UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities And Exchange Act of 1934
Date of Report (Date of earliest event reported): March 19, 2002
AQUACELL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Commission File No. 1-16165
Delaware 33-0750453
(State of incorporation) (IRS Employer Identification Number)
10410 Trademark Street
Rancho Cucamonga, CA 91730
(Address of principal executive offices) (Zip Code)
(909) 987-0456
(Telephone number, including area code)
Item 2. Acquisition or Disposition of Assets
(a) On March 19, 2002, the registrant acquired all the assets
of Water Science Technologies, Inc. ("WST"), an Arizona
corporation with its principal place of business in Tempe,
Arizona by acquiring one hundred (100%) percent of the
issued and outstanding common stock of WST.
As consideration, the registrant issued 203,252 shares of
its unregistered common stock from treasury to the four
stockholders of WST- Douglas Craver, James Wing, Maple
Resources Corporation and the Estate of Richard Ott. There
is no material relationship between any of such persons or
entities and the registrant. The aggregate value of all
shares issued totaled $1,000,000. The difference between
the value of WST's assets- including accounts receivable,
inventory and equipment-and the purchase price of
$1,000,000 will be accounted for as good will.
(b) The assets purchased by the registrant include personal
property and equipment used in water purification and
water treatment for industrial, commercial institutional
and residential uses. The registrant intends to continue
such uses.
Item 7. Financial Statements and Exhibits.
(a)-(b) Financial Statements required by this item will be
filed by amendment within sixty (60) days of the date
hereof.
(c) Stock Purchase Agreement and Addendum to Stock Purchase
Agreement annexed hereto.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: April 3, 2002
AquaCell Technologies, Inc.
By: /s/ Gary S. Wolff
---------------------------------------
Gary S. Wolff, Chief Financial Officer
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of this
23rd day of October, 2001 between and among AquaCell Technologies, Inc., a
Delaware corporation ("AquaCell" or "Purchaser"), Water Science Technologies,
Inc., an Arizona corporation (the "Company"), and Douglas M. Craver, the Estate
of Richard L. Ott, Jim Wing and Maple Resources Corporation (each a
"Shareholder" and collectively the "Shareholders").
R E C I T A L S
WHEREAS, the Shareholders collectively own all of the issued and
outstanding capital stock of the Company (the "Shares"); and
WHEREAS, the Shareholders desire to sell to the Purchaser and the Purchaser
desires to purchase from the Shareholders the Shares in accordance with and
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the preceding recitals and the mutual
representations, warranties, covenants and agreements set forth herein, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
I. SALE AND PURCHASE OF STOCK
1.1 Agreement to Sell and Purchase Stock. For the consideration hereinafter
provided and subject to the terms and conditions of this Agreement, at the
Closing (as defined in Section 1.3 below) each Shareholder shall sell, assign,
transfer, convey and deliver to Purchaser, free and clear of all liens, charges,
claims or encumbrances, and the Purchaser shall purchase and acquire, from each
Shareholder, the Shares of such Shareholder. At the Closing, each Shareholder
shall cause to be delivered to Purchaser certificates representing the Shares,
together with accompanying signed stock powers or instruments of assignment,
duly endorsed in blank for the transfer of the Shares to the Purchaser with all
necessary transfer taxes paid or other revenue stamps affixed thereto.
1.2 Purchase Price. At the Closing, subject to the terms and conditions of
this Agreement, the Purchaser agrees to pay to Shareholders, as the aggregate
purchase price for the Shares, consideration worth an aggregate of $1,000,000
(the "Purchase Price") the components of which are as follows:
(a) that number of Shares of AquaCell common stock equal to $1,000,000
calculated by taking the average closing price of AquaCell common stock on the
five business days immediately preceding the Closing as the denominator and
$1,000,000 as the numerator allocated as follows:
(1) a sufficient number of Shares required to pay all trade
creditors of the Company in full. It is a condition precedent to Closing that
all creditors agree to accept AquaCell common stock as payment in full, unless
otherwise agreed to by the parties hereto. The Company agrees to use its best
efforts to obtain the consent of its creditors to accept AquaCell common stock
in lieu of cash to liquidate the Company's payable. In the event the Company is
unable to obtain the consent of each creditor, the Purchaser may waive this
condition precedent on a case by case basis and such waiver will not be
unreasonably withheld; provided however, that at least 70% in the aggregate
indebt must agree to accept in lieu of cash.
(2) the balance of Shares to the Shareholders in proportion to their
respective stock interest in the Company as set forth on Schedule 1.1.
1.3 Closing. The closing of the sale and purchase of the Shares under and
in accordance with this Agreement (the "Closing") shall take place at the
offices of the Purchaser on or before October 31, 2001, or such later date as
may be mutually agreed to in writing by the parties hereto (the "Closing Date").
Each party shall be responsible for its own attorneys' fees, accountants' and
other advisory fees associated with the Closing.
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SHAREHOLDERS
As an inducement to the Purchaser to enter into this Agreement and to
purchase the Shares, Douglas M. Craver (the "Executive Shareholder") and the
Company (and each other Shareholder solely with respect to the matters set forth
in Sections 2.1, 2.4, 2.5 and 2.14 through 2.18) severally represent and warrant
to the Purchaser as set forth in this Article II. The representations and
warranties provided in Sections 2.1, 2.4 and 2.14 through 2.18 which are made
without limitation, shall be limited to the knowledge of the Shareholders after
reasonable inquiry.
2.1 Ownership of Company Shares. Each Shareholder is the owner of all
right, title and interest (legal, record and beneficial) in and to the Shares
described in Schedule 2.1 of the disclosure schedules attached to this Agreement
(the "Disclosure Schedules"), free and clear of any and all liens, charges,
claims, encumbrances or restrictions of any nature whatsoever (except for any
restrictions on transfer imposed by any federal securities laws or state blue
sky laws). The delivery to Purchaser of the Shares pursuant to and in accordance
with the provisions of this Agreement will transfer to Purchaser good and
marketable title in and to all such Shares free and clear of any and all liens,
charges, claims encumbrances or restrictions of any kind or nature whatsoever.
Except as specifically contemplated in this Agreement, no person or entity has
any interest, agreement, option, right, participation or privilege (whether
preemptive or contractual) capable of becoming an agreement or option for the
purchase of any of the Shares, or any interest therein, from Shareholder. Each
of the Shares has been legally and validly issued and is fully paid and
nonassessable, and was issued pursuant to a valid exemption from registration
under (i) the Securities Act of 1933, as amended, and (ii) all applicable state
securities laws. The Shares represent all of the issued and outstanding shares
of capital stock of the Company. No shares of the Company's common stock are
owned by the Company in treasury. None of the Shares have been issued or
disposed of in violation of any preemptive rights, rights of first refusal or
similar rights of any Shareholder. Other than the Shares, the Company has no
securities, bonds, debentures, notes or other obligations the holders of which
have the right to vote (or are convertible into or exercisable for securities
having the right to vote) with Shareholders on any matter.
2.2 Transactions in Capital Stock. The Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof.
2.3 Organization and Good Standing: Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation, with all requisite corporate power and authority
to own, operate and lease its assets and properties and to carry on its business
as currently conducted. The Company is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary. Copies of the Articles of
Incorporation of the Company, as amended or restated, and the Bylaws of the
Company, as amended or restated, and copies of the corporate minutes of the
Company, all of which have been or will be made available to the Purchaser for
review, are true and complete as in effect on the date of this Agreement and the
Closing Date, and in the case of the corporate minutes, accurately reflect all
material proceedings of the Shareholders and directors of the Company (and all
committees thereof). The stock record books of the Company, which have been or
will be made available to the Purchaser for review, contain true, complete and
accurate records of the stock ownership of record of the company and the
transfer record for all of its capital stock.
2.4 Authorization and Validity. The Company and each Shareholder have all
requisite power and authority to enter into this Agreement and all other
agreements entered into in connection with the transactions contemplated hereby
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by the Company of this Agreement and the
transactions contemplated herein are within the Company's respective corporate
powers and have been duly authorized by all necessary action on the part of the
Company's Board of Directors. This Agreement has been duly executed by the
Company and each Shareholder, and this Agreement and all other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby to which the Company or a Shareholder is a party constitute,
or upon execution will constitute, valid and binding agreements of such parties,
enforceable against such parties in accordance with their respective terms,
except as enforceability may be limited by bankruptcy or other laws affecting
the enforcement of creditors' rights generally, or by general equity principles,
or by public policy.
2.5 Absence of Conflicting Agreements or Required Consents. Except as set
forth on Schedule 2.5, the execution, delivery and performance of this Agreement
by the Company and each Shareholder and any other documents contemplated hereby
(with or without the giving of notice, the lapse of time, or both): (i) does not
require the consent of any governmental or regulatory body or authority or any
other third party; (ii) will not conflict with any provision of the Company's
Articles of Incorporation, as amended or restated, or Bylaws, as amended or
restated; (iii) will not conflict with result in a violation of, or constitute a
default under any law, ordinance, regulation, ruling, judgment, order or
injunction of any court or governmental instrumentality to which the Company or
a Shareholder is a party or by which the Company or a Shareholder or any of
their properties are subject or bound; (iv) will not conflict with, constitute
grounds for termination of, result in a beach of, constitute a default under,
require any notice under, or accelerate or permit the acceleration of any
performance required by the terms of any agreement, instrument, license or
permit, material to this transaction, to which the Company or a Shareholder is a
party or by which the Company or a Shareholder or any of their properties are
bound; and (v) will not create any encumbrance or restriction upon any of the
assets or properties of the Company or a Shareholder.
2.6 Absence of Changes. Except as permitted or contemplated by this
Agreement, the Company has conducted its business only in the ordinary course
and has not:
(a) Subject to the agreements obtained from trade creditors as provided
in Section 1(2) hereinabove, the Company has not suffered any changes in its
working capital, condition (financial or otherwise), assets, liabilities,
reserves, business or operations (whether or not covered by insurance) that
individually or in the aggregate has had or could reasonably be expected to have
a material adverse effect on the Company's business, prospects or results of
operations ("Material Adverse Effect")
(b) paid, discharged or satisfied any material liability, other than
the payment, discharge or satisfaction of liabilities in the ordinary course of
business;
(c) written off as uncollectible any receivable, except for write-offs
in the ordinary course of business;
(d) except in the ordinary course of business and consistent with past
practice, canceled or compromised any debts or waived or permitted to lapse any
claims or rights or sold, transferred or otherwise disposed of any of its
properties or assets;
(e) entered into any commitment or transaction not in the ordinary
course of business that is material to the Company, taken as a whole, or made
any capital expenditure or commitment in excess of $5,000;
(f) made any material changes in any method of accounting or accounting
practice, credit practices, collection policies, or payment policies;
(g) except in the ordinary course of business consistent with past
practice, incurred any liabilities or obligations (absolute, accrued or
contingent) in excess of $2,000 individually or $5,000 in the aggregate;
(h) mortgaged, pledged, subjected or agreed to subject, any of its
assets, tangible or intangible, to any claim or encumbrance, except for liens
for current personal property taxes not yet due and payable for mechanics,
landlords, materialmen, and other statutory liens, purchase money security
interests, sale-leaseback interests granted and all other encumbrances granted
in similar transactions;
(i) sold, redeemed, acquired or otherwise transferred any equity or
other interest in itself;
(j) increased any salaries, wages or any employee benefits for any
employee of the Company, except in the ordinary course of business and
consistent with past practice;
(k) hired, committed to hire or terminated any employee except in the
ordinary course of business;
(l) declared, set aside or made any payments, dividends or other
distributions to any Shareholder, employee, independent contractor or any other
holder of capital stock of the Company other than in accordance with customary
and past practices pursuant to existing agreements; or
(m) agreed, whether in writing or otherwise, to take any action
described in this Section.
2.7 Litigation and Claims. There are no claims, lawsuits, actions,
arbitrations, administrative or other proceedings, governmental investigations
or inquiries pending or, to the knowledge of the Company or any Executive
Shareholder, threatened against, or affecting the Company, any Shareholder, any
Company employee or any other individual affiliated with the Company affecting
or that would reasonably be likely to affect the Company, the value of the
Shares of the operations, business condition, (financial or otherwise), results
of operations or prospects of the Company.
2.8 Environmental Matters. Except as set forth on Schedule 2.8:
(a) the Company has not within the five years preceding the date
hereof, through the Closing Date, received from any federal, state or local
governmental body, agency, authority or entity, or any other person, any written
notice, demand, citation, summons, complaint or order or any notice of any
penalty, lien or assessment, and to the knowledge of the Company or any
Executive Shareholder no investigation or review is pending by any governmental
entity, with respect to any (i) alleged violation by the Company of any
Environmental Law (as defined below); (ii) alleged failure by the Company to
have any environmental permit, certificate, license, approval, registration or
authorization required pursuant to any Environmental Law in connection with the
conduct of its business, or (iii) alleged illegal Regulated Activity (as defined
below) by the Company;
(b) the Company has not engaged in any activity or failed to undertake
any activity which action or failure to act has given, or would reasonably be
likely to give, rise to any Environmental Liabilities or enforcement action by
any federal, state or local regulatory agency or authority, or has resulted, or
would reasonably be likely to result, in any fine or penalty imposed pursuant to
any Environmental Law;
(c) to the knowledge of the Company or the Executive Shareholder, there
is no friable asbestos in or on the Company's owned or leased premises;
(d) to the knowledge of the Company or any Executive Shareholder, no
soil or water in or under any assets currently or formerly held for use or sale
by the Company is or has been contaminated by any Hazardous Substance (as
defined below) while such assets or premises were owned, leased or operated,
directly or indirectly by the Company, where such contamination had, or would be
reasonably likely to have, a Material Adverse Effect; and
(e) there have been no environmental audits and other similar reports
which have been prepared by, for or, to the knowledge of the Company or any
Executive Shareholder, concerning the Company within the five years preceding
the date hereof through the Closing Date with respect to any real property now
or previously owned or leased by the Company or any of its predecessors.
For the purpose of this Section 2.8 the following terms have the following
meanings:
"Environmental Laws" shall mean any federal, state or local laws,
ordinances, codes, regulations, rules, policies and orders that are intended to
assure the protection of the environment, or that classify, regulate, call for
the remediation of, require reporting with respect to, or list or define air,
water, groundwater, solid waste, hazardous, toxic, or radioactive substances,
materials, wastes, pollutants or contaminants, or which are intended to assure
the safety of employees, workers or other persons, including the public in each
case as in effect on the date hereof;
"Environmental Liabilities" shall mean all liabilities of the Company,
whether contingent or fixed, which (i) have arisen, or would reasonably be
likely to arise, under Environmental Laws and (ii) relate to actions occurring
or conditions existing on or prior to the date hereof or the Closing Date;
"Hazardous Substances" shall mean any toxic or hazardous substances,
material or waste or any pollutant or contaminant, or infectious or radioactive
substance or material, including without limitation, those substances, materials
and wastes defined in or regulated under any Environmental Laws; and
"Regulated Activity" shall mean any generation, treatment, storage,
recycling, transportation, disposal or release of any Hazardous Substances.
2.9 Licenses and Authorizations. The Company and each of its employees or
independent contractors is the holder of all valid licenses, approvals, orders,
consents, permits, registrations, qualifications and other rights and
authorizations required by law, ordinance, regulation or ruling of any
governmental regulatory authority necessary to operate its/his/her business. A
true, correct and complete list of such licenses, permits and other
authorizations (if any), is set forth on Schedule 2.9, true, complete and
correct copies of which have been provided to the Purchaser. No violation,
default, order or deficiency exists with respect to any of the items listed on
Schedule 2.9.
2.10 Proprietary Rights and Information.
(a) Set forth on Schedule 2.10 is a complete and accurate list and
summary description of the following: (i) all trademarks (registered and
unregistered), trade-names, service marks and other trade designations,
including common law rights, registrations and applications therefore, currently
owned in whole or part, or used by the Company, (ii) all patents and
applications therefore and inventions and discoveries that may be patentable
currently owned, in whole or in part, or used by the Company, (iii) all
licenses, royalties, and assignments thereof to which the Company is a party
(iv) all copyrights (for published and unpublished works) currently owned in
whole or part, or used by the Company and (v) other similar agreements relating
to the foregoing to which the Company is a party (including expiration date if
applicable) (collectively, the "Proprietary Rights").
(b) Set forth on Schedule 2.10 is a complete and accurate list and
summary description of all agreements relating to technology, trade secrets,
know-how or processes that the Company is licensed or authorized to use by
others (other than technology, know-how or processes that are generally
available) or which it licenses or authorizes others to use, true, correct and
complete copies of which have been provided to the Purchaser. Except as set
forth on Schedule 2.10, there are no outstanding and, to the Company's knowledge
or knowledge of any Executive Shareholder, any threatened disputes or
disagreements with respect to any such agreement.
(c) Except as set forth on Schedule 2.10 (i) the Company owns or has
the legal right to use the Proprietary Rights without conflicting with,
infringing or violating the rights of any other person; (ii) no consent of any
person will be required for the use thereof by the Purchaser upon consummation
of the transactions contemplated hereby and the Proprietary Rights are freely
transferable; (iii) to the knowledge of the Company or the Executive
Shareholder, no claim has been asserted by any person to the ownership of or for
infringement by the Company of any Proprietary Right of any other person and
neither the Company nor any Executive Shareholder is aware of any valid basis
for any such claim; (iv) to the knowledge of the Company or the Executive
Shareholder, no proceedings have been threatened which challenge the Proprietary
Rights of the Company; and (v) the Company has the right to use, free and clear
of any adverse claims or rights of others, all trade secrets, customer lists and
proprietary information required for the performance and marketing of its
business.
2.11 Agreements in Full Force and Effect. All contracts, agreements, plans,
leases, policies and licenses referred to, or required to be referred to, in the
Disclosure Schedules are valid and binding, and are in full force and effect and
are enforceable in accordance with their terms, except to the extent that the
validity or enforceability thereof may be limited by bankruptcy or other laws
affecting the enforcement of creditors' rights generally, or by general equity
principles, or by public policy. Except as set forth on Schedule 2.11, there is
no pending or, to the knowledge of the Company of any Executive Shareholder,
threatened bankruptcy, insolvency or similar proceeding with respect to any
other party to such agreements, and no event has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute a default thereunder by the Company or any other party thereto.
2.12 Financial Statements. Attached hereto as part of the Disclosure
Schedules are the Company's financial statements. The Company's financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied (except as may be indicated therein or in the
notes thereto), present fairly the financial position of Company as of the dates
indicated and present fairly the results of the Company's operations for the
period then ended, and are in accordance with the books and records of the
Company, which have been properly maintained and are complete and correct in all
material respects. The Company's financial statements present fairly the
financial position of the Company and its subsidiaries as at the dates thereof
and the results of its operations and changes in financial position for the
periods then ended other than as provided on Schedule 2.12.
2.13 Backlog. Set forth on Schedule 2.13 is the backlog of orders that the
Company is to ship or contract work to be performed as of the date hereof (the
"Backlog"). The Company either possesses sufficient inventory of parts,
materials and personnel to produce the same within their scheduled delivery
dates or such parts or materials have lead times such that the Company can
acquire such parts and materials in time to produce and ship or perform such
backlog in accordance with the scheduled performance dates.
2.14 Purchase for Investment. Each Shareholder acknowledges that such
Shareholder is acquiring the Purchaser Shares for such Shareholder's own account
and not with a view to, or present intention of, distribution thereof in
violation of the Securities Act of 1933, as amended (the "1933 Act") or any
state securities laws, and the Purchaser Shares will not be disposed of in
contravention of the 1933 Act or state securities laws.
2.15 Purchaser's Stock Not Registered. Each Shareholder acknowledges that
the Purchaser Shares being acquired hereunder have not been registered under the
1933 Act or any state securities laws and, therefore, cannot be sold, and must
be held indefinitely, unless subsequently registered under the 1933 Act and
state securities laws or unless an exemption from such registration is
available, including without limitation an exemption pursuant to Rule 144 under
the 1933 Act. Certificates for the Purchaser Shares shall bear the following
legends:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THE SHARES REPRESENTED
HEREBY CANNOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS AND WILL NOT BE TRANSFERRED OF RECORD EXCEPT IN
COMPLIANCE WITH SUCH ACT AND LAWS.
The Purchaser agrees that any shares issued to the Company's trade
creditors pursuant to Section 1(2) will be deemed to have piggyback registration
rights and will be included in the Purchaser's next registration statement if
one is filed within the next twelve months, subject to underwriter's approval.
2.16 Economic Risk. Each Shareholder acknowledges that such Shareholder's
investment in the Purchase Shares involves a high degree of risk and represents
that such Shareholder is able to bear the economic risk of such investment in
the Purchaser Shares for an indefinite period of time.
2.17 Access to Information. Each Shareholder acknowledge that such
Shareholder has made such investigations and inquiries as such Shareholder has
deemed necessary for the purpose of informing himself or itself about the
Purchaser and its business prior to entering into this Agreement.
2.18 No Undisclosed Liabilities. The Company does not have any liabilities
or obligations of any nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, except for liabilities or obligations
reflected or reserved against in the Company's current balance sheet.
III. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to the Company and the Shareholders to enter into this
Agreement and to sell the Shares, the Purchaser hereby represents and warrants
as follows:
3.1 Organization and Good Standing: Qualification. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware, with all requisite corporate power and authority to
own, operate and lease its assets and properties and to carry on its business as
currently conducted. The Purchaser is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except where such failure to be so qualified or in good
standing would not have a Material Adverse Effect on the Purchaser. Copies of
the Purchaser's Certificate of Incorporation and Bylaws, as amended or restated,
and copies of the Purchaser's corporate minutes regarding this Agreement and the
transactions contemplated hereby, all of which have been or will be made
available to the Company for review, are true, correct and complete as in effect
on the date of this Agreement and accurately reflect all material proceedings of
the stockholders and directors of the Purchaser (and all committees thereof)
regarding this Agreement and the transactions contemplated hereby.
3.2 Authorization and Validity. The Purchaser has all requisite corporate
power to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by the Purchaser of
this Agreement and the agreements provided for herein, and the consummation by
the Purchaser of the transactions contemplated hereby are within the Purchaser's
corporate powers and have been duly authorized by all necessary action on the
part of the Purchaser's Board of Directors.
IV. COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
4.1 Conduct of the Company. The Company and each Shareholder shall, in all
material respects, conduct the business of the Company in the ordinary and usual
course consistent with past practices and shall use reasonable efforts to; (i)
preserve intact its business and its relationships, including without limitation
referral sources, customers, suppliers, employees and others having business
relations with it; (ii) maintain and keep its properties and assets in good
repair and condition consistent with past practice as is material to the conduct
of the business of the Company; and (iii) continuously maintain insurance
coverage substantially equivalent to the insurance coverage in existence on the
date hereof.
In addition, without the written consent of the Purchaser, neither the
Company nor any Shareholder shall:
(a) amend its Articles of Incorporation or Bylaws, as amended or
restated, or other charter documents;
(b) issue, sell or authorize for issuance or sale, shares of any class
of the Company's securities (including, but not limited to, by way of stock
split, dividend, recapitalization or other reclassification) or any
subscriptions, options, warrants, rights or convertible securities, or enter
into any agreements or commitments of any character obligating the Company or
any Shareholder to issue or sell any such securities;
(c) redeem, purchase or otherwise acquire, directly or indirectly, any
shares of the Company's capital stock or any option, warrant or other right to
purchase or acquire any such shares;
(d) declare or pay any dividend or other distribution (whether in cash,
stock or other property) with respect to the Company's capital stock (except as
expressly contemplated herein);
(e) voluntarily sell, transfer, surrender, abandon or dispose of any of
its assets or property rights (tangible or intangible) other than in the
ordinary course of business consistent with past practices;
(f) grant or make any mortgage or pledge or subject the Company or any
of its properties or assets to any lien, charge or encumbrance of any kind,
except liens for taxes not currently due and except for liens which arise by
operation of law;
(g) voluntarily incur or assume any liability or indebtedness
(contingent or otherwise) with respect to the Company, except in the ordinary
course of business or which is reasonably necessary for the conduct of the
Company's business;
(h) make or commit to make any capital expenditures by the Company
which are not reasonably necessary for the conduct of the Company business;
(i) grant any increase in the compensation payable or to become payable
to directors, officers, consultants or employees of the Company other than merit
increases to employees of the Company who are not directors or officers of the
Company, except in the ordinary course of business and consistent with past
practices;
(j) change in any manner any accounting principles or methods of the
Company other than changes which are consistent with generally accepted
accounting principles;
(k) enter into any material commitment or transaction by or on behalf
of the Company other than in the ordinary course of business;
(l) take any action which could reasonably be expected to have a
Material Adverse Effect on the Company;
(m) apply any of the Company's assets to the direct or indirect
payment, discharge, satisfaction or reduction of any amount payable directly or
indirectly to or for the benefit of any affiliate of the Company, other than in
the ordinary course and consistent with past practices;
(n) take any action at the Board of Director or shareholder level to
(in any way) amend, revise or otherwise affect the prior corporate approval and
effectiveness of this Agreement, any of the agreement attached as exhibits
hereto or the transactions contemplated hereby, other than as required to
discharge its or their fiduciary duties; or
(o) agree, whether in writing or otherwise, to do any of the foregoing.
4.2 Title of Assets: Indebtedness. From and as of the date of this
Agreement, the Company shall (i) except for sales of assets held as inventory,
if any, in the ordinary course of business and except as otherwise specifically
described in the Disclosure Schedules to this Agreement, have good and valid
title to all of its assets free and clear o all encumbrances of any nature
whatsoever, except for current year ad valorem taxes and liens which arise by
operation of law, and (ii) have no direct or indirect indebtedness except for
indebtedness disclosed in the Company's financial statements, the Disclosure
Schedules or normal and recurring accrued obligations of the Company arising in
connection with its business operations in the ordinary course of business and
which arise from the purchase of merchandise, supplies, inventory and services
used in connection with the provision of services. Notwithstanding any other
provision in this Agreement to the contrary, from and as of the date of this
Agreement, the Company shall not incur any single expense or indebtedness in
excess of $25,000 without the prior written consent of the Purchaser, except for
expenses or indebtedness incurred in the ordinary course of business consistent
with historic practices of the Company.
4.3 Access. At all times prior to the Closing Date, the Purchaser's
employees, attorneys, accountants, agents and other authorized and designated
representatives will be allowed full access upon reasonable prior notice and
during regular business hours (and at such other times as the parties may
reasonably agree) to the properties, books and records of the Company,
including, without limitation, deeds, title documents, leases, customer lists,
insurance policies, minute books, share certificate books, share registers,
accounts, tax returns, financial statements and all other data that, in the
reasonable opinion of the Purchaser, are required for the Purchaser to make such
investigation as it may desire of the properties and business of the Company.
The Purchaser shall also be allowed full access upon reasonable prior notice and
during regular business hours (and at such other times as the parties may
reasonably agree) to consult with the officers, employees (after announcement by
the Company of this Agreement to its employees), accountants, counsel and agents
of the Company in connection with such investigation of the properties and
business of the Company. No investigation by the Purchaser shall diminish or
otherwise affect any of the representations, warranties, covenants or agreements
of the Company or any Shareholder under this Agreement. Any access or
investigation referred to in this Section 4.3 shall be conducted in such a
manner as to minimize the disruption to the Company's ongoing business
operations.
4.4 Compliance with Obligations. Prior to the Closing Date, the Company
shall comply in all material respects with (i) all applicable federal, state,
local and foreign laws, rules and regulations; (ii) all material agreements and
obligations, including without limitation, its Articles of Incorporation, Bylaws
or other charter documents, as amended or restated, by which it or its
properties or its assets (real, personal or mixed, tangible or intangible) may
be bound; and (iii) all decrees, orders, writs, injunctions and judgments
applicable to the Company, and its respective properties or assets.
4.5 Notice of Certain Events. The Company and any Shareholder shall
promptly notify the Purchaser of:
(a) any notice or other communication from any person or entity
alleging that the consent of such person or entity is or may be required in
connection with the transactions contemplated by this Agreement;
(b) any employment of any new non-hourly employee by the Company who is
expected to receive any annualized compensation in 2001 of $50,000 or more:
(c) any termination of employment by, or threat to terminate employment
received from, any salaried or non-hourly employee of the Company;
(d) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement;
(e) any actions, suits, claims, investigations or proceedings commenced
or threatened against, relating to or involving or otherwise affecting the
Company which, if pending on the date of this Agreement, would have been
required to have been disclosed to the Purchaser hereunder or which relate to
the consummation of the transaction contemplated by this Agreement;
(f) any material adverse change in the operation of the Company's
business; and
(g) any notice or other communication indicating a material
deterioration in any material relationship of the Company, including without
limitation any relationship with any customer, supplier or key employee of the
Company.
4.6 Obligations of Company and Shareholders. The Company and each
Shareholder will take all action reasonably necessary to cause the Company and
each Shareholder to perform their obligations under this Agreement and all
related agreements and to consummate the transactions contemplated hereby on the
terms and conditions set forth in this Agreement and such agreements.
4.7 Funding of Accrued Employee Benefits. The Company hereby covenants and
agrees that it will take whatever steps are necessary to pay for or fund
completely any accrued benefits, where applicable, or vested accrued benefits
for which the Company or any entity might have any liability whatsoever arising
from any tax-qualified plan as required under applicable law. The Company
acknowledges that the purpose and intent of this covenant is to assure that the
Purchaser shall have no liability whatsoever at any time after the Closing Date
with respect to any such tax-qualified plan, unless such plan is merged with a
plan sponsored by the Purchaser.
4.8 Accounting and Tax Matters. The Company will not change in any material
respect the accounting methods or practices followed by the Company (including
any material change in any assumption underlying, or any method of calculating,
any bad debt, contingency or other reserve), except as may be required by
generally accepted accounting principles. The Company will not make any material
tax election except in the ordinary course of business consistent with past
practice, change any material tax election already made, adopt any tax
accounting method exception the ordinary course of business consistent with past
practice, change any tax accounting method, enter into any closing agreement,
settle any tax claim or assessment or consent to any tax claim or assessment or
any waiver of the statute of limitations for any such claim or assessment. The
Company will duly, accurately and timely (without regard to any extensions of
time) file all returns, information statements and other documents relating to
taxes of the Company required to be filed by it, and pay all taxes required to
be paid by it, on or before the Closing Date.
V. COVENANTS OF PURCHASER
The Purchaser agrees that between the date hereof and the Closing:
5.1 Consummation of Agreement. The Purchaser will take all action
reasonably necessary to perform its obligations under this Agreement and all
related agreements and to consummate the transactions contemplated hereby on the
terms and conditions set forth in this Agreement and such agreements.
5.2 Access. The Purchaser shall, at reasonable times during normal business
hours and on reasonable notice, permit the Company, the authorized
representatives of the Company and each Shareholder reasonably access to, and
make available for inspection, all of the assets and business of the Purchaser,
and permit the Company, its authorized representatives and each Shareholder to
inspect and, make copies of all documents, records and information with respect
to the affairs of the Purchaser as the Company, its representatives or any
Shareholder may reasonably request, all for the sole purpose of permitting the
Company or such Shareholder to become familiar with the business and assets and
liabilities of the Purchaser. No investigation by the Company or any Shareholder
shall diminish or otherwise affect any of the representations, warranties,
covenants or agreements of the Purchaser under this Agreement.
5.3 Notice of Certain Events. The Purchaser will promptly inform the
Company and each Shareholder in writing of (i) any notice of, or other
communication relating to, a default or event that, with notice or lapse of time
or both, would become a default, received by the Purchaser subsequent to the
date of this Agreement and on or prior to the Closing Date under any contract,
agreement or investment material to the Purchaser's condition (financial or
otherwise), operations, assets, liabilities or business and to which it is
subject; or (iii) any material adverse change in the Purchaser's condition
(financial or otherwise), operations, assets, liabilities or business.
VI. CONDITIONS TO OBLIGATIONS OF THE COMPANY
AND THE SHAREHOLDERS
The Obligations of Shareholders to sell the Shares and of the Company to
transfer the Shares on its books and records pursuant to this Agreement are
subject to the satisfaction, at or prior to Closing, of each of the following
conditions, any one or more of which may be waived at the sole option of any
Shareholder or the Company with regard to their respective obligations to close
pursuant to this Agreement:
6.1 Representations and Warranties. The representations and warranties of
the Purchaser contained in this Agreement shall be true and correct in all
material respects when initially made and as of the Closing Date.
6.2 Covenants. The Purchaser shall have performed and complied in all
material respects with all covenants required by this Agreement to be performed
and complied with by the Purchaser prior to the Closing Date.
6.3 Proceedings. No action, proceeding or order by any court or other
governmental agency or body shall have been instituted, threatened whether
orally or in writing, or entered concerning the Purchaser or its business or
restraining any of the transactions contemplated by this agreement.
6.4 Government Approvals and Required Consents. All necessary consents of
and filings with any governmental authority or agency or other person required
to be made or obtained by the Purchaser relating to the consummation of the
transactions contemplated in this Agreement shall have been obtained or made and
no action or proceeding shall have been instituted or threatened which could
materially affect, restrain or prohibit any of the transactions contemplated by
this Agreement.
6.5 Closing Deliveries. Shareholders and the Company shall have received
all schedules, documents, certificates, instruments, assignments and agreements
referred to in Section 8.2 hereof, duly executed and delivered in form
reasonably satisfactory to Shareholders and the Company.
6.6 Other Documents. Shareholders and the Company shall have received all
such other certificates, instruments or documents that are reasonably requested
by the Shareholders, the Company or their counsel in order to consummate the
transactions contemplated herein.
VII. CONDITIONS TO OBLIGATIONS OF THE PURCHASER
The obligation of the Purchaser to acquire the Shares pursuant to this
Agreement is subject to the satisfaction, at or prior to Closing, of each of the
following conditions, any one or more of which may be waived at the sole options
of the Purchaser:
7.1 Representations and Warranties. The representations and warranties of
the Company and the Shareholders contained in this Agreement shall be true and
correct in all material respects when initially made and as of the Closing Date.
7.2 Covenants. The Company and Shareholders shall have performed and
complied in all material respects with all covenants required by this Agreement
to be performed and complied with by the Company or the Shareholders,
respectively, prior to the Closing date.
7.3 Proceedings. No action, proceeding or order by any court or other
governmental agency or body shall have been instituted, threatened whether
orally or in writing, or entered concerning the Company or its business or
restraining any of the transactions contemplated in this Agreement.
7.4 No Material Adverse Effect. Subject to the provisions of Section 1(2)
no material adverse change in the results of operations, assets, properties,
financial condition, business or prospects of the Company shall have occurred,
and the Company shall not have suffered any material loss or damages to any of
its properties or assets, whether or not covered by insurance and whether or not
such change shall have been caused by the deliberate act or omission of the
Company or any Shareholder, since September 30, 2001, which change, loss or
damage materially affects or impairs the ability of the company to conduct its
business.
7.5 Government Approvals and Required Consents. All necessary consents of
any filings with any governmental authority or agency or other person required
to be made or obtained by the Company or any Shareholder relating to the
consummation of the transactions contemplated in this Agreement shall have been
obtained and made and no action or proceeding shall have been instituted or
threatened which could materially affect, restrain or prohibit any of the
transactions contemplated in this Agreement.
7.6 Closing Deliveries. The Purchaser shall have received all schedules,
documents, certificates, instruments, assignments and agreements referred to in
Section 8.1 hereof, duly executed and delivered in form reasonably satisfactory
to the Purchaser.
7.7 Other Documents. The Purchaser shall have received all such other
certificates, instruments or documents that are reasonably required by the
Purchaser or its counsel in order to consummate the transactions contemplated in
this Agreement.
7.8 Acknowledgment of Creditors. Subject to the provisions of Section 1(2)
the Company shall have received written acknowledgments executed by each and
every creditor of the Company that such creditor has agreed to accept as payment
in full of said debt that number of shares of AquaCell common stock as
calculated pursuant to paragraph 1.2(a) with the specific understanding that the
aforesaid shares are unregistered shares, bearing an appropriate restrictive
legend and may not be sold in the absence of a registration statement or opinion
of counsel as to their saleability except as those shares may be registered as
set forth in Section 2.15.
VIII. CLOSING DELIVERIES BY THE PARTIES
8.1 Shareholder and Company Deliveries. At or prior to the Closing Date,
the Shareholders and the Company shall deliver to the Purchaser the following,
all of which shall be in a form reasonably satisfactory to the Purchaser:
(a) a copy of resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement and the
transactions contemplated in this Agreement to which the Company is a party, and
all related documents and agreements, each certified by the Secretary of the
Company as being true and correct copies of the originals thereof subject to no
modifications or amendments;
(b) Articles of Incorporation of the Company certified by the Secretary
of State of Arizona;
(c) Bylaws of the Company certified by the Secretary of the Company;
(d) stock certificates representing the Shares, together with
accompanying signed stock powers or instruments of assignment, duly endorsed in
blank for the transfer of the Shares to the Purchaser with all necessary
transfer taxes paid or other revenue stamps affixed thereto, which certificates
shall then be canceled and a new stock certificate for the total number of the
Shares shall be issued in the name of the Purchaser.
(e) a certificate of the President of the Company dated the Closing
Date, certifying that the representations and warranties of the Company
contained in this Agreement are true and correct on and as of the Closing Date;
(f) a certificate of the Shareholders dated the Closing Date,
certifying that the representations and warranties of the Shareholders contained
in this Agreement are true and correct on and as of the Closing Date;
(g) a certificate of the President of the Company dated the Closing
Date, (i) as to the performance of and compliance in all material respects by
the Company with all covenants contained in this Agreement on and as of the
Closing Date and (ii) certifying that all conditions precedent required to be
satisfied by the Company have been satisfied;
(h) a certificate of the Shareholders dated the Closing Date, (i) as to
the performance of and compliance in all material aspects by the Shareholders
with all covenants contained in this Agreement on and as of the Closing Date and
(ii) certifying that all conditions precedent required by the Shareholders to be
satisfied shall have been satisfied;
(i) a certificate of the Secretary of the Company certifying the
incumbency of the directors and officers of the Company and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of the Company;
(j) a certificate, dated within ten days prior to the Closing Date, of
the Arizona Secretary of State establishing that the Company is in existence,
has paid all franchise or similar taxes, if any, and is in good standing to
transact business in the State of Arizona;
(k) certificates, dated within ten days prior to the Closing Date, of
the Secretaries of States in which the Company is qualified to do business, to
the effect that the Company is qualified to do business and is in good standing
as a foreign corporation in each of such states;
(l) all authorizations, consent, approvals, permits and licenses
referenced in Section 7.5 of this Agreement;
(m) executed Employment Agreements between the Company, and Douglas M.
Craver and between the Company and Lynda Craver in substantially the form
attached hereto as Exhibit "A" (the "Craver Employment Agreements").
(n) such other instruments as shall be necessary or appropriate, as the
Purchaser or its counsel shall reasonably request, to carry out and effect the
purpose and intent of this Agreement and the transactions contemplated by this
Agreement.
8.2 Purchaser Deliveries. At or prior to the Closing Date, the Purchaser
shall deliver to the Shareholders and the Company the following, all of which
shall be in a form reasonably satisfactory to the Shareholders and creditors and
the Company:
(a) a copy of resolutions of the Board of Directors of the Purchaser
authorizing the execution, delivery and performance of this Agreement and the
transactions contemplated by this Agreement to which the Purchaser is a party,
and all related documents and agreements, each certified by the Secretary of the
Purchaser as being true and correct copies of the originals thereof subject to
no modifications or amendments;
(b) Certificate of Incorporation of the Purchaser, certified by the
Delaware Secretary;
(c) Bylaws of the Purchaser certified by the Secretary of the
Purchaser;
(d) a certificate of the Chief Executive Officer of the Purchaser dated
the Closing Date, certifying that the representations and warranties of the
Purchaser contained in this Agreement are true and correct on and as of the
Closing Date;
(e) a certificate of the Chief Executive Officer of the Purchaser dated
the Closing Date, (i) as to the performance of and compliance in all material
respects by the Purchaser with all covenants contained in this Agreement on and
as of the Closing Date and (ii) certifying that all conditions precedent
required to be satisfied by the Purchaser shall have been satisfied;
(f) a certificate of the Secretary of the Purchaser certifying the
incumbency of the directors and officers of the Purchaser and as to the
signature of such directors and officers who have executed documents delivered
at the Closing on behalf of the Purchaser;
(g) a certificate, dated within ten days prior to the Closing Date, of
the Delaware Secretary of State establishing that the Purchaser is in existence,
has paid all franchise or similar taxes, if any, and is in good standing to
transact business in the State of Delaware;
(h) the Purchaser Shares duly authorized and issued in the amounts to
the respective Shareholders as set forth in Schedule 1.1; and
(i) such other instruments as shall be necessary or appropriate, as the
Shareholders, the Company or their counsel shall reasonably request, to carry
out and effect the purpose and intent of this Agreement and the transactions
contemplated in this Agreement.
IX. POST-CLOSING AND CERTAIN OTHER MATTERS
9.1 Further Instruments of Transfer. Following the Closing, at the request
of the Purchaser, each Shareholder and the Company shall deliver any further
instruments of transfer and take all reasonable action as may be necessary or
appropriate to carry out the purpose and intent of this Agreement. Following the
closing, at the request of the Shareholders, the Purchaser shall deliver any
further instruments of transfer and take all reasonable action as may be
necessary or appropriate to carry out the purpose and intent of this Agreement.
X. INDEMNIFICATION
10.1 Indemnification by the Company. Subject to the terms and conditions of
this Article X, the Company agrees to indemnify, defend and hold harmless the
Purchaser and its directors, officers, shareholders, employees, agents,
attorneys, consultants and affiliates from and against all losses, claims,
obligations, demands, assessments, penalties, liabilities, costs, damages,
reasonable attorneys' fees and expenses (including without limitation, all costs
of experts and all costs incidental to or in connection with any appellate
process) (collectively, "Damages") asserted against or incurred by such
individuals or entities arising out of, in connection with or resulting from a
breach by the Company or any Shareholder of any representation, warranty or
covenant of the Company or any Shareholder contained in this Agreement or in any
schedule, exhibit, certificate or other instrument delivered pursuant to or as a
part of this Agreement.
10.2 Indemnification by the Shareholders. Subject to the terms and
conditions of this Article X, each Shareholder agrees to indemnify, defend and
hold harmless the Purchaser and its directors, officers, shareholders,
employees, agents, attorneys, consultants and affiliates from and against any
Damages exceeding in the aggregate $10,000 asserted or incurred by such
individuals or entities rising out of, in connection with or resulting from one
or more breach or breaches by any such Shareholder of any representation,
warranty or covenant of such Shareholder contained in this Agreement or in any
schedule, exhibit, certificate or other instrument delivered pursuant to or as a
party of this Agreement.
10.3 Indemnification by the Purchaser. Subject to the terms and conditions
of this Article X, the Purchaser agrees to indemnify, defend and hold harmless
the Company and each Shareholder and, as applicable, their respective directors,
officers, shareholders, employees, agents, attorneys, consultants and affiliates
from and against all Damages asserted against or incurred by such individuals
and/or entities arising out of, in connection with or resulting from a breach by
the Purchaser of any representation or warranty or covenant of the Purchaser
contained in this Agreement or in any schedule, exhibit, certificate or other
instrument delivered pursuant to or as a part of this Agreement.
10.4 Indemnification Procedures. All claims for indemnification pursuant to
this Article X shall be asserted and resolved as follows:
(a) any party claiming indemnification pursuant to this Article X (an
"Indemnified Party") shall promptly (and, in any event at least ten days prior
to the due date for any responsive pleadings, filings or other documents) (i)
notify the party from whom indemnification is sought (the "Indemnifying Party")
of any third-party claim or claims asserted against the Indemnified Party (a
"Third Party Claim") that could give rise to a right of indemnification pursuant
to this Article X and (ii) transmit to the Indemnifying Party a written notice
("Claim Notice") describing in reasonable detail the nature of the Third Party
Claim, a copy of all papers served with respect to such claim (if any), an
estimate of the amount of Damages attributable to the Third Party Claim and the
basis of the Indemnified Party's request for indemnification under this
Agreement. The failure to promptly deliver a Claim Notice shall not relieve any
Indemnifying Party of its obligations to any Indemnified Party with respect to
the related Third Party Claim except to the extent that the resulting delay is
materially prejudicial to the defense of such claim. Within 30 days after
receipt of any Claim Notice the "Election Period"), the Indemnifying Party shall
notify the Indemnified Party (x) whether the Indemnifying party disputes its
potential liability to the Indemnified Party under this Article X with respect
to such Third Party Claim and (y) whether the Indemnifying Party desires, at the
sole cost and expense of such Indemnifying Party to defend the Indemnifying
Party against such Third Party Claim.
(b) If the Indemnifying Party notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party, subject to the obligation to
cooperate with other Indemnifying Parties hereunder as is in the best interest
of the Indemnified Party, shall have the right to co-defend along with any other
Indemnifying Parties which may similarly elect to defend, at its sole cost and
expense, with counsel reasonably acceptable to such Indemnified Party. In the
event of any such election, all proceedings shall be prosecuted diligently by
the Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 10.4(b). Except as set forth
in Section 10.4(f) hereof and subject to the requirement to cooperate with other
Indemnifying Parties, the Indemnifying Party shall have control of such defense
and proceedings over the control of the Indemnified Party, including any
compromise or settlement thereof. The Indemnified Party is hereby authorized, at
the sole cost and expense of the Indemnifying Party (but only if the Indemnified
Party is entitled to indemnification hereunder), to file, during the Election
Period, any motion, answer or other pleadings that the Indemnified Party shall
deem necessary or appropriate to protect its interests or those of the
Indemnifying Party and not prejudicial to the Indemnifying Party. If requested
by the Indemnifying Party, the Indemnified Party agrees, at the sole cost and
expense of the Indemnifying Party, to reasonably cooperate with the Indemnifying
Party and their counsel in contesting any third Party Claim that the
Indemnifying Party elects to contest, including, without limitation, the making
of any related counterclaim against the person asserting the Third Party Claim
or any cross-complaint against any person. The Indemnified Party may participate
in, but not control, any defense or settlement of any Third Party Claim
controlled by the Indemnifying Party pursuant to this Section 10.4(b) and shall
bear its own costs and expenses with respect to such participation; provided,
however, that if the named parties to any such action (including any impleaded
parties) include both the Indemnifying party and the Indemnified Party, and the
Indemnified Party has been advised by counsel that there may be one or more
legal defenses available to it that are different from or additional to those
available to the Indemnifying Party, then the Indemnified Party may employ
separate counsel at the expense of the Indemnifying Party, and upon written
notification thereof, the Indemnifying Party shall not have the right to assume
the defense of such action on behalf of the Indemnified Party, provided further
that the Indemnifying Party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for the Indemnified Party, which firm shall be designated in writing by the
Indemnified Party. Notwithstanding the foregoing, the Indemnifying Party shall
be prohibited from confessing or settling any criminal allegations brought
against the Indemnified Party without the express written consent of the
Indemnified Party.
(c) If the Indemnifying Party fails to notify the Indemnified Party
within the Election Period that the Indemnifying Party elects to defend the
Indemnified Party pursuant to Section 10.4(b), or if the Indemnifying Party
elects to defend the Indemnified Party pursuant to Section 10.4(b) but fails
diligently and promptly to prosecute or settle the Third Party Claim, then the
Indemnified Party shall have the right to defend, at the sole cost and expense
of the Indemnifying Party (if the Indemnified Party is entitled to
indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or settled. The Indemnified Party
shall have full control of such defense and proceedings, provided, however, that
the Indemnified Party may not enter into, without the Indemnifying Party's
consent, which shall not be unreasonably withheld, any compromise or settlement
of such Third Party Claim. Notwithstanding the foregoing, if the Indemnifying
Party has delivered a written notice to the Indemnified Party to the effect that
the Indemnifying Party has delivered a written notice to the Indemnified Party
to the effect that the Indemnifying Party disputes their potential liability to
the Indemnified Party under this Article X and if such dispute is resolved in
favor of the Indemnifying Party, the Indemnifying Party shall not be required to
bear the costs and expenses of the Indemnified Party's defense pursuant to this
Section or of the Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the Indemnifying
Party in full for all costs and expenses of such litigation. The Indemnifying
Party may participate in, but not control, any defense or settlement controlled
by the Indemnified Party pursuant to this Section 10.4(c), and the Indemnifying
Party shall bear its own costs and expenses with respect to such participation;
provided, however, that if the named parties to any such action (including any
impleaded parties) include both the Indemnifying Party and the Indemnified
Party, and the Indemnifying Party has been advised by counsel that there may be
one or more legal defenses available to it that are different from or additional
to those available to the Indemnified Part, then the Indemnifying Party may
employ separate counsel and upon written notification hereof, the Indemnified
Party shall not have the right to assume the defense of such action on behalf of
the Indemnifying Party.
(d) In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder that does not involve a Third Party Claim, the
Indemnified Party shall transmit to the Indemnifying Party a written notice (the
"Indemnity Notice") describing in reasonable detail the nature of the claim, an
estimate of the amount of damages attributable to such claim and the basis of
the Indemnified Party's request for indemnification under this Agreement. If the
Indemnifying Party does not notify the Indemnified Party within sixty (60) days
from its receipt of the Indemnity Notice that the Indemnifying Party admits and
agrees to pay such claim, the claim specified by the Indemnified Party in the
Indemnity Notice shall be deemed disputed. Any such disputed claim shall be
resolved by litigation in an appropriate court of competent jurisdiction if the
parties do not reach a settlement of such dispute within ninety (90) days after
receipt of the Indemnity Notice.
(e) Payments of all amounts owed by any Indemnifying Party pursuant to
this Article X relating to a Third Party Claim shall be made within thirty (30)
days after the latest of (i) the settlement of such Third Party Claim, (ii) the
expiration of the period for appeal of a final adjudication of such Third Party
Claim, or (iii) the expiration of the period for appeal of a final adjudication
of the Indemnifying Party's liability to the Indemnified Party under this
Agreement. Payments of all amounts owning by the Indemnifying Party pursuant to
Section 10.4(d) shall be made within thirty (30) days after the later of (i)
acceptance of the claim if the claim is accepted or (ii) the expiration of the
period for appeal of a final adjudication of the Indemnifying Party's liability
to the Indemnified Party under this Agreement.
(f) The Indemnifying Party shall provide the Indemnified Party with
written notice of any firm offer that is made to settle or compromise a Third
Party Claim against an Indemnified Party. If a firm offer is made to settle such
a claim solely by the payment of money damages and the Indemnifying Party
notifies the Indemnified Party in writing that the Indemnifying Party agrees to
such settlement, but the Indemnified Party elects not to accept and agree to it,
the Indemnified Party may continue to contest or defend such Third Party Claim
and, in such event, the total maximum liability of the Indemnifying party to
indemnify or otherwise reimburse the Indemnified Party hereunder with respect to
such a claim shall be limited to and shall not exceed the amount of such
settlement offer, plus reasonable out-of-pocket costs and reasonable expenses
(including reasonable attorneys' fees and disbursements) to the date of notice
that the Indemnifying Party desired to accept such settlement.
(g) Notwithstanding any provision herein to the contrary, the Purchaser
shall have the right to offset against a Shareholder or the Company amounts due
and payable by the Purchaser to such person or entity as payment for any
indemnification obligation of the Shareholder or the Company respectively,
pursuant to this Article X.
10.5 Costs, Expenses and Legal Fees. Each party hereto shall bear its own
costs and expenses (including attorneys' fees) in connection with the
transactions contemplated in this Agreement, except that each party hereto
agrees to pay the costs and expenses (including reasonable attorneys' fees and
expenses) incurred by the other parties in successfully (i) enforcing any of the
terms of this Agreement or (ii) proving that another party breached any of the
terms of this Agreement.
10.6 Tax Benefits: Insurance Proceeds. The total amount of any indemnity
payments owed by one party to another party to this Agreement shall be reduced
by any correlative tax benefits received by the party to be indemnified or the
net proceeds received by the party to be indemnified with respect to recovery
from third parties or insurance proceeds, and such correlative insurance benefit
shall be net of the insurance premium, if any, that becomes due as a result of
such claim.
XI. NON-COMPETE, NON-SOLICITATION AND NON-DISCLOSURE
11.1 Non-Competition Covenant. Each Executive Shareholder covenants and
agrees that during the term of his employment under the respective Craver
Employment Agreements and for a period ending two (2) years following the date
of his termination of employment thereunder, he will not without the prior
written consent of the Purchaser and the Company (i) directly or indirectly
engage in, (ii) assist or have an active interest in (whether as proprietor,
partner, investor, stockholder, officer, director or any type of principal
whatsoever, provided that ownership of not more than one percent (1%) of the
outstanding stock of a corporation traded on a national securities exchange or
on the Nasdaq Stock Market shall not of itself be viewed as assisting or having
an active interest in the below described business), or (iii) enter the
employment of or act as an agent for or advisor or consultant to any person,
firm, partnership, association, corporation or business organization, entity or
enterprise that is, or is about to become, directly or indirectly engaged in,
any business that competes with or is substantially similar to the business of
the Company or the Purchaser as conducted on the Closing Date.
11.2 Non-Solicitation Covenant. Each Shareholder covenants and agrees that
for a period of five (5) years commencing on the closing Date, such Shareholder
will not, (i) directly or indirectly, induce or attempt to induce any employee
of the Company or the Purchaser to discontinue employment with the Company or
the Purchaser and will not, (ii) directly or indirectly, solicit or entice any
of the Company's or the Purchaser's customers or suppliers to do business with
any person or business entity in competition with the Company or the Purchaser.
11.3 Non-Disclosure Covenant. The Company and each Shareholder recognize
and acknowledge that each has in the past, currently has, and in the future may
possibly have, access to certain Confidential Information of the Purchaser that
is valuable, special and a unique asset of such entity's business. The Purchaser
acknowledges that it has in the past, currently has, and in the future may
possibly have, access to certain Confidential Information of the Company and
each Shareholder that is valuable, special and a unique asset of each such
business. The Company, each Shareholder, and the Purchaser severally agree that
they will not disclose such Confidential Information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of the Purchaser, each Shareholder and
the Company; and (b) to counsel and other advisers to the Purchaser, each
Shareholder and the Company provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 11.3, unless (i) such
information becomes available to or known by the public generally through no
fault of the Company, any Shareholder or the Purchaser, as the case may be, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, that prior to disclosing any information pursuant to
this clause (ii) the Company, any Shareholder or the Purchaser, as the case may
be, shall, if possible, give prior written notice thereof to the Company, the
Shareholder or the Purchaser, as the case may be, and provide such party with
the opportunity to contest such disclosure, (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, or (iv) the disclosing party
is the sole and exclusive owner of such Confidential Information as a result of
the purchase and sale of the Shares or otherwise.
11.4 Injunctive Relief. In the event of a breach or threatened breach by
any party to this Agreement of the provisions o this Article XI, each party to
this Agreement hereby agrees any such breach or threatened breach will result in
irreparable harm to the non-breaching parties and that each non-breaching party
to this Agreement shall be entitled, without posting of a bond, to an injunction
restraining the party or parties involved in the breach or threatened breach
from any such conduct. Nothing herein shall be construed as prohibiting the
exercise of any other available remedy for such breach or threatened breach,
including the recovery of damages.
11.5 Survival. The obligations of the parties under Section 11.3 shall
survive the termination of this Agreement.
XII. MISCELLANEOUS
12.1 Amendment; Waivers. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of any terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
12.2 Termination Prior to Closing. This Agreement and the transactions
contemplated hereby may be terminated (i) at any time prior to the Closing by
mutual agreement of all parties; (ii) by any party hereto if the Closing of this
Agreement shall not have occurred on or before the Closing Date, unless such
date is mutually extended by the written Agreement of all parties; (iii) by the
Purchaser in the event of any material breach of the representations, warranties
or covenants of the Company or any shareholder; (iv) by the Company or any
Shareholder in the event of any breach of the representations, warranties or
covenants of the Purchaser; or (v) by the Purchaser or the Company or any
Shareholder in the event of the other party's failure to provide the deliveries
set forth in Article VIII.
12.3 Assignment. Neither this Agreement nor any right created hereby or in
any agreement entered into in connection with the transactions contemplated
hereby shall be assignable by any party hereto, except an assignment by the
Purchaser to a wholly owned subsidiary of the Purchaser; provided that any such
assignment shall not relieve the Purchaser of its obligations hereunder.
Notwithstanding the foregoing provision or any other provision in this
Agreement, the Purchaser's right to assign, transfer, convey, hypothecate or
otherwise dispose of the Shares immediately after the closing and at any time
thereafter shall be unrestricted other than as required by federal and state
securities laws for compliance therewith.
12.4 Parties in Interest; No Third Party Beneficiaries. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of any be binding upon the respective heirs, legal representatives,
successors and assigns of the parties hereto. Except as otherwise expressly
provided herein, neither this Agreement nor the transactions contemplated hereby
shall be deemed to confer upon any person not a party hereto any rights or
remedies hereunder.
12.5 Entire Agreement. This Agreement and transactions contemplated hereby
constitute the entire agreement of the parties regarding the subject matter
hereof, and supersede all prior agreements and understandings, both written and
oral, among the parties, or any of them with respect tot the subject matter
hereof including, without limitation, the Original Agreement.
12.6 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance therefrom. Furthermore,
in lieu of such illegal, invalid or unenforceable provision, there shall be
added automatically as part of this Agreement a provision as similar in its
terms to such illegal, invalid or unenforceable provision as may be possible and
be legal, valid and enforceable.
12.7 Survival of Representations. Warranties and Covenants. The
representations, warranties and covenants contained herein shall survive the
Closing and all statements contained in any certificate, exhibit or other
instrument delivered by or on behalf of the Company, each Shareholder or the
Purchaser pursuant to this Agreement shall be deemed to have been
representations and warranties by the Company, each Shareholder or the
Purchaser, respectively. Notwithstanding any provision in this Agreement to the
contrary, the representations and warranties contained herein shall survive the
Closing until the fifth (5th) anniversary of the Closing Date except that the
representations and warranties with respect to tax matters shall survive until
such time as the limitations period has run for all tax periods ended prior to
the Closing Date.
12.8 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS (BUT NOT THE RULES GOVERNING CONFLICTS OF LAWS) OF THE STATE OF
DELAWARE.
12.9 Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
12.10 Gender and Number. When the context requires, the gender of all words
used herein shall include the masculine, feminine and neuter and the number of
all words shall include singular and plural.
12.11 Confidentiality; Publicity and Disclosures. Each party shall keep
this Agreement and its terms confidential, and shall make no press release or
public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
other parties hereto; provided that the foregoing shall not prohibit any
disclosure (a) by press release, filing or otherwise that the Purchaser has
determined in its good faith judgment and after advice of legal counsel to be
required by federal securities laws, (b) to attorneys, accountants, investment
bankers or other agents of the parties assisting the parties in connection with
the transactions contemplated by this Agreement and (c) by the Purchaser in
connection with the conduct of any public offering of its securities or an
examination of the operations and assets of the Company in connection with some
or with future acquisitions by the Company; provided that the Purchaser shall
reasonably promptly provide notice of any release. In the event that the
transactions contemplated hereby are not consummated for any reason whatsoever,
the parties hereto agree not to disclose or use any Confidential Information
they may have concerning the affairs of the other parties, except for
information that is required by law to be disclosed; provided that should the
transactions contemplated hereby not be consummated, nothing contained in this
Section 12.11 shall be construed to prohibit the parties hereto from operating
business in competition with each other.
12.12 Notice. Whenever this Agreement requires or permits any notice,
request, or demand from one party to another, the notice, request or demand must
be in writing to be effective and shall be deemed to be delivered and received
(i) if personally delivered or if delivered by telex, telegram or courier
service, when delivered to the party to whom notice is sent, (ii) if delivered
by facsimile transmission, when so sent and receipt acknowledged by receipt or
(iii) if delivered by mail (whether actually received or not), at the close of
business on the third business day next following the day when placed in the
mail, postage prepaid, certified or registered, addressed to the appropriate
party or parties, at the address of such party set forth below (or at such other
address as such party may designate by written notice to all other parties in
accordance herewith):
If to the Purchaser: AquaCell Technologies, Inc.
10410 Trademark Street
Rancho Cucamonga, CA 91730
Fax No. (909) 987-6846
Attn: James C. Witham
with a copy to: Paul & Rosen, LLP
420 Lexington Avenue, Suite 2400
New York, NY 10170
Fax No. (212) 661-2727
Attn: Harold W. Paul, Esq.
If to the Company
or any Shareholder: Water Science Technologies, Inc.
2317 West Huntington Drive
Tempe, Arizona 85282
Fax No. (602) 431-0177
Attn: Douglas M. Craver
with a copy to:
12.13 No Waiver. No party hereto shall by any act (except by written
instrument pursuant to Section 12.1 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesce in any default in or breach of any of the terms and conditions hereof.
No failure to exercise, nor any delay in exercising, on the part of any party
hereto, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. No remedy set forth in this Agreement or
otherwise conferred upon or reserved to any party shall be considered exclusive
of any other remedy available to any arty, but the same shall be distinct,
separate and cumulative and may be exercised from time to time as often as
occasion may arise or as may be deemed expedient.
This Agreement and the Transactions may be terminated (a) at any time prior to
the Closing Date by mutual agreement of all parties, or (b) if the Closing of
this Agreement and the consummation of the transactions shall not have occurred
on or before the Closing Date unless such date is mutually extended by all
parties.
12.14 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
WITNESS WHEREOF, the parties hereto have duly executed this Stock Purchase
Agreement as of the date first written above.
Purchaser: AquaCell Technologies, Inc.
----------------------------
By: James C. Witham
Its: Chief Executive Officer
The Company: Water Science Technologies, Inc.
----------------------------
By: Douglas M. Craver
Its: President
Shareholders:
----------------------------
Douglas M.Craver
----------------------------
Maple Resources
By: Jack W. Hanks
----------------------------
James Wing
----------------------------
The Estate of Richard Ott
ADDENDUM TO STOCK PURCHASE AGREEMENT
This addendum ("Addendum") is entered into as of this 19th day of March,
2002 among AquaCell Technologies, Inc. a Delaware Corporation ("AquaCell" or
"Purchaser"), Water Science Technologies, Inc. an Arizona corporation, (the
"Company"), and Douglas M. Craver, the Estate of Richard L. Ott, Jim Wing and
Maple Resources Corporation (each a "Shareholder" and collectively the
"Shareholders").
RECITALS
WHEREAS, the above named parties entered into a certain Stock Purchase
Agreement (the "Agreement") dated October 23, 2001; and
WHEREAS, the parties desire to make certain modifications to said Agreement
in accordance with Section 12.1;
Now, THEREFORE, in consideration of the preceding recitals and in
consideration of the mutual agreements set forth herein, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
I. AMENDMENTS TO SALE AND PURCHASE OF STOCK (Section I)
1.1 In relation to Section 1.2 (a) (1) and 1.2 (a) (2) of the Agreement, the
parties agree that the Shares of AquaCell common stock issued to the
Shareholders shall equal $1,000,000, or 203,252 Shares at a price of $4.92,
as calculated by taking the average closing price of AquaCell common stock
on the five business days immediately preceding the signing of the
Agreement on October 23, 2001. The Purchaser hereby agrees to waive the
required consents of all creditors to accept AquaCell common stock as
payment in full, and agrees to accept consent representing a minimum of 50%
of the aggregate debt in stock. Creditors who agree to accept AquaCell
common stock as payment shall be issued Shares of AquaCell common stock
calculated by taking the average closing price of AquaCell common stock on
the five business days immediately preceding the Closing as the denominator
and the amount owed to them as the numerator.
1.2 In relation to Section 1.3 of the Agreement, the parties agree that the
Closing of the Agreement shall take place at the offices of the Purchaser
on March 19, 2002.
2. AMENDMENT TO CLOSING DELIVERIES BY THE PARTIES (Section VIII)
2.1 In relation to section 8.1(m) of the Agreement, the parties agree that an
Employment Agreement shall only be issued to Douglas M. Craver.
3. CERTAIN OTHER MATTERS
3.1 As a condition of Closing, the Shares previously issued in relation to
consulting services to Douglas M. Craver and Richard L. Ott in the amounts
of 33,000 shares and 17,000 shares respectively, shall be extended for
lock up from sale for an additional period of six months from this date of
Closing.
3.2 Following the Closing, AquaCell may at its own discretion change the focus
and direction of the Company from time to time, including but not limited
to the transitioning of the financial and certain other functions to its
headquarter location in Rancho Cucamonga, California. (This includes, but
is not limited to cash receipts, disbursements, accounts payable, accounts
receivable, order processing and purchasing.)
3.3 In the event that Douglas Craver voluntarily terminates his employment
agreement issued in connection with the Agreement prior to one year from
the date of Closing, Shares issued to the Shareholders shall be cancelled
and returned to AquaCell, except if the Executive voluntarily terminates
employment due to the relocation of the principal business location of the
Company outside of the state of Arizona.
This Amendment shall represent the only modifications to the Agreement and all
other provisions of the Agreement shall be deemed to be valid and applicable to
this Amendment.
This Amendment may be executed in multiple counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
instrument.
WITNESS WHEREOF, the parties hereto have duly executed this Amendment to the
Stock Purchase Agreement dated October 23, 2001 as of the date first written
above.
Purchaser: AquaCell Technologies, Inc.
-----------------------------
By: James C. Witham
Its: Chief Executive Officer
The Company: Water Science Technologies, Inc.
-----------------------------
By: Douglas M. Craver
Its: President
Shareholders:
-----------------------------
Douglas M. Craver
-----------------------------
Maple Resources
By: Jack W. Hanks
-----------------------------
James Wing
-----------------------------
The Estate of Richard L. Ott