Subject to the satisfaction of all of the conditions set forth in
Article VI of this Agreement (any or all of which may be waived in writing by
the respective parties whose performance is conditioned upon satisfaction of
such conditions), the purchase and sale of the Shares shall be consummated at a
closing (the "CLOSING") to be held on such date and at such time that the Seller
Parties and Buyer shall mutually agree (the "CLOSING DATE"); provided, that the
Closing Date shall occur on or before September 30, 1999 (the "SUNSET DATE"),
unless such date is extended upon the mutual agreement of the Seller Parties and
Buyer. The Closing shall take place jointly at the offices of Murphy Austin
Adams Schoenfeld LLP, 1000 G Street, Third Floor, Sacramento, California, 95814
and Hannig Law Firm LLP, 2991 El Camino Real, Redwood City, California,
94061-4003, or at such other location as may be agreed to by Buyer and the
Seller Parties.
3.2 Deliveries by Seller. At the Closing, Seller shall deliver to Buyer the
following, in form and substance reasonably satisfactory to Buyer:
(1) All of the documents, instruments and opinions required to be
delivered or cause to be delivered by any of the Seller Parties pursuant to
Section 6.1.
(2) The original stock certificate or stock certificates representing the
Shares registered in the name of Seller, duly endorsed by Seller for transfer or
accompanied by a separate assignment of the Shares duly executed by Seller. On
submission of such certificate or certificates to the Company for transfer, the
Company shall issue to Buyer a certificate representing the Shares registered in
the name of Buyer.
(3) All Government Approvals and Required Consents, which shall be in form
and substance reasonably satisfactory to Buyer.
(4) A certificate signed by Seller and by the President of the Company
stating that: (i) the representations and warranties of the Seller Parties set
forth in this Agreement are true and correct as of the Closing Date; (ii) each
of the Seller Parties has performed and complied with all agreements and
conditions required by this Agreement to be performed and complied with by such
party prior to or as of the Closing Date; and (iii) all Government Approvals and
Required Consents have been obtained and any other action required to be taken
by any Seller Party or any other party in connection with the execution and
delivery of this Agreement by the Seller Parties or the performance by each of
the Seller Parties of its respective obligations under this Agreement.
(5) Certificates of incumbency for every officer of the Company executing
any document, certificate or other instrument pursuant to this Agreement.
(6) Resignations of all directors and officers of the Company, effective
as of the Closing Date.
(7) Original Articles of Incorporation, Bylaws, stock ledger, minute book
and all other organizational documents of the Company, as amended to date.
(8) Such other documents and items as Buyer may reasonably require in
order to close the transactions contemplated by this Agreement.
3.3 Deliveries by Buyer. At the Closing, Buyer shall deliver the following
items and documents, in form and substance reasonably satisfactory to Seller:
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(1) All of the documents, instruments and opinions required to be
delivered or caused to be delivered by the Buyer pursuant to Section 6.2.
(2) Cash in the amount equal to the Purchase Price.
(3) A certificate signed by the President of Buyer stating that: (i) the
representations and warranties of Buyer set forth in this Agreement are true and
correct as of the Closing Date; (ii) Buyer has performed and complied with all
agreements and conditions required by this Agreement to be performed and
complied with by such party prior to or as of the Closing Date; and (iii) all
Government Approvals and Required Consents have been obtained and any other
action required to be taken by Buyer or any other party in connection with the
execution and delivery of this Agreement by Buyer or the performance by Buyer of
its obligations under this Agreement.
(4) Certificates of incumbency for every officer of Buyer executing any
document, certificate or other instrument pursuant to this Agreement.
(5) Such other documents and items as the Seller Parties may reasonably
require in order to close the transactions contemplated by this Agreement.
3.4 Further Assurances. After the Closing Date, each party shall each prepare,
sign and deliver, at the expense of such party, such further instruments of
conveyance, sale, assignment or transfer and shall take or cause to be taken
such other or further action as any party shall reasonably request of any other
party at any time or from time to time in order to perfect, confirm or evidence
the transfer of title in and to the Shares to Buyer or otherwise to consummate,
in any other manner, the terms and provisions of this Agreement.
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Seller Parties. Seller and the
Company hereby jointly and severally represent and warrant to Buyer as follows:
(1) Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and has all requisite power and authority to conduct the Business in
all of the locations where the Business is now conducted and to own, lease and
operate its assets, as now conducted, owned, leased and operated. The Company is
not qualified or licensed, and is not required to qualify or obtain a license,
to do business in any other jurisdiction other than the State of California. The
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, association, partnership, limited liability company or
other business entity. The Company has delivered to Seller a true, correct and
complete copy of the articles of incorporation and bylaws of the Company, each
as amended to date.
(2) Capitalization; Title to Shares. The authorized capital stock of the
Company consists of seventy-five thousand (75,000) shares of capital stock, One
Dollar ($1.00) per share par value. The Shares constitute all of the issued and
outstanding shares of capital stock of the Company. All of the Shares are duly
authorized, validly issued, fully paid and nonassessable, and are owned by
Seller, beneficially and of record, free and clear of all Liens and are free of
any preemptive rights. To the best knowledge of the Seller Parties, after
diligent inquiry and investigation, the issuance and sale of all of the Shares
are in full compliance with all applicable federal and state securities laws. To
the best knowledge of the Seller Parties, after diligent inquiry and
investigation, there are no outstanding subscriptions, options, warrants,
rights, convertible debt or equity, or other agreements
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or commitments obligating the Company to issue shares of its capital stock or
other securities, or to enter into or grant any such agreement or commitment.
(3) Authority of the Seller Parties. Each of the Seller Parties has the
full legal right, power, capacity and authority to execute and deliver this
Agreement and all other agreements, instruments and documents to be executed and
delivered by such Seller Party in connection herewith (the "SELLER DOCUMENTS"),
and to carry out its respective obligations hereunder and thereunder.
(4) Authorization and Noncontravention.
(1) This Agreement has been, and by the Closing each other Seller
Document shall have been, duly authorized, executed and delivered by the Seller
Parties that are parties thereto and constitutes or shall constitute by the
Closing, the valid, legal and binding obligations of each of the Seller Parties
that are parties thereto, enforceable in accordance with their respective terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and other
similar laws of general applicability relating to or affecting creditors'
rights, and to general equity principles (including, without limitation,
concepts of mutuality, reasonableness, good faith and fair dealing, and the
possible unavailability of specific performance or injunctive relief, regardless
of whether the issue of enforceability is considered in a proceeding in equity
or law). All corporate acts or other proceedings required to be taken by the
Company to authorize it to carry out this Agreement and the transactions
contemplated herein have been properly taken, and with respect to the other
Seller Documents shall have been properly taken by the Closing.
(2) The execution and delivery by the Seller Parties of this
Agreement do not, and with respect to the other Seller Documents to be executed
and delivered by the Seller Parties in connection herewith shall not, and the
performance of obligations pursuant hereto or thereto and the consummation of
the transactions contemplated hereby and thereby shall not, (a) violate any
provisions of the articles of incorporation or bylaws of the Company or (b)
subject only to obtaining the Government Approvals and Required Consents
described in SECTIONS 6.1(f) and 6.2(e), (A) violate any provision of, conflict
with, or result in the termination or acceleration of, or entitle any party to
accelerate (whether after the filing of notice or lapse of time or both) any
material obligation under, or result in the creation or imposition of any Lien
upon the Shares pursuant to any provision of, any mortgage, lien, lease,
agreement, license, contract, deed of trust, indenture or instrument, or (B)
violate any law, regulation, order, arbitration award, judgment, or decree, in
each case to which any Seller Party is a party or is subject or by which any
property of any Seller Party is bound or affected.
(5) Financial Statements. The Company has provided access to its financial
information to certified public accountants engaged by Buyer, who have prepared
an audited balance sheet of the Company as of March 31, 1999, the audited
Statement of Operations and Changes in Retained Earnings for the Company for the
nine month period ended March 31, 1999 and the audited Statement of Cash Flows
for the Company for the nine month period ended March 31, 1999, together with
the notes to such financial statements and the related opinion of its certified
public accountants (the "AUDITED FINANCIAL STATEMENTS"), and the Company has
furnished to Buyer true, correct and complete copies of the unaudited balance
sheet of the Company as of September 30, 1999, and the unaudited statement of
operations for the Company for the periods then ended (the "UNAUDITED FINANCIAL
STATEMENTS"). The Audited Financial Statements and the Unaudited Financial
Statements are collectively referred to herein as the "Financial Statements." To
the best knowledge of the Seller Parties, after diligent inquiry and
investigation, the Unaudited Financial Statements have been prepared in
accordance with the books and records of the Company and GAAP and fairly present
the financial position of the Company for the dates and periods covered. The
Company has no outstanding indebtedness or guaranties and is not a party to any
mortgage, deed of trust,
PAGE -8-
<PAGE> 9
indenture, loan or credit agreement or similar instrument or agreement, and owns
no notes receivable and has no material liability (whether accrued, absolute,
contingent or otherwise) which is not shown or provided for in the Financial
Statements. The Company owns good and marketable title to all assets reflected
on the Audited Financial Statements or acquired after the date thereof (except
for assets sold in the ordinary course of business consistent with past
practices or as otherwise permitted pursuant to the express terms of this
Agreement), free and clear of all Liens. To the best knowledge of the Seller
Parties, after diligent inquiry and investigation, the Company is not liable
upon or with respect to or obligated in any other way to provide funds in
respect of or to guarantee or assume in any manner any debt, obligation, or
dividend of any other person which is not set forth in the Audited Financial
Statements.
(6) Undisclosed Liabilities. There is no material debt, claim, liability
or obligation that is in an amount equal to or exceeding Five Thousand Dollars
($5,000) with respect to the Company and/or the Business, liquidated,
unliquidated, accrued, absolute, contingent or otherwise, that is not identified
in the Audited Financial Statements or otherwise disclosed in any of the
disclosure schedules attached to this Agreement.
(7) Personal Property, Inventory and Equipment. SCHEDULE 4.1(G) lists all
of the inventory owned by the Company and the tangible personal property owned
by the Company or with respect to which the Company is a lessee which, singly or
in the aggregate with other property of the same category, has a book value or a
fair market value in excess of One Thousand Dollars ($1,000) or is capitalized
by the Company. SCHEDULE 4.1(g) identifies such property as owned or leased. All
of the property set forth on SCHEDULE 4.1(g) is in good operating condition and
repair, ordinary wear and tear excepted. Except as described in SCHEDULE 4.1(g),
the Company has good and marketable title to the owned personal property listed
in SCHEDULE 4.1(g) free and clear of all Liens, and a valid, subsisting and
enforceable leasehold interest in the leased personal property, free and clear
of all Liens. Neither the Company nor, to the best knowledge of the Seller
Parties, after diligent inquiry and investigation, any other party to any of the
personal property leases is in material default of its respective obligations
under such leases nor has any event occurred which with notice or the lapse of
time or both would become such a material default by the Company or, to the best
knowledge of the Seller Parties, after diligent inquiry and investigation, any
other party thereto.
(8) Real Property. The Company does not own fee title to any real
property, and the Company is not a United States real property holding company
as defined in Section 897 of the Code. SCHEDULE 4.1(h) lists all real property
leased by the Company and indicates all lease expiration dates. All structures,
fixtures and improvements located on such property, taken as a whole, are in
good operation, condition and repair, ordinary wear and tear excepted. In the
case of each lease of real property listed, the Company has a valid, subsisting
and enforceable leasehold estate free and clear of any Liens. Neither the
Company nor, to the best knowledge of the Seller Parties, after diligent inquiry
and investigation, any other party to any of the leases is in material default
of its respective obligations under such leases nor has any event occurred which
with notice or the lapse of time or both would become such a material default by
the Company or, to the best knowledge of the Seller Parties, after diligent
inquiry and investigation, any other party thereto.
(9) Taxes/Tax Returns.
(1) The Company has materially completed and duly filed (or has
received an extension of time to file and will complete and file in such
extended time) in materially correct form with the appropriate United States,
state and local governmental agencies and with the appropriate foreign countries
and political subdivisions thereof, all Taxes (as defined below) returns and
reports required to be filed by the Company; all of such returns and reports are
accurate and complete; and the Company has paid in full or made adequate
provision on the financial statements of the
PAGE -9-
<PAGE> 10
Company for all Taxes, assessments or deficiencies shown to be due on such Tax
returns and reports or claimed to be due by any taxing authority or, to the best
knowledge of the Seller Parties, after diligent inquiry and investigation,
otherwise due or owing. To the best knowledge of the Seller Parties, after
diligent inquiry and investigation, the Company has made all payments of
estimated income Tax necessary to avoid any penalty through the date hereof and
all withholdings of Tax required to be made under all applicable United States,
foreign, state and local tax laws and regulations, and such withholdings have
either been paid to the respective governmental agencies or set aside in
accounts for such purpose or accrued, reserved against and entered upon the
books of the Company. The assets of the Company are not subject to any liens for
Taxes, except liens for current Taxes not yet due. For purposes of this
Agreement, "TAX" (and, with correlative meaning, "TAXES" and "TAXABLE") means
(i) any net income, alternative or add-on minimum tax, gross income, gross
receipts, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
governmental, regulatory or administrative entity or agency responsible for the
imposition of any such tax (domestic or foreign), (ii) any liability for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined, unitary or other group for any
Taxable period and (iii) any liability for the payment of any amounts of the
type described in (i) or (ii) as a result of any express or implied obligation
to indemnify any other person.
(2) Seller has delivered to Buyer corporate income tax returns for
the Company for each of the five (5) years immediately preceding June 30, 1998
("INCOME TAX RETURNS"). Seller acknowledges that Buyer is relying on the
accuracy of these Income Tax Returns in connection with its decision to purchase
the Shares.
(10) Compliance with Law. The Company has complied, and is in compliance,
with all applicable federal, state and local laws, statutes, licensing
requirements, rules and regulations, and judicial or administrative decisions
applicable to the Business, except where failure to be in compliance therewith
would not have a material adverse effect upon the Business and/or the Shares.
The Company has been granted all permits from federal, state, and local
government regulatory bodies necessary to own its assets and to carry on the
Business, all of which are currently valid and in full force and effect, not
including, any permits the failure of which to obtain would not have a material
adverse effect upon the Business and/or the Company's assets. There is no order
issued, investigation or proceeding pending or, to the best knowledge of the
Seller Parties after diligent inquiry and investigation, threatened, or notice
served with respect to any violation of any law, ordinance, order, writ, decree,
rule or regulation issued by any federal, state, local or foreign court or
governmental or regulatory agency or instrumentality applicable to the Company
or the Business that may have a material adverse effect on the Business.
(11) Intellectual Property.
(1) To the best knowledge of the Seller Parties, after diligent
inquiry and investigation, the Company is licensed or is otherwise entitled to
exercise, without restriction, all rights to all the Company's Intellectual
Property Rights (as defined below), and all other tangible and intangible
information or material in any form, as used or currently proposed to be used by
the Company in the Business, without any conflict with or infringement of the
rights of others.
(2) Listed on SCHEDULE 4.1(k) attached hereto are: (i) all software
(including source code and object code), copyrights, copyright registrations,
applications to register copyrights, patents, patent applications, patent
disclosures, trademarks, service marks, trade names, trademark and service mark
registrations, applications to register trademarks or service marks, and other
company, product or service identifiers owned by, exclusively or non-exclusively
licensed, or that the
PAGE -10-
<PAGE> 11
Company has otherwise been granted permission to use (collectively, the
"COMPANY'S INTELLECTUAL PROPERTY RIGHTS"); (ii) the jurisdiction(s) in which an
application for patent or application for registration of each of the Company's
Intellectual Property Rights has been made, including the respective application
numbers and dates; (iii) the jurisdiction(s) in which each of the Company's
Intellectual Property Rights has been patented or registered, including the
respective patent or registration numbers and dates; (iv) for each piece of
software, whether such software has been published and whether such software has
a copyright notice; (v) all licenses, sublicenses and other agreements to which
Company is a party and pursuant to which any other party is authorized to use,
exercise, or receive any benefit from any of the Company's Intellectual Property
Rights; and (vi) all parties to whom Company and/or Seller has delivered copies
of the Company's source code or object code, whether pursuant to an escrow
arrangement or otherwise, or parties who have the right to receive such source
code or object code. Seller has delivered to Buyer copies of all licenses,
sublicenses and other agreements identified pursuant to clause (v) of this
section.
(3) To the best knowledge of the Seller Parties, after diligent
inquiry and investigation, the Company is the owner, or licensee of, with all
right, title and interest in and to, free and clear of any Liens, the Company's
Intellectual Property Rights, and has the rights to use, sell, license, assign,
transfer, convey or dispose thereof or the products, processes and materials
covered thereby. Any rights Seller may have had with respect to Intellectual
Property relating to the Business have been transferred to the Company prior to
the date of this Agreement.
(4) The Company is not, nor will it, as a result of the signing and
delivery of this Agreement or the performance of its obligations hereunder, be
in violation of, nor shall it lose or in any way impair, any material rights
pursuant to any license, sublicense or agreement described on SCHEDULE 4.1(k).
If required by the terms of any licenses, sublicenses or other agreements with
respect to the Company's Intellectual Property Rights, the Company has secured
or shall promptly secure valid written consents from the licensors of such
Company's Intellectual Property Rights.
(5) Seller knows of no claims to the effect that the manufacture,
marketing, license, sale or use of any product or service as now used or offered
or proposed for use or sale by the Company infringes any copyright, patent,
trademark, service mark, trade secret or other intellectual property right of
any third party or violates any license or agreement with any third party.
(6) Neither Seller nor the Company has entered into any agreement to
indemnify any other person against any charge of infringement of any third party
intellectual property right or the Company's Intellectual Property Rights.
(12) Contracts and Commitments.
(1) SCHEDULE 4.1(l) lists all Material Contracts entered into by the
Company that relate to the Business, setting forth the parties thereto and the
dates thereof that relate to the Business, whether or not in writing, to which
the Company is a party.
(2) The Company has performed all of its obligations under the terms
of each Contract, and is not in default thereunder. No event or omission has
occurred which, but for the giving of notice or lapse of time or both, would
constitute a default by the Company, or to the best knowledge of the Seller
Parties, after diligent inquiry and investigation, any other party thereto under
any such Contract, where such default by any party could have a material adverse
effect on the Company, or its Business. Each such Contract is in full force and
effect and valid and binding on all parties thereto. None of the Seller Parties
has received any notice of default, cancellation or termination in connection
with any such Contract and has no knowledge that any such action is currently
contemplated or threatened.
PAGE -11-
<PAGE> 12
(13) Approvals and Consents; Continued Enjoyment. Except as described in
SCHEDULE 4.1(m), no Government Approvals or Required Consents are required for
(a) the execution and delivery by the Seller Parties of this Agreement and the
other Seller Documents or the consummation by the Seller Parties of the
transactions contemplated hereby and thereby; or (b) the continued use, benefit
and possession by Buyer immediately following the Closing of (i) the real
property leased by the Company as listed in SCHEDULE 4.1(h), (ii) the Licenses
listed in SCHEDULE 4.1(r), (iii) the Contacts listed in SCHEDULE 4.1(k), or (iv)
any asset, property, permit, license, franchise or other right material to the
continued conduct of the business and operations of the Company as currently
conducted.
(14) Litigation. Except as set forth in SCHEDULE 4.1(N), (a) no Seller
Party has been notified of any, and to the best knowledge of the Seller Parties,
after diligent inquiry and investigation, there is no action, suit or proceeding
pending or, to the best knowledge of the Seller Parties, threatened against the
Seller Parties or any of its Properties before any court or arbitral tribunal,
domestic or foreign, or before any Governmental Authority; (b) no Seller Party,
and, to the best knowledge of the Seller Parties after diligent inquiry and
investigation, no officer or executive employee of the Company is currently
charged with or, to the best knowledge of the Seller Parties after diligent
inquiry and investigation, is under investigation with respect to any material
violation of any law, statute, arbitration award, decree or judgment or
administrative regulation or order of any Governmental Authority; (c) no Seller
Party is a party to, bound by, subject to or in default in any material respect
under any order, arbitration award, judgment or decree entered in a lawsuit or
proceeding brought by any Governmental Authority or by any other person in
respect of any business practices or the acquisition of any property or the
conduct of the Business by the Company; and (d) to the best knowledge of the
Seller Parties after diligent inquiry and investigation, no facts exist which
form the basis for any latent claim against the Company which, if asserted,
would be likely to involve the assertion of a claim or claims for more than Five
Thousand Dollars ($5,000) in damages or would otherwise be material to the
business, financial condition or results of operations of the Company.
(15) Labor Relations. With respect to the Business:
(1) Except as disclosed on SCHEDULE 4.1(o), to the best knowledge of
the Seller Parties after diligent inquiry and investigation, there are no
written or oral employment, separation, severance or golden parachute agreements
or understandings with any of the employees of the Company or the service
providers of the Business.
(2) SCHEDULE 4.1(o) lists, as of the date of this Agreement, all of
the employees of the Company (the "EMPLOYEES"), and all of the consultants to
the Company (the "CONSULTANTS"), who provide services for the Company or the
Business and the cost of whose applicable health and welfare insurance have been
paid by the Company or accrued as a liability of the Company on the Financial
Statements.
(3) Except as listed on SCHEDULE 4.1(o), all severance, bonus and
vacation payments by the Company which are or were due under the terms of any
agreement have been paid or accrued as a liability on the Financial Statements.
(16) Employees and Employee Benefit Plans.
(1) Except as set forth on SCHEDULE 4.1(p), the Company is not a
party to any pension, profit sharing, savings, retirement or other deferred
compensation plan, or any bonus (whether payable in cash or stock) or incentive
program, or any group health plan (whether insured
PAGE -12-
<PAGE> 13
or self-funded), or any disability or group life insurance plan or other
employee welfare benefit plan, or to any collective bargaining agreement or
other agreement, written or oral, with any trade or labor union, employees
association or similar organization (a "PLAN"). The Company is not a party to,
nor has it made any contribution to or otherwise incurred any obligation under
any "multi-employer plan" as defined in Section 3(37) of ERISA.
(2) There are no strikes or labor disputes pending or, to the best
knowledge of the Seller Parties after diligent inquiry and investigation,
threatened by, or any attempts at union organization of, any of Employees. None
of the Employees whose continued services are material to the Business as
presently conducted has terminated employment, and the Company has not received
any notice that any such Employee intends to do so.
(3) To the best knowledge of the Seller Parties after diligent
inquiry and investigation, none of the Employees is or will be in violation of
any judgment, decree or order, or any term of any employment contract, or other
contract or agreement relating to the relationship of any of such Employees with
the Company or any other party because of the nature of the business conducted
by the Company or of the use by any of the Employees of such Employee's best
efforts with respect to such business.
(4) The Company has not violated any of the health care continuation
coverage requirements of COBRA, and will not do so, prior to the Closing.
(17) Occupational Safety and Health Matters; Environmental Matters.
(1) Except as disclosed in SCHEDULE 4.1(q), to the best knowledge of
the Seller Parties after diligent inquiry and investigation, the Company and its
operations have been and are now in compliance with all applicable Environmental
Laws. Neither the Seller nor the Company has assumed, contractually or through
merger, any known Liabilities, whether by indemnity or otherwise, under any
Environmental Law.
(2) Except as disclosed in SCHEDULE 4.1(q), to the best knowledge of
the Seller Parties after diligent inquiry and investigation, no Hazardous
Material was placed, stored, generated, used, manufactured, maintained, treated,
deposited, spilled, discharged, recycled, released, or disposed of on, under, or
at any real property leased, used, or occupied by the Company except as
authorized pursuant to Environmental Law.
(3) Except as disclosed in SCHEDULE 4.1(q), to the best knowledge of
the Seller Parties after diligent inquiry and investigation, no Hazardous
Material has been transported off real property leased, used, or occupied by the
Company except as authorized pursuant to Environmental Law.
(4) Except as disclosed in SCHEDULE 4.1(q), to the best knowledge of
the Seller Parties after diligent inquiry and investigation, the Company has not
arranged for the transportation, treatment, recycling, disposal or release of
Hazardous Material except as authorized by Environmental Law.
(5) Except as disclosed in SCHEDULE 4.1(q), no notice of claim,
claim, demand, citation, summons, order, or notice of violation has been
received by the Seller or the Company, no notice has been given by the Seller or
the Company, and no complaint has been filed, no penalty has been assessed that
remains outstanding and, to the best knowledge of the Seller Parties after
diligent inquiry and investigation, no investigation or review is pending or
threatened by any Governmental Authority or third person with respect to the
Seller, the real property leased, used or
PAGE -13-
<PAGE> 14
occupied by the Company at any time, or the Company arising from either one or
more of the following:
(1) any actual or alleged violation of Environmental Law;
(2) the placement, storage, generation, use, manufacture,
maintaining, treatment, depositing, spill, discharge, recycling, release,
transportation, or disposal of Hazardous Materials;
(3) the arranging for the transportation, treatment, recycling,
disposal, or release of Hazardous Materials.
(6) Except as disclosed in SCHEDULE 4.1(q), neither the Seller nor
the Company has received from an Governmental Authority any request for
information, notice of claim, notice of violation, demand, or notification that
the Seller or the Company is or might be a "potentially responsible party" with
respect to any investigation, remediation, or cleanup of any threatened or
actual release of Hazardous Materials.
(7) Except as disclosed in SCHEDULE 4.1(q), to the best knowledge of
the Seller Parties after diligent inquiry and investigation, there are no
underground or above-ground storage tanks, whether or not in use, located at,
on, or under any real property which the Company leases, uses, or occupies, or
has leased, used, or occupied.
(8) Except as disclosed in SCHEDULE 4.1(q), no notice has been
received by the Seller or the Company with respect to the listing or proposed
listing of any real property, which the Company leases, uses, or occupies or
real property or which the Company has leased, used, or occupied, pursuant to
Environmental Law (such as CERCLA) or any similar state law listing sites which
require investigation or cleanup.
(9) Except as disclosed in SCHEDULE 4.1(q), to the best knowledge of
the Seller Parties after diligent inquiry and investigation, there have been no
environmental inspections, investigations, studies, tests, reviews or other
analyses conducted in relation to the Seller or the Company or any real property
which was or is now leased, used, or occupied by the Seller or the Company, the
results of which identify a condition which could reasonably expect, either
individually or in the aggregate, to influence adversely the Buyer's decision to
enter in this Agreement.
(10) SCHEDULE 4.1(q), to the best knowledge of the Seller Parties
after diligent inquiry and investigation, is an accurate list of all permits,
orders, and approvals required of the Seller or the Company pursuant to
Environmental Law relating to the placement, storage, generation, use,
manufacture, maintaining, treatment, deposit, spill, discharge, recycling,
release, or disposal of Hazardous Materials.
(11) There is no pending or, to the best knowledge of the Seller
Parties after diligent inquiry and investigation, threatened administrative or
judicial proceeding against the Seller or the Company where such proceeding is
based on or involves an actual or alleged violation of or liability arising
under Environmental Law.
(18) Permits, Licenses, Variances and Laws. SCHEDULE 4.1(r) attached hereto
contains a complete, current and correct list of all governmental licenses,
permits, franchises, rights and privileges required for the business of the
Company as currently conducted (the "LICENSES"). All of such Licenses are in
full force and effect, and there is no pending revocation or material limitation
PAGE -14-
<PAGE> 15
thereof. Except as disclosed in SCHEDULE 4.1(r), all permits, licenses or
variances which are required for the conduct of the business of the Company as
currently conducted have been obtained and are valid and subsisting and in full
force and effect. Except as disclosed in SCHEDULE 4.1(r), to the best knowledge
of the Seller Parties after diligent inquiry and investigation, no portion of
the business of the Company has been, or is being conducted in violation of any
laws, regulations, permits, licenses or variances issued by Governmental
Authorities having jurisdiction over them where the failure to so comply would
have a material adverse effect on the business, financial condition or results
of operations of the Company.
(19) Changes in the Business or Financial Condition of the Company. Except
as described in SCHEDULE 4.1(s) and except as otherwise contemplated by this
Agreement, since March 31, 1999, there has not been any material adverse change
in the business, financial condition or results of operations of the Company.
Except as described in SCHEDULE 4.1(s) and except as otherwise contemplated by
this Agreement, since March 31, 1999, there has not been:
(1) any failure to conduct the Company's business in accordance with
the ordinary course of business, consistent with past practices and in
compliance in all material respects with all applicable laws, statutes,
regulations, decrees and orders;
(2) any incurrence or assumption of indebtedness for borrowed money
by the Company, nor any guarantee or endorsement by the Company of any
indebtedness for borrowed money of any other Person or any other express written
guarantee of the obligations of any Person (other than the endorsement of
negotiable instruments for deposit or collection or other similar transactions
in the ordinary course of business and consistent with past practices);
(3) any imposition of a Lien on any assets or property of the
Company;
(4) any change in or deviation from the accounting principles,
procedures, methods or practices of the Company;
(5) any declaration, setting aside, or payment of, any dividend, or
the making of any other distribution of payment in respect of the Company's
capital stock or any transfer, reacquisition or issuance of any shares of
capital stock or other securities, or rights to acquire any shares of capital
stock or other securities, of the Company;
(6) any sale or transfer or other disposition of any material asset
of the Company, or any cancellation, release or assignment of any material
indebtedness owed to the Company;
(7) any entry into, material modification of, or voluntary
termination by the Company of (i) any agreement or contract involving an
aggregate payment (A) by the Company reasonably estimated by the Company to
exceed Five Thousand Dollars ($5,000) or (B) to the Company reasonably estimated
by the Company to exceed Five Thousand Dollars ($5,000); (ii) any customer
contract providing for revenues to the Company of more than Five Thousand
Dollars ($5,000) per month; or (iii) any contract which is otherwise material to
the business of the Company;
(8) any increase in any manner in the compensation or fringe benefits
payable or to become payable by the Company to any of the Company's officers,
employees or agents; or any bonus, percentage of compensation, or other like
contingent benefit paid or accrued to, or for the credit of, any of the
officers, employees, or agents of the Company;
(9) any cancellation or termination of any insurance policy insuring
the assets or operations of the Company unless simultaneously replacement
policies providing substantially the same coverage were in full force and
effect;
PAGE -15-
<PAGE> 16
(10) any transfer of cash or cash equivalents from the Company or any
of its Affiliates, except in the ordinary course of business and consistent with
past practices;
(11) any settlement or compromise of any action, suit, proceeding,
litigation or claim (i) on terms which required or shall require the Company to
pay any amount or (ii) on any other terms material to the Company;
(12) any investment by the Company in any other person or entity;
(13) any capital expenditures or commitment therefore in excess of an
aggregate amount of Ten Thousand Dollars ($10,000); or
(14) to the best knowledge of the Seller Parties after diligent
inquiry and investigation, any Release of any Hazardous Substance in, on or
under any real property leased by the Company.
(20) Transactions with Affiliates. Except as disclosed on SCHEDULE 4.1(t),
neither the Company nor any of its Affiliates, has any interest, directly or
indirectly, in any lease, lien, contract, license, encumbrance, loan or other
agreement to which the Company is a party, any interest (other than as a
stockholder) in any properties or assets of the Company or any interest in any
competitor, supplier or customer of the Company.
(21) Insurance. SCHEDULE 4.1(u) lists all cargo, casualty, liability,
property, health, errors and omissions and other insurance policies held by the
Company, specifying with respect to each policy the type and amount of coverage,
deductibles, policy number, insurer, annual premium, additional insureds and
expiration date. SCHEDULE 4.1(u) also contains a true and complete list of the
loss runs under the Company's workman's compensation insurance and a list of all
casualty losses reported under applicable insurance policies for the past three
(3) fiscal years. Except as set forth in SCHEDULE 4.1(u), all such insurance
policies are written on an occurrence basis and, to the knowledge of the Seller
Parties, there is no threat by any of the insurers to terminate or materially
increase the premiums payable under any of such policies. The Company is in
material compliance with the conditions contained in such policies.
(22) Bank Accounts. SCHEDULE 4.1(v) sets forth a complete and accurate
list of all banks and other lending institutions with which the Company
maintains accounts or has credit arrangements and the name of each person who
has signing authority for such accounts and credit arrangements.
(23) Brokers' and Finders' Fees. Neither Seller Party shall be obligated
to pay any fees or expenses of any broker or finder in connection with the
origin, negotiation or signing of this Agreement or in connection with any
transactions contemplated hereby.
(24) Books and Records. The books and records of the Company to which
Buyer and his accountants and attorneys have been given access are the true
books and records of the Company, and truly and fairly reflect the underlying
facts and transactions in all respects.
(25) Accounts Receivable. Attached hereto as Schedule 4.1(x) is a true,
correct and complete listing of all of the outstanding accounts receivable of
the Company as of June 30, 1999, together with an aging schedule for same.
(26) Complete Disclosure. To the best knowledge of the Seller Parties
after diligent inquiry and investigation, no representation or warranty by the
Seller Parties in this Agreement, and
PAGE -16-
<PAGE> 17
no exhibit, schedule, statement, certificate or other writing furnished to Buyer
pursuant to this Agreement or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein and therein in the context in which they were made not
misleading.
4.2 Representations and Warranties of Buyer. Buyer hereby represents and
warrants to the Seller Parties as follows:
(1) Organization and Standing. Buyer is a corporation duly organized,
validly existing and in good standing, all under the laws of the State of
Nevada, and has all requisite power and authority to conduct its business and to
own, lease and operate its assets, as now conducted, owned, leased and operated.
Buyer is duly qualified or licensed to do business in each of the jurisdictions
in which the nature of its operations or location of its assets requires such
qualification or licensing, and where the failure to be so qualified would have
a material adverse effect on the business or operations of Buyer.
(2) Authority of Buyer. Buyer has full legal right, power, capacity and
authority to enter into this Agreement, together with all other agreements,
instruments and documents to be signed and delivered by it in connection
herewith (the "BUYER DOCUMENTS"), and to carry out its obligations hereunder and
thereunder.
(3) Authorization and Noncontravention. This Agreement has been duly
signed and delivered by Buyer, and this Agreement and the Buyer Documents
constitute legal, valid and binding obligations of Buyer enforceable against
Buyer in accordance with their terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other similar laws of general applicability
relating to or affecting creditors' rights, and to general equity principles
(including, without limitation, concepts of mutuality, reasonableness, good
faith and fair dealing, and the possible unavailability of specific performance
or injunctive relief, regardless of whether the issue of enforceability is
considered in a proceeding in equity or law).
(4) Litigation. There is no claim, litigation, action, suit or proceeding,
administrative or judicial, pending or, to Buyer's knowledge, threatened against
Buyer relating to this Agreement or the transactions contemplated hereunder, at
law or in equity, before any federal, state, local or foreign court, regulatory
agency, or other governmental authority, which could result in the institution
of legal proceedings to prohibit or restrain the consummation or performance of
this Agreement or the transactions contemplated hereby, or any claim of damages
as a result of this Agreement or the transactions contemplated hereby.
(5) No Conflict or Default. Neither the signing and delivery of this
Agreement, nor compliance with the terms and provisions hereof, including the
consummation of the transactions
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<PAGE> 18
contemplated hereby, will conflict with or result in the breach of any term,
condition or provision of any agreement, deed, contract, mortgage, indenture,
writ, order, decree, legal obligation or instrument to which Buyer is a party,
or by which he is or may be bound or constitute a default (or an event which,
with the lapse of time or the giving or notice, or both, would constitute a
default) thereunder, or to Buyer's knowledge, violate any statute, regulation or
ordinance of any governmental authority.
(6) Brokers' and Finders' Fees. Buyer is not obligated to pay any fees or
expenses of any broker or finder in connection with the origin, negotiation or
signing of this Agreement or in connection with any transactions contemplated
hereby.
ARTICLE V -- COVENANTS
5.1 Access to Information. After signing this Agreement, Seller Parties shall
give Buyer and Buyer's agents and/or representatives (the "REPRESENTATIVES")
full access, during normal business hours, to all of the properties, books,
contracts, commitments and records relating to the Business, and generally such
information as Buyer may reasonably request (the "COMPANY INFORMATION");
provided, that such access shall not unreasonably interfere with the normal
operations of the Business; provided, further, that any furnishing of such
information pursuant hereto or any investigation by Buyer shall not affect
Buyer's right to rely on the representations, warranties, agreements and
covenants made by the Seller Parties in this Agreement.
5.2 Governmental Approvals and Required Consents. Seller shall use all
reasonable efforts to obtain all of the Governmental Approvals and Required
Consents prior to the Closing.
5.3 Tax Returns. Seller shall cause the Company to properly file all returns,
statements, reports, forms or other documents (collectively, the "TAX RETURNS")
that are required by any applicable law to file with respect to Taxes arising in
or related to periods ending on or prior to the Closing or related to
transactions or events occurring prior to the Closing and shall cause Company to
pay all such Taxes when due; provided, however, Seller shall be responsible for
all filings with respect to, and the payment of any transfer tax related to, the
issuance of the Shares.
5.4 Conduct of Business in Normal Course. Prior to the Closing, Seller shall:
(1) Cause Company to carry on its Business and activities diligently and
in substantially the same manner as they have previously been carried out, and
shall not make or institute any unusual or novel methods of manufacture, or
purchase, sale, lease, management, accounting, or operation that will vary
materially from those methods used by Company as of the date of this Agreement.
(2) Cause Company to use its best efforts to preserve its business
organization intact, to keep available to Company its present officers and
employees, and to preserve its present relationships with suppliers, customers,
and others having business relationships with it.
(3) Cause Company not to (i) amend its articles of incorporation or
bylaws; (ii) issue any shares of its capital stock; (iii) issue or create any
warrants, obligations, subscriptions, options, convertible securities, or other
commitments under which any additional shares of its capital stock of any class
might be directly or indirectly authorized, issued, or transferred from
treasury, or (iv) agree to do any of the actions listed above.
(4) Cause Company to continue to carry its existing insurance, subject to
variations and amounts required by the ordinary operations of its Business.
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<PAGE> 19
(5) Cause Company not to, without Buyer's written consent, enter into any
contract, commitment or transaction not in the usual and ordinary course of its
Business, including the sale or disposal of any assets of Company.
(6) Cause Company not to (i) declare, set aside, or pay any dividend or
make any distribution in respect to its capital stock; (ii) directly or
indirectly purchase, redeem, or otherwise acquire any shares of its capital
stock; or (iii) enter into any agreement obligating it to do any of the
foregoing prohibited acts.
(7) Cause Company not to do, or agree to do, any of the following acts:
(i) pay any obligation or liability, fixed or contingent, other than current
liabilities; (ii) waive or compromise any right or claim; or (iii) cancel,
without full payment, any note, loan or other obligation owing to Company.
(8) Cause Company not to modify, amend, cancel, or terminate any of its
existing contracts or agreements, or agree to do any of those acts, except in
the ordinary course of Business or with Buyer's written consent.
5.5 Insurance. Seller hereby consents to the Company continuing to carry
coverage under its existing insurance policies listed in SCHEDULE 4.1(u) after
the Closing.
5.6 530 Parrott Property. Effective December 1, 1999, the Company shall assign
to Seller all of the Company's right, title and interest, and delegate all of
its obligations, under that certain Standard Industrial/Commercial Single-Tenant
Lease -- Gross, dated September 21, 1999, between Fred Yrueta, as Lessor, and
the Company, as Lessee, pursuant to which the Company leases the 530 Parrott
Property (the "530 PARROTT PROPERTY LEASE"), and Seller hereby agrees to accept
such assignment.
ARTICLE VI -- CONDITIONS PRECEDENT TO OBLIGATIONS
6.1 Conditions to Obligations of Buyer. Each and every obligation of Buyer to
be performed at the Closing shall be subject to the satisfaction as of or before
the Closing of the following conditions (unless waived in writing by Buyer):
(1) Representations, Warranties and Covenants. The representations and
warranties of the Seller Parties set forth in Section 4.1 of this Agreement
shall have been true and correct when made and shall be true and correct as
updated at and as of the Closing Date as if such representations and warranties
were made as of such date and time; and the covenants and agreements contained
in this Agreement to be complied with by the Seller Parties on or before the
Closing shall have been complied with in all material respects.
(2) Performance of Agreement. All covenants, conditions and other
obligations under this Agreement which are to be performed or complied with by
Seller Parties shall have been fully performed and complied with at or prior to
the Closing, including the delivery of the instruments and documents in
accordance with Section 3.2 above.
(3) No Material Adverse Change. There shall have been no material adverse
change in the financial condition, the Business, or the properties of Company
which materially adversely affects the conduct of the Business, as currently
being conducted.
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<PAGE> 20
(4) Absence of Governmental or Other Objection. There shall be no pending
or threatened investigation, action, suit or proceeding challenging the
transaction by any body or agency of the federal, state or local government or
by any third party, and the consummation of the transaction shall not have been
enjoined by a court of competent jurisdiction as of the Time of Closing and any
applicable waiting period under any applicable federal law shall have expired.
(5) Approval of Documentation. The form and substance of all certificates,
instruments and other documents delivered or to be delivered to Buyer under this
Agreement shall be reasonably satisfactory to Buyer and his counsel in all
respects.
(6) Consents and Approvals. All Government Approvals and Required
Consents, or other actions or proceedings required to be obtained or taken by
the Seller Parties under the laws of any jurisdiction or under this Agreement,
or required to prevent a breach or default by the Seller Parties under any
lease, agreement, contract, insurance policy, promissory note or other document
or instrument by virtue of the transactions contemplated by this Agreement shall
have been obtained, on terms reasonably satisfactory to Buyer, and shall be in
full force and effect.
(7) Opinion of Counsel. At the Closing, Buyer shall have been furnished
with an opinion of the Hannig Law Firm LLP, counsel for the Seller Parties,
dated the Closing Date and addressed to Buyer, in form and substance acceptable
to Buyer and Buyer's counsel.
(8) Absence of Certain Changes. There shall not have occurred prior to the
Closing Date (i) any material adverse change in the business of the Company, the
assets of the Company, or the Shares or in the financial condition of the
Company, (ii) damage or destruction in the nature of a casualty loss, whether
covered by insurance or reinsurance or not, affecting in any material respect
the operation of the business of the Company or the assets of the Company, or
(iii) the legal inability of Seller to convey, assign and transfer to Seller all
of the Shares.
(9) Legislation. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any domestic or foreign government,
governmental or administrative agency or court which would make the transactions
contemplated by this Agreement illegal or otherwise prevent the consummation
thereof.
(10) Corporate Action of the Company. The directors of the Company shall
have taken all corporate action necessary to approve the transactions called for
by this Agreement and certified copies of resolutions duly adopted by the
directors of the Company reasonably satisfactory to counsel for Buyer in
connection with the foregoing shall have been furnished to Buyer on or prior to
the Closing Date.
(11) Corporate Action of Buyer. The directors of Buyer shall have taken all
corporate action necessary to approve the transactions called for by this
Agreement.
(12) Lease. Seller shall have leased to the Company the 520 Parrott
Property pursuant to a written lease agreement which shall be in form and
substance acceptable to Buyer.
(13) Consulting Agreements. The Company shall have entered into a written
consulting agreement with each of Frederick Parkinson and Barbara Parkinson,
each of which shall be in form and substance mutually acceptable to Buyer and
Seller.
(14) Covenant Not to Compete. Seller shall execute and deliver to Buyer a
written agreement not to compete, in form and substance of Exhibit A attached
hereto and incorporated herein by reference (the "AGREEMENT NOT TO COMPETE").
PAGE -20-
<PAGE> 21
(15) Environmental Due Diligence. On or before September 30, 1999, Buyer
shall have completed and approved its environmental due diligence investigation
of the Company and the Business to the reasonable, good faith satisfaction of
Buyer.
(16) Company and Seller shall have entered into an assignment of the 530
Parrott Property Lease in form and substance reasonably satisfactory
to Seller and Buyer.
6.2 Conditions to Obligations of the Seller Parties. Each and every obligation
of the Seller Parties to be performed at the Closing shall be subject to the
satisfaction as of or before such time of the following conditions (unless
waived in writing by the Seller Parties):
(1) Representations and Warranties. The representations and warranties of
Buyer set forth in Section 4.2 of this Agreement shall have been true and
correct when made and shall be true and correct at and as of the Closing as if
such representations and warranties were made as of such date and time, other
than such other representations and warranties as are made as of another date,
which shall be true and correct in all material respects as of such other date;
and the covenants and agreements contained in this Agreement to be complied with
by Buyer on or before the Closing shall have been complied with in all material
respects.
(2) Performance of Agreement. All covenants, conditions and other
obligations under this Agreement which are to be performed or complied with by
Buyer shall have been fully performed and complied with at or prior to the
Closing.
(3) Absence of Governmental or Other Objection. There shall be no pending
or threatened lawsuit challenging the transaction by any body or agency of the
federal, state or local government or by any third party, and the consummation
of the transaction shall not have been enjoined by a court of competent
jurisdiction as of the Closing and any applicable waiting period under any
applicable federal law shall have expired.
(4) Approval of Documentation. The form and substance of all certificates,
instruments, opinions and other documents delivered or to be delivered to Seller
under this Agreement shall be reasonably satisfactory to Seller and his counsel
in all respects.
(5) Consents and Approvals. All Government Approvals and Required
Consents, or other actions or proceedings required to be obtained or taken by
Buyer under the laws of any jurisdiction or under this Agreement, or required to
prevent a breach or default by Buyer under any lease, agreement, contract,
insurance policy, promissory note or other document or instrument by virtue of
the transactions contemplated by this Agreement shall have been obtained, on
terms reasonably satisfactory to the Seller Parties, and shall be in full force
and effect.
(6) Opinion of Counsel. At the Closing, Seller shall have been furnished
with an opinion of Murphy Austin Adams Schoenfeld LLP, counsel for Buyer, dated
the Closing Date and addressed to Seller, in form and substance acceptable to
the Seller Parties and to the Seller Parties' counsel.
(7) Legislation. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any domestic or foreign government,
governmental or administrative agency or court which would make the transactions
contemplated by this Agreement illegal or otherwise prevent the consummation
thereof.
(8) Corporate Action. The directors of Buyer shall have taken all
corporate action necessary to approve the transactions called for by this
Agreement and certified copies of resolutions duly adopted by the directors of
Buyer reasonably satisfactory to counsel for Seller in connection with the
foregoing shall have been furnished to Seller on or prior to the Closing Date.
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<PAGE> 22
(9) Purchase Price. Buyer shall have delivered the Purchase Price to
Seller.
(10) Severance Plan. Buyer shall have caused Polymer Solutions, Inc., the
parent company of Buyer, to execute and deliver to Seller a written Guarantee of
all of the obligations of the Company under the Severance Plan, in form and
substance acceptable to the Seller Parties and to the Seller Parties' counsel.
ARTICLE VII -- INDEMNIFICATION
7.1 Survival of Representations and Warranties. The representations and
warranties in this Agreement, and all statements contained in this Agreement or
any Exhibit or Schedule or any certificate, financial statement or report or
other document delivered pursuant to this Agreement or in connection with the
transactions contemplated hereby (collectively, the "ACQUISITION DOCUMENTS"),
shall survive the signing and delivery of this Agreement and the Closing
hereunder for a two (2) year period immediately following the Closing,
notwithstanding any investigation made at any time by or on behalf of any party.
If written notice of a specific claim made in good faith has been given pursuant
to Section 7.4(b) on or prior to such date, then the relevant representations
and warranties shall survive as to such claim, until the claim has been finally
resolved.
7.2 Indemnification by Seller. Except as otherwise limited by this Article,
Buyer and each of Buyer's agents, successors and assigns shall be indemnified,
defended and held harmless by Seller for any and all liabilities, damages,
claims, costs and expenses, interest, awards, judgments and penalties (including
reasonable attorneys' and experts' fees and expenses) actually suffered or
incurred by them ("BUYER'S LOSS"), arising out of or resulting from:
(1) the breach of any representation or warranty by Seller or the Company
contained herein or in any document delivered by Seller or the Company pursuant
to this Agreement, or the transactions contemplated hereby; or
(2) the breach of any covenant or agreement by Seller or the Company, or
the breach of any covenant or agreement to be performed prior to the Closing by
Seller or the Company.
7.3 Indemnification by Buyer. Except as otherwise limited by this Article,
Seller, the Company, and each of its officers, directors, agents and successors
and permitted assigns, shall be indemnified, defended and held harmless by Buyer
for any and all liabilities, losses, damages, claims, costs and expenses,
interest, awards, judgments, and penalties (including reasonable attorneys' and
experts' fees and expenses) actually suffered or incurred by them ("COMPANY'S
LOSS") arising out of or resulting from:
(1) the breach of any representation or warranty by Buyer contained herein
or in any document delivered by Buyer pursuant to this Agreement, or the
transactions contemplated hereby;
(2) the breach of any covenant or agreement by Buyer, or the breach of any
covenant or agreement to be performed by Buyer contained herein; or
(3) from and after the Closing, and contingent upon the Closing, the
breach by the Company of any of the obligations of the Company under the
Severance Plan.
7.4 General Indemnification Provisions.
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<PAGE> 23
(1) Definitions. For the purposes of this Agreement, the term "INDEMNITEE"
shall refer to the person(s) or entity(ies) indemnified, or entitled, or
claiming to be entitled, to be indemnified, pursuant to the provisions of
Sections 7.2, 7.3 or 7.4, as the case may be, the term "INDEMNITOR" shall refer
to the entity having the obligation to indemnify pursuant to such provisions,
and "LOSS" or "LOSSES" shall refer to the Company's Losses or Buyer's Losses, as
the case may be.
(2) Notice. Within fifteen (15) calendar days of learning of an event that
could require indemnification, an Indemnitee shall give notice to the
Indemnitor, including in such notice a brief description of the facts, stating
the amount of the Loss claimed, and referencing the section of this Agreement
pursuant to which the claim is made.
(3) Defense of Third Party Claims. If an Indemnitee shall receive notice
of a claim by a third party (not a party to this Agreement) that may cause the
Indemnitee a Loss (a "THIRD PARTY CLAIM"), the Indemnitee shall give the
Indemnitor notice of such Third Party Claim within ten (10) calendar days
(provided, however, that failure to give such notice shall not preclude
indemnification under this Article 7 unless there is actual and material
prejudice to the rights of the Indemnitor) and shall permit the Indemnitor, at
its option, to participate in the defense of such Third Party Claim by counsel
of its own choice and at its expense. If, however, the Indemnitor acknowledges
in writing its obligation to indemnify the Indemnitee hereunder against any
Losses that may result from such Third Party Claim (subject to the limitations
set forth herein), then the Indemnitor shall be entitled, at its option, to
assume and control the defense of such Third Party Claim at its expense and
through counsel of its choice if it gives notice of its intention to do so to
the Indemnitee within seven (7) calendar days. However, if the Indemnitee shall
determine that its interests conflict with those of the Indemnitor, then the
Indemnitee shall be entitled to be represented at the Indemnitee's expense by
separate counsel of its choice and to participate in the defense of any such
Third Party Claim. Indemnitee and Indemnitor shall cooperate with each other in
such defense and make available to each other, at the Indemnitor's expense, all
witnesses, pertinent records, materials and information in their possession or
under their control relating thereto as is reasonably required. No Third Party
Claim, except the settlement thereof that involves the payment of money only and
for which the Indemnitee is released by the third party claimant and is totally
indemnified by the Indemnitor, may be settled by the Indemnitor without the
written consent of the Indemnitee, which consent shall not be unreasonably
withheld; provided, however, that if a Third Party Claim is brought that relates
in part to matters for which indemnification pursuant to this Agreement may be
available and in part to matters for which such indemnification may not be
available, a party may settle any segregable portion of such Third Party Claim
as to which such indemnification may not be available. Similarly, no Third Party
Claim that is being defended in good faith by the Indemnitor shall be settled by
the Indemnitee without the written consent of the Indemnitor; provided, however,
that, if a Third Party Claim is brought that relates in part to matters for
which indemnification pursuant to this Agreement may be available and in part to
matters for which such indemnification may not be available, a party may settle
any segregable portion of such Third Party Claim to which such indemnification
may not be available.
7.5 Limitations on Indemnification by Seller.
(1) Limitations on Indemnification by Seller. Except as otherwise provided
in this Article VII, Seller expressly disclaims, to the maximum extent
permissible under law, (i) any duty or obligation to indemnify Buyer or Company
for any Losses arising out of the conduct of the Business by the Company giving
rise to matters disclosed or governed by the Schedules pursuant to Section 4.1
of this Agreement, and (ii) any duty or obligation to indemnify Buyer or the
Company for any remediation of hazardous waste or conditions, environmental
claims, occupational safety or health matters, or liabilities of any kind of the
Company under any law or regulation on any theory or cause of action. Buyer
acknowledges and agrees as follows: (i) Buyer is acquiring the Company and the
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<PAGE> 24
Business as is with all associated liabilities and without any indemnification
by Seller except as otherwise provided in this Article VII; and (ii) Seller's
obligation to indemnify Buyer for any of Buyer's Losses arising from the conduct
of the Business by the Company shall be limited to the express provisions of
this Article VII; provided however, that nothing in this Section 7.5(a) shall be
construed to relieve Seller from any liability or obligation Seller may have
under federal or state law in his capacity as owner of the 520 Parrott Property.
(2) Notwithstanding anything contrary in this Agreement, and with the
exception for Buyer's Losses arising from fraud or willful misconduct by Seller,
Seller shall have no obligation to indemnify Buyer for any Buyer's Losses which
cumulatively total less than Twenty Five Thousand Dollars ($25,000), provided
however that if cumulative Losses exceed Twenty Five Thousand Dollars ($25,000),
Seller shall indemnify, defend and hold Buyer harmless from all such Losses and
provided further that in no event shall any indemnification paid by Seller for
all such Losses pursuant to this Article VII exceed an aggregate of Five Hundred
Thousand Dollars ($500,000).
ARTICLE VIII -- TERMINATION
8.1 Conditions Permitting Termination. The obligations of the parties hereto to
consummate the transactions contemplated hereby may be terminated and abandoned
at any time on or before the Closing Date as follows:
(1) Upon the mutual agreement of all of the parties hereto;
(2) By Buyer, if there has been a material breach by any Seller Party of
any of its representations, warranties or covenants set forth in this Agreement;
(3) By Seller, if there has been a material breach by Buyer of any of its
representations, warranties or covenants set forth in this Agreement;
(4) By Buyer, if any of the conditions precedent set forth in Section 6.2
have not been satisfied or waived by Buyer prior to the Closing;
(5) By Seller, if any of the conditions precedent set forth in Section 6.1
have not been satisfied or waived prior to the Closing; or
(6) Any party, who has not intentionally delayed the Closing, if the
Closing has not occurred on or before the Sunset Date.
ARTICLE IX -- CONCLUDING PROVISIONS
9.1 Notice. All notices, requests, demands and other communications required to
or permitted to be given under this Agreement shall be in writing and shall be
conclusively deemed to have been duly given (a) when hand delivered to the other
party; or (b) when received when sent by telex or facsimile at the address and
number set forth below (provided that any notice given by telex or facsimile
shall be deemed received on the next business day if such notice is received
after 5:00 p.m. (recipient's time) or on a non-business day); or (c) three (3)
business days after the same have been deposited in a United States post office
with first class or certified mail return receipt requested postage prepaid and
addressed to the parties as set forth below; or (d) the next business day after
same have been deposited with a national overnight delivery service reasonably
approved by the parties (Federal Express and DHL Worldwide Express being deemed
approved by the parties),
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<PAGE> 25
postage prepaid, addressed to the parties as set forth below with
next-business-day delivery guaranteed, provided that the sending party receives
a confirmation of delivery from the delivery service provider:
To Buyer: Alternative Materials Technology
311 Otterson Drive, Suite 60
Chico, California 95928
Attention: E. Laughlin Flanagan
Facsimile: (530) 896-0657
With a copy to: Murphy Austin Adams Schoenfeld LLP
1000 G Street, Third Floor
Attention: Russell J. Austin
Sacramento, California 95814
Facsimile: (916) 503-4000
To Seller: Frederick Parkinson
3609 Warner Drive
San Jose, California 95127
Facsimile: ________________
With a copy to: Hannig Law Firm LLP
2991 El Camino Real, Suite 100
Redwood City, California 94061
Attention: Ted J. Hannig, Esq.
Facsimile: (650) 482-2820
To the Company: U.S. Cellulose Co.
520 Parrott Street,
San Jose, California 95112
Attention: Frederick Parkinson
Facsimile: (408) 287-6471
Each party shall make an ordinary, good faith effort to ensure that it will
accept or receive notices that are given in accordance with this Section, and
that any person to be given notice actually receives such notice. A party may
change or supplement the addresses given above, or designate additional
addresses, for purposes of this Section by giving the other parties written
notice of the new address in the manner set forth above.
9.2 Assignment. This Agreement and the various rights and obligations arising
hereunder shall inure to the benefit of and be binding upon Seller, his
successors and permitted assigns, and Buyer and its successors and permitted
assigns. Neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be transferred or assigned (by operation of law or otherwise) by
any of the parties hereto without the prior written consent of the other
parties.
9.3 Expenses. Buyer, the Company and Seller shall each bear and pay all costs
and expenses respectively incurred by each of them on their behalf in connection
with this Agreement, including fees and expenses of their own financial
consultants, accountants and legal counsel. Seller shall pay all applicable
transfer, documentary and any other similar taxes arising out of this Agreement,
or in relation to the transactions referenced herein.
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<PAGE> 26
9.4 Waiver; Consent. This Agreement may not be changed, amended, terminated,
augmented, rescinded, or discharged (other than by performance), in whole or in
part, except by a writing signed by the parties hereto, and no waiver of any of
the provisions or conditions of this Agreement or any of the rights of a party
shall be effective or binding unless such waiver shall be in writing and signed
by the party claimed to have given or consented thereto. Except to the extent
that a party may have otherwise agreed in writing, no waiver by that party of
any condition of this Agreement or breach by the other party of any of its
obligations or representations hereunder or thereunder shall be deemed to be a
waiver of any other condition or subsequent or prior breach of the same or any
other obligation or representation by the other party, nor shall any forbearance
by the first party to seek a remedy for any noncompliance or breach by the other
party be deemed to be a waiver by the first party of its rights and remedies
with respect to such noncompliance or breach.
9.5 Counterparts. This Agreement may be signed simultaneously in multiple
counterparts, each of which shall be deemed an original (including copies sent
to a party by facsimile transmission), but all of which taken together shall
constitute one and the same instrument.
9.6 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 to the extent of its unenforceability, and the balance of the
Agreement shall be interpreted as if such unenforceable provision (to the extent
of its unenforceability) was so excluded, but shall otherwise be enforceable in
accordance with its terms.
9.7 Absence of Third Party Beneficiary Rights. No provisions of this Agreement
are intended, nor shall be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any client, customer,
affiliate, stockholder, partner or employee of any party or any other person or
entity unless specifically provided otherwise herein, and, except as so
provided, all provisions hereof shall be personal solely between the parties to
this Agreement.
9.8 Cooperation and Records Retention. Seller Parties and Buyer shall (a) each
provide the other with such assistance as may reasonably be requested by the
other in connection with the preparation of any Tax Returns, or in connection
with any audit or other examination by any taxing authority or any judicial or
administrative proceedings relating to liability for Taxes, (b) each retain and
provide the other, with any records or other information which may be relevant
to any such Tax Return, audit or examination, proceeding or determination, and
(c) each provide the other with any final determination of any such audit or
examination, proceeding or determination that affects any amount required to be
shown on any Tax Return of the other for any period. Without limiting the
generality of the foregoing, Seller Parties and Buyer shall use reasonable
efforts to retain, until the applicable statute of limitations (including any
extensions) has expired, copies of all Tax Returns, supporting work schedules
and other records or information which may be relevant to such Tax Returns for
all tax periods or portions thereof ending before or including the Closing and
shall not destroy or otherwise dispose of any such records without first
providing the other party with a reasonable opportunity to review and copy the
same.
9.9 Attorneys' Fees. If any party to this Agreement shall take any action to
enforce this Agreement or bring any action or commence any arbitration for any
relief against any other party, declaratory or otherwise, arising out of this
Agreement, the losing party shall pay to the prevailing party a reasonable sum
for attorneys' and experts' fees and costs incurred in bringing such suit or
arbitration and/or enforcing any judgment granted therein, all of which shall be
deemed to have accrued upon the commencement of such action or arbitration and
shall be paid whether or not such action or arbitration is prosecuted to
judgment. Any judgment or order entered in such action or arbitration shall
contain a specific provision providing for the recovery of attorneys' and
experts' fees and costs incurred in enforcing such judgment. For purposes of
this section, attorneys' and experts' fees and costs shall include, without
limitation, fees incurred in the following: (a) post-judgment
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<PAGE> 27
motions and collection actions; (b) contempt proceedings; (c) garnishment, levy,
and debtor and third party examinations; (d) discovery; and (e) bankruptcy
litigation.
9.10 Compulsory Arbitration and Legal Fees. Any controversy, claim and/or
dispute arising out of or relating to this Agreement or the breach hereof or
subject matter hereof (including any action in tort) shall be finally and
exclusively settled by arbitration in San Francisco, California, in accordance
with the then-existing Commercial Arbitration Rules of the American Arbitration
Association (the "AAA"), and judgment upon the award rendered by the arbitrators
may be entered in any court having applicable jurisdiction. Written notice of
demand for arbitration shall be given to the other parties and to the AAA within
six (6) months after the controversy, claim or dispute has arisen or be barred,
and in no event after the date when the institution of court proceedings based
on such dispute would be barred by the applicable statute of limitations.
Controversies, claims and/or disputes shall be resolved by one arbitrator
selected by the mutual agreement of the parties or, failing that agreement
within 45 days after written notice demanding arbitration, by the AAA. There
shall be limited discovery prior to the arbitration hearing as follows: (i)
exchange of witness lists and copies of documentary evidence and documents
related to or arising out of the issues to be arbitrated, and (ii) depositions
of all party witnesses. Depositions shall be conducted in accordance with the
California Code of Civil Procedure, and a court reporter shall record all
hearings, with such record constituting the official transcript of such
proceedings. All decisions of the arbitrator(s) shall be in writing, and the
arbitrator(s) shall provide reasons for the decision. If any arbitration or
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement or to protect the rights obtained under this Agreement, the
prevailing party shall be entitled to its reasonable attorneys' fees, costs and
disbursements in addition to any other relief to which it may be entitled.
9.11 Specific Performance. Notwithstanding Section 9.10, the parties agree that
irreparable damage would occur in the event any provision of this Agreement is
not performed in accordance with the terms hereof, and that the Company and
Buyer shall be permitted to access the court system to obtain injunctive relief
and/or specific performance of the terms hereof.
9.12 Further Action. Each of the parties shall use all reasonable efforts to
take, or cause to be taken, all appropriate action, do or cause to be done all
things reasonably necessary, proper or advisable under applicable laws, and sign
and deliver such documents and other papers, as may be reasonably required to
carry out the provisions of this Agreement, and consummate and make effective
the transactions contemplated by this Agreement.
9.13 Interpretation. As used in this Agreement, the term "PERSON" shall mean and
include any individual, partnership, joint venture, corporation, trust,
unincorporated organization, and government or other department or agency
thereof. Except to the extent the context otherwise requires: (i) any reference
to an Article, Section, Schedule or Exhibit is a reference to an article,
section, schedule or exhibit of this Agreement; (ii) any reference to a section
or a clause is, unless otherwise stated, a reference to a section or a clause of
the Section or subsection in which the reference appears; (iii) the words
"HEREOF", "HEREIN", "HERETO" and the like mean and refer to this Agreement as a
whole, and not merely to the specific Article, Section, subsection, paragraph or
clause in which the respective word appears; (iv) the meaning of defined terms
shall be equally applicable to both the singular and plural forms of the terms
defined; (v) the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be deemed to
always be followed by the words "without limitation"; (vi) references to
agreements and other contractual instruments shall be deemed to include all
subsequent amendments and other modifications thereto; (vii) references to
statutes or regulations are to be construed as including all statutory and
regulatory provisions consolidating, amending or replacing the statute or
regulation referred to; (viii) any table of contents, captions and headings are
for convenience of reference only, and shall not affect the construction of this
Agreement; and (ix) in the computation of periods of time from a specified date
to a later specified date, the word "FROM"
PAGE -27-
<PAGE> 28
means "from and including"; the words "TO" and "UNTIL" each mean "to but
excluding"; and the word "THROUGH" means "TO AND INCLUDING"; (x) the word
"KNOWLEDGE" shall mean actual knowledge without a duty to inquire unless the
circumstances are such that a reasonably prudent person would be put on notice
of the need to inquire; and (xi) words having a technical meaning shall be
interpreted with such meaning. No provision of this Agreement shall be construed
against or interpreted to the disadvantage of any of the parties by any court or
other authority by reason of that party having drafted or proposed such
provision.
9.14 Entire Agreement. This Agreement shall be deemed to include the exhibits
and schedules referred to herein. This Agreement, together with the documents
referred to herein, and the documents to be signed and delivered hereunder
contemporaneously with the Closing embody the entire agreement and understanding
of the parties with respect to the subject matter hereof, and supersede and
extinguish all prior agreements, drafts, representations and understandings,
oral or written, relative to such subject matter. Each of the parties hereby
acknowledges that no representations, inducements, promises or agreements,
verbally or otherwise, have been made by any of the parties, or anyone acting on
behalf of any of the parties, which are not embodied in this Agreement, and that
no other agreement, statement or promise not contained in this Agreement shall
be valid or binding. Each of the parties represents and warrants that it has
fully familiarized itself with this Agreement, and that such party has been
fully authorized to sign this Agreement, and all related documents. The parties
agree that this Agreement shall only be binding when signed by the parties in
the blanks immediately below. If the pages of this Agreement are initialed, such
initialing shall be solely for the purpose of identification. If initialing is
on some, but not all, of the pages of this Agreement, that absence of initialing
shall not affect the validity of this Agreement, to the extent it is signed in
the blanks immediately below.
9.15 Public Statement. Prior to the earlier of Closing or the termination of
this Agreement pursuant to Article VIII, none of the parties hereto shall issue
any public statement or communication regarding this Agreement or the
transactions contemplated in this Agreement, except for such disclosures as are
required to comply with applicable law, without the consent of the parties
hereto, which consent shall not be unreasonably withheld.
9.16 Time. Time is of the essence in the performance of this Agreement.
9.17 Drafting. The parties to this Agreement agree that this Agreement is the
product of joint draftsmanship and negotiation and that should any of the terms
be determined by a court, or in any type of quasi-judicial or other proceeding,
to be vague, ambiguous and/or unintelligible, that the same sentences, phrases,
clauses or other wordage or language of any kind shall not be construed against
the drafting party in accordance with California Civil Code Section 1654, and
that each such party to this Agreement waives the effect of such statute.
9.18 Confidentiality.
(1) The parties hereto shall hold in confidence the information contained
in this Agreement and each of them hereby acknowledges and agrees that all
information related to this Agreement, not otherwise known to the public, is
confidential and proprietary and is not to be disclosed to third persons without
the prior written consent of Buyer and Seller except:
(1) to the extent necessary, to comply with any law, rule or
regulation, or the valid order of any governmental agency or any court of
competent jurisdiction;
(2) as part of its normal reporting or review procedure, to its
auditors and its attorneys; or
PAGE -28-
<PAGE> 29
(3) as necessary to enforce its rights and perform its agreements and
obligations under this Agreement.
(2) Except as permitted by the Seller Parties, or to the extent necessary
to comply with any law, rule or regulation, or the valid order of any
governmental agency or any court of any governmental agency or any court of
competent jurisdiction, Buyer shall not divulge any information it may have
acquired in the course of its due diligence review of the Company and the
Business prior to Closing, unless and until all the transactions contemplated
hereby have been consummated.
(3) If this Agreement is terminated, Buyer and Seller Parties shall, and
shall use their reasonable, good faith efforts to cause their Representatives
to, destroy or deliver to the originating party, upon request, all documents and
other materials, and all copies thereof, obtained from the originating party in
connection with this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
PAGE -29-
<PAGE> 30
(4) The obligations of the parties under this Section 9.18 shall survive
any termination of this Agreement; provided that upon Closing as provided
herein, Buyer shall have no obligation to the Seller Parties under this Section
9.18.
* * *
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed and
delivered as of the day and year first above written.
BUYER:
ALTERNATIVE MATERIALS TECHNOLOGY, a
Nevada corporation
Date: October 18, 1999 By: /s/ William Maligie
------------------------------------
William A. Maligie
President
Date: October 18, 1999 By: /s/ E. Laughlin Flanagan
------------------------------------
E. Laughlin Flanagan
Secretary and Treasurer
COMPANY:
U.S. CELLULOSE CO.,
a California corporation
Date: October 18, 1999 By: /s/ Frederick Parkinson
------------------------------------
Frederick Parkinson
President/Secretary
SELLER:
Date: October 18, 1999 /s/Frederick Parkinson
------------------------------------
Frederick Parkinson
PAGE -30-
<PAGE> 31
SPOUSAL CONSENT
The undersigned ("Spouse"), who is the spouse of FREDERICK PARKINSON
("Parkinson"), hereby consents to Parkinson's execution of that certain Stock
Purchase Agreement, dated as of October 15, 1999, by and among ALTERNATIVE
MATERIALS TECHNOLOGY, a Nevada corporation, U.S. CELLULOSE CO., a California
corporation (the "Company"), and Parkinson (the "Agreement"). The Spouse
understands that her interest, if any, in the Agreement, in the Company, or in
any of the matters involved in the Agreement is or may be community property of
the Spouse and Parkinson. The Spouse acknowledges that the Company is a
business, and that the interest in the Company with which the foregoing
Agreement deals is also a business (that business and that of the Company being
called the "businesses" below) and that the Parkinson is operating or managing
the business to the extent provided in the Agreement and has and shall have the
primary management and control of the businesses, to the extent so provided. To
the extent that Spouse may lawfully do so, Spouse confirms that Parkinson may
act alone with respect to all matters that the Agreement provides that Parkinson
(in any capacity referred to in the Agreement) may act, but Parkinson shall give
prior written notice to Spouse of any sale, lease, exchange, encumbrance or
other disposition by Parkinson of all or substantially all of the interest of
Parkinson and the Spouse in the Agreement or in the Company. The Spouse also
agrees that failure of Parkinson to provide any such notice shall not impair,
invalidate, or adversely affect the validity of any transaction or of any
interest transferred as to which notice is above required to be given. The
Spouse also confirms that the authority of Parkinson includes transfer of the
stock or assets of the Company pursuant to the Agreement, granting of consents
or entering into agreements pursuant to the Agreement and consenting to and
executing amendments thereof, without further signature or consent of or notice
to Spouse.
Dated: October 18, 1999 /s/ Barbara Parkinson
------------------------------------
Barbara Parkinson
PAGE -31-
<PAGE> 1
EXHIBIT 2.2
CONTINUING GUARANTY
THIS CONTINUING GUARANTY (this "Guaranty") is made as of October 18,
1999, by POLYMER SOLUTIONS, INC., a Nevada corporation ("Guarantor"), in favor
of FREDERICK PARKINSON ("Parkinson"), with reference to the following facts:
RECITALS
1. Pursuant to that certain Stock Purchase Agreement, dated October 15,
1999 (the "Stock Purchase Agreement"), by and among Alternative Materials
Technology, a Nevada corporation ("AMT"), U.S. Cellulose Co., a California
corporation (the "Company") and Parkinson, Parkinson requires that AMT accept,
assume, satisfy and perform all of the Company's obligations under the Severance
Plan in the U.S. Cellulose Co. Employee Severance Plan, dated October 15, 1999
(the "Severance Plan") and that Guarantor guaranty AMT's acceptance, assumption,
satisfaction and performance of such obligations.
2. The execution of the Stock Purchase Agreement by Parkinson and AMT is
valuable to Guarantor, and this Guaranty is in furtherance of Guarantor's
business and other interests.
GUARANTY
NOW, THEREFORE, in consideration of Parkinson executing the Stock
Purchase Agreement, and as an inducement to Parkinson to do so, Guarantor hereby
agrees, covenants and warrants as follows:
1. CONSIDERATION. Guarantor acknowledges that the giving of this
Guaranty is a material condition precedent to Parkinson executing the Stock
Purchase Agreement, and that Guarantor has derived or expects to derive material
financial advantages or other benefits commensurate in value to the obligations
and liabilities being undertaken by Guarantor under the terms of this Guaranty.
2. ASSUMPTION OF SEVERANCE PLAN GUARANTEED. In consideration of the
foregoing, and for other valuable consideration, Guarantor unconditionally,
irrevocably and absolutely guarantees the full acceptance, assumption,
satisfaction and performance by AMT of all of the Company's obligations under
the Severance Plan. This Guaranty is irrevocable and unconditional. This
Guaranty shall continue to be effective or be reinstated, as the case may be.
3. NATURE OF GUARANTOR'S LIABILITY. The obligations and liabilities of
Guarantor under this Guaranty are independent of the obligations and liabilities
of AMT, and a separate action or actions may be brought and prosecuted against
Guarantor whether action is brought against AMT or any other guarantor or
Person, or whether AMT or any other guarantor or Person are joined in any such
action or actions. As used in this Guaranty, "Person" means any individual or
entity.
4. GUARANTOR'S AUTHORIZATION. Guarantor authorizes Parkinson, without
notice, demand or consent of any kind, and without affecting Guarantor's
liability under this Guaranty, from time to time, to release or substitute any
Person liable under the Severance Plan, any other guarantor
1
<PAGE> 2
of the Severance Plan, or any other Person providing support for the Severance
Plan to Parkinson, this Guaranty, or any other guaranty.
5. PARKINSON' REMEDIES. Guarantor waives any right to require Parkinson
to do any one or more of the following: (a) proceed against AMT or any other
guarantor or Person liable under the Severance Plan; or (b) pursue any other
remedy in Parkinson' power whatsoever.
6. WAIVERS. Guarantor waives any and all rights or defenses arising by
reason of:
(1) the statute of limitations in any action as to or relating to
this Guaranty or the Stock Purchase Agreement, except that as may be asserted or
pleaded by AMT under the Stock Purchase Agreement;
(2) the omission of any demand, presentment, protest or notice of
any kind, including without limitation notice of default under the Stock
Purchase Agreement; or
(3) until all the obligations are satisfied, any claims or other
rights which Guarantor may now have or hereafter acquire against AMT, which
claims or other rights arise from the existence or performance of Guarantor's
obligations under this Guaranty or the obligations including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution
or indemnification.
7. NOTICES. Any notice given by any party under this Guaranty shall be
in writing and personally delivered, sent by United States mail, postage
prepaid, or sent by telex or other authenticated message, charges prepaid and
addressed as follows:
To Guarantor:
Polymer Solutions, Inc.
311 Otterson Drive, Suite 60
Chico, California 95928
Attention: E. Laughlin Flanagan
Facsimile: (530) 896-0657
To Parkinson:
Frederick Parkinson
3609 Warner Drive
San Jose, California 95127
Facsimile: _____________
With Copy to Hannig Law Firm
2991 El Camino Real, Suite 100
Redwood City, CA 94061-4003
Attention: Ted Hannig
Facsimile: (650) 482-2820
2
<PAGE> 3
Guarantor and Parkinson may change the place to which notices, requests,
and other communications are to be sent by giving written notice of such change
to the other.
8. BINDING EFFECT. This Guaranty shall be binding upon Guarantor, its
permitted successors, representatives and assigns, and shall inure to the
benefit of Parkinson and their successors and assigns; provided, however, that
Guarantor may not assign or transfer its obligations under this Guaranty without
the prior written consent of Parkinson, which consent may be withheld in
Parkinson' sole discretion.
9. NO WAIVER. Any waiver, consent or approval of any kind by Parkinson
must be in writing and shall be effective only to the extent set forth in such
writing. No failure or delay on the part of Parkinson in exercising any power,
right or privilege under this Guaranty shall operate as a waiver thereof, and no
single or partial exercise of any such power, right or privilege shall preclude
any further exercise thereof, or the exercise of any other power, right or
privilege.
10. RIGHTS CUMULATIVE. All rights and remedies existing under this
Guaranty are cumulative to, and not exclusive of, any other rights or remedies
under contact or applicable law.
11. UNENFORCEABLE PROVISIONS. Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall be so only as to such
jurisdiction and only to the extent of such prohibition or unenforceability, but
all the remaining provisions of this Guaranty shall remain valid and
enforceable.
12. GOVERNING LAW. This Guaranty shall be governed by and construed in
accordance with the laws of the State of California.
13. CHOICE OF FORUM. Any dispute that arises under or relates to this
Guaranty (whether contract, tort, or both) shall be resolved in a superior court
in San Francisco, California. Each of the parties hereby irrevocably waives, to
the fullest extent permitted by law, any objection that it may now or hereafter
have to the laying of venue in any such court and any claim that any such court
is an inconvenient forum.
14. INDEMNIFICATION. Guarantor shall pay and protect, defend and
indemnify Parkinson and his agents and representatives against, and hold
Parkinson harmless from, all claims, actions, proceedings, liabilities, damages,
losses, expenses (including without limitation attorneys' fees and costs) and
other amounts incurred by Parkinson arising from (a) the matters contemplated by
this Guaranty or (b) any contention that AMT or Guarantor has failed to comply
with any law, rule, regulation, order or directive applicable to AMT's or
Guarantor's sales, leases or performance of services to their respective
customers, including without limitation those sales, leases and services
requiring consumer or other disclosures; provided, however, that this
indemnification shall not apply to any of the foregoing incurred solely as a
result of Parkinson' gross negligence or willful misconduct. This
indemnification shall survive the payment and satisfaction of all Guarantor's
obligations and liabilities to Parkinson.
15. COMPULSORY ARBITRATION; LEGAL FEES. Any controversy, claim and/or
dispute arising out of or relating to this Guaranty or the breach hereof or
subject matter hereof (including any action in tort) shall be finally and
exclusively settled by arbitration in San Francisco, California, in
3
<PAGE> 4
accordance with the then-existing Commercial Arbitration Rules of the American
Arbitration Association (the "AAA"), and judgment upon the award rendered by the
arbitrators may be entered in any court having applicable jurisdiction. Written
notice of demand for arbitration shall be given to the other parties and to the
AAA within six (6) months after the controversy, claim or dispute has arisen or
be barred, and in no event after the date when the institution of court
proceedings based on such dispute would be barred by the applicable statute of
limitations. Controversies, claims and/or disputes shall be resolved by one
arbitrator selected by the mutual agreement of the parties or, failing that
agreement within 45 days after written notice demanding arbitration, by the AAA.
There shall be limited discovery prior to the arbitration hearing as follows:
(i) exchange of witness lists and copies of documentary evidence and documents
related to or arising out of the issues to be arbitrated, and (ii) depositions
of all party witnesses. Depositions shall be conducted in accordance with the
California Code of Civil Procedure, and a court reporter shall record all
hearings, with such record constituting the official transcript of such
proceedings. All decisions of the arbitrator(s) shall be in writing, and the
arbitrator(s) shall provide reasons for the decision. If any arbitration or
action at law or in equity is necessary to enforce or interpret the terms of
this Guaranty or to protect the rights obtained under this Guaranty, the
prevailing party shall be entitled to its reasonable attorneys' fees, costs and
disbursements in addition to any other relief to which it may be entitled.
16. ENTIRE AGREEMENT. This Guaranty is intended by Guarantor and
Parkinson as the final expression of Guarantor's obligations and liabilities to
Parkinson described herein and supersedes all prior understandings or agreements
concerning the subject matter hereof. This Guaranty may be amended only by a
writing signed by Guarantor and Parkinson.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as set
forth below.
GUARANTOR:
POLYMER SOLUTIONS, INC., a Nevada
corporation
Date: October 18, 1999 By: /s/ E.L. FLANAGAN
---------------- -----------------------------
E. Laughlin Flanagan
President
Date: October 18, 1999 By: /s/ D.F. JONES
---------------- -----------------------------
Darryl F. Jones
Secretary and Treasurer
4
<PAGE> 1
EXHIBIT 2.3
U.S. CELLULOSE CO.
EMPLOYEE SEVERANCE PLAN
OCTOBER 15, 1999
1. INTRODUCTION
1.1 PURPOSE. The purpose of the U.S. Cellulose Employee Severance Plan
(the "Plan") is to provide certain benefits to employees of U.S. Cellulose Co.,
a California corporation (the "Company"), upon a change in ownership of the
Company.
1.2 NOT A QUALIFIED RETIREMENT PLAN. The Plan is not a qualified
retirement plan under Section 401 of the Internal Revenue Code of 1986, as
amended, nor is it subject to any provision of the Employee Retirement Income
Security Act of 1974, as amended. The Plan shall be governed by, and construed
in accordance with, the laws of the State of California.
1.3 EFFECTIVE DATE. The Company hereby establishes the Plan, as set
forth in this document, effective October 15, 1999. Any of the Company's prior
policies and practices, whether formal or informal, regarding severance or
similar payments upon employment termination for the Participants, are hereby
revoked and superseded by this Plan.
1.4 VESTING. This Plan establishes and vests, as of the date of any
Change in Control (as defined below), in each Participant a contractual right to
the benefits to which he or she is entitled pursuant to the terms thereof,
enforceable by the Participant against the Company.
1.5 NO TRUST CREATED. The Severance Payments (as defined below) and
costs of this Plan shall be paid by the Company out of its general assets.
Nothing contained in this Plan shall be deemed to create a trust of any kind.
2. ADMINISTRATION
2.1 THE BOARD OF DIRECTORS. The Plan shall be administered by the Board
of Directors of the Company. The interpretation and construction by the Board of
Directors of the Company of any provisions of the Plan or of any right granted
under the Plan shall be final and binding on all Participants. The Board of
Directors of the Company may adopt such rules or guidelines as it deems
appropriate to implement the Plan. No member of the Board of Directors of the
Company shall be liable for any action or determination made in good faith with
respect to the Plan or any right granted under the Plan.
2.2 ACTION BY THE COMPANY. Any action required or permitted by the
Company under the Plan shall be by resolution of its Board or any person or
persons authorized by resolution of its Board.
3. PLAN PARTICIPANTS
3.1 PARTICIPANTS. The participants in the Plan (the "Participants")
shall consist of each full-time employee of the Company who has been employed by
the Company on a full time basis
1
<PAGE> 2
for at least one year immediately preceding the date of any Change in Control
(as defined below), with the exception of Frederick L. and Barbara Parkinson.
For informational purposes only, Exhibit A attached hereto sets forth each of
the full-time employees of the Company as of October 15, 1999, together with the
date on which such employee became a full-time employee of the Company.
3.2 CHANGE IN CONTROL. For purposes of this Plan, a "Change in Control"
shall mean the earlier to occur of any of the following events with respect to
the Company:
(1) The acquisition by any individual, group of individuals or
other entity (excluding the acquisition by any current shareholders of the
Company or an employee stock ownership plan or any Affiliate (as defined below)
of the Company) of fifty-one percent (51%) or more of the voting power of the
voting securities of the Company;
(2) The consummation of a merger, consolidation or reorganization
of the Company (other than a merger, consolidation or reorganization upon the
consummation of which shareholders of the Company or an Affiliate shall own more
than a majority of the then outstanding voting securities of the surviving
company);
(3) The liquidation, dissolution or sale of eighty percent (80%)
or more of the aggregate fair market value of the assets of the Company to any
individual, group of individuals or other entity (excluding the acquisition by
any current shareholders of the Company or an employee stock ownership plan or
any Affiliate).
3.3 AFFILIATE. For purposes of this Plan, an "Affiliate" shall mean any
other individual, corporation, partnership, limited liability company or other
entity, directly or indirectly, controlling or controlled by or under direct
common control with the Company. For the purposes of this definition, "control"
when used with respect to any specified individual or entity means the power to
direct the management and policies of such individual or entity, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the meanings "controlling" and "controlled" shall have meanings
correlative to the foregoing.
4. SEVERANCE PAYMENTS
4.1 SEVERANCE PAYMENTS. Upon any Change in Control (as defined below),
the Company shall pay to each Participant a severance payment (the "Severance
Payment") in the amount which shall be determined by the following schedule (the
"Severance Payment Amount"):
(1) For any Participant who has been employed by the Company on a
full-time basis for at least the one (1) year period immediately preceding the
Change in Control, but not more than the two (2) year period immediately
preceding the Change in Control, the Severance Payment Amount shall be the
amount equal to such Participant"s monthly salary as of February 28, 1999
multiplied by three (3);
(2) For any Participant who has been employed by the Company
on a full-time basis for at least the two (2) year period immediately preceding
the Change in Control, but not more than the three (3) year period immediately
preceding the Change in Control, the Severance Payment Amount shall be the
amount equal to such Participant"s monthly salary as of February 28, 1999
multiplied by six (6);
2
<PAGE> 3
(3) For any Participant who has been employed by the Company on a
full-time basis for at least the three (3) year period immediately preceding the
Change in Control, but not more than, the four (4) year period immediately
preceding the Change in Control, the Severance Payment Amount shall be the
amount equal to such Participant"s monthly salary as of February 28, 1999
multiplied by nine (9); and
(4) For any Participant who has been employed by the Company on a
full-time basis for at least the four (4) year period immediately preceding the
Change in Control, the Severance Payment Amount shall be the amount equal to
such Participant's monthly salary as of February 28, 1999 multiplied by twelve
(12).
4.2 LIMITATION. In no event shall the aggregate Severance Payment Amount
for all Participants due a Severance Payment under this Plan (the "Aggregate
Severance Payment Amount") exceed the aggregate amount equal to Four Hundred
Thousand Dollars ($400,000) (the "Severance Payment Amount Maximum"). If the
Aggregate Severance Payment Amount exceeds the Severance Payment Amount Maximum,
then the Severance Payment Amount due each Participant shall be determined by
applying the percentage that each Participant would be entitled to participate
in the Aggregate Severance Payment Amount at the time of the Change in Control
against the Severance Payment Amount Maximum.
4.3 RELEASE. As a condition to receipt of payments under this Plan, (a)
a Participant must execute and deliver to the Company a written release, in the
form attached hereto as Exhibit B and incorporated herein by reference (the
"Release"), which shall become effective in accordance with its terms and (b)
any revocation period required under any applicable law, including, without
limitation, any revocation period set forth in the Release, shall have expired.
The failure or refusal of a Participant to sign a Release, or the revocation of
a Release (to the extent permitted by its terms) shall disqualify the
Participant from receiving benefits under this Plan. If a Participant files a
legal action asserting any claim or demand within the scope of the Release, the
Company shall retain all rights and benefits of the Release and may (a) cancel
all future obligations under the Release; and (b) recoup the value of all
payments and benefits paid under this Plan, together with the Company's costs
and attorneys fees.
5. PAYMENT OF SEVERANCE PAYMENT AMOUNTS
5.1 PAYMENT OF SEVERANCE PAYMENT AMOUNTS. All Severance Payment Amounts
shall be payable by the Company in cash, net of any required employer and
employee payroll tax payments and withholdings, at the times set forth in
Sections 5.2 through 5.4 of this Plan. The Company reserves the right to offset
Severance Payment Amounts payable under this Plan by any advanced monies the
Participant owes the Company.
5.2 INVOLUNTARY TERMINATION. If a Participant is involuntarily
terminated following a Change in Control, the Company or its successor shall pay
the Severance Payment Amount due such Participant in thirty-six (36) equal
monthly installments, with the first payment due on the first day of the month
immediately following such involuntary termination, and each subsequent payment
due on the first day of each successive month thereafter. For purposes of this
Plan, a Participant shall be deemed to have been "involuntary terminated
following a Change of Control" upon the occurrence of any of the following: (a)
a Participant is terminated as an employee of the
3
<PAGE> 4
Company or its successor within twelve (12) months of the Change of Control
(other than a termination for Cause (as defined below)), or (b) the Company or
its successor informs Participant, at any time within twelve (12) months of the
Change in Control, that such Participant's continued employment with the Company
or its successor is conditioned upon the relocation of such Participant's place
of employment to a location in excess of thirty (30) miles from such
Participant's prior place of employment, and as a result of such relocation
condition, such Participant terminates his or her employment with the Company or
its successor.
5.3 VOLUNTARY TERMINATION. If a Participant's employment with the
Company or its successor is terminated following a Change in Control for any
reason other than that which would constitute an involuntary termination
pursuant to Section 5.2 of the Plan, the Company or its successor shall pay the
Severance Payment Amount due such Participant in one lump sum amount upon the
three (3) year anniversary of such Participant's termination of employment
pursuant to this Section 5.3. Such anniversary date will not be extended for any
such Participant who is rehired as an employee, an independent contractor, or in
other such capacity by the Company at any time before the Severance Payment
Amount is paid to such Participant pursuant to this Plan.
5.4 EMPLOYED PARTICIPANTS. For any Participant who remains employed by
the Company or its successor for the three (3) year period immediately following
the Change in Control, the Company or its successor shall pay the Severance
Payment Amount due such Participant in thirty-six (36) equal monthly
installments, with the first payment due on the first day of the month
immediately following the three (3) year anniversary of the Change in Control,
and each subsequent payment due on the first day of each successive month
thereafter. All such payments shall be in addition to any other salary or
benefits received by the Participant by virtue of the Participant's continued
employment by the Company or its successor.
5.5 DEATH OR LEGAL INCAPACITY. If any Participant dies or becomes
legally incapacitated prior to the date that all of the Severance Payment Amount
is paid to such Participant pursuant to this Plan, then the Company or its
successor shall pay to such Participant's beneficiary or beneficiaries in the
case of such death, or to such Participant's legal guardian or conservator, as
applicable, in the case of such legal incapacity, any and all remaining unpaid
payments of the Severance Payment Amount due such Participant under this Plan as
and when such payments would have been paid to such Participant under the Plan.
If a Participant dies while an employee of the Company or its successor or
suffers a permanent disability or legal incapacity resulting in the termination
of the Participant's employment within the three (3) year period immediately
following the Change in Control, the Company or its successor shall pay the
Severance Payment Amount due such Participant in one lump sum amount within six
(6) months of the Participant's death or the termination of Participant's
employment.
5.6 REHIRED EMPLOYEES. A Participant who is rehired as an employee, an
independent contractor, or in other such capacity by the Company at any time
before all of the Severance Payment Amount is paid to such Participant pursuant
to this Plan, following an involuntary termination described in Section 5.2,
shall continue to receive such payments under this Plan in accordance with the
payment schedule set forth in Section 5.2 and will not be required to reimburse
the Company for payments already made.
5.7 OTHER BENEFIT PLANS. No amount paid to a Participant under this Plan
shall be deemed to be compensation with respect to the Participant's entitlement
to benefits under any
4
<PAGE> 5
employee benefit plan established by the Company for its employees unless
otherwise specifically provided in such plan or such other individual employment
arrangements as may apply to the Participant.
5.8 TERMINATION FOR CAUSE. If the Company terminates the Participant for
Cause, then the Participant shall not be entitled to receive severance or other
benefits under this Plan and shall be entitled only to those benefits (if any)
as may be available under the Company's then existing benefit plans and policies
at the time of such termination. "Cause" shall mean (i) any act of personal
dishonesty taken by the Participant in connection with his or her
responsibilities as an Employee and intended to result in substantial personal
enrichment of the Participant, (ii) the Participant's conviction of a felony
that is injurious to the Company, or (iii) a willful act by the Participant
which constitutes gross misconduct and which is injurious to the Company.
6. MISCELLANEOUS
6.1 WITHHOLDING TAXES. To the extent required by applicable federal,
state or local law, the recipient of any payment or distribution under the Plan
shall make arrangements satisfactory to the Company or its successor for the
satisfaction of any withholding tax obligations that arise by reason of the
receipt or vesting of such payment or distribution. The Company or its successor
shall not be required to make any cash payment under the Plan until such
obligations are satisfied.
6.2 ASSIGNMENT. Except as provided in Section 5.5, no rights or
interests granted by the Company under this Plan to any Participant shall be
anticipated, assigned, attached, garnished, optioned, transferred or made
subject to any creditor's process, whether voluntarily, involuntarily or by
operation of law, and any act in violation of this Section shall be void.
6.3 AMENDMENT. Any amendment, modification or termination of this Plan
shall require the written consent of the Company and all of the Participants.
5
<PAGE> 6
6.4 EMPLOYMENT STATUS. This Plan does not constitute a contract of
employment or impose on the Participant or the Company any obligation to retain
the Participant as an Employee, to change the status of the Participant's
employment, or to change the Company's policies regarding termination of
employment. If the Participant's employment with the Company or a successor
entity terminates for any reason, the Participant shall not be entitled to any
payments, benefits, damages, awards or compensation other than as provided by
this Plan, or as may otherwise be available in accordance with the Company's
established employee plans and practices or other agreements with the Company at
the time of termination.
6.5 COMPANY'S SUCCESSORS. Any successor to the Company (whether direct
or indirect and whether by purchase, lease, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Plan and agree expressly to
perform the obligations under this Plan by executing a written agreement. For
all purposes under this Plan, the term "Company" shall include any successor to
the Company's business and/or assets which executes and delivers the assumption
agreement described in this subsection or which becomes bound by the terms of
this Plan by operation of law.
6.6 PARTICIPANT'S SUCCESSORS. All rights of the Participant hereunder
shall inure to the benefit of, and be enforceable by, the Participant's personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
6.7 NO DUTY TO MITIGATE. The Participant shall not be required to
mitigate the amount of any benefits contemplated by this Plan, nor shall any
such benefits be reduced by any earnings or benefits that the Participant may
receive from any other source.
6.8 CAPTIONS. The captions of articles, sections, and paragraphs of this
Plan are for convenience only and shall not control or affect the meaning or
construction of any of its provisions.
6.9 SEVERABILITY. Whenever possible, each provision of the Plan shall be
interpreted in such manner as to be effective and valid under applicable law.
If, however, any provision of the Plan shall be held to be prohibited by or
invalid under applicable law, then (a) such provision shall be deemed amended
to, and to have contained from the outset such language as shall be necessary
to, accomplish the objectives of the provision as originally written to the
fullest extent permitted by law; and (b) all other provisions of the Plan shall
remain in full force and effect.
6
<PAGE> 7
IN WITNESS WHEREOF, U.S. CELLULOSE CO., a California corporation,
hereby adopts the U.S. CELLULOSE CO. EMPLOYEE SEVERANCE PLAN, effective as set
forth above, as of 15th Day of October, 1999.
U.S. CELLULOSE CO., a California
corporation
Date: October 18, 1999 By: /s/ FREDERICK PARKINSON
------------------------------------
Frederick Parkinson
President/Secretary
7
<PAGE> 1
EXHIBIT 2.4
ASSIGNMENT AND ASSUMPTION OF LEASE;
ACKNOWLEDGMENT AND CONSENT THERETO
This ASSIGNMENT AND ASSUMPTION OF LEASE, dated October 18, 1999 for
reference purposes only, is by and between U.S. CELLULOSE CO., a California
corporation ("Tenant"), and FREDERICK PARKINSON ("Tenant's Assignee").
RECITALS
1. Tenant is the lessee under that certain Standard
Industrial/Commercial Single-Tenant Lease -- Gross, dated September 21, 1999
(the "Lease"), by and between Fred Yrueta ("Landlord") and Tenant, pursuant to
which Tenant has leased from Landlord those certain premises commonly known as
530 Parrott Street, San Jose, California (the "Property").
2. Tenant, Tenant's Assignee and Alternative Materials Technology, a
Nevada corporation, have entered into that certain Stock Purchase Agreement,
dated October 15, 1999 (the "Agreement"), pursuant to which Tenant has agreed to
assign and delegate to Tenant's Assignee, and Tenant's Assignee has agreed to
accept all of Tenant's right, title and interest, and all of Tenant's
obligations, under the Lease, as set forth herein.
ASSIGNMENT AND ASSUMPTION OF LEASE
NOW, THEREFORE, for valuable consideration, receipt of which is
hereby acknowledged, Tenant and Tenant's Assignee hereby agree as follows:
1. EFFECTIVE DATE. This Assignment and Assumption of Lease shall be
deemed effective as of December 1, 1999 (the "Effective Date").
2. ASSIGNMENT OF LEASE. Effective as of the Effective Date, Tenant
hereby assigns, sells and conveys and otherwise transfers to Tenant's Assignee
all of Tenant's right, title and interest, and delegates all of Tenant's
obligations, as lessee in and to the Lease including, without limitation, any
security deposit and/or prepaid rent held by Landlord, and all rights of first
refusal, options and/or similar rights contained in the Lease, together with all
buildings, structures and improvements located on the Property (collectively,
the "Premises").
3. ASSUMPTION OF LEASE. Tenant's Assignee hereby accepts all of Tenant's
right, title and interest in and to the Lease and the Premises and assumes and
agrees to pay, perform and observe each and every obligation, covenant,
agreement and condition to be paid, performed or observed by the lessee pursuant
to the Lease arising on and after the Effective Date of this Assignment
including, without limitation, all liabilities of the Tenant that may accrue if
the Landlord refuses to consent to the assignment of Tenant's right, title and
interest in the Lease to Tenant's Assignee as provided herein.
4. CONSENT OF LANDLORD. The parties hereto acknowledge and agree that
the consent of Landlord to the foregoing assignment of Tenant's right, title and
interest in the Lease to Tenant's Assignee and the corresponding acceptance
thereof and assumption of Tenant's obligations, terms, covenants, conditions and
agreements made under the Lease by Tenant's
1
<PAGE> 2
Assignee, is required under the Lease. Tenant's Assignee agrees to use its best
efforts to obtain such consent of Landlord. Tenant agrees to waive the condition
that Landlord's consent be obtained prior to Closing (as defined in the
Agreement) in reliance on the agreements of Tenant's Assignee set forth in
Section 3 above and in this Section 4, and provided that Tenant's Assignee
executes and delivers this Assignment and Assumption of Lease at Closing.
5. RENT FOR OCTOBER AND NOVEMBER 1999. Tenant's Assignee hereby
represents and warrants to Tenant that the amount of rent under the Lease for
the months of October 1999 and November 1999 is Six Thousand Seven Hundred Fifty
Dollars ($6,750) per month.
6. WAIVER OF RIGHTS UNDER LEASE. Tenant hereby waives any first refusal,
option or similar rights under the Lease in connection with the foregoing
assignment of Tenant's right, title and interest in the Lease to Tenant's
Assignee and the corresponding acceptance thereof and assumption of Tenant's
obligations, terms, covenants, conditions and agreements made under the Lease by
Tenant's Assignee.
7. COUNTERPARTS. This Assignment and Assumption of Lease may be signed
simultaneously in multiple counterparts, each of which shall be deemed an
original (including copies sent to a party by facsimile transmission), but all
of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Tenant and Tenant's Assignee have executed this
Assignment and Assumption of Lease as set forth below.
TENANT:
U.S. CELLULOSE CO., a California
corporation
Dated: October 18, 1999 By: /s/ FREDERICK PARKINSON
----------------------------------
Name: Frederick Parkinson
Title: President/Secretary
TENANT'S ASSIGNEE:
Dated: October 18, 1999 By: /s/ FREDERICK PARKINSON
----------------------------------
Frederick Parkinson
2
<PAGE> 3
ACKNOWLEDGMENT AND CONSENT
This ACKNOWLEDGMENT AND CONSENT is made by FRED YRUETA
("Landlord") with respect to the foregoing Assignment and Assumption of Lease.
8. CONSENT TO ASSIGNMENT. Landlord hereby approves and consents to the
foregoing assignment of Tenant's right, title and interest in the Lease and the
Premises to Tenant's Assignee and the corresponding acceptance thereof and
assumption of Tenant's obligations, terms, covenants, conditions and agreements
made under the Lease by Tenant's Assignee. Landlord's consent to the assignment
of Tenant's right, title and interest in and to the Lease set forth herein shall
not be construed as a waiver of Landlord's right to reasonably refuse consent to
any future proposed assignment nor as a waiver of any other rights which
Landlord is provided under the Lease upon the occurrence of any proposed or
purported future assignments or subletting of the Premises.
9. WAIVER. Landlord hereby waives any first refusal, option or similar
rights under the Lease in connection with the foregoing assignment of Tenant's
right, title and interest in the Lease to Tenant's Assignee and the
corresponding acceptance thereof and assumption of Tenant's obligations, terms,
covenants, conditions and agreements made under the Lease by Tenant's Assignee.
IN WITNESS WHEREOF, Landlord has executed this Acknowledgment and
Consent as set forth below
LANDLORD:
Dated: October 18, 1999 /s/ FRED YRUETA
------------------------------------
Fred Yrueta
3
<PAGE> 1
EXHIBIT 2.5
CONSULTING AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into on October 18,
1999, by and between ALTERNATIVE MATERIALS TECHNOLOGY, a Nevada corporation
("AMT"), and FREDERICK PARKINSON ("Parkinson"), an individual. AMT and Parkinson
are hereafter collectively referred to as the "Parties."
RECITALS
1. Parkinson is a co-founder and former shareholder of U.S. CELLULOSE
CO., a California corporation (the "USCC").
2. Pursuant to that certain Stock Purchase Agreement, dated October
18,1999, by and among AMT, USCC, and Parkinson (the "Stock Purchase Agreement"),
AMT is purchasing all of the Shares, as defined in the Stock Purchase Agreement,
of USCC's capital stock owned by Parkinson.
3. In order to provide for continuity of management and a smooth
transition to new ownership, AMT wishes to retain Parkinson as a consultant to
render business advice to AMT on the terms set forth in this Agreement, and
Parkinson wishes to serve as a consultant to AMT on the terms set forth herein.
NOW, THEREFORE, for and in consideration of the premises and the terms,
covenants and conditions of this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto agree as follows:
AGREEMENT
1. ENGAGEMENT AND SERVICES.
(1) Engagement of Parkinson. Subject to the terms and conditions
of this Agreement, AMT hereby engages Parkinson as a business consultant to AMT,
and Parkinson hereby accepts such engagement. Parkinson shall provide AMT with
business advisory services during the term of this Agreement, including advice
and counsel on strategic business planning, product development, marketing
strategies, administrative matters, financial planning and general business
development (the "Services"), as requested by AMT. Parkinson shall provide forty
(40) hours per week of service hereunder.
(2) Acceptance. Subject to the terms and conditions of this
Agreement, Parkinson hereby accepts the engagement by AMT set forth in this
Section 1 of this Agreement, and Parkinson agrees to perform the Services.
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<PAGE> 2
(3) Services. In providing the Services to AMT pursuant to this
Agreement, Parkinson shall take the following actions:
(1) Perform the Services in full compliance with applicable
federal, state and local laws and regulations and in full conformity with the
standards of care and diligence normally practiced by parties performing similar
work;
(2) Prior to submitting any report or document prepared by
Parkinson on behalf of AMT to any governmental agency or third party, submit a
copy of such report or document, together with any supporting materials, to AMT
and obtain AMT's approval of the form and contents of same and of the submission
of such report or document to such governmental agency or third party;
(3) Regularly consult with AMT with respect to the status
and results of the Services and submit verbal and written reports as requested
by AMT or as necessary to keep AMT fully informed; and
(4) Maintain full and accurate records and books of accounts
necessary to document (A) all activities undertaken by or on behalf of AMT in
the course of performing the Services hereunder, including without limitation
any and all contacts and communications made by Parkinson on behalf of AMT with
any governmental agency or official or third party; and (B) all charges,
expenses and disbursements incurred by Parkinson, his agents or subcontractors
in performing the Services hereunder. Parkinson will make such books and records
available to AMT upon request during normal business hours.
(4) Work Product. All products produced or obtained by Parkinson
in the performance of the Services shall be the exclusive property of AMT, and
all documents (including, without limitation, all writings, drawings, pictures,
recordings, computer or machine-readable data, and all copies or reproductions
thereof) which describe or relate to the Services performed or to be performed
by Parkinson pursuant to this Agreement or the results thereof, including,
without limitation, all notes, data, reports or other information received or
generated in the performance of this Agreement, shall be the exclusive property
of AMT.
2. TERM OF ENGAGEMENT. The term of this Agreement shall commence on
the effective date of this Agreement and shall continue, unless terminated in
accordance with Section 4 of this Agreement for thirty (30) days (the "Term");
provided however, that AMT shall have two (2) options to extend the Term (the
"Extension Options") for a period of thirty (30) days each (the "Option Term").
3. COMPENSATION.
(1) Monthly Fee. In exchange for the Services to be performed
hereunder by Parkinson, AMT shall pay to Parkinson the amount equal to Ten
Thousand Dollars ($10,000) each month, in equal semi-monthly installments,
during the Term or any Option Term of this Agreement,
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<PAGE> 3
with the first payment to be made on or before November 1, 1999, for the
Services provided by Parkinson during the immediately preceding month. Payments
made by AMT under this Section 3 shall constitute full compensation for all
personnel, materials, supplies, equipment and facilities used by Parkinson in
performing the Services.
(2) Reimbursement of Expenses. AMT shall reimburse Parkinson for
extraordinary expenses incurred by Parkinson in connection with the Services if
and to the extent that Parkinson has obtained AMT's approval of such expenses
prior to the incurrence of such expenses by Parkinson.
4. TERMINATION.
(1) Notwithstanding the provisions of Section 2, AMT shall have
the right, at any time, in its sole discretion and with or without cause, by
written notice to Parkinson, to terminate this Agreement upon delivery of a
written notice of termination to Parkinson thirty (30) days in advance of the
date of termination. Parkinson shall stop work immediately upon receipt of such
written notice of termination and shall promptly deliver to AMT the work product
of Parkinson and any other results of Parkinson's work to date of termination.
(2) Upon termination of this Agreement, AMT shall pay Parkinson a
pro rata amount of the monthly payment due under Section 3 of this Agreement
which relates to any portion of a month prior to the effective date of
termination. The right to terminate this Agreement under Section 4(a) of this
Agreement shall be in addition to, and not in lieu of, any other rights and
remedies AMT may have at law or in equity.
5. CONFIDENTIALITY.
(1) Parkinson understands and acknowledges that Parkinson, his
employees, agents and subcontractors, have been and will be granted access to
certain Confidential Information (as defined below) of AMT in the course of
performing the Services hereunder. The term "Confidential Information" as used
herein shall mean all records and information with respect to AMT, and past or
present activities, that are not a matter in the public domain or lawfully
acquired on a non-confidential basis from others. Parkinson agrees to hold in
strictest confidence, and not to disclose or to permit disclosure to any person
or entity other than AMT or AMT's legal counsel, nor make an unauthorized use
of, any Confidential Information, without the prior written consent of AMT or
AMT's legal counsel.
(2) Parkinson understands and acknowledges that each
communication of Confidential Information collected or developed by Parkinson on
behalf of AMT in the course of performing the Services hereunder constitutes a
confidential communication from AMT to AMT's legal counsel which is intended to
be protected against disclosure to third persons by the attorney-client
privilege and, to the extent Confidential Information is prepared in
anticipation or defense of potential or pending litigation or administrative
proceedings, such communications are intended to be protected from discovery by
the work product doctrine. All written reports and other documents
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<PAGE> 4
which are prepared by Parkinson, his agents or subcontractors in performing the
Services hereunder shall be conspicuously marked "Confidential" on their face
unless Parkinson is otherwise instructed by AMT's legal counsel.
(3) Parkinson shall not, without the prior written approval of
AMT or AMT's legal counsel on AMT's behalf, publish or otherwise disseminate any
advertising, promotion, report, article, research piece or publicity wherein AMT
is mentioned or is otherwise reasonably identified or language is used from
which a relationship between AMT and Parkinson may, in the reasonable judgment
of AMT, be inferred. The confidentiality obligations set forth in this Section 5
shall survive the termination or expiration of this Agreement.
6. PROJECT DIRECTION. The Services performed by Parkinson pursuant
to this Agreement shall be performed under the direction and management of
William A. Maligie at AMT.
7. STANDARD OF CARE. Parkinson shall exercise good faith and due
diligence under this Agreement and shall at all times exercise all reasonable
efforts to defend and promote the interests of AMT. Parkinson shall perform his
obligations under this Agreement in a thorough, good and workmanlike manner, and
where applicable in accordance with industry and professional standards.
8. INDEMNIFICATION. Parkinson shall indemnify, defend and hold
harmless AMT, its directors, officers, employees, agents, representatives and
contractors, from and against any and all claims, liabilities, demands, damages,
losses, costs and expenses, including, but not limited to, attorneys' fees and
costs ("Liabilities") arising out of or resulting from (i) any breach or default
by Parkinson of any of his obligations under this Agreement or (ii) the
negligent acts, errors, omissions or willful misconduct of Parkinson, his
agents, subcontractors or employees.
9. STATUS OF PARKINSON. Parkinson shall be an independent
contractor and neither Parkinson nor any of his employees, agents or
subcontractors shall be eligible to participate in any benefit plan of AMT or to
receive any fringe benefits from AMT. None of Parkinson's employees,
subcontractors, agents or representatives shall be considered employees of AMT.
This Agreement shall not create a relationship of partnership, corporation,
joint venture or association for profit or an employee, employer relationship
between the Parties. Parkinson shall have no authority to assume or create any
commitment or obligation on behalf of or to bind AMT in any respect whatsoever.
10. RELIANCE BY THIRD PARTIES. The Services provided under this
Agreement are for the exclusive use of AMT. Any written documents, including but
not limited to data, reports, findings, summaries, or recommendations, prepared
by Parkinson for AMT in the course of performing the Services hereunder and
provided by AMT, in its sole discretion, to any third parties, may be relied
upon by such party to the extent that such documents may be relied upon by AMT.
11. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties and supersedes any and all prior or contemporaneous
written or oral negotiations, correspondence, understandings and agreements
between the parties respecting the subject matter hereof.
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<PAGE> 5
12. MODIFICATION. No supplement, modification or amendment to this
Agreement shall be binding unless executed in writing by both parties.
13. WAIVER. No waiver of any of the provisions of this Agreement
shall be deemed, or shall constitute, a waiver of any other provision, whether
or not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the waiver.
14. ASSIGNMENT. This Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective successors and assigns;
provided, however, that neither party shall be entitled to assign any of its
rights or obligations hereunder without the prior written consent of the other.
15. NOTICE. All notices, requests, demands and other communications
required to or permitted to be given under this Agreement shall be in writing
and shall be conclusively deemed to have been duly given (a)_when hand delivered
to the other party; or (b)_when received when sent by telex or facsimile at the
address and number set forth below (provided that any notice given by telex or
facsimile shall be deemed received on the next business day if such notice is
received after 5:00 p.m. (recipient's time) or on a nonbusiness day); or
(c)_three (3) business days after the same have been deposited in a United
States post office with first class or certified mail return receipt requested
postage prepaid and addressed to the parties as set forth below; or (d)_the next
business day after same have been deposited with a national overnight delivery
service reasonably approved by the parties (Federal Express and DHL Worldwide
Express being deemed approved by the parties), postage prepaid, addressed to the
parties as set forth below with next-business-day delivery guaranteed, provided
that the sending party receives a confirmation of delivery from the delivery
service provider:
To AMT: Alternative Materials Technology
311 Otterson Drive, Suite 60
Chico, California 95928
Attention: E. Laughlin Flanagan
Facsimile: (530) 896-0657
To Parkinson: Frederick Parkinson
3609 Warner Drive
San Jose, California 95127
Facsimile: _____________
Each party shall make an ordinary, good faith effort to ensure that it will
accept or receive notices that are given in accordance with this Section, and
that any person to be given notice actually receives such notice. A party may
change or supplement the addresses given above, or designate
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<PAGE> 6
additional addresses, for purposes of this Section by giving the other parties
written notice of the new address in the manner set forth above.
16. HEADINGS. The subject headings of the Sections of this Agreement
are provided for convenience only and shall not affect the construction or
interpretation of any of the provisions hereof.
17. COUNTERPARTS. This Agreement may be executed in multiple
counterparts and each such executed counterpart shall be deemed an original, but
all of which together shall constitute a single instrument.
18. ATTORNEYS' FEES. If any party to this Agreement shall take any
action to enforce this Agreement or bring any action for any relief against any
other party, declaratory or otherwise, arising out of this Agreement, the losing
party shall pay to the prevailing party a reasonable sum for attorneys' fees
incurred in bringing such suit and/or enforcing any judgment granted therein,
all of which shall be deemed to have accrued upon the commencement of such
action and shall be paid whether or not such action is prosecuted to judgment.
Any judgment or order entered in such action shall contain a specific provision
providing for the recovery of attorneys' fees and costs incurred in enforcing
such judgment. For purposes of this section, attorneys' fees shall include,
without limitation, fees incurred in the following: (a)_post-judgment motions
and collection actions; (b)_contempt proceedings; (c)_garnishment, levy, and
debtor and third party examinations; (d)_discovery; and (e)_bankruptcy
litigation.
19. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of California
applicable to contracts made and to be performed in California.
20. DRAFTING. The parties to this Agreement agree that this
Agreement is the product of joint draftsmanship and negotiation and that should
any of the terms be determined by a court, or in any type of quasi-judicial or
other proceeding, to be vague, ambiguous and/or unintelligible, that the same
sentences, phrases, clauses or other wordage or language of any kind shall not
be construed against the drafting party.
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<PAGE> 7
IN WITNESS OF THE FOREGOING PROVISIONS, the parties hereto have duly
executed this Agreement below.
AMT:
ALTERNATIVE MATERIALS TECHNOLOGY, a
Nevada corporation
Date: October 18, 1999 By: /s/ WILLIAM MALIGIE
------------------------------------------
William A. Maligie
President
Date: October 18, 1999 By: /s/ E. LAUGHLIN FLANAGAN
------------------------------------------
E. Laughlin Flanagan
Assistant Secretary/Treasurer and Director
PARKINSON:
Date: October 18, 1999 /s/ FREDERICK PARKINSON
-----------------------------------------
Frederick Parkinson
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<PAGE> 1
EXHIBIT 2.6
CONSULTING AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into on October
18, 1999, by and between ALTERNATIVE MATERIALS TECHNOLOGY, a Nevada corporation
("AMT"), and BARBARA PARKINSON ("Parkinson"), an individual. AMT and Parkinson
are hereafter collectively referred to as the "Parties."
RECITALS
1. Parkinson is an officer and key employee of U.S. CELLULOSE CO., a
California corporation ("USCC").
2. Pursuant to that certain Stock Purchase Agreement, dated October
15, 1999, by and among AMT, USCC, and Frederick Parkinson (the "Stock Purchase
Agreement"), AMT is purchasing all of the Shares, as defined in the Stock
Purchase Agreement, of USCC's capital stock.
3. In order to provide for continuity of management and a smooth
transition to new ownership, AMT wishes to retain Parkinson as a consultant to
render business advice to AMT on the terms set forth in this Agreement, and
Parkinson wishes to serve as a consultant to AMT on the terms set forth herein.
NOW, THEREFORE, for and in consideration of the premises and the terms,
covenants and conditions of this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto agree as follows:
AGREEMENT
1. ENGAGEMENT AND SERVICES.
(1) Engagement of Parkinson. Subject to the terms and conditions
of this Agreement, AMT hereby engages Parkinson as a business consultant to AMT,
and Parkinson hereby accepts such engagement. Parkinson shall provide AMT with
business advisory services during the term of this Agreement, including advice
and counsel on strategic business planning, product development, marketing
strategies, administrative matters, financial planning and general business
development (the "Services"), as requested by AMT. Parkinson shall provide forty
(40) hours per week of service hereunder.
(2) Acceptance. Subject to the terms and conditions of this
Agreement, Parkinson hereby accepts the engagement by AMT set forth in this
Section 1 of this Agreement, and Parkinson agrees to perform the Services.
(3) Services. In providing the Services to AMT pursuant to this
Agreement, Parkinson shall take the following actions:
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<PAGE> 2
(1) Perform the Services in full compliance with applicable
federal, state and local laws and regulations and in full conformity with the
standards of care and diligence normally practiced by parties performing similar
work;
(2) Prior to submitting any report or document prepared by
Parkinson on behalf of AMT to any governmental agency or third party, submit a
copy of such report or document, together with any supporting materials, to AMT
and obtain AMT's approval of the form and contents of same and of the submission
of such report or document to such governmental agency or third party;
(3) Regularly consult with AMT with respect to the status
and results of the Services and submit verbal and written reports as requested
by AMT or as necessary to keep AMT fully informed; and
(4) Maintain full and accurate records and books of
accounts necessary to document (A) all activities undertaken by or on behalf of
AMT in the course of performing the Services hereunder, including without
limitation any and all contacts and communications made by Parkinson on behalf
of AMT with any governmental agency or official or third party; and (B) all
charges, expenses and disbursements incurred by Parkinson, her agents or
subcontractors in performing the Services hereunder. Parkinson will make such
books and records available to AMT upon request during normal business hours.
(4) Work Product. All products produced or obtained by Parkinson
in the performance of the Services shall be the exclusive property of AMT, and
all documents (including, without limitation, all writings, drawings, pictures,
recordings, computer or machine-readable data, and all copies or reproductions
thereof) which describe or relate to the Services performed or to be performed
by Parkinson pursuant to this Agreement or the results thereof, including,
without limitation, all notes, data, reports or other information received or
generated in the performance of this Agreement, shall be the exclusive property
of AMT.
2. TERM OF ENGAGEMENT. The term of this Agreement shall commence on
the effective date of this Agreement and shall continue, unless terminated in
accordance with Section 4 of this Agreement for thirty (30) days (the "Term");
provided however, that AMT shall have two (2) options to extend the Term (the
"Extension Options") for a period of thirty (30) days each (the "Option Term").
3. COMPENSATION.
(1) Monthly Fee. In exchange for the Services to be performed
hereunder by Parkinson, AMT shall pay to Parkinson the amount equal to Five
Thousand Dollars ($5,000) each month, in equal semi-monthly installments, during
the Term or any Option Term of this Agreement, with the first payment to be made
on or before November 1, 1999, for the Services provided by Parkinson during the
immediately preceding month. Payments made by AMT under this Section 3 shall
constitute full compensation for all personnel, materials, supplies, equipment
and facilities used by Parkinson in performing the Services.
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<PAGE> 3
(2) Reimbursement of Expenses. AMT shall reimburse Parkinson for
extraordinary expenses incurred by Parkinson in connection with the Services if
and to the extent that Parkinson has obtained AMT's approval of such expenses
prior to the incurrence of such expenses by Parkinson.
4. TERMINATION.
(1) Notwithstanding the provisions of Section 2, AMT shall have
the right, at any time, in its sole discretion and with or without cause, by
written notice to Parkinson, to terminate this Agreement upon delivery of a
written notice of termination to Parkinson thirty (30) days in advance of the
date of termination. Parkinson shall stop work immediately upon receipt of such
written notice of termination and shall promptly deliver to AMT the work product
of Parkinson and any other results of Parkinson's work to date of termination.
(2) Upon termination of this Agreement, AMT shall pay Parkinson
a pro rata amount of the monthly payment due under Section 3 of this Agreement
which relates to any portion of a month prior to the effective date of
termination. The right to terminate this Agreement under Section 4(a) of this
Agreement shall be in addition to, and not in lieu of, any other rights and
remedies AMT may have at law or in equity.
5. CONFIDENTIALITY.
(1) Parkinson understands and acknowledges that Parkinson, her
employees, agents and subcontractors, have been and will be granted access to
certain Confidential Information (as defined below) of AMT in the course of
performing the Services hereunder. The term "Confidential Information" as used
herein shall mean all records and information with respect to AMT, and past or
present activities, that are not a matter in the public domain or lawfully
acquired on a non-confidential basis from others. Parkinson agrees to hold in
strictest confidence, and not to disclose or to permit disclosure to any person
or entity other than AMT or AMT's legal counsel, nor make an unauthorized use
of, any Confidential Information, without the prior written consent of AMT or
AMT's legal counsel.
(2) Parkinson understands and acknowledges that each
communication of Confidential Information collected or developed by Parkinson on
behalf of AMT in the course of performing the Services hereunder constitutes a
confidential communication from AMT to AMT's legal counsel which is intended to
be protected against disclosure to third persons by the attorney-client
privilege and, to the extent Confidential Information is prepared in
anticipation or defense of potential or pending litigation or administrative
proceedings, such communications are intended to be protected from discovery by
the work product doctrine. All written reports and other documents which are
prepared by Parkinson, her agents or subcontractors in performing the Services
hereunder shall be conspicuously marked "Confidential" on their face unless
Parkinson is otherwise instructed by AMT's legal counsel.
(3) Parkinson shall not, without the prior written approval of
AMT or AMT's legal counsel on AMT's behalf, publish or otherwise disseminate any
advertising, promotion, report, article, research piece or publicity wherein AMT
is mentioned or is otherwise reasonably identified
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or language is used from which a relationship between AMT and Parkinson may, in
the reasonable judgment of AMT, be inferred. The confidentiality obligations set
forth in this Section 5 shall survive the termination or expiration of this
Agreement.
6. PROJECT DIRECTION. The Services performed by Parkinson pursuant
to this Agreement shall be performed under the direction and management of
William A. Maligie at AMT.
7. STANDARD OF CARE. Parkinson shall exercise good faith and due
diligence under this Agreement and shall at all times exercise all reasonable
efforts to defend and promote the interests of AMT. Parkinson shall perform her
obligations under this Agreement in a thorough, good and workmanlike manner, and
where applicable in accordance with industry and professional standards.
8. INDEMNIFICATION. Parkinson shall indemnify, defend and hold
harmless AMT, its directors, officers, employees, agents, representatives and
contractors, from and against any and all claims, liabilities, demands, damages,
losses, costs and expenses, including, but not limited to, attorneys' fees and
costs ("Liabilities") arising out of or resulting from (i) any breach or default
by Parkinson of any of her obligations under this Agreement or (ii) the
negligent acts, errors, omissions or willful misconduct of Parkinson, her
agents, subcontractors or employees.
9. STATUS OF PARKINSON. Parkinson shall be an independent contractor
and neither Parkinson nor any of her employees, agents or subcontractors shall
be eligible to participate in any benefit plan of AMT or to receive any fringe
benefits from AMT. None of Parkinson's employees, subcontractors, agents or
representatives shall be considered employees of AMT. This Agreement shall not
create a relationship of partnership, corporation, joint venture or association
for profit or an employee, employer relationship between the Parties. Parkinson
shall have no authority to assume or create any commitment or obligation on
behalf of or to bind AMT in any respect whatsoever.
10. RELIANCE BY THIRD PARTIES. The Services provided under this
Agreement are for the exclusive use of AMT. Any written documents, including but
not limited to data, reports, findings, summaries, or recommendations, prepared
by Parkinson for AMT in the course of performing the Services hereunder and
provided by AMT, in its sole discretion, to any third parties, may be relied
upon by such party to the extent that such documents may be relied upon by AMT.
11. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties and supersedes any and all prior or contemporaneous written or
oral negotiations, correspondence, understandings and agreements between the
parties respecting the subject matter hereof.
12. MODIFICATION. No supplement, modification or amendment to this
Agreement shall be binding unless executed in writing by both parties.
13. WAIVER. No waiver of any of the provisions of this Agreement
shall be deemed, or shall constitute, a waiver of any other provision, whether
or not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the waiver.
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<PAGE> 5
14. ASSIGNMENT. This Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective successors and assigns;
provided, however, that neither party shall be entitled to assign any of its
rights or obligations hereunder without the prior written consent of the other.
15. NOTICE. All notices, requests, demands and other communications
required to or permitted to be given under this Agreement shall be in writing
and shall be conclusively deemed to have been duly given (a) when hand delivered
to the other party; or (b) when received when sent by telex or facsimile at the
address and number set forth below (provided that any notice given by telex or
facsimile shall be deemed received on the next business day if such notice is
received after 5:00 p.m. (recipient's time) or on a nonbusiness day); or
(c) three (3) business days after the same have been deposited in a United
States post office with first class or certified mail return receipt requested
postage prepaid and addressed to the parties as set forth below; or (d) the next
business day after same have been deposited with a national overnight delivery
service reasonably approved by the parties (Federal Express and DHL Worldwide
Express being deemed approved by the parties), postage prepaid, addressed to the
parties as set forth below with next-business-day delivery guaranteed, provided
that the sending party receives a confirmation of delivery from the delivery
service provider:
To AMT: Alternative Materials Technology
311 Otterson Drive, Suite 60
Chico, California 95928
Attention: E. Laughlin Flanagan
Facsimile: (530) 896-0657
To Parkinson: Barbara Parkinson
3609 Warner Drive
San Jose, California 95127
Facsimile: _____________
Each party shall make an ordinary, good faith effort to ensure that it
will accept or receive notices that are given in accordance with this Section,
and that any person to be given notice actually receives such notice. A party
may change or supplement the addresses given above, or designate additional
addresses, for purposes of this Section by giving the other parties written
notice of the new address in the manner set forth above.
16. HEADINGS. The subject headings of the Sections of this Agreement
are provided for convenience only and shall not affect the construction or
interpretation of any of the provisions hereof.
17. COUNTERPARTS. This Agreement may be executed in multiple
counterparts and each such executed counterpart shall be deemed an original, but
all of which together shall constitute a single instrument.
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18. ATTORNEYS' FEES. If any party to this Agreement shall take any
action to enforce this Agreement or bring any action for any relief against any
other party, declaratory or otherwise, arising out of this Agreement, the losing
party shall pay to the prevailing party a reasonable sum for attorneys' fees
incurred in bringing such suit and/or enforcing any judgment granted therein,
all of which shall be deemed to have accrued upon the commencement of such
action and shall be paid whether or not such action is prosecuted to judgment.
Any judgment or order entered in such action shall contain a specific provision
providing for the recovery of attorneys' fees and costs incurred in enforcing
such judgment. For purposes of this section, attorneys' fees shall include,
without limitation, fees incurred in the following: (a) post-judgment motions
and collection actions; (b) contempt proceedings; (c) garnishment, levy, and
debtor and third party examinations; (d) discovery; and (e) bankruptcy
litigation.
19. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of California applicable
to contracts made and to be performed in California.
20. DRAFTING. The parties to this Agreement agree that this Agreement
is the product of joint draftsmanship and negotiation and that should any of the
terms be determined by a court, or in any type of quasi-judicial or other
proceeding, to be vague, ambiguous and/or unintelligible, that the same
sentences, phrases, clauses or other wordage or language of any kind shall not
be construed against the drafting party.
IN WITNESS OF THE FOREGOING PROVISIONS, the parties hereto have duly
executed this Agreement below.
AMT:
ALTERNATIVE MATERIALS TECHNOLOGY, a
Nevada corporation
Date: October 18, 1999 By: /s/ William Maligie
------------------------------------------
William A. Maligie
President
Date: October 18, 1999 By: /s/ E. Laughlin Flanagan
-------------------------------------------
E. Laughlin Flanagan
Assistant Secretary/Treasurer and
Director
PARKINSON:
Date: October 18, 1999 /s/ Barbara Parkinson
----------------------------------------------
Barbara Parkinson
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<PAGE> 1
EXHIBIT 2.7
AGREEMENT NOT TO COMPLETE
THIS AGREEMENT NOT TO COMPETE (the "Agreement"), is made and effective
as of the "Closing," as defined below, by and among ALTERNATIVE MATERIALS
TECHNOLOGY, a Nevada corporation ("AMT"), U.S. CELLULOSE CO., a California
corporation ("USCC"), and FREDERICK PARKINSON, an individual ("Parkinson"), with
reference to the following facts:
RECITALS
1. AMT is engaged in the business of development, production and sale
of water-based and other coatings to industrial users (the "Business").
2. At the Closing (the "Closing"), as defined in that certain Stock
Purchase Agreement, dated October 15, 1999, by and among USCC, Parkinson, and
AMT (the "Stock Purchase Agreement"), AMT will acquire from Parkinson all of the
outstanding shares of capital stock of USCC.
3. In consideration of the covenants set forth in the Stock Purchase
Agreement, and as a material inducement to AMT to enter into the Stock Purchase
Agreement, AMT has required Parkinson to enter into an agreement not to compete
with AMT and USCC, on the terms more particularly set forth below.
AGREEMENTS
NOW, THEREFORE, as a material inducement to AMT to enter into and close
the transaction contemplated by the Stock Purchase Agreement, and for other good
and valuable consideration, the value and receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. NON-COMPETITION. Subject to the limitations set forth below,
Parkinson shall not, directly or indirectly, whether as an employee, consultant,
director, shareholder, member, partner, officer, investor, joint venturer,
and/or agent, or otherwise, engage in, have any interest in, lend Parkinson's
name or any similar name to, provide any finances or credit to, provide any
services or advice to, or otherwise participate in the management, ownership,
operation or control of, or be employed by or connected in any manner, with any
person, corporation, partnership (general or limited), limited liability
company, proprietorship, firm, association or other type of business or
enterprise which is engaged in any business in competition with the actual
Business of USCC or AMT, including but not limited to the development,
production and sale of water-based and other coatings to industrial or
commercial users, or with that business which USCC and/or AMT presently conducts
within Arizona, California, Nevada, Oregon, and Washington (the "Restriction
Area"). For the purposes of this Agreement, the term "USCC" shall be deemed to
include subsidiaries and parents of USCC. Nothing in this Agreement shall
restrict Parkinson from investing in publicly-traded stock, bonds, mutual funds
or other securities or investment vehicles of companies in direct or indirect
competition with USCC and/or AMT.
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<PAGE> 2
2. DURATION. This Agreement shall continue for a period of five (5)
years from the Closing (the "Term"); provided however if Parkinson breaches any
covenant set forth in this Agreement, the term of this Agreement shall be
extended by the duration of such breach.
3. REASONABLENESS. The parties have consulted with legal and other
counsel, and after such consultation, agree that the covenants contained in this
Agreement are reasonable and proper in all respects, including without
limitation, the substantive and geographic scope and duration. Without
limitation, the parties agree and intend that the covenants contained in this
Agreement shall be deemed to be a series of separate covenants and agreements,
one for each and every county of each state and political subdivision of the
United States. If, in any judicial proceeding, a court shall refuse to enforce
any part of the separate covenants deemed included herein, then at the option of
AMT, the covenant shall be deemed eliminated or revised to the extent necessary
to permit maximum enforceability of the remaining separate covenants in such a
proceeding, and the parties agree to amend the provisions of this Agreement
accordingly, without expanding the substantive or geographic scope or duration
thereof.
4. NON-SOLICITATION.
(1) During the Restriction Period, Parkinson shall not either for
himself, or any other entity or person, (i) induce or attempt to induce any
customer, supplier, licensee or business relationship of AMT or USCC to cease
doing business with AMT or USCC, or in any way interfere with the relationship
between any customer, supplier, licensee or business relation of AMT or USCC;
(ii) use the mailing lists and marketing materials provided to AMT or USCC for
any competing business; (iii) encourage, solicit or offer incentives of any
kind, directly or indirectly, to any employees of AMT or USCC (1) to promote any
product or service which may be offered from time to time by Parkinson, or (2)
to leave the employment of AMT or USCC for any reason except as may be required
in any bona fide termination decision regarding any AMT or USCC employee; (iv)
in any way interfere with the relationship between AMT or USCC and any such
employee of AMT or USCC; or (v) employ, or otherwise engage as an employee,
independent contractor or otherwise, any employee of AMT or USCC.
(2) As a separate and independent covenant, Parkinson agrees that
during the Restriction Period, unless specifically approved by AMT, Parkinson
shall not either for himself, or any other entity or person, in any way,
directly or indirectly, (i) call upon, solicit, advise or otherwise do, or
attempt to do, business which is competitive with AMT's or USCC's business with
any former customers of USCC or AMT, irrespective of whether USCC and/or
Parkinson had any dealings with such customers prior to the Closing; or (ii)
take away or interfere or attempt to interfere with any custom, trade, business
or patronage of AMT or USCC; or (iii) interfere with or attempt to interfere
with any officers, employees, representatives or agents of AMT or USCC; or (iv)
induce or attempt to induce any officer, employee, representative or agent of
AMT or USCC to leave the employ of AMT or USCC, or violate the terms of their
contracts, or any employment arrangements, with AMT or USCC.
5. BREACH OF AGREEMENTS BY AMT OR USCC. Any material breach by AMT or
USCC of the Stock Purchase Agreement or any related agreement shall relieve
Parkinson of any obligations under this Agreement.
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<PAGE> 3
6. BREACH BY PARKINSON. The parties acknowledge and agree that the
covenants of the parties set forth in this Agreement are an essential element of
the Stock Purchase Agreement and that, but for the agreement of the parties to
comply with these covenants, AMT would not have entered into the Stock Purchase
Agreement. The parties further acknowledge and agree that any violation of this
Agreement by Parkinson would cause immediate irreparable damage to AMT, and that
it would be extremely difficult or impossible to determine the amount of such
damage caused to AMT. The parties further acknowledge and agree that the remedy
at law for any breach of the Agreement will be inadequate and that, in addition
to any other relief to which AMT may be entitled, AMT shall be entitled to
injunctive or other equitable relief to restrain any breach or threatened breach
or otherwise to specifically enforce the provisions of this Agreement.
7. SEVERABILITY. If any of the provisions of this Agreement shall
contravene or be invalid under the laws of any state or other jurisdiction where
it is enforceable but for such contravention or invalidity, such contradiction
or invalidity shall not invalidate all of the provisions of this Agreement, but
rather, it shall be construed, insofar as the laws of that state or jurisdiction
are concerned, as not containing the provisions contravening or invalid under
the laws of that state or jurisdiction, and the rights and obligations created
hereby shall be construed and enforced accordingly. If, however, any such
contravening provision relates to the term of the covenants contained herein or
the geographic area or areas to which they apply, then such covenants shall be
construed as providing for the maximum time period and the widest geographic
area or areas which the laws of that state or jurisdiction permit; provided,
that such time period and geographic area shall never exceed the time period or
geographic area provided for herein.
8. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall inure
to the benefit of, and shall be binding upon, the parties' respective heirs,
successors and assigns, and as to Parkinson, the personal representative of his
estate and his heirs and legatees.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and complete understanding of the parties hereto with respect to the subject
matter of this Agreement and supersedes all prior and contemporaneous written
and oral agreements and understandings between the parties with respect to the
subject matter of this Agreement.
10. AMENDMENTS; WAIVER. This Agreement may not be amended,
supplemented, canceled or discharged except by written instrument executed by
the party or parties affected thereby. Any and all prior agreements,
understandings or representations relating to Parkinson's agreement not to
compete with AMT are hereby terminated and canceled in their entirety and are of
no further force or effect. No failure to exercise and no delay in exercising,
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude the exercise of any other right, power or privilege (hereunder or
otherwise). No waiver of any breach of any agreement hereunder or any other
agreement shall be deemed to be a waiver of any preceding or succeeding breach
of the same or any other agreement.
11. REMEDIES CUMULATIVE. No remedy conferred upon any party by this
Agreement is intended to be exclusive of any other remedy, and each and every
such remedy shall be cumulative
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<PAGE> 4
and shall be in addition to any other remedy given hereunder or now or hereafter
existing at law or in equity.
12. SECTION HEADINGS. The section headings used herein are inserted for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the laws of conflicts) of the State
of California.
14. ATTORNEYS' FEES. If any party to this Agreement shall bring any
action, suit, counterclaim, appeal, or arbitration for any relief against the
other, declaratory or otherwise, to enforce the terms hereof or to declare
rights hereunder (collectively, an "Action"), the losing party shall pay to the
prevailing party a reasonable sum for attorneys' fees and costs incurred in
bringing and prosecuting such Action and/or enforcing any judgment, order,
ruling or award (collectively, a "Decision") granted therein, all of which shall
be deemed to have accrued on the commencement of such Action and shall be paid
whether or not such Action is prosecuted to a Decision. Any Decision entered in
such Action shall contain a specific provision providing for the recovery of
attorneys' fees and costs incurred in enforcing such Decision. The court or
arbitrator may fix the amount of reasonable attorneys' fees and costs on the
request of either party. For the purposes of this paragraph, attorneys' fees
shall include, without limitation, fees incurred in the following: (a)
postjudgment motions and collection actions; (b) contempt proceedings; (c)
application for temporary or preliminary injunctive relief; (d) discovery; and
(e) bankruptcy litigation. "Prevailing party" within the meaning of this
paragraph includes, without limitation, a party who agrees to dismiss an Action
on the other party's payment of the sums allegedly due or performance of the
covenants allegedly breached, or who obtains substantially the relief sought by
it.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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16. DRAFTING. The parties to this Agreement agree that this Agreement
is the product of joint draftsmanship and negotiation and that should any of the
terms be determined by a court, or in any type of quasi-judicial or other
proceeding, to be vague, ambiguous and/or unintelligible, that the same
sentences, phrases, clauses or other wordage or language of any kind shall not
be construed against the drafting party in accordance with California Civil Code
Section 1654, and that each such party to this Agreement waives the effect of
such statute.
IN WITNESS WHEREOF, the parties have executed this Agreement as set
forth below.
AMT:
ALTERNATIVE MATERIALS TECHNOLOGY, a
Nevada corporation
Date: October 18, 1999 By: /s/ William Maligie
--------------------------------------
William A. Maligie
President
Date: October 18, 1999 By: /s/ E. Laughlin Flanagan
---------------------------------------
E. Laughlin Flanagan
Assistant Secretary/Treasurer and Director
USCC:
U.S. CELLULOSE CO., a California corporation
Date: October 18, 1999 By: /s/ Frederick Parkinson
---------------------------------------
Frederick Parkinson
President
PARKINSON:
Date: October 18, 1999 By: /s/ Frederick Parkinson
---------------------------------------
Frederick Parkinson
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