SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
K.L.S. ENVIRO RESOURCES, INC.
(Name of Issuer)
COMMON STOCK
(Title of Class of Securities)
482530102
(CUSIP Number)
Jeffrey M. Jones, Esq.
DURHAM, EVANS, JONES & PINEGAR, P.C.
50 South Main Street, 850 Key Bank Tower
Salt Lake City, Utah 84144
TELEPHONE: (801) 538-2424
(Name, Address, and Telephone Number of Person
Authorized to Receive Notices and Communications)
AUGUST 16, 1996
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
Check the following box if a fee is being paid with this statement [X].
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 (the "Act") or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act.
Page 1
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SCHEDULE 13D Page 2
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1. NAME OF REPORTING PERSON SMD, L.L.C.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE 87-0541037
PERSON
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A (a) [X]
GROUP (b) [ ]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS WC
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5. CHECK BOX IF DISCLOSURE OF LEGAL [ ]
PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) OR 2(e)
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6. CITIZENSHIP OR PLACE OF ORGANIZATION Utah
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NUMBER OF 7. SOLE VOTING POWER 3,061,000*
SHARES ---------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER 0
OWNED BY ---------------------------------------------------------------
EACH 9. SOLE DISPOSITIVE POWER 3,061,000*
REPORTING ---------------------------------------------------------------
PERSON WITH 10. SHARED DISPOSITIVE POWER 0
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY 3,061,000*
EACH REPORTING PERSON
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW [X]**
(11) EXCLUDES CERTAIN SHARES
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN 29.7%
ROW (11)
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14. TYPE OF REPORTING PERSON OO***
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* Includes 500,000 shares of common stock issuable upon conversion of
100,000 shares of Series A Preferred Stock.
** Excludes presently exercisable right to acquire 5,341,667 shares of
common stock upon conversion of debt payable to fonix corporation, a
corporation the executive officers and three of the six directors of
which are control persons of the Reporting Person. The Reporting
Person disclaims beneficial ownership of the shares underlying such
conversion right.
*** The Reporting Person is a limited liability company.
<PAGE>
SCHEDULE 13D Page 3
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1. NAME OF REPORTING PERSON RAYMOND H. KURZON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE ###-##-####
PERSON
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A (a) [X]
GROUP (b) [ ]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS WC
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5. CHECK BOX IF DISCLOSURE OF LEGAL [ ]
PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) OR 2(e)
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6. CITIZENSHIP OR PLACE OF ORGANIZATION U.S.
- ------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER 2,180,539
SHARES ---------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER 0
OWNED BY ---------------------------------------------------------------
EACH 9. SOLE DISPOSITIVE POWER 2,180,539
REPORTING ---------------------------------------------------------------
PERSON WITH 10. SHARED DISPOSITIVE POWER 0
- ------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY
EACH REPORTING PERSON 2,180,539
- ------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW [ ]
(11) EXCLUDES CERTAIN SHARES
- ------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN 22.2%
ROW (11)
- ------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON IN
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<PAGE>
SCHEDULE 13D Page 4
ITEM 1. SECURITY AND ISSUER.
(a) Name and Address of Principal Executive Offices of Issuer:
K.L.S. Enviro Resources, Inc.
3220 North Freeway
Fort Worth, Texas 76111
(b) Title and Class of Equity Securities: Common Stock
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is jointly filed by a group comprised of SMD, L.L.C. and
Raymond H. Kurzon (each or collectively, a "Reporting Person").
SMD, L.L.C.
(a) Name of Person Filing: SMD, L.L.C., a Utah limited
liability company.
The managers of SMD, L.L.C. are
set forth on Exhibit A hereto.
(b) Principal Business: Investment management on behalf of
members.
(c) Address of Principal Business and Principal Office:
1225 Eagle Gate Tower
60 East South Temple Street
Salt Lake City, Utah 84111
(d) Criminal Proceedings:
During the last five years neither SMD, L.L.C. nor
any manager of SMD, L.L.C. has been convicted in any
criminal proceeding.
(e) Civil Proceedings:
During the last five years neither SMD, L.L.C. nor
any manager of SMD, L.L.C. has been party to any
civil proceeding of a judicial or administrative
body of competent jurisdiction as a result of which
such person would have been subject to any judgment,
decree or final order enjoining future violations of
or prohibiting or mandating activities subject to
Federal or State securities laws or finding any
violation with respect to such laws.
(f) State of Organization: Utah
RAYMOND H. KURZON
(a) Name of Person Filing:Raymond H. Kurzon
(b) Business Address: 3220 North Freeway, Suite 105
Fort Worth, Texas 76111
<PAGE>
SCHEDULE 13D
(c) Present Principal Occupation:
Mr. Kurzon presently is the President and a Director
of the Issuer, K.L.S. Enviro Resources, Inc.
(d) Criminal Proceedings:
During the last five years Mr. Kurzon has not been
convicted in any criminal proceeding.
(e) Civil Proceedings:
During the last five years Mr. Kurzon has not been
party to any civil proceeding of a judicial or
administrative body of competent jurisdiction as a
result of which he would have been subject to any
judgment, decree or final order enjoining future
violations of or prohibiting or mandating activities
subject to Federal or State securities laws or
finding any violation with respect to such laws.
(f) Citizenship: U.S.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On August 16, 1996, SMD, L.L.C. and Raymond H. Kurzon entered into a
Stock Purchase Agreement (the "Purchase Agreement") between them, as
purchasers, and the Estate of James Robert Bell, and JoAnn Bell, as
sellers ("Sellers"). Pursuant to the Purchase Agreement, SMD, L.L.C.
and Mr. Kurzon agreed to purchase from Sellers 3,561,000 shares of
common stock and 100,000 shares of Series A Preferred Stock convertible
into 500,000 shares of common stock. The purchase price for such
shares is $1,977,000, which as of the date hereof has not been paid.
The Purchase Agreement provides for payment in six-month intervals
commencing on February 16, 1996 and thereafter every six months until
August 16, 1998 in the following amounts: $500,000, $500,000, $500,000
and $477,000. Mr. Kurzon received 1,000,000 shares of the common stock
acquired from Sellers, and will pay pro-rata portions of the purchase
price installments payable to Sellers. The Reporting Persons anticipate
that funds for the payment of such purchase price payments shall be
derived, in the case of SMD, L.L.C., from working capital, and, in the
case of Mr. Kurzon, from personal funds.
<PAGE>
SCHEDULE 13D Page 6
ITEM 4. PURPOSE OF THE TRANSACTION.
Each of the Reporting Persons has acquired the shares of common stock
(or the rights to acquires shares of common stock) included in this
Statement for investment purposes. The Reporting Persons have no plans
or proposals that relate to or would result in any of the circumstances
described in subparagraphs (a) to (j) of Item 4 of Schedule 13D.
ITEM 5. INTERESTS IN SECURITIES OF THE ISSUER.
SMD, L.L.C.
(a) Number of Shares Beneficially Owned: 2,561,000 shares
Right to Acquire: 500,000 shares
Percent of Class: 29.7% (based upon 10,312,656 shares of
common stock deemed to be issued and
outstanding based on representations
set forth in the Issuer's quarterly
report on Form 10-QSB for the period
ended June 30, 1996 and accounting for
the unissued shares of common stock
underlying the Series A Preferred
Stock).
(b) Sole Power to Vote, Direct the
Vote of, or Dispose of Shares: 3,061,000 shares
(c) Recent Transactions:
Pursuant to the Purchase Agreement and SMD, L.L.C.'s
collateral agreements with Mr. Kurzon, SMD, L.L.C.
received 2,561,000 shares of common stock and 100,000
shares of Series A Preferred Stock that is convertible, at
the option of the holder thereof, into 500,000 shares of
common stock, on August 16, 1996.
SMD, L.L.C. disclaims beneficial ownership of a total of
5,341,667 shares of common stock that are issuable to
fonix corporation ("fonix") upon the conversion by fonix
of $1,900,000 of debt into shares of common stock at the
option of fonix. Such conversion rights were granted to
fonix in connection with a course of short-term debt
financing by fonix that closed on August 12, 1996. The
three managers of SMD, L.L.C. also are executive officers
and directors of fonix. Any decision by fonix to convert
the $1,900,000 debt, or any portion thereof, to common
stock and thereafter to dispose of such stock could, under
applicable law, be accomplished only with the approval of
the three independent directors of fonix.
<PAGE>
SCHEDULE 13D Page 7
(d) Rights with Respect to Dividends
or Sales Proceeds: N/A
(e) Date of Cessation of Five Percent
Beneficial Ownership: N/A
RAYMOND H. KURZON
(a) Number of Shares Beneficially Owned: 2,180,539 shares
Percent of Class: 22.2%
(based upon 9,812,656 shares of
common stock issued and outstanding
based on representations set forth in
the Issuer's quarterly report on Form
10-QSB for the period ended June 30,
1996).
(b) Sole power to Vote, Direct the
Vote of, or Dispose of Shares: 2,180,539 shares
(c) Recent Transactions:
Pursuant to the Purchase Agreement and Mr. Kurzon's
collateral agreements with SMD, L.L.C., Mr. Kurzon
received 1,000,000 shares of common stock on August 16,
1996.
On August 16, 1996, Mr. Kurzon converted $180,000 of debt
payable to him by the Issuer into 450,000 shares of common
stock at the rate of $.40 per share.
(d) Rights with Respect to Dividends
or Sales Proceeds: N/A
(e) Date of Cessation of Five Percent
Beneficial Ownership: N/A
<PAGE>
SCHEDULE 13D Page 8
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Other than as is described in this Statement, there is no
contract, arrangement, understanding or relationship between the
Reporting Persons or between either of the Reporting Persons and
any third party with respect to the securities of the Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit A contains the name, citizenship, office, business address and
present principal occupation of each of the managers of SMD,
L.L.C.
Exhibit B is a Joint Filing Agreement among SMD, L.L.C. and Mr.
Kurzon.
Exhibit C is the Purchase Agreement described in Items 3 and 5 above.
<PAGE>
SCHEDULE 13D Page 9
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
Dated as of August 26, 1996.
SMD, L.L.C.
By: /s/ Thomas A. Murdock
---------------------------------
Thomas A. Murdock, Manager
/s/ Raymond H. Kurzon
---------------------------------
Raymond H. Kurzon, Individually
<PAGE>
Exhibit A
MANAGERS OF SMD, L.L.C.
The following is a list of all Managers of SMD, L.L.C. and certain
other information with respect to each Manager. All Managers are United
States citizens.
Name: Stephen M. Studdert
Business Address: 1225 Eagle Gate Tower
60 East South Temple Street
Salt Lake City, Utah 84111
Principal Occupation: Chairman, Chief Executive Officer and
Director of fonix corporation
Name, principal business and fonix corporation, development of computer
address of corporation or other voice recognition technologies
organization on which employment 1225 Eagle Gate Tower
is conducted: 60 East South Temple Street
Salt Lake City, Utah 84111
Name: Thomas A. Murdock
Business Address: 1225 Eagle Gate Tower
60 East South Temple Street
Salt Lake City, Utah 84111
Principal Occupation: President, Chief Operating Officer and
Director of fonix corporation
Name, principal business and fonix corporation, development of computer
address of corporation or other voice recognition technologies
organization on which employment 1225 Eagle Gate Tower
is conducted: 60 East South Temple Street
Salt Lake City, Utah 84111
Name: Roger D. Dudley
Business Address: 1225 Eagle Gate Tower
60 East South Temple Street
Salt Lake City, Utah 84111
Principal Occupation: Executive Vice President, Chief
Financial Officer and Director of fonix
corporation
Name, principal business and fonix corporation, development of computer
address of corporation or other voice recognition technologies
organization on which employment 1225 Eagle Gate Tower
is conducted: 60 East South Temple Street
Salt Lake City, Utah 84111
<PAGE>
EXHIBIT B
JOINT FILING AGREEMENT
The undersigned hereby agree, pursuant to Commission Rule 13d-
1(f)(1)(iii), that the foregoing Joint Statement of Beneficial Ownership on
Schedule 13D with respect to their beneficial ownership of the securities of
K.L.S. Enviro Resources, Inc., a Nevada corporation, shall be, and is, filed
by and on behalf of each of them. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SMD, L.L.C.
By /s/ Thomas A. Murdock August 26, 1996
--------------------------------- --------------------------
Thomas A. Murdock, Manager Date
/s/ Raymond A. Kurzon August 26, 1996
----------------------------------- --------------------------
Raymond A. Kurzon, individually Date
<PAGE>
EXHIBIT C
--------------------------------
STOCK PURCHASE AGREEMENT
_________________________________
STOCK PURCHASE AGREEMENT ("Agreement") by and between HERSHEL R.
PAYNE, Executor of the Estate of James Robert Bell (the "Estate"), JOANN
BELL, an individual resident in the State of Texas ("Bell") (the Estate
and Bell collectively are referred to herein as "Seller"), and SMD,
L.L.C., a Utah limited liability company ("SMD") and Raymond H. Kurzon,
an individual resident in the State of Texas ("Kurzon") (SMD and Kurzon
are collectively referred to herein as "Purchaser"), dated as of August
16, 1996.
Recitals
A. Seller is the owner of 3,561,000 shares of the restricted
common stock of K.L.S. Enviro Resources, Inc., a Nevada corporation (the
"Company"), and 100,000 shares of the Company's restricted Series A
preferred stock that is convertible into 500,000 shares of the Company's
common stock.
B. Seller desires to sell and Purchaser desires to purchase the
common stock and the preferred stock presently owned by Seller pursuant
to a transaction exempt from the registration and prospectus delivery
requirements of the U.S. Securities Act of 1933, as amended (the "Act")
and similar provisions of applicable state law, and upon the terms and
conditions set forth in this Agreement.
Agreement
In consideration of the mutual covenants and promises set forth
below and other good and valuable consideration, the receipt and
adequacy of which the parties acknowledge by their signatures below, the
parties agree as follows:
1. Purchase of Stock. Subject to the terms and conditions of
this Agreement, Purchaser hereby agrees to acquire, and Seller agrees
to sell, the following securities (collectively the "Purchased Stock"):
1.1 Common Stock. Purchaser shall purchase, and Seller shall
sell, three million five hundred sixty one thousand (3,561,000) shares
of the Company's restricted common stock, par value $.0001 per share
(the "Common Stock"), which presently is owned by the following persons
in the following amounts:
Name Amount Owned
------------------------ ---------------------
James Robert Bell Estate 2,138,000 Shares
JoAnn Bell 1,423,000 Shares
1.2 Preferred Stock. Purchaser shall purchase and the Estate
shall sell one hundred thousand (100,000) shares of the Company's
restricted Series A Preferred Stock, par value $.0001 per share (the
"Preferred Stock").
2. Purchase Price. The purchase price (the "Purchase Price")
that Purchaser shall pay to Seller for the sale of the Purchased Stock
shall be one million nine hundred seventy-seven thousand dollars
($1,977,000), which shall be payable by Purchaser to Seller in
installments of the following amounts according to the following
schedule:
Amount of Payment Date of Payment
-------------------- ------------------------
$500,000 February 16, 1997
$500,000 August 16, 1997
$500,000 February 16, 1998
$477,000 August 16, 1998
Payments by Purchaser under this Agreement shall be accomplished by, at
the discretion of Purchaser, wire fund transfer according to
instructions provided by Seller, or by delivery to Seller of certified
funds for such payment payable jointly to Seller at the following
address:
c/o Hershel R. Payne, Esq.
Bishop, Payne, Williams & Werley, L.L.P.
500 West Seventh Street, Suite 1800
Fort Worth, Texas 76102
2.1Delivery of Purchased Stock. At Closing, Seller shall
deliver to Purchaser original stock certificates representing the
Purchased Stock, together with such endorsements or stock powers as
shall be necessary and appropriate to effect the transfer of the
Purchased Stock to Purchaser and the issuance of replacement
certificates therefor. Seller agrees to provide such further documents,
affidavits or assurances as the Company's stock transfer agent may
request in order to effect the transfer of the Purchased Stock
contemplated by this Agreement.
2.2 Guaranty. Purchaser's obligations under this Section 2
shall be guaranteed by Studdert Companies Corp., a Utah corporation
("SCC"), which guaranty agreement shall be in the form attached hereto
as Exhibit "A".
3. Closing. The closing of the purchase and sale of the
Purchased Stock as described in this Agreement shall occur on or before
3:00 p.m. local time on August 16, 1996, or such later date as the
parties may agree (the "Closing Date").
4. Conditions Precedent. The consummation of the transactions
contemplated by this Agreement shall be subject to and conditioned upon
the occurrence of each of the following by or before the Closing Date,
unless satisfaction of such condition shall have been waived by
Purchaser in writing on or before the Closing Date:
4.1 Consent of Company. The Company shall have executed and
delivered to Purchaser the Company's written acknowledgement that (i)
the Company has been provided with and has reviewed this Agreement; (ii)
that the Company consents to the execution and delivery of this
Agreement by Purchaser and Seller and the consummation of the
transactions contemplated by this Agreement; and (iii) that the Company
shall use its best efforts to cause the Company's stock transfer agent
to comply with any request by Seller with respect to the transfer to
Purchaser of the Purchased Stock as contemplated by this Agreement.
Such written acknowledgement shall be substantially in the form attached
to this Agreement as Exhibit "B", which exhibit is incorporated herein
by reference.
4.2 Registration Rights Agreement. The Company shall have
executed and delivered to Purchaser the Registration Rights Agreement
in the form attached hereto as Exhibit "C", which exhibit is
incorporated in and made part of this Agreement by reference.
4.3 Opinion of Counsel. Seller shall have caused to be
delivered to Purchaser, at or before Closing, an opinion of counsel to
the effect that (i) the transaction contemplated by this Agreement is
exempt from the registration and prospectus delivery requirements of the
Act and similar requirements of applicable state law, and (ii) that upon
completion of the transactions contemplated by this Agreement, the
Purchased Stock shall duly and validly issued, fully paid and
nonassessable. Such opinion shall be substantially in the form attached
hereto as Exhibit "D", which exhibit is incorporated in and made part
of this Agreement by reference.
5. Representations and Warranties of Seller. Seller, unless more
specifically stated below, jointly represent and warrant to Purchaser
as follows:
5.1 Authorization. The persons executing, on Seller's
behalf, this Agreement and any other documents or instruments executed
by Seller in connection with this Agreement are duly authorized to do
so.
5.2 Valid and Binding Obligation. This Agreement has been
duly and validly executed and delivered by Seller, and this Agreement
shall constitute the valid and binding agreement of Seller, enforceable
against Seller in accordance with the terms of this Agreement, except
that (a) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium, or fraudulent conveyance or other similar
laws pertaining to creditors' rights, and (b) the remedy of specific
performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
5.3 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument executed in connection
with this Agreement, and the consummation of the transactions
contemplated thereby, and compliance with the requirements thereof, will
not violate any writ, judgment, injunction, decree or award binding on
Seller, or the provision of any indenture, instrument or agreement to
which Seller is a party or is subject, or by which Seller or any of its
properties is or may be bound, or conflict with or constitute a material
default thereunder, or result in the creation or imposition of any lien
pursuant to the terms of any such indenture, instrument or agreement,
or require the approval of any third-party pursuant to any material
contract, agreement, instrument, relationship or legal obligation to
which Seller is subject or to which any of its properties, operations
or management may be subject.
5.4 No Consents Required. No authorization, consent, or
approval of, or filing with, any governmental body or authority or any
third party, including without limitation lenders, lessors and other
creditors, is necessary for the consummation by Seller of the
transactions contemplated by this Agreement.
5.5 Ownership of Stock. As of the Closing Date, all of the
Purchased Stock is validly issued, fully paid and nonassessable. Seller
has good and valid title to all of the Purchased Stock, free and clear
of any liens or other encumbrances.
5.6Accuracy of Representations and Information. All
representations made by Seller in this Agreement and all documents and
instruments incorporated by reference into this Agreement are correct
and complete as of the date hereof and contain no material misstatement
of fact.
5.7 No Other Transactions. Other than the transactions by
which Seller acquired the Purchased Stock, neither the Estate nor Bell
has purchased or sold any equity securities of the Company during the
two year period immediately prior to the Closing Date.
5.8 No Brokers or Finders. No third person has in any way
brought the parties together or been instrumental in the negotiation,
execution, or consummation of this Agreement or any instrument, document
or agreement related to this Agreement for any fee or other transaction-
based remuneration for so doing. Seller agrees to indemnify Purchaser
against any claim by any third person for any commission, brokerage fee,
finders fee, or other payment with respect to this Agreement or the
transactions contemplated hereby based upon any alleged agreement or
understanding between such party and such third person, whether
expressed or implied, arising from the actions of such party.
6. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller as follows:
6.1 Sole Party in Interest. Purchaser represents that it is
the sole and true party in interest, and no other person or entity has
or will have upon the transfer of the Purchased Stock any beneficial
ownership interest in the Purchased Stock or any portion of the
Purchased Stock, whether direct or indirect.
6.2 Sophistication. SMD's management and Kurzon individually
have considered the advisability of Purchaser's investment in the
Purchased Stock as anticipated by this Agreement. SMD's management and
Kurzon collectively have such knowledge and experience in financial and
business matters in general and securities investments in particular
that Purchaser is capable of evaluating the merits and risks of
Purchaser's investment in the Purchased Stock and to otherwise protect
Purchaser's interests.
6.3 Investment Purpose. Purchaser represents that it is
acquiring the Stock for its own account and for investment purposes and
not on behalf of any other person or entity or for or with a view to any
public resale or public distribution of the Company's securities.
6.4 Access to Information. SMD's management and Kurzon
individually have had access to all documents, records, books and other
information pertaining to the Company or the Purchased Stock that they
have desired to review, and that there are no additional materials or
documents that have been sought by Purchaser that have not been
available to Purchaser. SMD's management and Kurzon individually have
had an opportunity to ask questions of and receive answers from the
Company's representatives about the Company and the Purchased Stock, and
that any decision not to ask questions of the Company's representatives
was a conscious decision on their part and reflects their belief that
no additional information is necessary in order to make an informed
decision about investing in the Purchased Stock. Without limiting the
generality of the foregoing, Purchaser acknowledges that it has received
and has reviewed copies of the following documents and materials, all
of which are incorporated herein by reference:
(1) Articles of Incorporation of the Company, as
amended;
(2) Bylaws of the Company, as amended;
(3) The Company's Annual Report on Form 10-KSB for the
fiscal year ended September 30, 1995;
(4) The Company's Quarterly Reports on Form 10-QSB for
the periods ended December 31, 1995 and March 31,
1996;
(5) Preferred Stock Purchase Agreement by and between
the Company and James Robert Bell dated as of March
1, 1994; and
(6) Unanimous Written Consent of the Company's
directors dated as of March 1, 1994, authorizing
the issuance and setting forth the rights and
preferences associated with the Company's Series A
Preferred Stock.
6.5 Liquidity. SMD and Kurzon each presently have sufficient
liquid assets to pay the Purchase Price in the manner anticipated by
this Agreement. Purchaser's overall commitment to investments that are
not readily marketable is not disproportionate to Purchaser's total
assets, and Purchaser's investment in the Purchased Stock will not cause
such overall commitment to become excessive. Purchaser has adequate
means of providing for its current needs and contingencies and has no
need for liquidity in its investment in the Purchased Stock or for a
source of income from the Purchased Stock. Purchaser is capable of
bearing the economic risk and the burden of the investment contemplated
by this Agreement.
6.6 Organization, Standing, Authorization. SMD is duly
organized, validly existing, and in good standing under the laws of the
State of Utah, and has the requisite power and authority to enter into
this Agreement, acquire the Purchased Stock and execute and deliver any
documents or instruments in connection with this Agreement. The
execution and delivery of this Agreement, and all other documents and
instruments executed by Purchaser in connection with any of the
transactions contemplated by this Agreement have been duly authorized
by all required action. The person executing, on SMD's behalf, this
Agreement and any other documents or instruments executed by SMD in
connection with this Agreement is duly authorized to do so.
6.7 Investment Advisors. Other than SMD's management, who
have received no compensation or other transaction-based remuneration
for advising SMD with respect to this investment, Purchaser represents
that no investment advisor or purchaser representative has been
consulted or retained in connection with Purchaser's decision to invest
in the Purchased Stock.
6.8 Residency. SMD is organized under the laws of and has
its principal place of business in the State of Utah. Kurzon is an
individual resident in the State of Texas.
6.9 No Brokers or Finders. No third person has in any way
brought the parties together or been instrumental in the negotiation,
execution, or consummation of this Agreement or any instrument, document
or agreement related to this Agreement for any fee or other transaction-
based remuneration of any type. Purchaser agrees to indemnify Seller
against any claim by any third person for any commission, brokerage fee,
finders fee, or other payment with respect to this Agreement or the
transactions contemplated hereby based upon any alleged agreement or
understanding between such party and such third person, whether
expressed or implied, arising from the actions of such party.
6.10 Manner of Sale. At no time was Purchaser presented with
or solicited by or through any leaflet, public promotional meeting,
television advertisement or any other form of general solicitation or
advertising.
7. Restricted Shares. Purchaser understands and acknowledges
that the Purchased Stock has not been registered under the Act, or any
state securities laws, and will be sold in reliance upon certain
exemptions from the registration requirements of those laws, and thus
cannot be resold unless they are registered under the Act or unless an
exemption from registration is available for such resale. With regard
to the restrictions on resales of the Purchased Stock or any security
underlying or into which the Purchased Stock may be convertible,
Purchaser is aware (i) of the limitations and applicability of
Securities and Exchange Commission Rule 144; (ii) that the Company may
issue stop transfer orders to its stock transfer agent in the event of
attempts to improperly transfer any such securities; and (iii) that a
restrictive legend will be placed on certificates representing the
Purchased Stock and any security underlying or into which any of the
Purchased Stock may be convertible, which legend will read substantially
as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ISSUED PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION
REQUIREMENT OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND STATE SECURITIES LAWS AND THEREFORE HAVE NOT BEEN
REGISTERED UNDER THE ACT OR UNDER THE SECURITIES LAWS OF ANY
STATE. THESE SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT COMPLIANCE WITH
THE REGISTRATION OR QUALIFICATION PROVISIONS OF THE ACT OR
APPLICABLE STATE LAWS, OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM SUCH REGISTRATION REQUIREMENTS.
8. Indemnification. Seller agrees to indemnify Purchaser, its
officers, employees, agents and attorneys, and hold them harmless from
and against any and all liability, damage, cost or expense, including
attorney's fees, incurred on account or arising out of:
8.1 Any inaccuracy in the declarations, representations, and
warranties by Seller set forth herein; and
8.2 Any action, suit or proceeding based upon the claim that
said declarations, representations, or warranties were inaccurate or
misleading or otherwise cause for obtaining damages or redress from
Purchaser.
9. General Provisions.
9.1 Attorneys' Fees. In the event of a default in the
performance of this Agreement or any document or instrument executed in
connection with this Agreement, the defaulting party, in addition to all
other obligations of performance hereunder, shall pay reasonable
attorneys' fees and costs incurred by the non-defaulting party to
enforce performance of this Agreement.
9.2 Choice of Law; Venue. This Agreement shall be governed
by and construed in accordance with the laws of the State of Utah,
without regard to the application of that jurisdiction's choice of law
rules. Any suit to enforce any provision of this Agreement or to obtain
any remedy with respect to this Agreement may be brought only in the
Courts of Tarrant County, Texas.
9.3 Counterparts. This Agreement may be executed in one or
more counterparts, each of which when so signed shall be deemed to be
an original, and such counterparts together shall constitute one and the
same instrument. A facsimile copy of any such counterpart signature
page shall have full force and effect upon delivery.
9.4 EDGAR Compliance. The parties to this Agreement agree
that they shall keep and maintain digital copies of any document
generated by such party and made part of this Agreement for a period of
at least one year after the Closing Date and shall make available
digital copies of such document to any other party hereto upon
reasonable request therefor.
9.5 Entire Agreement. This Agreement, and the exhibits and
other attachments referred to herein collectively set forth the entire
agreement between the parties as to the subject matter hereof, supersede
any and all prior or contemporaneous agreements or understandings of the
parties relating to the subject matter of this Agreement, and may not
be amended except by an instrument in writing signed by all of the
parties to this Agreement.
9.6 Expenses. The parties shall be responsible for and shall
pay their own costs and expenses, including without limitation
attorneys' fees and accountants' fees and expenses, in connection with
the conduct of the due diligence inquiry, negotiation, execution and
delivery of this Agreement and the instruments, documents and agreements
executed in connection with this Agreement.
9.7 Headings. The headings of the sections and paragraphs
of this Agreement have been inserted for convenience of reference only
and do not constitute a part of this Agreement.
9.8 Notices. All notices or other communications provided
for under this Agreement shall be in writing, and mailed, telecopied or
delivered by hand delivery or by overnight courier service, to the
parties at their respective addresses as indicated below or at such
other address as the parties may designate in writing:
If to Purchaser, to it at:
SMD, L.L.C.
1225 Eagle Gate Tower
60 East South Temple Street
Salt Lake City, Utah 84111
Fax: (801) 328-8778
With a copy to:
Jeffrey M. Jones, Esq.
DURHAM, EVANS, JONES & PINEGAR, P.C.
Key Bank Tower, Suite 850
50 South Main Street
Salt Lake City, Utah 84144
Fax: (801) 363-1835
If to Seller, to
Hershel R. Payne, Esq.
BISHOP, PAYNE, WILLIAMS & WERLEY, L.L.P.
Eighteenth Floor
500 West Seventh Street
Fort Worth, Texas 70108-4789
Fax (817) 870-2631
All notices and communications shall be effective as follows: When
mailed, upon three (3) business days after deposit in the mail (postage
prepaid); when telecopied, upon confirmed transmission of the telecopied
notice; when hand delivered, upon delivery; and when sent by overnight
courier, the next business day after deposit of the notice with the
overnight courier.
9.9 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors, and
shall be assignable by Purchaser without the prior consent of Seller.
9.10 Survival of Certain Representations, Warranties and
Covenants Closing. All warranties, representations, indemnities and
agreements made in this Agreement by either party shall survive the date
of this Agreement, the Closing Date, the consummation of the
transactions contemplated by this Agreement, and the transfer by Seller
of the Purchased Stock.
SIGNED as of the date first set forth above.
Seller:
/s/ HERSHEL R. PAYNE
------------------------------------
Hershel R. Payne,
Executor of the James Robert Bell Estate
/s/ JOANN BELL
------------------------------------------
JoAnn Bell
Purchaser
SMD, L.L.C.
a Utah limited liability company
By /s/ THOMAS A. MURDOCK
---------------------------------
Thomas A. Murdock, Manager
/s/ RAYMOND H. KURZON
-------------------------------------
Raymond H. Kurzon
