<PAGE>
United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------ --------------------
Commission file number 0-19352
------------------------
AGRIBIOTECH, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 85-0325742
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Quail Park West, 2700 Sunset Road, Suite C-25, Las Vegas, Nevada 89120
(Address of principal executive offices)
(702) 798-1969
(Issuer's telephone number)
Indicate by check mark whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. YES [X] NO .
----- -----
As of May 10,1996, the Registrant had 7,729,543 shares of Common Stock, par
value $.001 per share, issued and outstanding.
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
Pro Forma
March 31,
1996 March 31, June 30,
(Note 5) 1996 1995
----------- ---------- ---------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,663,395 185,518 1,422,943
Notes receivable from sale of stock -- -- 1,083,027
Accounts receivable 7,128,392 7,128,392 953,251
Inventories 9,875,200 9,875,200 1,819,159
Other 372,059 372,059 46,703
----------- ---------- ---------
Total current assets 19,039,046 17,561,169 5,325,083
----------- ---------- ---------
Property, plant and equipment 7,945,416 7,945,416 2,164,428
Less accumulated depreciation 385,477 385,477 72,163
----------- ---------- ---------
Net property, plant and equipment 7,559,939 7,559,939 2,092,265
----------- ---------- ---------
Intangible assets, net of accumulated amortization 1,013,456 1,013,456 164,874
Notes receivable from sale of stock -- -- 350,140
Other assets 142,924 142,924 81,640
----------- ---------- ---------
Total Assets $27,755,365 26,277,488 8,014,002
=========== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Pro Forma
March 31,
1996 March 31, June 30,
(Note 5) 1996 1995
----------- ---------- --------
<S> <C> <C> <C>
Current liabilities:
Short-term debt $ 5,085,334 3,585,334 564,291
Current installments of long-term debt 571,133 1,101,133 123,057
Accounts payable 5,980,507 5,980,507 702,576
Accrued liabilities 907,878 907,878 143,386
Amount due in connection with acquisitions -- 6,709,159 --
----------- ---------- ----------
Total current liabilities 12,544,852 18,284,011 1,533,310
Long-term debt, excluding current installments 1,092,911 1,092,911 148,057
----------- ---------- ----------
Total liabilities 13,637,763 19,376,922 1,681,367
----------- ---------- ----------
Stockholders' equity:
Preferred stock, $.01 par value. Authorized
10,000,000 shares; none issued (pro forma 7,425 shares) 7,425,000 -- --
Common stock, $.001 par value. Authorized
30,000,000 shares; issued and outstanding
7,567,200 at March 31, 1996 (pro forma 7,729,543
shares) and 7,145,200 shares at June 30, 1995 7,730 7,567 7,145
Capital in excess of par value 15,080,653 15,288,780 13,742,327
Accumulated (deficit) (8,352,760) (8,352,760) (6,387,184)
----------- ---------- ----------
14,160,623 6,943,587 7,362,288
Deferred compensation (43,021) (43,021) (358,640)
Notes receivable from sale of stock -- -- (671,013)
----------- ---------- ----------
Total stockholders' equity 14,117,602 6,900,566 6,332,635
----------- ---------- ----------
Total Liabilities and Stockholders' Equity $27,755,365 26,277,488 8,014,002
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three-Month Period Ended Nine-Month Period Ended
------------------------------ -------------------------
March 31, March 31, March 31, March 31,
1996 1995 1996 1995
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $9,743,741 1,507,356 16,676,415 1,976,638
Cost of sales 7,142,298 1,106,767 12,381,752 1,371,914
---------- --------- ---------- ----------
Gross profit 2,601,443 400,589 4,294,663 604,724
---------- --------- ---------- ----------
Operating expenses:
Regulatory expenses 19,809 210,220 81,195 406,968
Amortization expense 10,917 15,215 76,732 60,291
Research and development 11,033 10,890 26,138 84,955
Warehouse and distribution 759,691 -- 1,561,237 --
Selling and marketing 740,986 113,298 1,510,793 244,062
General and administrative 1,118,629 679,699 2,745,693 880,854
---------- --------- ---------- ----------
Total operating expenses 2,661,065 1,029,322 6,001,788 1,677,130
---------- --------- ---------- ----------
(Loss) from operations (59,622) (628,733) (1,707,125) (1,072,406)
---------- --------- ---------- ----------
Other income (expense):
Interest expense (215,925) (4,755) (270,174) (13,478)
Interest income 10,180 3,467 30,951 26,288
Other 9,593 97 (19,228) 97
---------- --------- ---------- ----------
Total other income (expense) (196,152) (1,191) (258,451) 12,907
---------- --------- ---------- ----------
Net (loss) ($255,774) (629,924) (1,965,576) (1,059,499)
========== ========= ========== ==========
Shares of common stock used in
computing loss per share 7,567,200 4,794,644 7,345,419 4,415,686
========== ========= ========== ==========
Net (loss) per share ($0.03) (0.13) (0.27) (0.24)
========== ========= ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Capital in Notes
-------------------- Excess of Accumulated Deferred Receivable From
Shares Amount Par Value (Deficit) Compensation Sale of Stock Total
--------- ------ ---------- ----------- ------------ --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1995 7,145,200 $7,145 13,742,327 (6,387,184) (358,640) (671,013) 6,332,635
Common stock issued for:
Services 10,000 10 31,490 -- -- -- 31,500
Notes 412,000 412 1,297,388 -- -- (1,297,800) --
Reduction of notes for:
Services -- -- -- -- -- 40,499 40,499
Cash -- -- -- -- -- 580,603 580,603
Acquisitions -- -- (343,777) -- -- 1,503,447 1,159,670
Increase in repayment amount of
notes receivable -- -- 155,736 -- -- (155,736) --
Restructuring of employee
stock options -- -- 220,000 -- 260,000 -- 480,000
Options issued for services -- -- 185,616 -- -- -- 185,616
Deferred compensation earned -- -- -- -- 55,619 -- 55,619
Net (loss) -- -- -- (1,965,576) -- -- (1,965,576)
--------- ------ ---------- ----------- ---------- ---------- ----------
Balance at March 31, 1996 7,567,200 $7,567 15,288,780 (8,352,760) (43,021) -- 6,900,566
========= ====== ========== =========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine-Month Period Ended
-------------------------------------
March 31, March 31,
1996 1995
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (1,965,576) (1,059,499)
Adjustments to reconcile net (loss) to net cash
flows from operating activities:
Amortization 76,732 67,805
Depreciation 313,314 27,374
Common stock for services 127,618 202,959
Changes in assets and liabilities excluding
effects of acquisitions:
Accounts receivable (4,226,125) (727,709)
Inventories (3,413,510) 224,044
Other assets 17,366 (36,724)
Payables 4,858,152 142,792
Accrued liabilities 633,062 (15,988)
------------ ----------
Net cash flows from operating activities (3,578,967) (1,174,946)
------------ ----------
Cash flows from investing activities:
Additions to property, plant and equipment (491,145) (39,634)
Additions to intangible assets (353,314) (11,337)
Acquisitions (1,434,732) (1,453,246)
------------ ----------
Net cash flows from investing activities (2,279,191) (1,504,217)
------------ ----------
Cash flows from financing activities:
Net proceeds of short-term debt 2,601,129 --
Repayments of short-term debt -- (138,008)
Repayments of long-term debt (124,026) (106,389)
Proceeds from exercise of warrants -- 2,140,000
Restructuring of employee stock options 480,000 --
Payments received on notes receivable from
sale of stock 1,663,630 654,430
------------ ----------
Net cash flows from financing activities 4,620,733 2,550,033
------------ ----------
Net decrease in cash and cash equivalents (1,237,425) (129,130)
Cash and cash equivalents at beginning of period 1,422,943 580,003
------------ ----------
Cash and cash equivalents at end of period $ 185,518 450,873
============ ==========
</TABLE>
6
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Month Period Ended
-------------------------------------
March 31, March 31,
1996 1995
------------ ----------
<S> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 102,709 68,589
============ ==========
Non cash investing and financing activities:
Debt issued in connection with acquisitions $ 1,250,000 --
Amount due in connection with acquisitions 4,871,587 --
Increase in warrant exercise price 155,736 --
Receivable from exercise of warrants 1,297,800 4,914,000
Reduction of notes receivable for acquisitions 1,853,587 1,174,000
Options granted for services 185,616 --
Notes receivable from sale of stock 161,023 85,000
Discount on notes receivable from sale of stock 343,777 --
============ ==========
Summary of assets and liabilities acquired through acquisitions:
Cash $ 5,641 29,165
Accounts receivable 1,949,016 1,206,383
Inventories 4,642,531 1,977,518
Property, plant and equipment 5,289,843 1,214,010
Intangible assets 572,000 --
Other assets 218,390 --
Accounts payable and accrued expenses 2,388,781 1,345,165
Long-term and short-term debt 1,216,870 50,000
------------ ----------
Net assets acquired $ 9,071,770 3,031,911
============ ==========
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE>
AGRIBIOTECH, INC., and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
===============================================================================
(1) PRESENTATION OF UNAUDITED FINANCIAL STATEMENTS
----------------------------------------------
The unaudited financial statements have been prepared in accordance with
the rules of the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows, in conformity with
generally accepted accounting principles. The information furnished, in the
opinion of management reflects all adjustments (consisting primarily of normal
recurring accruals) necessary to present fairly the financial position, results
of operations and cash flows for the three-month and nine-month periods ended
March 31, 1996 and 1995. The Company's business is subject to wide seasonal
fluctuations and, therefore, the results of operations for periods less than one
year are not necessarily indicative of results which may be expected for any
other interim period or for the year as a whole.
Effective June 30, 1995, the Company changed its fiscal year end from
September 30 to June 30 since that date better reflects the natural business
year of the seed business.
(2) ACQUISITIONS
------------
The Company purchased substantially all of the assets of Halsey Seed
Company (Halsey) effective July 1, 1995. The transaction was recorded using the
purchase method of accounting. The purchase price of $1,122,793 includes
inventory, accounts receivable, prepaid assets, and fixed assets, net of
accounts payable and certain assumed liabilities. The purchase price was paid
through cash of $772,653 and 87,535 shares of the Company's common stock valued
at $350,140.
The Company purchased substantially all of the assets of Arnold-Thomas Seed
Service, Inc. (Arnold-Thomas) effective October 1, 1995. The transaction was
recorded using the purchase method of accounting. The purchase price of
$926,195 includes inventory, accounts receivable, prepaid assets and fixed
assets, net of accounts payable and certain assumed liabilities. The purchase
price was paid through cash of $666,524 and 105,450 shares of the Company's
common stock valued at $259,671. The Company's common stock is subject to a
"lock-up agreement" through December 1997.
The Company purchased all of the capital stock of Clark Seeds, Inc. (Clark
Seed) effective October 1, 1995. The transaction was recorded using the purchase
method of accounting. The purchase price of $2,150,000 was paid through 400,000
shares of the Company's common stock valued at $900,000 and promissory notes of
$1,250,000. The Company's common stock is subject to a "lock-up agreement"
through December 1997.
The Company purchased certain assets of Doug Conlee Seed Company (Conlee)
effective January 1, 1996. The transaction was recorded using the purchase
method of accounting. The purchase price of $639,606 includes inventory, prepaid
assets, fixed assets and proprietary rights to certain crop varieties. The
purchase price was paid in cash. In addition, the Company must pay the seller 20
percent of the net margin, after expenses, from the business transferred to the
Company through December 31, 1998.
The Company purchased substantially all of the assets of Beachley-Hardy
Seed, a division of Research Seeds, Inc., (Beachley-Hardy) effective February 1,
1996. The transaction was recorded using the purchase method of accounting. The
net purchase price of $4,231,981 includes inventory, accounts receivable,
prepaid assets, fixed assets and trademark rights, less accounts payable and
certain assumed liabilities. The purchase price was paid through cash and
162,343 shares of the Company's common stock valued at $608,786. The Company's
common stock is subject to a "lock-up agreement" through January 1997.
8
<PAGE>
AGRIBIOTECH, INC., AND SUBSIDIARIES
NOTES TO CONSOIDATED FINANCIAL STATEMENTS
(UNAUDITED)
===============================================================================
At March 31, 1996, the Company owed the sellers of Conlee and Beachley-
Hardy $6,709,159 related to those acquisitions, including $1,837,572 for
operational items incurred subsequent to the effective dates of the
acquisitions. Subsequent to March 31, 1996, the Company satisfied these
obligations through the issuance of 162,343 shares of the Company's common stock
valued at $608,786 and the remainder in cash.
During the nine month period ended June 30, 1995, the Company consummated
acquisitions of Scott Seed Company, Seed Resource, Inc., and Hobart Seed
Company. Unaudited pro-forma results of operations assuming these and the
previously described acquisitions had occurred at the beginning of the period
presented is as follows:
<TABLE>
<CAPTION>
Three-Month Period Ended Nine-Month Period Ended
------------------------ -----------------------
March 31, 1996 March 31, 1995 March 31, 1996 March 31, 1995
-------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenue $10,175,561 $10,955,496 $20,250,641 $21,157,714
Net earnings(loss) $ (534,946) $ (159,434) $(2,944,041) $(2,782,943)
Net earnings(loss) per share $ (0.07) $ (0.03) $ (0.38) $ (0.48)
</TABLE>
In connection with the acquisitions, the former owners received common
stock of the Company that is subject to "lock-up agreements" which limit the
amount of common stock that the former owners can sell within specified time
periods. In addition, the Company has guaranteed the net proceeds to be received
by certain of the former owners of these entities from the sale of the common
stock during the lock up periods. At March 31, 1996, the remaining amounts on
such guarantees are as follows:
<TABLE>
<CAPTION>
End of
"Lock-up
Guaranteed Agreement"
Shares net, proceeds period
------- ------------- -----------
<S> <C> <C> <C>
- - ----
Seed Resource, Inc. 98,335 $399,167 May 1996
Hobart Seed Company 139,451 439,000 August 1998
</TABLE>
Any difference between the guaranteed net proceeds and the net proceeds
received by the previous owners of the above entities will be paid in cash by
the Company. Substantially all of the fixed assets of the Company's respective
subsidiaries secure the guaranteed net proceeds. The closing price for the
Company's common stock on May 9, 1996 was $4.125 per share and the range of
closing prices have been as follows:
<TABLE>
<CAPTION>
High Low
------- -------
<S> <C> <C>
July 1, 1995 - September 30, 1995 $5.4375 $3.0625
October 1, 1995 - March 31, 1996 $4.0625 $1.625
April 1, 1996 - May 9, 1996 $4.9375 $3.50
</TABLE>
The Company is continuing to perform due diligence and negotiate for the
purchase of additional regional companies specializing in the forage and turf
seed business and has one letter of intent for a minor acquisition as of May 9,
1996.
(3) SHORT-TERM DEBT
---------------
At March 31, 1996, the Company had a $2,000,000 line of credit with a bank.
The amount available under the line of credit is limited to the sum of 80
percent of the Company's eligible receivables less than 90 days old and 65
percent of inventory. The Company had $2,000,000 outstanding
9
<PAGE>
AGRIBIOTECH, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
===============================================================================
under this line of credit at March 31, 1996. The line of credit bears interest
at the bank's reference rate plus 1.5 percent and is secured by inventory,
receivables, equipment, and intangibles. Subsequent to March 31, 1996, the bank
increased the amount of the line of credit to $4,500,000 and extended the line
of credit through November 30, 1996. The extended line of credit has the same
basic terms as the prior agreement except that borrowings are limited to 70
percent of eligible receivables and 50 percent of eligible inventory.
In addition, Clark Seed has a revolving line of credit for up to $721,000
of which $585,334 was outstanding at March 31, 1996. This line of credit expires
October 1, 1996, bears interest at a variable rate which was 8.45 percent at
March 31, 1996 and is secured by Clark Seed's accounts receivable, inventory and
equipment.
(4) LONG TERM DEBT
--------------
In connection with the acquisition of Clark Seed, the Company assumed long-
term debt of $784,711. The debt was for equipment, note payable to a stockholder
and note payable to Farm Credit. The interest rates on the notes range from
7.95% to 9.75% and the terms of the notes range from one year to twelve years.
Additionally, in connection with the Clark Seed acquisition, the Company
entered into note agreements with the previous owners of Clark Seed aggregating
$1,250,000. The notes bear interest at an average rate of approximately 10
percent, and are due from April 1996 through January 1998. Subsequent to March
31, 1996, payments of $450,000 were made on this debt.
(5) CAPITAL STOCK
-------------
On October 10, 1995, the Company called all of its 422,000 outstanding
Class A Warrants. The Company paid warrant holders $.01 per warrant for A
Warrants not exercised by November 8, 1995. All of the warrants were then
exercised by "stand-by purchasers" who paid cash, signed promissory notes or
agreed to perform services. The warrants were exercised at $3.50 per share less
a 10% commission.
In connection with the acquisitions of Arnold-Thomas and Clark Seed,
$1,503,447 of notes receivable for sale of stock were satisfied by note holders
transferring 505,450 shares of stock to the previous owners of Arnold-Thomas and
Clark Seed. To facilitate the Clark Seed transfer, the notes receivable for sale
of stock were discounted by $343,777 to reflect the then current market price of
the stock.
In order to fully implement the Company's acquisition plans, the Company is
attempting to obtain additional equity and debt funding. In April 1996, the
Company completed a private placement of convertible preferred stock and issued
7,425 shares of Class B Convertible Preferred Stock. The Company received cash
proceeds, after commissions, of $6,608,250 from the issuance of the convertible
preferred stock. The convertible preferred stock is not entitled to a dividend
and is not mandatorily redeemable by the Company. The convertible preferred
stock has an aggregate liquidation preference of $7,425,000, plus a premium of
10 percent per annum from the date of issuance. The convertible preferred stock
is convertible into common stock for the amount of the aggregate liquidation
preference, including the 10 percent per annum premium, based on a formula
under which the conversion price is the lesser of (i) 80 percent of the average
closing bid price for the Company's common stock for the five days prior to
conversion or (ii) a set amount, which initially is $6.00 per share and
escalates to $8.00 per share over four years. In the event of a conversion when
the average closing price of the Company's common stock is $3.75 per share or
lower, the Company has the option of redeeming, at the average closing price,
the common stock issuable upon conversion. The convertible preferred stock will
convert into common stock after being outstanding four years if it has not been
previously converted.
The Company also has Class B and C Warrants which would generate
$28,250,000 if exercised at current exercise prices, of which there is no
assurance.
10
<PAGE>
AGRIBIOTECH, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
===============================================================================
On January 5, 1996, the Company entered into an eighteen-month consulting
agreement to assist the Company with investor communications and relations. In
consideration of the agreement, the Company has granted the consultant a
five-year option to purchase 2,000,000 shares of the Company's common stock
exercisable at $1.81 per share which equaled the market price at the grant date.
In July 1996, 1,500,000 options become exercisable with the remaining 500,000
options becoming exercisable in July 1997. The Company has determined that the
value of the investor communications and relations services to be received under
this agreement is $108,000, which is being amortized over the term of the
agreement.
In March 1996, the Company entered into an agreement, pending the
completion of the convertible preferred stock issuance described above, under
which the Company borrowed $1,000,000 from an individual, who is also a
stockholder of the Company. The loan was repaid from the proceeds of the
convertible preferred stock offering. Under the agreement, interest was paid on
the loan at 9 percent per annum and the lender was granted a five year option to
purchase 500,000 shares of the Company's common stock exercisable at $2.50 per
share which equaled the market price at the grant date. The Company has imputed
$27,616 of additional interest expense under this agreement to reflect the
relative risk undertaken by the lender. In addition, the Company granted a five
year option to purchase 250,000 shares of the Company's common stock exercisable
at $2.50 per share to the agent for the lender. The Company determined that the
compensation attributable to the agent's services was $50,000, which is being
amortized over the term of the loan agreement.
In December 1995, February 1996 and March 1996, the Company granted options
for the purchase of an aggregate of 5,500,000 shares of the Company's common
stock to officers of the Company. These options are exercisable at prices
ranging from $2.00 to $3.00, which equaled the market at the dates of grant, and
expire ten years from the date of grant. The options become exercisable over
periods of five to ten years, with those becoming exercisable over ten years
being subject to accelerated exercisability if the Company achieves certain
levels of revenues.
(6) PRO FORMA PRESENTATION
----------------------
The pro forma balance sheet as of March 31, 1996 presents the historical
March 31, 1996 balance sheet adjusted to reflect the following events, which are
described above and occurred subsequent to March 31, 1996, as if those events
had occurred on March 31, 1996:
(i) the net proceeds of $6,608,250 from the issuance of $7,425,000 of Class
B Convertible Preferred Stock;
(ii) the additional proceeds of $2,500,000 drawn on Company's increased
line of credit;
(iii) the payment of $6,709,159 due to the sellers in the Conlee and
Beachley-Hardy acquisitions through the issuance of 162,343 shares of the
Company's common stock valued at $608,786 and $6,100,373 in cash from the
proceeds of (i) and (ii);
(iv) the repayment of $1,000,000 of short-term debt and $530,000 of current
installments of long-term debt from the proceeds of (i) and (ii).
-------------------------------------------
11
<PAGE>
PART 1. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with
the Company's unaudited consolidated financial statements and notes thereto. The
Company is a specialized distributor of forage and turf grass seed. The Company
had limited revenues until January 1, 1995, when it commenced an acquisition
program and acquired all or part of various regional seed companies. The
Company's business strategy is to acquire reputable, regionally based companies
with proprietary products and established production and distribution channels
in their respective markets to enable the Company to be vertically integrated in
the forage and turf grass seed business.
MATERIAL CHANGES IN FINANCIAL CONDITION
The Company had a working capital deficit of $722,842 at March 31, 1996, as
compared to working capital of $3,791,773 at June 30, 1995. The working capital
deficit was primarily due to the amount due in connection with acquisitions of
$6,709,159 at March 31, 1996. Subsequent to March 31, 1996, the Company received
net proceeds of $6,608,250 from a private placement of convertible preferred
stock and $2,500,000 from an increase in its line of credit with a bank (see
notes 3 and 5 of notes to unaudited consolidated financial statements). On a pro
forma basis reflecting these additional fundings and the utilization of the
proceeds, as described in note 6 of notes to unaudited consolidated financial
statements, the Company had working capital of $6,494,194.
The Company had an increase in stockholders' equity of $567,931 during the
nine-month period ended March 31, 1996 (Nine-Month Period 1996). The increase
in stockholders' equity is primarily a result of the issuance of common stock
upon the exercise of warrants in exchange for notes receivable and the
satisfaction of the notes in cash or in connection with acquisitions, offset by
the net loss for the Nine-Month Period 1996 of $1,965,576. On a pro forma basis
at March 31, 1996, reflecting the issuance of convertible preferred stock and
the issuance of common stock valued at $608,786 in partial satisfaction of the
amount due in connection with acquisitions, the Company's stockholders' equity
was $14,117,602.
During the Nine-Month Period 1996, the Company had net deficit cash flows
from operating activities of $3,578,967, as compared to net deficit cash flows
from operating activities of $1,174,946 during the nine-month period ended
March 31, 1995 (Nine-Month Period 1995). The deficit cash flows from operating
activities during the Nine-Month Period 1996 is a result of the Company's net
loss of $1,965,576, changes in current assets and liabilities (primarily
increases in accounts receivable, inventories and payables due to acquisitions
made by the Company, as well as increased activity caused by the seasonality of
the Company's business) and adjustments to reconcile net loss to net deficit
cash flows from operating activities, including amortization and depreciation.
During the Nine-Month Period 1996, the Company had net deficit cash flows
from investing activities of $2,279,191. The deficit is the result of $491,145
in payments for equipment, $353,314 in payments for intangible assets and
$1,434,732 for acquisitions. Subsequent to March 31, 1996, the Company
extinguished the amount due in connection with acquisitions through the payment
of cash and the issuance of common stock.
During the Nine-Month Period 1996, the Company had net cash flows from
financing activities of $4,620,733 which included $2,601,129 in proceeds from
short-term debt, $1,663,630 in payments on notes receivable for stock, net of
$124,026 of repayments of long-term debt. As described above, subsequent to
March 31, 1996, the Company received net proceeds of $6,608,250 from a private
placement of convertible preferred stock and $2,500,000 from an increase in its
line of credit with a bank, as well as issuing common stock valued at $608,786.
In order to fully implement the Company's acquisition plans, the Company is
attempting to obtain additional equity and debt funding, including, but not
limited to, the exercise of existing warrants. If all warrants issued by the
Company are exercised at their current exercise prices, of which there is no
assurance, they would generate $28,250,000. In addition, the Company has signed
an Engagement Letter with a major financial institution as financial advisor and
agent concerning a funding of up to $15,000,000 in the form of mezzanine funding
on a "best efforts" basis. The company is currently re-evaluating the need for
this mezzanine funding. The proceeds of additional financings would be used
principally for working capital, inventory and the acquisition of seed
companies.
At March 31, 1996, the Company and its subsidiaries had a $2,000,000 line
of credit with Bank of America (Nevada) which was fully utilized. The Company
subsequently negotiated an increase in the line of credit to $4,500,000 and
extended it through November 30, 1996. The amount available under the line of
credit, as amended, is limited to a combination of 70% of eligible accounts
receivable and 50% of eligible inventory. The line of credit bears interest at
the bank's reference rate plus 1.5% and is secured by inventory, accounts
receivable, intangibles and equipment of the Company and of certain of its
subsidiaries.
12
<PAGE>
MATERIAL CHANGES IN RESULTS OF OPERATIONS
As a result of the Company's acquisition program referred to above, the
Company has acquired all or parts of nine regional seed businesses since January
1, 1995, which are described in the notes to the Company's consolidated
financial statements included herein and in the Company's June 30, 1995 Form 10-
KSB. All of the acquisitions have been recorded using the purchase method of
accounting. Accordingly, the Company's results of operations for periods in the
current fiscal year are significantly different than those in the prior fiscal
year due to the results of the acquired companies being included from the
effective dates of the acquisitions. The Company's business is subject to wide
seasonal fluctuations and, therefore, the results of operations for periods less
than one year are not necessarily indicative of results which may be expected
for any other interim period or for the year as a whole.
During the three-month period ended March 31, 1996 (Third Quarter 1996),
the Company finalized the acquisition of two regionally based seed distribution
companies, Doug Conlee Seed Company (Conlee) and Beachley-Hardy Seed (Beachley-
Hardy). Conlee had sales of approximately $1 million for fiscal year ended
December 31, 1995, and Beachley-Hardy had sales of approximately $9 million for
its fiscal year ended December 31, 1995. During the Third Quarter 1996 and the
Nine-Month Period 1996, the Company had revenues of $9,743,741 and $16,676,415
through its wholly owned subsidiaries. These amounts represent substantial
increases over the amounts for the corresponding periods in the prior year of
$1,507,356 and $1,976,638 primarily due to the Company's acquisitions of
regional seed companies.
The cost of revenues for the Company's products amounted to $7,142,298 and
$12,381,752 for the Third Quarter 1996 and the Nine-Month Period 1996 and
included such costs as the cost of product, packaging and shipping. Gross profit
was 27% and 26% respectively.
The Company had general and administrative expenses of $1,118,629 and
$2,745,693 for the Third Quarter 1996 and the Nine-Month Period 1996 which are
increases of $438,930 and $1,864,839 over the corresponding periods in the prior
year. The general and administrative expenses include salaries, occupancy costs,
professional fees, promotional expenses, and other administrative costs all of
which increased substantially in the 1996 periods due to inclusion of the
companies acquired.
The Company had regulatory expenses of $81,195 and $406,968 during the
Nine-Month Period 1996 and Nine-Month Period 1995. These expenses include
salaries and services rendered by consultants. This decrease resulted from the
completion of field trials for FDA approval of the Company's proprietary
product, Bloatenz Plus. The FDA has indicated that it will require the Company
to perform additional tests before it will approve the sale of Bloatenz Plus in
the United States. The Company is currently concentrating its management efforts
on the seed business and, therefore, is not currently inclined to expend
additional financial and management resources to pursue approval of Bloatenz
Plus for sale in the United States. However, the Company is continuing its
marketing efforts in Mexico and expects to receive approval for marketing in
Argentina in the near future. These foreign markets, where the approval process
is not as expensive and time consuming as in the United States, should provide
the Company with sufficient revenues to recover the related costs, including
those amounts capitalized as intangible assets.
Research and development expenditures decreased by $58,817 during the
Nine-Month Period 1996 over the Nine-Month Period 1995. This decrease is
primarily a result of diminishing expenses for consultants, design and materials
associated with the Company's proprietary liquid dispensing device, the
PDS-1000.
The Company had selling and marketing expenses of $740,986 during the Third
Quarter 1996 and $1,510,793 for the Nine-Month Period 1996 as compared to
$113,298 and $244,062 in the corresponding periods in the prior year. The
increase in these expenses for the Third Quarter 1996 and for the Nine-Month
Period 1996 is due to the acquisitions of regional seed companies, while the
expenses for the prior periods were primarily salaries, advertising and
marketing material for the Company's Graze N Hay TM product line and included
only limited seed operations.
As a result of the foregoing, the Company incurred a net loss of
$1,965,576, or $.27 per share, for the Nine-Month Period 1996, as compared to a
net loss of $1,059,499, or $.24 per share, for the Nine-Month Period 1995. The
Company incurred a net loss of $255,774, or $.03 per share, for the Third
Quarter 1996 and $629,924, or $.13 per share, for the three-month period ended
March 31, 1995. The net loss for periods in 1996 was primarily due to costs
inherent in the Company's business strategy of acquiring regional seed
companies. As the Company grows rapidly through acquisitions, it must incur
costs to identify and analyze appropriate acquisition candidates in addition to
raising capital to finance the acquisitions. In addition, the Company incurs
significant costs in salaries, promotional expenses, and financing as the
acquired companies are assimilated into the Company in an orderly manner. The
corporate infrastructure has been ramped up ahead of buildup in revenues from
acquisitions in order to ensure effective, orderly growth.
Management does not believe that inflation has had a significant effect on
the Company's operations to date, nor is inflation expected to have a material
impact over the next year.
- - --------------------------------------------------------------------------------
13
<PAGE>
PART II
Item 1. Legal Proceedings
On February 9, 1996, Jonathan R. Curshen commenced a lawsuit in the United
States District Court, Middle District of Florida, against the Company, John C.
Francis and Johnny R. Thomas, officers of the Company, and Tammie Winfield (a
shareholder). The plaintiff is seeking unspecified compensatory and punitive
damages based upon an alleged repudiation of an agreement to sell plaintiff
shares of Common Stock of the Company. The Company and the other defendants
have denied the allegations and are vigorously defending the lawsuit. The
Company believes that the lawsuit has no merit.
Item 2. Changes in Securities
As the Company reported on a Current Report on Form 8-K, dated April 12,
1996, which Form 8-K is hereby incorporated herein by reference, subsequent to
the end of the three-month period ended March 31, 1996, the Company completed a
private placement of 7,425 shares of Series B Convertible Preferred Stock
("Preferred Stock").
Each share of Preferred stock has a liquidation preference of $1,000 plus a
premium equal to 10% per annum of the original issue price, which premium is
also payable upon conversion in additional shares of Common Stock. In the event
of any dissolution, liquidation or winding up of the Company, whether voluntary
or involuntary, the holders of the Preferred Stock will be entitled to receive
their liquidation preference prior to the distribution of any assets or funds to
the holders of Common Stock.
The Preferred Stock is convertible (35% after June 1, an additional 35%
after July 1, and the remaining 30% after July 31, 1996) into shares of Common
Stock at a conversion price which is equal to the lesser of: (i) 80% of the
average closing bid price of the Common Stock over the five trading days
immediately preceding the date of conversion, or (ii) $6.00 per share, subject
to adjustment. Based on the closing bid price of the Common Stock over the five
trading days preceding May 10, 1996, the number of shares that would be issued
upon full conversion of the Common Stock would be 2,343,344, or about 23.3% of
the outstanding shares of Common Stock. The issuance of a large number of
shares of Common Stock upon conversion would affect the existing holders of
shares by diluting the voting power of their Common Stock.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
The Company's Annual Meeting of Shareholders was held on February 16, 1996.
All of the incumbent directors of the Company were re-elected at the Meeting, as
follows:
VOTES CAST
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD
NOMINEES ELECTION ELECTION AUTHORITY
<S> <C> <C> <C>
Johnny Thomas 4,768,396 5,200 5,225
Scott J. Looms 4,768,396 5,200 5,225
John C. Francis 4,768,396 5,200 5,225
</TABLE>
14
<PAGE>
In addition, the following votes were cast with respect to the appointment
of KPMG Peat Marwick LLP as the Company's auditors for the year ending June 30,
1996.
FOR: 4,768,396 AGAINST: 5,200 ABSTAIN: 5,225
Item 5. Other Information
(a) Acquisition of Assets of Doug Conlee Seed Co., Inc. ("Conlee").
On April 12, 1996, the Company, through its subsidiary Seed Resource, Inc.,
Completed the acquisition of certain assets of Conlee including inventory,
breeding program germplasm and proprietary varieties and trademarks, pursuant to
an Asset Purchase Agreement, effective as of January 1, 1996, by and among
Conlee, Seed Resource, Inc. and the Company. The aggregate purchase price was
$639,606, plus three annual payments of 20% of the net margin attributable to
the business transferred.
Conlee's business consists of wholesale and retail farm seed sales, in the
United States and Mexico, of a wide range of products including sorghum,
sudangrass, millets, rye, hybrid sorgo sudangrass and sumac. Conlee's
operations are located in the State of Texas.
(b) Acquisition of Assets of Beachley-Hardy Seed ("BH").
On May 2, 1996, the Company, through its subsidiary, Halsey Seed Company,
Inc. ("Halsey"), completed the acquisition of substantially all of the assets of
BH, a division of Research Seeds, Inc. ("RSI"), pursuant to an Asset Purchase
Agreement, effective as of February 1, 1996 (the "Purchase Agreement"), by and
among RSI, Halsey and the Company. The aggregate purchase price, net of assumed
liabilities of $761,359 (the "Purchase Price"), was $4,231,981, as adjusted,
payable in cash in the amount of $3,623,195 and with 162,343 shares of Common
Stock of the Company, valued at $608,786. The cash funds used for the
acquisition were obtained primarily from a private placement of securities as
well as from operations.
BH is engaged in wholesale and retail farm seed sales, primarily in the
Eastern United States, of a wide range of products including hybrid seed corn,
alfalfa, small grains, soybeans, soil erosion material, forage seeds, vegetable
seeds, sorghums, turf seeds and inoculate. BH's operations are headquartered in
the Commonwealth of Pennsylvania.
Financial information regarding the acquisition:
(i) Financial Statements of Business Acquired.
It is impracticable for the Company to file the financial information of
the business acquired from BH at this time. Such information will be filed by
amendment to this Form 10-Q within the applicable time period required for
disclosure of such information by Current Report Form 8-K instructions.
(ii) Pro-forma financial information.
It is impracticable for the Company to file the pro-forma financial
information required under the instructions of Current Report Form 8-K at this
time. Such information will be filed by amendment to this Form within the
applicable time period required for disclosure of such information by Current
Report Form 8-K instructions.
15
<PAGE>
(c) Credit Line Amendment
Effective May 1, 1996, the Company amended certain terms of its revolving
credit line with Bank of America Nevada ("BOA"). BOA increased the line of
credit to an amount equal to the lesser of (i) $4,500,000 or (ii) a formula
based on the value of inventory and receivables. The line of credit expires
November 30, 1996. Outstanding balances bear interest at 1.5% plus BOA's
"reference rate." An annual loan fee of $10,000 is due, and there is an "unused
commitment" fee of .5% per annum. The loan is secured by all personal property
of the Company and its subsidiaries.
Proceeds for the loan may be used only for working capital purposes, and
the Company must maintain a consolidated tangible net worth of at least
$11,000,000. The Company may not incur additional debt in excess of $1,000,000
in the aggregate without the written consent of BOA, among other restrictions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
1 Purchase Agreement for BH acquisition.
2 Omitted Schedules and Exhibits to the Purchase Agreement.
3 Employment Agreement between the Company and Henry A. Ingalls, dated
February 13, 1996.
27 Financial Data Schedule
(b) One report on Form 8-K was filed during the quarter for which this
Report is filed, reporting an acquisition of assets on February 1, 1996, under
Item 2 thereof.
16
<PAGE>
SIGNATURES
In accordance with the requirement of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AGRIBIOTECH, INC.,
May 14, 1996 By: /s/ Henry A. Ingalls
- - ----------- -------------------------
Date Henry A. Ingalls,
Vice-President/CFO
17
<PAGE>
Exhibit 1
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement") dated May 2, 1996 (hereinafter
referred to as the "Signing Date" or the "Signing") by and among Research Seeds,
Inc., a Missouri corporation (the "Seller"), Halsey Seed Company, Inc., a Nevada
corporation (the "Buyer") and AgriBioTech, Inc. ("ABT"), a Nevada corporation.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Buyer is a wholly-owned subsidiary of ABT;
WHEREAS, Beachley-Hardy Seed ("BH") is a division of the Seller;
WHEREAS, the Seller, through BH, has been engaged in the wholesale and
retail farm seed business in the States of Connecticut, Delaware, Maine,
Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North
Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia
and West Virginia, selling a wide range of products including, but not limited
to, hybrid seed corn, alfalfa, small grains, soybeans, soil erosion material,
forage seeds, vegetable seeds, sorghums, turf seeds and inoculate under BH's
name (the "Business"), which Business the Seller shall cease to operate and
shall be reconstituted as a new business of the Buyer;
WHEREAS, the Seller wishes to sell and the Buyer wishes to purchase certain
tangible and intangible assets associated with the Business (the "Assets").
NOW, THEREFORE, in consideration of the foregoing and the terms,
conditions, representations, warranties and mutual covenants appearing in this
Agreement, the parties hereto hereby agree as follows:
SECTION 1. SALE AND PURCHASE OF ASSETS. Upon the terms and subject to the
---------------------------
conditions set forth in this Agreement including at the prices shown in the
Schedules attached hereto, at the Closing (as hereinafter defined) effective as
of the Effective Date (as hereinafter defined), the Seller shall sell, assign,
transfer and deliver to the Buyer, and the Buyer shall purchase, acquire, accept
and take possession of all of the Seller's right, title and interest in and to
the following assets of the Seller (all of which are hereinafter sometimes
referred to as the "Assets," which shall be defined as those assets set forth in
Sections 1(a) through 1(o) as of the Effective Date adjusted for the deletions
and additions thereto in the ordinary course of business for the period after
the Effective Date through the Closing Date (as hereinafter defined)):
(a) BH's marketable inventory, including, but not limited to, the hybrid
seed corn, alfalfa, soybeans, forage seeds, turf seeds and small grains, which
relates to the Business (the "Inventory"), as set forth on Schedule 1(a)
attached hereto.
(b) BH's land which relates to the Business (the "Real Property"), as set
forth on Schedule 1(b) attached hereto.
(c) BH's buildings and improvements, including storage, which relate to the
Business, as set forth on Schedule 1(c) attached hereto.
(d) BH's equipment and machinery, which relate to the Business, as set
forth on Schedule 1(d) attached hereto.
(e) BH's office furniture and fixtures which relate to the Business, as set
forth on Schedule 1(e) attached hereto.
(f) BH's automobiles, trucks, vehicles and forklifts which relate to the
Business, as set forth on Schedule 1(f) attached hereto.
<PAGE>
(g) BH's miscellaneous equipment and hand tools which relate to the
Business, as set forth on Schedule 1(g) attached hereto.
(h) The Assets set forth in subsections (b) through (g) above are sometimes
referred to herein as the "Fixed Assets."
(i) BH's pre-paid assets which relate to the Business, as set forth on
Schedule 1(i) attached hereto (the "Pre-Paid Assets").
(j) BH's trade names which relate to the Business, as set forth on Schedule
1(j) attached hereto.
(k) BH's trademarks which relate to the Business, as set forth on Schedule
1(k) attached hereto.
(l) The customer list of BH which related to the Business as of the
Effective Date, as set forth on Schedule 1(l) attached hereto.
(m) BH's goodwill.
(n) The Assets set forth in subsections (j) through (m) above are sometimes
referred to herein as the "Intangible Assets."
(o) BH's accounts receivable which relate to the Business, as set forth on
Schedule 1(o) attached hereto (the "Accounts Receivable").
(p) The Assets shall be conveyed free and clear of all liabilities,
obligations, liens, security interests and encumbrances of any character
whatsoever, excepting only those liabilities and obligations, if any, which are
expressly to be assumed by the Buyer hereunder, including, but not limited to,
the Assumed Agreements (the "Assumed Liabilities"), as set forth on Schedule
1(p) attached hereto.
Except for the Assumed Liabilities, if any, the Buyer and/or ABT shall not
assume nor be responsible for any liabilities or obligations which relate in any
way to the operation of the Business prior to the Effective Date.
SECTION 2. PURCHASE PRICE. In full consideration for the sale, transfer,
--------------
conveyance, assignment and delivery of the Assets by the Seller to the Buyer and
in reliance upon the representations and warranties made herein by the Seller
and for other consideration set forth herein, the Buyer hereby agrees to pay to
the Seller (except as described in Section 2(h) below) at the Closing (as
hereinafter defined) a net purchase price (the "Purchase Price") of Four Million
One Hundred Forty-Two Thousand Ninety-Five and 67/100 ($4,142,095.67) Dollars
consisting of the following:
(a) In full consideration for the Inventory as of January 31, 1996, the
Buyer hereby agrees to pay to the Seller at the Closing a payment by wire
transfer of immediately available funds equal to Three Million Three Hundred
Ninety-One Thousand Two Hundred Ninety-Four and 24/100 ($3,391,294.24) Dollars,
as set forth on Schedule 1(a) attached hereto. The Inventory shall be valued
for purchase at the lower of current wholesale market or the Seller's cost.
(b) In full consideration for the sale of the Fixed Assets, the Buyer
hereby agrees to pay to the Seller at the Closing a payment of One Million Four
Hundred Eight Thousand Seven Hundred Eighty-Six and 00/100($1,408,786.00)
Dollars payable as follows:
(i) The Buyer shall pay to the Seller at the Closing a payment by wire
transfer of immediately available funds equal to One Million One Hundred
Thousand and 00/100 ($1,100,000.00) Dollars; and
(ii) In addition, the Buyer shall pay to the Seller, Three
-2-
<PAGE>
Hundred Eight Thousand Seven Hundred Eighty-Six and 00/100 ($308,786.00) Dollars
payable by the transfer to the Seller at the Closing of 82,343 shares of Common
Stock of ABT (the "Fixed Assets ABT Shares"), with an agreed upon value of $3.75
per share.
(c) In full consideration for the sale of the Pre-Paid Assets, the Buyer
hereby agrees to pay to the Seller at the Closing a payment by wire transfer of
immediately available funds equal to One Hundred Four Thousand Nine Hundred
Twenty-Two and 45/100 ($104,922.45) Dollars.
(d) In addition to the purchase and sale of the Assets as described above,
at the Closing, the Seller hereby agrees to enter into a five-year non-
competition agreement with the Buyer in the form annexed hereto as Exhibit 2(d)
as more fully described in Section 12(k) below, for the aggregate sum of Three
Hundred Thousand and 00/100 ($300,000.00) Dollars, including the purchase of the
Intangible Assets, payable at the Closing by the transfer to the Seller of
80,000 shares of Common Stock of ABT (the "Intangible Assets ABT Shares")
(collectively, with the Fixed Assets ABT Shares, the "ABT Shares"), with an
agreed upon value of $3.75 per share. The ABT Shares have not yet been
registered with the Securities and Exchange Commission. At the Closing, the ABT
Shares shall be delivered to the Seller registered in the name of the Seller or
the Seller's designees, fully paid and nonassessable. Notwithstanding the
foregoing, the resale of the ABT Shares shall be made pursuant to the Lock-Up
Agreement, in the form attached hereto as Exhibit 3(b).
(e) In full consideration for the Accounts Receivable, the Buyer hereby
agrees to pay to the Seller at the Closing a payment in cash equal to One
Million Seventy Thousand Seven Hundred Forty-Three and 57/100 ($1,070,743.57)
dollars.
The Seller hereby confirms the transfer to the Buyer of the Seller's
ownership of and sole right (i) to collect all accounts and Accounts Receivable,
(ii) to endorse the name of the Seller, without recourse to the Seller, any
checks or other instruments received on account of such accounts and Accounts
Receivable and (iii) to give notice, in the Buyer's name, to the various
customers and others owing monies to the Buyer in respect of any accounts and
Accounts Receivable, advising such customers and others, among other things,
that they should make payment of the foregoing directly to the Buyer. The
Seller shall transfer or deliver to the Buyer from time to time, within ten (10)
days of receipt thereof by the Seller, all cash or other property due the Buyer
that the Seller may receive in respect of any accounts or Accounts Receivable
transferred to the Buyer as contemplated by this Agreement, or as otherwise due
to the Buyer.
(f) The Buyer shall assume the payables as follows:
(i) The Buyer shall assume the accounts payable of Six Hundred Twenty-
Nine Thousand Nine Hundred Twenty-Eight and 77/100 ($629,928.77) dollars, which
related to the Business, as set forth on Schedule 2(f) attached hereto,
effective at the Closing (the "Accounts Payable").
(ii) The Buyer shall assume the assumed payables of One Hundred Thirty-
One Thousand Four Hundred Twenty-Nine and 86/100 ($131,429.86) dollars, which
related to the Business, as set forth on Schedule 1(p) attached hereto,
effective at the Closing.
(g) The Buyer shall assume the customer advances, and the terms under which
such advances were made, in the amount of One Million Three Hundred Seventy-Two
Thousand Two Hundred Ninety-One and 96/100 ($1,372,291.96) dollars, which
related to the Business, as set forth on Schedule 2(g) attached hereto,
effective at the Closing (the "Customer Advances").
(h) The parties hereto agree that the purchase and sale of the Assets and
the assumption of the Assumed Liabilities, if any, shall be accounted for
-3-
<PAGE>
as if such transactions had occurred as of the close of business on January 31,
1996 (the "Effective Date"), regardless of when the Closing in fact occurs. The
Buyer shall realize any operating profit or loss from the operation of the
Business after the Effective Date. Accordingly, the Seller agrees to consult
ABT on any material issues, events, conditions or contracts prior to the
Closing. Furthermore, the Seller agrees not to enter into any new capital
obligations or capital expenditures which relate to the Business from the
Signing Date and prior to the Closing, except with the respective Buyer's
consent. Accordingly, an adjusted Purchase Price (the "Adjusted Purchase
Price") shall be calculated and agreed to by both the Seller and the Buyer which
shall adjust the Purchase Price to account for the value of the Business from
the Effective Date through the Closing Date, as set forth on Schedule 2(h)
attached hereto and delivered at the Closing.
SECTION 3. REGISTRATION OF SHARES; LOCK-UP OF ABT SHARES.
---------------------------------------------
(a) ABT hereby agrees to register the resale by the Seller of the ABT
Shares under the Securities Act of 1933, as amended, as soon as practicable
after the Closing prior to October 1, 1996.
(b) The Seller hereby agrees to sell the ABT Shares in accordance with the
terms of the Lock-Up Agreement which restricts the sale of the ABT Shares during
the period commencing on the Closing Date and ending upon the sale of all of the
ABT Shares hereunder (the "Lock-Up Period").
(i) No ABT Shares may be sold during the period commencing on the
Closing Date and ending on September 30, 1996.
(ii) During the period commencing October 1, 1996 and ending upon the
sale of all of the ABT Shares hereunder, the Seller may attempt to sell the ABT
Shares in accordance with the terms of this Section 3 and the Lock-Up Agreement.
(iii) During the Lock-Up Period, the Seller may not sell more than 5,000
shares per day and no more than 10,000 shares per week. Any Gross Proceeds in
excess of $608,786 from the sale of the ABT Shares shall be retained by the
Seller. Provided; however, in the event that the Seller materially breaches any
term or condition of the Lock-Up Agreement, including, but not limited to, when
and how many ABT Shares it may sell, the Seller hereby agrees to remit to the
Buyer, within 20 days of receipt thereof, all Gross Proceeds in excess of
$608,786 received by the Seller.
(c) ABT reserves the right to waive the lock-up limitations and/or resale
limitations set forth in the Lock-Up Agreement, in writing, in whole or in part;
provided that such waiver shall be delivered to the Seller, in writing, to be
effective.
SECTION 4. EXCLUDED ASSETS. The Seller shall retain ownership of all
---------------
of the assets of the Business, except for those assets transferred to the Buyer
pursuant to this Agreement, including, but not limited to, the corporate records
(but not the business records) of the Business, and other assets as more
specifically listed on Schedule 4(a) attached hereto (the "Excluded Assets").
SECTION 5. NON-ASSUMPTION OF LIABILITIES. It is understood and agreed
-----------------------------
by the parties hereto that the Assets will be sold, conveyed, transferred and
assigned to the Buyer at the Closing free and clear of all liens, charges and
encumbrances whatsoever, and it is further understood and agreed by the parties
hereto that the Buyer does not assume, accept or undertake any obligations,
commitments, duties, debts or liabilities of any kind whatsoever (the
"Obligations"), except for the Assumed Liabilities assumed by the Buyer pursuant
to this Agreement as listed in Schedule 1(p) attached hereto.
SECTION 6. CLOSING. The closing of the sale and purchase of the Assets
-------
provided for in Section 1 of this Agreement (the "Closing") shall take place
-4-
<PAGE>
at the offices of counsel to the Seller, Brent G. Wennberg, on the 2nd day of
May 1996, or such other time and place as the parties may agree. The day on
which the Closing occurs is sometimes hereinafter referred to as the "Closing
Date."
SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
--------------------------------------------
warrants and represents to the Buyer and ABT as follows:
(a) Title. Except as set forth in Schedule 7(a) of this Agreement, the
-----
Seller owns, and at the Closing shall have, good, valid and marketable title to
the Assets and full right to transfer title to the Assets free and clear of all
liens, mortgages, charges, liabilities, claims, security interests or
encumbrances of every type whatsoever.
(b) Capacity; Organization; Standing. The Seller has full capacity to
--------------------------------
enter into and perform under this Agreement, and all other agreements to be
entered into in connection with the transactions contemplated hereby, (the
"Other Agreements") and to consummate such transactions; and no other consent or
joinder of any other persons or corporations is required. This Agreement has
been, and each of the Other Agreements executed by the Seller hereunder will at
the Closing, be duly authorized, executed and delivered by the Seller. This
Agreement constitutes, and each of the Other Agreements executed by the Seller
will constitute, the legal, valid and binding obligations of the Seller
enforceable in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights generally or by general
equitable principles. The Seller is duly organized, validly existing and in
good standing under the laws of the State of Missouri. The Seller has full
corporate power and authority to conduct the Business as it is now being
conducted and is duly qualified to do business in the States of Pennsylvania and
Ohio, and in each jurisdiction where the nature of the property owned or leased,
or the nature of the business conducted by the Seller with respect to the
Business requires such qualification, where failure to be so qualified would
have a material adverse effect on the Business. Except, where failure to be so
licensed would not have a material adverse effect on the Business, the Seller
has all necessary licenses and authority to operate its business as now being
conducted in the States of Connecticut, Delaware, Maine, Maryland,
Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina,
Ohio, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia and West
Virginia.
(c) Legal Proceedings. Except as set forth in Schedule 7(c) of this
-----------------
Agreement, the Seller is not a party to any pending litigation, arbitration or
administrative proceeding or investigation, with respect to or relating to the
Assets or the Business and, to the Seller's best knowledge and belief, no
litigation, arbitration or administrative proceeding or investigation that would
have a material adverse effect on the Assets or the Business is threatened.
(d) Trade Names and Trademarks, etc. With respect to the Business, the
-------------------------------
Seller owns or has the right to use the trade names and trademarks as set forth
on Schedules 1(j) and 1(k), respectively. The Seller has not granted, and will
not grant prior to the Closing, licenses or other rights to use such trade names
and trademarks. Except as disclosed in Schedules 1(j) and 1(k), to the best
knowledge of the Seller, no other trade names or trademarks are owned or used by
the Seller in relation to the Business. To the Seller's knowledge and belief,
the operation of the Business does not infringe on the trade names, trademarks
or any other intellectual property rights of any third party. No claim has
been made that there is any such infringement. To the Seller's knowledge and
belief, no trade name or trademarks of any person infringes the trade names or
trademarks which relate to the Business.
(e) Description of Material Contracts. To the best knowledge of the
---------------------------------
Seller, except for this Agreement and the Other Agreements, Schedule 7(e)
contains a complete and correct list as of the date hereof of all material
-5-
<PAGE>
agreements, contracts and commitments, obligations and understandings (the
"Material Agreements") which are not set forth in any other Schedule delivered
hereunder, of the following types, written or oral, which relate to the Business
and that the Seller is a party or by which it or any of the Assets are bound, as
of the date hereof. The Material Agreements, to the best knowledge of the
Seller, constitute all of the material contracts, leases and other agreements
related to the operation of the Business. Schedule 7(e) shall also designate
which of the Material Agreements that the Seller shall assign to the Buyer and
the Buyer shall assume (the "Assigned Agreements"). All of the Material
Agreements to which the Seller and/or BH is a party constitute valid and legally
binding obligations of the Seller and/or BH. The Seller has no knowledge that
the Material Agreements are not valid and legally binding obligations of the
other parties thereto. The Material Agreements are enforceable in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights generally or by general equitable principles, are in full
force and effect. Except as otherwise specified in Schedule 7(e), the Assigned
Agreements are validly assignable to the Buyer without the consent of any party.
It is the intention of the Seller that after the assignment of the Assigned
Agreements to the Buyer pursuant hereto, the Buyer will be entitled to the full
benefits thereof. There is not thereunder any existing default, or event which,
after notice or lapse of time, or both, would constitute a default or result in
a right to accelerate or loss of rights. The Seller has not received any notice
of termination of any Material Agreement. True and complete copies of all of
the written Material Agreements have been delivered to the Buyer.
(f) Default; Violations or Restrictions. The Seller is not in material
-----------------------------------
default under, nor to the Seller's best knowledge, has any event occurred which,
with the lapse of time or action by a third party, could result in a material
default under any outstanding note, indenture, mortgage, contract or agreement
to which it is bound, relating to the Assets. Except as declared in Schedule
7(f), the execution, delivery and performance of this Agreement and of any
agreement to be executed and delivered by the Seller pursuant hereto, and the
consummation of any of the transactions contemplated hereby or thereby will not
(or with the giving of notice or the lapse of time or both would), to the
Seller's best knowledge, result in any material violation of any provision of or
result in the material breach of, modification of, acceleration of the maturity
of obligations under, or constitute a default, or give rise to any right of
termination, cancellation or acceleration or otherwise be in material conflict
with or result in a loss of material contractual benefits to the Seller, as such
relates to the Assets, under any law, order, writ, injunction, decree, statute,
rule or regulation of any court, governmental agency or arbitration tribunal or
any of the terms, conditions or provisions of any contract, lease, note, bond,
mortgage, deed of trust, indenture, license, security agreement, agreement or
other instrument or obligation by which the Seller is a party or by which it may
be bound, or require any consent, approval or notice under the laws of any such
document or instrument; or result in the creation or imposition of any lien,
claim, restriction, charge or encumbrance upon the Assets.
(g) Court Orders and Decrees. Except as set forth on Schedule 7(g), the
------------------------
officers of the Seller have not received written or oral notice that there is
outstanding, pending, or threatened any order, writ, injunction or decree of any
court, governmental agency or arbitration tribunal against or affecting the
Assets.
(h) Approvals and Authorizations. The Seller has obtained all necessary
----------------------------
consents, approvals or authorizations in connection with the transactions
contemplated hereby, which are required by law or otherwise in order to make
this Agreement binding upon the Seller.
(i) Governmental Licenses. Schedule 7(i) attached hereto contains a list
---------------------
of all material governmental and administrative consents, permits, appointments,
approvals, licenses, certificates and franchises which are
-6-
<PAGE>
required in connection with the Seller's execution, delivery or performance of
this Agreement, all of which have been obtained and are in full force and
effect. The Seller has not received any notice of any material violation with
respect to any such consents, permits, licenses or other regulatory orders and
which remain unabated.
(j) Hazardous Material and Nuisance. Except as disclosed on Schedule 7(j)
-------------------------------
attached hereto, there are no known claims or to the best knowledge of the
Seller potential claims which may exist against the Seller relating to the
Business and/or the Assets, for, with respect to, or as direct or indirect
result of, the presence on or under, or the escape, seepage, leakage, spillage,
discharge, or emission discharging, from the real property of the Seller of any
"Hazardous Material," including, without limitation, any losses, liabilities,
damages, injuries, costs, expenses, reasonable fees of counsel or claims
asserted or arising under the Comprehensive Environmental Response, Compensation
and Liabilities Act ("CERCLA"), any so-called "Super Fund" or "Super Lien" law
or any other applicable federal, state or local statute, law, ordinance, code,
rule, regulation, order or decree now or at any time hereafter in effect,
regulating, relating to or imposing liability or standards of conduct concerning
any Hazardous Material.
(k) Employee Benefit Plans. No funding deficiency exists or has existed
----------------------
with respect to any "Employee Benefit Plans" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), or any
other profit sharing, deferred compensation, bonus, stock option, stock
purchase, pension or other compensation plan (excluding salaries, wages and
other customary employee benefits such as vacation and sick leave), or any other
plan or arrangement to benefit employees maintained or contributed to by the
Seller or any person, firm or corporation (an "Affiliate") under "common
control" (within the meaning of Section 401(b) of ERISA) with the Seller and in
which any of the employees of the Seller or any Affiliate participates or is
eligible to participate covering any present or former employee of the Seller or
any Affiliate which may cause or result in a lien upon any of the Assets. The
Seller shall indemnify and hold harmless the Buyer and ABT for any losses or
expenses incurred by the Buyer and/or ABT as a result of any Employee Benefit
Plan, as set forth in Section 9(b) hereof. Schedule 7(k) attached hereto
discloses, as of now and since the Seller has operated the Business, all
Employee Benefit Plans concerning the Business.
(l) Absence of Certain Business Practices. Neither the Seller, nor to the
-------------------------------------
best knowledge and belief of the Seller, any officer, employee or agent of the
Seller or BH acting on either's behalf, nor any other person acting on either's
behalf, has, directly or indirectly, within the past three (3) years given or
agreed to give any material gift or similar benefit inconsistent with the
Seller's past practices and policies to any customer, supplier, governmental
employee or other person who is or may be in a position to help or hinder the
Business (or assist the Seller in connection with any actual or proposed
transaction) which (i) would subject the Seller to any material damage or
penalty in any civil, criminal or governmental litigation or proceeding, (ii) if
not given in the past would have had a material adverse effect on the assets,
business or operation of the Business, or (iii) if not continued in the future,
would materially adversely affect the Assets, the Business or its operations or
prospects, or which would subject the Seller to suit or penalty in any private
or governmental litigation or proceeding.
(m) Brokers. The Seller has not entered into and will not enter into any
-------
agreement, arrangement or understanding with any person or firm which will
result in an obligation of the Buyer or ABT to pay any finder's fee, brokerage
commission, or similar payment in connection with the transactions contemplated
by this Agreement. Any brokerage commission owing to AgriCapital Corporation in
connection with the transactions contemplated by this Agreement, if any, shall
be paid by the Seller in accordance with the Seller's agreement with AgriCapital
Corporation.
-7-
<PAGE>
(n) Financial Statements. The Seller has delivered to the Buyer during the
--------------------
process of the Buyer's due diligence investigation copies of all the financial
statements requested by the Buyer (hereinafter collectively called the
"Financial Statements") and which are attached hereto as Exhibit 7(n). The
unaudited Financial Statements were prepared by Management of the Seller in the
ordinary course of business for periods through and including the month ending
January 31, 1996 (the "Balance Sheet Date") and through March 31, 1996 were
prepared from the books and records of the Seller and fairly present the
financial condition of the Business as at their respective dates and the results
of the Business' operations for the periods covered thereby.
(o) Absence of Undisclosed Liabilities and Conditions. Except as and to
-------------------------------------------------
the extent reflected or reserved against in the Financial Statements, or as set
forth on Schedule 7(o) attached hereto, as of the Closing Date, the Business, to
the Seller's best knowledge and belief, had no material debts, liabilities or
obligations (whether due or to become due, absolute, accrued, contingent or
otherwise) of any nature whatsoever, including, without limitation, any foreign
or domestic tax liabilities or deferred tax liabilities incurred in respect of
or measured by the Business' income, for the period after the Balance Sheet Date
and prior to the Closing, or any other material debts, liabilities or
obligations relating to or arising out of any act, transaction, circumstance or
state of facts which occurred or existed on or before the Closing Date, whether
or not then known, due or payable, other than liabilities of the same nature as
those set forth in the Financial Statements and reasonably incurred in the
ordinary course of business after the Balance Sheet Date. The Financial
Statements do not include any assets or liabilities of any entity other than the
Seller nor any expense of any entity other than the Seller. The Seller does
not know of any currently existing facts that materially adversely affect or
which might reasonably be expected to materially adversely affect the Assets.
(p) Compliance With Laws. Except as disclosed on Schedule 7(p), the
--------------------
operations and activities of the Business concerning the Assets comply in all
material respects with all applicable federal, state and local laws, statutes,
codes, ordinances, rules, regulations, permits, judgments, orders, writs,
awards, decrees or injunctions (collectively, the "Laws"), as in effect on or
before the date of this Agreement, including, without limitation, all Laws
relating to seed labeling and all rules and regulations of the Occupational
Safety and Health Administration. Neither the ownership nor use of the Assets
nor the conduct of the Business as presently conducted materially conflicts with
the rights of any other person, firm or corporation or violates, or with or
without the giving of notice or the passage of time, or both, will materially
violate, conflict with or result in a material default, right to accelerate or
loss of rights under, any terms or provisions of the Seller's Certificate of
Incorporation or Bylaws as presently in effect, or any lien, encumbrance,
mortgage, deed of trust, lease, license, agreement, understanding (hereinafter
collectively referred to as "Liens"), or Laws to which the Seller is a party or
by which it or the Assets may be bound or affected. The Seller has received no
notice of communication from any third party asserting a failure to comply with
any Laws, nor has the Seller received any notice that any authority or third
party intends to seek enforcement against the Seller to compel compliance with
any such Laws.
(q) Taxes. As of the Closing Date all taxes, including, without
-----
limitation, income, property, sales, use, franchise, added value, employees'
income withholding and social security taxes, imposed by any governmental entity
whatsoever, which are due or payable by the Seller in connection with the
Business, and all interest and penalties thereon, have been paid in full, all
tax returns required to be filed in connection therewith have been timely filed
and all deposits required by law to be made by the Seller with respect to
withholding taxes for employees engaged in the Business have been duly made.
The Seller is not delinquent in the payment of any tax, assessment or
governmental charge or deposit and, to its best knowledge, has no tax deficiency
or claim outstanding, proposed or assessed against it which would
-8-
<PAGE>
result in a tax lien on the Assets. Except for amounts accrued, but not payable
as of the Effective Date, (i) the Seller is not liable for the payment of any
taxes relating to the Assets or the operation of the Business, and (ii) the
Buyer shall have no liability for any taxes related to the ownership or
operation of the Assets or the Business prior to the Effective Date. The Seller
does not know of any tax deficiency or claim outstanding, proposed, or assessed
against it with respect to any taxes, including, without limitation, income,
property, sales, use, franchise, valued-added, employees' income withholding,
and social security taxes imposed by the United States or by any foreign country
or by any state, municipality, subdivision, or instrumentality of the United
States or of any foreign country, or by any other taxing authority that could
have a material adverse effect on the Assets or the Business, or result in the
imposition of a tax lien upon any of the Assets.
(r) Absence of Changes or Events. Without limiting the foregoing, since
----------------------------
the Balance Sheet Date and through the Signing Date, to the best of the Seller's
knowledge and belief, there has been no material adverse change in the Business.
Except as set forth in Schedule 7(r) attached hereto, since the Balance Sheet
Date, the Seller has conducted the Business only in the ordinary course and has
not:
[i] Incurred any obligation or liability, except current liabilities for
trade or business obligations incurred in the ordinary course of business and
consistent with its prior practice, none of which liabilities materially and
adversely affects the Assets, or the Business;
[ii] Mortgaged, pledged or subjected to lien, charge, security interest
or any other encumbrance or restriction on any of the Assets;
[iii] Except for the sale of Inventory, in the ordinary course of
business, sold, transferred, leased to others or otherwise disposed of any of
the Assets;
[iv] Received any notice of termination of any agreement or suffered any
damage, destruction or loss which has had or, with the passage of time, could
have a materially adverse effect on the Assets, or the Business;
[v] Made any change in its pricing, advertising or personnel practices
inconsistent with its prior practice;
[vi] Suffered any change, event or condition which, has had or may have
a materially adverse effect on the Assets, the Business, its operations, or
which might reasonably be expected to materially adversely affect the prospects
thereof;
[vii] Entered into any transaction, contract or commitment other than in
the ordinary course of business which had a material adverse effect on the
Assets or the Business; or
[viii] Instituted, settled or agreed to settle any litigation, action or
proceeding before any court or governmental body relating to the Seller, the
Assets, or the Business.
(s) Inventories. All Inventory consists of items purchased in the ordinary
-----------
course of the Business. All Inventory has been fully paid for or accrued by the
Seller.
(t) Labor Relations. The Seller in connection with the Business is not (i)
---------------
a party to any collective bargaining agreement relating to any of the employees
of the Business and has not recognized and is not required to recognize and has
not received a demand for recognition by any collective bargaining
representative, (ii) a party to any contract with and had no liability to, any
of its employees, agents, consultants, officers, sales
-9-
<PAGE>
representatives, distributors or dealers that is not cancelable by the Seller
without penalty on not more than thirty (30) days' notice, except as set forth
on Schedule 7(t) attached hereto, (iii) subject to any strike or work stoppage
in effect or to the Seller's best knowledge threatened against the Business nor
has any strike or work stoppage been enjoined by any order, writ, injunction or
decree of any court or federal, state, municipal or other governmental agency or
instrumentality.
(u) Customer Lists. All written agreements, and except as may occur in the
--------------
ordinary course of business all arrangements or commitments, with or respecting
any customer of the Seller to which the Seller is a party or is bound have been
described in Schedule 1(l) attached hereto except for those not involving a
consideration of at least $500 per annum.
(v) Investment. Subject to the provisions of Section 3, the Seller (or its
----------
designees) is acquiring, or will acquire, the ABT Shares for investment for its
own account, not as a nominee or agent, and not with the view to, or for resale
in connection with, any distribution thereof. The Seller understands that the
ABT Shares have not been registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the representations of the Seller as
expressed herein. The Sellers acknowledge that each certificate representing
the ABT Shares shall be stamped or otherwise imprinted with a legend
substantially in the following form (in addition to any legend required under
applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SAID ACT.
(w) Schedules. The Seller has delivered to the Buyer materially complete
---------
and correct schedules, in form and substance reasonably acceptable to the Buyer,
as of the Signing Date. The Seller will deliver updated schedules, supplemented
as necessary, to the Buyer as of the Closing.
(x) Accuracy. No representation, warranty, covenant or statement by the
--------
Seller in this Agreement, the Schedules attached hereto and the certificates or
other documents furnished or to be furnished to the Buyer pursuant hereto,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein in light of the
circumstances under which they were made, not materially false or misleading.
SECTION 8. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND ABT. The
---------------------------------------------------
Buyer and ABT, jointly and severally, warrant and represent to the Seller as
follows:
(a) Capacity. The Buyer and ABT have full capacity to enter into and
--------
perform their respective obligations under this Agreement, and the Other
Agreements, and to consummate such transactions; and no other consent or joinder
of any other persons or corporations is required. The execution and delivery of
this Agreement does not, and the consummation of the transactions contemplated
by this Agreement will not, constitute a material breach of any term or
provision of the certificate of incorporation or by-laws of the Buyer or ABT or
constitute a material default under any material law, rule, regulation,
indenture, instrument, mortgage, deed of trust, or other agreement or instrument
to which the Buyer or ABT is a party or by which they are bound.
-10-
<PAGE>
(b) Organization.
------------
(i) The Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada, and the Buyer has corporate
power and authority to carry on its business as now conducted and to own, lease
or operate the properties and assets now used by it in connection therewith.
The Buyer is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties make such qualification necessary.
(ii) ABT is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada, and ABT has corporate power and
authority to carry on its business as now conducted and to own, lease or operate
the properties and assets now used by it in connection therewith. ABT is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties make such
qualification necessary.
(c) Consents and Approvals. No governmental license, permit or
----------------------
authorization, and no registration or filing with any court, governmental
authority or regulatory agency, is required in connection with the Buyer's and
ABT's execution, delivery or performance of this Agreement. The Buyer and ABT
shall execute, deliver and perform its obligations under this Agreement and no
consent or other approval or any other party is required to be obtained by the
Buyer or ABT in connection with the transactions contemplated hereby.
(d) Legal Proceedings. Neither ABT nor the Buyer is a party to or affected
-----------------
by any pending litigation, arbitration or any governmental proceeding or
investigation that would in any manner affect its entering into this Agreement
or performing the transactions contemplated hereby or that might result in any
material adverse change in the financial condition, business or properties of
the Buyer or ABT and to the best of their respective knowledge no such
litigation, arbitration, proceeding or investigation is threatened.
(e) Misrepresentations and Omissions. No representation, warranty, covenant
--------------------------------
or statement by the Buyer or ABT in this Agreement, any Exhibit attached hereto,
the Schedules attached hereto and the certificates or other documents furnished
or to be furnished to the Seller pursuant hereto (including the Schedules, if
any, provided for in this Section 8 and Exhibits thereto), contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact required to be stated herein or therein or necessary to make the
statements contained herein or therein in light of the circumstances under which
they were made, not false or materially misleading.
(f) Binding Obligation. This Agreement has been, and each of the Other
------------------
Agreements executed by the Buyer and/or ABT hereunder will at the Closing, be
duly authorized, executed and delivered by the Buyer and/or ABT, respectively.
This Agreement constitutes, and each of the Other Agreements executed by the
Buyer and/or ABT, respectively, will constitute, the legal, valid and binding
obligations of the Buyer and/or ABT, respectively, enforceable in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights generally or by general equitable principles. All action of
the Boards of Directors of the Buyer and ABT and all other corporate action
necessary to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby has been duly and
validly taken.
(g) Financial Statements. ABT has delivered to the Seller a copy of its
--------------------
Annual Report on Form 10-KSB for June 30, 1995 and its Quarterly Reports on Form
10-QSB for September 30, 1995 and December 31, 1995, as filed by ABT with the
Securities and Exchange Commission (the "ABT Financial Statements"), which
fairly present the consolidated financial condition of ABT as of the respective
dates. Except as disclosed in the ABT Financial Statements, the
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<PAGE>
Buyer has no material debts, liabilities or obligations (whether due or to
become due, absolute, accrued, contingent or otherwise) of any nature whatsoever
relating to or arising out of any act, transaction, circumstance or state of
facts which occurred or existed on or before the date of the ABT Financial
Statements, whether or not then known, due or payable. To the best knowledge
and belief of the Buyer and ABT, there has been no material adverse change in
financial condition of ABT since the date of the ABT Financial Statements and
through the Signing Date.
(h) Brokers; Finders. No agent, broker, investment banker, person or firm
----------------
acting on behalf of the Buyer or ABT or any firm or corporation affiliated with
the Buyer or ABT or under their authority is or will be entitled to any brokers'
or finders' fee or any other commission or similar fee directly or indirectly
from the Seller or any entity affiliated with the Seller in connection with any
of the transactions contemplated hereby.
SECTION 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
-----------------------------------------------------------
(a) Survival of Representations and Warranties. All representations and
------------------------------------------
warranties made by the Seller or the Buyer and ABT in this Agreement, including
without limitation all representations and warranties made in any Exhibit or
Schedule hereto or certificate delivered hereunder, shall survive the Closing
until and through the later of the second anniversary of the Closing Date or the
date set forth in this Agreement (the "Survival Date").
(b) Indemnity on Outstanding Obligations. The Seller hereby agrees to
------------------------------------
indemnify, defend and hold harmless the Buyer and ABT from and against all
liabilities, losses, costs or damages whatsoever (including expenses and
reasonable fees of legal counsel) (collectively, "Damages"), arising on or
before the Survival Date and out of or from or are based upon (i) the inaccuracy
in any material respect of any representation or warranty contained in Section 7
made by the Seller; (ii) the non-performance by the Seller in any material
respect of any covenant, agreement or obligation to be performed by the Seller
under this Agreement; (iii) the non-compliance of the provisions of any
applicable bulk transfer laws in connection with the sale of the Assets to the
Buyer; (iv) any liability relating to the Business other than the Assumed
Liabilities set forth on Schedule 1(p); (v) the legal proceedings set forth on
Schedule 7(c); (vi) any potential environmental claims set forth on Schedule
7(j); (vii) the Employee Benefit Plans set forth on Schedule 7(k) and (viii) any
liability relating to the Seller's termination of the employees of the
Business.
The Buyer and ABT, jointly and severally, hereby agree to indemnify, defend
and hold harmless the Seller from and against all Damages arising on or before
the Survival Date and out of or from or are based upon (i) the inaccuracy in any
material respect of any representation or warranty contained in Section 8 made
by the Buyer or ABT, (ii) the non-performance by the Buyer or ABT in any
material respect of any covenant, agreement or obligation to be performed by the
Buyer or ABT under this Agreement, or (iii) any liability relating to the
operation of the Business or the assumption of the Assumed Liabilities set forth
on Schedule 1(p) that accrue, arise or are based upon events occurring after the
Closing Date.
Whenever any claim shall arise for indemnification hereunder, the party
seeking indemnification (the "Indemnitee") shall notify the indemnifying party
(the "Indemnitor") in writing within 30 days after the Indemnitee has actual
knowledge of the facts constituting the basis for such claim (the "Notice of
Claim"). The Notice of Claim shall specify all facts known to the Indemnitee
giving rise to such indemnification claim and the amount or an estimate of the
amount of the liability arising therefrom.
If the facts giving rise to any such indemnification shall involve any
actual, threatened or possible claim or demand by any person against the
Indemnitee, the Indemnitor shall be entitled (without prejudice to the right
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<PAGE>
of the Indemnitee to participate at its expense through co-counsel of its own
choosing) to contest or defend such claim at its expense and through counsel of
its own choosing if the Indemnitor gives written notice of its intention to do
so to the Indemnitee within 30 days after receipt of the Notice of Claim.
Notwithstanding anything to the contrary contained herein, (i) if there is
a reasonable probability that the Damages may materially and adversely affect
the Indemnitee other than as a result of money damages or other money payments,
the Indemnitee shall have the right to defend, compromise or settle the claim;
provided, however, in such event, if the Indemnitee shall compromise or settle
- - -------- -------
such claim without the approval of the Indemnitor, the Indemnitor shall not be
bound by such compromise or settlement, and (ii) the Indemnitor shall not,
without the Indemnitee's written consent, settle or compromise the claim or
consent to entry of any judgment that does not include as an unconditional term
thereof the release by the claimant or the plaintiff of the Indemnitee from all
liability in respect of the claim.
Notwithstanding any provision of this Agreement to the contrary, no claim
for indemnification, pursuant to this Section 9, by any of the parties hereto
shall be asserted or claimed except to the extent of damages exceeding, in the
aggregate, the sum of $30,000. Furthermore, except for claims arising pursuant
to Sections 9(b)(iv), (v), (vi) and (vii) hereunder, the Seller shall not be
liable for any damages which exceed the Purchase Price.
SECTION 10. COVENANTS OF THE SELLER. The Seller hereby covenants and
-----------------------
agrees:
(a) Further Assurances. The Seller hereby agrees that from time to time at
------------------
the reasonable request of the Buyer or ABT, and without further consideration,
to execute and deliver such additional instruments and to take such other action
as the Buyer or ABT may reasonably require to convey, assign, transfer and
deliver the Assets and otherwise to carry out the terms of this Agreement.
(b) Access to Information. Subsequent to the date hereof and prior to the
---------------------
Closing Date, the Seller will continue to give to the Buyer, ABT, their counsel,
accountants, and other representatives, full and free access to all properties,
books, contracts, commitments and records of the Seller relating to the Assets
so that the Buyer and ABT may have full opportunity to make such investigation
as it shall desire. Unless the Buyer has actual knowledge, no information or
knowledge obtained either independently or as a result of investigation of the
Seller shall diminish or otherwise affect the representations and warranties of
the Seller. In the event that this transaction is not completed for any reason,
the Buyer, ABT and their representatives agree to keep confidential and not
disclose any matters relating to the Business.
(c) Closing Documents. The Seller shall execute and deliver all
-----------------
instruments and documents required under Section 12 as a condition precedent to
the Closing under Section 12 hereof and take all action required to carry out
the terms of this Agreement and to consummate the transactions contemplated
hereby.
(d) Conduct of Business. From the date of this Agreement to the Closing
-------------------
Date, except as expressly disclosed in the Schedules to this Agreement or as
consented to by the Buyer, the Seller shall conduct its operations as engaged in
at the date of this Agreement according to its ordinary course of business,
shall maintain its records and books of account consistent with the Seller's
past practices and shall not engage in any transactions other than as
contemplated by this Agreement.
(e) Intentionally omitted.
(f) Employment. All employees of the Seller employed in connection with
----------
the Business will be terminated effective as of the Closing Date. The
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Seller shall pay all such employees, on or before five (5) business days after
the Closing Date, all compensation earned by them through the Closing Date. The
Buyer agrees to use its diligent efforts to offer employment opportunities to
such employees terminated by the Seller at the Buyer's sole discretion. The
Buyer shall not be liable for any severance pay due or owing to any employee of
the Business and the Seller shall indemnify and hold harmless the Buyer and ABT
for any losses or expenses incurred by the Buyer and/or ABT as a result of any
employee terminations, as set forth in Section 9(b) hereof. The Seller agrees
to use its diligent efforts to assist the Buyer in hiring any of such employees
as the Buyer determines in its sole discretion.
SECTION 11. COVENANTS OF THE BUYER AND ABT. The Buyer and ABT hereby
------------------------------
covenant and warrant as follows:
(a) Noninterference. The Buyer and ABT shall not take or omit to take any
---------------
action that (i) if taken or omitted on or before the date of this Agreement,
would make untrue any of the representations and warranties contained in Section
8 of this Agreement, or (ii) would interfere with the Buyer's or ABT's ability
to perform or would prevent performance of any of its obligations under this
Agreement or any of the other agreements or instruments provided for herein.
(b) Closing Documents. The Buyer and ABT shall execute and deliver all
-----------------
instruments and documents required under Section 13 as a condition precedent to
the Closing hereof and take all action required to carry out the terms of this
Agreement and to consummate the transactions contemplated hereby.
(c) Payment of Sales and Personal Property Taxes. The Buyer will pay all
--------------------------------------------
taxes (exclusive of the Seller's income taxes) payable in connection with the
sale, assignments, transfers, conveyances and deliveries hereunder including all
applicable sales tax with respect to the sale of the Assets exclusive of income
taxes of the Seller.
(d) Access. The Buyer agrees to preserve and provide the Seller and its
------
representatives with access to all such business records that are provided by
the Seller to the Buyer in connection with this transaction at all times for all
reasonable purposes for a period of five (5) years following the Closing.
SECTION 12. CONDITIONS PRECEDENT TO THE BUYER' AND ABT'S OBLIGATIONS.
--------------------------------------------------------
The obligations of the Buyer and ABT under this Agreement are subject to the
following conditions (any of which may be waived in writing in whole or in part
by the Buyer or ABT, as applicable):
(a) There shall not have been any material breach of the representations,
warranties, covenants and agreements of the Seller contained in this Agreement
or the Schedules hereto and all such representations and warranties shall be
true in all material respects at all times on or before the Closing as if given
at such time, except to the extent that any such representation or warranty is
expressly stated to be true as of some other time.
(b) The Seller shall have performed and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date. All documents
and instruments required in connection with this Agreement shall be reasonably
satisfactory in form and substance to Snow Becker Krauss P.C., counsel for the
Buyer.
(c) The Buyer shall have received a certificate dated the date of the
Closing and signed by the Seller, certifying that the conditions specified in
subsections (a) and (b) above have been fulfilled.
(d) The Buyer shall have received a certificate dated the date of the
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Closing and signed by the Seller, certifying that there has been no material
adverse change in the Assets since the Signing Date.
(e) The Seller shall have obtained and delivered to the Buyer any required
consents or approvals of any other third parties whose consent is required to
the transactions contemplated hereunder.
(f) The Buyer shall have received a written opinion of counsel for the
Seller dated as of the Closing Date, in the form of Exhibit 12(f) hereto.
(g) The Buyer shall have received a bill of sale or bills of sale and
documentation and such other good and sufficient instruments of transfer and
conveyance as, in the reasonable opinion of counsel to the Buyer, shall be
effective to transfer to the Buyer good and valid title to the Assets, as herein
provided.
(h) The Seller shall have delivered or otherwise surrendered possession to
the Buyer of the Assets sold to the Buyer hereunder as described in Section 1
hereof.
(i) The Buyer shall have received certified resolutions of the Seller's
Board of Directors authorizing the transactions contemplated by this Agreement.
(j) The Buyer shall have received at the Closing a satisfactory title
opinion, or title insurance with regard to the real property interests
transferred to the Buyer.
(k) The Buyer shall have received from the Seller pursuant to Section 2(d)
above, an agreement in the form of Exhibit 2(d) attached hereto, whereby the
Seller agrees for a period of five years from the Closing Date, not to compete
with the Buyer or ABT in selling any products to current customers of the
Business as existing on the Closing Date. Such agreement shall be reasonably
satisfactory in form and substance to counsel for the Buyer.
(l) The Buyer shall have completed their due diligence review to its
satisfaction and, among other things; (i) determined that a satisfactory
percentage of customers of the Seller will continue to do business with the
Buyer following the Closing; and (ii) agreed with the Seller upon a value of all
of the Assets.
(m) The Buyer shall have received assumption and assignment agreements, in
the form of Exhibit 12(l) attached hereto, for each agreement as set forth on
Schedule 7(e) requiring such agreement to be executed in order to be assigned,
and such other good and sufficient instruments of conveyance, assignment and
transfer, in form and substance reasonably satisfactory to the Buyer, as shall
be effective to transfer to the Buyer good and marketable title to the Assets
and put the Buyer in actual possession and operating control thereof and to
assist the Buyer in exercising all rights with respect thereto.
(n) Intentionally omitted.
(o) Since the Balance Sheet Date and through the Closing Date, there shall
not have occurred any material change in the Assets or the condition (financial
or otherwise) of the Business, its properties or prospects.
(p) The Buyer shall have received all contracts, customer files and
business records relating to the Assets in the possession of the Seller, its
subsidiaries and divisions, but excluding, corporate records and any other
Excluded Assets.
(q) The Buyer shall have received all documents required to be delivered to
the Buyer under any other provision of this Agreement.
-15-
<PAGE>
(r) The Buyer shall have received a Certificate of Incumbency identifying
the officers and directors of the Seller executing this Agreement of the Other
Agreements immediately before Closing.
(s) The Buyer shall have received the Phase I environmental study and
report applicable to the real property interests located in Pennsylvania and
transferred to the Buyer pursuant to this Agreement dated December 19, 1991.
(t) The Buyer shall have received, if available, audited financial
statements of the Seller with respect to the Business for the last two fiscal
years attached hereto as Exhibit 12(t).
SECTION 13. CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS. The
------------------------------------------------
obligations of the Seller under this Agreement are subject to the following
conditions (any of which may be waived in writing in whole or in part by the
Seller):
(a) There shall not have been any material breach of the representations,
warranties, covenants and agreements of the Buyer or ABT contained in this
Agreement, and all such representations and warranties shall be true at all
times at and before the Closing, except to the extent that any such
representation or warranty is expressly stated to be true as of some other time.
(b) The Buyer and ABT shall have performed and complied in all material
respects with all agreements and conditions required by this Agreement to be
performed or complied with by it. All documents and instruments required in
connection with this Agreement shall be reasonably satisfactory in form and
substance to Brent G. Wennberg, Esq., counsel for the Seller.
(c) The Seller shall have received a certificate dated the date of the
Closing and signed by the Buyer and ABT, certifying that the conditions
specified in subsections (a) and (b) above have been fulfilled.
(d) The Seller shall have received a written opinion of counsel for the
Buyer and ABT, dated as of the date of Closing, in the form of Exhibit 13(d)
attached hereto.
(e) At the Closing, the Seller shall have received payment in the amount of
the Purchase Price as set forth in Section 2 above, and as adjusted pursuant to
Schedule 2(h).
(f) The Seller shall have received copies of the minutes and resolutions of
the Board of Directors of the Buyer and ABT showing the authorization and
approval by such Boards of the execution and delivery by the Buyer and ABT to
the Seller of this Agreement, the Other Agreements and the agreements and
instruments provided for herein and of the performance of the obligations of the
Buyer and ABT under this Agreement and the Other Agreements and such other
instruments and agreements, certified as of a recent date by each Secretary or
another officer of the Buyer and ABT.
(g) The Seller shall have received a certificate of incumbency identifying
the officers and directors of the Buyer and ABT immediately before Closing.
(h) The Seller shall have received an officer's certificate of the Buyer
and ABT evidencing its authority to execute this Agreement and to consummate the
transactions contemplated hereby.
(i) The Seller shall have received all documents required to be delivered
to the Seller under any other provision of this Agreement.
SECTION 14. CONDITIONS PRECEDENT TO OBLIGATIONS OF BOTH THE SELLER AND
----------------------------------------------------------
THE BUYER. The obligations of both the Seller and the Buyer to complete this
- - ---------
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<PAGE>
transaction shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions:
(a) No Injunctions. No action or proceeding shall have been instituted or
--------------
threatened by any public authority or private person prior to the Closing before
any court or administrative body to restrain, enjoin or otherwise prevent the
consummation of this transaction or to recover any damages or obtain other
relief as a result of this transaction.
(b) Due Diligence. The Seller and the Buyer shall each have been afforded
-------------
the opportunity to complete their due diligence and conduct a review of the
business and prospects of the other and ABT, and shall be reasonably satisfied
as to such business and prospects.
(c) Consents. Any consent to the transaction considered by the Seller or
--------
the Buyer to be necessary or advisable under any agreement or contract, the
withholding of which might have, in the judgment of the Seller or the Buyer, a
material adverse effect on the financial condition of the other party or ABT,
shall have been obtained.
(d) Corporate Proceedings. All corporate and other proceedings in
---------------------
connection with the transactions contemplated by this Agreement, and all
documents and instruments incident thereto, shall be reasonably satisfactory in
substance and form to the Seller and the Buyer and their counsel, and the Seller
and the Buyer and their counsel shall have received all certified resolutions of
the Boards of Directors of the Seller and the Buyer authorizing the transactions
contemplated by this Agreement, and such other certificates, documents and
instruments, or copies thereof, certified if requested, as may be reasonably
requested.
SECTION 15. SUBSEQUENT EVENTS. ABT may, at its own expense, audit the financial
-----------------
statements of the Business ("Audited Financial Statements"), certified by KPMG
Peat Marwick LLP, independent certified public accountants (or any other auditor
chosen by the Buyer and reasonably acceptable to the Seller), for all periods
required of ABT under the rules and regulations of the Securities and Exchange
Commission (the "Rules"). The Seller hereby agrees to provide ABT, their
accountants and any other of their representatives with full and free access
during normal business hours to the books and records of the Business and to
cooperate fully with all such representatives of ABT so that the Audited
Financial Statements may be prepared on a timely basis. The Seller shall
cooperate in every way to expedite and facilitate the Audited Financial
Statements. The Buyer shall pay to the Seller the reasonable expenses associated
with such cooperation, including, but not limited to, the cost of retrieving
files from storage. Further, the Buyer shall pay to the Seller the reasonable
expenses of Brian Lewis or a mutually agreed upon employee of the Seller, for
his assistance to the Buyer in preparing the Audited Financial Statements. The
Audited Financial Statements shall be prepared in accordance with generally
accepted accounting principles applied consistently during the period covered
thereto and in accordance with the Rules and which shall present fairly the
financial condition of the Business in connection with the operation of the
Business on the date of such statements and the results of operations for the
periods covered thereby, and shall, to the extent possible, include all
statements, schedules and information required by the Rules.
SECTION 16. TERMINATION. (a) This Agreement may be terminated at any
-----------
time prior to the Closing Date:
(i) By mutual written consent of the Seller and the Buyer; or
(ii) By the Buyer or the Seller if this transaction is not completed
by May 15, 1996; provided, however, if one party is in compliance with the terms
and conditions of this Agreement and is ready to close then that party will
provide the other party with notice of its intent to close and provide such non-
compliant party with ten days in order to close the
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<PAGE>
transaction, unless extended by mutual agreement between the Buyer and the
Seller; or
(iii) By the Buyer or the Seller, if any court of competent
jurisdiction in the United States or other United States governmental body shall
have issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the other party from undertaking the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall not have been withdrawn by 30 days after the date on which
such order, decree, ruling or other action was first issued or taken; or
(iv) By the Seller or the Buyer if a proceeding in bankruptcy or
reorganization of the Buyer, ABT, or the Seller or the readjustment or any of
its debts under the Bankruptcy Act, as amended, or any part thereof, or under
any other laws, whether state or federal, for the relief of debtors now or
hereafter existing, shall be commenced by or against the Buyer or the Seller; or
(v) By the Buyer if the Seller has materially breached any of its
representations, warranties or covenants under this Agreement; or
(vi) By the Seller if the Buyer or ABT have materially breached any of
their representations, warranties or comments under this Agreement.
(b) In the event of termination of this Agreement, Sections 21, 22, 23 and
28 of this Agreement shall survive any such termination.
SECTION 17. BULK SALE ACT. The Seller and the Buyer agree to waive
-------------
compliance with all applicable State Bulk Sales Acts and the rules and
regulations promulgated thereunder. However, the Seller shall indemnify and
hold harmless the Buyer and ABT for any losses or expenses incurred by the Buyer
and/or ABT as a result of such waiver of compliance with such Bulk Sales Acts,
as set forth in Section 9(b) hereof.
SECTION 18. ORDERLY TRANSFER. The Seller shall, and hereby agrees to,
----------------
cooperate with the Buyer in all reasonable ways, at no direct or indirect cost
to the Seller, in effecting any orderly transfer to the Buyer of the Assets to
be acquired by the Buyer hereunder.
SECTION 19. PARTIES IN INTEREST. This Agreement shall be binding upon
-------------------
and shall inure to the benefit of the parties and their successors and assigns.
Nothing herein expressed or implied is intended or shall be construed to confer
upon or to give any person, firm, or corporation other than the parties hereto
any rights or remedies under or by reason hereof.
SECTION 20. ENTIRE AGREEMENT. This instrument, including the Schedules
----------------
and Exhibits hereto, contains the entire agreement and understanding among the
parties hereto with respect to the subject matter hereof and shall not be
modified or affected by any offer, proposal, statement or representation, oral
or written, made by or for any party in connection with the negotiation of the
terms hereof. All references herein to this Agreement shall specifically
include, incorporate and refer to the Schedules and Exhibits attached hereto
which are hereby made a part hereof. There are no representations, promises,
warranties, covenants, undertakings or assurances (express or implied) other
than those expressly set forth or provided for herein and in the other documents
referred to herein. This Agreement may not be modified or amended orally, but
only by a writing signed by all the parties hereto.
SECTION 21. GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement and
--------------------------------------
all rights and obligations hereunder shall be governed by, and construed in
accordance with, the laws of the State of Illinois, applicable to agreements
made and to be performed wholly within said State, without regard to the
conflicts of laws principles of such State.
SECTION 22. EXPENSES. Each party hereto shall pay its own expenses and
--------
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<PAGE>
fees incidental to the preparation of this Agreement, the carrying out of the
provisions of this Agreement and the consummation of the transactions
contemplated hereby, unless otherwise agreed to herein.
SECTION 23. SEVERABILITY. If any part of this Agreement is held to be
------------
unenforceable or invalid under, or in conflict with, the applicable law of any
jurisdiction, the unenforceable, invalid or conflicting part shall, to the
extent permitted by applicable law, be narrowed or replaced, to the extent
possible, with a judicial construction in such jurisdiction that effectuates the
intent of the parties regarding this Agreement and such unenforceable, invalid
or conflicting part. To the extent permitted by applicable law, notwithstanding
the unenforceability, invalidity or conflict with applicable law of any part of
this Agreement, the remaining parts shall be valid, enforceable and binding on
the parties.
SECTION 24. NOTICES.
-------
(a) All notices, requests, consents and demands by the parties hereunder
shall be delivered by hand, or telecopier at the applicable telecopier numbers
designated below (with confirmation received) by recognized national overnight
courier or by deposit in the United States mail, postage prepaid, by registered
or certified mail, return receipt requested, addressed to the party to be
notified at the addresses set forth below:
(i) if to the Seller or BH to:
Research Seeds, Inc.
225 Florence St.
St. Joseph, Missouri 64502
Attention: Mr. William Whitacre, President
Telecopier No.: (816) 238-7849
with a copy to: Brent G. Wennberg
Senior Counsel
Land O'Lakes, Inc.
4001 Lexington Avenue North
Arden Hills, Minnesota 55126
Telecopier No.: (612) 481-2832
(ii) if to the Buyer or ABT to:
AgriBioTech, Inc.
Quail Park West, Suite C-25
2700 Sunset Road
Las Vegas, Nevada 89120
Attention: Johnny R. Thomas, President
Telecopier No.: (702) 798-8808
with a copy to: Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158
Attention: Elliot H. Lutzker, Esq.
Telecopier No.: (212) 949-7052
(b) Notices given by mail shall be deemed effective on the earlier of the
date shown on the proof of receipt of such mail or, unless the recipient proves
that the notice was received later or not received, three (3) days after the
date of mailing thereof. Other notices shall be deemed given on the date of
receipt. Any party hereto may change the address specified in Section 24(a) by
written notice to the other parties hereto.
SECTION 25. AMENDMENT; NON-WAIVERS. Any provisions of this Agreement may
----------------------
be amended, if and only if, such amendment is written and signed by each party
to this Agreement. Neither any failure nor any delay on the part of any party
to this Agreement in exercising any right, power or privilege hereunder
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<PAGE>
shall operate as a waiver of any rights of such party, unless such waiver is
made by a writing executed by the party and delivered to the other parties
hereto, nor shall a single or partial exercise of any right preclude any other
or further exercise of any other right, power or privilege accorded to any party
hereto.
SECTION 26. ASSIGNMENT. This Agreement may not be assigned by any party
----------
without the prior written consent of the other parties.
SECTION 27. DISCLOSURE. From and after the Signing Date until the Closing
----------
or the termination of this Agreement, the Seller will not (i) solicit or
encourage inquiries or proposals with respect to, or furnish any information
relating to, or participate in, any negotiations or discussions concerning the
sale of the Assets with anyone other than the Buyer; or (ii) unless otherwise
required by law, neither party shall make any public announcement without prior
approval of the language of such announcement by the other.
SECTION 28. CONFIDENTIALITY. From and after the Signing Date until the
---------------
Closing or the termination of this Agreement, the Buyer and ABT and their
respective employees and representatives and the Seller and its representatives
will maintain the confidentiality of all documents and information of a
confidential nature disclosed to the other party in the course of their
negotiations and the Buyer' due diligence review and will in no event use any
confidential information for any purpose other than for the evaluation of the
transactions contemplated herein and the financing of this transaction and in
the event of termination of this Agreement will destroy all copies of
documentation which each party may have delivered to the other party.
SECTION 29. MISCELLANEOUS. Each of the parties hereto shall use its best
-------------
efforts to take or cause to be taken, and to cooperate with the other parties
hereto to the extent necessary with respect to, all action, and to do, or cause
to be done, consistent with applicable law, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement.
SECTION 30. HEADINGS. The headings contained herein are for reference
--------
purposes only and shall not affect the meaning or interpretation of this
Agreement.
SECTION 31. COUNTERPARTS. This Agreement may be executed and delivered in
------------
multiple counterpart copies, each of which shall be an original and all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the date first above written.
RESEARCH SEEDS, INC.(SELLER)
By: /s/William Whitacre
-------------------------
William Whitacre, President
HALSEY SEED COMPANY, INC. (BUYER)
By: /s/Kathleen L. Gillespie
-------------------------
Kathleen L. Gillespie, Vice President
AGRIBIOTECH, INC.
By: /s/Kathleen L. Gillespie
-------------------------
Kathleen L. Gillespie, Vice President
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<PAGE>
Exhibit 2
SCHEDULES TO THE ASSET PURCHASE AGREEMENT
AMONG RESEARCH SEEDS, INC., HALSEY SEED COMPANY, INC.,
AND AGRIBIOTECH, INC.
---------------------
Schedule No. Description
- - ----------- -----------
1(a) The Inventory
1(b) The Real Property
1(c) The Buildings and Improvements
1(d) The Equipment and Machinery
1(e) The Office Furniture and Fixtures
1(f) The Automobiles, Trucks, Vehicles and Forklifts
1(g) The Miscellaneous Equipment and Hand Tools
1(i) The Pre-Paid Assets
1(j) The Trade Names
1(k) The Trademarks
1(l) The Customer List
1(o) The Accounts Receivable
1(p) The Assumed Liabilities
2(f) The Accounts Payable
2(g) The Customer Advances
2(h) The Adjusted Purchase Price
4(a) The Excluded Assets
7(a) Exceptions to Title
7(c) Legal Proceedings
7(e) Material Agreements Including Assigned Agreements
7(f) Violations or Restrictions
7(g) Court Orders and Decrees
7(i) Governmental Licenses
7(j) Environmental Claims
7(k) Employee Benefit Plans
7(n) The Seller's Financial Statements
7(o) Undisclosed Liabilities and Conditions
7(p) Compliance with Laws
7(r) Changes Outside of Ordinary Course
7(t) Non-Cancelable Labor Contracts
EXHIBITS TO THE ASSET PURCHASE AGREEMENT
AMONG SEED RESEARCH, INC., HALSEY SEED COMPANY, INC.,
AND AGRIBIOTECH, INC.
---------------------
Exhibit No. Description
- - ---------- -----------
2(d) Form of Non-Competition Agreement
3(b) Form of Lock-Up Agreement
7(n) The Seller's Unaudited Financial Statements
12(f) Form of the Seller's Legal Opinion
12(l) Form of Assumption and Assignment Agreements
12(s) Phase I Environmental Study
12(t) The Seller's Audited Financial Statements
13(d) Form of the Buyer's Legal Opinion
<PAGE>
EXHIBIT 3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT sets forth the agreement reached the 13th
day of February, 1996, by and between HENRY A. INGALLS (hereinafter referred to
as "Employee") and AgriBioTech, Inc., a Nevada Corporation (hereinafter
referred to as "Corporation").
WITNESSETH
WHEREAS, the Corporation desires to employ the Employee; and
WHEREAS, the Employee desires to accept such employment with the
Corporation; and
WHEREAS, the Employee and the Corporation desire to set forth their
employment relationship in a written agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants
herein set forth, and for other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as follow:
ARTICLE 1.00 - EMPLOYMENT
1.01 EMPLOYMENT. The Corporation hereby offers to employ the Employee
upon the terms and conditions hereinafter set forth and the Employee accepts
such offer and agrees to abide by the terms and conditions hereof, and the terms
and conditions of the Corporation's and its affiliated corporations' Articles of
Incorporation, Bylaws and Employee Manual except as otherwise set forth herein.
The Employee may elect at any time to be considered a Regular Employee and
thereafter will not be considered a Probationary Employee.
1.02 DUTIES. Employee shall perform all services reasonably required
by the Corporation in furtherance of the Corporation's business purposes as
determined, from time to time, by the Board of Directors of the Corporation.
The Employee will work only for AgriBioTech, Inc. and its subsidiaries, as may
be needed. In addition and as part of his duties hereunder, the Employee shall,
if elected to such position, serve as an officer and/or director of the
Corporation. Employee's title shall be Vice President, Chief Financial Officer.
Employee shall report directly to the President of the Corporation.
ARTICLE 2.00 - TERM AND TERMINATION
2.01 TERM. The Corporation agrees to employ the Employee commencing
on April 3, 1996 and continuing for at least four years from the date of
employment unless terminated pursuant to 2.02 below.
2.02 TERMINATION. The Corporation may, by giving zero (0) days notice
to the Employee, terminate this Agreement with cause. Notwithstanding the
above, this Agreement shall terminate immediately upon the death of the
Employee, and shall terminate upon ten (10) working days notice by the
Corporation if, in the opinion of the Corporation, Employee becomes unable to
perform services required pursuant to this Agreement because of illness or
injury. Any decision to terminate this Agreement by the Corporation shall not
be voted upon by the Employee in any capacity whatsoever. In no event shall
termination of this
Initials ______
1
<PAGE>
Agreement relieve the parties hereto of any rights or obligation which survive
the termination of this Agreement as set forth herein. Termination as a result
of ownership or management changes: It is understood and agreed that current
management and "control" owners, i.e., Johnny R. Thomas, John C. Francis and
Scott J. Loomis desire Employee to become an integral part of the core
management team. As such, Employee is to diligently utilize his talents,
experience and expertise to rapidly grow the Corporation per the Corporation's
goals and objectives. It is understood that both the Corporation and Employee
are making at least a four year commitment. In the event there is a material
change in ownership or management of the Corporation and at any time thereafter
(i) the Employee is terminated or (ii) in the sole determination of the
Employee, there is a significant change in the duties, responsibilities,
principal location of employment, or compensation of the Employee, then Employee
shall immediately be vested in full on all stock options referenced in Section
3.02 and shall be entitled to receive a payment equal to (a) his full
Compensation as set forth in Section 3.01 for three (3) years from the date of
such termination or determination, less $1, and (b) other employee benefits for
three (3) years from the date of such termination or determination. In addition
to the foregoing, for a period of one (1) year following any such change of
control or management, Employee shall have the option of terminating this
Agreement without justification and, in such event, will be entitled to (i)
immediately be vested in the stock options referenced in Section 3.02 which
would otherwise become vested on the next anniversary of employment following
such termination and (ii) receive his full Compensation as set forth in Section
3.01 and other employee benefits for one (1) year following such termination. In
the event Corporation desires to terminate this Agreement without cause,
Employee will be entitled to (i) immediately be vested in the stock options
referenced in Section 3.02 which would otherwise become vested on the next
anniversary of employment following such termination and (ii) receive his full
Compensation as set forth in Section 3.01 and other employee benefits for two
(2) years following such termination. In the event Employee desires to terminate
this Agreement, Employee agrees to give Corporation a minimum of three (3)
months notice and to assist Corporation in all reasonable respects in finding a
successor to the Employee's duties and responsibilities and in the transition
process.
ARTICLE 3.00 - COMPENSATION
3.01 SALARY. The Corporation covenants and agrees to pay Employee, as
consideration for his services, Compensation consisting of (i) a salary of ONE
HUNDRED FIFTY THOUSAND DOLLARS ($150,000.00) per year, (ii) a minimum bonus of
20% of the salary, and (iii) reimbursement of personal expenses or "perquisites"
aggregating $20,000 per year. Employee shall be entitled to an increase in the
above described Compensation on each anniversary of this Agreement. Such
increase will be determined by the Corporation's Board of Directors but shall be
in an amount not less than the greater of 5% or general inflation. The salary
and perquisites portions of Compensation will be payable in equal bi-weekly
installments, less payroll deductions for income tax, FICA, withholding and any
other deductions as authorized by the Employee. Minimum bonus will be paid,
less applicable payroll deductions, on the date of the first payroll after each
anniversary of this Agreement.
3.02 STOCK OPTIONS. Employee shall be granted 1,250,000 options to
purchase the Corporation's common stock. Ownership in said options shall vest
on the following schedule:
A) 250,000 vest at signing of Agreement.
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B) 250,000 vest on the first anniversary of employment, subject to
Employee remaining employed by Corporation.
C) 250,000 vest on the second anniversary of employment, subject to
Employee remaining employed by Corporation.
D) 250,000 vest on the third anniversary of employment, subject to
Employee remaining employed by Corporation.
E) 250,000 vest on the fourth anniversary of employment, subject to
Employee remaining employed by Corporation.
The options shall be exerciseable at a price of $2.12 per share, at any
time, commencing six (6) months after the start of employment through February
12, 2006. The options shall be non-callable and the Corporation shall register
the shares underlying said options on the first applicable registration
statement filed by the Corporation. Such options shall be Incentive Stock
Options to the extent allowed under the Corporation's existing stock option
plan. Payment for options exercised may be made by Employee tendering common
stock of the Corporation owned by Employee valued at the then current market
price of such stock in what is generally referred to as pyramiding. Following
exercise of options by the Employee, the Corporation agrees to provide Employee
with "stock depreciation rights" to protect the Employee from declines in the
value of the Corporation's common stock for the period Employee is not able to
sell such stock without (i) being subject to the provisions of Section 16b of
the Securities Exchange Act of 1934 and (ii) receiving capital gain treatment
for income tax purposes.
3.03 BONUS. For the purpose of causing Employee's compensation to equal
the reasonable value of this services to the Corporation and to reflect any
outstanding contribution to Corporation by Employee, the Corporation may pay
Employee, in addition to the salary for services described in Section 3.01
above, a bonus in any amount determined by the Corporation in its sole
discretion. The bonus, if any, less payroll deductions for income taxes, FICA,
withholding and any other deductions authorized by the Employee, shall be paid
by the Corporation to the Employee at such time or times as the Corporation in
its sole discretion determines.
3.03 VACATION. During the term of this Agreement, the Employee shall be
entitled to a vacation pursuant to the Employee Manual, but not less than three
weeks per year during which time Employee's Compensation shall be paid in full.
Employee will be granted an accrual for two (2) weeks of vacation upon
commencement of employment and will be eligible to take any accrued vacation
upon commencement of employment.
3.04 BENEFITS. During the term of this Agreement, the Employee shall be
entitled to receive insurance and other benefits generally available to all
employees of the Corporation. In the event Employee elects not to be covered by
certain of the Corporation's benefits, the Corporation will contribute the cost
it would otherwise incur toward alternate benefits obtained by the Employee.
3.05 RELOCATION. The Corporation and Employee agree that for the Employee
to perform the services required by the Corporation, it will be necessary for
the Employee to perform such services in Las Vegas, Nevada and therefore he must
relocate to Las Vegas. Employee will not be required to relocate until
Corporation has obtained additional funding from its existing levels of at least
$5 million. In the event funding of at least such amount is not obtained by
July 1, 1996, Employee may terminate this Agreement without obligation to the
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Corporation. The Corporation will reimburse the Employee for the reasonable and
necessary expenses of such relocation. Such expenses will include moving of the
Employee's household goods, commission and other selling expenses for the sale
of the Employee's current residence, and expenses for travel, lodging, meals,
etc. for up to two house hunting trips to Las Vegas and the actual relocation.
Until Employee completes the relocation, a period not to exceed six months,
Corporation and Employee agree that to the extent possible, Employee's work week
will be structured to be completed in four consecutive days and the Corporation
will pay the costs of Employee's commuting between Las Vegas and Albuquerque and
Employee's expenses incurred for lodging, meals and transportation in Las Vegas.
Corporation agrees to allow Employee up to ten days of compensated absence for
house hunting and physically moving.
3.06 INDEMNIFICATION. The Corporation agrees to indemnify the Employee to
the full extent allowed by the Corporation's Articles of Incorporation and
Nevada law with respect to any claim, investigation, proceeding, or action
against or involving the Employee relating to this employment by the
Corporation. Such indemnification shall include advancement of attorney fees
during any such event and shall cover any adverse economic consequences to
Employee including judgments, settlements, and attorney fees. Corporation shall
obtain Directors and Officers liability insurance to the extent the Corporation
determines it is economically desirable as soon as adequate funding is available
to the Corporation. This Section 3.06 will survive termination of this
Agreement irrespective of the reason for termination.
ARTICLE 4.00 - SPECIFIC OBLIGATIONS OF THE PARTIES
4.01 CORPORATION'S OBLIGATIONS. The Corporation shall provide the employee
with and pay Employee's expenses for the following:
A. Such equipment, materials and supplies as the Employee requires for the
performance of his services.
B. Costs, including tuition, meals, lodging, and transportation incurred
by the Employee to fulfill his duties and responsibilities to the Corporation,
including professional dues, publications, and continuing professional education
requirements necessary to maintain Employee's status as a Certified Public
Accountant, as agreed upon by the Corporation and Employee.
4.02 EMPLOYEE'S OBLIGATIONS. The Employee agrees that during the term of
this Agreement, he shall:
A. Faithfully and to the best of his ability and skill serve the
Corporation and perform his duties pursuant to this Agreement;
B. Maintain records in the manner established by the Corporation; and
C. Keep current all records, reports, insurance records and clerical work
required by Corporation.
ARTICLE 5.00 - COVENANTS
5.01 COVENANT NOT TO COMPETE. The Corporation and Employee acknowledge and
confirm that Employee shall not compete with the Corporation while employed or
for a two year period after employment ceases.
5.02 COVENANT FOR PROTECTION OF PROPRIETARY INFORMATION. The parties
hereto recognize that the Corporation and its affiliated corporations and
Employee are desirous of exchanging information during the term of this
Agreement and during the period of the time Employee is affiliated with the
Corporation and
Initials ______
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<PAGE>
its affiliated corporations relating to the research, development, and marketing
of seed, seed products, seed related products and technology for application in
the general field of farming and ranching and that during the above periods of
time, the Corporation and its affiliated corporations may disclose to the
Employee certain information pursuant to this Agreement which the Corporation
and its affiliated corporations deems proprietary (hereinafter referred to as
"Information").
In order to protect the Information, the parties hereto agree that during
the period of Employee's affiliation with the Corporation and its affiliated
corporations, and for a period of two (2) years from the termination date of any
affiliation with the Corporation and its affiliated corporations, Employee shall
not disclose Information it receives or has received from Corporation or its
affiliated corporations that is proprietary in nature, including, but not by way
of limitation, Information marked PROPRIETARY or CONFIDENTIAL or STRICTLY
PRIVATE or INTERNAL DATA, to any other person, firm or corporation, or use it
for its own benefit except as provided herein, and shall use no less stringent
degree of care to void disclosure or use of such Information than Employee
employs with respect to his own proprietary information which it does not wish
to be disseminated, published or disclosed.
The parties hereto agree that Information shall not be deemed proprietary
and Employee shall have no obligation with respect to any such Information
which:
A. Is already known to Employee through lawful channels of communication;
B. Is or becomes publicly known through no wrongful act of Employee;
C. Is rightfully received from a third party without similar restriction
and without breach of this Agreement;
D. Is independently developed by Employee without breach of this
Agreement;
E. Is furnished to a third party by Corporation and its affiliated
corporations without a similar restriction on the third party's rights; or
F. Is approved for release by written authorization of Corporation or its
affiliated corporations. Either party may, without breach of this Agreement,
disclose Information to the government by reason of a governmental requirement
or to a court by reason of operation of law.
Employee shall not be liable for (1) inadvertent disclosure or use of
Information provided that (a) it used not less than the same degree of care in
safeguarding such Information as it used for its own Information of like
importance, and (b) upon discovery of such inadvertent disclosure or use of such
Information, it shall endeavor to prevent any further inadvertent disclosure or
use, or (2) unauthorized disclosure or use of Information by persons who are or
who have been in its employ, unless it fails to safeguard such Information with
not less than the same degree of care as it uses for its own proprietary
Information of like importance.
In the event Information should be lost, stolen or otherwise compromised,
the party formerly in possession of that Information shall promptly notify the
Corporation by phone, and follow up with a detailed report in writing within ten
(10) days. A coordinated effort shall then be made to recover such Information.
All copies of written data delivered by one party hereto to the other party
pursuant to this Section shall be and remain the property of such one party, and
Initials ______
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<PAGE>
all such written data, and any copies thereof, shall be promptly returned to
such one party upon written request, or destroyed at such one party's option.
Nothing contained in this Section shall be construed as granting or
conferring any rights by license or otherwise, expressly, implied, or otherwise
for any invention, discovery or improvement made, conceived, or acquired prior
to or after the date of this Agreement.
Employee and Corporation agree that the period set forth herein is
reasonable and further that the period set forth herein does not terminate at
the termination of this Agreement, but shall continue throughout any period of
affiliation, and for a two (2) year period thereafter. This covenant may be
enforced by specific performance or any available legal or equitable remedy,
including, but not by way of limitation, temporary restraining orders or
preliminary and permanent injunctions, and the Corporation and its affiliated
corporations shall be entitled to recover from Employee all court costs and
reasonable attorney's fees incurred in enforcing this covenant. The remedies
hereunder shall not be exclusive of each other, but shall be cumulative.
5.04 DEFINITION OF AFFILIATION. Affiliation, as used in this Article,
shall mean any proprietary, employment or fiduciary relationship of the Employee
with the Corporation and its affiliated corporations, including, but not limited
to, the position of Employee as director, officer, employee or consultant of the
Corporation or its affiliated corporations.
ARTICLE 6.00 - GENERAL MATTER.
6.01 NEVADA LAW. This Agreement shall be governed by the laws of the State
of Nevada and shall be construed in accordance therewith.
6.02 NO WAIVER. No provision of this Agreement may be waived except by an
agreement in writing signed by the waiving party. A waiver of any term or
provision shall not be construed as waiver of any other term or provision.
6.03 BINDING EFFECT. This Agreement shall be binding upon the parties,
their heirs, executors, administrators, successors or assignees. The parties
agree to do any and all things necessary to effectuate the purpose of this
Agreement.
6.04 CONSTRUCTION. Throughout this Agreement, the singular shall include
the plural; the plural shall include the singular; and the masculine and neuter
shall include the feminine, wherever the context so requires.
6.05 TEXT TO CONTROL. The headings of articles and sections are included
solely for convenience of reference. If any conflict between any heading and
the text of this Agreement exists, the text shall control.
6.06 SEVERABILITY. If any provision of this Agreement is declared by an
court of competent jurisdiction to be invalid for any reason, such invalidity
shall not affect the remaining provisions. On the contrary, such remaining
provisions shall be fully severable, and this Agreement shall be construed and
enforced as if such invalid provisions never had been inserted in this
Agreement.
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<PAGE>
6.07 AMENDMENT. This Agreement may be amended, altered or revoked at any
time, in whole or in part, by filing with this Agreement a written instrument
setting forth such charges, signed by the Corporation and the Employee.
6.08 NOTICES. All notices required to be given by this Agreement shall be
made in writing either by:
A. Personal delivery to the party requiring notice and securing a written
receipt, or
B. Mailing notice in the U.S. mails to the last known address of the party
requiring notice, which shall be the address shown on the records of the
Corporation for the Employee, by certified mail, return receipt requested.
The effective date of the notice shall be the date of the written receipt
received upon delivery in Paragraph A above or four (4) days after the date the
notice was delivered to the U.S. mail as posted on the receipt in Paragraph B
above.
The parties hereby execute this Employment Agreement on the day and year
first written above.
AGRIBIOTECH, INC.
/s/ Johnny R. Thomas
-------------------------------
Johnny R. Thomas, President/CEO
EMPLOYEE:
/s/ Henry A. Ingalls
- - --------------------
Henry A. Ingalls
Initials ______
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 185,518
<SECURITIES> 0
<RECEIVABLES> 7,128,392
<ALLOWANCES> 0
<INVENTORY> 9,875,200
<CURRENT-ASSETS> 17,561,169
<PP&E> 7,945,416
<DEPRECIATION> 385,477
<TOTAL-ASSETS> 26,277,488
<CURRENT-LIABILITIES> 18,284,011
<BONDS> 1,092,911
0
0
<COMMON> 7,567
<OTHER-SE> 6,892,999
<TOTAL-LIABILITY-AND-EQUITY> 26,277,488
<SALES> 16,676,415
<TOTAL-REVENUES> 16,676,415
<CGS> 12,381,752
<TOTAL-COSTS> 12,381,752
<OTHER-EXPENSES> 3,256,095
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 270,174
<INCOME-PRETAX> (1,965,576)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,965,576)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,965,576)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
