<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
American Stone Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in its charter)
Delaware 13-3704099
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
900 Keele Street Toronto, Ontario Canada M6N 3E7
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (416) 653-6111
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
N/A N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Shares ($.001 par value)
---------------------------------------------------------------------------
(Title of Class)
---------------------------------------------------------------------------
(Title of Class)
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TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
PART I...............................................................................................................Page 2
A. THE COMPANY.................................................................................................Page 2
-----------
B. BUSINESS AND PROPERTIES.....................................................................................Page 3
-----------------------
1. HISTORICAL OVERVIEW: AMERICAN STONE INDUSTRIES, INC................................................Page 3
2. ASI's BUSINESS.....................................................................................Page 3
A. AMERICAN STONE CORPORATION................................................................Page 3
(1) INCORPORATION....................................................................Page 3
(2) BUSINESS.........................................................................Page 4
(3) PROPERTY, PLANT AND EQUIPMENT...................................................Page 4
(i) Property.................................................................Page 4
(ii) Plant ...................................................................Page 5
(iii) Equipment................................................................Page 5
(4) INDUSTRY STRUCTURE...............................................................Page 5
(5) INDUSTRY PRODUCTION..............................................................Page 7
(6) MARKETING STRUCTURE..............................................................Page 9
(7) MARKET SIZE......................................................................Page 9
(8) SANDSTONE MARKET................................................................Page 10
(9) WORKFORCE.......................................................................Page 11
(10) COMPETITION.....................................................................Page 11
(11) MARKETING BY ASC................................................................Page 12
(12) BUSINESS STRATEGY...............................................................Page 12
(13) SALES...........................................................................Page 12
(14) INTELLECTUAL PROPERTY/PROPRIETARY RIGHTS........................................Page 13
(15) REGULATION......................................................................Page 13
</TABLE>
i
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<TABLE>
<CAPTION>
<S> <C>
(16) MATERIAL DEVELOPMENTs...........................................................Page 13
B. TYRRELL STONE DESIGN.....................................................................Page 15
3. FACTORS AFFECTING PROFITABILITY...................................................................Page 15
4. CASH FLOW/LIQUIDITY...............................................................................Page 17
5. DESCRIPTION OF SECURITIES.........................................................................Page 18
6. PRIOR DIVIDENDS, DISTRIBUTIONS OR REDEMPTIONS.....................................................Page 18
7. OFFICERS AND KEY PERSONNEL OF THE COMPANY.........................................................Page 18
8. DIRECTORS OF THE COMPANY..........................................................................Page 21
9. OTHER INFORMATION REGARDING OFFICERS/DIRECTORS
AND KEY PERSONNEL........................................................................Page 23
10. BANKRUPTCY/RECEIVERSHIP...........................................................................Page 23
11. PRINCIPAL OWNERS..................................................................................Page 23
12. SHARES BENEFICIALLY OWNED BY OFFICERS/DIRECTORS...................................................Page 25
13. MANAGEMENT RELATIONSHIPS, TRANSACTIONS AND
REMUNERATION.............................................................................Page 25
A. LOANS....................................................................................Page 25
B. RELATED PARTY TRANSACTIONS...............................................................Page 25
C. STOCK OPTIONS............................................................................Page 26
D. REMUNERATION.............................................................................Page 27
E. PERSONNEL RELIANCE.......................................................................Page 27
14. LITIGATION........................................................................................Page 28
15. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CERTAIN RELEVANT FACTORS..................................Page 28
A. CAUSES FOR LOSSES FROM OPERATIONS........................................................Page 28
B. TRENDS IN HISTORICAL OPERATING RESULTS...................................................Page 29
C. GROSS MARGIN.............................................................................Page 32
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
D. FOREIGN/GOVERNMENT SALES.................................................................Page 32
PART II ...........................................................................................................Page 33
Item 1. MARKET PRICE OF AND DIVIDENDS ON
REGISTRANT'S COMMON SHARES AND
OTHER SHAREHOLDER MATTERS.......................................................Page 33
Item 2. LEGAL PROCEEDINGS........................................................................Page 34
Item 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS............................................Page 34
Item 4. RECENT SALES OF UNREGISTERED SECURITIES..................................................Page 34
Item 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS................................................Page 34
PART F/S ...........................................................................................................Page 35
Item 1. AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR
ENDED DECEMBER 31, 1995.........................................................Page 36
Item 2. AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR
ENDED DECEMBER 31, 1996.........................................................Page 46
PART III: EXHIBITS.................................................................................................Page 62
--------
SIGNATURES.........................................................................................................Page 216
</TABLE>
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PART I
------
A. THE COMPANY
-----------
EXACT CORPORATE NAME:
American Stone Industries, Inc.
STATE AND DATE OF INCORPORATION:
Delaware; November 11, 1992
STREET ADDRESS OF PRINCIPAL OFFICE OF CORPORATION:
900 Keele Street
Toronto, Ontario Canada M6N 3E7
COMPANY TELEPHONE NUMBER:
(416) 653-6111
COMPANY FISCAL YEAR:
December 31
PERSON(S) TO CONTACT AT COMPANY WITH RESPECT TO FILING:
Glen Gasparini, President
or
Van P. Carter, Esq.
Walter & Haverfield, P.L.L.
50 Public Square
1300 Terminal Tower
Cleveland, OH 44113
Telephone: (216) 781-1212
Facsimile: (216) 575-0911
TELEPHONE NUMBER IF DIFFERENT FROM ABOVE:
Not applicable
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B. BUSINESS AND PROPERTIES
-----------------------
1. HISTORICAL OVERVIEW: AMERICAN STONE INDUSTRIES, INC.
---------------------------------------------------
American Stone Industries, Inc. ("ASI" or "the Company") is a holding
company which currently owns interests in two subsidiaries -- American Stone
Corporation ("ASC") and Tyrrell Stone Design Company ("Tyrrell").
The Company was incorporated in the State of Delaware on November 11,
1992 as Viva Designs U.S.A., Inc. The Company at that time was a distributor of
a line of jewelry and fragrances. In or about June 1993 the Company discontinued
those operations. On December 14, 1993, a certificate of amendment was filed to
change the name of the corporation to Viva Medical Sciences Corp. Beginning in
1994 and until a business combination in August 1995, the Company was a
distributor of medical equipment in the United States. In conjunction with the
1995 business combination, the medical equipment distributorship business was
transferred to a related party. On August 9, 1995, the Articles of Incorporation
were amended to effect a change of the corporate name to American Stone
Industries, Inc. Concurrent with the business combination, ASI became a holding
company which conducts business through its wholly-owned subsidiaries, ASC and
Tyrrell. ASC purchases and sells stone for use in the building construction
industry. Tyrrell provides design services to architects and stone processing
centers.
As of January 1, 1996, ASI (through ASC) owned 89.1% of a limited
partnership, Cleveland Quarries, L.P. ("CQ L.P."). In February 1996, ASC
acquired virtually all of the operating assets of CQ L.P. (See "Material
Developments" and "Related Party Transactions"). CQ L.P. was dissolved effective
December 31, 1996.
2. ASI'S BUSINESS
--------------
As a holding company, ASI conducts no operations and maintains only a
minimal corporate staff (See "Officers and Key Personnel of the Company").
The Company's operating assets consist of its two subsidiaries (ASC and
Tyrrell).
A. AMERICAN STONE CORPORATION
--------------------------
(1) INCORPORATION
-------------
ASC is a Delaware corporation incorporated in 1992. ASC acquired the
operating assets of Cleveland Quarries L.P. in February, 1996 and thereafter
began operating the 153 year old quarry situated near Amherst, Ohio known as the
"Cleveland Sandstone Quarries" (the "Cleveland
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Quarries"). Consisting of an estimated 300,000,000 cubic feet of reserve
deposits located on over 1,000 acres of ASC owned property, the Cleveland
Quarries is generally recognized as one of the World's largest sandstone
quarries.
(2) BUSINESS
--------
ASC is in the business of quarrying and marketing sandstone and
management of the Cleveland Quarries operation. ASC also maintains a sales
office in Toronto, Ontario, Canada.
The Cleveland Quarries produce sandstone, which is known in the
industry as "Berea Sandstone." Sandstone from the Cleveland Quarries has been
utilized throughout Ohio, the United States and Canada in such projects as the
John Hancock Building (Boston), Cleveland Post Office (Cleveland), Parliament
buildings of Ottawa, Osgoode Hall (Toronto), Buffalo City Hall (Buffalo),
Arkansas Bankruptcy Court (Little Rock), Oberlin College Campus Buildings
(Oberlin), Osgoode Hall - Law Courts of Upper Canada (Toronto), Hockey Hall of
Fame Building (Toronto), Courthouse (Savannah), St. James Cathedral (Toronto),
and University of Pennsylvania (Philadelphia), to name just a few, as well as
federal buildings, banks, churches and many prestigious private residential
dwellings throughout the U.S. and Canada. The most current personal residence of
note is Bill Gates' residence in Seattle, Washington.
(3) PROPERTY, PLANT AND EQUIPMENT
------------------------------
(I) PROPERTY:
ASC owns two (2) separate parcels of land in the Counties of Lorain and
Erie, Ohio. The property contains two categories of natural stone: (1)
Dimensional Stone, which is defined to be natural stone which is cut to size as
specified in architectural designs and primarily used as architectural accents
to buildings, although Dimensional Stone is also used for funeral monuments,
landscape and ornamental objects; and (2) Construction Stone, which is defined
to be natural stone primarily used for glass sand, foundry sand, silicon flour
and construction, especially roadways. The property has a total estimated
Dimensional Stone reserve of 336 million cubic feet. The parcel in Erie County
is in Birmingham Township, and is strictly a quarry operation. Dimensional Stone
reserve estimates were projected to be 126 million cubic feet based on a deposit
of at least 30 acres indicated by topographic studies. The Birmingham Quarry
yields both Gray and Buff Sandstone with a higher compressive strength than that
of the quarries located in the main parcel. The main parcel is in Amherst
Township (Lorain County) and is the site of numerous quarries, the mills and
offices. The main parcel fronts the Ohio State Turnpike approximately twenty
minutes west of downtown Cleveland. This property is estimated to contain 210
million cubic feet of Dimensional Stone and 21 million cubic feet of
Construction Stone. Many of the quarries on this section of land are currently
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unused and dormant. The same stone that has been used in thousands of
applications around the country is still available for renovation, restoration
and expansion of existing buildings. All of the properties have permits for use
as quarries and all permits are in good standing. The Birmingham property also
contains a supply of natural gas which is leased to a local utility.
(II) PLANT:
The following is a list of the main buildings on the property:
<TABLE>
<CAPTION>
MILL # SIZE S.F. YEAR BUILT CURRENT USE FUTURE USE
- ------ --------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
3 18,175 1946 Processing Processing
6 45,000 1923 Storage Gang Sawing
7 4,490 1955 Storage Carving
8 44,165 1926 Gang Sawing Processing
Office & Office & Office &
Showroom 11,305 1900 Showroom Showroom
</TABLE>
(III) EQUIPMENT:
ASC's equipment consists of saws, cranes, trucks, tow motors, grinders,
stone cutting equipment and haul tools. While some of the equipment is old, most
of it is still cost effective and functional and would be expensive to replace.
(4) INDUSTRY STRUCTURE
------------------
All natural stone products go through several stages prior to final
consumption. The various stages can be defined as follows:
- - Quarrying - extraction of large blocks of stone
- - Primary Processing - sawing the large blocks into smaller blocks or
large slabs
- - Secondary Processing - converting smaller blocks or slabs into finished
product
- - Installation - assembling and installing finished product
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Tile
Patio Stone
Sills
Table Tops
BLOCKS are turned into SLABS to make Step Treads
Garden Stone
House Ashlar
Cut Stone
Building Stone
Grindstones
BLOCKS are turned into SMALL BLOCKS to make Coping
Breakwater
Curbing
Laboratory Samples
Soaking Pit Linings
Landscape Pieces
Companies operate in diverse ways within the industry. They are usually
involved in more than one of these disciplines. The operations of companies
operating at each end of the spectrum, (i.e. the quarrying and installation)
tend to locate geographically. Quarry operations locate where the raw material
is found and installers operate in the market in which the finished product is
to be installed. The primary processors often locate at or near the quarries.
For this reason, the same company is often involved in both the quarry and
primary processing segment. Similarly, secondary processors locate at or near
the installers' premises and so companies that do installation are also usually
capable of secondary processing. It is rare to find a company that operates in
all segments of the industry.
The primary and secondary processing segments are the most mechanized
and therefore the most capital intensive. The machinery can be very
sophisticated and very expensive. There have been major advancements in quarry
technology and these operations are also becoming very capital intensive. These
expenses have been a bar to entry into these segments of the industry for many
and, for those that have failed to keep up, it has been a factor creating
adverse consequences.
This change is evidenced by a new phenomenon in the industry. Raw
blocks of stone are being shipped from North America to processing centers
located in Italy, and final product is returned to North America for
installation. Transportation is strictly limited to water and road, but the
portion of the final product cost attributable to transportation has steadily
fallen as the cost of processing has risen. The rising cost of processing has
only been offset by the efficiencies of modern machinery. This would suggest
that the processing centers can compete internationally, if they are as
sophisticated as those in Italy, and benefit from some of the other cost saving
elements available to the industry today.
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Even though a large portion of the labor component of the processing
has been eliminated, labor continues to be a problem in Italy. The processing
segment can benefit even further in an inexpensive labor pool location; however,
most third-world or underdeveloped countries offering inexpensive labor pools
also lack the sophisticated labor pool that is necessary to maintain and operate
the equipment. This is one of the reasons processing centers still locate in
countries like Italy, Germany and Japan.
Another important element in the cost of processing with modern
machinery has been a good source of fresh water. This element will become
increasingly more important as water jet technology emerges. Because the
Cleveland Quarries are located near Lake Erie, ASC is assured access to a
continuous source of fresh water.
(5) INDUSTRY PRODUCTION
-------------------
Based upon an August 1995 report prepared for the Company by Industrial
Mineral Facts (the "IMF Report"), the annual world production of raw Dimensional
Stone (Quarry stage) is estimated at thirty-four million (34,000,000) metric
tonnes or about twelve million six hundred thousand (12,600,000) cubic meters.
After primary and secondary processing, the total quantity of finished
Dimensional Stone products is approximately twenty million (20,000,000) tonnes
(59% yield), representing approximately three hundred seventy million
(370,000,000) equivalent square meters. The United States' share of worldwide
production of Dimensional Stone is approximately four percent (4%) and is
produced by about one hundred sixty (160) companies, operating over two hundred
fifty (250) quarries in thirty-five (35) states. The United States and the North
American continent, in general, are large importers of finished Dimensional
Stone products. In addition, six million (6,000,000) tonnes of ornamental stone
are also produced. It is estimated that the Dimensional Stone industry could
reach five hundred million (500,000,000) equivalent square meters by the year
2000, a rate of growth of five to six percent (5-6%) annually. Approximately
eighty percent (80%) of Dimensional Stone product is used by the building and
construction industries, while the remaining twenty percent (20%) is consumed by
the funeral monument, landscape and ornamental objects industries.
Worldwide production and consumption of raw Dimensional Stone, as
provided in the IMF Report, are illustrated on the following graph:
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PRODUCTION / CONSUMPTION
By Country
000 tonnes
<TABLE>
<CAPTION>
Country Production Consumption
- ------- ---------- -----------
<S> <C> <C>
Italy 7,500 8,200
Spain 3,500 3,350
China 2,300 1,400
Greece 1,750 1,700
S. Korea 1,600 1,500
India 1,500 700
U.S.A. 1,500 1,500
Portugal 1,300 1,150
Brazil 1,250 700
France 1,250 1,400
Benelux 750 800
S. Africa 750 100
Germany 700 1,000
Japan 500 1,700
Taiwan 300 1,350
Others 8,600 8,500
<FN>
* Production and consumption levels are estimates obtained from a bar graph.
</TABLE>
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(6) MARKETING STRUCTURE
-------------------
QUARRY TO END-USER
------------------
Quarry
------------------
------------------ ------------------
Processor --------------------- Primary Processor
------------------ -------------------
------------------
Installer
------------------
------------------
General Contractor
------------------
------------------ ------------------
Architect Distributor
------------------ ------------------
---------------------------------------
------------------
Designer
------------------
------------------
Purchsing Agent
------------------
------------------
End-User
------------------
The market for Dimensional Stone products is served by many more
companies than those involved in production and installation. They include
government agencies, distributors, marketing agencies, architectural and
engineering firms and designers. The company that has the closest contact with
the final consumer is often most responsible for the sale of stone products.
These other companies are often more important to the stone producer than the
stone itself. The illustration to the right indicates how many layers are
potentially between the End-User and the companies involved in the four levels
of the stone industry. The additional layers between End-User and Producer
require a sophisticated marketing department capable of dealing with these
companies. The marketing department may use in-house employees for estimating
and drafting functions or form strategic alliances with outside companies that
perform these functions.
(7) MARKET SIZE
-----------
[GRAPHIC]
There are four major geographical
markets for finished Dimensional Stone
products:
* Europe 8,500,000 Tonnes
* United States 1,200,000 Tonnes
* Far East 3,500,000 Tonnes
* Middle East 450,000 Tonnes
Source: IMF Report
[GRAPHIC]
<TABLE>
<CAPTION>
WORLD MARKET
Dimensional Stone
<S> <C>
United States 6.2%
Europe 43.9%
Middle East 2.3%
Far East 18.1%
Other 29.5%
</TABLE>
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Per the IMF Report, these four (4) regions consume at least seventy
percent (70%) of the world's production of raw and finished Dimensional Stone
products. Outside of Saudi Arabia, the countries with the greatest consumption
per capita of Dimensional Stone are Greece, Italy, Spain and Portugal. These
four (4) countries, which account for approximately two percent (2%) of the
world's population, consume over thirty percent (30%) of all Dimensional Stone
products. Per capita consumption in these four (4) countries is four-fold that
of Japan and ten-fold that of the United States. In these countries stone
products are used both in commercial construction and in housing while, in
countries such as Japan and the United States, Dimensional Stone is primarily
used in commercial buildings.
According to the IMF Report, total United States Dimensional Stone
consumption reached three billion two hundred million dollars ($3,200,000,000)
in 1989. Major market areas in the United States include New York, Dallas,
Chicago, Southern California and Florida. In North America, the markets for
natural stone are highly dependent on construction activity. While the
commercial market continues to form as construction start-ups increase in
strategic sectors such as Finance, Technology, Leisure, Healthcare, etc.,
increasing demand in natural stone products in renovation and restoration work
serve to fortify and strengthen burgeoning market demand.
(8) SANDSTONE MARKET
----------------
The worldwide market for Dimensional Sandstone products is estimated to
be approximately seven hundred thousand (700,000) tonnes, based upon the IMF
Report. The United States and Canada produce approximately twenty eight percent
(28%) of this total. This figure is high when compared to the overall share of
Dimensional Stone of all types which, for the United States and Canada, is only
approximately six percent (6%). This is due to the fact that the Northeast
portion of the North American Continent contains some of the world's best
sandstone deposits and because the product traditionally has been more popular
in North America than in other parts of the world. Specific figures including
conglomerate are available for the state of Ohio as follows.
According to the IMF Report, sandstone and conglomerate production was
two million fifty-three thousand eight hundred fifty-five (2,053,855) tons in
1993. Total sales were one million nine hundred thirty-three thousand two
hundred fifty-nine (1,933,259) tons, of which crushed sandstone and conglomerate
accounted for one million eight hundred ninety-four thousand seven hundred
sixty-one (1,894,761) tons and Dimensional Stone accounted for thirty-eight
thousand four hundred ninety-eight (38,498) tons. Ohio ranks seventh nationally
in production of all Dimensional Stone, but ranks first in the production of
sandstone Dimensional Stone. Construction Stone is used primarily for glass
sand, foundry sand, silica flour, and construction. Dimensional Stone is used
primarily for rough construction purposes. Sandstone production in Ohio accounts
for six and seven-tenths percent (6.7%) of Ohio's total stone production.
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The following markets are those which management has targeted to pursue
after expanding the sales of the Berea Sandstone:
<TABLE>
<CAPTION>
Building Stone:
---------------
<S> <C> <C> <C>
- Slabs - Curb Strips - Ashlar - Landscaping
- Sils - Benchstone - Patio Stone - Tile
- Steps - Wallstone - Cutstone
Specialty Products:
-------------------
- Cores (Oil & Gas Research) - Grindstones
- Breakwater Stone - Ornamental
Construction Materials:
-----------------------
- Crushed Stone - Bank Run / Rip Rap
- Sand
</TABLE>
(9) WORKFORCE
---------
ASC has approximately fifty (50) employees, of which about forty-five
(45) are hourly. The average hourly wage of the quarry personnel is less than
ten dollars ($10.00) per hour. The quarries are situated in geographic regions
that have a large labor pool, and management does not believe that securing
additional labor will be difficult or expensive.
In management's opinion, ASC has a positive relationship with its
employees.
There is no collective bargaining agreement in effect and, in the
opinion of management, it is unlikely that there will be one within the
foreseeable future.
(10) COMPETITION
-----------
ASC competes in the natural Dimensional Stone market. More
specifically, ASC competes against limestones and other sandstones. ASC's two
biggest competitors consist of Briar Hill Stone Co. (Glenmont, OH -- about 50
employees) and Indiana Limestone Company (Bedford, IN -- about 50 employees). As
a practical matter, when submitting proposals to provide Berea Sandstone to
larger commercial sites, ASC is in competition with quarries throughout the
United States and abroad.
ASC intends to compete within this environment utilizing a strategy
which embodies the following:
- Ownership of one of the largest sandstone reserves in
the World, which assures that ASC has access to the
raw material;
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- Access to a large supply of fresh water (Lake Erie)
which will assist in the conversion to water jet
technology;
- Low cost of raw materials; and
- Low cost provider, which is attributable to ASC's
access to a large labor pool that is not under
contract to a union.
(11) MARKETING BY ASC
----------------
The marketing of ASC products from Ohio are primarily done through an
in-house sales staff, and all sales staff are paid a salary. Independent agents
also market company products and are paid a commission on the selling price.
Distributors represent the company, although they deal directly with the
customer. They purchase the products from ASC at discounted rates and sell them
at a markup.
(12) BUSINESS STRATEGY
-----------------
ASC intends to expand its current market and financial base through a
business strategy that focuses on:
- Dedication to the core business of ASC, i.e. the
Cleveland Quarries;
- Development of ancillary assets, i.e., the sale,
lease or joint venture of surplus or nonessential
lands; and
- Selective acquisition of compatible assets or
businesses.
In addition, ASC intends to secure incremental capital in order to
upgrade and modernize its quarry operations as called for over time and to
centralize the marketing, administration and business facilities thereby
expanding and enhancing these functions as well as the core operations of
estimating, drafting and design.
(13) SALES
-----
ASC accounts for about ninety-five percent (95%) of the revenue of ASI
and for about seventy-eight percent (78%) of ASI's assets. The balance of the
assets are cash and other liquid assets owned by ASI.
As of December 31, 1996, ASC's backlog of orders was just under two
hundred fifty thousand dollars ($250,000). The company is careful not to
generate too large of a backlog of orders in order to assure that commitments
can be fulfilled and to avoid supply problems.
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(14) INTELLECTUAL PROPERTY/PROPRIETARY RIGHTS
----------------------------------------
ASC owns intellectual property (trademarks, trade names, etc.) and does
not license any such rights. ASC copyrights its marketing materials, but such
copyrights are not deemed to have any significant value in the marketplace.
Except as noted above, ASC does not own or license any proprietary
rights.
(15) REGULATION
----------
ASC's operations are subject to a variety of statutes, rules and
regulations, including State and local regulations governing mining. ASC is also
subject to a variety of regulations, such as OSHA, RCRA, EPA and DOT.
In the opinion of management, ASC is in compliance with all such
regulations.
If there are material changes in these regulations, the changes could
impact the operations of ASC.
(16) MATERIAL DEVELOPMENTS
---------------------
For the period 1992-1996, the material events which have impacted ASC
are the following:
- The acquisition of ASC by ASI on August 8, 1995. As a
result of the transaction, TMT Masonry, Ltd., the
former parent of ASC, received shares representing
approximately fifty-five percent (55%) of the
Company's outstanding common stock, thereby effecting
a change in control of the Company.
- On February 1, 1996, ASC purchased all inventories,
real estate, equipment, intangible assets, rights in
leases, and all other operational items of Cleveland
Quarries, L.P., in exchange for cash, assumption of
certain liabilities, and other consideration.
- The sale in August, 1996 of twenty-five (25%) of the
Common Shares of ASI to Roulston Venture Partners,
Ltd., which has provided ASC with working capital and
access to a Board of Directors of sophisticated
business people.
- The manufacturing procedure in the industry has
changed drastically since the 1950's. Modern
machinery acquired in the last year, technology and
methods have greatly reduced the cost of production,
but, have also required greater amounts of capital to
be employed.
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- The most positive events for ASC in 1996 were the
acquisitions of new personnel and additional capital.
Both of these events have allowed the company to
increase its production capacity and marketing
efforts. As of the fourth quarter of 1996, the
company became profitable, and is expected to
continue to expand its margin of profitability with
greater revenues.
In or about August 30, 1996, the Company entered into an "Interim
Management Agreement" (the "IM Agreement") with numerous Canadian individuals
and entities. Pursuant to the IM Agreement, the Company was retained as
"co-manager" of Stoklosar Marble Quarries, Limited, an Ontario Canada
corporation.
The IM Agreement was executed in anticipation of the acquisition of
Stoklosar by ASI and was intended to permit ASI an opportunity to become
familiar with the Stoklosar quarries prior to any acquisition.
Subsequent to the execution of the IM Agreement, the Company advanced
$200,000(US) to defray Stoklosar related expenses during the period September
through December 1996. On or about December 18, 1996, the $200,000(US) was
repaid together with interest computed at 3.75% per the bond rate in Canada.
On or about September 9, 1996, the Company (acting through Mr. Glen
Gasparini, its President) executed a "Share Purchase Agreement" (the "September
1996 Agreement") with various Canadian individuals and entities. Pursuant to the
September 1996 Agreement, the Company was to purchase 100% of the issued and
outstanding common shares of two Canadian entities, one of which owned
Stoklosar. Mr. Gasparini's father was an investor/creditor of one of the selling
parties.
In October 1996, the Company's Board of Directors declined to ratify
the September 1996 Agreement. Accordingly, that transaction did not close. Mr.
Gasparini requested and received leave of the Board to pursue this acquisition
separately.
On or about December 11, 1996, Mr. Gasparini and others completed their
purchase of the two Canadian entities (including Stoklosar) (hereinafter
referred to as the "Final Stoklosar Transaction"). The parties to the Final
Stoklosar Transaction agreed that the purchaser of the common shares (a newly
formed Ontario corporation identified as "1211769 Ontario, Ltd.") "has assumed
all obligations of [ASI] under the Interim Management Agreement...".
The Company is in the process of negotiating a separate agreement to
confirm that it complied fully with the terms of the IM Agreement. Messrs.
Gasparini and Costantino have agreed to indemnify, defend and hold harmless the
Company from all claims arising out of the IM Agreement.
At the Annual Meeting of Shareholders held on November 22, 1996, the
shareholders adopted a Resolution which authorizes the Company's Board of
Directors to effectuate up to a single one for ten reverse stock split of any
and all issued and outstanding common shares of the Company. No date
Page 14
<PAGE> 18
has been set for this action; however, it is anticipated that the reverse stock
split will occur in the Second Quarter of 1997.
B. TYRRELL STONE DESIGN
--------------------
ASI agreed to acquire Tyrrell in February 1996 and closed the
acquisition on May 23, 1996 in exchange for two hundred thousand (200,000)
shares of common stock of the Company. It is anticipated that Tyrrell, a wholly
owned subsidiary of ASI, will provide sales in Canada as the Canadian leg of the
Company.
Tyrrell provides design drawings to architects and stone processing
centers throughout North America. Through this acquisition, ASC intends to
expand the scope and magnitude of services which it can offer to customers and
become more involved in the design phase of projects, thereby being in a
position to suggest the use of Berea Sandstone as part of a project.
The revenue of Tyrrell is limited to job bills. Tyrrell has four (4)
full-time employees. All work is performed in Toronto, Canada. For the twelve
(12) months ending December 31, 1996, Tyrrell's revenue was approximately five
percent (5%) of the aggregate revenue of ASC.
Tyrrell owns no assets (other than desktop computers and other office
equipment), intellectual property or proprietary licenses. Competition in the
design arena is diversified and intense. As a practical matter, it is not
anticipated that Tyrrell will be a significant contributor of revenue for ASC,
but the services available through Tyrrell will assist ASC in marketing its
products and servicing the needs of its customers.
3. FACTORS AFFECTING PROFITABILITY
-------------------------------
As discussed in more detail at "Management's Discussion and Analysis of
Certain Relevant Facts," for the past two (2) fiscal years (1995 and 1996), ASI
was not profitable. In the opinion of management, the following is a
chronological schedule of the events which must or should occur in order for ASI
to become profitable:
<TABLE>
<CAPTION>
EXPECTED DATE OR NUMBER
MANNER OF OF MONTHS WHEN
EVENT OR MILESTONE OCCURRENCE OR EXPECTED TO BE
- ------------------ METHOD OF ACCOMPLISHED
ACHIEVEMENT --------------
-------------
<S> <C> <C>
1. Reduction of cost for electrical Negotiation with 7/97
service due to changeover to suppliers
municipal supply.
</TABLE>
Page 15
<PAGE> 19
<TABLE>
<CAPTION>
EXPECTED DATE OR NUMBER
MANNER OF OF MONTHS WHEN
EVENT OR MILESTONE OCCURRENCE OR EXPECTED TO BE
- ------------------ METHOD OF ACCOMPLISHED
ACHIEVEMENT --------------
-------------
<S> <C> <C>
2. Introduction of Master Stone Individual hired 4/97
Carver/Foreman for the No. 3 Mill -
in which specialty work is performed.
3. Clear new quarry area - No. 7 quarry. Block will be 4/97
easier to access
and thus reduce
cost of extraction.
4. Complete set up of distribution yards Increase 5/97
throughout Ontario and Quebec. international
sales. These
markets
historically use
more stone per
capita than the
United States.
5. Pursue land development projects. This development 1988-1999
would utilize
excess property
that would not
impede core
business.
6. Development of warm weather market i.e., New 1998-1999
South West U.S.A. and Pacific Coast. Development
</TABLE>
Page 16
<PAGE> 20
<TABLE>
<CAPTION>
EXPECTED DATE OR NUMBER
MANNER OF OF MONTHS WHEN
EVENT OR MILESTONE OCCURRENCE OR EXPECTED TO BE
- ------------------ METHOD OF ACCOMPLISHED
ACHIEVEMENT --------------
-------------
<S> <C> <C>
7. Winterization of primary sawing facility and
introduction of 11-6 Diameter Block Saw. Enables Completed -
production to November 1996
proceed through
winter months.
Allows for
Inventory
building-up
for head
start on
construction
season.
8. Relocate ASI head office to Quarry location a) Reduces office 10/97
- South Amherst, Ohio from Toronto, overhead and
Canada. duplication of
labor.
b) Closer to core
business and
Company assets.
</TABLE>
In addition, during the period summarized above, ASI will require
further operating capital, and the ability of the Company to remain liquid could
be impaired. See "Management's Discussion and Analysis of Certain Relevant
Factors."
4. CASH FLOW/LIQUIDITY
-------------------
The Company does not currently have, and is not expected to have within
the next twelve (12) calendar months, any cash flow or liquidity problems. The
Company is not in default with respect to any note, loan, lease or other
indebtedness or financing agreement. The Company is not subject to any
unsatisfied judgments, liens or settlement obligations; however, there are
accrued, unpaid and delinquent property taxes which are being brought current
pursuant to a five-year payment plan with the applicable County.
Page 17
<PAGE> 21
5. DESCRIPTION OF SECURITIES
-------------------------
ASI is seeking to register, pursuant to Section 12 of the Securities
Exchange Act of 1934, the following securities:
Common Shares ($.001 par value)
These shares have:
Yes No
[ ] [X] Cumulative voting rights
[ ] [X] Other special voting rights
[ ] [X] Preemptive rights to purchase in
new issues of shares
[ ] [X] Preference as to dividends or interest
[ ] [X] Preference upon liquidation
[ ] [X] Other special rights or preferences
These shares are not convertible.
These shares are not any form of a note or debt, nor are they Preferred
Shares.
There are no restrictions on dividends under loans or other financing
agreements to which ASI is a party.
There are no current assets available for payment of a dividend.
6. PRIOR DIVIDENDS, DISTRIBUTIONS OR REDEMPTIONS
---------------------------------------------
ASI has not paid dividends or made distributions of its stock or
redeemed any securities within the past five (5) years.
7. OFFICERS AND KEY PERSONNEL OF THE COMPANY
-----------------------------------------
ASI has no full time officer or directors, and the Company does not
compensate any of its officers for services rendered.
CHIEF EXECUTIVE OFFICER:
------------------------
Name: Glen Gasparini
Title: President
Age: 44
Page 18
<PAGE> 22
Office Street Address: 900 Keele Street
Toronto, Ontario, Canada M6N 3E7
Telephone Number: (416) 653-6111
Name of employers, titles and dates of positions held for past
five years with summary of job responsibilities:
Glen Gasparini, 44, is the President and a Director of the
Company. Mr. Gasparini has spent over twenty (20) years in the
Dimensional Stone industry, having held a number of senior
management positions. His family founded Terrazzo, Mosaic &
Tile Company Limited (TMT), Toronto, Ontario in 1930. As a
third generation member of the family, Mr. Gasparini rose to
become the President of TMT in 1975 and, later, its
controlling shareholder. He is the immediate past President of
the Terrazzo, Tile and Marble Association of Canada and the
immediate past president of the Terrazzo, Tile and Marble
Guild of Ontario. He is a founding member and Director of the
Terrazzo, Tile and Marble Trade School of Ontario, a member of
the negotiating committee for the Terrazzo, Tile and Marble
Guild of Ontario Union, and a Trustee of the Welfare, Vacation
and Pension Fund for Local 31 of the International Bricklayers
and Allied Craftsmen.
Education: York University Honours B.A.
Major: Political Science.
Also a Director of the Company: [x] Yes [ ] No
Indicate amount of time to be spent on Company
matters if less than full time: 25%
---
CHIEF OPERATING OFFICER: Name: None.
-----------------------
CHIEF FINANCIAL OFFICER:
-----------------------
Name: Enzo Costantino
Title: Treasurer
Age: 35
Office Street Address: 900 Keele Street
Toronto, Ontario, Canada M6N 3E7
Page 19
<PAGE> 23
Telephone Number: (416) 653-6111
Name of employers, titles and dates of positions held for past
five years with summary of job responsibilities:
Enzo Costantino, 35, is Treasurer & Director of the Company.
He serves as the Chief Financial Officer of the corporation,
having gained experience as the Cost Accounting Manager for
Canada Packers and the Controller of Daicon, a large General
Contractor. He joined the TMT group in 1994 and has served as
Controller of TMT, in addition to his day to day management of
the company's financial affairs, which includes the
introduction and maintenance of financial and administrative
systems and procedures.
Education (schools, degrees and dates):
Seneca College Accounting & Finance - 1983
Pursuing CMA. 5th Level Finalist
Also a Director of the Company: [x] Yes [ ] No
Indicate amount of time to be spent on Company
matters if less than full time: 25%
---
OTHER KEY PERSONNEL:
--------------------
Name: David Tyrrell
Title: President, American Stone Corporation
Age: 36
Office Street Address: 48 Lavender Road
City of York, Ontario, Canada M6N 2B7
Telephone Number: (416) 656-3422
Name of employers, titles and dates of positions held for past five
years with summary of job responsibilities:
Tyrrell Stone Design - Owner/Operator 1990 to 1996
Owen Sound Ledgerock - Independent Sales Representative 1993
- 1996
Page 20
<PAGE> 24
Education (schools, degrees and dates):
Drimnagn Castle Christian Brothers School - Graduated 1978
Bolton Street College of Technology, Dublin 1978 to 1982 -
Civil Engineering Tech.
Also a Director of the Company: [ ] Yes [X] No
Indicate amount of time to be spent on Company
matters if less than full time: 100%
----
8. DIRECTORS OF THE COMPANY
------------------------
There are five (5) Directors of ASI. In addition to Messrs. Gasparini
and Costantino as discussed above, the three additional Directors consist of the
following:
DIRECTOR:
---------
Name: Thomas H. Roulston, II (Chairman of the Board)
------------------
Age: 63
Office Street Address: 4000 Chester Avenue
Cleveland, Ohio 44103
Names of employers, titles and dates of positions held for
past five years with a summary of job responsibilities:
Roulston & Company, Inc., an Investment Advisory Firm.
Founder of the firm in 1963 and has served as Chairman since
1990. Mr. Roulston is an active investor serving as a
Director of a number of companies in a variety of industries.
Education (schools, degrees and dates):
AB from Dartmouth College
Page 21
<PAGE> 25
DIRECTOR:
---------
Name: Michael J. Meier (Secretary)
----------------
Age: 42
Office Street Address: 1111 Chester Avenue, Suite 750
Cleveland, Ohio 44114-3516
Names of employers, titles and dates of positions
held for past five years with a summary of job
responsibilities:
Michael Meier joined Defiance, Inc. in 1988 as Corporate
Controller, and was named to his current position as Vice
President and Chief Financial Officer in 1990. Prior to
joining Defiance, he spent several years in public accounting
at a regional CPA firm and his own practice in Fort Wayne,
Indiana. He also spent several years in industry as a plant
and divisional controller for North American Van Lines in Fort
Wayne and Midas International Corporation in Chicago.
Education (schools, degrees, dates):
Mr. Meier is a 1975 honors graduate of Western Michigan
University, where he received his degree in accounting and
mathematics. Mr. Meier also holds certifications as both a
CPA and a CMA.
DIRECTOR:
---------
Name: Timothy Panzica
----------------
Age: 41
Office Street Address: 735 Beta Drive
Mayfield Village, Ohio 44143
Names of employers, titles and dates of positions held for
past five years with a summary of job responsibilities:
Panzica Construction Company - Executive Vice President
Administrative - 30%/Project Management - 70%
Page 22
<PAGE> 26
Education (schools, degrees, dates):
University of Notre Dame B.S. 1977
The Ohio State University D.D.S. 1980
9. OTHER INFORMATION REGARDING OFFICERS/DIRECTORS
----------------------------------------------
AND KEY PERSONNEL
-----------------
The following Officers/Directors or Key Personnel have worked or
managed a company (including a subsidiary or division of a larger enterprise) in
the same business as ASI:
Glen Gasparini
Enzo Costantino
The Company has utilized historically a variety of other individuals to
provide advice and assistance on miscellaneous matters. None of the individuals
are currently involved with the Company.
The Company does not maintain any "key man" insurance.
10. BANKRUPTCY/RECEIVERSHIP
-----------------------
No petition under the Bankruptcy Act or any State insolvency law has
been filed by or against the Company or its Officers, Directors or other Key
Personnel, nor has a receiver, fiscal agent or similar officer been appointed by
a court; nor has any partnership, corporation or business association of which
any Officer, Director or Key Personnel was an executive officer within the past
five years filed petition under the Bankruptcy Act .
11. PRINCIPAL OWNERS
----------------
Based upon information provided by the Company's transfer agent and its
officers, Key Personnel and Directors, the principal owners of the Company (i.e.
those who have ten percent (10%) or more of the Common Shares) and the
outstanding capitalization are as follows:
<TABLE>
<CAPTION>
AMERICAN STONE INDUSTRY, INC. - COMMON SHAREHOLDER LISTING
AS OF: DECEMBER 31, 1996
<S> <C>
Total Securities: 16,313,628
Total Restricted: 8,976,197
Total Non-Restricted: 7,337,431
</TABLE>
Page 23
<PAGE> 27
PRINCIPAL SHAREHOLDERS (10% OR MORE)
Name: TMT MASONRY LTD.
Average Percentage of
Price per Total Shares
Share $0.375 Now Held: 25%
------ ---
Office Street Address: 900 Keele Street
Toronto, Ontario Canada M6N 3E7
Telephone No: (416) 653-6111
Principal Occupation: Dimensional Stone Industry.
Name: ROULSTON VENTURES, LTD.
Average Percentage of
Price per Total Shares
Share: $0.375 Now Held: 25%
------ ---
Office Street Address: 4000 Chester Avenue
Cleveland, Ohio 44103
Telephone No: (216) 431-3841
Principal Occupation: Investments
Name: CEDE & CO.
Average Percentage of
Price per Total Shares
Share: N/A Now Held: 12%
--- ---
Office Street Address: Box 20
Bowling Green Station
New York, N.Y. 10004
Principal Occupation: Stock Depositing Firm
Page 24
<PAGE> 28
12. SHARES BENEFICIALLY OWNED BY OFFICERS/DIRECTORS
-----------------------------------------------
The Officers and Directors of ASI, as a Group, own the following shares
beneficially:
Number of Shares Outstanding: 16,313,628
Number of Shares Held Beneficially by
Officers/Directors: 8,041,700
13. MANAGEMENT RELATIONSHIPS, TRANSACTIONS AND
------------------------------------------
REMUNERATION
------------
A. LOANS.
-----
The Company has not made any loans to any Officers, Key Personnel or
Directors. No Officer, Director or Key Personnel has guaranteed any loan or bank
debt of ASI.
B. RELATED PARTY TRANSACTIONS.
--------------------------
(1) In 1996, ASI's President (Mr. Glen Gasparini)
recommended that ASI acquire two Canadian entities. When the Board declined to
pursue the transaction to concentrate their efforts in the United States,
Messrs. Gasparini and Costantino pursued the acquisition individually with the
Board's approval. The Company has received appropriate indemnifications that ASI
is not a party to and has no responsibility for or out of the proposal and
acquisition by Messrs. Gasparini and Costantino.
(2) In 1996, ASI purchased from David Tyrrell all of
the issued and outstanding Common Shares of Tyrrell Stone Design, Ltd., an
Ontario corporation. In consideration of this transaction, ASI paid Mr. Tyrrell
and agreed to employ him as President of ASI. Pursuant to the terms of his
employment agreement, Mr. Tyrrell was given a base salary of ninety-six thousand
dollars ($96,000) (CDN).
(3) Terrazzo, Mosaic & Tile Company Limited, a
company which is controlled by Glen Gasparini, advanced twenty-nine thousand
dollars ($29,000) in January 1996 to ASI. The debt was converted to stock and
Terrazzo, Mosaic & Tile received one hundred sixteen thousand (116,000) shares
in exchange for the debt.
(4) Terrazzo, Mosaic & Tile Company Limited was owed
interest for an amount it had advanced of seven hundred forty-eight thousand
three hundred forty-five dollars ($748,345). The interest payment of sixteen
thousand dollars ($16,000) covered the period from February 22, 1996 to August
28, 1996. On August 28, 1996, seven hundred forty-eight thousand three hundred
forty-five dollars ($748,345) of this loan payable was converted to capital.
(5) Terrazzo, Mosaic & Tile Company Limited received
from ASI, twenty-two thousand two hundred thirty-three dollars ($22,233) for
reimbursement of office expense, stationery and other business supplies.
Page 25
<PAGE> 29
(6) In February, 1996, the Company began utilizing
office space of an affiliated company for seven hundred dollars ($700 - CDN) per
month on a month-to-month basis.
(7) Amherst Quarries, Inc. owns approximately two
hundred (200) acres adjacent to lands currently held by ASI. The ownership of
Amherst Quarries is ninety percent (90%) TMT Masonry, which is also owned by
Glen Gasparini, and ten percent (10%) Walter Molnar.
(8) During the years ended December 31, 1995 and
1996, the Company purchased stone from its unconsolidated subsidiary, Cleveland
Quarries, L.P. and paid for expenses such as stationary and business supplies
through its former parent company, TMT Masonry, Ltd. At December 31, 1995 and
1996, accounts payable to the same affiliates totaled nine thousand seven
hundred thirty-five dollars ($9,735.00) and ten thousand two hundred two dollars
($10,202.00), respectively. Such payables are expected to be satisfied in the
normal course of business.
(9) In February, 1996, ASC purchased the operating
assets of Cleveland Quarries, L.P., which was owned eighty-nine and one-tenth
percent (89.1%) by ASC. See "Mutual Developments." (For a discussion of the
"Stoklosar" transaction, see "Material Developments.")
C. STOCK OPTIONS.
-------------
The Company has granted stock options to Directors, selected Key
Personnel, and others. Many of the options have expired. At this time, the
outstanding options are as follows:
<TABLE>
<CAPTION>
NAME NUMBER OF EXERCISE EXPIRATION
---- --------- -------- ----------
SHARES PRICE DATE
------ ----- ----
<S> <C> <C> <C>
Glen Gasparini* 100,000 $0.75 October 31, 1997
Enzo Costantino* 100,000 $0.75 October 31, 1997
Carlo Onarti 100,000 $0.75 October 20, 1997
Suncrest Management 250,000 $0.25 August 8, 1998
David Tyrrell* 250,000 $0.50 February 18, 2000
<FN>
*Current Officer, Director, or Key Personnel
</TABLE>
The total number of shares subject to issuance under outstanding stock
options or purchase agreements is eight hundred thousand (800,000) Common
Shares, which is equal to four and nine-tenths percent (4.9%) of the total
number of shares outstanding, assuming conversion or exercise of all options or
purchase agreements.
The Shareholders have not approved any of these options and are not
required to approve any future stock purchase agreement, stock option, warrant
or rights agreement.
Page 26
<PAGE> 30
D. REMUNERATION
------------
The following table schedules the remuneration to ASI Officers,
Directors and Key Personnel for the past fiscal year:
<TABLE>
<CAPTION>
CASH
----
PERSON TITLE COMPENSATION OTHER
- ------ ----- ------------ -----
<S> <C> <C> <C>
Thomas H. Roulston, II Chairman of the
Board and Director $0.00 None
Glen Gasparini President, CEO and
Director $0.00 None
Enzo Costantino Treasurer and Director $0.00 None
Michael J. Meier Secretary and Director $0.00 None
Timothy I. Panzica Director $0.00 None
David Tyrrell President ("ASC") $96,000 (CDN) $6,000 (CDN) - car allowance
-------- ------ (see N.1 below as well)
Total: $96,000 (CDN) $6,000
======= ======
<FN>
Note 1: Mr. Tyrrell is also entitled through his Employment Agreement to a bonus
based on Net Income of ASC adjusted for depreciation and other factors, computed
as follows:
a) Five percent (5%) of the first one million dollars
($1,000,000) of adjusted Net Income per fiscal year;
b) Four percent (4%) of the second one million dollars
($1,000,000) of adjusted Net Income per fiscal year;
c) Three percent (3%) of the third one million dollars
($1,000,000) of adjusted Net Income per fiscal year;
d) Two percent (2%) of the fourth one million dollars
($1,000,000) of adjusted Net Income per fiscal year;
e) One percent (1%) of all adjusted Net Income in excess of four
million dollars ($4,000,000) earned during a fiscal year.
As of December 31, 1996, Mr. Tyrrell was entitled to a bonus of
approximately three thousand three hundred dollars ($3,300).
</TABLE>
E. PERSONNEL RELIANCE.
------------------
The Company's business is not dependent upon the services of any
single individual or group.
Page 27
<PAGE> 31
14. LITIGATION
----------
The Company is not currently a party to any litigation. At this time,
there is no pending or threatened litigation.
15. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CERTAIN RELEVANT
--------------------------------------------------------
FACTORS
-------
A. CAUSES FOR LOSSES FROM OPERATIONS
---------------------------------
For the fiscal year ending December 31, 1995, the Company incurred a
loss of one hundred forty-nine thousand six hundred eighty dollars ($149,680).
For the fiscal year ending December 31, 1996, the loss was two hundred thirty
thousand four hundred seven dollars ($230,407). The underlying causes for losses
from operations and the steps that have been and will be taken to address these
causes are as follows:
CAUSES FOR 1995 LOSS -
- ASI's disposition of the medical business and
acquisition of ASC; and
- ASC was a holding company in 1995 and had no source
of revenue from quarry operations.
CAUSES FOR 1996 LOSS -
- ASI activities included the acquisition of Tyrrell
Stone Design, Inc. and an active search for an equity
investment in ASI. Both of these functions caused the
company to spend money on legal and accounting fees
(some of which were capitalized), that would not have
otherwise been spent during the year, and will not be
required in future years;
- In addition, there were consulting fees incurred in
the process which will not be necessary in the
future. The total was approximately one hundred fifty
thousand dollars ($150,000) and there were investor
relations fees, such as mailing, couriers and
consulting expenses, which were more than normal due
to the need for the Company to explain to its
existing and potential shareholders the full extent
of the changes to the Company. ASI had no revenues to
offset these expenses;
- ASI had a debt of approximately seven hundred fifty
thousand dollars ($750,000) during most of 1996 and
paid interest of approximately seven and one-half
percent (7.5%). This debt was eliminated in September
1996;
Page 28
<PAGE> 32
- ASC became an operating company in February, 1996.
ASC also acquired the assets of Cleveland Quarries
L.P. and the purchase costs of these assets were
capitalized, but, for all intents and purposes, ASC
was operating in a startup mode for most of the year;
- Many new employees were hired and much of the labor
expenses went into activities required to start up
the operation. These activities included repairs,
maintenance, equipment installation, training and
administration. The Primary mill, Fabrication shop,
Office and Crushing operation were all completely
overhauled; and
- ASC also had an outstanding mortgage of approximately
five hundred thousand dollars ($500,000) which was
paid off in September 1996, which added to the
interest expense. The proceeds for loan repayment
were derived from the sale of four million
(4,000,000) shares of Common Stock for one million
five hundred thousand dollars ($1,500,000).
Revenues were at a level that would only provide a modest profit in any
year. Even with the decrease in expenses for 1997 it will be necessary for sales
to increase in order to be profitable. Many of the steps detailed earlier in
this document have been taken to increase sales in 1997. Sales and marketing
efforts have been stepped up, and new agents and distributors have been added.
Inventory levels have increased, employees have been hired and trained, new
equipment has been installed, and capacity has increased dramatically. The plant
has been winterized for year-round operation. The Quarry crew has doubled a new
section of Quarry 7 and is prepared for use in 1997.
B. TRENDS IN HISTORICAL OPERATING RESULTS
--------------------------------------
The Company's current Officers, Directors, Key Personnel and Management
have limited experience with respect to ASI and ASC and, therefore, are not in a
position to comment upon historical operating results prior to 1995. On the
basis of their limited experience with ASI and ASC and drawing upon their
experience in the industry, management has identified the following trends:
- The operations in Amherst, Ohio have recently been
below a break-even level. The plant, property, and
equipment were too large and too old to be sustained
and operated at the recent sales levels. This was the
result of an ever declining use of natural stone in
the building industry from the 1950's to the 1980's.
Ownership lacked interest and allowed the facilities
and employees to fall behind to become run-down,
thereby hurting production; and
- Cleveland Quarries has produced stone for public
buildings, churches, schools and prestigious homes
since 1869. Many of these structures are still in
existence today and the possibility of sales for
renovations exist.
Page 29
<PAGE> 33
With respect to the industry (in general) and ASI/ASC (in particular),
management has identified the following changes in the underlying economics of
the business which, in the opinion of management, will have significant impact
(either favorable or adverse) upon the Company's operating results for the next
twelve (12) months.
- Because it is not as structured as most industries in
North America, the stone industry has been difficult
to evaluate. While there has certainly been a feeling
of optimism at a recent trade show, there is some
question as to what will come from this confidence;
- According to Stone World Magazine's most recent
market study, which revealed an overwhelming
sentiment of optimism, the result will be increased
investment in equipment, facilities and personnel in
the stone industry;
- The survey, which was completed primarily by
fabricators, showed a positive outlook for the
short-term, as well as for the long-term. Of those
polled, eighty four and nine-tenths percent (84.9%)
expected the stone market to increase in 1997 and
eighty-six percent (86%) expected an increase over
the next five (5) to ten (10) years. Only one and
six-tenths percent (1.6%) expected a decrease in
1997, and two and nine-tenths percent ( 2.9%)
predicted a decline over the next five (5) to ten
(10) years. The remainder of those surveyed expected
the market to stay the same;
- Many of the respondents who predicted an increase
believe that it will be fairly significant. Around
eighty percent (80%) forecast an increase of over six
percent (6%) - for the short-term as well as the
long-term - and over half believe the increase will
be more than fifteen percent (15%) over the next five
(5) to ten (10) years;
- A stronger economy and increased demand for stone is
predicted by some to result in better exposure for
natural stone and increased consumer awareness;
- A number of fabricators mentioned the residential
market as a reason for increased optimism;
- Many people pointed to the increased use of stone for
kitchen countertops;
- Even on the commercial end, there is a feeling that
stone use will increase. A number of respondents
cited the amount of bids they have received for
commercial construction projects;
- Lower interest rates and a cyclical upswing of the
economy are factors that will increase commercial
construction;
Page 30
<PAGE> 34
- Those who predicted no change in the market cited
increased competition and overbuilding in the 1980's;
and
- The few respondents predicting a decline pointed to
specific factors, such as increases in fixed costs
and the minimum wage as a concern.
<TABLE>
<CAPTION>
[GRAPHIC]
<S> <C>
Increase 84.9%
Decrease 1.6%
Stay the Same 13.6%
</TABLE>
Source: "What do stone producers expect for the stone market in 1997?"
Stone World, January/97
The anticipated impact of these changes will be:
- The use of natural stone in the building industry has
come back significantly. Bigger, more expensive
housing and high-end commercial buildings, such as
resorts and financial institutions, have made greater
use of natural stone, which has led to greater demand
for a product that was once widely used. This trend
and the fact that ASC, together with Tyrrell Stone
Design, can provide a full-service stone supply to
the industry should bode well for the Company; and
- Management believes these changes will allow the
Company to increase sales and production and be
profitable in 1997. The break-even level of sales was
surpassed in 1996 and, with many of the startup costs
out of the way, management believes 1997 should prove
to be profitable. The Company plans to fully utilize
the new capacity of the plant prior to adding more
capacity through the purchase and installation of new
equipment. There is currently excess plant capacity.
Page 31
<PAGE> 35
C. GROSS MARGIN
------------
With respect to its product sales in the past fiscal year, the
Company's gross profit margin (as a percentage of sales) is about thirty-nine
percent (39%). This margin is expected to continue in the next fiscal year.
D. FOREIGN/GOVERNMENT SALES
------------------------
Foreign sales (which are exclusively in Canada) as a percent of total
sales for the past fiscal year were ten percent (10%). Domestic government
sales, as a percent of total sales, for the past fiscal year were ninety percent
(90%).
These sales are expected to be sustained in the upcoming fiscal year.
[INTENTIONALLY LEFT BLANK]
Page 32
<PAGE> 36
PART II
-------
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON
--------------------------------
REGISTRANT'S COMMON SHARES AND
------------------------------
OTHER SHAREHOLDER MATTERS
-------------------------
The Company's Common Shares are currently traded in the
over-the-counter market via "bulletin board" maintained through the National
Association of Securities Dealers, Inc. ("NASD"). The trading symbol is "ASTI".
The Company, through the first half of 1995, was operating under the
name Viva Medical Services Corp. as a distributor of medial equipment in the
United States. The material range of quotes at that time was:
<TABLE>
<CAPTION>
High Low Closing High Low Closing
Period Bid Bid Bid Ask Ask Ask
- ------ --- --- --- --- --- ---
1995
- ----
<S> <C> <C> <C> <C> <C> <C>
First Quarter 8 5 7.75 9 5.5 9
Second Quarter 5 0.5 5 5.5 0.8125 5.5
</TABLE>
In August 1995, the assets of Viva Medical Services were transferred to
a third party and the corporate name was changed to American Stone Industries,
Inc. Concurrent with the name change, ASI became a holding company which
conducts business only through its wholly-owned subsidiary, ASC, which purchases
and sells stone for use in the building construction industry. The mutual range
of quotes for ASI's Common Shares was:
<TABLE>
<CAPTION>
High Low Closing High Low Closing
Period Bid Bid Bid Ask Ask Ask
- ------ --- --- --- --- --- ---
1995
- ----
<S> <C> <C> <C> <C> <C> <C>
Third Quarter 0.65 0.25 0.65 0.9375 0.550 .9375
Fourth Quarter 1.1875 0.21875 1.1875 1.28125 0.40625 1.28125
1996
- ----
First Quarter 0.72 0.34375 0.7 0.8 0.4 0.8
Second Quarter 1.125 0.5 1 1.5 0.625 1.375
Third Quarter 0.75 0.375 0.71875 0.9375 0.53125 0.9375
Fourth Quarter 0.71875 0.375 0.71875 0.75 0.5 0.75
</TABLE>
Page 33
<PAGE> 37
No cash dividend has been paid by the Company within the past two (2)
fiscal years. The Company's ability to pay dividends is directly related to the
Company's future profitability and need for capital to support growth.
ITEM 2: LEGAL PROCEEDINGS:
-----------------
None.
ITEM 3: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
---------------------------------------------
In 1996, the Company engaged the accounting firm of Hobe & Lucas to
serve as its Auditors and Accountants. This engagement was made as a matter of
convenience because the Company intends to relocate its principal place of
business from Toronto to Cleveland, Ohio. In addition, the Chairman of the
Company's Board of Directors and its major operations are based in or near
Cleveland, Ohio and the former accounting firm was headquartered in Wayne, New
Jersey. There was no disagreement with the prior accounting firm, nor did that
firm resign.
ITEM 4: RECENT SALES OF UNREGISTERED SECURITIES
---------------------------------------
The following securities were sold by the Company during the past three
(3) fiscal years without registering the securities pursuant to the Securities
Act of 1933:
<TABLE>
<CAPTION>
DATE TITLE AMOUNT SOLD
---- ----- -----------
<S> <C> <C>
8/96 Private Placement 4,000,000 Common Shares
to Roulston for $ 0.375 per share for
Ventures, Ltd. total proceeds of
$ 1,500,000
</TABLE>
No underwriter was involved in any transaction. The transaction was
made in reliance upon Section 4(2) of the Securities Act of 1933 and Rule 506 of
Regulation D promulgated thereunder.
ITEM 5: INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
There is no statute, by-law or charter provision or other arrangement
which insures or indemnifies a controlling person, Officer or Director or
affects his or her liability in that capacity, with the exception that the Board
of Directors has adopted a resolution designating, for purposes of Section 6672
of the Internal Revenue Code, the following individuals as the "responsible
persons" who are liable for the collection and disbursement of payroll taxes:
Mr. David Tyrrell and Mr. Enzo Costantino. No other Officer or Director is
deemed to be liable for collection of payroll taxes.
Page 34
<PAGE> 38
PART F/S
--------
The following pages set forth the Company's Audited Financial
Statements for the fiscal years ending December 31, 1995 and December 31, 1996.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
Page 35
<PAGE> 39
INDEPENDENT AUDITORS' REPORT
Board of Directors
American Stone Industries, Inc.
Toronto, Canada
We have audited the accompanying consolidated balance sheet of American Stone
Industries, Inc. (a subsidiary of TMT Masonry, Ltd.) and subsidiary as of
December 31, 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. We did not audit the financial statements of Cleveland Quarries,
L.P., an unconsolidated subsidiary. The investment in and advances to Cleveland
Quarries, L.P. represents $783,948 of the Company's assets as of December 31,
1995. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, in so far as it relates to the amounts
included for Cleveland Quarries, L.P., is based solely on the report of the
other auditors.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American Stone
Industries, Inc. and subsidiary as of December 31, 1995, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
Horton & Company
April 3, 1996
Page 36
<PAGE> 40
AMERICAN STONE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash $ 288
Accounts receivable 11,794
Prepaid expenses 100
---------
Total current assets 12,182
---------
Other assets:
Goodwill 38,465
Organization costs 93
Advances to unconsolidated subsidiary (Note 3) 783,948
---------
822,506
---------
$ 834,688
=========
LIABILITIES STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 42,649
Payroll taxes payable 18,354
---------
Total current liabilities 61,002
---------
Due to consulting firm (Note 4) 132,570
---------
Stockholders' equity (Notes 2 and 5):
Common stock, $.001 par value
20 million shares authorized
14,591,828 shares issued and outstanding 14,592
Additional paid-in capital 777,249
Accumulated deficit (150,726)
---------
641,115
---------
$ 834,688
=========
</TABLE>
See notes to financial statements
Page 37
<PAGE> 41
AMERICAN STONE INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Sales $ 11,112
Cost of goods sold 9,620
---------
Gross profit 1,492
Selling and administrative expenses 151,172
---------
Net loss $(149,680)
---------
Net loss per share $ (.014)
=========
</TABLE>
See notes to financial statements
Page 38
<PAGE> 42
AMERICAN STONE INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Common Stock
------------ Additional
Issued Paid-In Accumulated
Shares Par Value Capital Deficit
<S> <C> <C> <C> <C>
Balance at January 1, 1995, as
restated for reverse acquisition
accounting (Notes 2 and 5) 8,000,000 $ 8,000 $ -- $ (1,046)
Loan from parent reclassified
to additional paid-in capital (Note 5) -- -- 777,249 --
Stock issued in business
combination accounted as a
reverse acquisition (Notes 2 and 5) 6,591,828 6,592 -- --
Net loss -- -- -- (149,680)
14,591,828 $ 14,592 $ 777,249 $ (150,726)
=========== =========== =========== ===========
</TABLE>
See notes to financial statements
Page 39
<PAGE> 43
AMERICAN STONE INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the year ended December 31, 1995
<S> <C>
Net loss $(149,680)
---------
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization expense 881
Changes in assets and liabilities:
Increase in accounts receivable (11,694)
Increase in prepaid expenses (100)
Increase in accounts payable 28,311
Increase in amounts due to consulting firm 107,874
---------
Total adjustments 125,272
---------
Net cash used in operating activities (24,408)
---------
Cash flows from financing activities:
Proceeds from loan advances 24,696
---------
Net increase in cash 288
Cash at beginning of year --
---------
Cash at end of year $ 288
=========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During the year ended December 31, 1995, the Company completed a business
combination through the issuance of 8,000,000 shares of its common stock. The
business combination was accounted as a reverse acquisition as described in Note
2.
For the year ended December 3l, 1995, the Company reclassified a loan from an
affiliated company to additional paid-in capital as described in Note 5.
See notes to financial statements
Page 40
<PAGE> 44
AMERICAN STONE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of American Stone
Industries, Inc. (a subsidiary of TMT Masonry, Ltd.), (hereinafter
"ASI" or the "Company") is presented to assist in understanding the
financial statements. The financial statements and notes are
representations of the Company's management, which is responsible for
their integrity and objectivity. These accounting policies conform to
generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
History and business activity
The Company was incorporated in the State of Delaware on November 11,
1992 as Viva Designs U.S.A., Inc. The Company was a distributor of a
line of jewelry and fragrances until June 1993 when it discontinued
those operations. On December 14, 1993, a certificate of amendment was
filed to change the name of the corporation to Viva Medical Sciences
Corp. Beginning in 1994 and until the business combination described in
Note 2, the Company was distributor of medical equipment in the United
States. In conjunction with the business combination, the medical
equipment distributorship business was transferred to a related party.
On August 9, 1995, articles of amendment were filed reflecting a change
of the corporate name to American Stone Industries, Inc. Concurrent
with the business combination described in Note 2, ASI became a holding
company which conducts business only through its wholly owned
subsidiary, American Stone Corp. "ASC"). ASC purchases and sells stone
for use in the building construction industry.
American Stone Industries, Inc. is a publicly-held company whose stock
is traded on tile OTC Bulletin Board.
American Stone Corporation is a holding company with an 89.1% ownership
interest in Cleveland Quarries, L.P. of Amherst, Ohio. Cleveland
Quarries, L.P. (Note 3) is the owner and operator of the Berea
Sandstone Quarries which mines stone predominantly for the building
stone market with several specialty areas making up the balance.
Page 41
<PAGE> 45
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Principles of consolidation
Under the accounting rules for a reverse acquisition which were applied
to the business combination described in Note 2, the accompanying
financial statements include the accounts of American Stone Corporation
for the year ended December 31, 1995, and of American Stone Industries,
Inc. For the period from the date of the acquisition, August 8, 1995,
through December 31, 1995. Significant intercompany transactions and
balances have been eliminated in consolidation. The operating results
of Cleveland Quarries, L.P. ("CQ") have been accounted on the equity
method. With the Company owns a majority interest in CQ, control is
vested in the general partner of CQ.
Sale of business
On May 30, 1995, ASI incorporated a wholly-owned subsidiary, VMS Rehab
Systems, Inc. ("VMS"). On June 1, 1995, ASI assigned substantially all
of its assets to VMS.
On July 31, 1995, ASI entered into an agreement to sell all of the
common stock of VMS to Suncrest Management Services, S.A. ("Suncrest")
a related party, in exchange for the cancellation of debt owed to
Suncrest. The net book value of the assets transferred approximated the
amount of the indebtedness canceled. Suncrest also received an option
to purchase up to 250,000 shares of the Company's common stock at $.25
per share. The option expires August 8, 1998.
Organization costs
Organization costs are being amortized on the straight-line method over
five years. Amortization expense for the year ended December 31, 1995
is $62. At December 31, 1995, organization costs are net of accumulated
amortization of $217.
Goodwill
Goodwill represents the excess of cost over far market value related to
be business combination described in Note 2. Goodwill is being
amortized on the straight-line method over a twenty your period.
Amortization expense for the year ended December 31, 1995 is $819. At
December 31, 1995, goodwill is net of accumulated amortization of $819.
Concentration of credit risk
Financial instruments, which potentially subject the Company to
concentration of credit risk, principally consist of accounts
receivable. The Company's policies do not require collateral to support
customer accounts receivables.
At December 31, 1995, uncollateralized accounts receivable from an
individual customer, amount to $11,029.
During the year ended December 31, 1995, sales to an individual
customer totaled $10,470. All of the Company's sales were to Canadian
customers.
Loss per common share
Loss per common share is based on the weighted average number of shares
outstanding which was 10,763,150 for the year ended December 31, 1995.
Page 42
<PAGE> 46
2. BUSINESS COMBINATION
On August 8, 1995, the Company acquired all of the outstanding capital
stock of American Stone Corporation ("ASC"), in exchange for 8,000,000
unregistered shares of its common stock. As a result of the
transaction, TMT Masonry, Ltd. ("TMT") the former parent company of ASC
received shares representing approximately 55% of the Company's
outstanding common stock, thereby effecting a change in control of the
Company.
The acquisition of ASC has been accounted for as a reverse acquisition.
Under the accounting rules for a reverse acquisition, ASC is considered
the acquiring entity. As a result, historical financial information for
periods prior to the date of the transaction are those of ASC. However,
the capital structure of ASC has been retroactively restated to reflect
the number of shares received by ASC in the acquisition and the
Company's par value. Under purchase method accounting, balances and
results of operations of the Company have been included in the
accompanying consolidated financial statements from the date of the
transaction, August 8, 1995. While there were no tangible assets
received in the reverse acquisition, the Company assumed liabilities of
$32,692. The Company recorded the assets and liabilities (excluding
intangibles) at their historical cost basis which was deemed to
approximate fair market value. The reverse acquisition is treated as a
non-cash transaction since all consideration given was in the form of
stock. Proforma results of operations (assuming the business
combination had been effected at the beginning of the year ended
December 31, 1995) are not presented because ASI became a holding
Company concurrent with the business combination. As a result, proforma
results of operations for the year ended December 31, 1995 would be no
different than the historical statement of operations presented
herewith.
3. ADVANCES TO UNCONSOLIDATED SUBSIDIARY
ASC has made unsecured, non-interest bearing advances to Cleveland
Quarries, L.P. ("CQ"), an unconsolidated subsidiary. While ASC owns an
89.1% limited partnership interest in CQ, the operating results of CQ
have been accounted on the equity method since control is vested in the
general partner of CQ. The initial investment in CQ was $891 which was
reduced to zero in earlier years through recognition of losses by CQ.
A condensed balance sheet of Cleveland Quarries, L.P. as of December
31, 1995 and a condensed statement of operations for the year then
ended are as follows:
<TABLE>
<CAPTION>
BALANCE SHEET
<S> <C>
Current assets $ 317,915
Property and equipment, net 1,341,250
Other assets 99,259
----------
$1,758,424
==========
Current liabilities $2,343,665
Long-term debt, net of current portion 28,432
Partners' deficit (613,673)
----------
$1,758,424
==========
</TABLE>
Page 43
<PAGE> 47
3. ADVANCES TO UNCONSOLIDATED SUBSIDIARY (CONTINUED)
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
<S> <C>
Revenues $1,036,933
Cost of sales 732,187
----------
Gross profit 304,746
General and administrative expenses 439,823
Interest expense 107,241
----------
Net loss $ (242,318)
==========
</TABLE>
During February 1996, ASC advanced $773,345 in additional funds to CQ.
The proceeds of such advance were utilized to satisfy a note payable to
a bank in the amount of $743,466 (Note 8).
Subsequent to year end, ASC entered into discussions to purchase the
assets of CQ. Under the terms of the proposed agreement all amounts
advanced to CQ through December 31, 1995 and subsequent to year end
would be applied to the purchase price (Note 8).
4. DUE TO CONSULTING FIRM
Due to consulting firm represents non-interest bearing amounts to
Georgia Capital Corporation ("GCC"). GCC is a stockholder in the
Company. In addition, one of the consultants employed by GCC is also a
stockholder in the Company. The payable arose from consulting services
provided and from non-interest bearing advances made to the Company.
During 1996, this payable was satisfied through the issuance of the
Company's common stock (Note 8).
5. STOCKHOLDERS' EQUITY
As the business combination, described in Note 2 above, has been
accounted for as reverse acquisition, the Company has assumed ASI's
capital structure (shares outstanding and par value) as of the
consummation of August 8, 1995. All capital transactions of ASI prior
to the date of the business combination are included in ASI's separate
historical financial information.
On August 8, 1995, the Company issued 8,000,000 shares of unregistered
common stock in connection with the reverse acquisition of ASC,
bringing the total shares of common stock issued and outstanding
immediately subsequent to the transaction to 14,591,828.
Concurrent with the business combination, TMT agreed to reclassify
loans it had made to ASC in the amount of $777,349 to additional
paid-in capital.
Page 44
<PAGE> 48
6. INCOME TAXES
<TABLE>
<CAPTION>
Income taxes (credit) consists of the following:
<S> <C>
Benefit derived from net operating loss carry forward $ 45,000
Provision for valuation allowance of net operating
loss carry forward (45,000)
--------
Income taxes $ -
========
</TABLE>
7. RELATED PARTY TRANSACTIONS
During the year ended December 31, 1995, the Company utilized office
space of its parent, TMT, on a rent-free basis.
During the year ended December 31, 1995, all of the Company's purchases
of stone were from its unconsolidated subsidiary, Cleveland Quarries,
L.P. or from its parent company, TMT Masonry, Ltd. At December 31,
1995, accounts payable to the same two affiliates totaled $10,202. Such
payables are expected to be satisfied in the ordinary course of
business.
8. SUBSEQUENT EVENTS
During February 1996, the Company issued 770,000 shares of unrestricted
common stock to Georgia Capital Corporation (Note 4) in satisfaction of
$192,500 of indebtedness including cash advances made to the Company
during 1995 and 1996.
During February 1996, the Company issued 60,000 shares of unrestricted
common stock to consultants in satisfaction of $15,000 payable for
consulting services rendered.
In February 1996, a shareholder who had performed investment banking
services for the Company agreed to return 746,197 shares in
acknowledgment of having failed to perform such services to the
satisfaction of the Company.
During February 1996, the Company received an advance of $773,345 from
TMT. In turn, the funds were advanced to Cleveland Quarries, L.P.
("CQ") which utilized the proceeds to retire a note payable to a bank
for $743,466.
Subsequent to year end, ASC entered into discussions to purchase the
assets of Cleveland Quarries, L.P. ("CQ"). Under the term of the
proposed agreement, ASC would acquire substantially all of the assets
of CQ for $2,100,000. Consideration for the purchase price would
include assumption of a mortgage payable in the amount of $498,604 and
credit for advances made to CQ totaling $1,528,515.
Page 45
<PAGE> 49
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of American Stone Industries, Inc. and Subsidiaries
Toronto, Canada
We have audited the consolidated balance sheet of American Stone
Industries, Inc. and Subsidiaries as of December 31, 1996, and the related
statements of operations, stockholders equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of American Stone
Industries, Inc. and Subsidiaries as of December 31, 1995, were audited by other
auditors whose report dated April 3, 1996, expressed an unqualified opinion on
those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of American Stone
Industries, Inc. and Subsidiaries as of December 31, 1996, and the results of
its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
Hobe & Lucas
Independence, Ohio
January 22, 1997
Page 46
<PAGE> 50
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
<TABLE>
<CAPTION>
ASSETS
1996 1995
---- ----
<S> <C> <C>
Current Assets
Cash $ 967,300 $ 288
Accounts receivable, net allowance for
doubtful accounts of $5,479 - 1996 and
$0 - 1995 232,675 11,794
Prepaid expenses -- 100
Inventory 431,810 --
----------- -----------
Total current assets 1,631,785 12,182
----------- -----------
Property, Plant and Equipment, Net 2,632,587 --
----------- -----------
Other Assets
Intangibles, Net of amortization 204,492 38,558
Restricted cash 10,900 --
Advances to unconsolidated subsidiary -- 783,948
Notes receivable 39,886 --
Deposits 1,000 --
----------- -----------
256,278 822,506
----------- -----------
$ 4,520,650 $ 834,688
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable, bank line of credit $ 600,000 $ --
Current portion of notes payable 68,007 --
Accounts payable 373,422 42,649
Accrued and withheld payroll
and payroll taxes 75,703 18,354
Accrued liabilities 118,014 --
----------- -----------
Total Current Liabilities 1,235,146 61,003
----------- -----------
Long Term Liabilities
Notes payable 87,463 --
Due to consulting firm -- 132,570
----------- -----------
87,463 132,570
----------- -----------
Stockholders' Equity
Common stock, $.001 par value
20 million shares authorized
16,313,828 - 1996 and 14,591,828 - 1995
shares issued and outstanding 16,314 14,592
Additional paid-in capital 3,562,860 777,249
Accumulated deficit (381,133) (150,726)
----------- -----------
3,198,041 641,115
----------- -----------
$ 4,520,650 $ 834,688
=========== ===========
</TABLE>
See notes to consolidated financial statements
Page 47
<PAGE> 51
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Sales $ 1,492,407 $ 11,112
Cost of goods sold 904,566 9,620
----------- -----------
Gross profit 587,841 1,492
----------- -----------
Selling and administrative expenses 816,571 151,172
----------- -----------
Loss from operations (228,730) (149,680)
----------- -----------
Other Income (Expense)
Other income 60,196 -
Interest income 10,223 -
Interest expense (65,596) -
----------- -----------
4,823 -
----------- -----------
Net loss before provision for income taxes (223,907) (149,680)
Provision for income taxes 6,500 -
----------- -----------
Net loss $ (230,407) $ (149,680)
=========== ===========
Net loss per Common Share $ (.01) $ (.01)
=========== ===========
</TABLE>
See notes to consolidated financial statements
Page 48
<PAGE> 52
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
Common Stock
----------------------- Additional Total
Issued Paid-In Accumulated Stockholders'
Shares Par Value Capital Deficit Equity
------ --------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995,
restated for reverse acq-
uisition accounting
(Notes 2 and 5) 8,000,000 $ 8,000 $ - $ (1,046) $ 6,954
Loan reclassified to additional
paid-in-capital - - 777,249 - 777,249
Stock issued in business
combination accounted as a
reverse acquisition 6,591,828 6,592 - - 6,592
Net Loss - - - (149,680) (149,680)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 14,591,828 14,592 777,249 (150,726) 641,115
Additional issue of common
stock during 1996 1,722,000 1,722 2,037,266 - 2,038,988
Loan reclassified to additional
paid-in capital - - 748,345 - 748,345
Net Loss - - - (230,407) (230,407)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 16,313,828 $ 16,314 $ 3,562,860 $ (381,133) $ 3,198,041
=========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements
Page 49
<PAGE> 53
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net Loss $ (230,407) $ (149,680)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation, amortization and depletion 89,603 881
Changes in assets and liabilities:
Increase in accounts receivable (220,881) (11,694)
Increase in inventory (255,941) -
Increase in payables 161,480 28,311
Increase in accrued liabilities 124,398
Increase in amounts due to consulting firm - 107,874
Other, net (8,759) (100)
----------- -----------
Total Adjustments (110,100) 125,272
----------- -----------
Net Cash Used in Operating Activities (340,507) (24,408)
----------- -----------
Cash Flows from Investing Activities:
Proceeds from notes receivable 62,114 -
Purchase of property, plant and equipment (543,526) -
----------- -----------
Net Cash (Used in) Provided by Investing
Activities (481,412) -
----------- -----------
Cash Flows from Financing Activities:
Proceeds from long term debt 994,763 24,696
Net borrowings under line of credit
arrangements 600,000 -
Repayment of long term debt (1,305,832) -
Proceeds from issuance of common stock 1,500,000 -
----------- -----------
Net Cash Provided by Financing Activities 1,788,931 24,696
----------- -----------
Net Increase in Cash 967,012 288
Cash at Beginning of Year 288 -
----------- -----------
Cash at End of Year $ 967,300 $ 288
=========== ===========
Supplemental Disclosure of Cash Flows
Information:
Interest paid $ 62,000 $ -
Taxes paid $ - $ -
</TABLE>
See notes to consolidated financial statements
Page 50
<PAGE> 54
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
-------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
Supplemental disclosures of non-cash investing and financing activities:
During the year ended December 31, 1996, the Company purchased all inventories,
real estate, equipment, intangible assets, and all rights in leases, contracts,
and all other operational items of Cleveland Quarries, L.P. for $2,320,259 in
exchange for cash, assumption of certain liabilities, and other consideration.
During the year ended December 31, 1996 the Company issued 200,000 shares of
common stock valued at $160,000 for 100% of the outstanding stock of Tyrrell
Stone Design, Ltd.
In 1996 the Company issued 1,522,000 shares of common stock as payment of
$1,127,333 of outstanding debt of the Company.
Additionally, in 1996 the Company entered into a capital lease for equipment
valued at $145,250.
During the year ended December 31, 1995, the Company completed a business
combination through the issuance of 8,000,000 shares of its common stock. The
business combination was accounted as a reverse acquisition as described in Note
2.
For the year ended December 31, 1995, the Company reclassified a loan from an
affiliated company to additional paid-in capital as described in Note 5.
See notes to consolidated financial statements
Page 51
<PAGE> 55
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
This summary of significant accounting policies of American Stone
Industries, Inc., (hereinafter "ASI" or the "Company") is presented to assist in
understanding the financial statements. The financial statements and notes are
representations of the Company's management, which is responsible for their
integrity and objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the financial statements.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
History and Business Activity
- -----------------------------
The Company was incorporated in the State of Delaware on November 11,
1992 as Viva Designs U.S.A., Inc. The Company was a distributor of a line of
jewelry and fragrances until June 1993 when it discontinued those operations. On
December 14, 1993, a certificate of amendment was filed to change the name of
the corporation to Viva Medical Sciences Corp. Beginning in 1994 and until the
business combination described in Note 2, the Company was distributor of medical
equipment in the United States. In conjunction with the business combination,
the medical equipment distributorship business was transferred to a related
party. On August 9, 1995, articles of amendment were filed reflecting a change
of the corporate name to American Stone Industries, Inc. Concurrent with the
business combination described in Note 2, ASI became a holding company which
conducts business only through its wholly-owned subsidiary, American Stone Corp.
("ASC"). ASC purchases and sells stone for use in the building construction
industry.
American Stone Industries, Inc. is a publicly-held company whose stock is
traded on the OTC Bulletin Board.
American Stone Corporation was a holding company with an 89.1% ownership
interest in Cleveland Quarries, L.P. of Amherst, Ohio. Cleveland Quarries, L.P.
(Note 3) was the owner and operator of the Berea Sandstone Quarries which mines
stone predominantly for the building stone market with several specialty areas
making up the balance.
As described in Note 2, on February 1, 1996 ASC purchased all
inventories, real estate, equipment, intangible assets, and all rights in
leases, contracts, and all other operational items of Cleveland Quarries L.P.
and began operating the Berea Sandstone Quarries. At that point, Cleveland
Quarries, L.P. ceased operations and liquidated.
On May 23, 1996, the Company acquired all of the outstanding shares of
Tyrrell Stone Design, Ltd. (a Canadian company providing design drawings to
architects) in exchange for 200,000 shares of common stock.
Page 52
<PAGE> 56
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ---------------------------------------------------------------
Property, Plant and Equipment - At Cost
- ---------------------------------------
<TABLE>
<CAPTION>
Property, plant and equipment at December 31, 1996 consisted of:
<S> <C>
Land $ 440,544
Buildings 1,033,806
Equipment 1,209,169
Computers 14,100
Leasehold improvements 15,346
Vehicle 2,500
-----------
2,715,465
Less: Accumulated depreciation 82,878
-----------
Net property, plant and equipment $2,632,587
===========
</TABLE>
Depletion is being calculated based on management's estimate of sandstone
reserves. There is no engineer's estimate available of such reserves. Depletion
amounted to $700 for the year ended December 31, 1996.
The cost of depreciable property is being depreciated over the estimated
useful lives of the assets using the straight-line method for financial
reporting. Depreciation expense was $82,878 for the year ended December 31,
1996.
Routine maintenance and repairs are charged to operations when incurred.
Expenditures which materially increase value or extend lives are capitalized.
Principles of Consolidation
- ---------------------------
Under the accounting rules for a reverse acquisition which were applied
to the business combination described in Note 2, the accompanying financial
statements include the accounts of American Stone Corporation for the year ended
December 31, 1996 and the period from the date of the acquisition, August 8,
1995, through December 31, 1995 and of Tyrrell Stone Design, Ltd. for the period
from the date of acquisition, May 23, 1996, through December 31, 1996.
Significant intercompany transactions have been eliminated in consolidation. The
operating results of Cleveland Quarries, L.P. ("CQ") had been accounted on the
equity method. While the Company owned a majority interest in CQ, control was
vested in the general partner of CQ.
Page 53
<PAGE> 57
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ---------------------------------------------------------------
Sale of Business
- ----------------
On May 30, 1995, ASI incorporated a wholly-owned subsidiary, VMS Rehab
Systems, Inc. ("VMS"). On June 1, 1995, ASI assigned substantially all of its
assets to VMS.
On July 31, 1995, ASI entered into an agreement to sell all of the common
stock of VMS to Suncrest Management Services, S.A. ("Suncrest") a related party
in exchange for the cancellation of debt owed to Suncrest. The net book value of
the assets transferred approximate the amount of the indebtedness canceled.
Suncrest also received an option to purchase up to 250,000 shares of the
Company's common stock at $.25 per share. The option expires August 8, 1998.
Intangibles
- -----------
Goodwill represents the excess of cost over fair market value related to
the business combinations described in Note 2. Goodwill is being amortized on
the straight-line method over a twenty and thirty year period. Other intangible
assets, including trademarks are amortized over their economic lives.
Amortization expense for the year ended December 31, 1996 and 1995 is $6,025 and
$881, respectively. At December 31, 1996 and 1995, intangibles are net of
accumulated amortization of $7,061 and $1,036, respectively.
Concentration of Credit Risk
- ----------------------------
Financial instruments, which potentially subject the Company to
concentration of credit risk, principally consist of accounts receivable. The
Company's policies do not require collateral to support customer accounts
receivables.
Loss Per Common Share
- ---------------------
Loss per common share is based on the weighted average number of shares
outstanding which was 15,709,213 and 10,763,150 for the years ended December 31,
1996 and 1995, respectively.
The exercise of stock options do not result in material dilution.
Inventory
- ---------
The inventories which consist of sandstone are stated at the lower of
first-in, first-out (FIFO) cost or market.
Restricted Cash
- ---------------
The Company's certificates of deposit are assigned to the Ohio Department
of Natural Resources Division of Reclamation.
Page 54
<PAGE> 58
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 2 - BUSINESS COMBINATION AND ACQUISITIONS
- ----------------------------------------------
On August 8, 1995, the Company acquired all of the outstanding capital
stock of American Stone Corporation ("ASC"), in exchange for 8,000,000
unregistered shares of its common stock. As a result of the transaction, TMT
Masonry, Ltd. ("TMT") the former parent company of ASC received shares
representing approximately 55% of the Company's outstanding common stock,
thereby effecting a change in control of the Company.
The acquisition of ASC has been accounted for as a reverse acquisition.
Under the accounting rules for a reverse acquisition, ASC is considered the
acquiring entity. As a result, historical financial information for periods
prior to the date of the transaction are those of ASC. However, the capital
structure of ASC has been retroactively restated to reflect the number of shares
received by ASC in the acquisition and the Company's par value. Under purchase
method accounting, balances and results of operations of the Company have been
included in the accompanying consolidated financial statements from the date of
the transaction, August 8, 1995. While there were no tangible assets received in
the reverse acquisition, the Company assumed liabilities of $32,692. The Company
recorded the assets and liabilities (excluding intangibles) at their historical
cost basis which was deemed to approximate fair market value. The reverse
acquisition is treated as a non-cash transaction since all consideration given
was in the form of stock. Proforma results of operations (assuming the business
combination had been effected at the beginning of the year ended December 31,
1995) are not presented because ASI became a holding Company concurrent with the
business combination. As a result, proforma results of operations for the year
ended December 31, 1995 would be no different than the historical statement of
operations presented herewith.
On February 1, 1996 ASC purchased all inventories, real estate,
equipment, intangible assets, and all rights in leases, contracts, and all other
operational items of Cleveland Quarries, L.P. for $2,320,259 in exchange for
cash, assumption of certain liabilities, and other consideration. At that point,
Cleveland Quarries, L.P. ceased operations and liquidated.
On May 23, 1996, the Company acquired all of the outstanding shares of
Tyrrell Stone Design, Ltd. (Tyrrell Stone) in exchange for 200,000 shares of
common stock. This acquisition was accounted for as a purchase, and as a result,
excess cost over fair market value of $156,729 is being amortized over thirty
years. Under purchase method accounting, balances and results of operations of
the Company have been included in the accompanying consolidated financial
statements from the date of the transaction, May 23, 1996. Proforma results of
operations (assuming the business combination had been effected at the beginning
of the year ended December 31, 1996) are not presented since Tyrrell Stone was
incorporated in 1996 and the impact is not material.
Page 55
<PAGE> 59
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 3 - NOTES RECEIVABLE - EMPLOYEES
- -------------------------------------
<TABLE>
<CAPTION>
<S> <C>
7%, secured by real estate mortgage, due in
monthly installments of $310 including interest,
final payment due August, 2000 $ 38,716
Non-interest bearing, unsecured, due in weekly
installments of $25, final payment due August, 1997 1,170
---------
$ 39,886
=========
</TABLE>
NOTE 4 - ADVANCES TO UNCONSOLIDATED SUBSIDIARY
- ----------------------------------------------
ASC made unsecured, non-interest bearing advances during 1996 and 1995 to
Cleveland Quarries, L.P. ("CQ"), an unconsolidated subsidiary. The net advances
were applied toward the purchase price of net assets acquired (Note 2). The
initial investment in CQ was $891 which was reduced to zero in earlier years
through recognition of losses by CQ.
A condensed balance sheet of Cleveland Quarries, L.P. as of December 31,
1995 and a condensed statement of operations for the year then ended is as
follows:
<TABLE>
<CAPTION>
BALANCE SHEET
1995
-----------
<S> <C>
Current assets $ 317,915
Property and equipment, net 1,341,250
Other assets 99,259
-----------
$ 1,758,424
===========
Current liabilities $ 2,343,665
Long-term debt, net of current portion 28,432
Partners' deficit (613,673)
-----------
$ 1,758,424
===========
STATEMENT OF OPERATIONS
1995
-----------
Revenues $ 1,036,933
Cost of sales 732,187
-----------
Gross profit 304,746
General and administrative expenses 439,823
Interest expense 107,241
-----------
Net loss $ (242,318)
===========
</TABLE>
Page 56
<PAGE> 60
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 5 - DUE TO CONSULTING FIRM
- -------------------------------
Due to consulting firm represents non-interest bearing amounts to Georgia
Capital Corporation ("GCC"). GCC is a stockholder in the Company. During 1996,
additional liabilities of $202,381 were incurred. In addition, one of the
consultants employed by GCC is also a stockholder in the Company. The payable
arose from consulting services provided and from non-interest bearing advances
made to the Company. During April and May, 1996, these payables were satisfied
through the issuance of 1,346,000 shares of common stock.
NOTE 6 - STOCKHOLDERS' EQUITY
- -----------------------------
As the business combination, described in Note 2 above, has been
accounted for as reverse acquisition, the Company has assumed ASI's capital
structure (shares outstanding and par value) as of the consummation of August 8,
1995. All capital transactions of ASI prior to the date of the business
combination are included in ASI's separate historical financial information.
On August 8, 1995, the Company issued 8,000,000 shares of unregistered
common stock in connection with the reverse acquisition of ASC, bringing the
total shares of common stock issued and outstanding immediately subsequent to
the transaction to 14,591,828.
During April and May, 1996, the Company issued 1,346,000 shares of
unrestricted common stock to Georgia Capital Corporation in satisfaction of
$334,951 of indebtedness including cash advances made to the Company during 1996
and 1995.
During February, 1996, the Company issued 60,000 shares of unrestricted
common stock to consultants in satisfaction of $15,000 payable for consulting
services rendered.
In February, 1996, a shareholder who had performed investment banking
services for the Company agreed to return 746,197 shares in acknowledgment of
having failed to perform such services to the satisfaction of the Company.
In May, 1996, the Company issued 116,000 shares of unrestricted common
stock to Terrazzo Mosaic & Tile Ltd. in satisfaction of $29,037 of indebtedness
of the Company.
In May, 1996, the Company acquired all of the outstanding shares of
Tyrrell Stone Design Ltd. in exchange for 200,000 shares of the Company.
In August, 1996, TMT Masonry Ltd. returned 4,000,000 shares which were
immediately reissued to Roulston Ventures Limited Partnership for $1,500,000.
NOTE 7 - LINE OF CREDIT
- -----------------------
The Company has a line of credit with maximum borrowings of $750,000. The
note provides for borrowing with interest payable monthly at a rate equivalent
to the bank's prime lending rate (8.25% at December 31, 1996). The debt
agreement contains certain restrictive terms and covenants. The Company was in
compliance with its covenants at December 31, 1996. The outstanding balance at
December 31, 1996 was $600,000.
Page 57
<PAGE> 61
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
Ru
NOTE 8 - LONG TERM DEBT
- -----------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
9.4%, secured by equipment, payable in
monthly installments of $378 including
interest, final payment due June, 1998 $ 6,330 $ -
9.9%, secured by equipment, payable in
monthly installments of $356 including
interest, final payment due January, 1998 4,390 -
12.13%, secured by equipment, payable in
monthly installments of $1,567 including
interest, final payment due July, 1997 10,584 -
8.31%, secured by equipment, payable in
monthly installments of $4,675 including
interest, final payment due September, 1999 134,166 -
-------- ----------
155,470 -
Less: Current Portion 68,007 -
-------- ----------
$ 87,463 $ -
======== ==========
</TABLE>
Following is a summary of future maturities of long term debt as of
December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 68,007
1998 50,735
1999 36,728
2000 and thereafter -
--------
$155,470
========
</TABLE>
NOTE 9- FAIR VALUE OF FINANCIAL STATEMENTS
- ------------------------------------------
The carrying amounts of cash, accounts receivable, accounts payable, and
long-term debt approximate the fair value reported in the balance sheet.
Page 58
<PAGE> 62
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 10 - FINANCIAL REPORTING FOR SEGMENTS OF THE COMPANY
- ---------------------------------------------------------
The Company and its subsidiaries operated predominantly in one industry,
the design, quarrying and cutting of sandstone primarily used in the
construction industry.
Following is the information regarding the Company's continuing
operations by geographic location. Transfers between geographic areas are
accounted for on a cost plus profit margin basis.
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net sales, including geographic transfers
United States $ 1,381,406 $ 11,112
Canada 153,583 -
Geographic transfers (42,582) -
----------- -----------
$ 1,492,407 $ 11,112
=========== ===========
(Loss) from operations:
United States $ (92,222) $ (149,680)
Canada (136,508) -
----------- -----------
(Loss) from operations (228,730) (149,680)
Interest expense (65,596) -
Other income (expense) 70,419 -
----------- -----------
(Loss) from operations before income taxes $ (223,907) $ (149,680)
=========== ===========
Identifiable assets:
United States $ 4,273,209 $ 834,688
Canada 247,441 -
----------- -----------
$ 4,520,650 $ 834,688
=========== ===========
</TABLE>
NOTE 11- INCOME TAXES
- ---------------------
<TABLE>
Income taxes on continuing operations include the following:
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Canadian:
Currently payable $ 6,500 $ -
Deferred - -
----------- -----------
Total $ 6,500 $ -
=========== ===========
</TABLE>
Page 59
<PAGE> 63
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 11 - INCOME TAXES (CONTINUED)
- ----------------------------------
A reconciliation of the effective tax rate with the statutory U.S.
income tax rate is as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------- ----------------------
% of % of
Pretax Pretax
Amount Income Amount Income
------ ------ ------ ------
<S> <C> <C> <C> <C>
Income taxes per
statement of income $ 6,500 3% $ - - %
Tax rate differences resulting from:
Income taxes applicable to
Canadian income at rate
different from U.S. rate (6,500) (3)% - - %
Loss for financial reporting
purpose without tax benefit
(unavailable for carryback
against prior income taxes paid) (76,128) (34)% (50,891) (34)%
-------- --- -------- ---
Income taxes at statutory rate $(76,128) (34)% $(50,891) (34)%
======== === ======== ===
</TABLE>
For United States tax purposes, the Company has net operating loss
carryforwards, expiring primarily in 2010, of approximately $657,000 available
to reduce future taxable income. Future United States taxes may also be reduced
by a capital loss carryforwards of approximately $59,000 which expire in 2000.
Utilization of these carryforwards is contingent upon the Company having
sufficient taxable income in the future.
The Company's deferred tax assets and liabilities at December 31, 1996
and 1995 consist of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax asset $ 244,000 $ 45,000
Valuation allowance (213,000) (45,000)
Deferred tax liability (31,000) -
--------- ---------
$ - $ -
========= =========
</TABLE>
Deferred taxes are provided for temporary differences in deducting
expenses for financial statement and tax purposes. The principal source for
deferred tax liabilities are different methods for recovering depreciation, and
for deferred tax assets are net operating loss and capital loss carryforwards.
No deferred taxes are reflected in the balance sheet at December 31, 1996 and
1995 due to a valuation allowance. As of December 31, 1996, the Company
recognized an $82,000 increase in the valuation allowance from 1995.
Page 60
<PAGE> 64
AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
NOTE 12 - RELATED PARTY TRANSACTIONS
- ------------------------------------
During the year ended December 31, 1995, the Company utilized office
space of its former parent, TMT, on a rent-free basis.
In February, 1996, the Company began utilizing office space of an
affiliated company for $700 per month on a month to month basis.
During the years ended December 31, 1996 and 1995, the Company purchased
stone from its unconsolidated subsidiary, Cleveland Quarries, L.P. and paid for
expenses such as stationery and business supplies through its former parent
company, TMT Masonry, Ltd. At December 31, 1996 and 1995, accounts payable to
the same two affiliates totaled $9,735 and $10,202, respectively. Such payables
are expected to be satisfied in the ordinary course of business.
At December 31, 1996, the Company has outstanding stock options to
officers, directors and key personnel totaling 300,000 shares at $75 per share
which expire in October, 1997.
Page 61
<PAGE> 65
<TABLE>
<CAPTION>
PART III
--------
EXHIBITS
--------
<S> <C>
(1) Underwriting Agreement.....................................................Not Applicable
(2) Charter and By-laws
A. Certificate of Incorporation of Viva Designs
U.S.A. Inc., dated November 13, 1992..............................................Page 65
B. Certificate of Amendment of the Certificate of
Incorporation of Viva Designs U.S.A., Inc.,
dated March 9, 1993...............................................................Page 68
C. Certificate of Amendment of the Certificate of
Incorporation of Viva Designs U.S.A., Inc.,
dated December 14, 1993...........................................................Page 70
D. Certificate for Renewal and Revival
of Character, dated May 31, 1994..................................................Page 72
E. Certificate of Amendment of the Certificate
of Incorporation of Viva Medical Sciences
Corporation, dated August, 1995...................................................Page 74
F. By-laws of American Stone Industries, Inc.....................................Page 76
(3) Instruments Defining the Rights of Security Holders........................Not Applicable
(4) Subscription Agreement.....................................................Not Applicable
(5) Voting Trust Agreement.....................................................Not Applicable
(6) Material Contracts
A. Business Loan Agreement between American
Stone Corporation and First National
Bank of Ohio, dated September 13, 1996............................................Page 92
</TABLE>
Page 62
<PAGE> 66
<TABLE>
<CAPTION>
<S> <C>
B. Amendment to Loan Agreement between American
Stone Corporation and First National Bank of Ohio,
dated February 26, 1997...........................................................Page 106
C. Employment Agreement between American Stone
Corporation and David Tyrrell, dated February 7, 1996.............................Page 107
D. Asset Purchase Agreement between American Stone
Corporation and Cleveland Quarries L.P.,
dated February 1, 1996............................................................Page 122
E. Amendment to and Restatement of Asset Purchase
Agreement, dated December 10, 1996................................................Page 139
F. Indemnification Agreement between Cleveland
Quarries, L.P., Slate and Stone Corporation of
America, and American Stone Corporation,
dated December 20, 1996...........................................................Page 142
G. Share Purchase Agreement between David Tyrrell
and American Stone Industries, Inc.,
dated May 22, 1996................................................................Page 145
H. Stock Purchase Agreement between American
Stone Industries, Inc. and Roulston Ventures
Limited Partnership, dated August 27, 1996........................................Page 165
I. Share Purchase Option Agreement between
TMT Masonry, Ltd., Roulston Ventures Limited
Partnership, and American Stone Industries, Inc.,.................................Page 196
J. Interim Management Agreement between Robert
Graham Nash, William Purvis Houston, E. Victor
Artuso, Nicholls Investments, Inc., 237894 Ontario
Limited, Grenville Aggregate Specialties Limited,
American Stone Industries, Inc., and American Stone
Industries, Inc., dated August 30, 1996...........................................Page 203
(7) Material Foreign Patents....................................................Not Applicable
(8) Plan of Acquisition, Reorganization, Arrangement,
Liquidation, or Succession.....................................................Not Applicable
</TABLE>
Page 63
<PAGE> 67
<TABLE>
<CAPTION>
<S> <C>
(9) Escrow Agreements..........................................................Not Applicable
(10) Consents and Other
A. Letter from Horton & Company Consenting
to the Change in Certifying Accountant,
dated March 19, 1997.............................................................Page 212
B. Letter from Horton & Company, L.L.C.
Consenting to Incorporation of Independent
Auditor's Report, dated March 19, 1997 ..........................................Page 213
C. Letter from Hobe & Lucas, C.P.A.
Consenting to Incorporation of Independent
Auditor's Report, dated March 24, 1997...........................................Page 214
D. Subsidiaries of Registrant as of December 31, 1996...........................Page 215
</TABLE>
Page 64
<PAGE> 1
Exhibit 2(A)
CERTIFICATE OF INCORPORATION
of
VIVA DESIGNS U.S.A. INC.
------------------------
FIRST. The name of this Corporation is VIVA DESIGNS U.S.A., INC.
SECOND. Its registered office in the State of Delaware is to be located
at 201 N. Walnut Street, in the City of Wilmington, County of NewCastle. The
registered agent in charge thereof is The Company Corporation at 201 N. Walnut
Street, Wilmington, Delaware 19801.
THIRD. The nature of the business and, the objects and purposes
proposed to be transacted, promoted and carried on, are to do any or all the
things herein mentioned, as fully and to the same extent as natural persons
might or could do, and in any part of the world. viz:
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General corporation
Law of Delaware."
FOURTH. The amount of the total authorized capital stock of this
Corporation is (a) Forty Million (40,000,000) shares of Common Stock, $.001 par
value per share; and (b) Twenty Million (20,000,000) shares of Preferred Stock,
$.001 par value per share; the Board of Directors of the Company is expressly
empowered to issue the Preferred Stock in such series as designated by the Board
of Directors, and to change the rights, powers, preferences and designations of
the Preferred Stock with regard to any shares of Preferred Stock that are not
issued and outstanding.
FIFTH. The name and mailing address of the incorporator is as follows:
NAME: ADDRESS:
----- --------
Kimberly Andras 201 N. Walnut St., Wilmington, DE 19801
Page 65
<PAGE> 2
SIXTH. The powers of the incorporator are to terminate upon filing of
the Certificate of Incorporation, and the name and mailing address of the person
who is to serve as the first director until the first annual meeting of
stockholders or until his successor is elected and qualified is as follows:
Michael S. Wexler, 130 Slater Street, Ottawa, Canada KlP 6E2
SEVENTH. The Directors shall have power to make and to alter or amend
the By-Laws; and to fix the amount to be reserved as working capital.
The By-Laws shall determine whether and to what extent the accounts and
books of this Corporation, or any of them shall be open to the inspection of the
stockholders; and no stockholder shall have any right of inspecting any account,
or book or document of this Corporation, except as conferred by the law or the
By-Laws, or by resolution of the stockholders.
It is the intention that the objects, purposes and powers specified in
the Third paragraph hereof shall, except where otherwise specified in said
paragraph, be nowise limited or restricted by reference to or inference from the
terms of any other clause or paragraph in this Certificate of Incorporation, but
that the objects, purposes and powers specified in the Third paragraph and in
each of the clauses or paragraphs of this charter shall be regarded as
independent objects, purposes and powers.
EIGHTH. Directors of the corporation shall not be liable to either the
corporation or its stockholders for monetary damages for a breach of fiduciary
duties unless the breach involves: (1) a director's duty of loyalty to the
Corporation or its stockholders; (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (3)
liability for unlawful payments of dividends or unlawful stock purchases or
redemption by the Corporation; or (4) a transaction from which the director
derived an improper personal benefit.
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<PAGE> 3
NINTH. The Corporation elects not to be governed by Section 203 of the
General Corporation Law of Delaware.
TENTH. The Corporation shall indemnify all persons whom it may
indemnify to the fullest extent allowed by the General Corporation Law of
Delaware.
I, THE UNDERSIGNED, for the purpose of forming a Corporation under the
laws of the State of Delaware, do make, file and record this Certificate and do
certify that the facts herein are true; and I have accordingly hereunto set my
hand.
DATED: 11/13, 1992
-----
State of: Delaware
County of: New Castle
------------------------------------
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<PAGE> 1
Exhibit 2(B)
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
VIVA DESIGNS U.S.A., INC.
Under Section 242 of the
Corporation Law of the State of Delaware
----------------------------------------
VIVA DESIGNS U.S.A., INC. (the "Corporation"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by written consent filed
with the minutes of the board, adopted the following resolution proposing and
declaring advisable to the following amendment to the Certificate of
Incorporation of said corporation:
1. That Article FOURTH of the Certificate of Incorporation be amended
and, as amended, read as follows:
FOURTH. The Corporation shall be authorized to issue the following
shares:
CLASS NUMBER OF SHARES PAR VALUE
----- ---------------- ---------
Common 20,000,000 $.001
SECOND: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Section 24 FOURTH of the General Corporation Law of the
State of Delaware.
THIRD: Prompt notice of the taking of this corporate action is being given to
all stockholders who did not consent in writing, in accordance with Section 228
of the General Corporation Law of the State of Delaware.
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<PAGE> 2
IN WITNESS WHEREOF, the corporation has caused this
certificate to be signed by Michael Wexler, its President, and attested by
Frederick H. Kalina, its Secretary, this 9th day of March, 1993.
VIVA DESIGNS U.S.A., INC.
By:
----------------------------
Michael Wexler, President
ATTEST:
By:
--------------------------------
Frederick H. Kalina, Secretary
Page 69
<PAGE> 1
Exhibit 2(C)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
*******
VIVA Designs U.S.A., Inc. a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by the
unanimous written consent of its members, filed with the minutes of the Board,
adopted a resolution proposing and declaring advisable the following amendment
to the Certificate of Incorporation of said corporation:
RESOLVED, THAT THE CERTIFICATE OF INCORPORATION OF VIVA DESIGNS,
U.S.A., INC. BE AMENDED BY CHANGING THE FIRST ARTICLE THEREOF SO THAT,
AS AMENDED, SAID ARTICLE SHALL BE AND READ AS FOLLOWS:
"The name of this Corporation shall be VIVA Medical Sciences Corp.".
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given written consent to said amendment in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware and written notice of the adoption of the amendment has been given as
provided in Section 288 of the General Corporation Law of the State of Delaware
to every stockholder entitled to such notice.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of sections 242 and 228 of the General Corporation Law
of the State of Delaware.
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<PAGE> 2
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by Michael Wexler, its President and attested by Maria Swan, its
Secretary, this 14th day of December, 1993.
Viva Design U.S.A, Inc.
-----------------------------------
By:
-------------------------------
President
ATTEST:
By:
---------------------------------
Secretary
Page 71
<PAGE> 1
Exhibit 2(D)
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CHARTER
VIVA MEDICAL SCIENCE CORP., a corporation organized under the laws of the state
of Delaware, the charter of which was voided for non-payment of taxes, now
desires a restoration, renewal and revival of its charter, and hereby certifies
as follows:
1. The name of this corporation is VIVA MEDICAL SCIENCE CORP.
2. Its registered office in the State of Delaware is located at Three Christina
Centre, 201 N. Walnut Street, Wilmington DE 19801, County of New Castle. The
name and address of its registered agent is The Company Corporation, address
"same as above".
3. The date of filing of the original Certificate of Incorporation in Delaware
was November 13, 1992.
4. The date when restoration, renewal, and revival of the charter of this
company is to commence is the 28th day of February, same being prior to the date
of the expiration of the charter. This renewal and revival of the charter of
this corporation is to be perpetual.
5. This corporation was duly organized and carried on the business authorized by
its charter until the last day of March, 1994 at which time its charter became
inoperative and void for non-payment of taxes and this certificate for renewal
and revival is filed by authority of the duly elected directors of the
corporation in accordance with the laws of the State of Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section 312 of
the General Corporation Law of the State of Delaware, as amended, providing for
the renewal, extension and restoration of Charters, Michael Wexler the last and
Acting President, and Michael Wexler, the last
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<PAGE> 2
and Acting Secretary of VIVA MEDICAL SCIENCE CORP. have hereunto set their hands
to this certificate this
31st day of May, 1994
-----------------------------
MICHAEL WEXLER
LAST AND ACTING PRESIDENT
ATTEST:
-----------------------------
MICHAEL WEXLER
LAST AND ACTING SECRETARY
Page 73
<PAGE> 1
Exhibit 2(E)
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
VIVA MEDICAL SCIENCES CORP
Under Section 242 of the
Corporation Law of the State of Directors
-----------------------------------------
VIVA MEDICAL SCIENCES CORP, (the "Corporation"), a corporation
organized under and existing under and by virtue of the General Corporation Law
of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board Directors of said corporation, by written consent
filed with the minutes of the Board, adopted the following resolution proposing
and declaring advisable the following amendment to the Certificate of
Incorporation of said corporation.
1. That Article FIRST of the Certificate of Incorporation be amended
and, as amended, read as follows:
FIRST: The name of the Corporation is AMERICAN STONE INDUSTRIES, INC.
INC.
SECOND: That the aforesaid amendment was duly adopted in accordance the
applicable provisions of Section 242 of General Corporation Law of the State of
Delaware.
THIRD Prompt notice of the taking of this corporate action is being
given to all stockholders who did not consent in writing, in accordance with
Section 228 of the General Corporation Law of the State of Delaware.
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<PAGE> 2
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Michael S. Wexler, its President and attested by Marc Wigle, its
Secretary, this __ day of August, 1995.
VIVA MEDICAL SCIENCES CORP.
By:
------------------------------
Michael S. Wexler, President
ATTEST:
By:
-----------------------
Marc Wigle, Secretary
Page 75
<PAGE> 1
Exhibit 2(F)
BYLAWS
OF
AMERICAN STONE INDUSTRIES, INC.
ARTICLE 1. OFFICES
- ---------- -------
Section 1.1 Registered Office
----------- -----------------
The registered office of American Stone Industries, Inc. (the
"Corporation") shall be located in the State of Delaware.
Section 1.2 Other Offices
----------- -------------
The Corporation may also have offices at such other places, within or
without the State of Delaware, where the Corporation is qualified to do
business, as the Board of Directors may designate, from time to time, or as the
business of the Corporation may require.
ARTICLE 2. SHAREHOLDERS
- ---------- ------------
Section 2.1 Annual Meeting
----------- --------------
The Annual Meeting of the Shareholders shall be held in the month of
November, at a time to be designated by the Board of Directors during ordinary
business hours. Notwithstanding the foregoing, the Board of Directors shall have
the authority to determine and designate an alternate date and time for the
Annual Meeting of Shareholders, which shall be selected on a business day,
during ordinary business hours. At the Annual Meeting, the Shareholders shall
elect the Board of Directors and consider the reports of the affairs of the
Corporation which shall be laid before the Annual Meeting. Furthermore, upon due
notice, there may be considered and acted upon at the Annual Meeting any matter
which could properly be considered and acted upon at a Special Meeting of
Shareholders.
Section 2.2 Special Meeting
----------- ---------------
Upon request in writing, delivered either in person or by certified
mail, to the President or the Secretary of the Corporation, by any person or
persons entitled to call a meeting of Shareholders, as set forth hereinafter,
such Officers shall fix the date of a Special Meeting and cause notice of such
meeting to be given to the Shareholders entitled to vote at such meeting. Such
meeting shall be held on a date not less than ten days nor more than 60 days
after the receipt of such request.
If such Officer shall not have given the notice within five days after
the delivery or mailing of the request, then, in such event, the person or
persons calling the meeting may fix the time of the meeting and
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<PAGE> 2
give notice thereof as provided hereinabove. In any event, the date shall be set
on a business day, during ordinary business hours.
Section 2.3 Persons Entitled to Call Special Meeting
----------- ----------------------------------------
Special Meetings of the Shareholders may be called at any time by any
of the following: (a) The Chairman of the Board, the President, or, in case of
the President's absence, death or disability, the Vice President authorized to
exercise the authority of the President; (b) the Directors by action at a
meeting, or a majority of the Directors acting without a meeting; or (c) a
person or persons who hold 40% of all shares outstanding and entitled to vote at
such Meeting.
Section 2.4 Notice of Meetings
----------- ------------------
Written notice, stating the time, place, and purpose of a meeting of
the Shareholders, shall be given either by personal delivery, or by ordinary
mail, not less than ten days nor more than 60 days before the date of the
meeting to each Shareholder of record entitled to notice of such meeting by or
at the direction of the President or the Secretary of the Corporation, or in
case of his neglect or failure to perform such duty, by any Director or
Shareholder. If mailed, the notice shall be deemed to be delivered when
deposited in the United States Mail, addressed to the Shareholder at his address
as the same shall appear on the records of the Corporation with the proper
postage prepaid thereon. Notice of adjournment of a meeting need not be given if
the time and place to which it is adjourned are announced at the meeting.
Section 2.5 Waiver of Notice
----------- ----------------
Notice of the time, place and purpose or purposes of any meeting of the
Shareholders, whether required by law, the Articles of Incorporation or the
Bylaws, if any, may be waived, in writing, either before or after the holding of
the meeting, by any Shareholder; which writing shall be deemed to be a waiver of
notice of the meeting by any Shareholder entitled to such notice, or by his
attendance at any such meeting without filing a written protest with the
Secretary prior to or at the commencement of the meeting.
Section 2.6 Place of Meeting
----------- ----------------
Meetings of Shareholders shall be held at any place within or without
the State of Delaware (fixed by the Board of Directors). In the absence of such
designation, Shareholder Meetings shall be held at the principal office of the
Corporation.
Section 2.7 Quorum
----------- ------
A majority of the outstanding shares, represented in person or by
proxy, shall constitute a quorum at a meeting of the Shareholders. If a quorum
is present, the affirmative vote of a majority of the shares represented at the
meeting shall be the act of the Shareholders.
The holders of the majority of the voting shares represented at a
meeting, whether or not a quorum is present, may adjourn such meeting from time
to time.
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<PAGE> 3
Section 2.8 Voting of Shares
----------- ----------------
Each outstanding voting share (including shares not fully paid)
regardless of class, shall be entitled to one (1) vote on each matter submitted
to a vote at a meeting of Shareholders, except to the extent that cumulative
voting is required pursuant to Delaware General Corporation law.
Section 2.9 Voting by Proxy
----------- ---------------
Any Shareholder holding voting stock may be represented at any meeting
and may vote by proxy or proxies appointed by a writing signed by such
Shareholder according to the manner set forth in Delaware General Corporation
law.
Section 2.10 Inspectors of Election
------------ ----------------------
A Board of Directors, in advance of any meeting of Shareholders, may
appoint Inspectors of Election to act at such meeting or at any adjournment
thereof, pursuant to the provisions of Delaware General Corporation law.
Section 2.11 Action Without Meeting
------------ ----------------------
Notwithstanding any provision herein to the contrary, any action which
may be taken at a meeting of Shareholders may be taken without a meeting,
pursuant to the provisions of Delaware General Corporation law.
ARTICLE 3. BOARD OF DIRECTORS
- ---------- ------------------
Section 3.1 Powers
----------- ------
The business and affairs of the Corporation and all corporate authority
shall be exercised by or under the authority of the Board of Directors.
Section 3.2 Number of Directors
----------- -------------------
The number of Directors shall be not less than three, nor more than
seven, as may be fixed from time to time by resolution the Board of Directors
adopted at any meeting of the Board of Directors; provided, however, that no
reduction in the number of Directors shall have the effect of removing any
Director prior to the expiration of his term of office. In the event that all
shares of the Corporation are owned of record by one or two Shareholders, the
number of Directors may be less than three, but not less than the number of
Shareholders. No Director need be a Shareholder of the Corporation.
Section 3.3 Election and Term of Office
----------- ---------------------------
The election of the Board of Directors shall be held at the Annual
Meeting of the Shareholders or at any Special Meeting called for that purpose.
Each Director shall be elected or designated to serve and
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<PAGE> 4
hold office until the next Annual Meeting of the Shareholders, and until his
successor is elected, or until his early resignation, removal from office, or
death.
Section 3.4 Resignation and Vacancies
----------- -------------------------
Any Director may resign his office at any time, such resignation to be
made in writing and to take effect immediately upon delivery to the Secretary of
the Corporation, regardless of its acceptance.
Any vacancy occurring in the Board of Directors, by death, resignation,
or otherwise, shall be filled promptly by a majority vote by the remaining
Directors at a Special Meeting which shall be called for that purpose within 30
days after the occurrence of the vacancy. The Director thus chosen shall hold
office for the unexpired term of his predecessor and the election and
qualification of his successor.
Section 3.5 Removal
----------- -------
Any Director or Directors may be removed from office, with or without
cause, at any time, at any Special Meeting of Shareholders called for that
purpose, or at the Annual Meeting of Shareholders, pursuant to the provisions of
Delaware General Corporation law.
Section 3.6 Compensation
----------- ------------
The Board of Directors, by the affirmative vote of a majority of the
Directors then in office, and irrespective of any personal interest of any of
its members, shall have authority to establish reasonable compensation of all
Directors for services to the Corporation as Directors.
Section 3.7 Conflict of Interest
----------- --------------------
Any contract or other transaction between the Corporation and any of
its Directors (or any Corporation or firm which any of its Directors is directly
or indirectly financially interested) shall be valid for all purposes
notwithstanding the presence of such Director at the meeting authorizing such
contract or transaction, or his participation in such meeting. The foregoing
shall apply, however, only if the interest of each such Director is known or
disclosed to the Board of Directors and it shall nevertheless authorize or
ratify such contract or transaction by the majority of the Directors present,
each such interested Director to be counted in determining whether a quorum is
present but not in calculating the majority necessary to carry such vote.
No contract or transaction shall be void or voidable with respect to
the Corporation for the reason that it is between the Corporation and one or
more of its Directors or Officers, or between the Corporation and any other
person in which one or more of its Directors or Officers are Directors,
Trustees, or Officers, or have a financial or personal interest or for the
reason that one or more interested Directors or Officers participate in or vote
at the meeting of the Directors or a committee thereof which authorizes such
contract or transaction, if in any such case:
(a) The material facts as to his or their relationship or interest and
as to the contract or transaction are disclosed or are known to the Directors or
the committee and the Directors or committee,
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<PAGE> 5
in good faith reasonably justified by such facts, authorize the contract or
transaction by the affirmative vote of a majority of the disinterested
Directors, even though the disinterested Directors constitute less than a
quorum; or
(b) The material facts as to his or their relationship or interest and
as to the contract or transaction are disclosed or are known to the Shareholders
entitled to vote thereon and the contract or transaction is specifically
approved at a meeting of the Shareholders held for such purpose by the
affirmative vote of the holders of shares entitling them to exercise a majority
of the voting power of the Corporation held by persons not interested in the
contract or transaction; or
(c) The contract or transaction is fair as to the Corporation as of the
time it is authorized or approved by the Directors, a committee thereof, or the
Shareholders.
Common or interested Directors may be counted in determining the
presence of a quorum at a meeting of the Directors, or of a committee thereof
which authorized the contract or transaction.
The Directors, by the affirmative vote of a majority of those in
office, and irrespective of any financial or personal interest of any of them,
shall have authority to establish reasonable compensation, which may include
pension, disability, and death benefits, for services to the Corporation by
Directors and Officers, or to delegate such authority to one or more Officers or
Directors.
The Corporation intends to permit transactions between the Corporation
and its Directors or Officers as provided in Delaware General Corporation law,
and nothing contained herein shall limit or otherwise affect the liability of
Directors under Delaware General Corporation law.
This section shall not be construed to invalidate any contract or
transaction which would be valid in the absence of this Section.
Section 3.8 Meetings
----------- --------
The Annual Meeting of the Board of Directors shall be held, without
call or notice, immediately following each Annual Meeting of the Shareholders of
this Corporation, for the election or appointment of Officers and for the
transaction of any other business within the authority of the Board of
Directors.
Special Meetings of the Board of Directors may be called by the
Chairman of the Board, the President, any Vice President, or any two Directors.
Section 3.9 Notice of Special Meetings
----------- --------------------------
Upon written request to the President or Secretary, sent by certified
mail, return receipt requested, or delivered to such Officer in person, by any
person or persons entitled to call a Special Meeting of the Board of Directors,
such Officer shall fix the date of a Special Meeting not less than 10 days after
the receipt of such request, and shall cause notice to be given to each
Director, either by personal delivery or by mail, telegram, or cablegram,
addressed to each Director at his last known post office address, at least 2
days prior to the date of such meeting, specifying the time and place of the
meeting, but need not specify
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<PAGE> 6
the purpose of the meeting.
In the event such Officer shall refuse to perform his duty, such person
or persons who shall have requested the meeting, shall be entitled to fix the
date of the meeting and serve proper notice as provided herein.
Section 3.10 Validation of Meeting Defectively Called or Noticed
------------ ---------------------------------------------------
The transactions of any meeting of the Board of Directors however
called and noticed, and wherever held, are as valid as though had at a meeting
duly held after regular call and notice, if a quorum is present and if, either
before or after the meeting, each of the Directors not present signs a waiver of
notice. All such waivers shall be filed with the corporate records and made a
part of the minutes of the meeting. Furthermore, the attendance of a Director at
any meeting shall constitute a waiver of notice of such meeting except where a
Director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened, and by the filing of a written protest therefore at the commencement
of the meeting.
Section 3.11 Place of Meeting; Communications Equipment
------------ ------------------------------------------
The Board of Directors shall hold its meetings at such places within or
without the State of Delaware as a majority of the Directors shall agree or
assent to by their attendance, from time to time. The Board of Directors shall
be permitted to hold meetings of the Directors through the utilization of any
communications equipment if all persons participating can hear each other, and
participation in such a meeting shall constitute presence at such meeting,
pursuant to Delaware General Corporation law.
Section 3.12 Quorum
------------ ------
The majority of the Directors in office constitute a quorum of the
Board of Directors for the transaction of business.
Section 3.13 Majority Action
------------ ---------------
Every act or decision done or made by a majority of the Directors
present at any meeting duly held at which a quorum is present is the act of the
Board of Directors. Each Director who is present at a meeting will be
conclusively presumed to have assented to the action taken at such meeting
unless his dissent to the action is entered on minutes of the meeting, or, where
he is absent from the meeting, his written objection to such action is properly
filed with the Secretary of the Corporation upon learning of the action. Such
right to dissent shall not apply to a Director who voted in favor of such
action. At all meetings of the Board of Directors, each Director shall have one
vote irrespective of the number of shares he may hold.
Section 3.14 Adjournment
------------ -----------
In the absence of a quorum, a majority of the Directors present may
adjourn from time to time, until the time fixed for the next regular meeting of
the Board of Directors. Notice of the time and place of
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<PAGE> 7
holding an adjourned meeting need not be given to absent Directors if the time
and place are fixed at the meeting adjourned.
Section 3.15 Conduct of Meetings
------------ -------------------
At every meeting of the Board of Directors, the Chairman of the Board
shall preside. The Secretary of the Corporation shall act as Secretary of the
Board of Directors. In case the Secretary shall be absent from any meeting, the
Chairman may appoint any person to act as Secretary of the meeting.
Section 3.16 Bylaws
------------ ------
The Board of Directors may adopt and, from time to time, amend Bylaws
for their own government. Such Bylaws shall not be inconsistent with the
Articles of Incorporation or the Regulations.
Section 3.17 Committees
------------ ----------
The Board of Directors shall have the authority to create an executive
committee or any other committee of Directors, and to delegate its authority to
such committees in a manner not inconsistent with the provisions of Delaware
General Corporation law.
Section 3.18 Action Without Meeting
------------ ----------------------
Notwithstanding any provision herein to the contrary, any action which
may be authorized or taken at a meeting of the Board of Directors may be
authorized or taken without a meeting pursuant to the provisions of Delaware
General Corporation law.
ARTICLE 4. OFFICERS
- ---------- --------
Section 4.1 Number and Titles
----------- -----------------
The Officers of the Corporation shall be a Chairman of the Board, a
President, a Secretary, and a Treasurer. The Board of Directors may appoint,
from time to time, by resolution any or all of the following Officers: (a) one
or more Vice Presidents (one of whom may be designated Executive Vice
President), (b) one or more assistant Secretaries, (c) one or more assistant
Treasurers.
Except as otherwise provided, any two or more Offices may be held by
the same person. However, no Officer may execute, acknowledge, or verify any
instrument in more than one capacity if such instrument, as required by law, the
Articles of Incorporation, or the Bylaws, is to be executed, acknowledged, or
verified by two or more Officers.
Section 4.2 Election of Term of Office
----------- --------------------------
All Officers of the Corporation shall be elected or designated annually
by the Board of Directors at the Annual Meeting of the Board of Directors held
after the Annual Meeting of the Shareholders, and
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<PAGE> 8
each Officer shall hold office until his successor shall have been duly elected
and shall have qualified, or until he shall resign or shall have been removed.
At said meeting the Board of Directors may also elect or designate such
subordinate Officers as it shall determine.
Section 4.3 Removal and Resignation
----------- -----------------------
Any Officer may be removed, with or without cause, by a majority vote
by the Board of Directors; provided, however, that such removal shall be without
prejudice to any contract rights, if any, of the person so removed.
Any Officer may resign at any time by giving written notice to the
Board of Directors, to the President, or to the Secretary of the Corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Section 4.4 Vacancies
----------- ---------
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the Board of Directors for the
unexpired portion of the term.
Section 4.5 Chairman of the Board
----------- ---------------------
The Chairman of the Board shall preside at all meetings of the Board of
Directors, may execute all authorized contracts, deeds, or other instruments in
the name of the Corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors. He shall be ex officio a member of all
committees.
Section 4.6 President and Chief Executive Officer
----------- -------------------------------------
The President shall be the Chief Executive Officer of the Corporation
and shall, subject to the control of the Board of Directors, direct the
operations of the Corporation and shall see that all orders and resolutions of
the Board of Directors are carried into effect, and he may execute all
authorized contracts, deeds or other instruments in the name of the Corporation.
All such contracts, deeds or other instruments to be deemed authorized are
subject to prior approval of the Board of Directors, and all such contracts,
deeds or other instruments shall not be binding upon the Company until ratified
by the Board of Directors. In general, he shall have the authority and shall
perform all duties incident to the office of a President of a corporation, and
such other duties as from time to time may be assigned to him by the Board of
Directors. He shall be ex officio a member of all committees. He shall from time
to time report to the Board of Directors all matters within his knowledge which
the interest of the Corporation may require to be brought to their notice.
Section 4.7 Vice President
----------- --------------
The Vice President of the Corporation, if one be elected, under the
direction of the Chief Executive Officer, shall have such powers and perform
such duties as the Board of Directors or the Chief Executive
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<PAGE> 9
Officer may prescribe, from time to time and shall perform such other duties as
may be prescribed in these Regulations. In the case of the death, absence or
inability of the President to act, then the Vice President shall have the powers
and discharge the duties of the President. If there are two or more Vice
Presidents, then the Executive Vice President shall have the powers and
discharge the duties of the President upon his death, absence or inability to
act.
Section 4.8 Secretary
----------- ---------
The Secretary shall attend all meetings of the Shareholders of the
Corporation and of its Board of Directors and shall keep the minutes of all such
meetings in a book or books kept by him for that purpose. He shall keep in safe
custody the seal of the Corporation, if any, and when authorized by the Board of
Directors, he shall affix such seal to any instruments requiring it. The
Secretary may delegate such duties to the attorney or law firm who may represent
the Corporation, from to time. In the absence of a transfer agent or a
registrar, the Secretary shall have charge of the stock certificate books and
the Secretary shall have charge of such other books and papers as the Board of
Directors may direct. He shall also have such other powers and perform such
other duties as pertain to his office, or as the Board of Directors or the Chief
Executive Officer may prescribe from time to time.
Section 4.9 Treasurer.
----------- ----------
The Treasurer, shall have charge of the funds, securities, receipts and
disbursements of the Corporation. He shall supervise the deposit all monies and
other valuable effects in the name and to the credit of the Corporation in such
banks or trust companies or with such other depositories as the Board of
Directors may designate from time to time. He shall supervise and have charge of
keeping correct books of account of all the Corporation's business and
transactions. He shall also have such other powers and perform such other duties
as pertain to his office, or as the Board of Directors or the Chief Executive
Officer may prescribe from time to time.
Section 4.10 Other Officers
------------ --------------
Other Officers of the Corporation may be designated by the Board of
Directors and shall have such powers and duties as may be assigned to or
invested in them by the Board of Directors.
ARTICLE 5. INDEMNIFICATION
- ---------- ---------------
Section 5.1 Third Party Actions.
----------- --------------------
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
including all appeals (other than an action, suit or proceeding by or in the
right of the Corporation) by reason of the fact that he is or was a Director or
Officer of the Corporation, or is or was serving at the request of the
Corporation as a Director, Trustee, Officer, or employee of another corporation,
partnership, joint venture or trust or other enterprise, against expenses
(including attorneys fees), judgments, decrees, fines, penalties and amounts
paid in settlement actually and reasonably
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incurred by him in connection with such action, suit, or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation and, with respect to any criminal action
or proceeding, he had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit, or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interest of the Corporation and, with respect to any criminal action or
proceeding, has reasonable cause to believe that his conduct was unlawful.
Section 5.2 Derivative Actions
----------- ------------------
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action or
suit, including all appeals, by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a Director or
Officer of the Corporation, or is or was serving at the request of the
Corporation as a Director, Trustee, Officer, or employee of another Corporation,
partnership, joint venture, trust, or other enterprise against expenses
(including attorneys fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, except that no indemnification shall be made in
respect of any claim, issue, or matter as to which such person shall have been
fully adjudged to be liable for negligence or misconduct in the performance of
his duty to the Corporation unless and only to the extent that the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to be indemnified for
such expenses as the court shall deem proper.
Section 5.3 Rights After Successful Defense
----------- -------------------------------
To the extent that a Director or Officer has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to in
Section 5.1 or 5.2, or in the defense of any claim, issue, or matter therein, he
shall be indemnified against expenses (including attorneys fees) actually and
reasonably incurred by him in connection herewith.
Section 5.4 Other Determinations of Rights
----------- ------------------------------
Except in a situation governed by Section 5.3, any indemnification
under Section 5.1 or 5.2 (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the Director or Officer is proper under the circumstances
because he has met the applicable standard of conduct set forth in Sections 5.1
or 5.2. Such determination shall be made (a) by a majority vote of Directors
acting at a meeting at which a quorum consisting of Directors who were not
parties to such action, suit, or proceeding is present, or (b) if such a quorum
is not obtainable (or even if obtainable, and a majority of disinterested
Directors so directs), by independent legal counsel (compensated by the
Corporation) in a written opinion, or by the affirmative vote in person or by
proxy of the holders of a majority of the shares entitled to vote in the
election of Directors, without regard to voting power which may thereafter exist
upon a default, failure or other contingency.
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Section 5.5 Advances of Expenses
----------- --------------------
Expenses of each person indemnified hereunder incurred in defending a
civil, criminal, administrative, or investigative action, suit, or proceeding
(including all appeals), or threat thereof, may be paid by the Corporation in
advance of the final disposition of such action, suit, or proceeding as
authorized by the Board of Directors, whether a disinterested quorum exists or
not, upon receipt of an undertaking by or on behalf of the Director or Officer
to repay such amount unless it shall be ultimately determined that he is
entitled to be indemnified by the Corporation.
Section 5.6 Non-Exclusiveness; Heirs
----------- ------------------------
The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled as a matter of law or under the Articles of Incorporation, or the
Regulations, any agreement, vote of Shareholders, any insurance purchased by the
Corporation, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a Director or Officer and shall inure to the benefit
of the heirs, executors, and administrators of such a person.
Section 5.7 Purchase of Insurance
----------- ---------------------
The Corporation may purchase and maintain insurance on behalf of any
person who is or was a Director or Officer of the Corporation, or is or was
serving at the request of the Corporation as a Director, Trustee, Officer or
employee of another corporation, partnership, joint venture, trust, or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article or of the General Corporation Law.
ARTICLE 6. SHARES
- ---------- ------
Section 6.1 Certificates
----------- ------------
Certificates for shares shall be of such form and style, printed or
otherwise, as the Board of Directors may designate, in compliance with the
provisions of Delaware General Corporation law.
All share certificates shall be signed by two officers of the
Corporation. If a certificate is countersigned by an incorporated transfer
agent or registrar, the signature of any of said Officers of the Corporation may
be facsimile engraved, stamped, or printed. Although the Officer whose signature
is affixed to such a certificate ceases to be an Officer before the certificate
is delivered, such certificate nevertheless shall be effective in all respects
when delivered.
Section 6.2 Consideration
----------- -------------
The consideration for the issuance of shares may be paid, in whole or
in part, in money, or other property actually received, tangible or intangible,
or in labor performed for the Corporation. When
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authorized by Delaware General Corporation law, the promissory notes or future
services shall constitute payment, or part-payment for shares of the Corporation
at the discretion of the Board of Directors.
Neither shares, nor certificates representing such shares, may be
issued by the Corporation until the full amount of the consideration has been
paid. When such consideration has been paid to the Corporation, the certificate
representing such shares shall be issued to the Shareholder.
Section 6.3 Lost or Destroyed Shares
----------- ------------------------
When a share certificate has been lost, or appears to have been
destroyed or wrongfully taken, and the owner fails to notify the Corporation of
that fact within a reasonable time after he has notice of it, and the
Corporation registers a transfer of the share represented by the certificate
before receiving such a notification, the owner is precluded from asserting
against the Corporation any claim arising from the registration of the transfer
or any claim to a new certificate.
When the holder of a share certificate claims that the certificate has
been lost, destroyed, or wrongfully taken, the Corporation shall issue a new
certificate in place of the original certificate if the owner:
(1) So requests before the Corporation has notice that the
security has been required by a bona fide purchaser;
(2) Files with the Corporation any indemnity bond, which the
Corporation may reasonably require; and
(3) Satisfies any other reasonable requirements imposed by the
Corporation.
If, after the issuance of a new certificate as a replacement for a
lost, destroyed, or wrongfully taken certificate, a bona fide purchaser of the
original certificate presents it for registration of transfer, the Corporation
must register the transfer unless registration would result in overissue. In
addition to any rights on the indemnity bond, the Corporation may recover the
new certificate from the person to whom it was issued or any person taking under
him except a bona fide purchaser.
Section 6.4 Conditions of Transfer
----------- ----------------------
A person in whose name shares of stock stand on the books of the
Corporation shall be deemed the owner thereof as regards the Corporation;
provided that whenever any transfer of shares shall be made for collateral
security, and not absolutely, and written notice thereof shall be given to the
Secretary of the Corporation or its Transfer Agent, if any, such fact shall be
stated in the entry of the transfer.
When a transfer of shares is requested and there is reasonable doubt as
to the right of the person seeking the transfer, the Corporation, or its
transfer agent, before recording the transfer of the shares on its books or
issuing any certificate therefor, may require from the person seeking the
transfer reasonable proof of his right to the transfer. If there remains a
reasonable doubt of the right to the transfer, the Corporation may refuse a
transfer unless the person gives adequate security or a bond of indemnity
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executed by a corporate surety or by two individual sureties satisfactory to the
Corporation as to form, amount, and responsibility of the sureties. The bond
shall be conditioned to protect the Corporation, its Officers, transfer agents,
and registrars, or any of them, against any loss, damage, expense, or other
liability to the owner of the shares by reason of the recording of the transfer
or the issuance of a new certificate for shares.
If required by Federal or State Securities law, or if recommended by
legal counsel for the Corporation, the Secretary of the Corporation, or the
Transfer Agent, may place stop transfer instructions upon the stock certificates
issued by the Corporation. Furthermore, the Secretary of the Corporation, or the
Transfer Agent, if any, may refuse to transfer any shares of stock, except upon
the issuance of a favorable written opinion of legal counsel for the Corporation
to the effect that the resale, pledge, hypothecation or other transfer of the
stock of the Corporation shall not be in violation of any Federal or State
Securities Act, or any rule or regulation promulgated thereunder.
ARTICLE 7. CORPORATE RECORDS, REPORTS, AND INSTRUMENTS
- ---------- -------------------------------------------
Section 7.1 Record Dates
----------- ------------
The Board of Directors may fix a record date, in compliance with
Delaware General Corporation law for any lawful purpose, including, without
limitation the determination of the Shareholders who are entitled to:
(1) Receive notice of or to vote at a meeting of Shareholders; or
(2) Receives payment of any dividend or distributions; or
(3) Receive or exercise rights of purchase of or subscription for,
or exchange or conversion of shares or other securities,
subject to contractual rights with respect thereto; or
(4) Participate in the execution of written consents, waivers, or
releases.
Section 7.2 Records, Books of Account, and Minutes
----------- --------------------------------------
The Corporation shall keep correct and complete books and records of
account, together with minutes of proceedings of its Incorporators,
Shareholders, Directors and Committees of the Directors, and records or its
Shareholders showing their names and addresses and the number and class of
shares issued or transferred of record to or by them, from time to time, and
such other books and records as the Secretary may deem necessary and
appropriate, from time to time.
Section 7.3 Execution of Instruments
----------- ------------------------
Unless otherwise specifically determined by the Board of Directors, or
otherwise required by law, formal contracts of the Corporation, promissory
notes, mortgages, and other evidences of indebtedness of the Corporation, and
other Corporate instruments or documents, and certificates of shares of stock
owned
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by the Corporation, shall be executed, signed, or endorsed by the President or
any Vice President and by the Secretary or Treasurer, or any Assistant Secretary
or Assistant Treasurer, and shall have the corporate seal, if any, affixed
thereto.
All funds of the Corporation shall be deposited from time to time to
the credit of the Corporation with such banks, bankers, trust companies, or
other depositories as the Board of Directors may select or as may be selected by
any Officer or Officers, agent or agents of the Corporation to whom such power
may be delegated from time to time by the Board of Directors.
Except as otherwise provided by the Regulations, all checks, drafts, or
other order for payment of money, notes, or other evidences of indebtedness,
issued in the name of or payable to the Corporation, shall be signed or endorsed
by such person or persons and in such manner as shall be determined from time to
time by resolution of the Board of Directors.
ARTICLE 8. MISCELLANEOUS
- ---------- -------------
Section 8.1 Voting Upon Shares Held by the Corporation
----------- ------------------------------------------
Unless otherwise ordered by the Board of Directors, the Secretary, in
person or by proxy, appointed by him, shall have full power and authority on
behalf of the Corporation to vote, act and consent with respect to any shares
issued by other corporations which the Corporation may own. The Corporation
shall not directly or indirectly vote upon any shares issued by it.
Section 8.2 Corporate Seal
----------- --------------
The Board of Directors may, at their option, adopt, use and thereafter
alter a corporate seal. Such seal shall be circular in form, with the name of
the Corporation stamped on the margin and the words "Delaware" and "Seal"
stamped across the center.
Section 8.3 Fiscal Year
----------- -----------
The fiscal year of the Corporation shall be as determined by the Board
of Directors, from time to time.
Section 8.4 Consistency With Articles of Incorporation
----------- ------------------------------------------
If any provision of these Regulations shall be inconsistent with
General Corporate Law, with the Articles of Incorporation, and as they may be
amended, from time to time, or a Close Corporation Agreement, as the same may be
adopted, or amended, from time to time, by the Shareholders, pursuant to
Delaware General Corporation law, such Corporate Law, the Articles or such
Agreement, as the case may be, shall govern.
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Section 8.5 Emergency Regulations
----------- ---------------------
The Board of Directors are empowered to adopt emergency regulations
prior to the occurrence of an emergency, to the extent permitted by Delaware
General Corporation law.
Section 8.6 Conduct of Meetings
----------- -------------------
Shareholders' meetings shall be presided over by the Chairman of the
Board or, in his absence, by a Chairman chosen at the meeting by the holders of
a majority of the voting shares present in person or by proxy. The Secretary of
the Corporation, or, in his absence, an Assistant Secretary, or, if no such
officer is present, a person designated by the presiding officer, shall act as
Secretary of the meeting.
The most recent edition of ROBERT'S RULES OF ORDER, except to the
extent such Rules are inconsistent with law, the Articles of Incorporation or
the Regulations, if any, shall govern the conduct of all Shareholders' meetings
and Board of Directors' meetings.
Section 8.7 Order of Business
----------- -----------------
The order of business at all Annual Meetings, and insofar as
practicable at special meetings, of the Shareholders and Board of Directors
shall be as follows:
(1) Call to order.
(2) Proof of due notice of the meeting by the Secretary.
(3) Roll call.
(4) Presentation and examination of proxies.
(5) Announcement of a quorum.
(6) Reading, or waiver thereof, correction, and approval of the
minutes of the previous meeting.
(7) Announcements.
(8) Reports of Officers.
(9) Reports of committees.
(10) Election of Directors or Officers.
(11) Old, or unfinished business.
(12) New business.
(13) Adjournment.
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Section 8.8 Amendment
----------- ---------
These Bylaws may be altered, amended, or repealed at the Annual Meeting
of the Board of Directors, at any special meeting of the Board called for that
purpose, at the Annual Meeting of the Shareholders or at any special meeting of
the shareholders called for that purpose.
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<PAGE> 1
Exhibit 6(A)
BUSINESS LOAN AGREEMENT
Borrower: American Stone Corporation Lender: First National Bank of Ohio
48 Lavender Avenue 123 West Prospect Avenue
Toronto, Canada M6N 2B7 Cleveland, OH 44115
- --------------------------------------------------------------------------------
THIS BUSINESS LOAN AGREEMENT between American Stone Corporation ("Borrower") and
First National Bank of Ohio ("Lender") is made and executed on the following
terms and conditions. Borrower has received prior commercial loans from Lender
or has applied to Lender for a commercial loan or loans and other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of September 13, 1996, and shall
continue thereafter until all indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this
Business Loan Agreement from time to time.
Borrower: The word "Borrower" means American Stone Corporation. The
word "Borrower" also includes, as applicable, all subsidiaries and
affiliates of Borrower as provided below in the paragraph titled
"Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
Cash Flow. The words "Cash Flow" mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and
amortization.
Collateral. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan,
whether real or personal property, whether granted directly or
indirectly, whether granted now or in the future, and whether granted
in the form of a security interest, mortgage, deed of trust,
assignment, pledge, chattel mortgage, chattel trust, factor's lien,
equipment trust, conditional sale, trust receipt lien, charge, lien or
title retention contract, lease or
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<PAGE> 2
09-13-1996 BUSINESS LOAN AGREEMENT PAGE 2
LOAN NO. (CONTINUED)
consignment intended as a security device, or any other security or
lien interest whatsoever, whether created by law, contract, or
otherwise.
Debt. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation each
and all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all
Borrowers granting such a Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well
as all claims by Lender against Borrower, or any one or more of them;
whether now or hereafter existing, voluntary or involuntary, due or not
due, absolute or contingent, liquidated or unliquidated; whether
Borrower may be liable individually or jointly with others; whether
Borrower may be obligated as a guarantor, surety, or otherwise; whether
recovery upon such Indebtedness may be or hereafter may become barred
by any statute of limitations; and whether such Indebtedness may be or
hereafter may become otherwise unenforceable.
Lender. The word "Lender" means First National Bank of Ohio, its
successors and assigns.
Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand
plus Borrower's receivables.
Loan. The word "Loan" or "Loans" means and includes without limitation
any and all commercial loans and financial accommodations from Lender
to Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to
this Agreement from time to time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan
obligations in favor of Lender, as well as any substitute, replacement
or refinancing note or notes therefor.
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guarantees, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Indebtedness.
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<PAGE> 3
09-13-1996 BUSINESS LOAN AGREEMENT PAGE 3
LOAN NO. (CONTINUED)
Security Agreement. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
Security Interest. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the form
of a lien, charge, mortgage, deed of trust, assignment, pledge, chattel
mortgage, chattel trust, factor's lien, equipment trust, conditional
sale, trust receipt, lien or title retention contract, lease or
consignment intended as a security device, or any other security or
lien interest whatsoever, whether created by law, contract, or
otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
Subordinated Debt. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written
agreement. Indebtedness owed by Borrower to Lender in form and
substance acceptable to Lender.
Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's
total assets excluding all intangible assets (i.e., goodwill,
trademarks, patents, copyrights, organizational expenses, and similar
intangible items, but including leaseholds and leasehold improvements)
less total Debt.
Working Capital. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current
liabilities.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender as of
the date of this Agreement and as of the date of each disbursement of Loan
proceeds:
Organization. Borrower is a corporation which is duly organized,
validly existing, and in good standing under the laws of the State of
Delaware. Borrower has the full power and authority to own its
properties and to transact the businesses in which it is presently
engaged or presently proposes to engage. Borrower also is duly
qualified as a foreign corporation and is in good standing in all
states in which the failure to so qualify would have a material adverse
effect on its businesses or financial condition.
Authorization. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be
executed, delivered or performed by Borrower, have been duly authorized
by all necessary action by Borrower; do not require the consent or
approval of any other person, regulatory authority or governmental
body; and do not conflict with, result in a violation of, or constitute
a default under (a) any provision of its articles of incorporation or
organization, or bylaws or code of regulations, or any agreement or
other instrument binding upon Borrower or (b) any law, governmental
regulation, court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as
of the date of the statement, and there has been no material adverse
change in Borrower's financial condition subsequent to the date of the
most recent
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<PAGE> 4
09-13-1996 BUSINESS LOAN AGREEMENT PAGE 4
LOAN NO. (CONTINUED)
financial statement supplied to Lender. Borrower has no material
contingent obligations except as disclosed in such financial
statements.
Legal Effect. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered
will constitute, legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms.
Properties: Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes
not presently due and payable, Borrower owns and has good title to all
of Borrower's properties free and clear of all Security Interests, and
has not executed any security documents or financing statements
relating to such properties. All of Borrower's properties are titled in
Borrower's legal name, and Borrower has not used, or filed a financing
statement under, any other name for at least the last five (5) years.
Hazardous Substances. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used in
this Agreement shall have the same meanings as set forth in the
"CERCLA," "SARA," the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery Act, 48
U.S.C. Section 6901, et seq., or other applicable state or Federal
laws, rules, or regulations adopted pursuant to any of the foregoing.
Except as disclosed to and acknowledged by Lender in writing, Borrower
represents and warrants that (a) During the period of Borrower's
ownership of the properties, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or substance by any person on, under, or
about any of the properties. (b) Borrower has no knowledge of, or
reason to believe that there has been (i) any use, generation,
manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or substance by any prior owners or
occupants of any of the properties, or (ii) any actual or threatened
litigation or claims of any kind by any person relating to such
matters. (c) Neither Borrower nor any tenant, contractor, agent or
other authorized user of any of the properties shall use, generate,
manufacture, store, treat, dispose of, or release any hazardous waste
or substance on, under, or about any of the properties; and any such
activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations, and ordinances, including without
limitation those laws, regulations and ordinances described above.
Borrower authorizes Lender and its agents to enter upon the properties
to make such inspections and tests as Lender may deem appropriate to
determine compliance of the properties with this section of the
Agreement. Any inspections or tests made by Lender shall be at
Borrower's expense and for Lender's purposes only and shall not be
construed to create any responsibility or liability on the part of
Lender to Borrower or to any other person. The representations and
warranties contained herein are based on Borrower's due diligence in
investigating the properties for hazardous waste. Borrower hereby (a)
releases and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or other
costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of
the Agreement or as a consequence of any use, generation, manufacture,
storage, disposal, release or threatened release occurring prior to
Borrower's ownership or interest in the properties, whether or not the
same was or should have been known to Borrower. The provisions of this
section of the Agreement, including the obligation to indemnify, shall
survive the payment of the Indebtedness
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<PAGE> 5
09-13-1996 BUSINESS LOAN AGREEMENT PAGE 5
LOAN NO. (CONTINUED)
and the termination or expiration of this Agreement and shall not be
affected by Lender's acquisition or any interest in any of the
properties, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Borrower is pending or threatened, and no other event
has occurred which may materially adversely affect Borrower's financial
condition or properties, other than litigation, claims, or other
events, if any, that have been disclosed to and acknowledged by Lender
in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports
of Borrower that are or were required to be filed, have been filed, and
all taxes, assessments and other governmental charges have been paid in
full, except those presently being or to be contested by Borrower in
good faith in the ordinary course of business and for which adequate
reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
Interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrowers Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests and
rights in and to such Collateral.
Binding Effect. This Agreement, the Note and all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note
are binding upon Borrower as well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in accordance
with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable
Event nor Prohibited Transaction (as defined in ERISA) has occurred
with respect to any such plan, (ii) Borrower has not withdrawn from any
such plan or initiated steps to do so, and (iii) no steps have been
taken to terminate any such plan.
Location of Borrower's Offices and Records. The chief place of business
of Borrower and the office or offices where Borrower keeps its records
concerning the Collateral is located at 48 Lavender Avenue, Toronto,
Canada M6N 2B7.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purpose of or in connection
with this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender
will be, true and accurate in every material respect on the date as of
which such information is dated or certified; and none of such
information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading.
Survival of Representation and Warranties. Borrower understands and
agrees that Lender is relying
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09-13-1996 BUSINESS LOAN AGREEMENT PAGE 6
LOAN NO. (CONTINUED)
upon the above representations and warranties in extending Loan Advance
to Borrower. Borrower further agrees that the foregoing representations
and warranties shall be continuing in nature and shall remain in full
force and effect until such time as Borrower's Loan and Note shall be
paid in full, or until this Agreement shall be terminated in the manner
provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all litigation and
claims and all threatened litigation and claims affecting Borrower or any
Guarantor which could materially affect the financial condition of Borrower or
the financial condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis, and
permit Lender to examine and audit Borrower's books and records at all
reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but in
no event later than ninety (90) days after the end of each fiscal year,
Borrower's balance sheet and income statement for the year ended, audited by a
certified public accountant satisfactory to Lender, and, as soon as available,
but in no event later than thirty (30) days after the end of each month,
Borrower's balance sheet and profit and loan statement for the period ended,
prepared and certified as correct to the best knowledge and belief by Borrower's
chief financial officer or person acceptable to Lender. All financial reports
required to be provided under this Agreement shall be prepared in accordance
with generally accepted accounting principles, applied on a consistent basis,
and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and
statements, lists of assets and liabilities, aging of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports with
respect to Borrower's financial condition and business operations as Lender may
request from time to time.
Financial Covenants and Ratios. Comply with the following covenants and
ratios:
Tangible Net Worth. Maintain a minimum Tangible Net Worth of
not less than $3,200,000.00 at 12/31/96 and increasing by
$50,000.00 annually thereafter.
Net Worth Ratio. Maintain a ratio of Total Liabilities to
Tangible Net Worth of less than 0.50 to 1.00, measured
monthly.
Current Ratio. Maintain a ratio of Current Assets to Current
Liabilities in excess of 1.20 to 1.00, measured monthly.
Other Ratio. Maintain a ratio of Minimum debt service coverage
(Net Income + Depreciation)/(CMLTD + CM Capital Leases),
measured on a monthly basis of 1.20 to 1.00.
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09-13-1996 BUSINESS LOAN AGREEMENT PAGE 7
LOAN NO. (CONTINUED)
For purposes of this Agreement and to the extent the following terms
are utilized in this Agreement, the term "Tangible Net Worth" shall mean
Borrower's total assets excluding all intangible assets (i.e., goodwill,
trademarks, patents, copyrights, organizational expenses, and similar intangible
items, but including leaseholds and leasehold improvements) less total Debt. The
term "Debt" shall mean all of Borrower's liabilities excluding Subordinated
Debt. The term "Subordinated Debt" shall mean indebtedness and liabilities of
Borrower which have been subordinated by written agreement to indebtedness owed
by Borrower to Lender in form and substance acceptable to Lender. The term
"Working Capital" shall mean Borrower's current assets, excluding prepaid
expenses, less Borrower's current liabilities. The term "Liquid Assets" shall
mean Borrower's cash on hand plus Borrower's receivables. The term "Cash Flow"
shall mean net income after taxes, and exclusive of extraordinary gains and
income, plus depreciation and amortization. Except as provided above, all
computations made to determine compliance with the requirements contained in
this paragraph shall be made in accordance with generally accepted accounting
principles, applied on a consistent basis, and certified by Borrower as being
true and correct.
Insurance. Maintain the fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon request of
Lender, will deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations that coverages
will not be canceled or diminished without at least ten (10) days' prior written
notice to Lender. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any way by
any act, omission or default of Borrower or any other person. In connection with
all policies, covering assets in which Lender holds or is offered a security
interest for the Loans, Borrower will provide Lender with such loss payable or
other endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports
on each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the name of
the insurer; (b) the risks insured; (c) the amount of the policy; (d) the
properties insured; (e) the then current property values on the basis of which
insurance has been obtained, and the manner of determining those values; and (f)
the expiration date of the policy. In addition, upon request of the Lender
(however no more often than annually), Borrower will have an independent
appraiser satisfactory to Lender determine, as applicable, the actual cash value
or replacement cost of any Collateral.
Guaranties. Prior to disbursement of any Loan proceeds, furnish
executed guaranties of the Loans in favor or Lender, on Lender's forms, and in
the amount and by the guarantor named below:
<TABLE>
<CAPTION>
Guarantor Amount
--------- ------
<S> <C>
American Stone Industries, Inc. $750,000.00
</TABLE>
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any other
party and notify Lender immediately in writing of any default in connection with
any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in writing.
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09-13-1996 BUSINESS LOAN AGREEMENT PAGE 8
LOAN NO. (CONTINUED)
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature, imposed
upon Borrower or its properties, income, or profits, prior to the date on which
penalties would attach, and all lawful claims that, if unpaid, might become a
lien or charge upon any of Borrower's properties, income, or profits. Provided,
however, Borrower will not be required to pay and discharge any such assessment,
tax, charge, levy, lien or claim so long as (a) the legality of the same shall
be contested in good faith by appropriate proceedings, and (b) Borrower shall
have established on its books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance with generally
accepted accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies, liens and
claims and will authorize the appropriate governmental official to deliver to
Lender at any time a written statement of any assessments, taxes, charges,
levies, liens and claims against Borrower's properties, income, or profits.
Performance. Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in all other instruments and
agreements between Borrower and Lender in a timely manner, and promptly notify
Lender if Borrower learns of the occurrence of any event which constitutes an
Event of Default under this Agreement.
Operations. Substantially maintain its present executive and management
personnel, conduct its business affairs in a reasonable and prudent manner and
in compliance with all applicable federal, state and municipal laws, ordinances,
rules and regulations respecting its properties, charters, businesses and
operations, including without limitation, compliance with the Americans With
Disabilities Act and with all minimum funding standards and other requirements
of ERISA and other laws applicable t Borrower's employee benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable time
to inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records and
to make copies and memoranda of Borrower's books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any records
it may request, all at Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender, provide
Lender at least annually and at the time of each disbursements of Loan proceeds
with a certificate executed by Borrower's chief financial officer, or other
officer or person acceptable to Lender, certifying that the representations and
warranties set forth in this Agreement are true and correct as of the date of
the certificate and further certifying that, as of the date of the certificate,
no Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all
respects with all environmental protection federal, state and local laws,
statutes, regulations and ordinances; not cause of permit to exist, as a result
of an intentional or unintentional action or omission on its part or on the
apart of any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local government authorities;
shall furnish to Lender
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09-13-1996 BUSINESS LOAN AGREEMENT PAGE 9
LOAN NO. (CONTINUED)
promptly and in any event within thirty (30) days after receipt thereof a copy
of any notice, summons, lien, citation, directive, letter or other communication
from any governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection with any
environmental activity whether or not there is damage to the environment and/or
other natural resources.
Additional Assurances. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds or trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to perfect
all Security interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money, including
capital leases, (b) sell, transfer, mortgage, assign, pledge, lease, grant a
security interest in, or encumber any of Borrower's assets, or (c) sell with
recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged, (b)
cease operations, liquidate, merge, transfer, acquire or consolidate with any
other entity, change ownership, dissolve or transfer or sell Collateral out of
the ordinary course of business, (c) pay any dividends on Borrower's stock
(other than dividends payable in its stock), provided, however, that
notwithstanding the foregoing, but only so long as no Event of Default has
occurred and is continuing or would result from the payment of dividends, if
Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue
Code of 19___ as amended), Borrower may pay cash dividends on its stock to its
shareholders from time to time in amounts necessary to enable the shareholders
to pay income taxes and make estimated income tax payments to satisfy their
liabilities under federal and state law which arise solely from their status as
Shareholders of a Subchapter S Corporation because of their ownership of shares
of stock of Borrower, or (d) purchase or retire any of Borrower's outstanding
shares or alter or amend Borrower's capital structures.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance
money or assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surety or guarantor other
than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceed it:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower becomes insolvent, files a petition in
bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there occurs a
material adverse change in Borrower's financial condition, in the financial
condition of any Guarantor, or in the value of any Collateral securing any Loan;
(d) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke
such Guarantor's guaranty of the Loan or any other loan with Lender; or (e)
Lender in good faith deems itself insecure, even though no Event of Default
shall have occurred.
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09-13-1996 BUSINESS LOAN AGREEMENT PAGE 10
LOAN NO. (CONTINUED)
LETTER OF CREDIT. "Borrower hereby authorizes Lender to draw against this Line
of Credit of reimbursement of any payments made by Lender pursuant to any Letter
of Creditor or Check Guarantee Letter issued by Lender, or any affiliate of the
Lender, the for the account of the Borrower. Borrower agrees to reimburse Lender
for any such payments in accordance with the terms of this agreement. Borrower
agrees that Lender may reduce the availability of this Line of Credit by the
amount of the Letter of Creditor or Check Guarantee Letter for the period of
time that the Letter of Creditor or Check Guarantee Letter is outstanding if the
Letter of Creditor or Check Guarantee Letter is issued against this Line of
Credit."
FINANCIAL INFORMATION - GUARANTOR. The Guarantor shall provide the Bank on an
annual basis with review-quality financial statements within ninety (90) days of
the fiscal year-end.
BORROWING AMOUNT LIMITATIONS. This Revolving Line of Credit shall be limited to
the lesser of (a) $750,000.00 or (b) seventy-five percent (75%) of eligible
Accounts Receivable aged less than sixty (60) days plus fifty percent (50%) of
eligible Inventory not to exceed $375,000.00.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extend permitted by applicable law,
to charge or setoff all sums owing on the indebtedness against any and all such
accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement.
Default on indebtedness. Failure of Borrower to make any payment when
due on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or to perform any other term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
Default in Favor of Third Parties. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or of the
Related Document.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
this Agreement or the Related Documents is false or misleading in any
material respect either now or at the time made or furnished.
Detective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any Security Agreement to cease a valid and perfected Security
Interest) at any time and for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the
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09-13-1996 BUSINESS LOAN AGREEMENT PAGE 11
LOAN NO. (CONTINUED)
insolvency of Borrower, the appointment of a receiver for any part of
Borrower's property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any proceeding under
any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Borrower or Grantor, as the case may
be, as to the validity or reasonableness of the claim which is the
basis of the creditor or forfeiture proceeding, and if Borrower or
Grantor gives Lender written notice of the creditor or forfeiture
proceeding and furnishes reserves or a surety bond for the creditor or
forfeiture proceeding satisfactory to Lender.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the indebtedness or such Guarantor
dies or comes incompetent or any Guarantor revokes any guaranty of the
indebtedness. Lender, at his option, may, but shall not be required to,
permit the Guarantor's estate to assume unconditionally the obligations
arising under the guaranty in a manner satisfactory to Lender, and, in
doing so, cure the Event of Default.
Change in Ownership. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been
given a notice of a similar default within the preceding twelve (12)
months, it may be cured (and no Event of Default will have occurred) if
borrower or Grantor, as the case may be, after receiving written notice
from Lender demanding cure of such default: (a) cures the default
within fifteen (15) days; or (b) if the cure requires more than fifteen
(15) days, immediately initiates steps which Lender deems in Lender's
sole discretion to be sufficient to cure the default and thereafter
continues and completes all reasonable and necessary steps sufficient
to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon
as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If an Event of Default shall occur, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option, all
Loans immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement.
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No
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09-13-1996 BUSINESS LOAN AGREEMENT PAGE 12
LOAN NO. (CONTINUED)
alteration of or amendment to this Agreement shall be effective unless
given in writing and signed by the party or parties sought to be
charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and
accepted by Lender in the State of Ohio. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of
the courts of Cuyahoga County, the State of Ohio. This Agreement shall
be governed by and construed in accordance with the laws of the State
of Ohio.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower
under this Agreement shall be joint and several, and all references to
Borrower shall mean each and every Borrower. This means that each of
the persons signing below is responsible for all obligations in this
Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participations
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchases, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any
other matter relating to the Loan, and Borrower hereby waives any
rights to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such
participation interests. Borrower also agrees that the purchaser of any
such participation interests will be considered as the absolute owners
of such interests in the Loans and will have all the rights granted
under the participation agreement or agreements governing the sale of
such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or
against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligations under the Loans irrespective of the failure or
insolvency of any holder of any interest in the Loans. Borrower further
agrees that the purchaser of any such participation interests may
enforce its interests irrespective of any personal claims or defenses
that Borrower may have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's
out-of-pocket expenses, including without limitation attorneys' fees,
incurred in connection with the preparation, execution, enforcement and
collection of this Agreement or in connection with the Loans made
pursuant to this Agreement. Lender may pay someone else to help collect
the Loans and to enforce this Agreement, and Borrower will pay that
amount. This includes, subject to any limits under application law,
Lender's attorneys' fees and Lender's legal expenses, whether or not
there is a lawsuit, including attorneys' fees for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all
other costs provided by law.
Notices. All notices required to be given under this Agreement shall be
given in writing and shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier or deposited
in the United States mail, first class, postage prepaid, addressed to
the party to whom the notice is to be given at the address shown above.
Any party may change its address for notices
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09-13-1996 BUSINESS LOAN AGREEMENT PAGE 13
LOAN NO. (CONTINUED)
under this Agreement by giving formal written notice to the other
parties, specifying that the purpose of the notice is to change the
party's address. To the extent permitted by applicable law. If there is
more than one Borrower, notice to any Borrower will constitute notice
to all Borrowers. For notice purposes, Borrower agrees to keep Lender
informed at all times of Borrower's current address(es).
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible,
any such offending provision shall be deemed to be modified to be
within the limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be stricken and all
other provisions of this Agreement in all other respects shall remain
valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of
any provisions of this Agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the word
"Borrower" as used herein shall include all subsidiaries and affiliates
of Borrower. Notwithstanding the foregoing, however, under no
circumstances shall this Agreement be construed to require Lender to
make any Loan or other financial accommodation to any subsidiary or
affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall
inure to the benefit of Lender, its successors and assigns. Borrower
shall not, however, have the right to assign its rights under this
Agreement or any interest therein, without the prior written consent of
Lender.
Survival. All warranties, representatives, and covenants made by
Borrower in this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement shall be
considered to have relied upon by Lender and will survive the making of
the Loan and delivery to Lender of the Related Documents, regardless of
any investigation made by Lender or on Lender's behalf.
Time is of the Essence. Time is of the essence in the performance of
this Agreement.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any obligations of
Borrower or of any Grantor as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting of
such consent by Lender in any instance shall not constitute continuing
consent in subsequent instances where such consent is required, and in
all cases such consent may be granted or withheld in the sole
discretion of Lender.
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09-13-1996 BUSINESS LOAN AGREEMENT PAGE 14
LOAN NO. (CONTINUED)
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
SEPTEMBER 13, 1996.
BORROWER:
American Stone Corporation
By:
----------------------------------
David Tyrrell, President
LENDER:
First National Bank of Ohio
By:
----------------------------------
Authorized Officer
Page 105
<PAGE> 1
Exhibit 6(B)
AMENDMENT TO LOAN AGREEMENT
Pursuant to a certain Loan Agreement between American Stone Corporation and
First National Bank of Ohio dated September 13, 1996, and whereas the parties to
the Loan Agreement desire to amend the Affirmative Covenants section of the Loan
Agreement;
Now, therefore, the Financial Covenants and Ratios are hereby amended as
follows:
1) The minimum Tangible Net Worth requirement is hereby amended as
follows: Borrower will maintain a minimum Tangible Net Worth of
$2,100,000 as of March 31, 1997, and increase by $50,000 by the end of
each fiscal year starting with the fiscal year ending 12/31/97.
2) The Net Worth Ratio requirement is hereby amended as follows:
Borrower's ratio or Total Liabilities to Tangible Net Worth will not
exceed 1 to 1 effective March 31, 1997.
3) The Current Ratio requirement is hereby deleted from the Loan Areement.
4) The Minimum Debt Service Coverage ratio is hereby amended as follows:
Borrower will maintain a minimum ratio of net income plus depreciation
to current portion of long term debt and capital leases from the prior
fiscal year-end of 1 to 1 effective December 31, 1997, and annually
thereafter.
For the purposes of the above calculations, Total Liabilities will be defined as
total liabilities less subordinated debt, which includes loans payable to
American Stone Industries; and Tangible Net Worth will be defined as total
asssets minus the sum of intangible assets and Total Liabilities.
It is expressly agreed by the parties hereto that this Amendment to Loan
Agreement does not change any other terms or conditions of said Loan Agreement
not specifically amended herein, and that all such terms and conditions not
amended shall remain in full force and effect and are expessly applicable to the
terms of this Agreement to the Loan Agreement.
This Amendment is dated February 26, 1997
FIRST NATIONAL BANK OF OHIO AMERICAN STONE CORPORATION
By: By:
--------------------------- -----------------------------
Lawrence P. Allen David Tyrrell
Assistant Vice President President
Page 106
<PAGE> 1
Exhibit 6(C)
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT shall be effective as of February 7,1996;
BETWEEN:
AMERICAN STONE CORPORATION, a corporation incorporated
under the laws of the State of Delaware (the "Employer")
-and-
DAVID TYRRELL of the City of Toronto in the Province of
Ontario (the "Employee")
WHEREAS the Employer is desirous of retaining the services of the
Employee in the position of President of the Employer upon the terms and
conditions herein contained and the Employee is agreeable to providing such
services.
AND WHEREAS the terms "affiliate" and "associate" when used herein
shall have the respective meaning ascribed to them in the Business Corporations
Act (Ontario);
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants hereinafter contained and provided for, the parties hereto
covenant and agree as follows:
1 RETENTION, DUTIES AND POWERS OF THE EMPLOYEE
- - --------------------------------------------
.1 TERM. Subject to the terms and conditions hereinafter set forth, the Employer
hereby appoints the employee as President of the Employer. Such employment shall
commence on the effective date hereof and shall expire on December 31, 2000
(such period referred to herein as the "Term") unless otherwise terminated in
accordance with the provisions hereof.
.2 RENEWAL. This employment agreement, following the end of the Term, shall be
automatically renewed for successive one year periods (each a "Renewal Term")
unless terminated by either party in accordance with Article 4 hereof.
.3 DUTIES AND SERVICES.
(a) The services provided by and duties of the Employee hereunder shall
be those customarily or commonly provided by or performed by a president of a
corporation such as the Employer, including, but not limited to:
I. product development, including product sourcing,
product formulation and specifications; product
logistics, packaging development and pricing;
II. operations, including employment hiring and firing,
accounting;
III. procurement, including raw material sourcing and
purchasing;
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IV. product and project coordination, including plant
sourcing, project management and quality control;
V. strategic planning, including assisting the board of
directors in finalizing annual budgets, making
recommendations on obtaining new plant and equipment,
and exclusively making all capital expenditures and
borrowing decisions for individual items of less than
$50,000.00 each (provided that the Employee will be
entitled to approve all expenditures and borrowing of
more than $50,000.00 each in consultation with the
Board of Directors with the intent that all such
expenditures and borrowing over $50,000.00 will be
approved by both the Board of Directors and the
Employee prior to expenditure being made provided
further that any expenditure or borrowing
contemplated in the budget for the Employer shall be
deemed to be approved by both parties without further
approval required, once the budget is approved by
both parties). For greater certainty, it is
understood and agreed that no amount in excess of
$50,000.00 will be borrowed by the Employer, no
expenditure in excess of $50,000.00 will be made by
the Employer, and no obligation will be incurred with
a monetary liability in excess of $50,000.00 without
the express written consent of the Employee; and
VI. such other services as may, from time to time, be
required for the proper operation of the Employer, if
such services would be reasonably expected to be
performed by the president of a company such as the
Employer.
(b) The Employee agrees to provide his services to the Employer and
perform his duties in a faithful and diligent manner to the best of the
Employee's ability on a full-time basis, and to devote all of the Employee's
attention, skill and effort to the Employer's business at all times (subject to
the provisions herein after provided) in compliance with the reasonable
policies, practices, directions and instructions, written or oral, of the board
of directors of the Employer,
(c) INTENTIONALLY DELETED.
(d) Notwithstanding the foregoing, the parties agree that the Employee
shall be entitled to carry on other business activities during the Term which
may be unrelated to the activities of the Employer, provided that such
activities do not result in a negative effect upon the Employer and provided
that the Employees first obligation will be to the Employer. In particular and
without limiting the generality of the foregoing, the Employee shall be entitled
to carry on the agency work that he has performed historically for Owen Sound
Ledgerock Limited ("Owen Sound") provided that in the event of a direct conflict
in the interests of the Employer and Owen Sound, the Employee will advise the
Employer immediately and will cease to act for Owen Sound in the conflicting
matter at the request of the Employer.
(e) INTENTIONALLY DELETED.
.4 REPORTING RESPONSIBILITIES.
Without restricting the provisions of Section 1.3(a), the Employee
shall be required to report to the board of directors and shareholders of the
Employer (or such Nominee of the Employer as the Employer shall nominate from
time to time) in the manner and to the extent contemplated by this Agreement, or
as otherwise reasonably instructed by the board of directors.
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.5 INSURANCE. The Employer shall be entitled, at its sole option, to obtain and
maintain insurance on the Employee, the proceeds of which shall be payable to
the Employer. In furtherance of the foregoing, the Employee agrees to do such
things, including without limitation, submitting to physical examinations
(including blood tests) as may be required to obtain such insurance provided
that the failure of the Employee to qualify for such insurance shall not, in
itself, affect the validity of this Agreement and shall not, in itself, amount
to cause for dismissal of the Employee or termination of this Agreement.
2
- -
COMPENSATION AND BENEFITS
-------------------------
.1 REMUNERATION. For the performance of his services hereunder, the Employee
shall be paid a salary (the "Salary") of $96,000.00 per annum, payable biweekly
in arrears. During any Renewal Term hereunder, the Salary shall be reviewed by
the Employer on an annual basis, with any increase in Salary to be at the sole
discretion of the Employer after discussions with the board of directors of the
Employer.
.2 BENEFITS.
a) Assuming the Employee is otherwise eligible, the
Employee will be eligible to participate in benefit
programs which are generally equivalent to any
Employer benefit plans made available to the senior
employees of The Employer, other than any stock
participation plan, bonus plan or any other kind of
profit-sharing or financial incentive plan. The
Employee acknowledges and agrees that there is
currently no benefit plan in place for the senior
employees of the Employer, but if the Employer
chooses to obtain such a plan, the Employer agrees
that it will try to obtain a typical plan that will
not exclude the Employee for any reason other than
those demographic, health or lifestyle reasons that
insurers typically apply to screen high risk
candidates.
b) The Employer shall, during the Employee's employment
hereunder, provide the Employee with a car allowance
in an amount equal to $500.00 per month.
c) The Employer shall reimburse the Employee for proper
and reasonable out-of-pocket expenses actually
incurred by the Employee in the performance of the
Employee's duties and the Employee shall maintain
supporting statements, receipts or vouchers for such
expenses to the extent reasonably possible..
.3 VACATION. In each year of employment, the Employee is entitled to take three
weeks per calendar year vacation with pay. Vacations may be taken at such time
or times as shall be convenient to the Employee and the Employer.
.4 WITHHOLDING. The Employer shall be entitled to withhold from any payments to
the Employee pursuant to the provisions of this Agreement any amounts required
by any applicable taxing or other authority.
.5 OTHER COMPENSATION. Commencing after completion of the 1996 fiscal year of
the Employer and following with each fiscal year thereafter, the Employee shall
be entitled to receive the following additional payments to share in the Net
Income (as hereinafter defined) earned in the immediately preceding fiscal year
of the Employer. "Net Income" for purposes of this Agreement shall mean net
income of the Employer calculated in accordance with generally accepted
accounting principles and procedures ("GAAP") applicable to the Province of
Ontario adjusted so that: (1) all depreciation; and (2) all depletion allowances
for
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resource based properties, which could otherwise properly be deducted, in
accordance with GAAP from gross income of the Employer to calculate net income
for other purposes shall be added back to Net Income and shall not be deducted.
Net Income will be net of applicable income taxes.] In addition, the parties
agree that Net Income shall be net only of interest payments on loans to related
companies only with respect to loans approved by the Employee as contemplated
herein. The Employee acknowledges and agrees that the existing loans between the
Employer and American Stone Industries Inc. in the approximate total amount of
$2,300,000.00 bearing interest at the Prime Rate plus two percent, (and for
purposes of this Agreement, "Prime Rate" shall mean the rate charged by Fleet
Bank of New York (or such other bank that American Stone Industries Inc. is
using from time to time) to its most favored commercial customers for US dollar
loans made in the USA) are permitted loans and the interest on same shall be
deducted from income in calculating Net Income. The interest on any other loans
made without the Employee's consent shall be added back to Net Income. The
Employee shall be entitled to the following payments which shall be made within
one hundred and twenty (120) days of the Employer's fiscal year end.
a) A payment equal to Five percent (5%) of the first
$1,000,000.00 in Net Income earned during a fiscal year of the
Employer,
b) A payment equal to Four percent (4%) of the second
$1,000,000.00 in Net Income earned during a fiscal year of the
Employer,
c) A payment equal to Three percent (3%) of the third
$1,000,000.00 in Net Income earned during a fiscal year of the
Employer,
d) A payment equal to Two percent (2%) of the fourth
$1,000,000.00 in Net Income earned during a fiscal year of the
Employer,
e) A payment equal to One percent (1%) of all Net Income in
excess of $4,000,000.00 earned during a fiscal year of the
Employer,
2.5A For the 1996 fiscal year and for each partial fiscal year thereafter for
which the Employee is entitled to a payment, the parties agree that the
Employee's share of Net Income shall be prorated for the period during which the
Employee was in the employ of the Employer, and the Employee shall be entitled
to receive a payment that is based upon the income during the period of the
employment, adjusted to reflect the fact that the Employee only worked for a
portion of the year based upon the formula hereinafter described.
If the Employee is in the employ of the Employer for a portion of a fiscal year
(such portion referred to herein as the "Stub Period"), then the Employee shall
be entitled to a payment that is calculated in accordance with the following
provisions:
(a) For purposes of this section, the "Factor" means a fraction, the
numerator of which is the number of days in the Stub Period, and the
denominator of which is the number of days in the fiscal year
containing the Stub Period (either 365 or 366).
(b) The Employees share of Net Income for the Stub Period will be
determined as follows:
I. net income of the Employer for the Stub Period will
be calculated in accordance with
GAAP;
II. the figure in I) will be multiplied by the inverse of
the Factor and the resulting amount
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will be the deemed net income of the Employer for the
fiscal year containing the Stub Period for the
purposes of the calculations herein contained;
III. the amount which the Employer would have been
required to pay for income taxes had the amount
determined in II) been the actual net income of the
Employer for the fiscal year in which the Stub Period
is contained shall be determined; and such
determination shall be made with a view to arriving
at the lowest possible amount of income tax payable
and accordingly all available deductions, allowances,
credits and other amounts which would reduce taxable
income shall be deemed to be claimed or taken;
IV. the amount of tax determined in accordance with iii)
shall be subtracted from the amount determined in II)
to determine net income for the fiscal year
containing the Stub Period, net of taxes;
V. any amounts which, for the purposes of determining
Net Income pursuant to this Agreement are to be added
back to net income determined for other purposes
(including depreciation, depletion allowances for
resource based properties, and loan interest not
approved by the Employee or authorized in accordance
with this Agreement), and which were deducted from
income in the calculation of net income of the
Employer for the Stub Period in I) , shall be added
together and the sum thereof will be multiplied by
the inverse of the Factor. The product will be added
to the net income for the fiscal year containing the
Stub Period net of taxes as determined in IV). The
resultant sum is referred to herein as the
"Annualized Net Income of the Employer for the Stub
Period".
VI. The percentages set forth in 2.5 to determine the
Employee's share of Net Income in a fiscal period
shall be applied against Annualized Net Income of the
Employer for the Stub Period and the resultant figure
will then be multiplied by the Factor to determine
the Employee's share of Net Income for the Stub
Period.
(c) The above noted calculations shall be made without regard for the
actual income and expenses in the entire fiscal year containing the
Stub Period and shall use only income earned and expenses incurred,
having regard to GAAP, during the Stub Period.
(d) The Employer shall provide the Employee, within one hundred and
twenty (120) days following the end of the Stub Period with:
I. payment of the Employee's share of Net Income for the
Stub Period; and
II. a financial statement setting forth the calculations
set out in b) above along with the figures used to
make such calculations and all additional information
reasonably required to verify the accuracy thereof.
(e) acceptance of the payment described in d) shall not be deemed to be
an acknowledgment by the Employee that the amount is accurate, and
notwithstanding such acceptance the Employee, shall, for the six (6)
month period following receipt of the financial statement and payment
be entitled to dispute the amount of the payment, and in that event the
Employer shall make available to the Employee all supporting
documentation and materials reasonably required by the Employee to
verify
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such, amount. After such six (6) month period has passed, the Employee
shall be deemed to have accepted the payment and the statements as
correct without further recourse against the Employer subject only to
any outstanding written objections received prior to the end of the
said six (6) month period.
.6 NO OTHER BENEFITS. The Employee shall not be entitled to any additional
compensation or benefits for acting as a director, officer or employee of or in
any capacity for or on behalf of the Employer or any affiliate or associate of
the Employer or other entity in which the Employer has an equity interest, other
than as provided in this Article 2. For greater certainty, the Employee shall
not be entitled to participation in any stock or equity purchase or stock or
equity option plans of the Employer or of any affiliate of associate of the
Employer or any other entity in which the Employer has an equity interest.
3
- -
EMPLOYEE'S REPRESENTATIONS AND NEGATIVE COVENANTS
-------------------------------------------------
.1 EMPLOYEE'S REPRESENTATIONS. The Employee represents and warrants that the
execution and delivery of this Agreement, the Employee's employment by the
Employer and the performance of the Employee's duties hereunder shall not
contravene or violate or result in the breach of any judgment, order, decree or
injunction of any court or governmental or regulatory authority or the
provisions of any agreement, arrangement or understanding to which the Employee
is a party or by which he is bound.
.2 CONFIDENTIAL INFORMATION. The Employee acknowledges that, in the course of
carrying out, performing and fulfilling his obligations to the Employer or any
affiliate or associate of the Employer, the Employee will have access to and
will be entrusted with information that would reasonably be considered
confidential to the Employer, its affiliates or associates and their respective
clients, the disclosure of any of which to competitors of the Employer, its
affiliates or associates or such clients, or the general public, would be highly
detrimental to the best interests of the Employer, its affiliates or associates.
Such information includes, without limitation, trade secrets, know-how,
marketing plans and techniques, project work, cost figures, client lists,
special techniques peculiar to the clients, the services and general business of
the Employer, its affiliates or associates (both past, present and contemplated)
and information relating to the clients, their names, tastes, preferences and
plans and their requirements for services provided or which could be provided by
the Employee. Except as may be required in the course of carrying out his
duties, the Employee therefore covenants and agrees that he will not disclose,
during his employment or any time thereafter, any of such information to any
person, other than the directors, officers or employees of the Employer that
have a need to know such information, nor shall the Employee use or exploit,
directly or indirectly, the same for any purpose other than the purposes of the
Employer nor will he disclose or use for any purpose, other than those of the
Employer, the private affairs of the Employer, its affiliates or associates or
any other information which he may acquire or utilize during his employment with
respect to the business and affairs of the Employer, its affiliates or
associates. The Employee shall take all reasonable measures available to him to
keep such information in the strictest confidence. Notwithstanding all of the
foregoing, the Employee shall be entitled to disclose such information that he
possesses prior to the commencement of this Agreement, and also may make
disclosure if required pursuant to a subpoena or order issued by a court,
arbitrator or governmental body, agency or official, provided that the Employee
shall:
(a) promptly notify the Employer thereof;
(b) consult with the Employer on the advisability of
taking steps to resist or narrow such requirement;
and
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(c) if disclosure is required or deemed advisable,
cooperate with the Employer in any attempt to obtain
an order or other assurance that such information
will be accorded confidential treatment at the sole
expense of the Employer.
The restrictions in this Section shall not apply to information which is or
subsequently becomes in the public domain as result of circumstances not
attributable either directly or indirectly to the Employee.
.3 CORPORATE OPPORTUNITIES. Any business opportunities related to the business
of the Employer, its affiliates or associates, which become known to the
Employee during the period of his employment hereunder must be fully disclosed
and made available to the Employer by the Employee and the Employee agrees not
to take or omit to take any action if the result would be to divert from the
Employer, its affiliates or associates any opportunity which is within the scope
of its business as known to the Employee from time to time. This provision shall
not apply to the Employee's ongoing relationship to the Owen Sound business
unless the Employee's position as Employee is such that his intended actions on
behalf of Owen Sound will benefit Owen Sound to the clear detriment of the
Employer, in which case the Employee shall immediately disclose his conflict to
the Board of Directors, shall take no further action, and shall follow the
direction of the Board of Directors with respect to the involvement of Owen
Sound.
.4 PROPRIETARY INFORMATION. The Employee acknowledges and agrees that all right,
title and interest in and to any information, trade secrets, inventions,
discoveries, improvements, research materials and databases made or conceived by
the Employee during his employment relating to the business or affairs of the
Employer, its affiliates or associates shall belong to the Employer, its
affiliates or associates. In connection with the foregoing, the Employee agrees
to execute any assignments and/or acknowledgment as may be requested by the
board of directors of the Employer from time to time.
.5 NON-COMPETITION.
(a) The Employee shall not without prior written consent of the board
of directors of the Employer, which consent may be unreasonably
withheld, during the 12 month period following the date that the
Employee ceases to be an employee of the Employer or other termination
of this Agreement (regardless of who initiated the termination and
whether with or without cause), either individually or in partnership
or in conjunction in any way with any person -or persons, whether as
principal, agent, consultant, shareholder, guarantor, creditor or in
any other manner whatsoever,
I. solicit, interfere with or endeavor to entice away from the
Employer or any of its respective affiliates or associates,
accept any business from or the patronage of or render any
service to, sell to or contract or attempt to contract with
any person, firm, or corporation who was a client, customer or
supplier of the Employer, or any of its respective affiliates
or associates or a prospective client, customer or supplier of
the Employer, or any of its respective affiliates or
associates with whom the Employer, or any of its respective
affiliates or associates have or have had any dealing during
the 12 month period immediately preceding the date upon which
the Employee ceases to be an employee of the Employer,
II. offer employment to or endeavor to entice away from
the Employer, or any of its respective affiliates or
associates, any person employed by the Employer at
the date of the termination of this Agreement or
interfere in any way with the employment relationship
between such employee and the Employer, or
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<PAGE> 8
III. seek employment or be employed by, consult, engage
in, carry on or otherwise be concerned with or have
any interest in, or advise, lend money to, guarantee
the debts or obligations of, permit the Employee's
name, or any part thereof, to be used or employed by
any person, firm, association, syndicate or
corporation engaged in or concerned with a business
which primarily manufactures or sells Berea
sandstone. For purposes of this agreements business
will be primarily involved in the manufacture or sale
of Berea sandstone if more than 50% of its sales
result from the manufacture or sale of Berea
sandstone.
(b) The foregoing covenants are given by the Employee acknowledging
that the Employee either has or will have specific knowledge of the
affairs of the Employer and its business. Therefore, the Employee
hereby acknowledges and agrees that all covenants, provisions and
restrictions contained in Article 3 of this Agreement are reasonable
and valid in the circumstances of this Agreement, and all defenses to
the strict enforcement thereof by the Employer are hereby waived by the
Employee. The Employee acknowledges and agrees that any breach by the
Employee of the covenants, provisions and restrictions contained in
Article 3 of this Agreement during the term of employment hereunder
shall constitute cause for termination. Notwithstanding anything herein
to the contrary, the parties agree that nothing in 3.5(a)(iii) shall be
deemed to restrict the Employee, following termination of this
Agreement (regardless of the circumstances of such termination and
regardless of who initiated same) from carrying on a business similar
to the proprietorship carried on by the Employee under the name
"Tyrrell Stone Design" as that business was carded on prior to February
7, 1996, so long as such business is not one which primarily
manufactures or sells Berea sandstone.
(c) The Employee further acknowledges and agrees that in the event of a
breach of the covenants, provisions and restrictions in Article 3 of
this Agreement, the Employer's remedy in the form of monetary damages
may be inadequate and that the Employer shall be and is hereby
authorized and entitled, in addition to all other rights and remedies
available to the Employer, to apply for and obtain from any court of
competent jurisdiction interim and permanent injunctive relief and an
accounting of all profits and benefits arising out of such breach. The
Employee also acknowledges that the operation of the foregoing
covenants may seriously constrain his freedom to seek other
remunerative employment.
.6 RESTRICTIONS AND RIGHTS OF THE EMPLOYEE.
(a) Nothing in this Agreement shall be deemed to prevent or
prohibit the Employee from owning shares in a public company
as an investment, so long as the Employee does not own more
than five percent (5%) of the outstanding voting shares
thereof.
(b) Intentionally Deleted.
(c) Provided that the Employee acts honestly, diligently, and in
good faith in the completion of his duties hereunder, the
Employer agrees to indemnify and hold harmless the Employee
from any cause of action or other liability to a third party,
or to the Employer that may arise as a result of the Employee
performing his duties hereunder, including, without
limitation, any liability that may arise as a result of the
negligence of the Employee.
.7 SURVIVAL. Except as otherwise provided, each and all of the provisions of
this Article 3 hereof shall survive the termination of this Agreement and the
Employee's employment hereunder.
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4
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TERMINATION OF THE EMPLOYEE'S EMPLOYMENT
----------------------------------------
.1 TERMINATION FOR CAUSE. Notwithstanding anything contained in this Agreement,
this Agreement and the Employee's employment hereunder may be terminated by the
Employer
(a) for any cause recognized at law, and it shall be deemed for
purposes of this Agreement to be just cause for termination if
Net Income for a fiscal year of the Employer occurring during
the Term of this Agreement is less than one dollar ($1.00)
provided that said fiscal year must occur entirely within the
Term of this Agreement;
(b) upon thirty (30) days notice by reason of the inability of the
Employee to devote sufficient time and attention to the
business and affairs of the Employer through BONA FIDE illness
or disability, physical or mental, for a period of at least
three (3) consecutive months or ninety days in any one (1)
year period;
(c) by reason of the death of the Employee;
(d) upon the Employee reaching the age of 65;
(e) the failure of the Employee in any material respect to
observe, perform or comply with any material term, condition
or obligations required by this Agreement if such failure has
continued for a period of 14 days after notice of such failure
and a demand for performance, observance or compliance has
been given by the Employer, or in circumstances where such
failure becomes repetitive, notwithstanding that on a prior
occasion or occasions such failure has been remedied within
such 14 day period: or
(f) the conviction of the Employee of an offence punishable by
imprisonment, which would adversely affect the goodwill or
reputation of the Employer, or
(g) during the first six (6) months of the Term, and at the end of
the Term and each renewal period, the Employer may terminate
for any reason whatsoever, provided that if the termination is
without cause, then this Agreement may be terminated upon
thirty (30) days notice or one months salary in lieu thereof
which may be given thirty (30) days prior to the end of the
Term or any renewal term to coincide with the end of the said
Term or renewal term. It is understood and agreed that the
Employer shall be deemed to have given such notice to
terminate this Agreement at the end of the Term and any
applicable renewal period, unless the Employer has previously
delivered written notice of its intent to renew the Agreement
for the period of the next renewal term.
Upon termination of the Employee's employment hereunder pursuant to
this section 4.1, the Employee's sole entitlement shall be his Salary
and any expense reimbursement owing to him to the date of termination
as well as his right to his share of Net Income as stipulated in
Section 2.5 hereof and payment of any portion of the Employee's share
of Net Income from a fiscal year previous to the fiscal year in which
termination takes place, if such share has not been paid in full.
.2 OTHER TERMINATION. The Employee shall be entitled to terminate this Agreement
at any time upon thirty (30) days notice to the Employer. The following
provisions shall apply to all terminations, subject to the limitations
hereinafter expressed:
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(a) where the provisions of Section 4.1 do not apply, this Agreement
and the Employee's employment hereunder may be terminated at any time by the
Employer upon payment to the Employee, by way of lump sum severance, a sum equal
to one years salary, benefits (to the extent permitted by any plan), expense
reimbursement, and the Employee's share of Net Income for the Stub Period
calculated in accordance with Section 2.5A, and payment of any portion of the
Employee's share of Net Income from a fiscal year previous to the fiscal year in
which termination takes place, if such share has not been paid in full.
(b) upon termination of the Employees employment hereunder by reason of
the voluntary resignation of the Employee, the Employee's sole entitlement shall
be his Salary to the date of termination, benefits (to the extent permitted by
any plan), expense reimbursement, and the Employee's share of Net Income for the
Stub Period calculated in accordance with Section 2.SA, and payment of any
portion of the Employee's share of Net Income from a fiscal year previous to the
fiscal year in which termination takes place, if such share has not been paid in
full.
.3 CONSEQUENCES OF TERMINATION.
(a) If the Employee's employment hereunder is terminated in accordance
with Section 4.2, the Employee shall be required, upon receipt of the Payout, to
release the Employer and all of its subsidiaries from all manners of action,
causes of action, suits, claims or demands against any of them which he ever
had, then has or may thereafter have, for or by reason of or rising out of any
cause, matter or thing. The Employee shall be deemed to have granted such a
release upon payment of the Payout whether such a release is actually executed
or not.
(b) Upon termination of the Employees employment, howsoever caused, the
Employee shall immediately resign all offices held, including directorships, in
the Employer or any of its subsidiaries and the Employee shall not be entitled
to receive any severance payment or compensation for loss of office or otherwise
by reason of such resignation other than the payment contemplated by this
Agreement. If the Employee fails to resign, the Employer is irrevocably
authorized to appoint any person to act in his name and on his behalf to sign
any documents or do any things necessary or requisite to give effect to it.
(c) The Employee hereby authorizes the Employer to deduct from any
payment due to the Employee at any time, including any termination payment, any
amounts owed to the Employer by reason of any amounts owing by the Employee to
the Employer provided however that this provision shall be applied so as not to
conflict with any applicable legislation. In the event that the aforesaid
amounts cannot be accurately calculated at the time of termination, the Employee
hereby authorizes the Employer to withhold any amounts owed to the Employee for
a period not to exceed 30 days for the purposes of such calculation.
(d) Upon termination of his employment, howsoever caused, the Employee
shall surrender to a representative of the Employer, upon request, all keys,
manuals, insured lists, correspondence, monies, supplies, customer lists,
employee lists, all other material and records, or other property of the
Employers, its affiliates or associates of any kind that may be in the
Employee's possession at such time.
(e) All payments made and notices given by the Employer pursuant to
this Article 4 shall include both notice of termination and severance pay as
defined in the EMPLOYMENT STANDARDS ACT (Ontario) as it may from time to time be
amended, the provisions of which are deemed to be incorporated into this
Agreement.
The amount paid to the Employee shall be either the Payout, or the amount
required under the said Act, whichever is greater. As provincial legislation is
changed from time to time, the above notice of termination provisions will be
altered accordingly and the new provisions will apply, if greater.
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5
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GENERAL CONTRACT PROVISIONS
---------------------------
.1 NOTICES.
(a) Any notice or other document ("Notice") required or permitted to be
given to the Employer or the board of directors of the Employer under this
Agreement shall be in writing and shall be given to The Employer at its
registered office, attention: Secretary, and to each director of the Employer by
hand delivery or by mailing by registered mail, with postage thereon fully
prepaid, in a sealed envelope, addressed to the director at the address
designated by him from time to time by notice to the Employer and reflected in
the records of the Employer.
(b) Any Notice required or permitted to be given to the Employee
hereunder shall be in writing and shall be given to the Employee by hand
delivery or by registered mail, with postage thereon fully prepaid, in a sealed
envelope, addressed to the Employee at:
DAVID TYRRELL
48 Lavender Avenue
Toronto, Ontario, M6N 2B7
(c) Any Notice hand delivered personally shall be deemed to have been
received by and given to the addressee on the day of delivery. Any Notice mailed
shall be deemed to have been received by and given to the addressee on the third
(3rd) business day following the date of mailing, provided that during a strike
or other occurrence which shall interfere with normal mail service, all Notices
shall be delivered personally by hand.
.2 CURRENCY. All dollar amounts set forth or referred to in this Agreement and
all uses of the dollar sign ($) used herein refer to Canadian currency.
.3 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein. The parties hereto hereby agree to attorn to the
jurisdiction of the courts of the Province of Ontario.
.4 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. Any headings preceding the text
and paragraphs in this Agreement hereof have been inserted for convenience of
reference only and shall not be construed to affect the meaning, construction or
effect of this Agreement.
.5 WAIVER. No waiver of any provision of this Agreement shall be binding unless
it is in writing. No indulgence or forbearance by a party shall constitute a
waiver of such party's right to insist on performance in full and in a timely
manner of all covenants in this Agreement. Waiver of any provision shall not be
deemed to waive the same prevision thereafter or any other provision of this
Agreement at any time.
.6 ENFORCEMENT AND SEVERABILITY. If any provisions of this Agreement as applied
to any party or to any circumstance shall be adjudged by a court of competent
jurisdiction to be invalid or unenforceable, the same shall not affect any other
provision of this Agreement, the application of such provision in any other
circumstances, or the validity or enforceability of this Agreement. The parties
hereto agree that the provisions hereof are reasonable and intend this Agreement
to be enforced as written. However, if any provision or part thereof is held to
be unenforceable because of the duration thereof, the area covered thereby or
the types of activities restricted thereby, the parties hereto agree that a
court of competent jurisdiction
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<PAGE> 12
making such determination shall have the power to reduce the duration of any
provision, the geographic area of any provision and the types of activities
specified in any provision and to delete specific words or phrases contained in
any provision, and in its reduced form, such provision shall then be
enforceable.
.7 NON-ASSIGNABILITY. This Agreement is personal to the Employee and may not be
assigned by the Employee without the prior written approval of the Employer.
.8 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement.
.9 ENUREMENT. Subject to the restrictions on assignments contained in this
Agreement, this Agreement shall be binding upon and shall enure to the benefit
of each of the parties and to the heirs, executors, administrators, successors
and assigns of the Employee and the successors and assigns of the Employer.
.10 ENTIRE AGREEMENT. This Agreement and the terms hereof supersede and replace
all prior negotiations and/or agreements made between the parties, whether oral
or written, and shall constitute the entire agreement between the parties with
respect to all matters relating to the Employee's employment and the execution
of this Agreement has not been induced by, nor do any of the parties hereto rely
upon or regard as material any representations or writings whatsoever not
incorporated into and made a part of this Agreement. This Agreement shall not be
amended, altered or modified except in writing signed by the parties.
.11 COUNTERPARTS. This Agreement may be executed by the parties in separate
counterparts each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF the parties have duly executed this Agreement on
_____________, 1996.
AMERICAN STONE CORPORATION
Per:
---------------------------------
Per:
---------------------------------
I/we have authority to bind the corporation
- --------------------------- ---------------------------------------
Witness DAVID TYRRELL
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RESIGNATION
-----------
To: American Stone Corporation
From: Glen Garparini
Re: Resignation as President
I hereby resign by position as president of American Stone Corporation,
effective as of February 7, 1996. I will retain my position as director of the
Corporation until further notice.
Dated this ______ day of __________________, 1996
------------------------------------
Glen Garparini
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<PAGE> 14
RESOLUTION OF THE BOARD OF DIRECTORS
OF
AMERICAN STONE CORPORATION
HIRING OF DAVID TYRRELL AS PRESIDENT
- ------------------------------------
RESOLVED that the employment agreement with David Tyrrell, dated effective
February 7, 1996 (copy attached) is hereby approved, and it is further resolved
that Glen Garparini and Enzo Constantino be authorized to execute same on behalf
of the Corporation.
* * * * *
The foregoing resolution is hereby consented to by all the Sole Director of the
Corporation pursuant to the Business Corporation Act this ______ day of
____________, 1996.
- ------------------------------
Glen Garparini, Director
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RESOLUTION OF THE DIRECTOR OF
TYRRELL STONE DESIGN LIMITED (the "Corporation")
------------------------------------------------
RESOLVED THAT the following transfer of shares in the capital stock of the
Corporation be and the same is hereby approved:
<TABLE>
<CAPTION>
Transferor Transferee No. and Class of Shares
- ---------- ---------- -----------------------
<S> <C> <C>
David Tyrrell American Stone Industries Inc. 100 Common shares
</TABLE>
The undersigned, being the sole director of the Corporation entitled to vote on
the foregoing resolution at a meeting of the board of directors or a committee
of directors signs the foregoing resolution pursuant to subsection 129(1) of the
Business Corporations Act effective as of the 22nd day of May, 1996.
------------------------------------
DAVID TYRRELL
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<PAGE> 1
EXHIBIT 6(D)
ASSET PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of the 1st day of
February, 1996, by and between American Stone Corporation, a Delaware
corporation having a mailing address at 8705 Quarry Road, P.O. Box 261, Amherst,
Ohio ("Purchaser") and Cleveland Quarries L.P., a Delaware limited partnership,
having an address at 900 Keele Street, Toronto, Ontario M6N 3E7 ("Seller").
BACKGROUND STATEMENT
--------------------
Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, certain of the assets of Seller used to operate Seller's
business upon and subject to the terms of this Agreement.
Capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings set forth in Section 9.1 of this
Agreement.
SECTION 1 TERMS OF AGREEMENT
------------------
1.1 ASSETS TO BE SOLD TO PURCHASER. On the terms and subject
to the conditions set forth in this Agreement, Seller shall sell or assign and
deliver or cause to be sold or assigned and delivered to Purchaser, and
Purchaser shall purchase from Seller, all of the property and assets, except as
specifically provided in Section 1.2, owned by Seller or used in conjunction
with or pertaining to the business of Seller, as the same shall exist at the
close of business on the Closing Date (as defined in Section 6.1), including but
not limited to, the following (collectively the "Acquired Assets"):
(a) All of the inventories of stone (whether or not
fabricated) used in Seller's business wherever located on the Closing Date
(collectively referred to as the "Inventory");
(b) All Real Property and interests therein owned or
leased by the Seller;
(c) All fixed assets owned by Seller including,
without limitation, buildings, fixtures, machinery, tools, stores, supplies,
furniture, fuel, furnishings, plant and office equipment, vehicles and all
similar assets and properties whether or not charged off or expended in whole or
in part (collectively, the "Fixed Assets"), together with all manufacturers'
warranties relating to the Fixed Assets;
(d) All rights in and under the leases, contracts,
and other agreements of Seller (collectively, the "Contracts");
(e) All operating data and records of the business of
Seller, including sales and sales promotional data, advertising materials,
customer lists, engineering, production and other technical data, all mechanical
and other drawings, written operating methods and procedures, specifications,
operating records and other information related to equipment, reference
catalogues, personnel records and inventory records;
(f) All rights under permits, licenses, franchises
and similar authorizations used in the business of Seller (collectively the
"Permits");
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(g) All of Seller's rights to indemnification and
reimbursement for, and otherwise with respect to, environmental liabilities,
costs, losses and expenses of any kind whatsoever including, without limitation,
all rights which Seller may have against Hull & Associates, Inc. ("Hull")
pertaining to or connected with Hull's conducting an environmental assessment of
the Seller's South Amherst Facility and issuing a report pertaining to such
assessment to Cleveland Quarries Co., Inc.; and
(h) All intangible assets used in the operations and
business of Seller, including, without limitation, any and all inventions,
patent rights, patent applications, trade secrets, know-how, and trademarks,
service marks and trade names, the goodwill associated therewith, and all
applications therefor (the "Intangible Rights").
1.2 CERTAIN ASSETS AND RECORDS RETAINED. There is excepted
from the assets and properties of Seller to be sold to Purchaser pursuant to
this Agreement, and the phrase "Acquired Assets" does not include, the following
(the "Retained Assets"):
(a) All cash and cash equivalents;
(b) All accounts and interest receivable
(collectively, the "Receivables");
(c) All prepaid rent, prepaid property taxes and
assessments, prepaid supplies and other prepaid expenses, deposits and deferred
charges attributable to the business of Seller (the "Prepaid Expenses");
(d) All policies of insurance of Seller and all
prepayments of premiums with respect to such policies;
(e) Seller's corporate minute books, stock records
and charter documents;
(f) All prepayments of income and franchise taxes of
Seller; and
(g) All accounts owing to Seller by partners ,
officers or directors of partners of Seller.
1.3 LIABILITIES ASSUMED AND NOT ASSUMED. Except for the
secured promissory note payable to CQ Development Corp. in the original
principal amount of $498,604, Purchaser does not assume or be obligated or in
any way responsible in respect of any of the liabilities, indebtedness or
obligations of whatever nature of Seller. Without limiting the generality of the
foregoing, it is specifically agreed that Purchaser shall not be liable for any
of the following:
(a) any direct or contingent liabilities or
obligations of Seller to any creditor;
(b) any and all obligations of Seller under any
collective bargaining agreements to which the Seller is a party or is bound (the
"Collective Bargaining Agreements").
(c) any liability of Seller for (i) accrued salaries
and wages, vacation pay, accrued bonuses and other employment benefits or
commissions and related taxes and (ii) severance payments or other termination
benefits payable to employees of Seller;
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<PAGE> 3
(d) any liability of Seller to former employees of
Seller (including without limitation any retired union employees) or their
spouses or dependents;
(e) any liability of Seller directly or indirectly as
a member of a group of employers under Section 414(b), (c) or (m) of the Code,
arising out of any employee benefit plans as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
maintained by Seller including, without limitation, liabilities attributable to
a complete or partial withdrawal from a multi-employer plan (as defined under
Section (3)(37) or Section 4001 of ERISA) or to the Pension Benefit Guaranty
Corporation for benefit liabilities or premiums due any liability resulting from
failure to provide continuation coverage under group health plan as required
under IRC Section 162(k), or any liabilities arising out of any nonqualified
plan or plans covering any employees or former employees of Seller;
(f) any liability of Seller for the Excluded Items or
other government-imposed fees or charges arising out of doing business in any
jurisdiction where Seller is not incorporated or otherwise qualified to do
business as a foreign corporation that would not have been incurred if Seller
had been so qualified;
(g) any liability of Seller for dividends or earnings
distributable to partners;
(h) any liability of Seller for any indebtedness,
whether for borrowed money or otherwise, (i) owing to any present or former
partner of Seller or (ii) to any bank, bondholder, trade or non-trade creditor,
customer, employee, financial institution, government entity, trust company or
other party, either directly or by reason of any guaranty;
(i) any liability of Seller arising after the Closing
Date, except to the extent specifically assumed pursuant to this Agreement by
Purchaser;
(j) any obligations and liabilities arising from the
non-compliance by Seller with any federal, state, local or foreign laws,
regulations, orders or administrative or judicial determinations (including
those relating to the environment), and any obligations and liabilities arising
from incidents, occurrences, suits, claims, actions, programs and proceedings of
any kind, voluntary or otherwise, relating to alleged or actual pollution,
contamination or harm of any kind to the environment (including, without
limitation, harm to any person or property), attributable to or caused by,
assigned to or otherwise involving Seller, the Acquired Assets, or the Real
Property, regardless of when the underlying incident, occurrence, suit, claim,
action, program or proceeding occurred or is discovered or made;
(k) any liability of Seller under any and all
medical, dental, disability or other employee welfare reimbursement plan or any
other plan of any nature whatsoever maintained by Seller for the benefit of its
employees (whether union or non-union);
(l) any liability for workers compensation claims,
general liability claims, automobile liability claims or any other negligent act
or omission of Seller, whether related to Seller's business or otherwise;
(m) any liability of Seller under any contract,
lease, purchase or sale order, agreement or obligation that is not specifically
assumed or purchased pursuant to this Agreement by Purchaser except as is
otherwise specifically provided for herein;
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(n) any liability of Seller for federal, state or
local income or personal property taxes.
1.4 PURCHASE PRICE
--------------
The purchase price for the Acquired Assets is $2,100,000 (the
"Purchase Price") and shall be paid by Purchaser as provided in Section 1.5 of
this Agreement.
1.5 CLOSING PURCHASE PRICE; ADJUSTMENTS TO PURCHASE PRICE
-----------------------------------------------------
The Purchase Price shall be paid as follows:
(a) $743,366 shall be credited against the
Purchase Price for Purchaser's payment of
the outstanding balance on Seller's line of
credit from Bank One, N.A.;
(b) $498,604 by Seller's assumption of the
promissory note due to CQ Development Corp.;
(c) $785,149 by Purchaser forgiving the debt
owed by Seller to Purchaser; and
(d) The balance after any adjustment to be
delivered at Closing.
1.6 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Acquired Assets as set forth on Schedule 1.6 attached to and
made a part of this Agreement. Purchaser and Seller acknowledge that the amounts
set forth on Schedule 1.6 represent the fair market value of the Acquired Assets
and agree to file all forms required under Section 1060 of the Internal Revenue
Code of 1986 and all other income, franchise, sales and other tax returns and
reports in a manner consistent with such allocation.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER
-----------------------------------------
Seller represents and warrants to Purchaser that:
2.1 SELLER'S ORGANIZATION. Seller is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The conduct of Seller's business or the ownership or leasing
of its properties does not require and has not required its qualification or
licensing to do business as a foreign corporation in any state of the United
States other than Ohio. Seller has all corporate power and authority to own its
property and to carry on its business as now or previously conducted by it.
2.2 SELLER'S CORPORATE ACTION; LEGAL, VALID AND BINDING
AGREEMENT. All action of Seller necessary to authorize the execution and
delivery of this Agreement and the instruments to be executed and delivered
pursuant hereto and to consummate the transactions contemplated hereby has been
properly taken, and resolutions of the Board of Directors of Slate & Stone
Corporation of America ("Slate") and a copy of the Certificate of Limited
Partnership of the Purchaser, evidencing that Slate is the sole general partner
of Seller, certified by the Secretary or an Assistant Secretary of State and in
form reasonably satisfactory to Purchaser, shall be delivered at the Closing to
Purchaser. Upon execution and
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delivery, this Agreement will constitute a legal, valid and binding agreement of
Seller enforceable in accordance with its terms.
2.3 NO VIOLATION OF SELLER. Neither the execution, delivery
nor performance of this Agreement or the documents executed in connection
herewith, nor the consummation of the transactions contemplated hereby or
thereby is prohibited by, is a violation of, is in conflict with, constitutes a
default under (whether such default would occur with the passage of time, the
giving of notice or both) or requires Seller to obtain any consent,
authorization or approval or registration under, or gives any person the right
to accelerate the performance of any obligation under (a) any term or provision
of the Certificate of Limited Partnership or Limited Partnership Agreement of
Seller, (b) any agreement or commitment to which Seller is bound, (c) any
agreement, understanding or commitment relating to any bank or other
institutional loans or indebtedness of Seller, (d) any judgment, decree, order,
regulation or rule of any court or governmental authority, or any statute or law
applicable to Seller, or (e) otherwise. No consent of any federal, state or
local authority is required in connection with the execution and delivery of
this Agreement and the performance of the transactions contemplated hereby.
2.4 LIMITED PARTNERSHIP RECORDS. Seller has delivered to
Purchaser or Purchaser's counsel, for review, true and complete copies of
Seller's (a) Certificate of Limited Partnership and all amendments thereto, and
(b) Limited Partnership Agreement and all amendments thereto. The Certificate of
Limited Partnership of Seller has not been amended, except and to the extent
provided in any Amendments heretofore delivered to Purchaser. The Limited
Partnership Agreement of Seller is true, correct, and complete.
2.5 TAX RETURNS. Seller has fully paid or provided for the
payment of all taxes, charges, interest and penalties due or claimed to be due
with respect to Seller by all federal, state, local and foreign taxing
authorities. There are no federal, state, local or foreign tax liens upon any of
the Acquired Assets, and there are no unpaid taxes which are or could become the
basis for a lien on the Acquired Assets, except for current taxes not yet due
and payable for which adequate reserves have been established on Seller's books
and records.
2.6 CONDEMNATION; REZONING; ZONING. None of the Acquired
Assets, including, without limitation, the Real Property, is subject to any
pending or threatened condemnation, requisition, eminent domain, rezoning or
similar proceeding and all of the Real Property is properly zoned for the
conduct of Seller's business and the business contemplated by Purchaser.
2.7 TITLE TO AND CONDITION OF ACQUIRED ASSETS. Except for
matter filed of record with the appropriate governmental agencies, (a) Seller
has good and marketable fee simple absolute title to all of the Acquired Assets,
including, without limitation, all coal, gas, oil, stone, shale and slate and
other mineral rights, free and clear of any agreement or understanding with
respect to the use or possession thereof or any rights thereto and of all liens,
mortgages, pledges, encumbrances, security interests, conditional sales
agreements or charges of any kind or character (b) none of the Acquired Assets
are on consignment with any third party. All property, real or personal,
tangible or intangible, located upon the Real Property, is owned by Seller,
there has been no prior severance, reservation or leasing of any mineral rights
affecting any of the Real Property, including, without limitation, coal, oil,
gas, and to the extent applicable, stone, shale and slate, and none of the
Acquired Assets are owned by any third party including, but not limited to, any
Affiliate of Seller. To the extent that any of the Acquired Assets are owned by
any third party, Seller will cause such third party to convey lawful possession
of such Acquired Assets to Purchaser. A complete and accurate list of all Real
Property and
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Fixed Assets has been provided to Purchaser. Seller enjoys peaceful and quiet
possession of all Real Property. No consent or action is necessary to permit the
transactions contemplated hereunder.
2.8 LITIGATION. No unsatisfied judgment, order, writ,
injunction, decree or assessment or other command of any court or any federal,
state, local, foreign or other governmental department, commission, board,
bureau, agency or instrumentality has been entered against or served upon Seller
or any of its Affiliates. There is no action, proceeding or investigation
pending or threatened which questions or challenges the validity of this
Agreement or any of the transactions contemplated by this Agreement or otherwise
seeks to prevent or have the effect of preventing the consummation of the
transactions contemplated hereby.
2.9 EMPLOYEE BENEFIT PLANS.
(b) No liability under ERISA or the Code has been, or through
the Closing Date, will be, incurred with respect to any Plan of Seller or any
employee benefit plan of any trade or business (whether or not incorporated)
which is under common control, or a member of an affiliated service group, with
Seller (within the meaning of ERISA Section 401(b)(1) or Section 414(b), (c) or
(m) of the Code) which could result in a lien or other claim upon any of the
Acquired Assets.
(c) Each Plan, if any, has been, and will continue through the
Closing Date to be, operated in material compliance with the applicable
provisions of such Plan, ERISA and the Code, and each Plan which is subject to
the minimum funding standards of Section 302 of ERISA or Section 412 of the Code
has not incurred an accumulated funding deficiency nor has an application for a
funding waiver been applied for or granted.
(d) There are not now, and as of the Closing Date there will
not be, any pending, or to the best of Seller's knowledge, threatened claims,
suits or other proceedings by any of Seller's employees, former employees, or
Plan participants or beneficiaries, spouses or representatives of any of them,
or governmental agencies against any Plan, the assets held thereunder, the
trustees of any such Plan's assets or the Seller, involving any Plan.
(e) Plans that are group health plans (as defined for purposes
of Section 4980B of the Code and Part 6 of Subtitle B Title I of ERISA) have
complied at all times, and will continue to comply through the Closing Date,
with the requirements of Section 4980B of the Code and Part 6 of Subtitle B of
Title I of ERISA, and all regulations thereunder. Seller, or its agents who
administer any Plan that is a group health plan have complied at all times, and
will continue to comply, with the notification and written notice requirements
of Section 4980B of the Code and Section 606 of ERISA.
2.10 CONTRACTS. The Contracts are valid and binding
obligations of Seller and are in full force and effect, have been entered into
in the ordinary course of business consistent with past practice, are not
subject to termination except in accordance with the respective terms thereof,
do not call for any extraordinary capital expenditures, do not contain any
unduly burdensome provisions and Seller is not in material default thereunder
and Seller has received no notice or information as to a threatened default by a
third party. True and complete copies of the Contracts, including without
limitation, all changes, additions, or modifications thereto, together with any
and all necessary consents to the assignment thereof to Purchaser have been
delivered in a bound volume to Purchaser prior to the signing of this Agreement.
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2.11 INVENTORIES. The Seller has good and marketable title to
all of the Inventory free and clear of all liens and encumbrances. None of the
Inventory is toll inventory or on consignment. The Inventory consists, and will
consist as of the Closing Date, solely of inventories of good and merchantable
quality and of the kind and quality regularly and currently used in the business
of Seller.
2.12 INTANGIBLE RIGHTS. The Intangible Rights that are owned
by Seller are owned and used solely and exclusively by, and belong to, Seller,
and there are no franchise agreements, licenses, royalty agreements or
assignments with respect to the Intangible Rights. To the best of Seller's
knowledge, no other person has any rights in the Intangible Rights, whether by
license, sublease or other agreement or understanding. To the best of Seller's
knowledge, Seller does not improperly use the Intangible Rights and the
Intangible Rights do not conflict with or infringe upon valid patents, licenses,
copyrights, trademarks, service marks or trade names of others. Seller has
received no notice of a challenge to the right of Seller to or to the use of any
of the Intangible Rights.
2.13 GOVERNMENT REGULATION; COMPLIANCE WITH LAWS. Seller is in
compliance with all applicable statutes, laws, ordinances, rules, regulations,
orders or directives pertaining to the Acquired Assets and Seller has not
received notice of any violation of any such statutes, laws, ordinances, rules,
regulations, orders or directives, including, without limiting the generality of
the foregoing, any notice from any Governmental Agency having jurisdiction over
Seller as to any violation of any building, fire, environmental, health,
immigration or other governmental law, ordinance, regulation, order or
directive.
2.14 ENVIRONMENTAL MATTERS. Seller has complied with and is
currently in compliance with all Environmental Laws.
(b) No Regulated Material has been previously disposed of at
or from the Real Property, regardless of whether such materials constituted a
Regulated Material at such time of disposal or whether the act of disposal was
lawful, and, no Environmental Condition exists for which the Seller or its
predecessors is or may be liable.
(c) Each transporter and disposal facility that has
transported or disposed of any Regulated Material on behalf of Seller, if any,
was properly licensed at the time of such transport or disposal, and all such
Regulated Material was properly transported or disposed of at a facility with
authorization to legally dispose of such materials. All manifests or equivalent
documents required by any and all of the statutes, laws, ordinances, rules,
regulations, orders or directives of any or all Governmental Agency or Agencies
to be completed and retained by Seller in connection with each such instance of
transportation were so completed and retained, copies of which will be made
available to Purchaser within a reasonable period of time prior to the Closing.
(d) The Real Property and each portion thereof, is not listed
and has never been listed on the National Priorities List ("NPL") or on any
federal or Ohio registry, list or report of inactive hazardous waste disposal
sites.
(f) The "Environmental Property Assessment, Phase I for
Cleveland Quarries Company, South Amherst Facility, Ohio State Route 113, South
Amherst Ohio 44001", dated April 1992, prepared by Hull & Associates, Inc. which
is hereby incorporated into this Agreement by reference, accurately and
completely identifies any existing and potential environmental problems
pertaining to the South Amherst Facility.
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(g) The Real Property is not now being used, and has never
been used, for (i) the storage, treatment, generation, transportation,
processing, handling, production or disposal of Regulated Material, except as
permitted by law, (ii) a landfill or other waste disposal site or (iii) military
purposes.
(h) There has not been, and there is no, Release, threatened
Release, migration, or uncontrolled presence of any Regulated Material on, at or
from the Real Property or, to the knowledge of Seller, any property within one
mile vicinity of the Real Property.
(i) Seller has not received any notice or inquiry from (i) any
Governmental Agency, (ii) any operator, tenant, subtenant, licensee or occupant
of the Real Property or of any property within one mile of the Real Property, or
(c) any other person, regarding a Release, threatened Release, migration or
uncontrolled presence of any Regulated Material on, at or from the Real Property
or any property within one mile of the Real Property or any property to which
the Borrower transported or with respect to which the Seller arranged for the
transportation, treatment, disposal, etc.
(j) There are no agreements, consent orders, decrees,
judgments, license or permit conditions or other directives of any Governmental
Agency relating to Environmental Laws and pertaining to the past, present or
future ownership, use, operation, sale or transfer of the Real Property that
require any change in the present condition of the Real Property or any work,
investigations, studies, testing, sampling, evaluation of environmental
conditions, design, containment, abatement, clean-up, investigation, removal,
remedial or corrective action, post-remedial monitoring, or capital
expenditures.
(k) There are no actions, suits, claims or other proceedings
pending or threatened against or involving the Seller before any Governmental
Agency, whether or not covered by insurance, that arise out of, relate to, or
results from, (i) a violation or an alleged violation of any Environmental Law
or (ii) the Release, threatened Release, migration or uncontrolled presence of
Regulated Material on, at or from the Real Property or any property within one
mile of the Real Property or any property to which waste was sent.
(l) Seller has not received from any Governmental Agency or
other person any oral or written notice (i) of Seller's failure to comply with
any Environmental Law or (ii) that Seller is under investigation for the failure
to comply with any Environmental Law.
(m) Seller possesses all licenses, certificates, permits,
franchises and other authorizations, approvals and consents necessary for the
use and occupancy of its assets and the conduct of its business.
(n) Seller has not filed any notice under any Environmental
Law regarding past or present treatment, storage or disposal of Regulated
Material or reporting a Release or threatened Release Regulated Material into
the Environment.
(o) Seller has no contingent liability relating to, or derived
from, any Release or threatened Release of Regulated Material into the
Environment.
Each of the foregoing representations and warranties of this
Section 2.14 shall be in addition to, and not in lieu of, any other
representation or warranty contained in this Agreement.
2.15 GENERAL REPRESENTATION AND WARRANTY. Except as otherwise
disclosed in this Agreement, there is no fact or condition which is materially
adverse to the Acquired Assets or Purchaser's
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proposed operations. None of the representations and warranties of Seller made
in this Agreement contain any untrue statement of material fact or omits to
state any material fact necessary in order to make said representation or
warranty not misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER
--------------------------------------------
Purchaser represents and warrants to Seller as follows:
3.1 ORGANIZATION. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Purchaser is duly qualified to transact business and is in good standing in all
jurisdictions where the nature of the business transacted by Purchaser or the
character of the properties owned by Purchaser would require such qualification.
Purchaser has all power and authority to own its property and to carry on its
operations as now conducted by it.
3.2 CORPORATE ACTION; LEGAL, VALID AND BINDING AGREEMENT. All
corporate action of Purchaser necessary to authorize the execution and delivery
of this Agreement and the instruments to be executed and delivered pursuant
hereto and to consummate the transactions contemplated hereby has been properly
taken, and resolutions of the Board of Directors of Purchaser, certified by the
Secretary or an Assistant Secretary of State and in form reasonably satisfactory
to seller, shall be delivered at the Closing to Seller. Upon execution and
delivery, this Agreement will constitute a legal, valid and binding agreement of
Purchaser enforceable in accordance with its terms.
3.3 NO VIOLATION. Neither the execution, delivery nor
performance of this Agreement nor the consummation of the transactions
contemplated hereby is prohibited by, or requires Purchaser to obtain any
consent, authorization or approval or registration under or gives any person the
right to accelerate the performance of any obligation under (a) any term or
provision of the Certificate of Incorporation or the By-Laws of Purchaser, (b)
any agreement or commitment to which Purchaser is bound, (c) any agreement,
understanding or commitment relating to any bank or other institutional loans or
indebtedness of Purchaser, or (d) any judgment, decree, order, regulation or
rule of any court or governmental authority, or any statute or law applicable to
Purchaser.
3.4 LITIGATION. To the best of Purchaser's knowledge, there is
no action, proceeding or investigation pending or threatened which questions or
challenges the validity of this Agreement or any of the transactions
contemplated by this Agreement or otherwise seeks to prevent or have the effect
of preventing the consummation of the transactions contemplated hereby.
3.5 GENERAL REPRESENTATION AND WARRANTY. None of the
representations and warranties of Purchaser made in this Agreement contain any
untrue statements of material fact or omit to state any material fact necessary
in order to make said representations and warranties not misleading.
SECTION 4. ACCESS AND CONFIDENTIALITY.
---------------------------
4.1 ACCESS TO PROPERTIES AND RECORDS. Purchaser, through its
employees, attorneys, accountants, lenders, appraisers and such other agents and
professional consultants and advisers as may be selected by Purchaser, shall
have through the Closing Date access (which access may not be materially
disruptive to or unreasonably interfere with any business or operations of
Seller) to all premises and operations of Seller and its and their officers and
employees for the purpose of its due diligence examination of all of the
Acquired Assets and other relevant records, papers and information relating to
the operations of Seller. Seller has and shall continue to cooperate fully and
will arrange for the
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cooperation of the employees of Seller and its independent certified public
accountants, and will comply with all reasonable requests for data, information
and access. Upon the reasonable request of Purchaser, copies of such records,
papers and information shall be promptly furnished by Seller.
4.2 CONFIDENTIALITY BY PURCHASER; RETURN OF INFORMATION. All
information acquired by or on behalf of Purchaser about or relating to Seller
and the Acquired Assets which is not (i) generally known to the public, (ii)
previously known by Purchaser before the negotiation of the transactions
contemplated herein, or (iii) subsequently disclosed to Purchaser by a person or
entity other than Seller having the right to disclose such information without
violation of a covenant of confidentiality, shall be treated as confidential
information and shall not be disclosed or used by Purchaser or its employees,
attorneys, accountants, lenders, appraisers or other agents or professional
consultants and advisers, at any time from the date such information was
received (whether before, after or contemporaneously with the execution of this
Agreement) until after the Closing, or if the Closing does not occur, at any
time after the date hereof, except for the disclosure or use of any such
information as may be reasonably necessary (i) in connection with any lawsuit or
arbitration arising out of this Agreement, (ii) in connection with any judicial
or administrative filing, investigation or proceeding or otherwise with or by a
governmental agency or (iii) as otherwise may be required by law. If the
transactions contemplated hereunder are not consummated for any reason,
Purchaser agrees to promptly return to Seller or destroy, at Seller's
discretion, all copies of any confidential information acquired by or on behalf
of Purchaser in the investigation of Seller, except for those exceptions (i),
(ii), and (iii), set forth in the immediately preceding sentence.
4.3 ACCESS TO RECORDS AFTER THE CLOSING. From and after the
Closing, Seller and its attorneys, accountants, employees and agents shall be
allowed, upon reasonable request, to inspect and copy at their expense the
business records and accounts of Purchaser pertaining to (i) all matters as to
which Seller is required to provide indemnification pursuant to this Agreement,
and (ii) any transactions of Seller occurring or assets of Seller held, at and
through the Closing Date. Purchaser agrees not to destroy or abandon any such
business records or accounts for a period of four (4) years following the
Closing.
From and after the Closing, Purchaser and its attorneys,
accountants, employees and agents shall be allowed upon reasonable request to
inspect and copy at their expense the records of Seller through the date of the
Closing not transferred to Purchaser, including, without limitation, all
financial records and tax returns of Seller. Seller agrees not to destroy or
abandon any such records for a period of four (4) years following the Closing
and to destroy such records only upon thirty (30) days advance written notice to
Purchaser for an additional period of two (2) years thereafter. If Purchaser
requests the surrender of such records, then Seller shall surrender, at
Purchaser's expense, such records so requested rather than proceeding with such
destruction.
SECTION 5. PURCHASER'S CONDITIONS PRECEDENT TO CLOSING
-------------------------------------------
The obligation of Purchaser to consummate the transactions provided for
in this Agreement is subject to the satisfaction at or before the Closing Date
of each of the following conditions precedent:
(a) Seller shall have delivered to Purchaser such
fully executed documents and instruments of assignment, transfer and conveyance
as are necessary in the opinion of, and satisfactory in form to, counsel to
Purchaser to transfer good and marketable title to all of the Acquired Assets to
Purchaser in accordance with the provisions of this Agreement.
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(b) The representations and warranties of Seller
contained in this Agreement shall be true in all material respects as of the
date hereof and shall be true in all material respects on the date of the
Closing as if made on that date.
(c) All covenants, agreements and obligations and all
conditions precedent on the part of Seller to be performed hereunder on or prior
to the Closing shall have been duly performed and complied with in all material
respects.
(d) Seller shall have delivered to Purchaser a
certificate executed by the President of the Seller bearing the date of the
Closing stating that (i) all representations and warranties made by Seller
contained in this Agreement are true, complete and accurate as of the Closing as
if made on and as of such date, and (ii) all terms, covenants (to the extent
required to be performed prior to the Closing), conditions and provisions of
this Agreement to be met by Seller have been complied with.
(f) Seller shall have delivered access to and
possession of all of the Acquired Assets to Purchaser.
(g) There shall have occurred after the date of this
Agreement no material casualty to the Acquired Assets, and no other material
adverse change shall have been sustained by Seller after the date of this
Agreement with respect to the Acquired Assets.
(h) To the extent transferable under applicable law,
all material licenses, permits, certificates of occupancy and other governmental
or non-governmental approvals or consents necessary for the use and occupancy of
the Acquired Assets and the operation of the South Amherst Facility will remain
in full force and effect upon the transfer of the Acquired Assets to Purchaser
pursuant to this Agreement and otherwise upon the consummation of the
transactions contemplated hereby.
(i) Seller shall have obtained the Fee Policy
insuring Purchaser's fee title interest in and to each parcel of Real Property,
and the Survey, as more particularly described in Section 7.6 of this Agreement.
(j) Seller shall have delivered evidence in form
reasonably satisfactory to Purchaser that the General Partner of Seller has
approved this Agreement and the transactions contemplated hereby in accordance
with all applicable laws of the State of Delaware.
(k) Purchaser's due diligence review of the Seller's
business and the Acquired Assets provided for in Section 4.1 of this Agreement
shall not have revealed any matter which would prevent Purchaser from operating
as presently contemplated.
(l) Seller shall have made arrangements to pay in
full at the Closing all indebtedness not specifically assumed by Purchaser
pursuant to this Agreement due to any creditor and Purchaser shall have received
evidence reasonably satisfactory to it that upon such prepayment, all liens
securing such indebtedness shall be removed and that no further obligations
shall remain with respect to such indebtedness.
Purchaser shall have the right, exercisable in its sole
discretion, to waive any one or more of the foregoing conditions (which waiver
shall not operate as a waiver of any right of indemnity or any other right or
remedy for breach of this Agreement with respect thereto, including without
limitation, that
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contained in Section 8.2 of this Agreement), and to proceed with the Closing, or
to terminate this Agreement without liability on the part of any party hereto.
SECTION 6. CLOSING
-------
6.1 DATE AND PLACE OF CLOSING. The consummation and closing of
the transactions provided for in this Agreement (the "Closing") shall occur on
April ____, 1996 (the "Closing Date") at such place and time as the parties
shall mutually agree. The Closing shall be deemed to be effective as of the
close of business on the date of the Closing.
6.2 PRORATIONS AS OF CLOSING. All Prepaid Expenses
attributable to the Acquired Assets, other than prepaid personal property taxes
attributable to Inventory, including, without limitation, water and sewer
charges in respect of the Real Property, shall be prorated as of the Closing
Date, and the parties shall provide at Closing for any adjustments or payments
in respect of such proration. For purposes of prorating the personal property
taxes attributable to the Acquired Assets other than Inventory, the parties
shall use Seller's liability as reflected on Seller's 1995 Personal Property tax
return, irrespective of the actual amount of credit available to Purchaser as a
consequence of the transactions contemplated by this Agreement.
SECTION 7. ADDITIONAL AGREEMENTS
---------------------
7.1 WAIVER OF COMPLIANCE WITH BULK SALES LAWS. The parties
waive compliance with the bulk transfer provisions of the Uniform Commercial
Code as adopted in the State of Ohio. Seller shall file on the date of Closing
or as soon as practicable a State of Ohio Department of Taxation Request for
Sales Tax Release (Prescribed Sales Tax Form No. ST 915 (Rev. 2-82)) with the
Ohio Department of Taxation Sales Tax Unit ("STU"). Seller shall deliver a copy
of such form at Closing to Purchaser. After the Closing, Seller shall keep
Purchaser fully informed with respect to all dealings with STU and shall deliver
to Purchaser a copy of the Sales Tax Release Certificate promptly after it is
obtained from the STU. Seller shall pay when due and discharge (a) all claims of
creditors and all taxes and interest and penalties and all other liabilities of
whatsoever nature which could be collected from Purchaser by reason of such
noncompliance, and (b) all sales and other state and local taxes owing by Seller
in respect of the operation of the business of Seller through the Closing, and
Seller shall indemnify Purchaser against and hold it harmless with respect to
any liability, loss or expense (including without limitation attorneys' fees)
incurred or suffered by Purchaser by reason of the failure of Seller to pay or
discharge such claims or taxes and interest and penalties thereon.
7.2 FURTHER ASSURANCES. After the Closing, each of the parties
shall take whatever further action is necessary and to execute whatever further
documents, instruments of assignment, transfer, conveyance or authorization and
agreements as may be reasonably requested by the other in order to fulfill the
purposes and the intent of this Agreement.
7.3 BROKERAGE COMMISSIONS AND FEES. Purchaser and Seller
represent and warrant to each other that all negotiations between them have been
carried on by them directly, each with the other, or with the other's counsel,
accountants or business consultants, without the intervention of any third
person and that there are no brokers' commissions, finder's fees or other
payments of like nature payable to any. Seller agrees to indemnify and hold
harmless Purchaser from and against any and all losses, claims, costs, damages
and expenses of whatsoever nature (including, without limitation, all legal
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expenses) attributable to any claim, liability or obligation for any brokers'
commission, finder's fees or other payment of like nature which arises from any
contract or agreement or obligation on the part of the Seller with any broker,
finder or like person. Purchaser agrees to indemnify and hold harmless Seller
from and against any and all losses, claims, costs, damages and expenses of
whatsoever nature (including, without limitation, all legal fees and expenses)
attributable to any claim or liability or obligation for any brokers'
commissions, finder's fees or payment of like nature which arises from any
contract, agreement or obligation on the part of Purchaser with any broker,
finder or like person.
7.4 ACTIONS OF THE SELLER PRIOR TO CLOSING. Prior to the
Closing, Seller shall:
(a) protect the Acquired Assets from the elements and maintain
the Acquired Assets in good operating condition and repair; and
(b) maintain the books, accounts and records of Seller in the
usual, regular and ordinary manner on a basis consistent with past practice.
If Seller fails to do so, then Purchaser, upon notice to
Seller, may enter the premises and take all reasonable actions necessary to
protect and maintain the Acquired Assets and may deduct the cost thereof from
the Purchase Price.
7.5 PUBLIC STATEMENTS. Purchaser and Seller agree to
cooperate, both prior to and after the Closing, in issuing any press releases or
otherwise making public statements with respect to the transactions contemplated
herein, and no press releases or other public statements shall be issued without
the joint consent of Purchaser and Seller (except as may be required by law and,
in any such event, only after consultation with the other party).
7.7 SALES TAX; TRANSFER TAX. Seller shall be responsible for
payment of any State of Ohio sales tax generated by the completion of the
purchase of the tangible personal property (not held for resale by the Seller)
contemplated by this Agreement. In addition, Seller shall pay all transfer taxes
and other related taxes arising out of the transactions contemplated by this
Agreement, including but not limited to the transfer of the Real Property to
Purchaser.
7.8 ENVIRONMENTAL MATTERS.
Purchaser shall not assume any liability for, and Seller covenants and
agrees to reimburse and indemnify Purchaser against, any cost or liability with
respect to all Environmental Conditions relating to the Real Property and all
other Acquired Assets being acquired from Seller whether or not Purchaser knew
of any such Environmental Condition prior to Closing.
7.9 EMPLOYEE MATTERS.
(a) Purchaser shall not have any obligation to employ or offer
employment to any employee or former employer of Seller following the Closing.
(b) Seller has issued all notices and taken any and all other
actions required by the Worker Adjustment and Retraining Notification Act
("WARN") and Seller shall indemnify and hold harmless Purchaser from and against
any and all losses, claims, costs, damages and expenses of whatsoever nature
(including, without limitation, legal expenses) attributable to any failure by
Seller to do
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so. In the event Seller fails to issue any such notice or take any such action
required by WARN, Purchaser shall be entitled, but is not required, to do so for
and on behalf of Seller as Seller's agent.
SURVIVAL AND INDEMNIFICATION
----------------------------
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
INDEMNITIES. The representations and warranties of the parties to this
Agreement, and the indemnities and covenants with respect thereto, shall survive
the Closing until the third Anniversary of the Closing, at which time they shall
terminate, except for (a) the representations, warranties, covenants and
indemnities relating to tax liabilities shall survive the Closing until all
applicable statutes of limitation, as extended, shall have expired and (b) there
shall be no time limitation on the representations and warranties set forth in
Section 2.7 (which relates to Seller's title to the Acquired Assets), Sections
2.15 and 2.16 to the extent they relate to any Environmental Law, and Section
2.16 (which relates to environmental matters) or the covenants set forth in
Section 7.8 (which relates to environmental matters) and (c) any claims made
prior to the third anniversary of the Closing, with respect to any Loss (as
hereinafter defined), which claims shall survive until the liability shall be
finally determined. The covenants of the parties to this Agreement, and the
indemnities with respect thereto, including but not limited to the covenants and
indemnities set forth in Section 7.9, shall survive the Closing until they have
been fully satisfied or otherwise discharged.
8.2 INDEMNIFICATION BY SELLER. Seller agrees to reimburse,
indemnify and hold harmless Purchaser from and against any and all liabilities,
losses, costs and expenses whatsoever, including, but not limited to,
attorneys', accountants' and consultants' fees and disbursements (a "Loss" or
collectively "Losses"), arising out of or incurred with respect to (a) any
breach of any one or more of Seller's warranties or representations in this
Agreement, (b) any misrepresentation by or on behalf of Seller under this
Agreement, (c) the breach or nonperformance of any covenant or obligation to be
performed by Seller, including, with limitation, the covenants and indemnities
set forth in Section 7.9, or (d) the breach or nonperformance of any liabilities
or obligations of Seller retained by Seller and not assumed by Purchaser
pursuant to this Agreement.
8.3 INDEMNIFICATION BY PURCHASER. Purchaser agrees to
indemnify and hold harmless Seller from and against any and all liabilities,
losses, reasonable costs and expenses whatsoever, including, but not limited to,
attorneys' and accountants' fees and disbursements (a "Loss" or collectively
"Losses"), arising out of or incurred with respect to (a) any breach of any one
or more of Purchaser's warranties or representations in this Agreement, (b) any
misrepresentation by or on behalf of Purchaser under this Agreement, (c) the
breach or nonperformance by Purchaser of any covenant or obligation to be
performed by Purchaser hereunder, or (d) the breach or nonperformance of any
liabilities or obligations of Seller assumed by Purchaser and not retained by
Seller pursuant to this Agreement.
8.4 NOTIFICATION OF CLAIMS. In the event that any party hereto
proposes to make any claim for indemnification pursuant to Sections 8.2 or 8.3,
the party seeking indemnification (the "Indemnified Party") shall deliver on or
prior to the date upon which the applicable representations, warranties,
indemnities or covenants expire pursuant to Section 8.1 of this Agreement, a
signed certificate, which certificate shall (i) state that a Loss has occurred,
(ii) specify the sections of this Agreement under which such claim is made, and
(iii) specify in reasonable detail each individual item of Loss or other claim
including the amount thereof and the date such Loss was incurred.
8.5 DEFENSE OF THIRD PARTY CLAIMS AND EXTENSION OF STATUTE OF
LIMITATIONS. The party to this Agreement against which a claim for a particular
item (or group of related items) of Loss is asserted (the "Indemnifying Party")
shall have the right in its discretion and at its expense to participate in
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and control (a) the defense or settlement of any claim, suit, action or
proceeding (including appeals) in respect of such item (or items) by any other
person other than a party hereto insofar as the Indemnified Party shall claim
indemnification hereunder in respect thereof, (b) any and all negotiations with
respect thereto, and (c) the assertion of any claim against any insurer with
respect thereto, and the Indemnified Party shall not settle any such claim,
suit, action or proceeding or agree to extend any applicable statute of
limitation without the prior written approval of the Indemnifying Party, which
approval shall not be unreasonably withheld or delayed. The rights of
participation, control and approval granted to the Indemnifying Party shall be
subject as a condition precedent to such party's acknowledging to the
Indemnified Party, in writing, the obligation of the Indemnifying Party to
indemnify the other party hereto in respect of such third party's claim, suit,
action or proceeding giving rise to such item. Upon such acknowledgment, the
Indemnified Party will provide the Indemnifying Party with all reasonably
available information, assistance and authority to enable the Indemnifying Party
to effect such defense or settlement, and upon the Indemnifying Party's payment
of any amounts due in respect of such claim, suit, action or proceeding, the
Indemnified Party will, to the extent of such payment, assign or cause to be
assigned to the Indemnifying Party the claims of the Indemnified Party, if any,
against such third parties in respect of which such payment is made. If the
Indemnifying Party is not so willing to acknowledge such obligation, the parties
shall jointly consult and proceed as to any such third party claim, suit, action
or proceeding.
DEFINITIONS
-----------
9.1 The following terms as used in this Agreement shall have
the meanings set forth below:
(a) "Affiliate" shall mean any Person controlled by, under
common control with and/or controlling a Person, and the term "Person" shall
mean and include natural persons and corporations, partnerships, trusts and
other entities.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Environment" shall mean any water, water vapor, land
surface or subsurface, air, fish, wildlife, biota and other natural resources.
(d) "Environmental Condition" shall mean the discharge, spill,
disposal, emission, or release into the environment on or from the Real
Property, or presence in or on the Real Property, of any Regulated Material or
other substance or property, in each case prior to the Closing, in an amount and
under circumstances that would require removal or remediation or constitute a
basis for a claim or cause of action for cleanup costs or personal injury or
damages under any Environmental Law or the common law.
(e) "Environmental Law" shall mean any and all statutes, laws,
ordinances, rules, regulations, permits, licenses, orders and/or directives of
any Governmental Agency, now or hereafter in effect, relating to the protection
of the Environment or governing or regulating the use, storage, treatment,
generation transportation, processing handling, abandoning, production or
disposal of, or Release of any chemical, substance, waste, pollutant or
contaminant.
(f) "Excluded Items" shall mean (i) liabilities for Seller's
federal, state and local income, franchise and sales taxes, gross receipts and
similar taxes and employee tax withholding, and (ii)
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liabilities for professional fees and expenses incurred in connection with the
negotiation and consummation of the transactions provided for in this Agreement.
(g) "Governmental Agency" shall mean any federal, state, local
or foreign government, political subdivision, court, agency or other entity,
body, organization or group exercising any executive, legislative, judicial,
quasi-judicial, regulatory or administrative function of government.
(h) "Permitted Exceptions" shall mean only those exceptions to
title set forth in the Title Policy which are acceptable to Purchaser.
(i) "Regulated Material" shall mean any chemical, substance,
waste pollutant or contaminant, as defined in or governed by any Environmental
Law or as determined by any Governmental Agency.
(j) "Real Property" shall mean (i) all real property owned by
Seller, wherever located, and (ii) leased by Seller and used in its business,
after January 1, 1991.
(k) "Release" shall mean any spilling, leaking, pumping,
pruning, emitting, discharging, injecting, escaping, leaching, dumping or
dispensing into the Environment.
(l) "South Amherst Facility" shall mean Seller's property and
operations which have an address of Ohio State Route 113, South Amherst, Ohio
44001.
GENERAL PROVISIONS
------------------
10.1 NOTICES. All notices under this Agreement shall be in
writing. All notices and other communications given pursuant to this Agreement
shall be deemed to have been properly given or delivered if hand delivered or if
mailed, by certified mail, postage prepaid, addressed to the appropriate party
at the following addresses:
A. SELLER:
Cleveland Quarries L.P.
900 Keele Street
Toronto, Ontario M6N 3E7
Attention: Glen Gasparini, President
Slate & Stone Corporation of America
B. PURCHASER:
American Stone Corporation
8705 Quarry Road
Box 261
Amherst, Ohio 44001
Attention: President
Any party may from time to time designate by written notice
pursuant to this Section any other address or party to which such notice or
communication or copies thereof shall be sent.
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10.2 PAYMENT OF EXPENSES. All expenses incurred by Seller in
connection with the negotiation and completion of the transactions contemplated
by this Agreement shall be the responsibility of Seller. Except as otherwise
provided in this Agreement, all expenses incurred by Purchaser in connection
with the negotiation and completion of the transactions contemplated by this
Agreement shall be the responsibility of Purchaser.
10.3 RIGHT OF OFFSET. If Purchaser is obligated to make any
payments to Seller pursuant to the terms of this Agreement or any document
signed in connection with this Agreement, then Purchaser may offset against such
amounts any amounts owing to Seller.
10.4 MISCELLANEOUS. This Agreement shall be construed in
accordance with and governed by the internal domestic laws of the State of Ohio
without reference to its conflicts of law principles. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties and
their respective successors, legal representatives, heirs and assigns. No rights
of third-party beneficiaries exist or are intended to exist under this
Agreement. Headings and subheadings in this Agreement and in any Schedules or
attached to and made a part of this Agreement are for convenience of reference
only and are not of substantive effect. There are no oral agreements in
connection with this Agreement. This Agreement constitutes the entire agreement
of the parties, and supersedes any prior agreements or understandings, whether
oral or written, between the parties, with respect to the subject matter hereof.
This Agreement may not be terminated, modified or amended orally or by any
course of conduct or usage of trade but only by an agreement in writing duly
executed by the parties. This Agreement may be executed simultaneously or in one
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument. Any waiver of a breach of
any of the provisions of this Agreement shall not be deemed a waiver of any
other provision of this Agreement. If any article, paragraph, section, portion,
subsection, subparagraph or subportion of this Agreement shall be determined to
be unenforceable or invalid, it shall not affect the remainder of this
Agreement, which shall be and remain binding and effective as against all
parties.
The parties have signed this Agreement as of the date first above
written.
CLEVELAND QUARRIES L.P.
By Slate & Stone Corporation of America, Its
General Partner
By
-------------------------------
Glen Gasparini, President
AMERICAN STONE CORPORATION
By
-------------------------------
Its President
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Exhibit 6(E)
AMENDMENT TO AND RESTATEMENT OF
ASSET PURCHASE AGREEMENT
OF FEBRUARY, 1996
THIS AMENDMENT TO AND RESTATEMENT OF ASSET PURCHASE AGREEMENT OF
FEBRUARY 1, 1996 ("Amendment") is entered into as of the 20th day of December,
1996, by and between AMERICAN STONE CORPORATION (hereinafter "American Stone" or
"ASC") and CLEVELAND QUARRIES, LP (hereinafter "Cleveland Quarries").
WITNESSETH:
WHEREAS, on or about February 1, 1996, an Asset Purchase Agreement (the
"Initial Agreement") was entered into by all parties to this Amendment; and
WHEREAS, upon review, analysis and careful consideration of the Initial
Agreement, the parties hereto agree and concur that the Initial Agreement did
not express the actual intentions of the parties with respect to the computation
of purchase price, such error constituting a mistake of fact which the parties
now wish to remedy; and
WHEREAS, the parties hereto wish to amend and restate the Initial
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein, the affirmation and restatement of the Initial Agreement, the
increase in Purchase Price and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. The recitals set forth above are true and correct.
2. Except to the extent amended herein, the Initial Agreement, a true
and correct copy of which is attached hereto and incorporated herein as Exhibit
A, is hereby affirmed in its entirety and restated to be in full force and
effect.
3. Sections 1.4 and 1.5 of the Initial Agreement, as the result of a
mistake of fact, failed to correctly set forth the complete purchase price.
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4. The Initial Agreement is hereby amended by deleting therefrom
Section 1.4 on page 4 and substituting the following in place thereof:
"1.4 Purchase Price
"The Purchase Price for the Acquired Assets is (a)
$2,100,000.00 and (b) such other and additional funds
(not to exceed $300,000.00) which the Purchaser and
Seller mutually determine to be necessary and
appropriate in order that the Acquired Assets are
transferred free and clear of any and all liens and
encumbrances as provided in Section 1.5 of this
Agreement."
5. Subsection (d) of Section 1.5 is hereby deleted and the following
substituted in place thereof:
"(d) At Closing, Purchaser shall deliver to Seller a
sum which shall be computed by deducting subsections
(a), (b) and (c) of Section 1.5 from the principal
sum of $2,100,000.00.
"(e) Subsequent to Closing, Purchaser shall pay such
further and additional sums, not to exceed
$300,000.00, which Purchaser and Seller agree are
necessary and appropriate in order that the Acquired
Assets may be conveyed free and clear of liabilities
to Purchaser."
6. Schedule 1.6 is hereby amended by adding the following language:
"To the extent that Purchaser pays additional
compensation as provided in subsection (e) of Section
1.5, such additional compensation shall be allocated
to land, inventory and such other asset category as
appropriate."
7. Cleveland Quarries, at the election of American Stone, shall pay for
or on behalf of American Stone all costs incurred by American Stone, including
but not limited to attorneys' fees, which are incurred by American Stone and
which result in any way from actions taken by Cleveland Quarries. Such payment
shall be made by Cleveland Quarries within fifteen (15) days after being
presented with an invoice for or other evidence of such costs.
8. This Amendment shall be construed, enforced and interpreted by an
Ohio court in accordance with the internal laws of the State of Ohio, without
regard to its conflicts of laws principles.
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<PAGE> 3
9. The parties hereto acknowledge and warrant that they have read this
Amendment; that they have pull power and authority to execute the same; and that
the execution hereof is of their free will and is done so voluntarily intending
to be legally bound.
10. In the event that any party brings a claim, action or other
proceeding against ASC or its parent, American Stone Industries, Inc. ("ASI"),
ASC and/or ASI shall have the right to employ counsel of its choice to defend or
otherwise contest such claim, action or proceeding and the party or parties
bringing such shall pay all reasonable attorney's fees and costs incurred by ASC
and/or ASI to defend or contest.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have executed this Amendment on the day and year first written above.
AMERICAN STONE CORPORATION
By:
----------------------------------
Its:
----------------------------------
CLEVELAND QUARRIES, LP
By: Slate & Stone Corporation of America
By:
----------------------------------
Its:
----------------------------------
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<PAGE> 1
Exhibit 6(F)
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is entered into as of the
20th day of December, 1996, by and between CLEVELAND QUARRIES, LP ("Cleveland
Quarries"), SLATE AND STONE CORPORATION OF AMERICA ("Slate and Stone") and
AMERICAN STONE CORPORATION ("ASC").
WITNESSETH:
WHEREAS, in or about February 1, 1996, Cleveland Quarries and ASC
entered into an Asset Purchase Agreement (the "Initial Agreement"); and
WHEREAS, subsequent to the execution of the Initial Agreement, the
parties thereto determined that there was a mistake in fact with respect to
computation of the Purchase Price; and
WHEREAS, the parties to the Initial Agreement have amended and restated
the Initial Agreement in order to correct the mistake of fact; and
WHEREAS, Cleveland Quarries and Slate and Stone desire to indemnify and
hold ASC harmless from any and all expenses and damages which it might incur as
a result of the mistake of fact including, but not limited to, any legal fees
incurred by ASC in connection with the investigation of this matter and the
preparation of the Amended and Restated Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the willingness of ASC to amend the
Initial Agreement in order to increase the Purchase Price, and other good and
valuable consideration, the parties hereto, intending to be legally bound, agree
as follows:
1. The recitals set forth above are true and correct.
2. As an acknowledgment of their good faith and in consideration of the
willingness of ASC to amend and restate the Initial Agreement in order to
increase the Purchase Price paid to Cleveland Quarries, Cleveland Quarries and
Slate and Stone, jointly and severally, agree to indemnify, defend and hold ASC
and its parent American Stone Industries, Inc. ("ASI") harmless from any and all
claims, causes of action, fines,
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<PAGE> 2
damages, awards, costs (including attorneys' fees) or otherwise which in any way
arise or result from any act, error, omission or negligence of Slate and Stone
and Cleveland Quarries or which otherwise in any way relate to or arise from the
Initial Agreement or in any way relate to or arise from the amendment thereto.
3. Slate and Stone and Cleveland Quarries, jointly and severally, at
the election of ASC shall pay for or on behalf of ASC and/or ASI all costs
incurred by ASC and/or ASI, including but not limited to attorneys' fees, which
are incurred by ASC and/or ASI and which result in any way from actions taken by
Cleveland Quarries and Slate and Stone. Such payment shall be made by Slate and
Stone and Cleveland Quarries within fifteen (15) days after being presented with
an invoice for or other evidence of such costs.
4. The parties hereto acknowledge and warrant that they have read this
Agreement; that they have full power and authority to execute the same; and that
the execution hereof is of their free will and is done so voluntarily and with
the intent to be legally bound.
5. This Agreement shall be construed, enforced and interpreted by an
Ohio court in accordance with the internal laws of the State of Ohio, without
regard to its conflicts of laws principles.
6. In the event that any party brings a claim, action or other
proceeding against ASC, ASC shall have the right to employ counsel of its choice
to defend or otherwise contest such claim, action or proceeding and the party or
parties bringing such shall pay all reasonable attorneys' fees and costs
incurred by ASC to defend or contest.
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<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement on the day and year first written above.
SLATE AND STONE CORPORATION
OF AMERICA
By:
--------------------------------
Its:
--------------------------------
CLEVELAND QUARRIES, LP
Slate and Stone Corporation of America, its
General Partner
By:
--------------------------------
Its:
--------------------------------
AMERICAN STONE CORPORATION
By:
--------------------------------
Its:
--------------------------------
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<PAGE> 1
Exhibit 6(G)
SHARE PURCHASE AGREEMENT
THIS AGREEMENT effective as of May 22, 1996 (the "Effective Date")
BETWEEN:
DAVID TYRRELL
-------------
of the Municipality of Metropolitan Toronto in the Province of Ontario
(hereinafter referred to as the "Vendor")
OF THE FIRST PART
- -and -
American Stone Industries, Inc.
-------------------------------
a corporation duly incorporated under the laws of the Province of
Ontario (hereinafter called the "Purchaser")
OF THE SECOND PART
WHEREAS the authorized capital of Tyrrell Stone Design Limited (hereinafter
called the "Corporation", a corporation duly incorporated under the laws of the
Province of Ontario, consists of unlimited common shares of which 100 Common
shares (the "Common Shares" are issued and outstanding as fully paid and
non-assessable and the beneficial owners thereof are as follows:
Beneficial Owner Number of shares
---------------- ----------------
David Tyrrell 100 Common
AND WHEREAS the Vendor wishes to sell and the Purchaser wishes to purchase the
Common Shares on the terms and conditions hereof;
NOW THEREFORE in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt and sufficiency whereof each
of the parties hereto hereby acknowledges, the parties hereto covenant and agree
as follows:
ARTICLE ONE
PURCHASE AND SALE OF SHARES
Section 1.01 The Purchaser hereby purchases and the Vendor hereby sells the
Common Shares for the consideration and subject to the terms and conditions
hereinafter set forth, effective on the Closing Date.
Section 1.02 The following shall be the terms of payment for the Common Shares:
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<PAGE> 2
(a) the purchase price (the "Purchase Price") payable for the
Common Shares shall be an amount equal to the fair market
value of 200,000 Class A Common Shares of the Purchaser, on
the Closing Date determined by multiplying the closing share
price of one Class A Common Share as listed on NASDAQ on the
Closing Date by 200,000;
(b) in satisfaction of the Purchase Price payable for the Common
Shares, the Purchaser shall issue to the Vendor 200,000 fully
paid and non-assessable and restricted Class A Common Shares
(the "Issued Shares") in the capital of the Purchaser. The
Purchaser shall issue to the Vendor on the Closing Date a
certificate registered in the name of the Vendor for the
Issued Shares;
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
Section 2.01 The Vendor hereby represents and warrants to the Purchaser that:
(a) the authorized capital of the Corporation is described in the
recitals herein and the Common Shares have been issued as
fully paid and non-assessable shares and there are no other
shares, options, or other rights with respect to the equity of
the Corporation outstanding now or at Closing;
(b) the Vendor is the registered and beneficial owner of the
Common Shares set opposite his or her name;
(c) the fulfillment of the Vendor's obligations hereunder will
not, on the Closing Date, be in contravention of any contracts
or instruments to which the Vendor is a party or by which he
is bound;
(d) the Common Shares are free and clear of all liens, claims,
rights, adverse interests, restrictions and encumbrances of
any nature whatsoever,
(e) the Vendor knows of no claim, action, proceeding or
investigation pending or threatened which places in question
the validity or enforceability of this agreement; and
(f) the Vendor is not a non-resident as defined in subsection
248(l) of the Income Tax Act (Canada) (the "Act").
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Section 3.01 The Purchaser represents and warrants to the Vendor that:
(a) the Purchaser has been duly incorporated and organized and is
validly subsisting under the laws of the State of Delaware,
USA with full corporate power and authority to enter into and
perform this agreement and this agreement constitutes a legal,
valid and binding obligation of the Purchaser enforceable in
accordance with its terms;
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<PAGE> 3
(b) the Issued Shares will be issued as fully paid and
non-assessable shares in the capital of the Purchaser and the
authorized capital of the Purchaser is as stated in Schedule
"A" hereto;
(c) the fulfillment of the Purchaser's obligations hereunder will
not be in contravention of the Purchaser's constating
documents, articles or by-laws or of any laws, regulations or
similar requirements, and will not contravene any contracts or
instruments to which the Purchaser is a party or by which the
Purchaser is bound;
(d) on Closing the Issued Shares will be free and clear of all
liens, claims, rights, adverse interests, restrictions and
encumbrances of any nature whatsoever, save as expressly set
forth in this Agreement, and
(e) the Purchaser knows of no action, claim, proceeding or
investigation pending or threatened which places in question
the validity or enforceability of this agreement.
ARTICLE FOUR
COVENANTS OF THE VENDOR
Section 4.01 The Vendor covenants as follows:
(a) all necessary steps and proceedings shall be taken to
effectively and validly carry out the transaction herein
contemplated including providing an affidavit confirming the
truth of the Vendor's representations and warranties hereunder
on Closing; and
(b) the Vendor shall cause the share certificates representing the
Common Shares to be delivered to the Purchaser on the Closing
Date, duly endorsed in blank for transfer.
(c) the Vendor shall provide the opinion of its corporate counsel,
in the form attached hereto as Schedule "B-1".
(d) the Vendor shall continue to be the sole director and shall
continue as the sole officer of the Corporation after Closing,
and shall operate the Corporation after the Closing Date in a
prudent and reasonable manner, provided that the Vendor shall
assure that no salaries, dividends, shareholder loans or other
pay outs of any type are made by the Corporation to the Vendor
or to any other party, without the specific instructions of
the Purchaser as shareholder of the Corporation, after the
Closing Date save and except for payments of third party
invoices for supplies, materials and other direct operating
costs of the Corporation made in the usual course of business.
The Vendor represents and warrants to the Purchaser, that, to
the best of the knowledge and belief of the Vendor, the
financial records of the Corporation that have been provided
to the Purchaser accurately describe the current state of the
Corporation, and that there are no claims, liabilities,
obligations or other matters which might affect the
Corporation, except as shown in the said statements. The
Purchaser acknowledges that the use of the "Tyrrell Stone
Design" business style is limited to the use permitted by law
and the Vendor makes no representation or warranty that he has
any right to the use of the said name, and the Purchaser
agrees that if they choose to use such name that they do so at
their own risk.
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<PAGE> 4
ARTICLE FIVE
COVENANTS OF THE PURCHASER
Section 5.01 The Purchaser covenants as follows:
(a) the Purchaser shall cause all necessary steps and corporate
proceedings to be taken to effectively and validly carry out
the transaction herein contemplated including providing the
share certificates for the Issued Shares.
(b) the Purchaser will provide the opinion of its corporate
counsel in the form attached hereto as Schedule "B-2".
(c) INTENTIONALLY DELETED.
ARTICLE SIX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
PURCHASER AND THE VENDOR
Section 6.01 The Purchases and the Vendor's obligations under this agreement are
subject to the fulfillment on or prior to the Closing Date of the following
conditions with each of subparagraphs (a) and (b) being for the sole benefit of
the Vendor and being subject to being waived by the Vendor and with each of
subparagraphs (c) and (d) being for the sole benefit of the Purchaser and being
subject to being waived by the Purchaser, and the condition in subparagraph (e)
being a true condition precedent:
(a) all the representations and warranties herein of the Purchaser
shall be true on and as of the closing Date with the same
effect as though they had been made on and as of the Closing
Date and the Purchaser shall have provided the corporate
opinion described in Article 5 hereof;
(b) the Purchaser shall have complied with all covenants to be
complied with by the Purchaser as set forth herein;
(c) all the representations and warranties herein o the Vendor
shall be true on and as of the Closing Date with the same
effect as though they had been made on and as of the Closing
Date and the Vendor shall have provided the corporate opinion
described in Article 4 hereof;
(d) the Vendor shall have complied with all of the covenants to be
complied with by the Vendor as set forth herein; and
(e) INTENTIONALLY DELETED.
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<PAGE> 5
ARTICLE SEVEN
CLOSING
Section 7.01 The purchase and sale of the Common Shares shall be completed in
the offices of the Purchaser at May 23, 1996 or at such other place, date or
time as may be mutually agreed to in writing by the parties hereto (the "Closing
Date" or the "Date of Closing").
ARTICLE EIGHT
MISCELLANEOUS
Section 8.01 Survival All representations and warranties made by the parties
herein or pursuant hereto shall speak as of the Closing Date and shall survive
the Closing Date.
Section 8.02 Governing Law This agreement shall be construed and interpreted in
accordance with the laws of the Province of Ontario and the laws of Canada in
force therein and the parties agree to submit any dispute arising out of this
agreement to the courts of such Province.
Section 8.03 Further Assurances The parties hereto agree to sign or execute all
such other deeds and documents and do such other things as may be necessary or
desirable for more completely and effectually carrying out the terms and
intention of this agreement.
Section 8.04 Successors and Assigns This agreement shall enure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns, provided that this agreement shall not be assigned by either party
without the express written consent of the other party.
Section 8.05 Time shall be of the essence of this agreement.
IN WITNESS WHEREOF the parties hereto have executed and delivered this agreement
as of the time and date first above written.
- ---------------------------- -----------------------------------------
Witness David Tyrrell
American Stone Industries, Inc.
By:
----------------------------------
By:
----------------------------------
I/we have authority to bind the corporation.
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<PAGE> 6
Schedule "A"
------------
List of Authorized Capital of American Stone Industries, Inc.
including
Limitations on Issued Shares
AUTHORIZED CAPITAL of AMERICAN STONE INDUSTRIES INC.:
- -----------------------------------------------------
40,000,000 shares of common stock with $.001 par value
20,000,000 shares of preferred stock with $.001 par value
RESTRICTIONS ON ISSUED SHARES
- -----------------------------
Shares are subject to a complete prohibition on transfer or sale for a two year
period after issuance.
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<PAGE> 7
SCHEDULE "B-1"
DRAFT
- -----
May 23, 1996
American Stone Industries, Inc.
DELIVERED
- ---------
Re: American Stone Industries Inc. ("ASII") purchase of Shares of Tyrrell
Stone Design Limited from David Tyrrell
We have acted as counsel for David Tyrrell in connection with the sale of all of
the shares of Tyrrell Stone Design Limited (the "Company") pursuant to an
agreement made as of the 22 day of May, 1996 (the "Share Purchase Agreement")
between David Tyrrell and American Stone Industries, Inc. (the "Purchaser").
In connection with the opinions hereinafter expressed, we have considered such
questions of law but have examined only the corporate records in our possession
for the purposes of the opinions hereinafter expressed. In such examination, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to originals of all
documents submitted to us as certified, photostatic or facsimile copies.
In expressing the opinions in paragraphs 6 and 7 hereof, we have assumed that
the Share Purchase Agreement and all documents thereunder have been duly
authorized, executed and delivered by the Purchaser and constitute valid and
legally binding obligations of the Purchaser enforceable in accordance with
their terms.
Based on the foregoing, and subject to the qualifications and reservations
hereinafter expressed, we are of the opinion that:
1. The Company is a subsisting corporation and has not been dissolved
under the laws of the Province of Ontario.
2. The authorized capital of the Company consists of an unlimited number
of common shares of which 100 common shares (the "Shares") are validly
issued and outstanding and are the only outstanding shares of record of
the Company.
3. Immediately prior to Closing, David Tyrrell was the owner of record of
the Shares.
4. The Share Purchase Agreement and all documents thereunder to which
David Tyrrell is a party have been duly executed and delivered by David
Tyrrell and constitute legally binding obligations of David Tyrrell
enforceable against him in accordance with their respective terms.
5. Neither (a) the execution or delivery of the Share Purchase Agreement
nor (b) the fulfillment or compliance with any of the terms thereof
will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, the articles and by-laws,
as amended, of the Company, or will require the consent or other action
by any administrative or governmental body.
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<PAGE> 8
The opinions expressed herein are subject to the following qualifications and
reservations:
(a) the enforceability of any agreement or any judgment arising
out of or in connection therewith (and the priority of any
rights arising thereunder) may be limited by any applicable
bankruptcy, reorganization, winding-up, insolvency, moratorium
or other laws of general application affecting the enforcement
of creditors' rights from time to time in effect;
(b) the enforceability of the provisions of the Share Purchase
Agreement and any documents thereunder may be limited by
general principles of equity and the obligation to act in a
reasonable manner and, in particular, no opinion is expressed
as to the availability of equitable remedies (including those
of specific performance and injunction) for the enforcement of
any provision of the Share Purchase Agreement or any document
thereunder;
(c) with respect to the opinion given in paragraph 2 above, we
have assumed that all consideration required to have been paid
or given in connection with the issuance of the outstanding
shares in the capital of the Company has in fact been paid;
(d) the opinions expressed herein are limited to the laws of the
Province of Ontario and laws of Canada applicable therein in
force on the date hereof;
(e) we express no opinion as to the truth or accuracy of any of
the warranties or representations in the Share Purchase
Agreement nor have we made any searches or investigations or
inquiries with respect thereto; the opinions expressed herein
are based solely on a review of the corporate records of the
Company in our possession and are subject to any matter that
would be revealed by any further investigation or inquiry.
The opinions expressed herein are provided solely for the benefit of the
addresses pursuant to the Share Purchase Agreement and may not be relied upon by
or disclosed to anyone else or used for any other purpose, without our prior
written consent.
Yours very truly,
BIRENBAUM, KOFFMAN, STEINBERG
Per:
Stanley Landau
SL/rg
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<PAGE> 9
Schedule "B-2"
May 22, 1996
Mr. David Tyrrell
22 Trenton Avenue
Toronto, Ontario M4C 2Z5
-and-
Birenbaum, Koffman, Steinberg
Barristers and Solicitors
33 Bloor Street East
Suite 1000
Toronto, Ontario M4W 3H1
Dear Sirs:
We act as counsel to American Stone Industries, Inc. ("Issuer") in
certain matters. This opinion is being delivered to you pursuant to an Agreement
by and between the Issuer and David Tyrrell ("Seller"), dated May 22, 1996 (the
"Agreement").
This opinion is governed by and shall be interpreted in accordance
with, the Legal Opinion Accord of the ABA Section of Business law (1991) (the
"Accord"). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations (only
some of which are referred to in this letter) more particularly described in the
Accord, and this letter should be read in conjunction with the Accord.
We have examined the Agreement together with copies of such records of
meetings written actions in lieu of meetings, or resolutions adopted at
meetings, of the directors of the Company, and such other documents and
instruments as in our judgment as in our judgment are necessary or appropriate
to enable us to render the opinions expressed below. In this regard, we have
also relief upon verbal information provided by the Issuer, including its
officers and directors and others acting on the Issuer's behalf.
In examination of the foregoing documents and verbal representations,
we have assumed, without independent investigation; the genuineness of all
signatures and the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified or photostatic copies, and the authenticity of the originals of such
latter documents; the truth and accuracy of all verbal representations; and the
truth and accuracy of all representations of Issuer in the Agreement.
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<PAGE> 10
Based upon and subject to the foregoing we are of the opinion that:
1. The Issuer is duly incorporated under the laws of the State of
Delaware, U.S.A. The Issuer has not yet filed its 1995 Annual
Franchise Tax Report, because the Issuer's registered agent
misaddressed the Report. As a result, the Secretary of State
of Delaware will not issue a Good Standing Certificate until
the Report is filed. The Issuer has informed this law firm
that the Report will be filed on or before May 25, 1996, and
as soon as we are informed that the Report has been filed, we
will amend this opinion to state that the Issuer is validly
existing and in good standing. However, we note that the
Issuers charter has not been voided, and the Company can
continue to active operations.
2. The authorized capital stock of the Issuer consists of
40,000,000 shares of common stock, $.001 par value and
20,000,000 shares of preferred stock, $.001 par value.
3. The 200,000 shares of the Issuer's common stock (the "Shares")
to be delivered to the Seller pursuant to the Agreement, when
so delivered, will be validly authorized and issued, fully
paid and non-assessable. The attributes of the Shares will be
as specified in the Agreement and the Shares shall have no
attributes other than as specified in the Agreement.
4. The delivery of the Shares in compliance with the terms of the
Agreement will be effective to legally transfer full
ownership, title, property and interest in said shares to the
Seller.
5. The warranties and representations contained in Article III of
the Agreement are true and accurate in all respects, although
our opinion is to the best of our knowledge with respect to
Articles 3.01(c), (d) and (e).
6. There are no restrictions on the sale or disposition of the
Shares other than as specified in the Agreement, and other
than restrictions on resale pursuant to Rule 144 under the
Securities Act of 1933; a copy of Rule 144 is attached hereto.
7. The Agreement has been duly authorized and approved by the
Board of Directors of Issuer and no other corporate acts or
proceedings are necessary to authorize the Agreement or the
transactions contemplated thereby.
The various statutory provisions and the interpretations thereunder by
administrative authorities in courts having jurisdiction over such matters, upon
which the foregoing opinions are based, are necessarily subject to change from
time to time. The opinions and conclusions expressed herein are based upon the
facts as previously stated which have been provided to us by the Issuer. This
opinion is premised on the accuracy of the facts and representations of the
Issuer. In the event such facts and representations are determined not to be
true, this opinion shall be null and void.
Moreover, as members of the Bar of the State of New York, we do not
purport to be experts in or express an opinion upon the laws of any other
jurisdiction.
The Issuer and Seller are authorized to rely on this opinion in
connection with the Agreement. No other use of this opinion is authorized
without the written consent of the undersigned. This opinion is valid only as of
the date issued and we hereby expressly disclaim any duty to provide updates.
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<PAGE> 11
This authorization is provided solely for your benefit in connection
with the transaction contemplated by the Agreement and may not be relied upon by
you for any other purpose, nor may it be furnished to, used, circulated, quoted
or relied upon by any other person for any purpose whatsoever, without prior
written consent of the undersigned.
Very truly yours,
John B. Lowy, P.C.
JBL:ah
ASLA0011.056
Page 155
<PAGE> 12
Reg. section 230.144. (a) Definitions. The following definitions shall
apply for the purposes of this rule.
(1) An "affiliate" of an issuer is a person that directly, or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, such issuer.
(2) The term "person" when used with reference to a person for whose
account securities are to be sold in reliance upon this rule includes, in
addition to such person, all of the following persons:
(i) Any relative or spouse of such person, or any relative of
such spouse, any one of whom has the same home as such person;
(ii) Any trust or estate in which such person or any of the
persons specified in paragraph (a)(2)(1) of this section, collectively
own ten percent or more of the total beneficial interest or of which
any of such persons serve as trustee, executor or in any similar
capacity; and
(iii) Any corporation or other organization (other than the
issuer) in which such person or any of the persons specified in
paragraph (a)(2)(i) of this section are the beneficial owners
collectively of ten percent or more of any class of equity securities
or ten percent or more of the equity interest.
(3) The term "restricted securities" means:
(i) securities that are acquired directly or indirectly from
the issuer, or from an affiliate of the issuer, in a transaction or
chain of transactions not involving any public offering; or
(ii) securities acquired from the issuer that are subject to
the resale limitations of Regulation D (section 230.501 through
section 230.506 of this chapter) or Rule 701(c) 230.701(c) of this
chapter) under the Act; or
(iii) securities that are subject to the resale limitations of
Regulation D and acquired in a transaction or chair of transactions not
involving any public offering; or
(iv) securities that are acquired in a transaction or chain of
transactions meeting the requirements of Rule 144A (section 230.144A
of this chapter). [Amended in 'Release No. 33-6862 (paragraph 84,523)
effective April 30, 1990, 55 F.R. 17933]
PROPOSED AMENDMENTS_____________________________________________________________
-> Reproduced below is the text of paragraphs (a)(3)(iv), as
proposed to be amended, and (a)(3)(v), as proposed to be added, in
Release No. 33-7185 (P. 85,636), June 27, 1995.
(iv) securities that are acquired in a transaction or chain of
transactions meeting the requirements of Rule 144A (section 230.144A
of this chapter); or
(v) Securities acquired from the issuer that are subject to
the resale limitations of Regulation CA (section 230.1001).
END OF PROPOSED AMENDMENTS______________________________________________________
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<PAGE> 13
.10 ANNOTATIONS OF RULINGS UNDER PARAGRAPH (A) OF RULE 144 --See
paragraphs 2706.222; 2706.223; 2706.2235; 2706.3039; 2706.307; 2706.308;
2706.3081; 2706.38; 2706.382; 2706.385 2706.412; 2706.4153; 2706.5012;
2706-5013; 2706.5061; 2706.735 and 2706.83.
(b) Conditions to be Met. Any affiliate or other person who sells
restricted securities of an issuer for his own account, or person who sells
restricted, or any other securities for the account of an affiliate of the
issuer of such securities, shall be deemed not to be engaged in a distribution
of such securities and therefore not to be an underwriter thereof within the
meaning of Section 2(11) of the Act if all of the conditions of this rule are
met.
(c) Current Public Information. There shall be available adequate
current public information with respect to the issuer of the securities. Such
information shall be deemed to be available only if either of the following
conditions is met:
(1) Filing of Reports. The issuer has securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, has been
subject to the reporting requirements of Section 13 of that Act for a
period of at least 90 days immediately preceding the sale of the
securities and has filed all the reports required to be filed
thereunder during the 12 months preceding such sale (or for such
shorter period that the issuer was required to file such reports); or
has securities registered pursuant to the Securities Act of 1933, has
been subject to the reporting requirements of Section 15(d) of the
Securities Exchange Act of 1934 for a period of at least 90 days
immediately preceding the sale of the securities and has filed all the
reports required to be filed thereunder during the 12 months preceding
such sale (or for such shorter period that the issuer was required to
file such reports. The person for whose account the securities are to
be sold shall be entitled to rely upon a statement in whichever is the
most recent, quarterly or annual, required to be filed and filed by the
issuer that such issuer has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the issuer was
required to file such reports) and has been subject to such filings
requirements for the past 90 days, unless he knows or has reason to
believe that the issuer has not complied with such requirements. Such
person shall also be entitled to rely upon a written statement from the
issuer that it has complied with such reporting requirements unless he
knows or has reason to believe that the issuer has not complied with
such requirements. [As amended in Release No. 34-5452 (paragraph
9928), effective March 15, 1974.]
(2) Other Public Information. If the issuer is not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, there is
publicly available the information concerning the issuer specified in
paragraph (a)(5)(i) to (xiv), inclusive, and paragraph (a)(5)(xvi) of
Rule 15c2-11 (section 240.15c2-11 of this chapter) under that Act or,
if the issuer is an insurance company the information specified in
Section 12(g)(2)(G)(i) of that Act. [Amended in Release No. 33-6862
(paragraph 84,523), effective April 30, 1990, 55 F.R. 17933.]
.30 ANNOTATIONS OF RULINGS UNDER PARAGRAPH (C) OF RULE 144. --See
12706.141; 2706.2237; 2706.2241; 2706.328; 2706.49; 2706-4901; 2706.4902;
2706.4903; 2706.491; 2706.4911; 2706.4912; 2706.4915; 2706.4916; 2706-4917;
2706.492; 2706.4921; 2706.494; 2706.495, 2706.496; 2706.497; 2706.5151; 2706.58;
2706.581; 2706.70; 2706.86; 2706.88 and 2706.92.
(d) Holding Period for Restricted Securites. If the securities sold are
restricted securities, the following provisions apply:
Page 157
<PAGE> 14
(1) General rule. A minimum of two years must elapse between
the later of the date of the acquisition of the securities from the
issuer or from an affiliate of the issuer, and any resale of such
securities in reliance on this section for the account of either the
acquisition or any subsequent holder of those securities, and if the
acquisition takes the securities by purchase, the two-year period shall
not begin until the full purchase price or other consideration is paid
or given by the person acquiring the securities from the issuer or from
an affiliate of the issuer.
PROPOSED AMENDMENT ___________________________________________________________
-> Reproduced below is the text of paragraph (d)(1) as proposed
to be amended in Release No. 33-7187 (paragraph 85,638), June 27, 1995.
(1) General rule. A minimum of one year must elapse between
the later of the date of the acquisition of the securities from the
issuer or from an affiliate of the issuer, and any resale of such
securities in reliance on this section for the account of either the
acquisition or any subsequent holder of those securities, and if the
acquisition takes the securities by purchase, the one-year period shall
not begin until the full purchase price or other consideration is paid
or given by the person acquiring the securities from the issuer or from
an affiliate of the issuer.
END OF PROPOSED AMENDMENT_____________________________________________________
(2) Promissory Notes, Other Obligations or Installment Contracts.
Giving the issuer or affiliate of the issuer from whom the securities were
purchased a promissory note or other obligation to pay the purchase price, or
entering into an installment purchase contract with such seller, shall not be
deemed full payment of the purchase price unless the promissory note, obligation
or contract:
(i) provides for full recourse against the purchaser of the
securities;
(ii) is secured by collateral, other than the securities
purchased, having a fair market value at least equal to the purchase
price of the securities purchased; and
(iii) shall have been discharged by payment in full prior to
the sale of the securities.
(3) Determination of Holding Period. The following provisions shall
apply for the purpose of determining the period securities have been held:
(i) Stock Dividends, Splits and Recapitalizations. Securities
acquired from the issuer as a dividend or pursuant to a stock split,
reverse split or recapitalization shall be deemed to have been acquired
at the same time as the securities on which the dividend or, if more
than one, the initial dividend was paid, the securities involved in the
split or reverse split, or the securities surrendered in connection
with the recapitalization;
(ii) Conversions. If the securities sold were acquired from
the issuer for a consideration consisting solely of other securities of
the same issuer surrendered for conversion, the securities so acquired
shall be deemed to have been acquired at the same time as the
securities surrendered for conversion;
Page 158
<PAGE> 15
(iii) Contingent Issuance of Securities. Securities acquired
as a contingent payment of the purchase price of an equity interest in
a business, or the assets of a business, sold to the issuer or an
affiliate of the issuer shall be deemed to have been acquired at the
time of such sale if the issuer or affiliate was then committed to
issue the securities subject only to conditions other than the payment
of further consideration for such securities. An agreement entered into
in connection with any such purchase to remain in the employment of, or
not to compete with, the issuer or affiliate or the rendering of
services pursuant to such agreement shall not be deemed to be the
payment of further consideration for such securities.
(iv) Pledged Securities. Securities which are bona fide
pledged by an affiliate of the issuer when sold by the pledgee, or by a
purchaser, after a default in the obligation secured by the pledge,
shall be deemed to have been acquired when they were acquired by the
pledgor, except that if the securities were pledged without recourse
they shall be deemed to have been acquired by the pledgee at the time
of the pledge or by the purchaser at the time of purchase.
(v) Gifts of Securities. Securities acquired from an affiliate
of the issuer by gift shall be deemed to have been acquired by the
donee when they were acquired by the donor.
(vi) Trusts. Where a trust settlor is an affiliate of the
issuer, securities acquired from the settlor by the trust, or acquired
from the trust by the beneficiaries thereof, shall be deemed to have
been acquired when such securities were acquired by the settlor.
(vii) Estates. Where a deceased person was an affiliate of the
issuer, securities held by the estate of such person or acquired from
such estate by the beneficiaries thereof shall be deemed to have been
acquired when they were acquired by the deceased person, except that no
holding period is required if the estate is not an affiliate of the
issuer or if the securities are sold by a beneficiary of the estate who
is not such an affiliate.
NOTE: While there is no holding period or amount limitation for estates
and beneficiaries thereof which are not affiliates of the issuer, paragraphs
(c), (h) and (i) of the rule apply to securities sold by such persons in
reliance upon the rule.
(viii) Rule 145(a) transactions. The holding period for
securities acquired in a transaction specified in Rule 145(a) shall be
deemed to commence on the date the securities were acquired by the
purchaser in such transaction. This provision shall not apply, however,
to a transaction effected solely for the purpose of forming a holding
company.
[Amended in Release No. 33-6862 (paragraph 84,523), effective April
30, 1990, 55 F.R. 17933.]
.40 ANNOTATIONS OF RULINGS UNDER PARAGRAPH (D) OF RULE 144. --See
2706-153; 2706.185; 2706.2236; 2706.3001; 2706.3042; 2706.3051; 2706-308;
2706.3510; 2706.391; 2706.41 thru 2706.421; 2706.429, 2706.4410; 2706.625;
2706.641; 2706.642; 2706.732; 2706.810; 2706.93.
(e) Limitation on amount of securities sold. Except as hereinafter
provided, the amount of securities which may be sold in reliance upon this rule
shall be determined as follows:
(1) Sales by affiliates. If restricted or other securities are sold for
the account of an affiliate of the issuer, the amount of securities sold,
together with all sales of restricted and other securities of the same class for
the account of such person within the preceding three months, shall not exceed
the greater of (i)
Page 159
<PAGE> 16
one percent of the shares or other units of the class outstanding as shown by
the most recent report or statement published by the issuer, or (ii) the
average weekly reported volume of trading in such securities on all national
securities exchanges and/or reported through the automated quotation system of
a registered securities association during the four calendar weeks preceding
the filing of notice required by paragraph (h), or if no such notice is
required the date of receipt of the order to execute the transaction by the
broker or the date of execution of the transaction directly with a market
maker, or (iii) the average weekly volume of trading in such securities
reported through the consolidated transaction reporting system contemplated by
Rule 11Aa3-1 under the Securities Exchange Act of 1934 (section 240-11Aa3-1)
during the four-week period specified in subdivision (ii) of this paragraph.
[Amended in Release No. 33-5717 (paragraph 80,601), June 8, 1976,
41 F. R. 24702; Release No. 33-5979 (paragraph 81,731), effective September 25,
1978, 43 F. R. 43711; Release No. 33-5995 (paragraph 81,759), effective
November 15, 1978, 43 F. R. 54230; Release No. 34-16589 (paragraph 82,455),
effective April 5, 1980, 45 F. R. 12377.]
(2) Sales by persons other than affiliates. The amount of restricted
securities sold for the account of any person other than an affiliate of the
issuer, together with all other sales of restricted securities of the same class
for the account of such person within the preceding three months, shall not
exceed the amount specified in paragraphs (1)(ii) or (1)(iii) of this section,
whichever is applicable, unless the conditions in paragraph (k) of this rule are
satisfied. [Amended in Release No. 33-5979 (paragraph 81,731), effective
September 25, 1978, 43 F. R. 43711; Release No. 33-5995 (paragraph 81,759),
effective November 15, 1978, 43 F. R. 54230; Release No. 33-6032 (paragraph
81,992), effective March 12, 1979, 44 F R. 15612; Release No. 33-6286
(paragraph 82,821), February 6, 1981, effective March 16,1981, 46 F. R. 12195.]
(3) Determination of Amount. For the purpose of determining the amount
of securities specified in paragraphs (e)(l) and (2) of this rule, the following
provisions shall apply:
(i) Where both convertible securities and securities of the
class into which they are convertible are sold, the amount of
convertible securities sold shall be deemed to be the amount of
securities of the class into which they are convertible for the purpose
of determining the aggregate amount of securities of both classes sold;
(ii) The amount of securities sold for the account of a
pledgee thereof, or for the account of a purchaser of the pledged
securities, during any period of three months within two years after a
default in the obligation secured by the pledge, and the amount of
securities sold during the same three-month period for the account of
the pledgor shall not exceed, in the aggregate, the amount specified in
subparagraph (1) or (2) of this paragraph, whichever is applicable.
[Amended in Release No. 33-5995 (paragraph 81,759), effective November
15, 1978, 43 F. R. 54230.]
(iii) The amount of securities sold for the amount of a donee
thereof during any period of three months within two years after the
donation, and the amount of securities sold during the same three-month
period for the account of the donor, shall not exceed, in the
aggregate, the amount specified in subparagraph (1) or (2) of this
paragraph, whichever is applicable; [Amended in Release No. 33-5995
(paragraph 81,759), effective November 15, 1978, 43 F. R. 54230.]
(v) Where securities were acquired by a trust from the settlor
of the trust, the amount of such securities sold for the account of the
trust during any period of three months within two years after the
acquisition of the securities by the trust, and the amount of
securities sold during the same three-month period for the account of
the settlor, shall not exceed, in the aggregate, the amount
Page 160
<PAGE> 17
specified in subparagraph (1) or (2) of this paragraph, whichever is
applicable; [Amended in Release No. 33-5995 (paragraph 81,759),
effective November 15, 1978, 43 F. R. 54230.]
PROPOSED AMENDMENTS_____________________________________________________________
- -> Reproduced below is the text of paragraphs (e)(3)(ii), (iii) and (iv)
as proposed to be amend in Release No. 33-7187 (paragraph 85,638), June 27,
1995.
(ii) The amount of securities sold for the account of a
pledgee thereof, or for the account of a purchaser of the pledged
securities, during any period of three months within one year after a
default in the obligation secured by the pledge, and the amount of
securities sold during the same three-month period for the account of
the pledgor shall not exceed, in the aggregate, the amount specified in
paragraph (e)(1) or (2) of this section, whichever is applicable;
(iii) The amount of securities sold for the account of a donee
thereof during any period of three months within one year after the
donation, and the amount of securities sold during the same three-month
period for the account of the donor, shall not exceed, in the
aggregate, the amount specified in paragraph (e)(1) or (2) of this
section, whichever is applicable;
(iv) Where securities were acquired by a trust from the
settlor of the trust, the amount of such securities sold for the
account of the trust during any period of three months within one year
after the acquisition of the securities by the trust, and the amount of
securities sold during the same three-month period for the account of
the settlor, shall not exceed, in the aggregate, the amount specified
in paragraph (e)(1) or (2) of this section, whichever is applicable;
END OF PROPOSED AMENDMENTS____________________________________________________
(v) The amount of securities sold for the account of the
estate of a deceased person, or for the account of a beneficiary of
such estate, during any period of three months and the amount of
securities sold during the same period for the account of the deceased
person prior to his death shall not exceed, in the aggregate, the
amount specified in subparagraph (1) or (2) of this paragraph,
whichever is applicable; Provided, That no limitation on amount shall
apply if the estate or beneficiary thereof is not an affiliate of the
issuer; [Amended in Release No. 33-5995 (paragraph 81,759), effective
November 15, 1978, 43 F. R. 54230.]
(vi) When two or more affiliates or other persons agree to act
in concert for the purpose of selling securities of an issuer, all
securities of the same class sold for the account of all such persons
during any period of three months shall be aggregated for the purpose
of determining the limitation on the amount of securities sold;
[Amended in Release No. 33-5995 (paragraph 81,759), effective November
15, 1978, 43 F R 54230.]
(vii) Securities sold pursuant to an effective registration
statement under the Act or pursuant to an exemption provided Regulation
A under the Act or in a transaction exempt pursuant to Section 4 of the
Act and not involving any public offering need not be included in
determining the amount of securities sold in reliance upon this rule.
[As amended in Release No. 33-5432 (paragraph 79,633), effective
March 15, 1974, 39 F. R. 6069.]
.50 ANNOTATIONS OF RULINGS UNDER PARAGRAPH (E) OF RULE 144.--See
2706.2201; 2706.2231; 2706.2241; 2706.3025; 2706.303; 2706.3031; 2706.3033;
2706.30341; 2706.3035; 2706.3036; 2706.3047;
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<PAGE> 18
2706.305; 2706.3051; 2706.3052; 2706.3053; 2706.3054; 2706.3055; 2706.3056;
2706.306; 2706.328; 2706.3853; 2706-412; 2706.481; 2706.50' 2706.501; 2706 5011;
2706.5012; 2706.514; 2706.562; 2706.503; 2706.504; 2706.505; 2706.506;
2706.5060; 2706.3037; 2706.304; 2706.3042; 2706.3043; 2706.5061; 2706.64;
2706-642; 2706.652; 2706-723; 2706.732; 2706.86; 2706.88; 2706.92; 2706-93.
(f) Manner of sale. The securities shall be sold in "brokers'
transactions" within the meaning of section 4(4) of the Act or in transactions
directly with a "market maker," as that term is defined in section 3(a)(38) of
the Securities Exchange Act of 1934, and the person selling the securities shall
not (1) solicit or arrange for the solicitation of orders to buy the securities
in anticipation of or in connection with such transaction, or (2) make any
payment in connection with the offer or sale of the securities to any person
other than the broker who executes the order to sell the securities. The
requirements of this paragraph, however, shall not apply to securities sold for
the account of the estate of a deceased person or for the account of a
beneficiary of such estate provided the estate or beneficiary thereof is not
an affiliate of the issuer, nor shall they apply to securities sold for the
account of any person other than an affiliate of the issuer, provided the
conditions of paragraph (k) of this rule are satisfied. [Amended in Release
No. 33-5979 (paragraph 8l,731), effective September 25, 1978, 43 F. R. 43711;
Release No. 33-6286 (paragraph 82,821), February 6, 1981, effective March 16,
1981, 46 F. R. 12195.]
.60 ANNOTATIONS OF RULINGS UNDER PARAGRAPH (F) OF RULE 144. --See
2706.2241; 2706.2262; 2706.2237; 2706.328; 2706423; 2706.656; 2706.6561;
2706.86; 2706.90; and 2706-92.
(g) Brokers' Transactions. The term "brokers' transactions" in Section
4(4) of the Act shall for the purposes of this rule be deemed to include
transactions by a broker in which such broker-
(1) does no more than execute the order or orders to sell the
securities as agent for the person for whose account the securities are
sold; and receives no more than the usual and customary broker's
commission;
(2) neither solicits nor arranges for the solicitation of
customers' orders to buy the securities in anticipation of or in
connection with the transaction; provided, that the foregoing shall not
preclude (i) inquiries by the broker of other brokers or dealers who
have indicated an interest in the securities within the preceding 60
days, (ii) inquiries by the broker of his customers who have indicated
an unsolicited bona fide interest in the securities within the
preceding 10 business days; or (iii) the publication by the broker of
bid and ask quotations for the security in an inter-dealer quotation
system provided that such quotations are incident to the maintenance of
a bona fide inter-dealer market for the security for the broker's own
account and that the broker has published bona fide bid and ask
quotations for the security in an inter-dealer quotation system on each
of at least twelve days within the preceding thirty calendar days with
no more than four business days in succession without such two-way
quotations;
Note to Subparagraph g(2)(ii): The broker should obtain and
retain in his files written evidence of indications of bona fide
unsolicited interest by his customers in the securities at the time
such indications are received. [As amended in Release No. 33-5452
(paragraph 79,633), effective March 15, 1974.]
.70 Annotations of rulings under paragraph (g) of Rule 144. -- See
paragraphs 2706.215; 2706.2237; 2706.285; 2706.387; 2706.388; 2706.172;
2706.444; 2706.6561; 2706.6563; 2706.6565; 2706.6567; 2706.86; and 2706.92.
Page 162
<PAGE> 19
(3) after reasonable inquiry is not aware of circumstances
indicating that the person for whose account the securities are sold is
an underwriter with respect to the securities or that the transaction
is a part of a distribution of securities of the issuer. Without
limiting the foregoing, the broker shall be deemed to be aware of any
facts or statements contained in the notice required by paragraph (h)
below.
Notes. (1) The broker, for his own protection, should obtain
and retain in his files a copy of the notice required by paragraph (h).
(ii) The reasonable inquiry required by paragraph (g)(3) of
this section should include, but not necessarily be limited to, inquiry
as to the following matters:
a. The length of time the securities have been held
by the person for whose account they are to be sold. If
practicable, the inquiry should include physical inspection of
the securities;
b. The nature of the transaction in which the
securities were acquired by such person;
c. The amount of securities of the same class sold
during the past three months by all persons whose sales are
required to be taken into consideration pursuant to paragraph
(e) of this section,
d. Whether such person intends to sell additional
securities of the same class through any other means;
e. Whether such person has solicited or made any
arrangement for the solicitation of buy orders in connection
with the proposed sale of securities;
f. Whether such person has made any payment to any
other person in connection with the proposed sale of the
securities, and
g. The number of shares or other units of the class
outstanding, or the relevant trading volume.
(h) Notice of proposed sale. If the amount of
securities to be sold in reliance upon the rule during any
period of three months exceeds 500 shares or other units or
has an aggregate sale price in excess of $10,000, three copies
of a notice on Form 144 shall be filed with the Commission at
its principal office in Washington, D.C.; and if such
securities are admitted to trading on any national securities
exchange, one copy of such notice shall also be transmitted to
the principal exchange on which such securities are so
admitted. The Form 144 shall be signed by the person for whose
account the securities are to be sold and shall be transmitted
for filing concurrently with either the placing with a broker
of an order to execute a sale of securities in reliance upon
this rule or the execution directly with a market maker of
such a sale. Neither the filing of such notice nor the failure
of the Commission to comment thereon shall be deemed to
preclude the Commission from taking any action it deems
necessary or appropriate with respect to the sale of the
securities referred to in such notice. The requirements of
this paragraph, however, shall not apply to securities sold
for the account of any person other than an affiliate of the
issuer, provided the conditions of paragraph (k)
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<PAGE> 20
of this rule are satisfied. [Amended in Release No.
33-5307 (paragraph 79,001), effective November 1, 1972, 37 F.
R. 20577; Release No. 33-5452 (paragraph 79,633), effective
March 15, 1974, 39 F. R. 6069; Release No. 33-5452A, effective
March 15, 1974, 39 F. R. 8914; Release No. 33-5560 (paragraph
80,066), effective March 15, 1975, 40 F. R. 6487; Release No.
33-5995 (paragraph 81,759), effective November 15, 1978, 43 F.
R. 54230; Release No. 33-6286 (paragraph 82,821), February 6,
1981, effective March 16, 1981, 46 F. R. 12195.]
.80 ANNOTATIONS OF RULINGS UNDER PARAGRAPH (H) OF RULE 144. -- See
paragraphs 2706.2237; 2706-301; 2706- 3011; 2706.30121; 2706.3015; 2706-417;
2706.419; 2706.500; 2706.59; 2706.611; 2706.635; and 2706.636.
(i) Bona Fide Intention to Sell. The person the notice related
by paragraph, (h) shall have a bona fide intention to sell the
securities referred to therein within a reasonable time after the
filing of such notice.
(j) Non-exclusive rule. Although this rule provides a means
for reselling restricted securities and securities held by affiliates
without registration, it is not the exclusive means for reselling such
securities in that manner. Therefore, it does not eliminate or
otherwise affect the availability of any exemption for resales under
the Securities Act that a person or entity may be able to rely upon.
[Added in Release No. 33-6032 (paragraph 81,992), effective March 12,
1979, 44 F. R. 15612.]
(k) Termination of certain restrictions on sales of restricted
securities by persons other than affiliates. The requirements of
paragraphs (c), (e), (f) and (h) of this rule shall not apply to
restricted securities sold for the account of a person who is not an
affiliate of the issuer at the time of the sale and has not been an
affiliate during the preceding three months, provided a period of at
least three years has elapsed since the later of the date the
securities were acquired from the issuer or from an affiliate of the
issuer. In computing the three-year period for purposes of this
provision, reference should be made to paragraph (d) of this section.
[Amended in Release No. 33-6286 (paragraph 82,821), effective March
16, 1981, 46 F.R. 12195; Release No. 33-6488 (paragraph 83,429),
effective October 31, 1983, 48 F.R. 44770; and Release No. 33-6862
(paragraph 84,523), effective April 30, 1990, 55 F.R. 17933.]
Page 164
<PAGE> 1
Exhibit 6(H)
STOCK PURCHASE AGREEMENT
------------------------
THIS AGREEMENT made as of this 27th day of August, 1996 by and between
AMERICAN STONE INDUSTRIES, INC., a Delaware corporation (the "Company") , and
ROULSTON VENTURES LIMITED PARTNERSHIP, an Ohio limited partnership (the
"Buyer").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company requires additional capital and desires to obtain
such capital from Buyer and Buyer desires to provide capital to the Company
through the purchase of common stock of the Company;
NOW, THEREFORE, for the considerations, subject to the representations
and warranties and upon the terms and conditions hereinafter set forth, the
parties hereto agree as follows:
ARTICLE I.
----------
PURCHASE AND SALE OF STOCK
--------------------------
SECTION 1.1. SALE OF STOCK Subject to the terms and provisions of this
Agreement, Buyer agrees to purchase on the Closing Date (as hereinafter
defined) from the Company and the Company agrees to sell, transfer, deliver and
convey to Buyer 4,000,000 shares of common stock par value $.001 per share (the
"Shares"), of the Company for a consideration of One Million, Five Hundred
Thousand Dollars ($1,500,000).
Page 165
<PAGE> 2
ARTICLE II
----------
CLOSING
-------
SECTION 2.1. CLOSING. The closing of the transactions contemplated by
this Agreement and all deliveries to be made at the time fixed for the closing
shall take place at the offices of Baker & Hostetler, 3200 National City Center,
1900 East 9th Street, Cleveland, Ohio, on August 27, 1996, at 2:00 p.m. or on
such other date or at such other place as the parties may agree to in writing
(the "Closing Date").
SECTION 2.2. CLOSING; DELIVERY. At the closing, the Company shall
deliver to Buyer a certificate or certificates for the Shares in such form as
Buyer shall designate and such other instruments and documents as are required
by this Agreement. At the closing, Buyer shall deliver to the Company (a) the
amount of $1,500,000; and (b) such other instruments and documents as are
required by this Agreement.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 3.1. The Company hereby, and as of the Closing, represents
and warrants to Buyer that:
(a) CORPORATE ORGANIZATION. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and is qualified to do business and in good standing in each
jurisdiction in which the nature of its business conducted or property owned
therein requires such qualification; the Company has all requisite corporate
power and authority to own, lease, hold and operate its properties and or
conducted and to consummate the transactions contemplated by this Agreement.
(b) SUBSIDIARIES. A "Subsidiary" shall mean a corporation or
other entity of which the Company owns directly, or indirectly (through a
Subsidiary or otherwise) 50% or more of the outstanding securities entitled
generally to vote. Schedule 3.1(b) sets forth with respect to each Subsidiary
(i) the name of the Subsidiary; (ii) the jurisdiction of its incorporation
(iii) the number and class of shares of its capital
Page 166
<PAGE> 3
stock issued and outstanding and the number of shares, or amounts of, other
outstanding securities of it; (iv) a description of any outstanding options or
other rights to acquire (including by way of conversion or exchange) its
securities; (v) the securities of such corporation owned, directly or
indirectly, by the Company; (vi) a description of any limitations on the
Company's ability to vote or alienate such securities; (vii) with respect to
each such Subsidiary, a list of all jurisdictions in which such Subsidiary is
qualified to do business, and (viii) the names and percentage ownership of all
record owners and all beneficial owners of securities (including capital stock)
of each such Subsidiary other than the Company. Except for capital stock of the
Subsidiaries as set forth in Schedule 3.1(b), the Company does not own, directly
or indirectly, any capital stock or other equity securities of any corporation
or have any direct or indirect equity or ownership interest in any business
other than the businesses conducted by the Company and the Subsidiaries. Except
as set forth in Schedule 3.1 (b) , neither the Company nor any Subsidiary is
subject to any obligation or requirement to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
person or entity.
All outstanding shares of capital stock of each Subsidiary have been
validly issued and are fully paid, nonassessable and free of preemptive rights.
Each Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, with all requisite
power and authority (corporate and other) to own, operate and lease its
properties and to carry on its business as now being conducted, and is qualified
to do business and is in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification necessary. There are no voting trusts or other
agreements or understandings with respect to the voting of the capital stock of
any of the Subsidiaries. There is no subscription, option, warrant, call, right,
contract, commitment, understanding or arrangement relating to the issuance,
sale or transfer by any Subsidiary of any shares of the capital stock of the
Company or any Subsidiary, including any right of conversion or exchange under
any outstanding security or other instrument. All shares of each Subsidiary,
which are owned directly or indirectly by the Company, are owned by the Company
or a Subsidiary free and clear of all liens, charges,
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encumbrances, security interests, equities, claims and options of whatever
nature. The Company has heretofore delivered to Buyer complete and correct
copies of the charter, articles, by-laws or codes of regulations (which terms
shall be deemed to also include comparable governing instruments with different
names) of each Subsidiary, as amended and presently in effect, and no Subsidiary
is in default in the performance, observation or fulfillment of any provision
its charter, articles, by-laws or code of regulations.
(c) CAPITALIZATION. Upon consummation of the transactions set
forth in this Agreement, The authorized capitalization of the Company will
consist solely of 20,000,000 shares of Common Stock, par value $.001 per share,
of the Company (the "Common Stock"), of which 16,313,628 shares will be
issued and outstanding; such shares will constitute all of the issued and
outstanding shares of capital stock of any classes of the Company; and all of
the issued and outstanding capital stock of the Company will be duly and validly
issued and fully paid and nonassessable. Except as set forth in Schedule 3.1(c)
there are no outstanding subscriptions, options, warrants, puts, calls,
agreements or other commitments or rights of any type to purchase any securities
of the Company, nor are there outstanding any securities which are convertible
into or exchangeable for any shares of capital stock of the Company; and the
Company does not have an obligation of any kind to issue any additional
securities. The list of Shareholders attached as Schedule 3.1(c) dated July 11,
1996 is complete and accurate as of that date.
(d) CORPORATE DOCUMENTS. The copies of the Certificates of
incorporation, as amended, of the Company and the Subsidiaries certified by the
Secretary of State and the By-Laws of the Company and the Subsidiaries delivered
to Buyer, certified by the Secretary of the Company, are true, correct and
complete copies of said Certificates and By-Laws currently in effect.
(e) FINANCIAL STATEMENTS. The audited financial statements of
the Company and the Subsidiaries for the fiscal year ended December 31, 1995,
including the notes thereto, and the unaudited financial statements of the
Company and the Subsidiaries for the period ended July 31, 1996, (the "Financial
Statements") and the related statements of income and retained earnings for such
period and initialed by the President of the Company for identification are all
true, correct and complete in all material respects, have
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been prepared in conformity with generally accepted accounting principles
applied on a consistent basis, and fairly present the financial condition of the
Company and the Subsidiaries as at the dates indicated and the results of
operations for the periods then ended, in accordance with such principles.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 1,
1996, except as shown on Schedule 3.1 (f) , there has not been:
(i) Any material adverse change in the capital
structure, condition, financial or otherwise, or in the operation of
the business (as conducted prior to the Closing) of the Company or the
Subsidiaries, or any occurrence, circumstance, or combination thereof,
which reasonably could be expected to result in any such material
adverse change;
(ii) Any material adverse event, including, without
limitation, shortage of materials or supplies, fire, explosion,
accident, labor trouble, requisition or taking of property by any
governmental agency, flood, drought, earth-quake or other natural
event, riot, act of God or the public enemy, or damage, destruction
or other casualty, whether covered by insurance or not, materially
adversely affecting the property, assets or business of the Company,
or the Subsidiaries; or
(iii) Any material transaction or agreement entered
into or carried out by the Company, or the Subsidiaries other than in
the ordinary and usual course of business;
(iv) Any borrowings or agreement to borrow funds,
or any incurrence of any other indebtedness or liability, contingent
or otherwise, except in the usual and ordinary course of business; or
any endorsement, assumption, or direct or indirect guarantee of
payment or performance of any loan or obligation of any other
individual, firm, corporation or other entity by the Company,
or the Subsidiaries;
(v) Any material change made by the Subsidiaries in
their methods of doing business or of accounting;
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(vi) Any sale, lease or disposition of or any
agreement to sell, lease or dispose of any assets held for use or
used in the business of the Company, or the Subsidiaries other than
sales, leases or dispositions in the usual and ordinary course
of business for fair equivalent value;
(vii) Any labor disputes or disturbances materially
or adversely affecting the business or financial condition of the
Company, or the Subsidiaries, including the filing of any petition or
charge of unfair labor practices with the National Labor Relations
Board of which the Company, or the Subsidiaries has received notice
or is aware;
(viii) Any loan or advance made by the Company, or
the Subsidiaries to any individual, firm, corporation or
entity except for advances not material in amount made in the
usual and ordinary course of business to employees; or
(ix) To the best of the Company's knowledge, any
other event or condition of any character which materially or
adversely affects, or may reasonably be expected to so affect, the
business operations (as now conducted or as presently proposed to be
conducted), assets, properties or rights, condition (financial or
otherwise), or prospects of the Company, or the Subsidiaries.
(g) UNDISCLOSED LIABILITIES. To the best of the Company's
knowledge, the Company, or the Subsidiaries have no material liability or
obligation, liquidated, unliquidated, accrued, absolute, contingent or
otherwise, whether due or to become due, except:
(i) those set forth or reflected in the Financial
Statements that have not been paid or discharged since the date
thereof;
(ii) those arising under agreements or other
commitments expressly referred to in this Agreement or any Schedule
hereto;
(iii) current liabilities incurred in or as a result
of the conduct of its business in the ordinary and usual course
consistent with past practice since January 1, 1996 (in transactions
in the ordinary and usual course of such business) that are properly
reflected on the books and not
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inconsistent with the other representations, warranties and
agreements of the Company set forth herein; and
(iv) those existing in the ordinary and usual course
of business of the Company, or the Subsidiaries.
(h) TAXES.
(i) The Company and the Subsidiaries have duly and
timely filed or caused to be filed with the appropriate federal,
state, county, local and foreign governmental agencies or
instrumentalities all tax returns and tax reports required to be
filed or obtained appropriate extensions of time for the making of
such filings, and all such returns and reports, as delivered to
Buyer, were properly prepared on a reasonable basis and have not
been amended; all taxes, assessments, fees and other governmental
charges due pursuant thereto have been paid.
(ii) There have been no audits of federal, state and
local tax returns performed by federal, state or local taxing
authorities and no waivers of any applicable statutes of limitations
are outstanding for the Company or the Subsidiaries. There is
no pending and no threatened federal, state or local tax audit of the
Company, or the Subsidiaries and there is no agreement with any
federal, state or local taxing authority that may affect the
subsequent tax liabilities of the Company, or the Subsidiaries.
(i) COMPLIANCE WITH LAW. To the best of the Company's
knowledge, the Company, and the Subsidiaries have complied and are in compliance
in all material respects with all applicable federal, state and local laws,
statutes, licensing requirements, rules and regulations and judicial or
administrative decisions pertaining to the ownership of their assets or the
operation of their business, including, without limitation, all Securities and
Exchange Commission zoning or safety, building, pollution, environmental
control, matters and laws, ordinances, regulations and requirements. To the best
of the Company's knowledge, the Company, and the Subsidiaries have been granted
any and all valid licenses, permits, authorizations and approvals (collectively
the "Permits") from federal, state and local government regulatory bodies
necessary to carry on
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their business as such business has been and is expected to be conducted, all
of which are currently in full force and effect. The Company and the
Subsidiaries are not in violation of any of the Permits. There is no order
issued, or any investigation or proceeding pending or threatened, nor has any
notice been served with respect to any violation of any law, ordinance, order,
writ, decree, rule or regulation by any state, county, municipal or local
court, or any governmental agency or instrumentality to which the Company, or
the Subsidiaries is subject.
(j) RESTRICTIVE DOCUMENTS OR LAWS. To the best of the
Company's knowledge, except as disclosed in the Financial Statements or other
Schedules attached hereto, the Company, and the Subsidiaries are not parties to
or bound under any mortgage, lien, lease, agreement, contract, instrument, or
any other restriction of any other kind or character which materially and
adversely affects, or could reasonably be expected to materially and adversely
affect, (i) the condition, financial or otherwise, of the Company, or the
Subsidiaries, or any assets or properties owned or used by them in their
business; or (ii) the consummation of the transactions contemplated by this
Agreement.
(k) CONTRACTS AND COMMITMENTS. Except as set forth on Schedule
3.1(k), all material contracts, arrangements, agreements, leases, licenses,
commitments and instruments to which the Company or the Subsidiaries is a party
or by which they are bound are in full force and effect and are valid, binding
and enforceable in accordance with their respective terms, and the Company or
the Subsidiaries is not in default, nor has there occurred an event or condition
which, with the passage of time or the giving of notice (or both), would
constitute a material default, with respect to the payment or performance of any
obligation thereunder; no claim of such a default has been asserted and there is
no reasonable basis upon which such a claim could validly be made. The Company
and the Subsidiaries have not received any notice that any person intends or
desires to modify, waive, amend, rescind, release, cancel or terminate any such
contract, agreement, commitment, lease, license, instrument or arrangement.
(l) NO CONFLICT OR DEFAULT. Neither the execution and delivery
of this Agreement, nor compliance with the terms and provisions hereof,
including, without limitation, the consummation of the
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transactions contemplated hereby, will violate any statutes, regulation or
ordinance of any governmental authority applicable to the Company or will
conflict with or result in the breach of any term, condition or provision of
the Certificate of Incorporation, or By-Laws of the Company or the
Subsidiaries, or of any agreement, deed, contract, mortgage, indenture, writ,
order, decree, commitment or instrument to which the Company, or the
Subsidiaries is a party or by which they or their assets or properties is
bound, or constitute a default (or an event which, with the lapse of time or
the giving of notice, or both, would constitute a default) thereunder or result
in the creation or imposition of any lien, charge or encumbrance, or
restriction of any nature whatsoever thereon, or give to others any interest or
rights, including rights of termination, acceleration or cancellation in
or with respect to its properties, assets, contracts or business.
(m) LITIGATION. There is no suit, claim, action litigation or
proceeding, administrative or judicial, or governmental investigation, pending
or threatened, against the Company or the Subsidiaries or involving any of their
properties and assets, including without limitation, any claim, proceeding, or
litigation for the purpose of challenging, enjoining or preventing the execution
and delivery of this Agreement, the performance of the terms and conditions
hereof or the consummation of the transaction contemplated hereby. To the best
of the Company's knowledge, there is no reasonable basis upon which any suit,
claim, action, litigation, proceeding or investigation could be brought or
initiated against the Company or the Subsidiaries. To the best of the Company's
knowledge, neither the Company nor the Subsidiaries is subject to or in default
under any order, writ, injunction, or decree of any court or governmental
authority.
(n) TITLE TO PROPERTIES. The Company and the Subsidiaries have
good, valid and marketable title (in fee simple in the case of real property),
to all of its assets and properties of every kind, nature and description,
tangible or intangible, known and unknown, wherever located, which constitute
all of the property now used in and necessary for the conduct of its business as
presently conducted (including, without limitation, all property and assets
shown or reflected on the December 31, 1995 and June 30, 1996 financial
statements). All such properties are held free and clear of all mortgages,
pledges, liens, security interests, encumbrances and restrictions of any nature
whatsoever, except as shown in Schedule 3.1(n). No
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financing statement under the Uniform Commercial Code or similar law naming
the Company or any Subsidiary as debtor has been filed in any jurisdiction, and
the Company and the Subsidiaries are not a party to or, to the best knowledge
of Seller, bound under any agreement or legal obligation authorizing any party
to file any such financing statement. To the best knowledge of Seller, the
Company conducts all phases of its business in compliance with any leases or
other agreements, any restrictions of record, and all zoning, fire, safety,
building, pollution, environmental and other laws, ordinances, regulations and
requirements of every governmental authority applicable to the ownership,
operation or other use of such assets and properties. All real property, plants
and structures and all machinery and equipment and tangible personal property
owned or used by the Company and material to the operation of its business
is suitable for the purpose or purposes for which it is being used. Except as
set forth in Hull & Associates, Inc., reports of Phase I Environmental Property
Assessment dated April 1, 1992, (i) no hazardous waste or toxic material other
than xylene and mineral spirits is or has been stored on or disposed of on any
real property owned or used by the Company, or any Subsidiary, there are no oil
or gas wells capped or uncapped, or piping, structures, fixtures or other
appliances relating thereto on or about such property and no such property has
been used as a landfill and (ii) no hazardous waste or toxic material is or has
been stored on or disposed of on any real property owned or used by the Company
or any Subsidiary. There are no pending or threatened zoning, environmental,
condemnation or eminent domain proceedings, building, utility or other
moratoria, or injunctions or court orders which would materially affect
continued operation of the business of the Company or any Subsidiary.
(o) LABOR RELATIONS. To the best of the Company's knowledge,
the Company and the Subsidiaries have complied with Title VII of the Civil
Rights Act of 1964, as amended, the Fair Labor Standards Act, as amended, and
the Occupational Safety and Health Act of 1970, as amended, and all applicable
federal, state and local laws, rules and regulations relating to employment. To
the best of the Company's knowledge, the Subsidiaries have complied with all
applicable laws, rules and regulations governing payment of minimum wages and
overtime rates and the withholding and payment of taxes from
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compensation of employees. There are no controversies threatened between the
Subsidiaries and their employees; and the Subsidiaries have no collective
bargaining unit representing any of its employees.
(p) PATENTS, TRADEMARKS, ETC. The Company and the Subsidiaries
possess and have been issued valid patents, patent rights and licenses,
trademarks, trademark rights, service marks, trade names, trade name rights,
franchises, and franchise rights (all rights of this nature hereinafter referred
to in this Section as "Rights") sufficient to conduct their business as now
operated. To the best of the Company's knowledge, no one is infringing upon the
Rights of the Company or the Subsidiaries, and the Rights of the Company and the
Subsidiaries do not infringe upon or conflict with valid or asserted Rights or
applications therefor of others.
(q) EMPLOYEE BENEFIT PLANS; ERISA. There are no bonus,
deferred compensation, hospitalization or other medical, stock purchase,
pension, life or other insurance, profit-sharing or retirement plan or
arrangement, and each other employee benefit plan or arrangement of the Company
and the Subsidiaries, whether formal or informal and whether legally binding or
not. The Company and the Subsidiaries have no plan or commitment, whether formal
or informal and whether legally binding or not, to create any additional such
plan or arrangement. The Company and the Subsidiaries have no "employee pension
benefit plans" as that term is defined in Section 3 (2) of the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder ("ERISA") or any "employee benefit plan"
within the meaning of Section 3 (3) of ERISA.
(r) CONTRACTS. Schedule 3.1(r) lists all contracts,
agreements, contract rights, leases, license agreements, franchise rights and
agreements, policies, purchase and sales orders, quotations and executory
commitments, instruments, arrangements, obligations and understandings (written
or oral) (a "Contract") to which the Company or the Subsidiaries is a party (i)
which are material to the condition (financial or otherwise), operations,
assets, business or prospects of the Company or the Subsidiaries taken as a
whole, (ii) which (other than unfilled purchase orders to purchase goods)
involve payments or commitments in excess of $25,000, (iii) with directors,
officers, employees, former employees, agents or
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consultants with respect to salaries, bonuses, percentage compensation,
pensions, deferred compensation or retirement benefits, or any profit-sharing,
stock option, stock purchase or other employee benefit plan or arrangement,
(iv) which provide for the future purchase by the Company or the Subsidiaries
of any materials, equipment, services or supplies, which continue for a period
of more than twelve months (including periods covered by any option to renew by
either party) or which provide for a price materially in excess of current
market prices or are in excess of normal operating requirements over their
remaining terms, or (v) which involve any of the following: (A) any borrows or
guaranties; or (B) any Contract providing for indemnification or responsibility
for the obligations or losses of any person. All of the Contracts are
valid and binding, in full force and effect and enforceable in accordance with
their respective provisions. The Company is not in violation of, in default in
respect of nor has there occurred an event or condition which, with the passage
of time or giving or notice (or both), would constitute a default of any
Contract.
(s) BINDING OBLIGATION. This Agreement is a legal, valid and
binding obligation of the Company enforceable against it in accordance with its
terms, except that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' right generally and that the remedy of specific
performance and injunctive or other equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(t) ACCOUNTS RECEIVABLE; CUSTOMERS. All accounts receivable
and any accounts receivable arising between the date hereof and the Closing are
or will be valid and subsisting; represent or will represent sales actually
made; arose or will arise in the ordinary and usual course of the business of
the Company and the Subsidiaries; and, to the extent not collected prior to the
time of Closing. Such accounts are not and will not be subject to any
counterclaim, set-off or defense and are not and will not be subject to any
lien, charge or encumbrance which are material in nature.
(u) INVENTORIES. All inventory held by the Company and the
Subsidiaries is merchantable and currently usable in the ordinary course of the
Company's and the Subsidiaries' business at values not less
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than book value, and will be free and clear of all pledges, liens, security
interests, encumbrances, charges, equities and other restrictions of any
material nature whatsoever.
(v) AUTHORITY. The Company has all requisite power and
authority and has taken all corporate action necessary for the execution,
delivery and performance by it of this Agreement. This Agreement constitutes a
valid and binding obligation of Seller enforceable in accordance with its terms.
SECTION 3.2. COMPLETENESS OF REPRESENTATIONS AND WARRANTIES. The
Company further represents and warrants that:
(a) The subparagraphs of Section 3.1 hereof, including the
material incorporated by reference are, and other written information provided
by the Company to Buyer is, true, accurate and complete and do not or does not
contain any untrue statement of material fact or omit to state a material fact
necessary to make the statements herein or therein contained not misleading.
(b) There is no fact known to the Company which materially and
adversely affects or could reasonably be expected to materially and adversely
affect the business prospects, operations or condition (financial, business,
labor or otherwise) of the Company or of any of its properties or assets, which
has not been set forth herein or therein.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
SECTION 4.1. Buyer hereby represents and warrants to the Company that:
(a) ORGANIZATION. Buyer is a partnership duly organized,
validly existing and in good standing under the laws of the State of Ohio, and
has all requisite power and authority to enter into this Agreement, perform its
obligations hereunder and consummate the transactions contemplated hereby.
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(b) AUTHORIZATION. All necessary and appropriate action has
been taken by Buyer with respect to the execution and delivery of this Agreement
and the performance by Buyer of its obligations hereunder, and this Agreement
constitutes a valid and binding obligation of Buyer.
(c) REVIEW BY BUYER. The representatives and agents of the
Buyer who have investigated the purchase of the Shares of the Company have
knowledge and experience in venture capital investing. Prior to the execution of
this Agreement, the Buyer will have received and reviewed the information and
records referred to in the Schedules to this Agreement. In consummating the
purchase of the Shares contemplated by this Agreement, the Buyer will not be
relying upon any information about the Company or the Subsidiaries which it may
have received as referred to in Section (d) (xi) below, except the information
referred to in the Schedules to this Agreement or otherwise provided by the
Company to the Buyer in written form pursuant to this Agreement and the
representations and warranties of Company set forth in Article III.
(d) INVESTMENT REPRESENTATION. Buyer is aware of the
following:
(i) The Shares have not been registered under the
Securities Act in reliance upon the exemption provided by
Section 4 (2) and/or Section 4 (6) of the Securities Act
and/or Regulation D promulgated thereunder;
(ii) The Shares are offered to Buyer only as an
investment and without a view to resale in connection with any
distribution.
(iii) The Company is subject to the reporting
requirements of the Securities Exchange Act of 1934, as
amended, (the "Exchange Act"), and the Company represents
that it has filed all reports required to be filed during the
twelve months preceding the date of this letter. Buyer has had
an opportunity to review the most recent reports filed by the
Company under the Exchange Act and all other publicly
available information concerning the Company.
(iv) Buyer understands that, although the Common
Stock of the Company is traded on the NASDAQ, (a) there is
limited market for the Common Stock and (b) the Shares to be
sold to Buyer pursuant to this Agreement are restricted and
cannot be
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transferred unless registered pursuant to the Securities Act
of 1933 (the "Act") , applicable state securities laws or
applicable laws of foreign jurisdiction or an exemption from
registration exists under the Act, applicable state laws or
the laws of foreign jurisdiction.
(v) Buyer understands and acknowledges that the
Shares which it is purchasing must be held for investment
purposes unless subsequently registered under the Act or until
the Company is satisfied that the securities may be legally
sold or otherwise transferred without registration. Such
restrictions will apply to any sales or transfers of Shares.
(vi) In effecting the sales as set forth in the
Agreement, Buyer understands that the Company is relying upon
the representations and warranties set forth in this
Agreement.
(vii) Buyer has not received a general solicitation
of general advertising concerning the Common Stock of the
Company.
(viii) Buyer will not participate, trade or hold a
position, directly, in any hedging transactions with respect
to the Shares (including a short position, or any part or
option to dispose of the Company's Common Stock) until such
time as the Shares may be freely sold by Buyer in compliance
with the Act.
(ix) Buyer agrees and understands that any and all
stock certificates evidencing ownership of the Shares shall be
stamped or otherwise printed with a distinctive legend that
shall adhere to the following form:
THE COMMON STOCK EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT"), ANY STATE
SECURITIES LAW OR THE APPLICABLE LAWS OF A FOREIGN JURISDICTION. NO
RESALES, PLEDGES, HYPOTHECATIONS OR OTHER TRANSFERS, IN ANY MANNER
WHATSOEVER, OF THE COMMON STOCK EVIDENCED BY THIS CERTIFICATE, WHETHER
VOLUNTARILY OR INVOLUNTARILY, SHALL BE MADE AT ANY TIME WHATSOEVER,
EXCEPT UPON THE ISSUANCE OF A FAVORABLE OPINION OF LEGAL COUNSEL TO THE
SELLER, WHICH LEGAL OPINION MUST BE
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SATISFACTORY IN FORM AND CONTENT TO THE COMPANY AND ITS LEGAL COUNSEL,
TO THE EFFECT THAT THE RESALE, PLEDGE, HYPOTHECATION OR OTHER TRANSFER
OF SUCH COMMON STOCK SHALL NOT BE IN VIOLATION OF THE ACT, ANY STATE
SECURITIES ACT OR THE LAWS, REGULATIONS, ORDINANCES, ORDERS OR RULES OF
ANY FOREIGN JURISDICTION, WHICHEVER MAY BE APPLICABLE. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CERTAIN STOCK PURCHASE
AGREEMENT, A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE CORPORATION
AND WILL BE FURNISHED TO ANY PROSPECTIVE PURCHASERS UPON REQUEST. BY
ACCEPTANCE OF THIS CERTIFICATE, EACH HOLDER AGREES TO BE BOUND BY THE
PROVISIONS OF SUCH STOCK PURCHASE AGREEMENT AND EACH AMENDMENT THERETO.
(x) Buyer understands and agrees that it has no right
to demand registration of the Shares under the Act.
(xi) Buyer acknowledges that its representatives have
had access to the management and operation facilities of the
Company, have had an opportunity to make inquiries with
respect to the organization and operations of the Company and
have undertaken such acts of due diligence as Buyer deems
necessary and appropriate under the circumstances.
(xii) Buyer is acquiring the Shares for its own
account, for investment purposes only and not with a view to
distribution or resale thereof.
SECTION 4.2. COMPLETENESS OF REPRESENTATIONS AND WARRANTIES. Buyer
further represents and warrants that:
(a) The subparagraphs of Section 4.1 hereof, including the
material incorporated by reference are, and all other written information
provided by Buyer to the Company is, true, accurate and complete and do not or
does not contain any untrue statement of material fact or omit to state a
material fact necessary to make the statements herein or therein contained not
misleading.
(b) There is no fact known to the Buyer which materially and
adversely affects or could reasonably be expected to materially and adversely
affect the business prospects, operations or condition
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(financial, business, labor or otherwise) of Buyer or of its Properties or
assets, which has not been set forth herein or therein.
ARTICLE V
---------
COVENANTS
---------
SECTION 5.1. AFFIRMATIVE COVENANTS. During the period from the date of
this Agreement so long as Buyer remains a shareholder of the Company, unless
Buyer otherwise consents in writing, the Company and the Subsidiaries shall:
(a) OPERATION OF BUSINESS. Conduct their business and
operations in compliance with all applicable laws and diligently and
substantially in the same manner as conducted heretofore, maintain its books of
account and records in a manner consistent with generally accepted accounting
principles consistently applied, prepare properly and file on or prior to the
due date thereof all tax returns required by any jurisdiction and pay all taxes
shown to be due thereon; and promptly advise Buyer of any audit, suit, claim,
administrative action filed or threatened against the Company and the
Subsidiaries or the default on or breach of any material contract of the Company
and the Subsidiaries.
(b) MAINTAIN EXISTENCE AND PROPERTY. Maintain their corporate
existence and maintain in working order and condition all properties used in
its business, and make all such repairs, renewals, replacements, additions and
improvements thereto as may be needed and appropriate.
(c) FINANCIAL STATEMENTS. The Company shall deliver financial
statements for the Company and the Subsidiaries monthly to Buyer within 15 days
after the end of each month and an annual audited statement on or before ninety
days following the end of each fiscal year.
SECTION 5.1. NEGATIVE COVENANTS. Except, as otherwise expressly
provided herein, during the period from the date of this Agreement and so long
as Buyer remains a shareholder of the Company, unless Buyer otherwise consents
in writing, the Company and the Subsidiaries shall not:
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(a) COMPENSATION. Increase the compensation payable or to
become payable to or for the benefit of any director, shareholder, officer or
employee of the company or any Subsidiary (whose salary is in excess of $50,000
per annum) in an amount greater than $20,000 per annum.
(b) REDEMPTIONS. Redeem, or purchase or otherwise acquire, any
of its own stock or any outstanding options, warrants, rights to acquire such
stock, or enter into agreements to purchase or acquire such stock.
(c) CHANGES IN GOVERNING DOCUMENTS. Amend or change the
Certificate of Incorporation or By-Laws of the Company.
ARTICLE VI
----------
CONDITIONS
----------
SECTION 6.1 CONDITIONS TO OBLIGATIONS OF BUYER. Each and every
obligation of the Buyer to be performed at the Closing shall be subject to the
satisfaction as of or before such time of the following conditions (unless
waived in writing by the Buyer) and unless so satisfied shall permit Buyer to
terminate this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. The Company's
representations are warranties set forth in Article III of this Agreement shall
have been true and correct in all respects at the Closing as though such
representations and warranties were made as of such time.
(b) CONVERSION OF ADVANCE. The Shareholder advance to the
Company (currently $748,344) shall be converted to equity as a contribution to
capital.
(c) SHAREHOLDER EQUITY. Total Shareholder equity in the
Company will be in excess of $1,750,000 immediately prior to the Closing.
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<PAGE> 19
(d) PERFORMANCE OF AGREEMENT. All covenants, conditions and
other obligations under this Agreement which are to be performed or complied
with by the Company, shall have been fully performed and complied with by it on
or prior to the Closing Date.
(e) CERTIFICATES. The Company shall have delivered to Buyer on
the Closing Date a Certificate of an officer of TMT Masonry, Ltd. relating to
the sale of its shares to the Company and conversion of its loan to capital and
a Certificate of the President of the Company, dated the Closing Date, to the
effect that the representations and warranties set forth in Article III of this
Agreement are true and correct in all material respects, and containing an
agreement to cooperate in good faith with Buyer in the selection of members of
the Board of Directors of the Company by appropriate Corporate action promptly
following the Closing.
(f) OPINION OF COUNSEL. The Buyer shall have received the
opinion of counsel for the Company, dated the Closing Date, in form satisfactory
to counsel for Buyer, substantially to the effect that:
(i) this Agreement has been duly executed and
delivered by the Company and is the legally valid and binding
obligation of the Company, enforceable in accordance with its
respective terms except as limited by bankruptcy, insolvency,
reorganization or other similar laws relating to creditors'
rights and by general principles of equity;
(ii) The Company and the Subsidiaries have been duly
incorporated and are validly existing as a corporation in good
standing under the laws of the States in which they are
incorporated, with all requisite corporate power and authority
to own, hold and operate its properties and to conduct its
businesses as now owned, leased, held, operated and conducted,
and is qualified to do business and is in good standing in
each jurisdiction in which the nature of its business
conducted or property owned therein requires such
qualification;
(iii) the authorized and outstanding capital stock of
the Company is as stated in Section 3.1(c) of this Agreement;
Page 183
<PAGE> 20
(iv) the outstanding shares of Common Stock of the
Company have been validly authorized and issued and are
fully-paid and non-assessable;
(v) no authorization, approval or consent under any
agreement or undertaking to which the Company is a party is
required in connection with the execution or performance of
this Agreement or the authorization, issuance, sale or
delivery of the Shares;
(vi) all corporate action has been taken by the
Company to authorize the execution, delivery and performance
of this Agreement, the Shares and all of the transactions
contemplated herein and therein; and
(vii) Other than as disclosed in the schedules to the
Agreement, counsel has no knowledge of any material
litigation, legal or administrative proceeding investigation
or other action of any nature pending or threatened against or
affecting the Company or the Subsidiaries.
(g) The Company has received a commitment from a bank for a
loan of at least $750,000 in a form satisfactory to Buyer.
(h) A Buy-Sell Agreement relating to the disposition of the
Shares of the Company has been executed by Buyer and TMT Masonry, Ltd.
SECTION 6.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY. Each and every
obligation of the Company to be performed at the Closing shall be subject to the
satisfaction as of or before such time of the following conditions (unless
waived in writing by the Company) and unless so satisfied shall permit the
Company to terminate this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. Buyer's representations
and warranties set forth in Article IV of this Agreement shall have been true
and correct in all material respects at the Closing as though such
representations and warranties were made as of such time.
Page 184
<PAGE> 21
(b) PERFORMANCE OF AGREEMENT. All covenants, conditions and
other obligations under this Agreement which are to be performed or complied
with by Buyer, shall have been fully performed and complied with by it on or
prior to the Closing Date.
(c) A Buy-Sell Agreement relating to the disposition of the
Shares of the Company has been executed by Buyer and TMT Masonry, Ltd.
Page 185
<PAGE> 22
ARTICLE VII
-----------
MISCELLANEOUS
-------------
SECTION 7.1. THE COMPANY'S REPRESENTATION CONCERNING FEES. The Company
represents and warrants that it has not incurred any obligation to any finder,
broker or agent in connection with the transactions contemplated by this
Agreement and will defend and indemnify Buyer, against any loss, costs or
expenses of any kind arising out of any claim of such obligation.
SECTION 7.2. BUYER'S REPRESENTATION CONCERNING FEES. Buyer represents
and warrants that it has not incurred any obligation to any finder, broker or
agent in connection with the transactions contemplated by this Agreement and
will defend and indemnify the Company against any loss, cost or expenses of any
kind arising out of any claim of such obligation.
SECTION 7.3. TERMINATION OF AGREEMENT. All representations and
warranties contained in this Agreement by and on behalf of the Company in
connection with the transactions contemplated hereby, shall survive the
execution and delivery of this Agreement and any investigations made by Buyer.
This Agreement and all covenants, representations and warranties shall terminate
upon the redemption or repurchase by the Company or others of any and all equity
interests in the Company held by the Buyer or its permitted assigns.
SECTION 7.4. SCHEDULES AND EXHIBITS INCORPORATED. All references herein
to this Agreement shall be deemed to also refer to the Schedules and Exhibits
attached hereto, which are incorporated into this Agreement.
SECTION 7.5 NO LIMITATION OR WAIVER OF RIGHTS OF BUYER. No course of
dealing on the part of, nor any omission or delay by, Buyer, with respect to
exercising any right, power or privilege of Buyer shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or of any other right,
power or privilege, and Buyer may exercise each such right, power or privilege
either independently or concurrently with the others and as often and in such
order as it may deem desirable.
Page 186
<PAGE> 23
SECTION 7.6. PARTIES BOUND BY AGREEMENT; ASSIGNMENT. This Agreement
shall be binding upon the Company and its legal representatives, transferees,
successors and assigns; provided, however, the Company shall not assign this
Agreement without the prior written consent of Buyer. This Agreement shall not
be assigned by Buyer without the prior written consent of the Company, except to
Buyer's partners or a corporation or other entity controlled by Buyer's General
Partners.
SECTION 7.7. ENTIRE AGREEMENT. This Agreement and the Schedules and
Exhibits hereto embody the entire agreement and understanding between Buyer and
the Company and supersede all prior agreements and understandings relative to
the subject matter hereof. This Agreement may not be changed, modified,
terminated, or discharged, in whole or in part, except by a writing executed by
Buyer and the Company. All such writings shall be signed by the parties and
dated, whereupon they shall become an integral part of, or be construed together
with this Agreement. No waiver of the provisions or conditions of this
Agreement or of any of the rights of a party hereto shall be effective or
binding unless such waiver shall be in writing and signed by the party claimed
to have given or consented to such waiver.
SECTION 7.8. NOTICES. Any notice required or permitted hereunder shall
be deemed given if personally delivered or mailed by registered or certified
mail, return receipt requested (or such form of mail as may be substituted
therefor by United States postal authorities), postage prepaid to the following
addresses of the parties or at such other addresses as either the Company or
Buyer shall, from time to time, designate by written notice:
TO BUYER: Roulston Ventures Limited Partnership
-------- 4000 Chester Avenue
Cleveland, Ohio 44103
Attention: Thomas H. Roulston
and to:
Norman S. Jeavons, Esq.
Baker & Hostetler
3200 National City Center
1900 East 9th Street
Cleveland, Ohio 44114
Page 187
<PAGE> 24
TO COMPANY: Van P. Carter, Esq.
---------- Walter & Haverfield, L.L.P.
1300 Terminal Tower
50 Public Square
Cleveland, Ohio 44113
All notices so mailed shall be deemed given on the date indicated by the
postmark thereof.
SECTION 7.9. HEADINGS, TIME AND GOVERNING LAW. The headings contained
in this Agreement are for convenience only and are not to be used as an aid in
the interpretation of this Agreement. Time is of the essence in this Agreement,
which shall be governed by the laws of the State of Ohio. Any dispute concerning
the interpretation of this Agreement, or the performance of obligations of the
respective Parties to this Agreement which cannot be amicably settled between
the Parties within sixty (60) days of written notice by the aggrieved Party to
the other, shall be finally settled by binding arbitration in accordance with
the rule and regulations of the American Arbitration Association. The place of
Arbitration shall be Cleveland, Ohio, unless other agreed.
SECTION 7.10. OTHER AND FURTHER DOCUMENTS. The parties shall, in good
faith, either before or after the Closing Date, take such further action and
execute such other and further instruments, assignments or documents as may be
necessary or appropriate for the consummation of the transactions contemplated
by this Agreement provided that no such additional instrument, assignment, or
document shall increase or modify the obligations of any party under this
Agreement.
SECTION 7.11. COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all of
which together shall be construed as one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
WITNESS: ROULSTON VENTURES LIMITED PARTNERSHIP
- ---------------------------------- By:
----------------------------------
General Partner
Page 188
<PAGE> 25
WITNESS: AMERICAN STONE INDUSTRIES, INC.
- ------------------------------ By:
----------------------------------
Its:
----------------------------------
Page 189
<PAGE> 26
SCHEDULE 3.1 (b)
----------------
(i) AMERICAN STONE CORPORATION
(ii) Delaware Corporation
(iii) 100 common shares issued and outstanding
(iv) no options or rights exist to acquire its securities
(v) 100 common shares owned by American Stone Industries, Inc.
(vi) no limitations on the issued and outstanding securities
(vii) state of Delaware, and Ohio, Province of Ontario
(viii) no other ownership
(i) TYRRELL STONE DESIGN, INC.
(ii) Ontario Corporation
(iii) 100 common shares issued and outstanding
(iv) no options or rights exist to acquire its securities
(v) 100 common shares owned by American Stone Industries, Inc.
(vi) no limitations on the issued and outstanding securities
(vii) Province of Ontario
(viii) no other ownership
INDIRECT ENTITY INTEREST
Through American Stone Corporation, The Company owns an 89.1% limited
partnership interest in Cleveland Quarries, L.P.
Page 190
<PAGE> 27
SCHEDULE 3.1(C)
---------------
An Option Agreement exists between the Company and Suncrest Management Services
Dated August 8, 1998 for the purchase of 250,000 common shares of the company
for $0.25 per share in whole or in part with an expiry date of August 8, 1998.
Option Agreements exist between the Company and each of Glen Gasparini, Carlo
Onorati and Enzo Costantino, all dated October 30, 1995 for the purchase of
100,000 shares each at an exercise price of $0.05 per share in whole or in part
until October 30, 1996 or for $0.75 per share until October 30, 1997.
Shareholders list attached.
Page 191
<PAGE> 28
SCHEDULE 3.1(F)
---------------
(i) Changes to the capital of the Company
Shares Issued Date
750,000 April 17, 1996
972,000 May 23, 1996
(ii) None
(iii) Agreement to purchase Tyrrell Stone Design, Inc.
Letter of intent to purchase Stoklosar Marble Quarries Ltd.
Agreement by American Stone Corporation to purchase Park Industries,
Inc. Block Saw.
(iv) Funds borrowed from Terrazzo Mosaic & Tile Company Limited and Georgia
Capital Corp.
(v) None
(vi) None
(vii) None
(viii) None
(ix) None
Page 192
<PAGE> 29
SCHEDULE 3.1(K)
---------------
(i) Secured 6% Note Dated December 10, 1992 in the face amount of
$1,000,000.00 and Due December 10, 1994, with an amended due date of
December 10, 1995 and now past due. Principal outstanding as of August
1, 1996 of $439,314.00 and accrued interest payable of $17,071.71
Page 193
<PAGE> 30
SCHEDULE 3.1(N)
(i) Secured 6% Note Dated December 10, 1992 in the face amount of
$1,000,000.00 and Due December 10, 1994, with an amended due date of
December 10, 1995 and now past due. Principal outstanding as of August
1, 1996 of $439,314.00 and accrued interest payable of $17,071.71.
Page 194
<PAGE> 31
SCHEDULE 3.1(R)
---------------
(i) Note to Draft [Do we want a list of all the quarry permits here]
(ii) David Tyrrell employment agreement
Letter of Intent to purchase Stoklosar
Agreement to purchase Block Saw
(iii) Option Agreements
Sucrest Management Services 250,000 shares
Glen Gasparini 100,000 shares
Carlo Onorati 100,000 shares
Enzo Costantino 100,000 shares
(iv) American Stone Corporation
(a) Case Credit $973.00/month until 12/97
Caterpiller $356.00/month until 2/98
Caterpiller $378.00/month until 07/98
(v) (A) None
(B) None
Page 195
<PAGE> 1
Exhibit 6(I)
SHARE PURCHASE OPTION AGREEMENT
-------------------------------
This Share Purchase Option Agreement ("Agreement") is entered into by
and among TMT MASONRY, LTD., ("TMT") of Ontario, Canada, ROULSTON VENTURES
LIMITED PARTNERSHIP ("Roulston Ventures") of Cleveland, Ohio, and AMERICAN STONE
INDUSTRIES, INC. ("Corporation") of Ontario, Canada.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, American Stone Industries, Inc. ("Corporation"), a Delaware
Corporation, has issued and outstanding as of the date of this Agreement,
16,745,153 Common Shares of the Corporation.
WHEREAS, TMT Masonry, Ltd. ("TMT"), owns 4,000,000 of the issued and
outstanding Common Shares of the Corporation as of the date of this Agreement.
WHEREAS, Roulston Ventures Limited Partnership ("Roulston Ventures"),
an Ohio limited partnership owns 4,000,000 of the issued and outstanding Common
Shares of the Corporation as of the date of this Agreement.
WHEREAS, the parties wish to set forth their agreement regarding the
terms and conditions pertaining to sale and restriction of Common Shares owned
by TMT and Roulston Ventures.
NOW, THEREFORE, in consideration of mutual covenants and conditions set
forth herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties to this Agreement,
intending to be legally bound, do hereby agree as follows:
1. SALE OF TMT SHARES. TMT covenants and agrees that, prior to
effecting any sale or transfer for value of all or any part of the 4,000,000
Common Shares of the Corporation owned by TMT; TMT shall:
A. OFFER TO CORPORATION. Offer such shares for purchase by the
Corporation pursuant to a written proposal. The written proposal shall
specify the number of Common Shares proposed to be sold and the
proposed purchase price for said shares. The written proposal shall be
delivered
Page 196
<PAGE> 2
to the Secretary of the Corporation by messenger, overnight delivery,
tele-facsimile or certified mail. Such proposal shall constitute TMT's
offer to sell the offered interest set forth in the proposal to the
Corporation upon the terms and conditions set forth in the proposal.
The offer to purchase shall remain open to the Corporation for a period
of fifteen (15) days after its receipt by the Corporation and may not
be withdrawn by TMT during that period.
B. CORPORATION'S REVIEW AND ACCEPTANCE OR REJECTION. The
Secretary of the Corporation shall immediately deliver the TMT proposal
upon receipt to the Board of Directors of the Corporation for
consideration at a special meeting of the Board of Directors.
Thereupon, upon resolution of the Board of Directors, the Corporation
shall notify TMT in writing by messenger, overnight delivery,
tele-facsimile or certified mail within fifteen (15) days after receipt
of the proposal, of the Corporation's acceptance or rejection of TMT's
offer to sell. If accepted, the transaction shall be consummated
through the Corporation's transfer agent in accordance with the terms
of the offer within forty-five (45) days, unless otherwise extended in
writing by the parties to the sale. If the Corporation does not respond
to the proposal within the fifteen (15) day period, such lapse of time
shall be deemed a rejection.
C. OFFER TO ROULSTON VENTURES. In the event the Corporation
declines to purchase such shares as proposed by TMT, TMT shall then
offer the identical proposal to Roulston Ventures by delivering by
messenger, overnight delivery, tele-facsimile or certified mail,
written notice of the proposal, with a copy of the original proposal to
the Corporation included, to Thomas H. Roulston, II, General Partner,
Roulston Ventures Limited Partnership, pursuant to Section 4. Notice.,
herein, or such other address as shall be provided from time to time
hereafter. Such notice of proposal shall constitute TMT's offer to sell
the offered interest set forth in the proposal to Roulston Ventures,
upon the same terms and conditions set forth in the proposal to
Roulston Ventures. The offer to purchase shall remain open to the
Corporation for a period of fifteen (15) days after its receipt by
Roulston Ventures and may not be withdrawn by TMT during that period.
Page 197
<PAGE> 3
D. ROULSTON VENTURES REVIEW AND ACCEPTANCE OR REJECTION.
Roulston Ventures shall review the proposal. Thereupon, Roulston
Ventures shall notify TMT in writing by messenger, overnight delivery,
tele-facsimile, or certified mail, within fifteen (15) days after
receipt of the notice of sale and proposal of its acceptance or
rejection of the same. If accepted, the transaction shall be
consummated through the Corporation's transfer agent in accordance with
the terms of the offer within forty-five (45) days, unless otherwise
extended in writing by the parties to the sale. If Roulston Ventures
does not respond to the proposal within the fifteen (15) day period,
such lapse of time shall be considered a rejection.
E. REJECTION OF PURCHASE BY CORPORATION AND ROULSTON VENTURES.
If neither the Corporation or Roulston Ventures elect to purchase the
Common Shares proposed to be sold by TMT, TMT shall have the right to
sell the interest so offered to a third-party, provided the sale is
made strictly in accordance with the terms of the original offer as
submitted to the Corporation and Roulston Ventures. If any changes are
made to the offer or in consummating the transaction with the
third-party, TMT must once again re-offer the shares in accordance with
the procedures outlined in Section 1 of this Agreement. Such sale to a
third-party shall not be recognized by the Corporation's transfer agent
unless and until TMT provides an affidavit to the Corporation's
transfer agent setting forth that the terms and conditions of the sale
to the third-party are identical to those previously offered to the
Corporation and Roulston Ventures pursuant to this Agreement.
2. SALE OF ROULSTON VENTURES SHARES. Roulston Ventures covenants and
agrees that, prior to effecting any sale or transfer for value of all or any
part of the 4,000,000 Common Shares of the Corporation owned by Roulston
Ventures; Roulston Ventures shall:
a. OFFER TO CORPORATION. Offer such shares for purchase by the
Corporation pursuant to a written proposal. The written proposal shall
specify the number of Common Shares proposed to be sold and the
proposed purchase price for said shares. The notice of sale shall be
delivered to
Page 198
<PAGE> 4
the Secretary of the Corporation by messenger, overnight delivery,
tele-facsimile or certified mail. Such proposal shall constitute
Roulston Ventures' offer to sell the offered interest to the
Corporation upon the terms and conditions set forth in the proposal.
The offer to purchase shall remain open to the Corporation for a period
of fifteen (15) days after its receipt by the Corporation and may not
be withdrawn by Roulston Ventures during that period.
B. CORPORATION'S REVIEW AND ACCEPTANCE OR REJECTION. The
Secretary of the Corporation shall immediately deliver the Roulston
Ventures proposal upon receipt to the Board of Directors of the
Corporation for consideration at a special meeting of the Board of
Directors. Thereupon, upon a resolution of the Board of Directors, the
Corporation shall notify Roulston Ventures in writing by messenger,
overnight delivery, tele-facsimile, or certified mail, within fifteen
(15) days after receipt of the proposal, of the Corporation's
acceptance or rejection of Roulston Ventures' offer to sell. If
accepted, the transaction shall be consummated through the
Corporation's transfer agent in accordance with the terms of the offer
within forty-five (45) days, unless otherwise extended in writing by
the parties to the sale. If the Corporation does not respond to the
proposal within the fifteen (15) day period, such lapse of time shall
be deemed a rejection.
C. OFFER TO TMT. In the event the Corporation declines to
purchase such shares as proposed by Roulston Ventures, Roulston
Ventures shall then offer the identical proposal to TMT by delivering
by messenger, overnight delivery, tele-facsimile, or certified mail,
written notice of the proposal, with a copy of the original proposal to
the Corporation included, to Glen Gasparini, President, pursuant to
Section 4. Notice., herein , or such other address as shall be provided
from time to time hereafter. Such notice of proposal shall constitute
Roulston Ventures' offer to sell the offered interest set forth in the
proposal to TMT, upon the same terms and conditions set forth in the
proposal to the Corporation. The offer to purchase shall remain open to
TMT for a period of fifteen (15) days after its receipt by TMT and may
not be withdrawn by Roulston Ventures during that period.
Page 199
<PAGE> 5
D. TMT'S REVIEW AND ACCEPTANCE OR REJECTION. TMT shall review
the proposal. Thereupon, TMT shall notify Roulston Ventures in writing
by messenger, overnight delivery, tele-facsimile, or certified mail,
within fifteen (15) days after receipt of the notice of sale and
proposal of its acceptance or rejection of the same. If accepted, the
transaction shall be consummated through the Corporation's transfer
agent in accordance with the terms of the offer within forty-five (45)
days, unless otherwise extended in writing by the parties to the sale.
If TMT does not respond to the proposal within the fifteen (15) day
period, such lapse of time shall be considered a rejection.
E. REJECTION OF PURCHASE BY CORPORATION AND TMT. If neither
the Corporation or TMT elect to purchase the Common Shares proposed to
be sold by Roulston Ventures, Roulston Ventures shall have the right to
sell the interest so offered to a third-party, provided the sale is
made strictly in accordance with the terms of the original offer as
submitted to the Corporation and TMT. If any changes are made to the
offer or in consummating the transaction with the third-party, Roulston
Ventures must once again re-offer the shares in accordance with the
procedures outlined in this Section 2 of the Agreement. Such sale to a
third-party shall not be recognized by the Corporation's transfer agent
unless and until Roulston Ventures provides an affidavit to the
Corporation's transfer agent setting forth that the terms and
conditions of the sale to the third-party are identical to those
previously offered to the Corporation and TMT pursuant to this
Agreement.
3. ENDORSEMENT OF CERTIFICATES. TMT and Roulston Ventures agree to
cause all share certificates previously issued to them to be endorsed with the
following legend:
The shares represented by this certificate are
subject to the terms of a Share Purchase Option
Agreement and may not be sold or transferred for
value except in conformity with the terms of that
Agreement. A copy of that Agreement has been
deposited with the Secretary of the Corporation
and shall be delivered to all interested parties
within ten (10) days of their written request for
such to the Corporation.
Page 200
<PAGE> 6
4. NOTICE. Any and all notices required to be sent to the parties to
this Agreement shall be transmitted to:
To TMT: Glen Gasparini, President
----------------------------------
TMT Masonry, Ltd.
----------------------------------
900 Keele Street
----------------------------------
Toronto, Ontario, Canada M6N 3E7
----------------------------------
Copy to:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
----------------------------------
TO ROULSTON VENTURES: Thomas H. Roulston, II, General Partner
----------------------------------
Roulston Ventures Limited Partnership
----------------------------------
4000 Chester Avenue
----------------------------------
Cleveland, Ohio 44103
----------------------------------
COPY TO:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
----------------------------------
TO CORPORATION: Michael J. Meier, Secretary
----------------------------------
American Stone Industries, Inc.
----------------------------------
c/o 1111 Chester Avenue, #750
----------------------------------
Cleveland, Ohio 44114
----------------------------------
COPY TO: Walter & Haverfield, P.L.L.
----------------------------------
1300 Terminal Tower
----------------------------------
50 Public Square
----------------------------------
Cleveland, Ohio 44113
----------------------------------
Attn.: Van P. Carter, Esq.
----------------------------------
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year set forth below the signature lines. This Agreement may be executed in
multiple counterparts, each of which shall be an original, but all of which
shall be deemed to constitute one instrument.
"CORPORATION"
American Stone Industries, Inc.
- -------------------------- By:
----------------------------------
Michael J. Meier, its Secretary
(Duly Authorized)
- -------------------------- DATE: ___________________
Page 201
<PAGE> 7
"TMT"
- ------------------- TMT Masonry, Ltd., a ____________________
By:
- ------------------- ----------------------------------
Glen Gasparini, its President
(Duly Authorized)
DATE: _________________________
"ROULSTON VENTURES"
Roulston Ventures Limited Partnership, an
Ohio Limited Partnership
- ------------------- By:
----------------------------------
Thomas H. Roulston, II, its General Partner
(Duly Authorized)
- ------------------- Date: _________________________
Page 202
<PAGE> 1
Exhibit 6(J)
INTERIM MANAGEMENT AGREEMENT
THIS AGREEMENT dated as of August 30, 1996
BETWEEN:
ROBERT GRAHAM NASH
------------------
of the Township of Madoc, County of Hastings, Ontario
(hereinafter referred to as "Nash")
OF THE FIRST PART
- and -
WILLIAM PURVIS HOUSTON
----------------------
of the Township of Madoc, County of Hastings, Ontario
(hereinafter referred to as "Houston")
OF THE SECOND PART
- and -
E. VICTOR ARTUSO
----------------
of the Township of Madoc, County of Hastings, Ontario
(hereinafter referred to as "Artuso")
OF THE THIRD PART
- and -
NICHOLLS INVESTMENTS INC.
-------------------------
(hereinafter referred to as "Nicholls")
OF THE FOURTH PART
- and -
237894 ONTARIO LIMITED
----------------------
a corporation duly incorporated under the laws of the Province of Ontario
(hereinafter called the "237894")
OF THE FIFTH PART
- and -
GRENVILLE AGGREGATE SPECIALITIES LIMITED
----------------------------------------
a corporation duly incorporated under the laws of the Province of Ontario
(hereinafter referred to as "Grenville")
OF THE SIXTH PART
- and -
Page 203
<PAGE> 2
AMERICAN STONE INDUSTRIES, INC.
-------------------------------
a corporation duly incorporated under the laws of the State of Delaware
(hereinafter called the "Purchaser")
OF THE SEVENTH PART
-and-
AMERICAN STONE INDUSTRIES, INC.
-------------------------------
a corporation duly incorporated under the laws of the Province of Ontario
(hereinafter called the "Corporation")
OF THE EITHTH PART
WHEREAS Grenville and 273984 (Grenville and 273984 together with Nash, Artuso,
Houston and Nicholls are collectively referred to herein as the "Vendors" and
individually as a "Vendor") are the sole shareholders of the Corporation, a
corporation duly incorporated under the Laws of the Providence of Ontario;
AND WHEREAS Nash, Artuso and Nicholls are the sole shareholders of 237894;
AND WHEREAS Houston is the sole shareholder of Grenville;
AND WHEREAS the Purchaser and the Vendors are currently negotiating for the
Purchaser to purchase either all of the shares of the Corporation from each
Vendor or, alternatively, to purchase all of the shares of 237894 and all of the
shares of Grenville from the Vendors together with certain other transactions so
as to obtain control of all of the shares and assets of the Corporation (the
sale of shares of any of these companies in furtherance of this objective shall
be referred to as the "Sale of the Shares");
AND WHEREAS the parties have exchanged various draft documentation and proposals
to this date but the Sale of the Shares will not be finalized on or before
August 31, 1996;
AND WHEREAS the parties intend to enter into an Agreement of Purchase and Sale
with respect to the Sale of the Shares (referred to herein sometimes as the
"Purchase Agreement"), on or before September 6, 1996 or such later date as may
be agreed to by the parties in writing (the "Agreement Signing Date")
AND WHEREAS the parties wish to have the Purchaser assume joint control of the
Corporation from and after August 31, 1996 (the "Effective Date") in
anticipation of the completion of the Sale of the Shares hereinbefore referred
to (the date of the completion of the Sale of the Shares as referred to herein
as the ("Closing");
Page 204
<PAGE> 3
NOW THEREFORE in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt and sufficiency whereof each
of the parties hereto hereby acknowledges, the parties hereto covenants and
agree as follows:
1. RECITALS. The above recitals are true.
2. MANAGEMENT. The Corporation hereby retains the Purchaser as co-manager
of the Corporation with the intent that the Vendor and the Purchaser
will both act in the management of the Corporation. All material
decisions with respect to the operation of the Corporation during the
term of this Agreement shall require the consent of both the Purchaser
and Nash or Houston on behalf of the Vendors. The Purchaser shall
assume co-management of the Corporation from and after the Effective
Date, as agent of the Vendors and the Corporation, and as agents, shall
have the full power to conduct the business of the Corporation as if it
were the Corporation, provided that any action that will result in a
material adverse change in the affairs of the Corporation will require
the consent of the Vendors, which may be unreasonably withheld. The
Vendors agree to execute such other documentation as may be necessary
to give effect to agency. The Purchaser shall be entitled to set up
separate bank accounts for the management of the Corporation from and
after the Agreement Execution Date. From and after the Effective Date
until the Agreement Execution Date, Nash and Houston shall be entitled
to collect their standard salaries (without bonus or other additional
payment) but after the Agreement Execution Date the Corporation shall
make no further payments to either Nash or Houston except as
specifically agreed between the parties. Nash and Houston shall be
entitled to attend at the Corporation offices until the closing of the
Sale of the Shares to assure that the Corporation is being run in
accordance with this agreement and good management practices and to
participate as co- managers of the Corporation.
3. PURCHASER COVENANTS. The parties hereby agree to manage and operate the
Corporation in a good and prudent manner, provided that either party
may, but shall not be obligated to, add any further capital by cash or
otherwise to the Corporation as they deem necessary provided both
parties agree
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<PAGE> 4
to the addition of capital. The Vendors agree to leave the sum of
$25,000.00 (the "Float") in the existing Corporation bank accounts to
fund the operation of the Corporation prior to Closing.
4. APPLICATION OF PROCEEDS. All costs of operation, including all taxes
and all sale proceeds and other income accrued and collected up to the
day prior to the Effective Date shall be to the account of the Vendors.
All proceeds from the sale of inventory and other operations of the
Corporation from and after the Effective Date and during the term of
This Agreement shall be to the account of both parties and shall be
applied in the following priority:
a) firstly, payment of all operating expenses (including, without
limitation, operating costs, rent interest charges and taxes,
actual reasonable out of pocket expenses of the Purchaser in
operating the Corporation, refunding of the Float to the
Vendors and payment of the salaries of Nash and Houston,
provided that there shall be no management fees paid to the
Purchaser or any manager appointed by the Purchaser and the
Purchaser shall not be entitled to reimbursement for travel,
accommodation or other similar costs related to co-management
of the Corporation;
b) secondly, repayment of any capital additions made with the
agreement of both parties, during the term of Agreement; and
c) lastly, all remaining funds (the "Profits") shall be to the
account of the Purchaser, but shall be held in trust by the
Purchaser pending completion of the Sale of the Shares and
shall be subject to the provisions hereinafter set out.
5. PROFIT DISTRIBUTION UPON TERMINATION. Upon Closing the parties agree
that this Agreement shall terminate and all Profits shall be to the
account of the Purchaser and shall be fully available to the Purchaser
upon completion of the Sale of the Shares. In the event that the
Purchase Agreement has not been executed by both parties by the
Agreement Execution Date arrangement created herein forthwith upon
written notice, and all profits shall be paid to the Vendors or as they
direct. In the event that the Sale of the Shares has not been completed
by October 31, 1996 (the "Termination Date") then either party may
terminate this Agreement and the co-management arrangement created
herein forthwith upon written notice. In the event of a termination of
this agreement for reasons other than a completion of Sale of the
Shares or for reasons other than a termination for failure to
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<PAGE> 5
execute the Purchase Agreement by the Agreement Execution Date, then
all Profits shall be divided equally between the Vendors (who shall
collectively receive a fifty per cent share) and the Purchaser (who
shall receive a fifty per cent share). The parties agree that the
Profits shall be paid out no later than ninety days after the Purchaser
have surrendered control of the Corporation to the Vendors. The
Purchaser shall provide a full accounting to the Vendors of all
transactions conducted by the Purchaser during the term of this
Agreement upon request of the Vendors. At Closing, the Corporation and
the Purchaser shall jointly and severally pay to the Vendors an amount
equal to the Float less any refund of the Float already paid to the
Vendors pursuant to Section 4(a) above.
6. GAAP. The parties agree that all accounts and bookkeeping shall be
performed in accordance with generally accepted accounting principles
and procedures in use in the Province of Ontario. The Purchaser agrees
to keep separate books and bank accounts for all operations pertaining
to the Corporation.
7. INDEMNITIES. The parties agree that they shall cooperate
reasonably in order to complete the Sale of the Shares and shall
fulfill their obligations here fully and in good faith, and that
each shall indemnify the other for any breach of covenant. 237984 and
Grenville and the Corporation hereby agree that they shall jointly and
severally indemnify the Purchaser from any action, claim or liability
of the Corporation which arises for reasons other than the wilful,
omission or negligence of the Purchaser. The Purchaser agrees to
indemnify the Vendors and the Corporation from any liability or claim
that arises from the wilful act, omission or negligence of the
Purchaser during the term of this Agreement (unless such act or
omission or negligence was approved by the Vendors in writing). These
indemnities shall survive the termination of Agreement.
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<PAGE> 6
8. RELATIONSHIP. Nothing herein is intended to create any relationship
between the parties other than a co-management relationship except as
specifically set out herein. The parties specifically agree that
they are not partners or joint ventures.
9. NOTICE. The parties agree that any notice to be given under this
agreement may be sent by personal delivery or telephone transmitted
facsimile ("Fax") to the following address. Such notice shall be deemed
delivered on the day of personal delivery, the day of Faxing if Faxed
prior to 4:30 p.m on a business day.
To the Vendors
c/o Stoklosar Marble Quarries Limited
Box 389
Madoc, Ontario
KOK 2KO
With a Copy To:
Jamie Wylie
750-55 Metcalfe Street
Ottawa, Ontario
KIP 6L5
613-233-8631 (Fax)
To the Purchaser
Keele Street
Toronto, Ontario
M6N 3E7
FAX 416 653 2594
10. GOVERNING LAW. This agreement shall be construed and interpreted in
accordance with the laws of the Province of Ontario and the laws of
Canada in force therein and the parties agree to submit any dispute
arising out of this agreement to the courts of such Province.
11. FURTHER ASSURANCES. The parties hereto agree to sign or execute such
other deeds and documents and do such other things as may be necessary
or desirable for more completely and effectually carrying
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<PAGE> 7
out the terms and intention of this agreement The parties agree to act
reasonably and in good faith with the intent of completing the Purchase
Agreement and the Closing.
12. SUCCESSORS AND ASSIGNS. This agreement shall enure to the benefit of
and be binding upon the parties hereto and their respective successors
and assigns, provided that this agreement shall not be assigned by
either party without the express written consent of the other party.
The obligations of the Vendors hereunder shall be joint and several.
13. TIME. shall be of the essence of this agreement.
14. ENTIRE AGREEMENT. This Agreement is intended to represent the entire
agreement between the parties.
15. FAX EXECUTION. This agreement may be executed in counter part by fax
and shall be binding on any party so signing. The parties agree to
exchange original signed copies as soon as possible thereafter.
IN WITNESS WHEREOF THE PARTIES HERETO HAVE EXECUTED AND DELIVERED THIS AGREEMENT
AS OF THE TIME AND DATE FIRST ABOVE WRITTEN.
- -------------------------------- ---------------------------------
Witness ROBERT GRAHAM NASH
- -------------------------------- ---------------------------------
Witness WILLIAM PURVIS HOUSTON
- -------------------------------- ---------------------------------
Witness E. VICTOR ARTUSO
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<PAGE> 8
NICHOLLS INVESTMENTS INC.
By:
-------------------------------
I have authority to bind the corporation.
AMERICAN STONE INDUSTRIES,
INC.
By:
-------------------------------
By:
-------------------------------
I/we have authority to bind the corporation.
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<PAGE> 9
GRENVILLE AGGREGATE
SPECIALITIES LIMITED
By:
-----------------------------------
By:
-----------------------------------
I/we have authority to bind the corporation.
237894 ONTARIO LIMITED
By:
-----------------------------------
By:
-----------------------------------
I/we have the authority to bind the corporation.
STOKLOSAR MARBLE QUARRIES
LIMITED
By:
-----------------------------------
By:
-----------------------------------
I/we have the authority to bind the corporation.
Page 211
<PAGE> 1
Exhibit 10(A)
March 19, 1997
Mr. Glen Gasparini
President
American Stone Industries, Inc.
900 Keele Street
Toronto, Ontario
Canada M6N 2B7
Re: Concurrence with Statement in Form
10-SB concerning the Change
in Certifying Accountant
Dear Mr. Gasparini:
This firm was the independent auditors for American Stone Industries, Inc. (the
"Company") for fiscal years ended December 31, 1994 and December 31, 1995 and
for the period November 11, 1992 (date of incorporation) through June 30, 1993
and for the six-month period ended December 31, 1993. In this regard, we have
reviewed that portion of the Company's registration statement on Form 10-SB to
be filed with the Securities and Exchange Commission in which the Company
discusses the change in certifying accountant.
This letter will confirm that we are in concurrence with the statement made by
the Company in its Form 10- SB concerning the change in certifying accountant.
Horton & Company, L.L.C.
cc: Van P. Carter, Esq.
EH/ha
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<PAGE> 1
Exhibit 10(B)
March 19, 1997
Mr. Glen Gasparini
President
American Stone Industries, Inc.
900 Keele Street
Toronto, Ontario
Canada M6N 2B7
Re: Consent to Incorporation of
Independent Auditors' Report
Dear Mr. Gasparini:
This firm was the independent auditors for American Stone Industries, Inc. (the
"Company") for the fiscal year end December 31, 1995. In this context, we
understand that the Company is in the process of preparing and filing a Form
10-SB with the Securities & Exchange Commission.
Pursuant to Rule 601(b)(23), this letter will service as our consent for the
Company to file as an exhibit with the Form 10-SB, our Independent Auditors'
Report dated April 3, 1996 for fiscal year ended December 31, 1995, and to the
reference of Horton & Company, L.L.C. therein.
Horton & Company, L.L.C,
EH/ha
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<PAGE> 1
Exhibit 10(C)
March 24, 1997
Mr. Glen Gasparini
President
American Stone Industries, Inc.
900 Keele Street
Toronto, Ontario
Canada M6N 2B7
RE: Consent to Incorporation of
Independent Auditors' Report
Dear Mr. Gasparini:
This firm was the independent auditor for American Stone Industries,
Inc. (the "Company") for the fiscal year ended December 31, 1996. In this
context, we understand that the Company is in the process of preparing and
filing a Form 10-SB with the Securities & Exchange Commission.
Pursuant to Rule 601(b)(23), this letter will serve as our consent for
the Company to file as an exhibit with the Form 10-SB, our Independent Auditors'
Report dated January 22, 1997 for fiscal year ended December 31, 1996, and to
the reference of Hobe & Lucas, Certified Public Accountants, Inc., therein.
Hobe & Lucas,
Certified Public Accountants, Inc.
Page 214
<PAGE> 1
Exhibit 10(D)
SUBSIDIARIES OF REGISTRANT
As of December 31, 1996, the following entities were subsidiaries of
American Stone Industries, Inc.:
- American Stone Corporation
--------------------------
STATE OF INCORPORATION: Delaware
NAMES UNDER WHICH SUCH SUBSIDIARY DOES BUSINESS:
American Stone Corporation
Cleveland Quarries
- Tyrrell Stone Design
--------------------
STATE OF INCORPORATION: Ontario Canada
NAMES UNDER WHICH SUCH SUBSIDIARY DOES BUSINESS:
Tyrrell Stone Design
In addition to the foregoing, as at December 31, 1996, American Stone
Corporation owned an 89.1% interest in Cleveland Quarries, L.P., a limited
partnership organized pursuant to the laws of the State of Ohio. This
partnership ceased operations on or about December 31, 1996 and was dissolved as
of that date.
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<PAGE> 2
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
American Stone Industries, Inc.
- --------------------------------------------------------------------------------
(Registrant)
Date:
---------------------------------------------------------------------------
By:
---------------------------------------------------------------------------
(Signature)*
*Print the name and title of each signing officer under his or her signature
/s/ /s/
- ------------------------------- -------------------------------
ENZO COSTANTINO GLEN GASPARINI
/s/ /s/
- ------------------------------- -------------------------------
TIMOTHY I. PANZICA MICHAEL J. MEIER
/s/
- -------------------------------
THOMAS H. ROULSTON, II
Page 216
