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
Nevada 33-0836954 ------ -------------------------- (State or other jurisdiction (IRS Employer File Number) of incorporation) 32921 Calle Perfecto San Juan Capistrano, California 92675 ------------------------------- ----- (Address of principal executive offices) (zip code) |
Securities to be Registered Pursuant to Section 12(b) of the Act:
None
Securities to be Registered Pursuant to Section 12(g) of the Act:
Common Stock, $0.001 per share par value
References in this document to "us," "we," or "the Company" refer to Seychelle Environmental Technologies, Inc., its predecessor and its subsidiary.
ITEM 1. DESCRIPTION OF BUSINESS.
(A) General Development of Business
We are a Nevada corporation. Our principal business address is 32921 Calle Perfecto, San Juan Capistrano, California 92675. Our telephone number at this address is 949-234-1999.
We were incorporated under the laws of the State of Nevada on January 23, 1998 as a change of domicile to Royal Net, Inc., a Utah corporation that was originally incorporated on January 24, 1986. Royal Net, Inc. changed its state of domicile to Nevada and its name to Seychelle Environmental Technologies, Inc. effective in January 1998.
On January 30, 1998, we entered into an Exchange Agreement with Seychelle Water Technologies, Inc., a Nevada corporation ("SWT"), whereby we exchanged our issued and outstanding capital shares with the shareholders of SWT on a one share for one share basis. We became the parent company and SWT became a wholly owned subsidiary. SWT had been formed in 1997 to market water filtration systems.
On January 31, 1998, we entered into a Purchase Agreement to acquire all of the assets of Aqua Vision International, a California sole proprietorship. This Purchase Agreement was amended on February 26, 1999 to provide for the issuance of 8,000 shares of Series "AAA" 12% Cumulative Convertible Preferred Shares in lieu of all consideration which had remained unpaid under the original Purchase Agreement. Aqua Vision International had been in operation since 1996 to develop, manufacture, and market its own proprietary water filtration systems.
Organization
Our Company is presently comprised of one corporation with one subsidiary, Seychelle Water Technologies, Inc., a Nevada corporation.
(B) Operations
General
We propose to implement a business plan to manufacture and market a range of water filtration products. We are dedicated to improving the quality of life by providing highly effective, economical, convenient, durable, reliable filtration systems for assured quality drinking water. We design, manufacture and supply water filtration systems to the general public. These systems will range from portable water bottles that can be filled from nearly any available source, to units which provide entire water facilities at the point of entry for those facilities. We also have the capability of tailoring systems to meet the needs of areas where specific water problems or severe water contamination exist, on a local or worldwide basis.
RISK FACTORS
THE OWNERSHIP AND INVESTMENT IN OUR SECURITIES INVOLVES SUBSTANTIAL RISKS, SOME OF WHICH ARE SUMMARIZED BELOW. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS AMONG OTHERS, RELATING TO OUR COMPANY.
NEWLY-FORMED COMPANY Our Company was formed on January 23, 1998 and acquired the operations of a company which had only been in existence since 1995. Since beginning operations, we have operated at a loss, although we were profitable for the first nine months of the current fiscal year. Nevertheless, we have not engaged in any substantial business activity over a sustained period of time, and thus cannot be said to have a successful operating history. We expect to incur some losses in the near future. Further, we are likely to experience under-capitalization shortages, setbacks and other risks common to emerging businesses. There can be no assurance that we will operate profitably in the future or sustain our profitability.
NEED FOR ADDITIONAL FINANCING For the foreseeable future, we expect to rely principally upon our ability to operate on a profitable basis, the success of which cannot be guaranteed. From time to time, we may have to obtain additional financing in order to conduct our business in a manner consistent with our proposed operations. There can be no guaranty that additional funds will be available when, and if, needed. If we are unable to obtain such financing, or if the terms thereof are too costly, we may be forced to curtail proposed expansion of operations until such time as alternative financing may be arranged, which could have a materially adverse impact on our operations and our shareholders' investment. At the present time, we have no definitive plans for additional financing.
POTENTIAL OPERATIONAL PROBLEMS The results of our operations will depend, among other things, upon our ability to develop and to market our water filtration products. Further, it is possible that our proposed operations will not generate income sufficient to meet operating expenses or will generate income and capital appreciation, if any, at rates lower than those anticipated or necessary to sustain ourselves. Our operations may be affected by many factors, some of which are beyond our control. Any of these problems, or a combination thereof, could have a materially adverse effect on our viability as an entity.
START-UP COMPANY-INHERENTLY RISKY-COMPETITION Because we are a start-up company with limited history, our operations will be extremely competitive and subject to numerous risks. The water filtration business is highly competitive with many companies having access to the same market. Substantially all of them have greater financial resources and longer operating histories than us and can be expected to compete within the business in which we engage and intend to engage. Although we expect ultimately to be competitive in the markets in which we compete and intend to compete, there can be no assurance that we will have the necessary resources to be competitive. There are other risks which are common to start-up companies. Many of these risks cannot be foreseen at this time. Therefore, investors should consider an investment in us to be an extremely risky venture.
DEPENDENCE UPON TECHNOLOGY We are operating in a business which requires extensive and continuing research efforts. There can be no assurance that new products will not render our products obsolete at some time in the future. In addition, there can be no guarantee that we will be able to protect our
technology from being copied or infringed upon. Therefore, there are no assurances that we will be able to obtain and to maintain a profitable position in the marketplace.
SUCCESS DEPENDENT UPON MANAGEMENT Our success is dependent upon the decision making of our directors and executive officers. These individuals intend to commit as much time as necessary to our business. The loss of any or all of these individuals could have a materially adverse impact on our operations. We have no employment agreement with any individuals and have not obtained key man life insurance on the lives of any of these individuals.
GENERAL BUSINESS PLAN
To understand the full extent of our water filtration technology, it is first necessary to look at the hundreds of pollutants found in drinking water. These can be grouped into the following zones of contamination:
Aesthetics: unpleasant taste, odor, clarity, chlorine,
sand and sediment.
Biologics: harmful microscopic pathogens such as,
Cryptosporidium, Giardia and other
waterborne cysts and spores.
Chemicals: toxic chemicals, detergents, pesticides and
other harmful industrial and agricultural
wastes.
Radiological: Radon 222
Dissolved solids: heavy metals such as aluminum,
asbestos, copper, lead, mercury and others.
|
The elements listed are only a sampling of the contaminants red-flagged by the Environmental Protection Agency (EPA) as contaminants which may be hazardous to your health. The EPA has established Maximum Contamination Levels (MCL) as guidelines to public water supply companies.
Our patented products reduce up to 99.8% (and in some cases more) of the key contaminants listed by the EPA. We combine absolute micron physical filtration, adsorption, and reduction using sorbent medias and other materials. All products are engineered by first researching the many contaminants listed by the EPA in its National Drinking Water Standards and the contaminants' direct effect upon health from ingestion. All possible areas of harmful contaminants are considered in the design effort in order to reach maximum reduction percentages of these pollutants. Health claims are represented by the reduction in volume percentages as determined by various independent labs.
We develop and manufacture products in the area of water filtration - Point of Use, Portable Water Filtration Systems and (currently under development) Point of Entry units.
Our Point of Use (POU) filtration system is installed at a single tap or hook-up where the water actually comes out. Americans are now spending hundreds of millions of dollars per year for home drinking water units and their replacement cartridges. Our POU products include our SE-1 Counter Top system. This system uses the patented Quick Disconnect adapter. The one-micron filter provides contaminant reduction for over 2,500 gallons per replaceable cartridge filter.
Our Shower Massage and Hand Held Shower Filter Units effectively reduce the harmful contaminants that can be ingested, inhaled and absorbed through the skin cells while showering. Our system filters over 15,000 gallons, or for up to six months, per replaceable, reversible cartridge.
Our Coffee Maker Filtration System was designed to pre-treat product water to eliminate scaling and remove unpleasant taste, odor and harmful contaminants from coffee maker systems. The filter extends the life of the home, office or industrial coffee machine as much as ten times.
Our Portable Water Filtration Units are filtration systems built to go anywhere for use at any time. They are designed to be a practical, effective, and superior substitute for bottled water and to provide additional protection against waterborne contaminants while traveling, especially in foreign lands, where the EPA regulations may not exist. Our patented Ionic-Adsorption Micro-Filtration system is in every portable unit, including the following:
Gravity Feed Water Filtration System- portable unit that houses a three-multi phase filtering system, including one phase with anti-microbial properties, for enhanced filtration effectiveness. This system produces a half-gallon of filtered water in less than ten minutes. This system is portable and easily stored when not in use.
Bottom's UP(TM)- patented design, available in 18oz., 24oz. (this is the "Designer Bottom's UP(TM)), and 30oz. portable water filtration bottles, all of which fill from the bottom.
Baby UP(TM)- 18oz. portable water filtration bottle that attaches to any standard baby bottle. It is filled from the bottom.
Canteen - 30oz. portable water filtration bottle. It fills from the top and is carried on a belt or by sling.
Pres 2 Pure(TM)- 24oz. portable water filtration bottle. The device fills from the top and has an easy grip design that also fits into bike holders or a car caddy.
Tap 2 Pure(TM)- Portable universal rubber adapter with a filter attached, which fits nearly every faucet, both in the United States and internationally.
Pump n Pure(TM)- small. For use in pumping water from any source while engaging in outdoor activities or in emergencies. This device comes with a carrying case.
Pump n Pure(TM)- large. To be used with 5-gallon bottles when large quantities of water are needed in remote areas or during emergencies.
Products in Development
Our Point of Entry (POE) filtration system is designed to be installed at a single point where water enters the entire home, office building, school, hotel, hospital, or apartment complex. We believe that this
market is expanding rapidly. Our POE units are three-phase filtering systems which combine various filtering concepts.
Our Under the Counter Unit is a system designed to be installed below the counter, delivering filtered water through a sink dispenser. This unit contains a one micron filter to provide contaminant reduction for over 2,500 gallons per replaceable cartridge filter and is designed to be convenient, automatic, out of sight, permanently installed and to filter water for an ice maker as well.
Our Hydration System is a portable backpack that provides filtered water on demand. The system features a flexible, ergonomic blow-molded reservoir, an air pressurized delivery system, an insulated cover, a survival kit and includes additional anti-microbial properties in the patented filtration system.
Our goal is to capture a significant market share of the water filtration market using these and other products which we plan to develop. We plan to market our current products and to develop additional products in the water filtration area.
(C) Markets
At the present time, we have begun our marketing efforts and have developed relationships with various organizations in private labeling, multi-level marketing, our own labeled products, and international licensing.
Our marketing plan is focused primarily on developing public awareness and acceptance of our products through sales to independent sales representatives, who sell to retailers and direct selling programs. Our targeted markets can be grouped into the following five categories:
The health-conscious - Those who are very aware of what they ingest and insist on high quality drinking water to help ensure their physical and mental well-being. They also demand that their water taste good and be odor and contaminant free. They personally filter their own water.
The traveler - Those concerned with the quality of foreign water supplies encountered while traveling. The phrase "Don't drink the water," if not heeded, could destroy a business trip or vacation with family or friends. Filtration of foreign waters equals protection from foreign contaminants.
The bottled water buyer - The substantial segment of the nation' population currently expending substantial amounts to purchase bottled water. The bottled water industry is over $8 billion strong, worldwide. The uninformed public is paying as much as $8.00 per gallon for water which is often from a questionable source and of unknown quality. As much as 70% of the water consumed by the average person is consumed away from home. As a result, we plan to be a direct competitor to the bottled water industry.
The emergency prepared - Those individuals wishing to ensure a safe alternative source for drinking water in the event of an emergency. When your survival depends upon securing reliable drinking water, you must be able to turn to any available source, such as a swimming pool, flood waters, or a toilet tank, and must be able to filter it to a level safe for ingestion. In light of the numerous recent natural disasters
throughout the world, the necessity for a way to be assured safe drinking water is foremost in the minds of many people all over the world.
The exercise and sports enthusiast - Those individuals seeking a safe and convenient source of drinking water while either exercising indoors or hiking, biking, swimming, camping, fishing or mountain climbing in remote areas. When exercising, it is important to replenish the water lost through exertion with water free of contaminants. Even the most pristine appearing stream can be polluted. "Everyone is downstream from someone" says it all.
(D) Raw Materials
The use of proprietary materials in the manufacturing of our line of products is a major factor. We project production volumes to coordinate with raw materials. However, at the present time, there is adequate availability of raw materials for all of our products. We do not expect this situation to change in the near future.
(E) Customers and Competition
There are a number of established companies in the water filtration business, with no one company dominating this business. Many of those companies are larger and better capitalized than us and/or have greater personnel resources and technical reserves. In view of our extremely limited financial resources and limited management availability, we will continue to be at a significant competitive disadvantage compared to many, if not most, of our competitors. There is no guarantee that we can continue to be profitable.
(F) Backlog
As of November 30, 1999 we had no current backlog.
(G) Employees
As of November 30, 1999 we had thirteen employees, seven corporate and administrative employees and six operations and warehouse employees, who worked for us under a lease arrangement with an unaffiliated third party Professional Employer Organization. We hire additional employees, on a temporary or ongoing basis, as circumstances require.
(H) Proprietary Information
We have been granted a patent for the Portable Water Filtration System with the filter cap assembly, Patent # 5,914,045. As described in the Abstract, it is "[a] filter assembly for a flexible, portable bottle having a sealing cap including a filter attached to the interior of the cap to filter out substantially all INORGANICS, ORGANICS, RADIOLOGICAL CHEMICALS AND MICROBIOLOGY. The filter assembly also may include a second filter or Iodinator sealed in the flexible bottle to further remove micro- organisms from water passing there-through. The filter assembly is designed so that the flexible bottle must be pressurized, as by being hand pressed, after it is filled with water to force flow of water through the [sic]
either or both of the filters. The filter in the cap includes a check valve to allow the bottle to be re-pressurized after water has been dispensed from the bottle."
We have recently been granted an additional patent, Patent # 6,004,460, for the Portable Water Filtration System that allows the user to fill the bottle from the bottom, thereby reducing any chance of contaminating the filter that is attached to the top of the bottle. The patent is described in the abstract as "[a] combination filter assembly and flexible portable bottle having a bottom opening with a sealing cap attached thereto, to filter out substantially all INORGANICS, ORGANICS, RADIOLOGICAL CHEMICALS and MICROBIOLOGY held in water in the bottle. The filter assembly may be attached to an adapter sealed to the top of the flexible bottle. Water in the bottle passes through the filter assembly and out a top nozzle or valve when the flexible bottle is squeezed. The flexible bottle is filled with water through the bottom opening." This is the technology which we use for our Bottom's UP product line.
We also have a United States Utility Patent application, S.N. 09/144,589 for Quick Connect Diverter Valve, for which a notice of allowance was recently received.
In addition, we have the trademark registration for "Pres to Pure," S.N. 75/040,704.
(I) Government Regulation
We are not, as a company, subject to any material governmental regulation or approvals. However, our products are subject to inspection and evaluation by regulatory authorities who have jurisdiction over water quality standards. Such authorities are on the federal, state, and local level, both in the United States and overseas, where we market our products. Our products have already been inspected and evaluated by all applicable governmental authorities in the areas in which we operate or plan to operate in the near future. Therefore, the impact of governmental regulation is not expected to be material to our operations.
(J) Research and Development
We have spent $41,866 and $5,741 in research and development activities for the fiscal years ended February 28, 1999 and 1998, respectively.
(K) Environmental Compliance
At the present time we, as a company, are not subject to any material costs for compliance with any environmental laws.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Forward-Looking Statements
The following discussion contains forward-looking statements regarding our Company, its business, prospects and results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that may affect such forward- looking statements include, without limitation: our ability to successfully develop new products for new markets, the impact of competition on our revenues, changes in law or regulatory requirements that
adversely affect or preclude customers from using our products for certain applications, delays in our introduction of new products or services, and our failure to keep pace with emerging technologies.
When used in this discussion, words such as "believes," "anticipates," "expects," "intends" and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements. Readers are cautioned not to place undue reliance on these forward- looking statements, which speak only as of the date of this Registration Statement. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by us in this Registration Statement and other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business.
Results of Operations
During fiscal year 1998 and 1999, we experienced steady revenues from our operations. We are currently in a profitable position as of the end of our third fiscal quarter and continue to expand the market for our products. We believe that the revenue growth experienced during the first nine months of our fiscal year ended February 28, 2000 demonstrates increased acceptance of our products from consumers. Our original plan has been to market our products to retailers who in turn will sell these products to the public. Along with this strategy, we have developed private label arrangements with several retailers and programs with two multi-level marketing programs. For the remainder of this fiscal year we intend to continue to focus on this plan.
Our revenues were relatively static for the fiscal years ended February 28, 1998 and 1999. They were $703,240 and $710,576, respectively. For the nine months ended November 30, 1999, our revenues were $1,376,383, which compares to $432,768 for the same nine months in 1998. The increase for the nine months ended November 30, 1999 represents a substantial gain primarily due to an expansion of our manufacturing capabilities and wider public acceptance of our products. We believe that this increase follows a pattern of growth in revenue which will continue for at least for the next twelve months.
Costs of sales include all costs incurred in the manufacturing process. The major components of direct job costs are direct labor and associated benefits, materials and freight. The major components of indirect job costs are indirect labor costs and associated benefits and depreciation of production equipment. Our costs of sales as a percentage of revenue grew for the fiscal years ended February 28, 1998 and 1999. They were 47.2% and 56.6%, respectively. For the nine months ended November 30, 1999, our costs of sales as a percentage of revenue were 43.3%, which compares to 56.6% for the same nine months in 1998. We believe that we have better control over our costs of sales and should continue to see additional economies of scale in our manufacturing process in the future.
Gross profit from operations was $371,496 or 52.8% for the year ended February 28, 1998 and decreased slightly to $309,921, or 43.4% of revenue for the year ended February 28, 1999. Gross profit from operations for the nine months ended November 30, 1999 was $780,915 or 56.7% of revenue. This is a significant increase in gross profit compared to the previous fiscal years and in comparison to $187,814, or 43.4% of revenue for the nine months ended November 30, 1998. We believe that the most recent margins better reflect what is to be expected in the future. Earlier results were affected by the trials and errors inherent in starting operations.
Our general and administrative expenses were $1,233,079 for the year ended February 28, 1999, and $727,768 for the year ended February 28, 1998. Our general and administrative expenses were $657,102 for the nine months ended November 30, 1999, compared to $1,026,336 for the nine months ended November 30, 1998. We have reduced a number of controllable expenses and will continue to look for opportunities to do so in the future. However, we do not expect to see a further substantial reduction in expenses since most of our remaining fixed expenses cannot be further reduced. Nevertheless, we are pleased that our expenses, and particularly our general and administrative expenses, are now in line for us to generate an operational profit for the first time.
The major components of general and administrative expenses are office salaries and associated payroll costs, general and health insurance costs, rent, telephone, accounting and legal expenses.
As of the nine months ended November 30, 1999, we achieved a modest operational profit of $42,950, compared with a loss of $855,370 for the same period of the previous year. While modest, this operational profit represents a substantial reversal of the previous trend in our results of operations. We anticipate an operational profit to continue through the fiscal year end.
Liquidity and Capital Resources
Our operating activities used $684,237 during the year ended February 28, 1999, compared to $581,165 for the previous year. Our operating activities generated $18,621 for the nine months ended November 30, 1999, compared to using $618,146 for the nine months ended November 30, 1998. We believe that our increased cash flows from operations result from our higher revenues and lower general and administrative expenses.
Our investing activities used $123,447 for the year ended February 28, 1999, compared to $89,388 for the year ended February 28, 1998. Our investing activities used $23,990 for the nine months ended November 30, 1999, compared to $117,906 for the nine months ended November 30, 1998. All investing activities were directed toward the purchase of property and equipment.
We had positive cash flows from financing activities for the year ended February 28, 1999 of $286,532, compared to $1,235,820 for the year ended February 28, 1998. These activities were essentially related to our private placements of securities. We had no cash flows from financing activities for the nine months ended November 30, 1999, compared to $286,532 for the nine months ended November 30, 1998. For the nine months ended November 30, 1999, we used internally generated cash from our activities and issued stock to settle litigation and to pay for services.
Our net cash and cash equivalents at November 30, 1999 were $47,062, compared to $124,053 at November 30, 1998. Our net cash and cash equivalents decreased from $573,583 at February 28, 1998 to $52,431 at February 28, 1999.
Net accounts receivable increased to $139,852 for the year ended February 28, 1999, compared to $13,179 for the year ended February 28, 1998. Accounts receivable were slightly lower at $71,976 for the nine months ended November 30, 1999, compared to $91,752 for the nine months ended November 30, 1998.
Inventories increased to $263,869 for the year ended February 28, 1999, compared to $74,490 for the year ended February 28, 1998. Inventories increased to $374,842 for the nine months ended November 30, 1999, compared to $294,796 for the nine months ended November 30, 1998.
Accounts payable increased to $104,463 for the year ended February 28, 1999 from $55,719 for the year ended February 28, 1998. Accounts payable decreased by $14,647 to $89,816 in the nine month ended November 30, 1999, compared to an increase in the prior fiscal year of $16,416 to $72,135 for the nine months ended November 30, 1998.
We entered into various arrangements for the settlement of outstanding litigation during the nine months ended November 30, 1999 and incurred substantial legal expenses during fiscal year 1999 and 1998. We expect that such expenses will be minimized in the near term.
In July, 1999, we settled a lawsuit which we had brought against our former Chairman, Mr. DuSean Berkich, and certain of his affiliates. Under the terms of the settlement, Mr. Berkich and his affiliates returned a total of 4,440,666 shares of Common Stock for cancellation by us, and we released Mr. Berkich and his affiliates from all future liability to us. In addition, a lawsuit brought by an individual claiming consulting fees from us was dismissed by the U.S. District Court for the District of Colorado in July, 1999.
Our financial situation continues to become healthier. However, we still believe that we are slightly undercapitalized for the activities which we plan to undertake in the next twelve months. Nevertheless, we believe that a combination of profitable operations, prudent management, and new products will permit us to show positive earnings and increasing revenues for the next twelve months.
ITEM 3. DESCRIPTION OF PROPERTIES
As of November 30, 1999 our business office was located at 32921 Calle Perfecto, San Juan Capistrano, CA 92675. Our telephone number at this address is 949-234-1999. We pay a total of $8,020 in rent per month for approximately 13,000 square feet of office space through March 31, 2002, escalating to $8,750 per month through January 14, 2003. We have a three-year lease with an unaffiliated third party. We own manufacturing equipment, office equipment and inventory.
We own two patents, a trademark, trade secrets (see Proprietary Information above), and other proprietary information related to our business operations.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following sets forth the number of shares of our $0.001 par value Common Stock beneficially owned by (i) each person who, as of November 30, 1999, was known by us to own beneficially more than five percent (5%) of our Common Stock; (ii) our individual directors and (iii) our officers and directors as a group. As of November 30, 1999, there were a total of 8,550,046 shares of Common Stock issued and outstanding.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1)(2) CLASS ------------------- --------------------------- ---------- The TAM Irrevocable Trust 2,100,000(3) 24.65% 4012 S. Rainbow #K111 Las Vegas, NV 80103-2012 Select Property Investments, LLC 1,400,000(4) 16.43% 4012 S. Rainbow #K111 Las Vegas, NV 80103-2012 FTS Worldwide Corp. 1,337,509 15.70% 24 Route De Malagnon 1208 Geneva, Switzerland Carl Palmer -0- -0- 32921 Calle Perfecto San Juan Capistrano, CA 92675 Donald S. Whitlock 40,000(5) .47% 720 East Hyman Ave., Suite 301 Aspen, CO 81611 Paul H. Lusby 152,500 1.78% 141 East Walnut Street Pasadena, California 91103 Michelle Palmer 2,000(4) .02% 32921 Calle Perfecto San Juan Capistrano, CA 92675 Jeffrey DeLong 82,000(6) .96% 32921 Calle Perfecto San Juan Capistrano, CA 92675 Susan Mallett 52,000 .61% 32921 Calle Perfecto San Juan Capistrano, CA 92675 Kenneth Rawald 62,000 .73% 32921 Calle Perfecto San Juan Capistrano, CA 92675 All officers and directors as a Group 390,500 4.57% (seven persons) |
(1) All ownership is beneficial and of record, unless indicated otherwise.
(2) Beneficial owners listed above have sole voting and investment power with respect to the shares shown, unless otherwise indicated.
(3) The TAM Irrevocable Trust is an irrevocable trust for the benefit certain family members of Mr. Carl Palmer. Mr. Palmer disclaims any beneficial ownership or interest in this Trust. In addition, this entity owns an interest in our Series "AAA" 12% Cumulative Convertible Preferred Shares.
(4) Select Property Investments, LLC is a limited liability company owned by Ms. Michelle Palmer, the wife of Mr. Carl Palmer. Mr. Palmer disclaims any beneficial ownership or interest in this limited liability company. In addition, this entity owns an interest in our Series "AAA" 12% Cumulative Convertible Preferred Shares.
(5) Does not include 4,700 shares owned of record by the wife of Mr. Whitlock. Mr. Whitlock disclaims any beneficial ownership or interest in these shares.
(6) Mr. DeLong, one of our former Vice Presidents, owned these shares of record as of that date. However, we have the right to repurchase 45,000 shares at a nominal amount, since Mr. DeLong resigned to pursue other opportunities prior to the end of the term of his employment agreement.
Certain of these individual shareholders signed lock up agreements which will prevent all of the shares of Common Stock from being sold or transferred, either in the open market or in a private transaction, except based upon the passage of time and upon defined percentage sales.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Our current directors and executive officers, their ages and present positions held are as follows:
NAME AGE POSITION HELD
---- --- -------------
Carl Palmer 65 President, Chief Executive Officer
Treasurer and Director
Paul H. Lusby 44 Secretary and Director
Donald S. Whitlock 29 Director
Michelle Rae Palmer 36 Vice President
Susan Mallett 52 Vice President - Communications
Kenneth Rawald 75 Vice President - Engineering
|
Our directors have served and will serve in such capacity until the next annual meeting of our shareholders and until their successors have been elected and qualified. The officers serve at the discretion of our directors. Except for Carl and Michelle Palmer, who are husband and wife, and Ken Rawald, who is the father of Michelle Palmer, there are no family relationships among the Company's officers and
directors, nor are there any arrangements or understandings between any of the directors or officers of the Company or any other person pursuant to which any officer or director was or is to be selected as an officer or director.
CARL PALMER. Mr. Palmer has been the President, CEO and a director of the Company since January, 1998. He is the founder of our company, innovator of the complete line of Seychelle water filtration products and primary spokesperson worldwide. He personally oversees every aspect of operations. He is the inventor of twelve patented products related to water purification. Mr. Palmer received a Bachelors Degree from Whittier College.
PAUL H. LUSBY. Mr. Lusby has been Secretary and a director of the Company since January, 1998. For the past five years he has been a principal of the law firm of Cooper, Kardaras & Scharf L.L.P. He has a Juris Doctor from the University of Virginia and a Bachelor of Arts from the University of Virginia. He has been an active member of the California Bar since 1982. He is also the current Chairman of the Board of Pacific Clinics, a non-profit organization dedicated to the treatment of children and adults suffering from behavioral and mental health disorders.
DONALD S. WHITLOCK. Mr. Whitlock has been a director of our Company since January, 1998. For the past five years, he has been a principal of International Corporate Development, Ltd., an investment banking firm headquartered in Aspen, Colorado. Mr. Whitlock is a Fellow of the Aspen Institute. He has a Bachelors degree in Economics from Loyola Marymount College.
MICHELLE RAE PALMER. Ms. Palmer has been Vice President of our Company since January, 1998. Her past and present responsibilities include all aspects of accounting, implementation of product lines, corporate structure and operational configurations. She was co-inventor of the Pres 2 Pure(TM) water filtration system. She received a Bachelor of Arts Degree from California State University, Long Beach.
SUSAN MALLETT. Ms. Mallett has been a Vice President of Communications since March, 1998. Her past experience includes all venues of communication - newsletters, press releases, manuals, advertisements, video and audio scripts, training and support materials, contracts, plus public speaking, events planning, and product development. She has extensive experience in exportation to the Pacific Rim. She received a Bachelor of Arts degree and Teaching Credential from California State University, Long Beach.
KENNETH RAWALD. Mr. Rawald has been a Vice President of Engineering since January, 1998. His primary responsibilities include product design and engineering, fixture design and assembly procedures. He provides necessary engineering drawings as well as presentation perspective sketches in various mediums for our Company and patent offices. He received a certification in Engineering from Pratt Institute.
ITEM 6. EXECUTIVE COMPENSATION
Only one of our executive officers received compensation in excess of $100,000 during the fiscal years ended February 28, 1998 or 1999. Compensation does not include minor business-related and other expenses paid by us. Such amounts in the aggregate do not exceed $10,000. Mr. Jeff DeLong, a former Vice President, received a salary of $120,000 for the fiscal year ended February 28, 1999 and a car allowance of $500 per month, of which $3,500 had been paid in cash through February 28, 1999. Mr.
DeLong resigned in February, 2000 to pursue other opportunities. Our President, Carl Palmer, received no compensation for 1998 or 1999. Mr. Palmer serves as our President on a full-time basis.
We have granted 139,000 shares of our Common Stock as additional compensation for the fiscal years ended 1998 and 1999.
For the fiscal years 1998 and 1999, we paid health care insurance for our employees. We have no pension plan. We have no plans or agreements which provide compensation in the event of a change in control. We have no plans or agreements which provide compensation in the event of termination of employment.
We do not customarily pay members of our Board of Directors any fees for attendance or similar remuneration, but reimburse them for any out-of- pocket expenses incurred by them in connection with their activities.
After the 1999 fiscal year end, we granted Mr. Paul Lusby, one of our directors, 150,000 shares of Common Stock, valued at $75,000, as consideration for past services rendered as a member of the Board of Directors. At the same time, we granted Mr. Donald S. Whitlock, one of our directors 40,000 shares of Common Stock valued at $20,000 for past services rendered as a member of our Board of Directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have entered into a Purchase Agreement and an Amended Purchase
Agreement for the acquisition of Aqua Vision International, a private California
entity controlled by the TAM Irrevocable Trust and Select Property Investments,
LLC. The TAM Irrevocable Trust is an irrevocable trust for the benefit of
certain family members of Mr. Carl Palmer. Mr. Palmer disclaims any beneficial
ownership or interest in this Trust. Select Property Investments, LLC is a
limited liability company owned by Ms. Michelle Palmer. Mr. Palmer also
disclaims any beneficial ownership or interest in this limited liability
company. Under the terms of these agreements, these entities received 8,000
shares of Series "AAA" 12% Cumulative Convertible Preferred Shares. The Purchase
Agreement and Amended Purchase Agreement were negotiated and approved by our
Board of Directors. Every effort was made to deal on an arms-length basis.
Mr. Paul Lusby, one of our directors and shareholders, provided legal services through his law firm for us during the 1999 fiscal year for which his firm was compensated $2,000 in cash and 100,000 shares of Common Stock, which was granted after the fiscal year end, with a value of $50,000. He was also personally granted 150,000 shares of Common Stock, valued at $75,000, after the fiscal year end as consideration for services rendered as a member of the Board of Directors.
Mr. Donald S. Whitlock, one of our directors and shareholders, provided advice to us, through a firm with which he is associated, on capitalization and business development matters during the 1998 and 1999 fiscal years. The firm with which he is associated was issued 559,266 shares at inception and was paid $54,478 and $150,451, respectively. Subsequent to the 1999 fiscal year end, he was personally granted 40,000 shares of common stock valued at $20,000 for services rendered as a member of our Board of Directors.
We have made advances from time to time to Mr. Carl Palmer, our President. As of November 30, 1999 we had advanced $25,609 to him. These advances are not compensation and will be repaid.
ITEM 8. DESCRIPTION OF SECURITIES.
We are authorized to issue 50,000,000 shares of Common Stock, par value $0.001 per share, and 1,000,000 shares of Preferred Stock, par value $0.01 per share. As of January 1, 2000 a total of 8,550,046 shares of Common Stock were outstanding.
As of the same date, three classes of Preferred Stock were authorized but only two classes were issued or outstanding: 17 shares of Series "A" 13.5% Non Voting, Cumulative and 8,000 shares of Series "AAA" 12% Cumulative Convertible Preferred Shares.
COMMON STOCK
The holders of Common Stock have one vote per share on all matters (including election of directors) without provision for cumulative voting. Thus, holders of more than 50% of the shares voting for the election of directors can elect all of the directors, if they choose to do so. The Common Stock is not redeemable and has no conversion or preemptive rights.
The Common Stock currently outstanding is validly issued, fully paid and non-assessable. In the event of our liquidation, the holders of Common Stock will share equally in any balance of our assets available for distribution to them after satisfaction of creditors and the holders of our senior securities, whatever they may be. We may pay dividends, in cash or in securities or other property when and as declared by the Board of Directors from funds legally available therefor, but we have paid no cash dividends on our Common Stock.
PREFERRED STOCK
Under the Articles of Incorporation, the Board of Directors has the authority to issue Preferred Stock and to fix and determine its series, relative rights and preferences to the fullest extent permitted by the laws of the State of Nevada and such Articles of Incorporation. As of the date of this Registration Statement, three classes of Preferred Stock were authorized, but only two were issued or outstanding.
Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred Stock
Such Stock has rights which are superior to all other securities of the Company, including upon liquidation and as to payment of dividends, if any. The Series "A" Preferred carries a dividend of 13.5% per annum, is non-voting, and is redeemable by us at any time at face value and is convertible into Common Stock at the lesser of $10 per share or 85% of the last five closing bid prices. A total of 17 shares are issued and outstanding as of the date of this Registration Statement.
Series "AA" Non Voting, Cumulative, Convertible Preferred Stock
Such Stock had rights which were superior to all other securities of the Company except to Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred Stock, including upon liquidation and as to payment of dividends, if any. The Series "AA" Preferred carried a dividend which was set by the Board of
Directors at 10% prior to the time of issuance thereof, was non-voting, redeemable by the Company at any time at face value and was convertible into Common Stock of the Company at 85% of the last five closing bid prices. We had previously issued 26 shares of the Preferred Stock. As of the date of this Registration Statement, all of the Series "AA" Non Voting, Cumulative, Convertible Preferred Stock had been converted to Common Stock. This Series "AA" is no longer issued or outstanding. A total of 1,337,509 shares of Common Stock were issued upon conversion, including for accrued interest.
Series "AAA" 12% Cumulative Convertible Preferred Shares
Such Stock has rights which are superior to all other securities of the Company except Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred Stock and, before its conversion, the Series "AA" Non Voting, Convertible Preferred Stock, including upon liquidation and as to payment of dividends, if any. The Series "AAA" Cumulative Convertible Preferred Voting Stock carries a 12% per annum dividend payable in stock or cash, is voting, with each share equal to 100 shares of Common Stock, and is redeemable according to the following procedure: upon written notice of conversion from the holders, the Company shall have the right, but not the obligation, for 45 days from receipt of such notice to repurchase, for cash, up to 2,000 shares of the Series "AAA" 12% Cumulative Convertible Preferred Shares at $1,000 per share.
Pursuant to the terms of the Amended Purchase Agreement, the number of shares of Common Stock issuable to the holders pursuant to the conversion provisions of the Series "AAA" 12% Cumulative Convertible Preferred Shares was reduced from 8,000,000 shares to 4,500,000 shares (subject to pro rata adjustments, if any, for stock dividends, stock splits, reverse stock splits, and any other similar capital stock adjustments of a general nature). At the date of this Registration Statement, there are 8,000 shares issued and outstanding.
We do not plan to issue any other Preferred Stock in the foreseeable future.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
(A) Principal Market or Markets
Our Common Stock began trading in 1987. Since the consummation of the Exchange Agreement between the Company and SWT, market makers and other dealers have provided bid and ask quotations of our Common Stock under the symbol "SYEV." Trading is conducted in the over-the-counter market on the NASD's "Electronic Bulletin Board."
The table below represents the range of high and low bid quotations of our Common Stock as reported during the reporting period herein. The following bid price market quotations represent prices between dealers and do not include retail markup, markdown, or commissions; hence, they may not represent actual transactions.
Fiscal Year 1999 High Low
---- ---
First Quarter $2.25 $0.50
Common Shares
Second Quarter $1.75 $0.91
Common Shares
Third Quarter $0.97 $0.53
Common Shares
Fourth Quarter $0.69 $0.34
Common Shares
|
Fiscal Year 1998 High Low
---- ---
First Quarter $20.00 $1.88
Common Shares
Second Quarter $2.43 $0.75
Common Shares
Third Quarter $1.13 $0.49
Common Shares
Fourth Quarter $0.69 $0.35
Common Shares
|
(B) Approximate Number of Holders of Common Stock
As of November 30, 1999, a total of 8,550,046 of our shares of Common Stock were outstanding and 273 holders of record owned these shares. However, we believe that we have a significantly greater number of shareholders because a substantial number of our shares are held in nominee name. The number of outstanding shares is computed after the approximate 4,400,666 shares of Common Stock which have been canceled by us a result of the settlement of the lawsuit with the former Chairman of the Company and certain of his affiliates.
(C) Dividends
Holders of Common Stock are entitled to receive such dividends as may be declared by our Board of Directors. No dividends on the Common Stock were paid by us during the periods reported herein nor do we anticipate paying dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS.
No legal proceedings of a material nature to which we are a party are pending, and we know of no legal proceedings of a material nature pending or threatened or judgments entered against any director or officer of the Company in his capacity as such.
In July, 1999, we settled a lawsuit which we had brought against our former Chairman, Mr. DuSean Berkich, and certain of his affiliates. Under the terms of the settlement, Mr. Berkich and his affiliates returned a total of 4,440,666 shares of Common Stock for cancellation by us, and we released Mr. Berkich and his affiliates from all future liability to us.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
We did not have any disagreements on accounting and financial disclosures with our accounting firm during the reporting period.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
Between its incorporation in February 1997 and January 30, 1998, SWT issued securities in the amounts and for the aggregate consideration as listed as follows. All shares were acquired directly from SWT except where indicated below:
Name Number of Shares Price ---- ----------------------------- Aribi, Robbi 3,000 $.001 Barie, Julie 1,000 $.001 Beadelston, Marina 1,333 $.001 Berkich Limited Partners* 3,500,000 $.001 Berkich, Cynthia L.* 15,000 $.001 Berkich, Donald B.* 15,000 $.001 Berkich, DuSean* 800,000 $.001 Berkich, John* 1,000 $.001 Berkich, Judy* 15,000 $.001 Berkich, Rebecca, L.* 15,000 $.001 Blake, Peter 2,000 $.001 Bowden, Bob 2,000 $.001 Brownell, Veronica 25,000 $.001 Casper, Brandy 6,700 $.001 Davidson, Gary 12,000 $0.42 Delong, Jeffrey Foster 80,000 $.001 Dunn, Lawrence 5,000 $4.00 Duplan, Stefan Debelle 5,000 $.001 Erdman, Colin 1,000 $.001 Farver, Suzanne 6,700 $.001 Frederick, William 30,000 $.001 Gaydos, Chad 14,000 $.001 Grasso, Diane 2,500 $.001 |
Hammel, Charles & Cathy (JTROS) 24,000 $.001 Helvey, Casey 10,000 $.001 Helvey, Lindsay 10,000 $.001 Holstein, Phil 5,000 $.001 International CorporateDevelopment, Ltd. 116,250 $.001 Intresco Ltd 25,000 $.001 Jenkins, Lorna 1,000 $.001 Jones, Michael 1,000 $.001 Kam, Raymond** 144,000 $.001 Kearns, Michael 243,000 $.001 Kikuyama, Kendall** 12,000 $.001 Laymac, John 77,000 $.001 Larson, Jim 80,000 $.001 Lippert, Eric 20,000 $.001 Lupo, Thomas M.* 80,000 $.001 Lusby, Paul 2,500 $.001 MacKinney, Mary 2,500 $.001 Macre, Thomas 20,000 $.001 McDougall, John 3,333 $.001 Mason Trust** 3,750 $.001 Murakami, Mitsuo or Ema** 24,000 $.001 Murakami, David** 24,000 $.001 Nanniga, Alison 371,250 $.001 Otta, David S.* 15,000 $.001 Otta, Mark W.* 15,000 $.001 Palmer, Cari 279,000 $.001 Patterson, Mark 10,000 $.001 Rawald, Kenneth 10,000 $.001 Rawald, Marie 5,000 $.001 Roby, James 3,334 $.001 Rojo, Louis Napolean 30,000 $.001 Salet, Willy 10,000 $.001 Sax Family Trust 1,667 $.001 Schwartz, Hans 2,000 $.001 Silver, Joseph 3,333 $.001 Select Property Investments, LLC 1,400,000 $.001 Stanberry, Dan 2,600 $.001 Solinap, Wilhelmina 1,000 $.001 STG - Coopers & Lybrand 62,500 $4.00 Suchor, Sandra A 7,200 $0.42 Swiss American Securities Co 180,000 $3.96 The Tam Irrevocable Trust 2,100,000 $.001 Ulrich, George* 100,000 $.001 Ulrich, Michael* 10,000 $.001 Wagner, David 180,000 $.001 Wagner & Assoc. Money Pur. Plan 12,500 $.001 Wagner & Assoc. Profit Sharing Plan 12,500 $.001 |
Wagner, Diana 20,000 $.001 Warner, James 6,000 $.001 Whitlock, Debbie 60,000 $.001 Whitlock, Donald S. 93,750 $.001 Whitlock, Donald A. 12,000 $.001 Whitlock, Donald S. 138,600 $.001 Whitlock, Tim 4,927 $.001 Wiles, Grace 54,000 $.001 Work, Horace 6,666 $.001 Wright, Doug** 1,250 $.001 Yafuso, Alvin** 12,000 $.001 Zeimer, David* 100,000 $.001 |
* All or part of these shares have been canceled. ** These individuals acquired their shares directly from, and paid consideration directly to, Mr. DuSean Berkich, who was an officer and a director of us at the time.
On January 30, 1998, we entered into an Exchange Agreement with SWT, whereby we exchanged our issued and outstanding capital shares with the shareholders of SWT on a one share for one share basis, with us becoming the parent company and SWT becoming a wholly-owned subsidiary.
During the three years prior to the date of this Registration Statement, we had issued and sold unregistered securities as Royal Net, Inc. for $.001 per share consideration, in the amounts and at the times listed as follows:
Name Number of Shares Date ------------------------------------------------------------------ Anthony Eames 2,500,000 7/02/96 Thomas Eames 2,500,000 7/02/96 Garth Jacobson 2,500,000 7/02/96 |
As a part of the Exchange Agreement between SWT and us, these shares and all other issued and outstanding shares of Common Stock of Royal Net were reverse split one-for-five and then a total of 1,413,597 shares of our post split Common Stock were canceled. At the time of the Exchange Agreement, there were no more than 300,000 shares of Common Stock issued and outstanding in Royal Net.
Subsequent to the Exchange Agreement, we have issued securities in the amounts, at the times, and for the amounts of consideration listed as follows:
Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred Stock
A total of 17 shares for $850,000 were sold effective January 31, 1998 to Rohm and Bodmer.
Series "AA" Non Voting, Cumulative, Convertible Preferred Stock
A total of 26 shares for $1,300,000 were sold effective March 27, 1998 to FTS Worldwide Corporation. These shares were converted on June 14, 1999 into 1,337,509 shares of Common Stock.
Series "AAA" 12% Cumulative Convertible Preferred Shares
On January 31, 1998, we entered into a Purchase Agreement to acquire all of the assets of Aqua Vision International, a California sole proprietorship. This Purchase Agreement was amended on February 26, 1999 to provide for the issuance of 8,000 shares of Series "AAA" 12% Cumulative Convertible Preferred Shares in lieu of all consideration which then remained unpaid under the original Purchase Agreement.
Common Stock
In March, 1998, we sold 62,500 restricted shares of Common Stock for $250,000 to Harvel, Limited. We also issued 18,500 restricted shares of Common Stock to Rick Emmett in cancellation of a promissory note held by him.
On April 1, 1999, we granted shares of Common Stock valued at $.50 per share to the following individuals and entities in the amounts indicated below:
Name Number of Shares -------------------------------------------------------------- Jeff DeLong 2,000 Susan Mallett 52,000 Michelle Rae Palmer 2,000 Ken Rawald 52,000 Louis N. Rojo 22,000 Arturo & Maria Villafuerte 7,000 Horn & Loomis 75,000 David Wagner & Associates, P.C 100,000 Cooper, Kardaras & Scharf L.L.P 100,000 Wickens, Herzer & Panza 50,000 Donald S. Whitlock 40,000 Paul H. Lusby 150,000 |
On July 1, 1999, we issued shares of Common Stock valued at $.50 per share to the following individuals in the amounts indicated below:
Name Number of Shares -------------------------------------------------------------- Grace Wiles 2,000 Israel Marelus 75,000 |
We believe that most of the offers and sales described above were exempt from registration pursuant to Rule 504 of Regulation D under the Securities Act because those offers and sales met all the conditions of Rule 504 as then in effect, including the dollar limitation, and we were not at the time of such transactions within any of the categories of issuers prohibited from using Rule 504.
In addition to the Rule 504 exemptions described above, the foregoing sales of Common Stock and Preferred Stock were also made in reliance upon the exemptions from registration set forth in Sections 4(2) and 4(6) of the Securities Act of 1933 and/or Regulation S promulgated thereunder for transactions not involving a public offering. No underwriters were engaged in connection with the foregoing sales of
securities. These sales were made without general solicitation or advertising. Each purchaser was an "accredited investor" or a sophisticated investor with access to all relevant information necessary to evaluate the investment who represented to SWT or to us, as the case may be, that the shares were being acquired for investment.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles of Incorporation authorize the Board of Directors, on behalf of the Company and without shareholder action, to exercise all of the Company's powers of indemnification to the maximum extent permitted under the applicable statute. The Nevada Private Corporations Act allows indemnification of directors, officers, employees and agents of the Company, including the advancement of expenses:
Section 78.751 of the Nevada Private Corporations Act provides:
1. A corporation may 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, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonable 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, 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, does 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 interests of the corporation, and, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may 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 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, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the 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. Indemnification may not be made for any claim, issue or matter as to which such person shall have been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction, determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1. and 2., or in
defense of any claim, issue or matter therein, he must be indemnified by the corporation against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense.
4. Any indemnification under subsections 1. and 2., unless ordered by a court or advanced pursuant to subsection 5, must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made: (a) By the stockholders; (b) By the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding; (c) If a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel in a written opinion; (d) If a quorum consisting of directors who were not parties to the act, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion.
5. The articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles or incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding such office, except that indemnification, unless ordered by a court pursuant to subsection 2 or for the advancement of expenses made pursuant to subsection 5, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or knowing violation of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors, and administrators of such a person.
The indemnification discussed herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under the Articles of Incorporation, any Bylaw, agreement, vote of shareholders, or disinterested directors, or otherwise, and any procedure provided for by any of the foregoing, 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, officer, employee or agent and shall inure to the benefit of heirs, executors, and administrators of such a person.
Insofar as indemnification for liabilities under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of our Company under to the preceding provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the Registrant of expense incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Consolidated Audited Financial Statements
Seychelle Environmental Technologies, Inc.
Years Ended February 28, 1999 and 1998
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS
Consolidated Balance Sheets F-2 to F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Changes in Stockholders' Equity F-5 to F-7
Consolidated Statements of Cash Flows F-8 to F-9
Notes to Consolidated Financial Statements F-10 to F-24
|
[RAIMONDO PETTIT GROUP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Seychelle Environmental Technologies, Inc.
San Clemente, California
We have audited the accompanying consolidated balance sheet of Seychelle Environmental Technologies, Inc. as of February 28, 1999, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the years ended February 28, 1999 and 1998. The consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Seychelle Environmental Technologies, Inc. as of February 28, 1999 and the consolidated results of their operations and their cash flows for the two years then ended, in conformity with generally accepted accounting principles.
RAIMONDO PETTIT GROUP
Torrance, California
August 10, 1999
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
November 30, February 28,
1999 1999
------------- -------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 47,062 $ 52,431
Trade receivable, net of allowance for doubtful
accounts of $5,179 and $6,861, respectively 71,976 139,852
Inventories 374,842 263,869
Other current assets 20,000 17,292
------------- -------------
Total current assets 513,880 473,444
------------- -------------
Property and equipment, net 180,528 222,283
Intangible assets, net 10,658 8,948
Other non-current assets 21,141 8,650
------------- -------------
Total non-current assets 31,799 17,598
------------- -------------
TOTAL ASSETS $ 726,207 $ 713,325
============= =============
|
See accompanying notes to consolidated financial statements
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
November 30, February 28,
1999 1999
------------- -------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 89,816 $ 104,463
Accrued expenses 241,663 481,952
Customer deposits 8,380 8,334
Note payable -- 31,530
Other current liabilities 6,500 --
------------- -------------
Total current liabilities 346,359 626,279
------------- -------------
COMMITMENTS AND CONTINGENCIES (NOTE 9)
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value - 1,000,000 shares authorized,
Series A, non-voting, cumulative, convertible preferred
stock, 17 shares issued and outstanding 0 0
Series AA, non-voting, cumulative, convertible preferred
stock, 0 and 26 shares, respectively, issued and outstanding -- 0
Series AAA, preferred stock, 8,000 shares issued and
outstanding 80 80
Common stock, $.001 par value - 50,000,000 shares authorized;
8,550,046 and 11,200,643 shares issued and outstanding 8,550 11,201
Additional paid-in capital 2,028,050 1,773,526
Accumulated deficit (1,631,223) (1,674,173)
Receivable from stockholder (25,609) (23,588)
------------- -------------
Total stockholders' equity 379,848 87,046
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 726,207 $ 713,325
============= =============
|
See accompanying notes to consolidated financial statements.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the nine months For the years
ended November 30, ended February 28,
1999 1998 1999 1998
------------ ------------ ------------ ------------
(Unaudited)
SALES $ 1,376,383 $ 432,768 $ 710,576 $ 703,240
COST OF SALES 595,468 244,954 400,655 331,744
------------ ------------ ------------ ------------
GROSS PROFIT 780,915 187,814 309,921 371,496
------------ ------------ ------------ ------------
OPERATING EXPENSES
Selling 80,863 46,848 144,072 279,079
General and administrative 657,102 1,026,336 1,233,079 727,768
------------ ------------ ------------ ------------
TOTAL EXPENSES 737,965 1,073,184 1,377,151 1,006,847
------------ ------------ ------------ ------------
PROFIT (LOSS) FROM OPERATIONS 42,950 (885,370) (1,067,230) (635,351)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Miscellaneous income (expense) -- -- (5,707) (100,000)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) -- -- (5,707) (100,000)
------------ ------------ ------------ ------------
PROFIT (LOSS) BEFORE PROVISION
FOR INCOME TAXES 42,950 (885,370) (1,072,937) (735,351)
------------ ------------ ------------ ------------
PROVISION FOR INCOME TAXES -- -- -- --
------------ ------------ ------------ ------------
NET PROFIT (LOSS) $ 42,950 $ (885,370) $ (1,072,937) $ (735,351)
------------ ------------ ------------ ------------
BASIC AND DILUTED PROFIT (LOSS)
PER SHARE $ (.01) $ (.09) $ (0.12) $ (0.09)
------------ ------------ ------------ ------------
WEIGHTED AVERAGE NUMBER OF
SHARES: BASIC AND DILUTED 9,525,863 11,200,643 11,200,643 8,416,686
============ ============ ============ ============
|
See accompanying notes to consolidated financial statements.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES SEYCHELLE WATER
("SET") formerly RoyalNet Technologies ("SWT")
------------------------------------------------------------ -----------------------------
Preferred Stock Common Stock Common Stock
----------------------------- ----------------------------- -----------------------------
Shares Amount Shares Amount Shares Amount
------------- ------------- ------------- ------------- ------------- -------------
Balance, March 1, 1997 -- $ -- -- $ -- -- $ --
Issuance of Seychelle Water
Technologies common stock -- -- -- -- 8,024,927 8,025
Issuance of SWT common
stock in connection with
Regulation D offering, net of
issuance costs of $64,899 -- -- -- -- 2,794,716 2,795
Issuance of SWT common
stock in satisfaction of note
payable -- -- -- -- 18,500 19
Issuance of SWT common
stock in connection with
Private Placement, net of
issuance costs of $16,390 -- -- -- -- 62,500 62
Aquavision owners net
contribution
Reverse merger of SWT with
SET -- -- 11,200,643 11,201 (10,900,643) (10,901)
Capital Distribution -- -- -- -- -- --
Issuance of Series A Preferred
Stock, net of issuance costs
of $138,251 17 -- -- -- -- --
Net Loss for the year ended
February 28, 1998 -- -- -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
Balance, February 28, 1998 17 $ -- 11,200,643 $ 11,201 -- $ --
------------- ------------- ------------- ------------- ------------- -------------
Retained Stock Subscription Total
Additional Earnings Receivable and Stockholders'
Paid-In (Accumulated Stockholder Equity
Capital Deficit) Receivable (Deficit)
------------- ------------- ------------- -------------
Balance, March 1, 1997 $ 39,651 $ 134,115 $ -- $ 173,766
Issuance of Seychelle Water
Technologies common stock (25) -- -- 8,000
Issuance of SWT common
stock in connection with
Regulation D offering, net of
issuance costs of $64,899 924,973 -- -- 927,768
Issuance of SWT common
stock in satisfaction of note
payable 37,620 -- -- 37,639
Issuance of SWT common
stock in connection with
Private Placement, net of
issuance costs of $16,390 233,548 -- -- 233,610
Aquavision owners net
contribution (70,168) -- -- (70,168)
Reverse merger of SWT with
SET (300) -- -- --
Capital Distribution (200,000) -- -- (200,000)
Issuance of Series A Preferred
Stock, net of issuance costs
of $138,251 711,749 -- (149,983) 561,766
Net Loss for the year ended
February 28, 1998 -- (735,351) -- (735,351)
------------- ------------- ------------- -------------
Balance, February 28, 1998 $ 1,677,048 $ (601,236) $ (149,983) $ 937,030
------------- ------------- ------------- -------------
|
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
Seychelle Environmental Technologies Seychelle Water
("SET") formerly RoyalNet Technologies ("SWT")
---------------------------------------------------- -----------------------
Preferred Stock Common Stock Common Stock
------------------------ ------------------------ -----------------------
Shares Amount Shares Amount Shares Amount
---------- ---------- ---------- ---------- ---------- ----------
Balance, March 1, 1998 17 $ -- 11,200,643 $ 11,201 -- $ --
Payment of stock subscription
receivable -- -- -- -- -- --
Issuance of Series AA Preferred
Stock, net of issuance costs
of $211,442 26 -- -- -- -- --
Issuance of Series AAA Pre-
ferred Stock 8,000 80 -- -- -- --
Capital Distribution -- -- -- -- -- --
Receivable from stockholder -- -- -- -- -- --
Net Loss for year ended
February 28, 1999 -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Balance, February 28, 1999 8,043 $ 80 11,200,643 $ 11,201 -- $ --
Shareholder advances (unaudited) -- -- -- -- -- --
Conversion of AA preferred stock to
common stock (unaudited) (26) -- 1,337,509 1,338 -- --
Issuance of common stock in connection
with settlement of lawsuit (unaudited) -- -- 100,000 100 -- --
Issuance of common stock for compen-
sation in connection with 504 offering
(unaudited) -- -- 327,000 327 -- --
Cancellation of common stock of former
consultant (unaudited) -- -- (80,000) (80) -- --
Cancellation of common stock in con-
nection with Berkich lawsuit (unaudited) -- -- (4,440,666) (4,441) -- --
Retained Stock Subscription Total
Additional Earnings Receivable and Stockholders'
Paid-In (Accumulated Stockholder Equity
Capital Deficit) Receivable (Deficit)
--------------- --------------- --------------- ---------------
Balance, March 1, 1998 $ 1,677,048 $ (601,236) $ (149,983) $ 937,030
Payment of stock subscription
receivable -- -- 149,983 149,983
Issuance of Series AA Preferred
Stock, net of issuance costs
of $211,442 1,088,558 -- -- 1,088,558
Issuance of Series AAA Pre-
ferred Stock (80) -- -- --
Capital Distribution (992,000) -- -- (992,000)
Receivable from stockholder -- -- (23,588) (23,588)
Net Loss for year ended
February 28, 1999 -- (1,072,937) -- (1,072,937)
--------------- --------------- --------------- ---------------
Balance, February 28, 1999 $ 1,773,526 $ (1,674,173) $ (23,588) $ 87,046
Shareholder advances (unaudited) -- -- (2,021) (2,021)
Conversion of AA preferred stock to
common stock (unaudited) (1,338) -- -- --
Issuance of common stock in connection
with settlement of lawsuit (unaudited)- 20,213 -- -- 20,313
Issuance of common stock for compen-
sation in connection with 504 offering
(unaudited) 163,173 -- -- 163,500
Cancellation of common stock of former
consultant (unaudited) 80 -- -- --
Cancellation of common stock in con-
nection with Berkich lawsuit (unaudited)- 4,441 -- -- --
|
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
Seychelle Environmental Technologies Seychelle Water
("SET") formerly RoyalNet Technologies ("SWT")
----------------------------------------------------- -------------------------
Preferred Stock Common Stock Common Stock
------------------------- ------------------------- -------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
Issuance of common stock for
commissions (unaudited) -- $ -- 75,000 $ 75 -- $ --
Issuance of common stock in consi-
deration for settlement of note
payable (unaudited) -- -- 30,560 30 -- --
Net income for the period ended
(unaudited) -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance, November 30, 1999 8,017 $ 80 8,550,046$ $ 8,550 -- $ --
=========== =========== =========== =========== =========== ===========
Retained Stock Subscription Total
Additional Earnings Receivable and Stockholders'
Paid-In (Accumulated Stockholder Equity
Capital Deficit) Receivable (Deficit)
----------------- ----------------- ----------------- -----------------
Issuance of common stock for
commissions (unaudited) $ 37,425 $ -- $ -- $ 37,500
Issuance of common stock in consi-
deration for settlement of note
payable (unaudited) 30,530 -- -- 30,560
Net income for the period ended
(unaudited) -- 42,950 -- 42,950
----------------- ----------------- ----------------- -----------------
Balance, November 30, 1999 $ 2,028,050 $ (1,631,223) $ (25,609) $ 379,848
================= ================= ================= =================
|
See accompanying notes to consolidated financial statements.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months For the Years Ended
Ended November 30, February 28,
1999 1998 1999 1998
---------- ----------- ----------- ------------
(Unaudited)
OPERATING ACTIVITIES:
Net profit (loss) $ 42,950 $ (885,370) $(1,072,937) $ (735,351)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 70,989 44,613 60,598 28,683
Provision for doubtful accounts 6,349 12,539 6,861 167
Notes issued for services -- -- 2,707 28,820
Stock issued for services -- 235,891 -- 38,989
Write down carrying value of
receivable from shareholder -- -- 6,525
Write off carrying value of
investment in joint venture -- -- 8,000
Loss on sale of equipment 1,256 -- -- --
Increase (decrease) resulting
from changes in:
Accounts receivable 61,527 (91,112) (133,534) (9,588)
Inventory (110,973) (220,306) (189,379) 90,100
Prepaid assets (2,708) 4,789 (11,082) (6,210)
Receivable from shareholders (2,021) 160,912 160,912 22,291
Other assets (14,201) 11,464 (4,140) (11,750)
Accounts payable (14,647) 16,416 48,744 (3,129)
Accrued liabilities (19,946) 83,684 438,679 5,774
Customer deposits 46 8,334 8,334 (44,486)
--------- ---------- ----------- -----------
Net cash (used in) provided by
operating activities 18,621 (618,146) (684,237) (581,165)
--------- ---------- ----------- -----------
INVESTING ACTIVITIES:
Purchase of property and equipment (23,990) (117,906) (123,447) (89,388)
--------- ---------- ----------- -----------
Net cash used in investing activities (23,990) (117,906) (123,447) (89,388)
--------- ---------- ----------- -----------
|
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Nine Months For the Years Ended
Ended November 30, February 28,
1999 1998 1999 1998
---------- ----------- ----------- ------------
(Unaudited)
FINANCING ACTIVITIES:
Issuance of common stock $ -- $ -- $ -- $1,242,642
Issuance of preferred stock -- 1,300,000 1,300,000 700,018
Cash paid for capital transaction
fees -- (171,451) (171,451) (220,834)
Cash proceeds from stock
subscriptions receivable -- 149,983 149,983 --
Equity draws and distributions -- (992,000) (992,000) (486,006)
--------- ---------- ---------- ----------
Net cash provided by financing
activities -- 286,532 286,532 1,235,820
--------- ---------- ---------- ----------
Net change in cash and cash
equivalents (5,369) (449,520) (521,152) 565,267
Cash and cash equivalents,
beginning of period 52,431 573,583 573,583 8,316
--------- ---------- ---------- ----------
Cash and cash equivalents,
end of period $ 47,062 $ 124,053 $ 52,431 $ 573,583
========= ========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
CASH PAID DURING THE PERIOD
FOR:
Interest $ 2,682 $ -- $ -- $ 7,592
Income Taxes $ -- $ -- $ -- $ 800
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Notes issued for services $ -- $ 6,861 $ 6,861 $ 28,820
Stock issued for services and
settlement of litigation $ 223,025 $ -- $ -- $ 38,989
Stock issued for settlement
of debt $ 31,530 $ -- $ -- $ --
========= ========== ========== ==========
|
See accompanying notes to consolidated financial statements.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization
Seychelle Environmental Technologies, Inc. ("SET"), a Nevada corporation, was formed in 1998 for the purpose of merging into and surviving the former RoyalNet, Inc., a Utah shell corporation, formed in 1986.
Seychelle Water Technologies ("SWT") was formed in February 1997 under the laws of the state of Nevada for the purpose of marketing the products of Aquavision, a sole proprietorship operating since 1996. Prior to January 1998, SWT operations were limited primarily to fundraising activities.
On January 30, 1998, SET entered into a stock exchange agreement with SWT, whereby SWT shareholders emerged as the majority stockholder of SET. This reverse acquisition resulted in SWT becoming a wholly-owned subsidiary of SET.
On January 31, 1998, SET purchased the assets of Aquavision for $9.5 million. Only $1.2 million was paid to the Aquavision owners and the transaction was not consummated. Effective February 28, 1999, the Company revised its Purchase Agreement and issued 8,000 shares of its Series AAA Preferred Stock (described in Note 7) to Aquavision's owners. The Company sued its controlling stockholder and, subsequent to year end, the controlling stockholder returned his shares to the Company (see Note 11). As a result, Aquavision's owners became the ultimate controlling stockholder of SET. Accordingly, the above transactions were treated as a reverse acquisition where SWT and Aquavision are the accounting acquirors, and are included in the accompanying consolidated financial statements at their historical bases. Because the assets were acquired from existing shareholders, the $1.2 million payment was treated as a distribution and the Series AAA stock issuance was treated as a recapitalization. Costs to acquire SET ($100,000) were expensed as period costs.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)
Description of Business
SET develops, manufacturers and sells water filtration products through retailers and multilevel marketing programs. The Company sells its products throughout the United States and abroad including Europe and Asia. Geographic information is as follows:
For the Years Ended February 28,
1999 1998
------------- -------------
Water filtration products sold to
external customers (1) (2) in:
the United States $ 666,139 $ 534,762
Europe and Asia 40,510 131,790
Canada 3,927 36,688
----------- ----------
Total $ 710,576 $ 703,240
=========== ==========
|
(1) Sales to external customers are attributed based on the country of residence of the customer.
(2) There are no long lived assets outside the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management's Estimates
The preparation of the consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of SET (formerly known as RoyalNet), its wholly-owned subsidiary, SWT, and the operations of Aquavision through the date of the merger, (collectively, the "Company"). All significant intercompany transactions and balances have been eliminated.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
Sales are recognized upon shipment of the products.
Cash and Cash Equivalents
The Company considers short-term investments which have maturities of three months or less at the date of acquisition to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market using the average cost method.
Property and Equipment
Property and equipment, including significant improvements thereto, are stated at cost and are depreciated using the straight-line method over an estimated useful life of 5 years. Maintenance and repairs are charged to expense as incurred.
Intangible Assets
Intangible assets include patents, product rights and technology costs. All patent, product rights and technology costs are capitalized and amortized over ten years using the straight-line method. The Company assesses whether there has been a permanent impairment of the value of intangible assets by considering factors such as expected future product revenues, anticipated product demand and prospects and other economic factors. Total intangible assets amounted to $8,948, net of $0 accumulated amortization at February 28, 1999.
Impairment of Long-Lived Assets
Management periodically reviews the realizability of long-lived assets based on an evaluation of remaining useful lives, cash flows and profitability projections and has determined that there is no impairment at February 28, 1999.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Research and Development Expenses
Research and development costs are expensed as incurred and amounted to $41,866 and $5,741 for the years ended February 28, 1999 and 1998, respectively.
Advertising Expenses
Advertising expenses are expensed as incurred. Total advertising expenses amounted to $40,455 and $258,356 for the years ended February 28, 1999 and 1998.
Risk Concentrations
The Company places its temporary cash investments with high credit quality financial institutions. At times, such investments may be in excess of the FDIC insurance limit.
The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Receivables generally are due in 30 days. Credit losses have consistently been within management's expectations. An allowance for doubtful accounts is recorded when it is probable that all or a portion of the receivables balance will not be collected.
During fiscal 1999 and 1998, the Company derived approximately 27% and 23% of its net sales from one and two of its major customers, respectively. At year end 1999 and 1998, these major customers accounted for approximately 43% and 1% of accounts receivable.
Income Taxes
The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the consolidated financial statements and the tax basis of assets and liabilities using enacted rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loss Per Common Share
Effective December 31, 1997, the Company adopted SFAS No. 128, "Earnings Per Share." This new standard requires dual presentation of basic and diluted earnings per share ("EPS") on the face of the statement of income and requires reconciliation of the numerators and the denominators of the basic and diluted EPS calculations.
Basic net loss per common share is computed by dividing net loss by the weighted average number of outstanding common shares during the periods presented. For purposes of SFAS No. 128, basic loss per share and diluted loss per share are the same amount as the impact of additional common shares that might have been issued under the Company's stock option plan, warrants and convertible debt would be anti-dilutive.
Fair Value of Financial Instruments
The carrying value of financial instruments included in current assets and liabilities approximates fair value because of the short maturity of these items.
Issuance of Stock for Services
Shares of the Company's common stock issued for services are recorded in accordance with Accounting Principles Board Opinion ("APBO") No. 16, "Business Combinations" and SFAS No. 123, "Accounting for Stock-Based Compensation", at the fair market value of the stock issued or the fair market value of the services provided, whichever value is the more clearly evident.
Stock Compensation Plan
SFAS No. 123 encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company elected to account for stock-based compensation using the intrinsic value method prescribed in APBO No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Comprehensive Income
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income," which requires presentation of comprehensive income within an entity's primary financial statements. Comprehensive income is defined as net income as adjusted for changes to equity resulting from events other than net income or transactions related to an entity's capital structure. Comprehensive income equaled net income for all periods presented.
Segment Disclosures
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." This statement requires public enterprises to report financial and descriptive information about its reportable operating segments and establishes standards for related disclosures about product and services, geographic areas, and major customers. At this time, the Company has only one segment.
Unaudited Interim Financial Information
The accompanying interim consolidated balance sheet as of November 30, 1999 and the consolidated statements of operations, changes in stockholders' equity and cash flows for the nine months ended November 30, 1999 and 1998, together with the related notes are unaudited and include all normal recurring adjustments that the Company considers necessary. Inventories and cost of goods sold have been estimated based on the purchases and sales from the most recent physical inventory. Results for the nine months ended November 30, 1999 and 1998 are not necessarily indicative of results for an entire year.
3. INVENTORIES
At February 28, 1999, inventories consist of:
Raw Materials $ 219,902
Work In Progress 16,620
Finished goods 27,347
---------
$ 263,869
=========
|
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at cost, less accumulated depreciation as of February 28, 1999:
Tooling $ 238,056
Equipment 12,090
Vehicles 45,600
Furniture and fixtures 12,400
Computer equipment 18,116
Leasehold improvements 2,975
---------
$ 329,237
Accumulated depreciation 106,954
---------
$ 222,283
=========
|
Total depreciation expense for the years ended February 28, 1999 and 1998 was $60,598 and $28,683, respectively.
5. ACCRUED EXPENSES
Accrued expenses consist of:
Accrued legal expenses and settlements $ 182,813
Accrued wages and benefits 105,885
Accrued outside services 95,000
Accrued consulting fees 37,500
Other accrued expenses 60,754
----------
$ 481,952
=========
|
The accrued legal expenses and settlements represent the amounts the Company agreed to pay in connection with various litigation along with accrued attorneys' fees related to these actions.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. ACCRUED EXPENSES (CONTINUED)
During fiscal 1999, the Company replaced all of its employees with leased employees from a Professional Employer Organization (PEO). The accrued wages and benefits represent amounts due to the PEO for the outstanding amounts due at February 28, 1999.
Of the $481,952 in accrued expenses, $384,733 were settled after year end through the issuance of 829,000 shares of common stock of which, 502,000 shares had been issued by November 30, 1999.
6. NOTES PAYABLE
At February 28, 1998, $25,034 principal plus $6,496 in accrued interest at 10% per annum was due on a convertible note which matured July 1, 1998. In November 1999, the note was renegotiated and as such will be repaid by the issuance of 30,560 shares of common stock and payment of $2,503.
7. CAPITAL STRUCTURE
Common Stock
The holders of Common Stock have one vote per share on all matters (including election of Directors) without provisions for cumulative voting. The Common Stock is not redeemable and has no conversion or preemptive rights.
In the event of liquidation of the Company, the holders of Common Stock will share equally in any balance of the Company's assets available for distribution to them after satisfaction of creditors and the holders of the Company's senior securities. The Company may pay dividends, in cash or in securities or other property when and as declared by the Board of Directors from funds legally available therefore, but has not declared or paid dividends on its Common Stock.
Preferred Stock
The Board of Directors has the authority to issue Preferred Stock and to fix and determine its series, relative rights and preferences to the fullest extent permitted by the laws of the State of Nevada and its articles of incorporation. As of February 28, 1999, three classes of Preferred Stock were issued and outstanding.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. CAPITAL STRUCTURE (CONTINUED)
Preferred Stock (Continued)
Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred Stock
Series "A" Preferred Stock has rights which are superior to all other securities of the Company, including upon liquidation and as to payment of dividends, if any, carries a cumulative dividend of 13.5% per annum, is non-voting, and is redeemable by the Company at any time at face value and is convertible into common shares of the Company at the lesser of $10 per share or 85% of the last five closing bid prices. A total of 17 shares are issued and outstanding as of February 28, 1999 and November 30, 1999 (unaudited).
Series "AA" Non Voting, Cumulative, Convertible Preferred Stock
Series "AA" Preferred Stock has rights which are superior to all other securities of the Company except to Series "A" Preferred Stock, including upon liquidation and as to payment of dividends, if any, carries a cumulative dividend which was set by the Board of Directors at 10% prior to the time of issuance thereof, is non-voting, redeemable by the Company at any time at face value and is convertible into common shares of the Company at 85% of the last five closing bid prices. On June 14, 1999, all of the Series "AA" Non Voting, Cumulative, Convertible Preferred Stock were converted into 1,337,509 shares of common stock.
Series "AAA" 12% Cumulative, Convertible Preferred Shares
Series "AAA" Preferred Stock has rights which are superior to all other securities of the Company except Series "A" and the Series "AA" Preferred Stock, including upon liquidation and as to payment of dividends, if any. Series "AAA" Cumulative, Convertible Preferred Voting Stock carries a 12% per annum dividend payable in stock or cash, is voting, with each share equal to 100 shares of common stock, and is redeemable, at the Company's option, according to the following procedure: upon written notice of conversion from the holders, the Company shall have 45 days from receipt of such notice to repurchase for cash up to 2,000 shares of the Series AAA 12% Cumulative, Convertible Preferred Shares at $1,000 per share.
As a result of the settlement of the litigation involving the Company and its former Chairman, in which the Company was seeking to rescind the issuance of all common shares in the Company previously issued to the former Chairman, the number of common shares issuable to the holders pursuant to the conversion provisions of the Series "AAA" Cumulative, Convertible Preferred Shares
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. CAPITAL STRUCTURE (CONTINUED)
Preferred Stock (Continued)
are reduced from 8,000,000 shares to 4,500,000 shares (but after pro rata adjustments, if any, for stock dividends, stock splits, reverse stock splits, and any other similar capital stock adjustments of a general nature). There are 8,000 shares issued and outstanding at February 28, 1999 and November 30, 1999 (unaudited). The 12% cumulative dividend shall be computed based on the preferred stock par value.
Aggregate preferred redemption value and cumulative dividends in arrears at February 28, 1999 and November 30, 1999 are as follows:
November 30, 1999 February 28, 1999
----------------- -----------------
(Unaudited)
Aggregate redemption value $ 5,729,706 $ 6,888,379
Cumulative preferred dividend $ 379,706 $ 238,378
Per share preferred dividend $ .03 $ .03
============ ============
|
Stockholder's Receivable
Represents advances made to a stockholder and not reimbursed at the date of these financial statements.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. CAPITAL STRUCTURE (CONTINUED)
Warrants
Outstanding warrants at February 28, 1999 and 1998 were as follows:
FEBRUARY 28, 1999 February 28, 1998
------------------ ------------------
SHARES WAEP* Shares WAEP*
------ ----- ------ -----
Outstanding, beginning of year - - - -
Granted 100,000 $ 1.50 - -
Canceled-expired - - - -
Exercised - - - -
------- ------ ----- -----
Outstanding, end of year 100,000 $ 1.50 - -
======= ====== ===== =====
Exercisable, end of year 100,000 $ 1.50 - -
======= ====== ===== =====
|
* Weighted average exercise price
8. INCOME TAXES
The components of the provision for income taxes are as follows:
Years Ended February 28,
------------------------
1999 1998
-------- --------
Current:
State $ - $ -
Federal - -
--------- ---------
Deferred:
State (46,360) (77,136)
Federal (360,157) (303,107)
Valuation allowance 406,517 380,243
--------- ---------
$ - $ -
========= =========
|
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAXES (CONTINUED)
The reconciliation of the effective tax rates and U.S. statutory tax rates are as follows:
Years Ended February 28,
------------------------
1999 1998
-------- -------
Tax (benefit) at statutory rate (34%) (34%)
Tax benefit exclusion relating to Aquavision prior to
January 31, 1998 - 33%
Deferred tax effect of goodwill relating to Aquavision
acquisition - (46%)
Effect of state tax benefit (4%) -
Other 1% (3%)
Change in valuation allowance 37% 50%
----- -----
- -
===== =====
|
Since Aquavision was a sole proprietorship prior to January 31, 1998, the tax benefit relating to the period prior to January 31, 1998 was excluded from the computation of the tax benefit, deferred taxes and NOL's carryforward.
At February 28, 1999, the Company has net operating loss (NOL) carryforwards, for income tax reporting purposes, of approximately $1,126,919 and $563,144 available to offset future federal and California taxable income, respectively. The federal carryforwards expire in 2009 and the California carryforwards expire in 2004.
At February 1999, the Company had available tax credit carryforwards comprised of federal and state research and experimentation credits of $4,187 and $2,303, respectively. The research and experimentation credit carryforwards expire in 2019 for federal purposes and do not expire for California purposes.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAXES (CONTINUED)
The components of the net deferred tax asset and (liability) are as follows:
Ended February 28,
-----------------------------------
1999 1998
Goodwill $ 342,748 $ 366,917
Net operating loss carryforward 427,591 8,628
Depreciation and amortization 5,623 -
Other 9,287 4,698
--------- ---------
Less: Valuation allowance (785,249) (380,243)
--------- ---------
$ - $ -
========= =========
|
9. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases office space under an operating lease that expires in fiscal year 2000. Total rent expense amounted to $75,237 and $70,796 for the years ended June 30, 1999 and 1998.
Other Commitments and Contingencies
The Company's current management believes that the Company's and SWT's former management entered into certain contracts, agreements and transactions which were not properly authorized or consummated. At the date of these consolidated financial statements, the Company is not aware of any formal claim relating to these contracts, agreements or transactions and believe that any such claims would be without merit. The Company cannot currently estimate the potential liability that would arise if such claim were to be made. Accordingly, no accrual has been made for these contingencies.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Legal Proceedings
No legal proceedings of a material nature to which the Company is a party are pending at November 30, 1999, and the Company knows of no legal proceedings of a material nature pending or threatened or judgments entered against any director or officer of the Company in his capacity as such.
In July 1999, the Company settled a lawsuit which it had brought against its former Chairman, Mr. DuSean Berkich, and certain of his affiliates. Under the terms of the settlement, Mr. Berkich and his affiliates returned a total of 4,400,666 common shares for cancellation by the Company, and the Company released Mr. Berkich and his affiliates from all future liability to the Company.
Indemnification Agreement
The Company agreed to indemnify its agent with respect to a claim brought against the agent and his firm with respect to services performed by the firm on behalf of the Company. The Company was not named as a defendant and legal counsel has advised the Company that, at the date of these consolidated financial statements, it is not probable that there will be an unfavorable outcome to the Company.
10. RELATED PARTY TRANSACTIONS
A board member's firm provided legal services for the Company during the 1999 fiscal year for which the firm was compensated $2,000 in cash payments and 100,000 shares of common stock granted after year end valued at $50,000. In addition, the board member was granted 150,000 shares of common stock valued at $75,000 after year end as consideration for services rendered as a member of the board of directors.
Another board member's firm was engaged to advise the Company on capitalization issues during the 1998 and 1999 fiscal years for which the firm was compensated $54,478 and $150,451, respectively, as well as the issuance of 559,266 shares of common stock valued at $559. Subsequent to year end, the board member was granted 40,000 shares of common stock valued at $20,000 for services rendered as a member of the board of directors.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. NET PROFIT (LOSS) PER SHARE
For the Nine Months For the Years Ended
Ended November 30, February 28,
1999 1998 1999 1998
--------- ---------- ---------- -----------
NUMERATOR:
Net profit (loss) $ 42,950 $ (885,370) $(1,072,937) $ (735,351)
Preferred stock dividends (141,268) (169,761) (230,503) (7,875)
---------- --------- ----------- ----------
Loss available to common
stockholders (98,318) (1,055,131) (1,303,440) (743,226)
========== =========== =========== ==========
DENOMINATOR:
Weighted average shares
outstanding 9,525,863 11,200,643 11,200,643 8,416,686
---------- ----------- ----------- ----------
Basic profit (loss) per share $ (.01) $ (.09) $ (0.12) $ (0.09)
========== =========== =========== ==========
|
Options to purchase common stock and convertible preferred stock, were outstanding during the 1999 and 2000 fiscal years (see Note 7) but were excluded in the computation of the diluted loss per share because their inclusion would have an anti-dilutive effect.
Also excluded from the computation of diluted loss per share because of their anti-dilutive effect was preferred stock convertible to approximately 6,888,380 and 857,900 shares of common stock at February 28, 1999 and 1998, respectively.
The fiscal 1999 loss per share includes the operations of Aquavision, a sole proprietorship, the Company's predecessor (see Note 1).
Subsequent to year end, approximately 4,400,000 shares of common stock were canceled. The effect of this cancellation on loss per share would increase the loss per share by $0.07 and $0.10 per share for the years ended February 28, 1999 and 1998, respectively.
Subsequent to year end, the Series AA preferred stock was converted into common stock (see Note 7).
PART III
ITEM 1. INDEX TO EXHIBITS.
Exhibit
Number Description
------ -----------
2A Plan of Exchange between Seychelle Environmental Technologies,
Inc. and Seychelle Water Technologies, Inc.
3A Articles of Incorporation
3B Articles of Merger of Royal Net, Inc. into Seychelle
Environmental Technologies, Inc.
3C Amendment to Articles of Incorporation re: Series "A"
Preferred Stock
3D Amendment to Articles of Incorporation re: Series "AA"
Preferred Stock
3E Amendment to Articles of Incorporation re: Series "AAA"
Preferred Stock
3F Bylaws
10A Purchase Agreement with Aqua Vision
10B Amended Purchase Agreement with Aqua Vision
|
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
Dated: 2/7/00 By: /s/ Carl Palmer
------ -------------------------------
Carl Palmer
President
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
CHIEF FINANCIAL OFFICER
Dated: 2/7/00 By: /s/ Carl Palmer
------ --------------------------------
Carl Palmer
Treasurer and Director
Dated: 2/7/00 By: /s/ Paul H. Lusby
------ --------------------------------
Paul H. Lusby
Secretary and Director
Dated: 2/7/00 By: /s/ Donald S. Whitlock
------ --------------------------------
Donald S. Whitlock
Director
|
INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
2A Plan of Exchange between Seychelle Environmental Technologies,
Inc. and Seychelle Water Technologies, Inc. dated January 30,
1998.
3A Articles of Incorporation dated January 23, 1998.
3B Articles of Merger of Royal Net, Inc. into Seychelle
Environmental Technologies, Inc.
3C Amendment to Articles of Incorporation re: Series "A"
Preferred Stock as of January 31, 1998.
3D Amendment to Articles of Incorporation re: Series "AA"
Preferred Stock as of June 5, 1998.
3E Amendment to Articles of Incorporation re: Series "AAA"
Preferred Stock as of February 18, 1999.
3F Bylaws
10A Purchase Agreement with Aqua Vision
10B Amended Purchase Agreement with Aqua Vision
|
2A
Plan of Exchange between Seychelle Environmental Technologies, Inc. and Seychelle Water Technologies, Inc.
AGREEMENT AND PLAN OF EXCHANGE
between
ROYAL NET, INC. an Utah corporation
and
SEYCHELLE WATER TECHNOLOGIES, INC., an Nevada corporation;
January 30th, 1998
TABLE OF CONTENTS
Page
Recitals ........................................................................................................1
Agreement .......................................................................................................1
1. Plan of Exchange ..............................................................................1
2. Issuance of Shares ............................................................................2
3. Exemption ......................................................................................3
4. Representations and Covenants of Acquiree .....................................................3
5. Representations and Covenants of Acquiring Corporation ........................................4
6. Delivery Date .................................................................................6
7. Conditions Precedent to the Obligations of
Acquiree ....................................................................................6
8. Conditions Precedent to the Obligations of Acquiror ...........................................8
9. Indemnification ...............................................................................8
10. Nature and Survival of Representations ........................................................9
11. Documents at Closing ..........................................................................9
12. Miscellaneous ................................................................................10
Signature Page ...............................................................................11
|
AGREEMENT AND PLAN OF EXCHANGE
This Agreement and Plan of Exchange (hereinafter known as the "Agreement") is entered into this 30th day of January, 1998, by and between ROYAL NET, INC., an Utah corporation, (hereinafter known as "Acquiror") and SEYCHELLE WATER TECHNOLOGIES, INC., an Nevada corporation (hereinafter known as "Acquiree").
RECITALS
Acquiror desires to enter into a transaction whereby Acquiree will
exchange all of its issued and outstanding capital shares with Acquiror, with
Acquiror becoming the parent company. It is the intention of the parties hereto
that this transaction comply with the tax-free exchange provisions of Section
368 (a)(1)(B) of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, for the mutual consideration set out herein, the parties agree as follows:
AGREEMENT
1. Plan of Exchange.
(a) It is the intention of the parties hereto that Acquiree will exchange all of its issued and outstanding capital shares with Acquiror, with Acquiror becoming the parent company. Acquiror shall issue shares of Acquiror in common stock to the Stockholders of Acquiree solely in exchange for their shares in Acquiree. It is the intention of the parties hereto that this transaction comply with the tax-free exchange provisions of Section 368 (a)(1)(B) of the Internal Revenue Code of 1986, as amended. Prior to the consummation of this exchange, the Acquiror will have changed its domicile to the State of Nevada and its name of Seychelle Environmental Technologies, Inc., or such derivation thereof as may be approved by the appropriate state authorities. This change of domicile shall be effected by a statutory merger with Seychelle Environmental Technologies, Inc., a Nevada corporation.
(b) Subject to the terms and conditions in this Agreement, Acquiror and Acquiree will promptly, upon the satisfaction of the conditions and obligations set forth herein, proceed with the Exchange and file on the Delivery Date (which is defined in Paragraph 6 herein) Articles of Exchange with the Secretary of State for the State of Nevada meeting the requirements of the Nevada Private Corporations Act and will take all other action necessary and appropriate to consummate the Exchange pursuant to this Agreement. The parties hereto agree that the said Exchange shall be submitted to the Stockholders of Acquiree and Acquiror for their approval, and the appropriate officers and directors of Acquiree and Acquiror agree to use their best efforts to secure approval of the Exchange.
(c) As a result of the Exchange and without any action on the part of the holder thereof, all Acquiree shares of Common Stock issued and outstanding at the Delivery Date shall be exchanged, and each holder of a certificate representing any such Acquiree shares of Common Stock shall thereafter cease to have any rights with respect to such Acquiree, except the right to receive, without interest, such number of fully paid and nonassessable shares of Acquiror Common Stock as is provided in this Agreement upon the surrender of such certificate.
The Acquiree stock options outstanding on the Delivery Date, if any, shall not expire on the Delivery Date but shall be exercisable in accordance with their respective terms to acquire shares of Acquiror Common Stock, except that the number of shares and the exercise prices thereof shall be adjusted to correspond to the capital structure of the Acquiree, whether before or after the Delivery Date. After the Delivery Date, Acquiror shall assume the obligation of Acquiree to issue Acquiror Common Stock pursuant to such stock options.
Notwithstanding the foregoing, any exchange agent or any party hereto shall be not liable to a holder of shares of Common Stock of Acquiree for any shares of Acquiror's Common Stock or dividends or any other distributions thereon delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.
The persons who are Directors of Acquiror immediately prior to the Delivery Date shall, from and after the Delivery Date, resign and be replaced by the Directors of Acquiree until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Acquiror's Articles of Incorporation and Bylaws.
The persons who are Officers of Acquiror immediately prior to the Delivery Date shall, from and after the Delivery Date, resign and be replaced by the Officers of Acquiror until their successor have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Acquiror's Articles of Incorporation and Bylaws.
(d) On the Delivery Date (which is defined as the date in Paragraph 6 herein), Stockholders of Acquiree will deliver certificates for their shares of Acquiree Common Stock to Acquiror or an agent appointed by Acquiror and, upon the surrender of said certificates, Stockholders of Acquiree shall be entitled to receive in exchange therefor a certificate representing the number of whole shares of Common Stock of Acquiror into which those shares of Acquiree have been converted as provided in this Agreement. All fractional shares shall be rounded up to the next whole number. A list of the shares of Acquiree, the owners thereof, and shares of Acquiror Common Stock to be received by said Stockholders of Acquiree shall be tendered to Acquiror as of the Delivery Date. The delivery of the shares will be made to the Stockholders of Acquiree as of the record date as set by Acquiree and will be without restrictive legend on each certificate, except as required by applicable statute, regulation, or contract. This Exchange is being made in accordance with Rule 504 of the Securities Act of 1933, as amended. (the "Securities Act").
2. Issuance of Shares. The parties agree that a total of approximately 12,500,000 shares of Acquiror Common Stock(to be issued from the new Nevada corporation) will be issued on the basis of one new share for each share currently outstanding to the Stockholders of record of Acquiree as certified by Acquiree on the Delivery Date (as defined in Paragraph 6 herein).
3. Exemption. Acquiror agrees to file with the Securities and Exchange Commission (the "SEC") a Form D and such other form as may be appropriate under then applicable SEC rules and regulations under the Securities Act and appropriate state laws pertaining to the
shares of Common Stock of Acquiror to be issued to those persons who are Stockholders of Acquiree on the Delivery Date.
4. Representations and Covenants of Acquiree. Acquiree specifically hereby represents and covenants that, effective the Delivery Date, the following will be true and correct to the best of its knowledge, information, and belief.
(a) The Stockholders as of the record date for the special Stockholder meeting as set by Acquiree will be the sole owners of all of the issued and outstanding shares of Common Stock of Acquiree, and such shares are free from claims, liens, or other encumbrances.
(b) The issued shares of Acquiree Common Stock constitute validly issued shares of Acquiree, and such shares will be fully-paid and nonassessable.
(c) The unaudited financial statements of Acquiree which have been delivered to Acquiror, will be complete, accurate and will fairly present the financial condition of Acquiree as of the dates thereof and the results of its operations for the periods covered. There will be no debts, liabilities, or obligations, either accrued, absolute, fixed or contingent, not reflected or reserved in such financial statements other than contracts or obligations in the ordinary and usual course of business; and no such contracts or obligations in the usual course of business will constitute liens or other liabilities which, if disclosed, would alter substantially the financial condition of Acquiree as reflected in such financial statements.
(d) There will not be any negative material changes in the financial position of Acquiree, except changes arising in the ordinary course of business, which changes will in no event adversely affect the financial position of Acquiree.
(e) Except as set forth in Exhibit A hereto and except as previously disclosed in the financial statements provided under Paragraph 4(c) herein, to the best of Acquiree's knowledge, information and belief, it will not be involved in, and will not have received judicial notice of any pending litigation or governmental investigation or proceeding not reflected in such financial statements, or otherwise disclosed in writing to Acquiror and, to the best knowledge of Acquiree, no material litigation, claims, assessments, or governmental investigation or proceeding is threatened against Acquiree or its properties.
(f) Acquiree will be in good standing in its jurisdiction of incorporation, and will be in good standing and qualified to do business in each jurisdiction where required to be so qualified.
(g) Acquiree will have complied with all applicable laws in connection with its formation, issuance of securities, organization, capitalization and operations, and to the best of Acquiree's knowledge, information and belief, no contingent liabilities will have been threatened or claims made, and no basis for the same exists with respect to said operations, formation or capitalization, including claims for violation of any US state or federal securities laws.
(h) Acquiree will have filed all governmental, tax or related returns and reports due or required to be filed and will have paid all taxes or assessments which have or which shall become due.
(i) Except as disclosed in this Agreement or on any Exhibit, Acquiree will not have breached any material agreement to which it may be a party.
(j) The Acquiree has no subsidiary corporations.
(k) The corporate financial records, minute books, and other documents and records of Acquiree will be available to present management of Acquiror prior to the Delivery Date and turned over to new management of Acquiror in their entirety on the Delivery Date.
(l) The execution of this Agreement will not violate or breach any agreement, contract, or commitment to which Acquiree is a party and will have been duly authorized by all appropriate and necessary action.
(m) The authorized capitalization of Acquiree will be as set forth in the most recent unaudited balance sheet of Acquiree as described in Paragraph 4(c), except as may be specifically supplemented in writing by Acquiree. All outstanding shares will have been duly authorized, validly issued and will be fully paid and nonassessable with no personal liability attaching to the ownership thereof. Except as set forth in Exhibit B hereto, there will be no outstanding convertible securities, warrants, options or commitments of any nature which may cause authorized but unissued shares to be issued to any person except as shown in the most recent financial statement of Acquiree.
(n) To the best knowledge of Acquiree, Acquiree will not be subject to any material labor disputes or disagreements, either actual or contingent.
(o) To the best knowledge of Acquiree, Acquiree's products, materials and brochures will not infringe the patent or copyright rights of any other person or entity.
(p) As of the Delivery Date, the management of Acquiree will have, to the best of management's knowledge, disclosed all events, conditions and facts materially affecting the business and prospects of Acquiree and its assets. Acquiree will not have, at the Delivery Date, withheld knowledge of any such events, conditions, and facts which Acquiree knows, or has reasonable grounds to know, may materially affect the business and prospects of Acquiree or its assets.
5. Representations and Covenants of Acquiring Corporation. Acquiror specifically hereby represents and covenants that, effective the Delivery Date, the following will be true and correct to the best of its knowledge, information, and belief.
(a) As of the Delivery Date, the Acquiror shares of Common Stock to be delivered to the Stockholders of Acquiree will constitute valid and legally issued shares of Acquiror as reflected as a result of the change of Acquiror's state of domicile, fully-paid and
nonassessable, and will be legally equivalent in all respects to the Common Stock of Acquiror issued and outstanding as of the date thereof.
(b) The officers of Acquiror will have been duly authorized to execute this Agreement and will have taken all actions required by law and agreements, charters, and bylaws, to properly and legally execute this Agreement.
(c) The audited year-end financial statements of Acquiror which includes the periods ending February 28, 1997, December 31, 1996 and December 31, 1995, which have been delivered to Acquiree, are complete, accurate and fairly present the financial condition of Acquiror as of the dates thereof and the results of its operations for the periods covered. There are no liabilities, either fixed or contingent, not reflected in such financial statements other than contracts or obligations in the ordinary and usual course of business; and no such contracts or obligations in the usual course of business constitute liens or other liabilities which, if disclosed, would alter substantially the financial condition of such Acquiror as reflected in such financial statements. These financial statements have been prepared in accordance with US Generally Accepted Accounting Principles consistently applied. Prior to and as of the Delivery Date, there will not be any material changes in the financial position of Acquiror, except changes arising in the ordinary course of business, which changes will in no event adversely affect the financial condition of the Acquiror.
(d) Acquiror will not be involved in any pending litigation, claims, or governmental investigation or proceeding and there will be no lawsuits, claims, assessments, investigations, or similar matters, to the best knowledge of management, threatened or contemplated against Acquiror, its management or properties.
(e) As of the Delivery Date, Acquiror will be duly organized, validly existing and in good standing under the laws of the state of incorporation; it will have the corporate power to own its property and to carry on its business as now being conducted and will be duly qualified to do business in any jurisdiction where so required.
(f) Acquiror will have filed all federal, state, county and local income, excise, property and other tax returns, forms, or reports, which are due or required to be filed by it prior to the Delivery Date and will have paid or made adequate provision for the payment of all taxes, fees, or assessments which have or may become due pursuant to such returns or pursuant to any assessments received.
(g) Except as previously disclosed, Acquiror will not have breached, nor will there be any pending or threatened claims or any legal basis for a claim that Acquiror has breached, any of the terms or conditions of any agreements, contracts or commitments to which it is a party or is bound and the execution and performance hereof will not violate any provisions of applicable law of any agreement to which Acquiror is subject.
(h) The present capitalization of Acquiror will be comprised of authorized Common Stock of 50,000,000 shares, $0.001 par value, of which no more than 300,000 shares will be issued and outstanding at the Delivery Date and authorized preferred stock
of 1,000,000 shares, with a $0.01 par value, to have such classes and preferences as the Acquiror may determine from time to time. No preferred shares will be issued and outstanding. All outstanding shares will have been duly authorized, validly issued, and fully paid. There will not be outstanding or presently authorized securities, warrants, options or related commitments of any nature.
(i) Acquiror has no subsidiary corporations.
(j) The shares of Common Stock of Acquiror to be issued to Acquiree's Stockholders as of the Delivery Date, will be validly issued, nonassessable and fully-paid under Nevada corporation law and will be registered pursuant to a Rule 504 offering as applicable under federal and state securities laws.
(k) Acquiror will have, disclosed all events, conditions and facts materially affecting the business and prospects of Acquiror. Acquiror will not have withheld disclosure of any such events, conditions, and facts which it, through management, has knowledge of, or has reasonable grounds to know, may materially affect the business and prospects of Acquiror.
6. Delivery Date. The Delivery Date shall be the date that a closing is held at such place as the parties may mutually agree, which date is expected to be January 30th, 1998, or such date as may mutually be agreed to after the date that the transaction contemplated hereby has been approved by the Stockholders of the Acquiree and Acquiror. Certain exhibits, etc. may be delivered subsequent to the Delivery Date upon the mutual agreement of the parties hereto. The Stockholders will be deemed to have accepted, as of the Delivery Date, delivery of the certificates of stock to be issued in their respective names.
7. Conditions Precedent to the Obligations of Acquiree. All obligations of Acquiree under this Agreement are subject to the fulfillment, prior to, as of this date or at the Delivery Date, of each of the following conditions:
(a) The representations and covenants by or on behalf of Acquiror contained in this Agreement or in any certificate or document delivered to Acquiree pursuant to the provisions hereof shall be true in all material respects at and as of the Delivery Date as though such representations and warranties were made at and as of such time.
(b) Acquiror shall have performed and complied with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by it prior to or at the Delivery Date, subject only to the conditions required on the Delivery Date.
(c) A comfort letter shall be delivered to the Acquiree from the Acquiror's accountant, Andersen, Andersen & Strong, LLC. The comfort letter shall delivered by said independent public accountants shall be in form and substance satisfactory to the Acquiree and shall be to the effect that:
(1) they are public accountants, independent with respect to Acquiror, within the meaning of the Securities Act and applicable published rules and regulations thereunder;
(2) the financial statements of the Acquiror audited by them comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the related published rules and regulations; and
(3) they have carried out procedures to a specified
date not more than 10 business days prior to the
Delivery Date on, which constitutes an examination in
accordance with generally accepted auditing
standards, of the financial statements of the
Acquiror audited by them as follows: (i) read the
unaudited interim financial statements of Acquiror;
(ii) read the unaudited interim financial statements
of Acquiror for the period from the date of the most
recent financial statements through the date of the
latest available interim financial statements; (iii)
read the minutes of the meetings of stockholders and
boards of directors of such Acquiror to a date not
more than 10 business days prior to the Delivery
Date, and (iv) made inquiries of certain officers and
employees of such Acquiror responsible for financial
and accounting matters and, based on such procedures,
nothing has come to their attention which would cause
them to believe that: (A) any unaudited financial
statements of such Acquiror do not comply as to form
in all material respects with the applicable
accounting requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended, and the
published rules and regulations issued by the SEC
thereunder; (B) said financial statements are
presented in conformity with GAAP applied on a basis
substantially consistent with that of the audited
financial statements; and (C) for the period from the
date of the most recent financial statements, either
audited or unaudited to the Delivery Date, there was
no material change (as defined under the applicable
securities laws) in the financial statements of the
Acquiror.
(d) Acquiree shall have received an opinion from the counsel to Acquiror, dated the Delivery Date, in form and substance satisfactory to counsel for the Acquiree, to the effect that:
(1) The Acquiror is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has full corporate power and authority to carry on its business as it now is being conducted and to own and operate its assets and properties;
(2) The outstanding shares of capital stock of the Acquiror are fully paid and are duly and validly issued and non-assessable and have not been issued in violation of any preemptive right of Acquiror's shareholders;
(3) Assuming that all existing directors have been duly elected, all legal and corporate proceedings necessary to be taken by and on the part of the Acquiror in connection with the transactions contemplated by this Agreement and necessary to make the same effective have been duly and validly taken, this Agreement has been duly and validly authorized, executed and delivered by the Acquiror and constitutes the valid and binding agreement of the Seller, Acquiror as limited by applicable bankruptcy, insolvency, reorganization or similar laws at the time in effect;
(4) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby is an event which, of itself or with the giving of notice or the passage of time or both, could: (i) constitute a violation of or conflict with or result in any breach of the Articles of Incorporation or Bylaws of the Acquiror or, to the knowledge of such counsel, any material agreement or instrument to which the Acquiror or any of its subsidiaries is a Acquiror or by which any of them is bound or any judgment, decree, or order to which any of them is subject; or (ii) to the knowledge of such counsel result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever on the property or assets of the Acquiror or any of its subsidiaries, and no such event of itself or with the giving of notice or the passage of time or both will result in the acceleration of the due date of any obligation of the Acquiror; and
(5) To the knowledge of such counsel, there is no action or proceeding pending or threatened against the Acquiror or any of its properties or assets before any court or governmental department, agency or commission to restrain or prohibit, or to obtain substantial damages in respect of, this Agreement or the consummation of the transactions contemplated hereby.
(e) There shall be no more than 300,000 common shares of Acquiror issued and outstanding, after giving effect to a one-for-five reverse split of the Acquiror's common stock and a cancellation of approximately 1,412,892 common shares.
(f) The Directors and Stockholders of Acquiror shall have approved this transaction and such other reasonable matters as requested by Acquiree as pertaining to this transaction.
8. Conditions Precedent to the Obligations of Acquiror. All obligations of the Acquiror under this Agreement are subject to the fulfillment, prior to, as of this date or at the Delivery Date, of each of the following conditions:
(a) The representations and covenants by Acquiree contained in this Agreement or in any certificate or document delivered to Acquiror pursuant to the provisions hereof shall be true at and as of the Delivery Date as though such representations and warranties were made at and as of such time.
(b) Acquiree shall have performed and complied with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by it prior to or at the Delivery Date, including obtaining approval of the Exchange by the Stockholders of Acquiree, subject only to the conditions on the Delivery Date.
9. Indemnification. Within the period provided in paragraph 10 herein and in accordance with the terms of that paragraph, each party to this Agreement, shall indemnify and hold harmless each other party at all times after the date of this Agreement against and in respect of any liability, damage or deficiency, all actions, suits, proceedings, demands, assessments, judgments, costs and expenses including attorney's fees incident to any of the foregoing, resulting from any misrepresentations, breach of covenant or warranty or non-fulfillment of any agreement on the part of such party under this Agreement or from any
misrepresentation in or omission from any certificate furnished or to be furnished to a party hereunder. Subject to the terms of this Agreement, the defaulting party shall reimburse the other party on demand, for any reasonable payment made by said party at any time after the Closing, in respect of any liability or claim to which the foregoing indemnity relates, if such payment is made after reasonable notice to the other party to defend or satisfy the same and such party failed to defend or satisfy the same.
10. Nature and Survival of Representations. All representations, warranties and covenants made by either party in this Agreement shall survive the Closing hereunder and the consummation of the transactions contemplated hereby for two years from the date hereof. Each of the parties hereto is executing and carrying out the provisions of this Agreement in reliance solely on the representations, warranties and covenants and agreements contained in this Agreement and not upon any investigation upon which it might have made or any representations, warranty, agreement, promise or information, written or oral, made by the other party or any other person other than as specifically set forth herein.
11. Documents at Closing. At the Delivery Date, the following transactions shall occur, all of such transactions being deemed to occur simultaneously:
(a) Acquiree will deliver, or cause to be delivered, to Acquiror the following:
(1) all corporate records of Acquiree, including without limitation corporate minute books (which shall contain copies of the Articles of Incorporation and Bylaws, as amended to the Delivery Date), stock books, stock transfer books, corporate seals, and such other corporate books and records as may reasonably requested for review by Acquiror and its counsel;
(2) a certificate of the President of Acquiree to the effect that all representations and warranties of Acquiree made under this Agreement are reaffirmed on the Delivery Date, the same as though originally given on said date;
(3) certified copies of resolutions by Acquiree's Board of Directors and Stockholders authorizing this transaction;
(4) such other instruments, documents and certificates, if any, as are required to be delivered pursuant to the provisions of this Agreement or which may be reasonably requested in furtherance of the provisions of this Agreement;
(b) Acquiror will deliver or cause to be delivered to Acquiree:
(1) stock certificates for Common Stock to be issued as a part of the exchange after the date of approval of this transaction by the Stockholder of Acquiree;
(2) a certificate of the President of Acquiror to the effect that all representations and warranties of Acquiror made under this Agreement are reaffirmed on the Delivery Date, the same as though originally given on said date;
(3) certified copies of resolutions by Acquiror's Board of Directors and Stockholders authorizing this transaction;
(4) such other instruments and documents as are required to be delivered pursuant to the provisions of this Agreement.
12. Miscellaneous.
(a) Further Assurances. At any time, and from time to time, after the Delivery Date, each party will execute such additional instruments and take such action as may be reasonably requested by the other party to confirm or perfect title to any property transferred hereunder or otherwise to carry out the intent and purposes of this Agreement.
(b) Waiver. Any failure on the part of either party hereto to comply with any of its obligations, agreements or conditions hereunder may be waived in writing by the party to whom such compliance is owed.
(c) Brokers. Neither party has employed any brokers or finders with regard to this Agreement unless otherwise described in writing to each party hereto.
(d) Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been given if delivered in person or sent by prepaid first class registered or certified mail, return receipt requested.
(e) Headings. The section and subsection headings in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.
(f) Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
(g) Governing Law. This Agreement was negotiated and is being contracted for in the State of Nevada, and shall be governed by the laws of the State of Nevada.
(h) Binding Effect. This Agreement shall be binding upon the parties hereto and inure to the benefit of the parties, their respective heirs, administrators, executors, successors and assigns.
(i) Entire Agreement. This Agreement is the entire agreement of the parties covering everything agreed upon or understood in the transaction. There are no oral promises, conditions, representations, understandings, interpretations or terms of any kind of condition or inducements to the execution hereof.
(j) Time. Time is of the essence.
(k) Severability. If any part of this Agreement is deemed to be unenforceable the balance
of the Agreement shall remain in full force and effect.
(l) Default Costs. In the event either party hereto has to resort to legal action to enforce any of the terms hereof, such party shall be entitled to collect attorneys fees and other costs from the party in default.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written.
ROYAL NET, INC.
a Utah Corporation
SEYCHELLE WATER TECHNOLOGIES, INC.
a Nevada Corporation
ROYAL NET, INC.
OFFICER'S CERTIFICATE
The undersigned, President of ROYAL NET, INC. ("Acquiror"), does hereby certify that he is a duly elected, qualified and acting officer of Acquiror, a Utah corporation, and as such is familiar with the business affairs of said corporation, and is familiar with and has read that certain Agreement and Plan of Exchange between Acquiror and SEYCHELLE WATER TECHNOLOGIES, INC., dated January 30th, 1998 (the "Agreement").
The undersigned does hereby state that the representations and covenants made by Acquiror contained in said Agreement, to the best of his knowledge, are true and correct at and as of the Delivery Date. In addition, the undersigned hereby states that to the best of his knowledge, Acquiror has performed and complied with all covenants, agreements and conditions required by the Agreement to be performed or complied with by Acquiror prior to the Delivery Date.
IN WITNESS WHEREOF, the undersigned, has hereunto duly executed this Certificate this 30th day of January, 1998.
ROYAL NET, INC.
SEYCHELLE WATER TECHNOLOGIES, INC.
OFFICER'S CERTIFICATE
The undersigned, President of SEYCHELLE WATER TECHNOLOGIES, INC. ("Acquiree"), does hereby certify that he is a duly elected, qualified and acting officer of Acquiree, a Nevada corporation, and as such is familiar with the business affairs of said corporation, and is familiar with and has read that certain Agreement and Plan of Exchange between ROYAL NET, INC. and Acquiree, dated January 30th, 1998 (the "Agreement").
The undersigned does hereby state that the representations and covenants made by Acquiree contained in said Agreement, to the best of his knowledge, are true and correct at and as of the Delivery Date. In addition, the undersigned hereby states that to the best of his knowledge, Acquiree has performed and complied with all covenants, agreements and conditions required by the Agreement to be performed or complied with by Acquiree prior to the Delivery Date.
IN WITNESS WHEREOF, the undersigned, has hereunto duly executed this Certificate this 30th day of January, 1998.
SEYCHELLE WATER TECHNOLOGIES, INC.
3A
Articles of Incorporation
ARTICLES OF INCORPORATION
OF
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
Pursuant to the provisions of the Nevada Private Corporations Act (Ch. 78, NRS, as amended), the undersigned Corporation hereby adopts the following Articles of Incorporation:
FIRST. The name of the Corporation is SEYCHELLE ENVIRONMENTAL
TECHNOLOGIES, INC.
SECOND. OFFICE: Its principal office in the State of Nevada is located at Suite 3, 251 Jeanell Drive, Carson City, Nevada 89703. The name and address of its resident agent is Corporate Advisory Services, Inc., Suite 3, 251 Jeanell Drive, Carson City, Nevada 89703.
THIRD. PURPOSE: The nature of the business, or objects or purposes proposed to be transacted, promoted or carried on are:
To engage in any lawful activity and to manufacture, purchase or otherwise acquire, invest in, own, mortgage, pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and deal with minerals, goods, wares and merchandise and personal property of every class and description.
To hold, purchase and convey real and personal estate and mortgage or lease any such real and personal estate with its franchises and to take the same by devise or bequest.
To acquire, and pay for in cash, stock or bonds of this corporation or otherwise, the good will, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage, or otherwise dispose of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trademarks and trade names, relating to, or useful in connection with, works of art or any other business of this Corporation.
To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of the shares of the capital stock of, or any bonds, securities or evidences of the indebtedness created by any other corporation or corporations of this state, or any other state or government, and while owner of such stock, bonds, securities or evidences of indebtedness, to exercise all the rights, powers and privileges of ownership, including the right to vote, if any.
To borrow money and contract debts when necessary for the transaction of its business, or for the exercise of its corporate rights, privileges or franchises, or for any other lawful purpose of its incorporation; to issue bonds, promissory notes, bills of exchange, debentures, and other obligations and evidences of indebtedness, payable at specified time or times, or payable upon the happening of a specified event or events, whether secured by mortgage, pledge, or otherwise, or unsecured, for money borrowed, or in payment for property purchased, or acquired, or for any other lawful objects.
To purchase, hold, sell and transfer shares of its own capital stock, and use therefor its capital, capital surplus, surplus, or other property or funds; provided it shall not use its funds or property for the purchase of its own shares of capital stock when such use would cause any impairment of its capital; and provided further, that shares of its own capital stock belonging to it shall not be voted upon, directly or indirectly, nor counted as outstanding, for the purpose of computing any stockholders' quorum or vote.
To conduct business, have one or more offices, and hold, purchase, mortgage and convey real and personal property in this state, and in any of the several states, territories, possessions and dependencies of the United States, the District of Columbia, and in any foreign countries.
To do all and everything necessary and proper for the accomplishment of the objects hereinbefore enumerated or necessary or incidental to the protection and benefit of the corporation, and, in general, to carry on any lawful business necessary or incidental to the attainment of the objects of the corporation, whether or not such business is similar in nature to the objects hereinbefore set forth.
The objects and purposes specified in the foregoing clauses shall, except where otherwise expressed, be in no way limited or restricted by reference to or inference from the terms of any other clause in these articles of incorporation but shall be regarded as independent objects and purposes.
FOURTH. CAPITAL STOCK: The amount of the total authorized capital stock of the corporation is SIXTY THOUSAND DOLLARS ($60,000) consisting of Fifty Million (50,000,000) shares of one class of common stock of the par value of One Mill ($.001) each; and One Million (1,000,000) shares of preferred stock of the par value of One Cent ($.01) each, to have such classes, series and preferences as the Board of Directors may determine from time to time.
Any and all shares issued by the Corporation will be issued in registered form, as may be directed by the Board of Directors from time to time, and the fixed consideration for which has been paid and delivered shall be deemed fully paid and not liable for any further call or assessment thereon, and the holders of such stock shall not be liable for any further assessments.
There shall be no preemptive rights in connection with the acquisition of any capital stock of the Corporation.
FIFTH. DIRECTORS: The governing board of this Corporation shall be known as directors, and the number of directors may from time to time be increased or decreased in such manner as shall be provided by the by-laws of this Corporation, provided that the number of directors shall not be reduced to less than one (1).
The name and post office address of the first board of directors, which shall be one (1) in number, is as follows:
NAME POST OFFICE ADDRESSES
---- ---------------------
DuSean Berkich Penthouse Suite
8400 East Prentice Ave.
Englewood, Colorado 80111
|
SIXTH. INCORPORATORS: The name and post office address of the incorporator signing the articles of incorporation is as follows:
David J. Wagner 8400 E. Prentice Ave.
Penthouse Suite
Englewood, Colorado 80111
|
SEVENTH. TERM: The Corporation is to have perpetual existence.
EIGHTH. AUTHORIZATIONS: In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized:
Subject to the by-laws, to make, alter or amend the by-laws of the Corporation.
To fix the amount to be reserved as working capital over and above its capital stock paid in, to authorize and cause to be executed mortgages and liens upon the real and personal property of this Corporation.
By resolution passed by a majority of the whole board, to designate one
(1) or more committees, each committee to consist of one (1) or more of the
directors of the Corporation, which, to the extent provided in the resolution or
in the by-laws of the Corporation, shall have and may exercise the powers of the
board of directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be stated in the by-laws of the Corporation or as may be
determined from time to time by resolution adopted by the board of directors.
When and as authorized by the affirmative vote of stockholders holding stock entitling them to exercise at least a majority of the voting power given at a stockholders' meeting called for that purpose, or when authorized by the written consent of the holders of at least a majority of the voting stock issued and outstanding, the board of directors shall have power and authority at any meeting to sell, lease or exchange all of the property and
assets of the Corporation, including its good will and its corporate franchises, upon such terms and conditions as its board of directors deems expedient, and for the best interest of the Corporation.
NINTH. MEETINGS: Meetings of stockholders may be held outside the State of Nevada, if the by-laws provide. The books of the Corporation may be kept (subject to any provision contained in the statues) outside the State of Nevada at such place or places as may be designated from time to time by the board of directors or in the by-laws of the Corporation.
TENTH. AMENDMENTS: This Corporation reserves the right to amend, alter, change or repeal any provision contained in the articles of incorporation by majority vote of the shareholders and in the manner now or hereafter prescribed by statute, or by the articles of incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation.
ELEVENTH. VOTING: There shall be no cumulative voting permitted in any shareholder election of the Corporation.
TWELFTH. INDEMNIFICATION: The Corporation shall indemnify and hold harmless the officers and directors of the Corporation from any and all liabilities or claims to the fullest extent now, or hereafter from time to time, permitted pursuant to the General Corporation Law of the State of Nevada.
I, THE UNDERSIGNED, being the incorporator hereinbefore named for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Nevada, do make and file these articles of incorporation, hereby declaring and certifying that the facts herein stated are true, and accordingly have hereunto set my hand this 21st day of January, 1998.
STATE OF COLORADO )
) SS:
COUNTY OF ARAPAHOE )
|
On this 21st day of January, 1998, before me, a Notary Public, personally appeared DAVID J. WAGNER, who acknowledged that he executed the above instrument.
My Commission Expires:
3B
Articles of Merger of Royal Net, Inc. into Seychelle Environmental Technologies, Inc.
ARTICLES OF MERGER
OF
ROYAL NET, INC., a Utah Corporation
INTO
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC., a Nevada Corporation
THESE ARTICLES OF MERGER (the "Articles") are made this 30th day of January, 1998, by and between ROYAL NET, INC., a Utah corporation (hereinafter referred to as the "Non- surviving Corporation") and SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC. a Nevada corporation (hereinafter the "Surviving Corporation"), pursuant to the respective portions of Chapter 92A of the Nevada Private Corporations Act.
I. The Non-surviving Corporation shall merge with the Surviving Corporation and upon the effective date of such merger, as hereinafter specified, the Non-surviving Corporation shall cease to exist and shall no longer exercise its powers, privileges and franchises subject to the laws of the State of Utah, its state of incorporation. The Surviving Corporation shall succeed to the property and assets of and exercise all the powers, privileges and franchises of the Non-surviving Corporation and shall assume and be liable for all of the debts and liabilities, if any, of the Non-surviving Corporation.
II. The merger shall become effective as of January 30, 1998.
III. Immediately prior to the effective date of the merger contemplated herein, the Non-surviving Corporation had 8,567,985 shares of its common stock issued and outstanding. Immediately prior to the date of the merger contemplated herein, the Surviving Corporation had one share of its common stock issued and outstanding.
IV. As a result of the merger, all outstanding and issued shares of the Non-surviving Corporation's common stock shall be exchanged for the exact amount of shares of the Surviving Corporation.
V. A copy of the Agreement and Plan of Merger is attached hereto as Exhibit A and incorporated herein by reference as though its provisions were fully set forth herein.
VI. The Plan of Merger was submitted to the shareholders of the Non-Surviving Corporation and approved by a sufficient number of shareholders of the Non-Surviving Corporation on January 30, 1998 by a total of 5,000,000 shares out of a total of 8,567,985 shares entitled to vote thereon, with a total of -0- shares voting against the proposal and -0- shares voting to abstain. The sole shareholder of the Surviving Corporation unanimously approved the Plan on January 30, 1998.
The undersigned respective President and Secretary of the Non-surviving Corporation and of the Surviving Corporation each hereby acknowledges that the execution of these Articles of
Merger is the act and deed of the Corporation on whose behalf he executes these Articles and that the facts stated herein are true.
ROYAL NET, INC.
a Utah corporation
By: Signed By: Signed
------------------------------ ---------------------------
President Secretary
STATE OF UTAH )
) SS:
COUNTY OF Salt Lake )
|
On this 3rd day of February, 1998, before me, a Notary Public, personally appeared Justine Blankenship and Dannette Uyeda who acknowledged that they are the respective President and Secretary of Royal Net, Inc., and that each has executed the above instrument
My Commission Expires: Stamp May 15, 2000
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
a Nevada corporation
By: Signed By: Signed
------------------------------ ---------------------------
President Secretary
STATE OF CA )
) SS:
COUNTY OF ORANGE )
|
On this 2nd day of February, 1998, before me, a Notary Public, personally appeared DuSean Berkich who acknowledged that they are the respective President and Secretary of Seychelle Environmental Technologies, Inc., and that each has executed the above instrument
My Commission Expires:10-1-99
AGREEMENT AND PLAN OF MERGER
OF
ROYAL NET, INC., a Utah corporation
INTO
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC., a Nevada corporation
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made this 30th day of January, 1998 by and between ROYAL NET, INC., a Utah corporation (hereinafter referred to as the "Non-surviving Corporation") and SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC., a Nevada corporation (hereinafter referred to as the "Surviving Corporation"). Hereinafter the Non-surviving Corporation and Surviving Corporation shall be referred to as the "Corporations".
WHEREAS, the respective Corporations desire to merge;
NOW THEREFORE, in consideration of the mutual covenants contained herein, the parties hereby agree as follows:
I. Pursuant to the Nevada Private Corporations Act, the Non-surviving Corporation shall merge with the Surviving Corporation and upon the effective date of such merger, the Non-surviving Corporation shall cease to exist and shall no longer exercise its powers, privileges and franchises subject to the laws of the State of Utah, its state of incorporation. The Surviving Corporation shall succeed to the property and assets of and exercise all powers, privileges and franchises of the Non- surviving Corporation and shall assume and be liable for all of the debts and liabilities of the Non-surviving Corporation.
II. The Non-surviving Corporation's assets and liabilities shall otherwise become the assets and liabilities of the Surviving Corporation.
III. The officers of the Corporations are authorized and directed to take all appropriate and necessary action to dissolve the Non-surviving Corporation under applicable law.
IV. This Agreement and Plan of Merger shall become effective as of January 30, 1998.
V. The state of incorporation of the Surviving Corporation after the effective date of the merger shall be the State of Nevada.
VI. The officers and directors of the Surviving Corporation after the effective date of the merger shall be the same officers and directors as prior to the effective date of the merger.
VII. The Surviving Corporation's name after the merger's effective date shall remain the same.
VIII. The Articles of Incorporation of the Surviving Corporation shall serve as the Articles of Incorporation for the Surviving Corporation and Non-surviving Corporation as merged.
IX. The authorized capital shares of the Surviving Corporation, whether issued or unissued on the effective date of the merger, shall remain the same and not be converted into a different number or class of shares as a result of the merger.
X. Immediately prior to the effective date of the merger contemplated herein, the Non-surviving Corporation had 8,567,985 shares of its common stock issued and outstanding. Immediately prior to the date of the merger contemplated herein, the Surviving Corporation had one share of its common stock issued and outstanding.
XI. As a result of the merger, all outstanding and issued shares of the Non-surviving Corporation's common stock shall be exchanged for all of the outstanding and issued shares of the Surviving Corporation. The Non-surviving Corporation's shares will then be canceled.
XII. The Non-surviving and Surviving Corporation shall take, or cause to be taken, all actions necessary, proper or advisable under the laws of the State of Nevada to consummate and make effective the merger.
XIII. It is intended that the transaction described herein qualifies as a change of domicile within the definition of Section 368 of the Internal Revenue Code of 1986, as amended.
The undersigned President and Secretary of each of the parties hereto hereby acknowledge that the execution of this Agreement is the act and deed of the Corporation on whose behalf each executes this Agreement, and that the facts stated herein are true.
ROYAL NET, INC.
a Utah corporation
By: Signed By: Signed
----------------------------- ----------------------
President Secretary
|
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
a Nevada corporation
By: Signed By: Signed
----------------------------- ----------------------
President Secretary
|
3C
Amendment to Articles of Incorporation re: Series "A" Preferred Stock
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
OF
Seychelle Environmental Technologies, Inc.
We the undersigned, Carl Palmer, President, and Paul Lusby, Secretary of Seychelle Environmental Technologies, Inc. (The Corporation) do hereby certify:
That the Board of Directors of the Corporation, by resolution dated January 31, 1998, adopted a resolution to amend the original articles as follows:
Article FOURTH is hereby amended to add the following at the end of the first paragraph thereof:
The Corporation hereby establishes a new class of Two Hundred Fifty
(250) shares of the Corporation's $0.01 per share Preferred Stock, which shall
be designated Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred
Stock. Such Stock has rights which are superior to all other securities of the
Corporation as to the payment of dividends and upon liquidation, carries a 13.5%
cumulative dividend, payable quarterly if and when declared, is non-voting, and
is redeemable by the Corporation and convertible into common shares of the
Corporation upon terms and conditions to be established by the Corporation prior
to the issuance of the said Stock.
This Amendment was duly adopted by the Board of Directors of the Corporation as permitted under the authority of Section 78.1955 of the Nevada Revised Statutes, as amended and the Corporation's Articles of Amendment.
Date January 31, 1998.
Seychelle Environmental Technologies, Inc.
By Signed
--------------------
President
and Signed
-------------------
Secretary
STATE OF California )
) SS:
COUNTY OF Orange )
|
On this 4th day of March, 1998, before me, a Notary Public, personally appeared Carl Palmer, the President of Seychelle Environmental Technologies, Inc., who acknowledged that he executed the above instrument.
My Commission Expires: 6-21-99
STATE OF California )
) SS:
COUNTY OF Los Angeles )
|
On this 5th day of March, 1998, before me, a Notary Public, personally appeared Paul Lusby, the Secretary of Seychelle Environmental Technologies, Inc., who acknowledged that he executed the above instrument.
My Commission Expires: April 28, 2000
3D
Amendment to Articles of Incorporation re: Series "AA" Preferred Stock
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
OF
Seychelle Environmental Technologies, Inc.
We the undersigned, Carl Palmer, President, and Paul Lusby, Secretary of Seychelle Environmental Technologies, Inc. (The Corporation) do hereby certify:
That the Board of Directors of the Corporation, by resolution dated June 5, 1998, adopted a resolution to amend the original articles as follows:
Article FOURTH is hereby amended to add the following at the end of the first paragraph thereof:
The Corporation hereby establishes a new class of Three Hundred (300) shares of the Corporation's $0.01 per share Preferred Stock, which shall be designated Series "AA" Non Voting, Convertible Preferred Stock. Such Stock has rights which are superior to all other securities of the Corporation except to Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred Stock, including upon liquidation and as to payment of dividends, if any, carries a dividend as set by the Board of Directors prior to the time of issuance thereof, is non-voting, and is redeemable by the Corporation and convertible into common shares of the Corporation upon terms and conditions to be established by the Corporation prior to the issuance of the said Stock.
This Amendment was duly adopted by the Board of Directors of the Corporation as permitted under the authority of Section 78.1955 of the Nevada Revised Statutes, as amended and the Corporation's Articles of Amendment.
Date June 5, 1998.
Seychelle Environmental Technologies, Inc.
By Signed
------------------------
President
and Signed
-----------------------
Secretary
STATE OF CA )
) SS:
COUNTY OF Orange )
|
On this 19th day of June, 1998, before me, a Notary Public, personally appeared Carl Palmer, the President of Seychelle Environmental Technologies, Inc., who acknowledged that he executed the above instrument.
My Commission Expires: July 3rd, 2001
STATE OF California )
) SS:
COUNTY OF Los Angeles )
|
On this 19th day of June, 1998, before me, a Notary Public, personally appeared Paul Lusby, the Secretary of Seychelle Environmental Technologies, Inc., who acknowledged that he executed the above instrument.
My Commission Expires: 4-28-2000
3E
Amendment to Articles of Incorporation re: Series "AAA" Preferred Stock
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock under the authority of Section 78.1955 of the Nevada Revised Statutes, as amended and the Corporation's Articles of Amendment.)
of Seychelle Environmental Technologies, Inc.
We the undersigned, Carl Palmer, President, and Paul Lusby, Secretary of Seychelle Environmental Technologies, Inc. (The Corporation) do hereby certify:
That the Board of Directors of the Corporation, by resolution dated February 18, 1999, adopted a resolution to amend the original articles as follows:
Article FOURTH is hereby amended to add the following at the end of the first paragraph thereof:
The Corporation hereby establishes a new class of Eight Thousand (8,000) shares of the Corporation's $0.01 per share Preferred Stock, which shall be designated Series "AAA" Cumulative Convertible Preferred Voting Stock. Such Stock has rights which are superior to all other securities of the Corporation except Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred Stock and the Series "AA" Non Voting, Convertible Preferred Stock, including upon liquidation and as to payment of dividends, if any. Series "AAA" Cumulative Convertible Preferred Voting Stock carries a dividend as set by the Board of Directors prior to the time of issuance thereof, is voting, and is redeemable by the Corporation and convertible into common shares of the Corporation upon terms and conditions to be established by the Corporation prior to the issuance of the said Stock.
The Board of Directors has the authority to amend its Articles of Incorporation pursuant to Paragraph FOURTH thereof, which permits the Board of Directors to issue preferred stock of the par value of One Cent ($.01) each, to have such classes, series and preferences as the Board of Directors may determine from time to time.
1.
This Amendment was duly adopted by the Board of Directors of the Corporation as permitted under the authority of Section 78.1955 of the Nevada Revised Statutes, as amended and the Corporation's Articles of Amendment.
Date: March 1, 1999
Seychelle Environmental Technologies, Inc.
STATE OF CALIFORNIA )
) ss.
COUNTY OF ORANGE )
|
On January 26, , before me, Stacey Hanes, Notary Public, personally appeared Carl Palmer, (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
2.
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
|
On January 27, , before me, Consuelo M. Madrigal, Notary Public, personally appeared Paul H. Lusby, (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
3.
3F
Bylaws
BYLAWS
OF
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
ARTICLE I
OFFICES
The principal office of the Corporation shall initially be located at 1920 Main Street, Suite 1020, Irvine, California and other offices at such places within or without the State of Nevada and as the Board of Directors may from time to time establish.
ARTICLE II
REGISTERED OFFICE AND AGENT
The registered office of the Corporation shall be located at 251 Jeanell Drive, Suite 3, Carson City, Nevada 89703, and the registered agent shall be Corporate Advisory Service, Inc. The Board of Directors may, by appropriate resolution from time to time, change the registered office and/or agent.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. The annual meeting of the Stockholders for the election of Directors and for the transaction of such other business as may properly come before such meeting shall be held at such time and date as the Board of Directors shall designate from time to time by resolution duly adopted.
Section 2. Special Meetings. A special meeting of the Stockholders may be called at any time by the President, the Chairman of the Board of Directors, or the Board of Directors, and shall be called by the President or the Chairman of the Board of Directors upon the written request of Stockholders of record holding in the aggregate fifty-one percent (51%) or more of the outstanding shares of stock of the Corporation entitled to vote, such written request to state the purpose or purposes of the meeting and to be delivered to the President or the Chairman of the Board of Directors.
Section 3. Place of Meetings. All meetings of the Stockholders shall be held at the principal office of the Corporation or at such other place, within or without the State of Nevada, as shall be determined from time to time by the Board of Directors or the
Stockholders of the Corporation.
Section 4. Change in Time or Place of Meetings. The time and place specified in this Article III for annual meetings shall not be changed within thirty (30) days next before the day on which such meeting is to be held. A notice of any such change shall be given to each Stockholder at least twenty (20) days before the meeting, in person or by letter mailed to his last known post office address.
Section 5. Notice of Meetings. Written notice, stating the place, day
and hour of the meeting, and in the case of a special meeting, the
purposes for which the meeting is called, shall be given by or under
the direction of either the President, the Chairman of the Board of
Directors, or Secretary at least ten (10) days but not more than fifty
(50) days before the date fixed for such meeting. Notice shall be given
to each Stockholder entitled to vote at such meeting, of record at the
close of business on the day fixed by the Board of Directors as a
record date for the determination of the Stockholders entitled to vote
at such meeting, or if no such date has been fixed, of record at the
close of business on the day next preceding the day on which notice is
given. Notice shall be in writing and shall be delivered to each
Stockholder in person or sent by United States Mail, postage prepaid,
addressed as set forth on the books of the Corporation. A waiver of
such notice, in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be
deemed equivalent to such notice. Except as otherwise required by
statute, notice of any adjourned meeting of the Stockholders shall not
be required.
Section 6. Quorum. Except as may otherwise be required by statute, the presence at any meeting, in person or by proxy, of the holders of record of one-third of the shares then issued and outstanding and entitled to vote shall be necessary and sufficient to constitute a quorum for the transaction of business. In the absence of a quorum, a majority in interest of the Stockholders entitled to vote, present in person or by proxy, or, if no Stockholder entitled to vote is present in person or by proxy, any Officer entitled to preside or act as secretary of such meeting, may adjourn the meeting from time to time for a period not exceeding sixty (60) days in any one case. At any such adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at the meeting as originally called. The Stockholders present at a duly organized meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough Stockholders to leave less than a quorum.
Section 7. Voting. Except as may otherwise be provided by statute or these Bylaws, including the provisions of Section 4 of Article VIII hereof, each Stockholder shall at every meeting of the Stockholders be entitled to one (1) vote, in person or by proxy, for each share of the voting capital stock held by such Stockholder.
However, no proxy shall be voted on after eleven (11) months from its date, unless the proxy provides for a longer period. At all meetings of the Stockholders, except as may otherwise be required by statute, the Articles of Incorporation of this Corporation, or these Bylaws, if a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the Stockholders.
Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held, and persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee or his proxy may represent said stock and vote thereon.
Shares of the capital stock of the Corporation belonging to the Corporation shall not be voted directly or indirectly.
Section 8. Consent of Stockholders in Lieu of Meeting. Whenever the vote of Stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action, by any provision of statute, these Bylaws, or the Articles of Incorporation, the meeting and vote of Stockholders may be dispensed with if all the Stockholders who would have been entitled to vote upon the action if such meeting were held shall consent in writing to such corporate action being taken.
Section 9. Telephonic Meeting. Any meeting held under this Article III may be held by telephone, in accordance with the provisions of the Nevada Private Corporations Act.
Section 10. List of Stockholders Entitled to Vote. The Officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every annual meeting, a complete list of the Stockholders entitled to vote at such meeting, arranged in alphabetical order, and showing the address of each Stockholder and the number of shares registered in the name of each Stockholder. Such list shall be open to the examination of any Stockholder during ordinary business hours, for a period of at least ten (10) days prior to election, either at a place within the city, town or village where the election is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where said meeting is to be held. The list shall be produced and kept at the time and place of election during the whole time thereof and be subject to the inspection of any Stockholder who may be present.
ARTICLE IV
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation shall be managed by the Board of Directors, except as otherwise provided by statute, the Articles of Incorporation of the Corporation, or these Bylaws.
Section 2. Number and Qualifications. The Board of Directors shall consist of at least one (1) member, and not more than nine (9) members, as shall be designated by the Board of Directors from time to time, and in the absence of such designation, the Board of Directors shall consist of one (1) member. This number may be changed from time to time by resolution of the Board of Directors. Directors need not be residents of the State of Nevada or Stockholders of the Corporation. Directors shall be natural persons of the age of eighteen (18) years or older.
Section 3. Election and Term of Office. Members of the initial Board of Directors of the Corporation shall hold office until the first annual meeting of Stockholders. At the first annual meeting of Stockholders, and at each annual meeting thereafter, the Stockholders shall elect Directors to hold office until the next succeeding annual meeting. Each Director shall hold office until his successor is duly elected and qualified, unless sooner displaced. Election of Directors need not be by ballot.
Section 4. Compensation. The Board of Directors may provide by resolution that the Corporation shall allow a fixed sum and reimbursement of expenses for attendance at meetings of the Board of Directors and for other services rendered on behalf of the Corporation. Any Director of the Corporation may also serve the Corporation in any other capacity, and receive compensation therefor in any form, as the same may be determined by the Board in accordance with these Bylaws.
Section 5. Removals and Resignations. Except as may otherwise be provided by statute, the Stockholders may, at any special meeting called for the purpose, by a vote of the holders of the majority of the shares then entitled to vote at an election of Directors, remove any or all Directors from office, with or without cause.
A Director may resign at any time by giving written notice to either the Board of Directors, the President, the Chairman of the Board of Directors, or the Secretary of the Corporation. The resignation shall take effect immediately upon the receipt of the notice, or at any later period of time specified therein. The acceptance of such resignation shall not be necessary to make it effective, unless the resignation requires acceptance for it to be effective.
Section 6. Vacancies. Any vacancy occurring in the office of a Director, whether by reason of an increase in the number of directorships or otherwise, may be filled
by a majority of the Directors then in office, though less than a quorum. A Director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office, unless sooner displaced.
When one or more Directors resign from the Board, effective at a future date, a majority of the Directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective. Each Director so chosen shall hold office as herein provided in the filling of other vacancies.
Section 7. Committees. By resolution adopted by a majority of the Board of Directors, the Board may designate one or more committees, including an Executive Committee, each consisting of one (1) or more Directors. The Board of Directors may designate one (1) or more Directors as alternate members of any such committee, who may replace any absent or disqualified member at any meeting of such committee. Any such committee, to the extent provided in the resolution and except as may otherwise be provided by statute, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require the same. The designation of such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him by law. If there be more than two (2) members on such committee, a majority of any such committee may determine its action and may fix the time and place of its meetings, unless provided otherwise by the Board. If there be only two (2) members, unanimity of action shall be required. Committee action may be by way of a written consent signed by all committee members. The Board shall have the power at any time to fill vacancies on committees, to discharge or abolish any such committee, and to change the size of any such committee.
Except as otherwise prescribed by the Board of Directors, each committee may adopt such rules and regulations governing its proceedings, quorum, and manner of acting as it shall deem proper and desirable.
Each such committee shall keep a written record of its acts and proceedings and shall submit such record to the Board of Directors. Failure to submit such record, or failure of the Board to approve any action indicated therein will not, however, invalidate such action to the extent it has been carried out by the Corporation prior to the time the record of such action was, or should have been, submitted to the Board of Directors as herein provided.
ARTICLE V
MEETINGS OF BOARD OF DIRECTORS
Section 1. Annual Meetings. The Board of Directors shall meet each year immediately after the annual meeting of the Stockholders for the purpose of organization, election of Officers, and consideration of any other business that may properly be brought before the meeting. No notice of any kind to either old or new members of the Board of Directors for such annual meeting shall be necessary.
Section 2. Regular Meetings. The Board of Directors from time to time may provide by resolution for the holding of regular meetings and fix the time and place of such meetings. Regular meetings may be held within or without the State of Nevada. The Board need not give notice of regular meetings provided that the Board promptly sends notice of any change in the time or place of such meetings to each Director not present at the meeting at which such change was made.
Section 3. Special Meetings. The Board may hold special meetings of the Board of Directors at any place, either within or without the State of Nevada, at any time when called by the President, the Chairman of the Board of Directors, or two or more Directors. Notice of the time and place thereof shall be given to and received by each Director at least three (3) days before the meeting. A waiver of such notice in writing, signed by the person or persons entitled to said notice, either before or after the time stated therein, shall be deemed equivalent to such notice. Notice of any adjourned special meeting of the Board of Directors need not given.
Section 4. Quorum. The presence, at any meeting, of a majority of the total number of Directors shall be necessary and sufficient to constitute a quorum for the transaction of business. Except as otherwise required by statute, the act of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors; however, if only two (2) Directors are present, unanimity of action shall be required. In the absence of a quorum, a majority of the Directors present at the time and place of any meeting may adjourn such meeting from time to time until a quorum is present.
Section 5. Consent of Directors in Lieu of Meeting. Unless otherwise restricted by statute, the Board may take any action required or permitted to be taken at any meeting of the Board of Directors without a meeting, if a written consent thereto is signed by all members of the Board, and such written consent is filed with the minutes of proceedings of the Board.
Section 6. Telephonic Meeting. Any meeting held under this Article V may be held by telephone, in accordance with the provisions of the Nevada Private Corporations Act.
Section 7. Attendance Constitutes Waiver. Attendance of a Director at a meeting constitutes a waiver of any notice to which the Director may otherwise have been entitled, except where a Director attends a meeting for the express purpose of objecting the transaction of any business because the meeting is not lawfully called or convened.
ARTICLE VI
OFFICERS
Section 1. Number. The Corporation shall have a Chairman of the Board, a President, one or more Vice Presidents as the Board may from time to time elect, a Secretary and a Treasurer, and such other Officers and Agents as may be deemed necessary. One person may hold any two offices.
Section 2. Election, Term of Office, and Qualifications. The Board shall choose the Officers specifically designated in Section 1 of this Article VI at the annual meeting of the Board of Directors and such Officers shall hold office until their successors are chosen and qualified, unless sooner displaced. Officers need not be Directors of the Corporation.
Section 3. Subordinate Officers. The Board of Directors, from time to time, may appoint other Officers and Agents, including one or more Assistant Secretaries and one or more Assistant Treasurers, each of whom shall hold office for such period, and each of whom shall have such authority and perform such duties as are provided in these Bylaws or as the Board of Directors from time to time may determine. The Board of Directors may delegate to any Officer or the Chairman of the Board of Directors the power to appoint any such subordinate Officers and Agents and to prescribe their respective authorities and duties.
Section 4. Removals and Resignations. The Board of Directors may, by vote of a majority of their entire number, remove from office any Officer or Agent of the Corporation, appointed by the Board of Directors.
Any Officer may resign at any time by giving written notice to the Board of Directors. The resignation shall take effect immediately upon the receipt of the notice, or any later period of time specified therein. The acceptance of such resignation shall not be necessary to make it effective, unless the resignation requires acceptance for it to be effective.
Section 5. Vacancies. Whenever any vacancy shall occur in any office by death, resignation, removal, or otherwise, it shall be filled for the unexpired portion of the term in the manner prescribed by these Bylaws for the regular election or
appointment to such office, at any meeting of Directors.
Section 6. The Chairman of the Board. The Chairman of the Board shall be the Chief Executive Officer of the Corporation and, subject to the direction and under the supervision of the Board of Directors, shall have general charge of all of the affairs of the Corporation. The Chairman shall preside at all meetings of the Stockholders and of the Board of Directors at which he is present.
Section 7. The President. The President shall be the chief operating officer of the Corporation and, subject to the direction and under the supervision of the Board of Directors, shall have general charge of the day-to-day operations and of the property of the Corporation, and shall have control over its Officers, Agents and Employees. The President shall preside at all meetings of the Stockholders and of the Board of Directors at which the Chairman is not present. The President shall do and perform such other duties and may exercise such other powers as these Bylaws or the Board of Directors from time to time may assign to him.
Section 8. The Vice President. At the request of the President or in the event of his absence or disability, the Vice President, or in case there shall be more than one Vice President, the Vice President designated by the President, or in the absence of such designation, the Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting, shall have all the powers of, and be subject to all the restrictions upon, the President. Any Vice President shall perform such other duties and may exercise such her powers as from time to time these Bylaws or by the Board of Directors or the President be assign to him.
Section 9. The Secretary. The Secretary shall:
a. record all the proceedings of the meetings of the Corporation and Directors in a book to be kept for that purpose;
b. have charge of the stock ledger (which may, however, be kept by any transfer agent or agents of the Corporation under the direction of the Secretary), an original or duplicate of which shall be kept at the principal office or place of business of the Corporation;
c. see that all notices are duly and properly given;
d. be custodian of the records of the Corporation and the Board of Directors, and the and of the seal of the Corporation, and see that the seal is affixed to all stock certificates prior to their issuance and to all documents for which the Corporation has authorized execution on its behalf under its seal;
e. see that all books, reports, statements, certificates, and other documents and records required by law to be kept or filed are properly kept or filed;
f. in general, perform all duties and have all powers incident to the office of Secretary, and perform such other duties and have such other powers as these Bylaws, the Board of Directors, the Chairman of the Board of Directors, or the President from time to time may assign to him; and
g. prepare and make, at least ten (10) days before every election of Directors, a complete list of the Stockholders entitled to vote at said election, arranged in alphabetical order.
Section 10. The Treasurer. The Treasurer shall:
a. have supervision over the funds, securities, receipts and disbursements of the Corporation;
b. cause all moneys and other valuable effects of the Corporation to be deposited in its name and to its credit, in such depositories as the Board of Directors or, pursuant to authority conferred by the Board of Directors, its designee shall select;
c. cause the funds of the Corporation to be disbursed by checks or drafts upon the authorized depositories of the Corporation, when such disbursements shall have been duly authorized;
d. cause proper vouchers for all moneys disbursed to be taken and preserved;
e. cause correct books of accounts of all its business and transactions to be kept at the principal office of the Corporation;
f. render an account of the financial condition of the Corporation and of his transactions as Treasurer to the President, the Chairman of the Board of Directors, or the Board of Directors, whenever requested;
g. be empowered to require from the Officers or Agents of the Corporation reports or statements giving such information as he may desire with respect to any and all financial transactions of the Corporation; and
h. in general, perform all duties and have all powers incident to the office of Treasurer and perform such other duties and have such other powers as from time to time may be assigned to him by these Bylaws or by the Chairman of the Board of Directors, the Board of Directors or the President.
Section 11. Salaries. The Board of Directors shall from time to time fix the salaries of the Officers of the Corporation. The Board of Directors may delegate to any person the power to fix the salaries or other compensation of any Officers or Agents appointed, in accordance with the provisions of Section 3 of this Article VI. No Officer shall be prevented from receiving such salary by reason of the fact that he is also a Director of the Corporation. Nothing contained in this Bylaw shall be construed so as to obligate the Corporation to pay any Officer a salary, which is within the sole discretion of the Board of Directors.
Section 12. Surety Bond. The Board of Directors may in its discretion secure the fidelity of any or all of the Officers of the Corporation by bond or otherwise.
ARTICLE VII
EXECUTION OF INSTRUMENTS
Section 1. Checks, Drafts, Etc. The President or the Chairman of the Board of Directors and the Secretary or Treasurer shall sign all checks, drafts, notes, bonds, bills of exchange, and orders for the payment of money of the Corporation, and all assignments or endorsements of stock certificates, registered bonds, or other securities, owned by the Corporation, unless otherwise directed by the Board of Directors, or unless otherwise required by law.. The Board of Directors or the Chairman of the Board of Directors may, however, authorize any Officer or the Chairman of the Board to sign any of such instruments for and on behalf of the Corporation without necessity of countersignature, and may designate Officers, or Employees of the Corporation other than those named above who may, in the name of the Corporation, sign such instruments.
Section 2. Execution of Instruments Generally. Subject always to the specific direction of the Board of Directors, the President or the Chairman of the Board of Directors shall execute all deeds and instruments of indebtedness made by the Corporation and all other written contracts and agreements to which the Corporation shall be a party, in its name, attested by the Secretary. The Secretary, when necessary required, shall affix the corporate seal thereto.
Section 3. Proxies. The President, the Chairman of the Board and the Secretary or an Assistant Secretary of the Corporation or by any other person or persons duly authorized by the Board of Directors may execute and deliver proxies to vote with respect to shares of stock of other corporations owned by or standing in the name of the Corporation from time to time on behalf of the Corporation.
ARTICLE VIII
CAPITAL STOCK
Section 1. Certificates of Stock. Every holder of stock in the Corporation shall be entitled to have a certificate, signed in the name of the Corporation by either the Chairman of the Board of Directors or the President and by the Secretary of the Corporation, certifying the number of shares owned by that person in the Corporation.
Certificates of stock shall be in such form as shall, in conformity to law, be prescribed from time to time by the Board of Directors.
Section 2. Transfer of Stock. Shares of stock of the Corporation shall only be transferred on the books of the Corporation by the holder of record thereof or by his attorney duly authorized in writing, upon surrender to the Corporation of the certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization and other matters as the Corporation may reasonably require. Surrendered certificates shall be canceled and shall be attached to their proper stubs in the stock certificate book.
Section 3. Rights of Corporation with Respect to Registered Owners. Prior to the surrender to the Corporation of the certificates for shares of stock with a request to record the transfer of such shares, the Corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner.
Section 4. Closing Stock Transfer Book. The Board of Directors may close the Stock Transfer Book of the Corporation for a period not exceeding fifty (50) days preceding the date of any meeting of Stockholders, the date for payment of any dividend, the date for the allotment of rights, the date when any change, conversion or exchange of capital stock shall go into effect, or for a period of not exceeding fifty (50) days in connection with obtaining the consent of Stockholders for any purpose.
However, in lieu of closing the Stock Transfer Book, the Board of Directors may in advance fix a date, not exceeding fifty (50) days preceding the date of any meeting of Stockholders, the date for the payment of any dividend, the date for the allotment of rights, the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent, as a record date for the determination of the Stockholders entitled to notice of, and to vote at, any such meeting and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, or to give such consent. In such case such Stockholders of record on the date so fixed, and only such Stockholders shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid.
Section 5. Lost, Destroyed and Stolen Certificates. The Corporation may issue a new certificate of shares of stock in the place of any certificate theretofore issued and alleged to have been lost, destroyed or stolen. However, the Board of Directors may require the owner of such lost, destroyed or stolen certificate or his legal representative, to: (a) request a new certificate before the Corporation has notice that the shares have been acquired by a bona fide purchaser; (b) furnish an affidavit as to such loss, theft or destruction; (c) file with the Corporation a sufficient indemnity bond; or (d) satisfy such other reasonable requirements, including evidence of such loss, destruction, or theft as may be imposed by the Corporation.
ARTICLE IX
DIVIDENDS
Section 1. Sources of Dividends. The Directors of the Corporation, subject to the Nevada Revised Statutes, as amended, may declare and pay dividends upon the shares of the capital stock of the Corporation.
Section 2. Reserves. Before the payment of any dividend, the Directors of the Corporation may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose, and the Directors may abolish any such reserve in the manner in which it was created.
Section 3. Reliance on Corporate Records. A Director in relying in good faith upon the books of account of the Corporation or statements prepared by any of its officials as to the value and amount of the assets, liabilities, and net profits of the
Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid shall be fully protected.
Section 4. Manner of Payment. Dividends may be paid in cash, in property, or in shares of the capital stock of the Corporation.
ARTICLE X
SEAL AND FISCAL YEAR
Section 1. Seal. The corporate seal, subject to alteration by the Board of Directors, shall be in the form of a circle, shall bear the name of the Corporation, and shall indicate its formation under the laws of the State of Nevada and the year of incorporation. Such seal may be used by causing it or a facsimile thereof to be impressed, affixed, or otherwise reproduced.
Section 2. Fiscal Year. The Board of Directors shall, in its sole discretion, designate a fiscal year for the Corporation.
ARTICLE XI
AMENDMENTS
Except as may otherwise be provided herein, a majority vote of the whole Board of Directors at any meeting of the Board, is required to amend or repeal any provision of these Bylaws.
ARTICLE XII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. Exculpation. No Director or Officer of the Corporation shall be liable for the acts, defaults, or omissions of any other Director or Officer, or for any loss sustained by the Corporation, unless the same has resulted from his own willful misconduct, willful neglect, or gross negligence.
Section 2. Indemnification. Each Director and Officer of the Corporation and each person who shall serve at the Corporation's request as a director or officer of another corporation in which the Corporation owns shares of capital stock or of which it is a creditor shall be indemnified by the Corporation to the fullest extent permitted from time to time by the Nevada Revised Statutes against all reasonable costs, expenses and liabilities (including reasonable attorneys' fees) actually and necessarily incurred by or imposed upon him in connection with, or resulting from any claim, action, suit, proceeding, investigation, or inquiry of whatever nature in
which he may be involved as a party or otherwise by reason of his being or having been a Director or Officer of the Corporation or such director or officer of such other corporation, whether or not he continues to be a Director or Officer of the Corporation or a director or officer of such other corporation, at the time of the incurring or imposition of such costs, expenses or liabilities, except in relation to matters as to which he shall be finally adjudged in such action, suit, proceeding, investigation, or inquiry to be liable for willful misconduct, willful neglect, or gross negligence toward or on behalf of the Corporation in the performance of his duties as such Director or Officer of the Corporation or as such director or officer of such other corporation. As to whether or not a Director or Officer was liable by reason of willful misconduct, willful neglect, or gross negligence toward or on behalf of the Corporation in the performance of his duties as such Director or Officer of the Corporation or as such director or officer of such other corporation, in the absence of such final adjudication of the existence of such liability, the Board of Directors and each Director and Officer may conclusively rely upon an opinion of independent legal counsel selected by or in the manner designated by the Board of Directors. The foregoing right to indemnification shall be in addition to and not in limitation of all other rights which such person may be entitled as a matter of law, and shall inure to his legal representatives' benefit.
Section 3. Liability Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation or who is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, association, 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 he is indemnified against such liability by this Article XII.
10A
Purchase Agreement with Aqua Vision
PURCHASE AGREEMENT
between
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
("Purchaser")
and
The TAM Irrevocable Trust and Select Property Investments, LLC
(Collectively "Sellers")
JANUARY 31, 1998
TABLE OF CONTENTS
Page
----
1. PURCHASE AND SALE OF ASSETS ........................................................... 1
1.1 Purchase and Sale of Assets .................................................. 1
1.2 Assumption of Certain Liabilities ............................................ 3
1.3 Other Liabilities Not Assumed ................................................ 3
1.4 Assignment of Certain Contracts .............................................. 4
1.5 Instruments of Conveyance, Assumption, or Assignment ......................... 5
2. PURCHASE PRICE ........................................................................ 5
2.1 Purchase Price ............................................................... 5
3. CLOSING ............................................................................... 6
3.1 Closing ...................................................................... 6
4. TAXES AND PREPAID ITEMS ............................................................... 6
5. REPRESENTATIONS AND WARRANTIES OF SELLERS ............................................. 6
5.1 Organization and Authority ................................................... 6
5.2 Due Authorization; Effect of Transaction ..................................... 6
5.3 Financial Statements ......................................................... 7
5.4 Accounts Receivable .......................................................... 7
5.5 Liabilities .................................................................. 7
5.6 Distributions ................................................................ 8
5.7 Subsidiaries ................................................................. 8
5.8 Personal Properties .......................................................... 8
5.9 Material Contracts and Arrangements .......................................... 9
5.10 Ordinary Course of Business .................................................. 9
5.11 Litigation and Compliance with Laws ......................................... 11
5.12 Tax Returns .................................................................. 11
5.13 Environmental Matters ........................................................ 12
5.14 Trademarks, Trade Secrets, Licenses, Etc ..................................... 13
5.15 Insurance Policies ........................................................... 13
5.16 Extraordinary Events ......................................................... 13
5.17 Adverse Restrictions ......................................................... 14
5.18 Material Information ......................................................... 14
5.19 Products in Warranty ......................................................... 14
5.20 Certain Transactions ......................................................... 14
5.21 No Governmental Authorizations or Approvals Required ......................... 15
5.22 Continuing Representations ................................................... 15
6. REPRESENTATIONS, WARRANTIES, AND AGREEMENTS OF PURCHASER .............................. 15
6.1 Due Authorization; Effect of Transaction ..................................... 15
6.2 Continuing Representations ................................................... 15
7. COVENANTS AND AGREEMENTS .............................................................. 16
|
7.1 Sellers' Covenants and Agreements Pending Final Delivery of All Documents .... 16
8. CONDITIONS OF PURCHASER'S OBLIGATIONS ................................................. 17
8.1 No Opposition ................................................................ 17
8.2 Permits, Etc ................................................................. 17
8.3 Insurance .................................................................... 18
8.4 Representations and Covenants ................................................ 18
8.5 Instruments of Transfer ...................................................... 18
8.6 Tax Waiver ................................................................... 18
8.7 Tax Allocation ............................................................... 18
8.8 Solvency Certificate ......................................................... 18
8.9 Diligence .................................................................... 18
9. CONDITIONS OF SELLERS' OBLIGATIONS .................................................... 19
9.1 Representations and Covenants ................................................ 19
9.2 No Opposition ................................................................ 19
10. INDEMNIFICATION BY SELLERS ............................................................ 19
10.1 Indemnification .............................................................. 19
10.2 Notice of Claim .............................................................. 21
10.3 Set-Off or Reimbursement ..................................................... 22
11. INDEMNIFICATION BY PURCHASER .......................................................... 22
11.1 Indemnification .............................................................. 22
11.2 Notice of Claim .............................................................. 23
12. BULK SALES ACT ........................................................................ 24
13. BROKERAGE FEE ......................................................................... 24
14. AMENDMENTS; WAIVERS ................................................................... 25
15. ASSIGNMENT; SUCCESSORS AND ASSIGNS .................................................... 25
16. SEVERABILITY .......................................................................... 25
17. COUNTERPARTS .......................................................................... 26
18. SECTION AND OTHER HEADINGS ............................................................ 26
19. NOTICES ............................................................................... 26
19. GENDER ................................................................................ 27
20. LAW TO GOVERN ......................................................................... 27
21. COURTS ................................................................................ 27
|
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement"), entered into this 31st day of January, 1998 by and between SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC, a Nevada corporation ("Purchaser"), and THE TAM IRREVOCABLE TRUST, a California Trust and SELECT PROPERTY INVESTMENTS, LLC, a Nevada Limited Liability Company (collectively, "Sellers");
W I T N E S S E T H T H A T:
WHEREAS, Purchaser desires to purchase and Sellers desire to sell and convey to Purchaser all of the assets of AQUA VISION INTERNATIONAL, a California sole proprietorship, upon the terms and subject to the conditions set forth herein; and
WHEREAS, Purchaser is willing to assume certain specified liabilities of Sellers;
NOW, THEREFORE, in consideration of the agreements of the parties hereto, and intending to be legally bound hereby, the parties hereto agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 Purchase and Sale of Assets. At the Closing (as defined in Section
3), Sellers agree to sell, convey, transfer, assign, and deliver to
Purchaser, and Purchaser agrees to purchase from Sellers, for the
purchase price hereinafter specified, all of the assets, properties,
and business of every kind and description and wherever situated used
by Sellers in the operation of AQUA VISION INTERNATIONAL, as more
specifically listed in the Schedule of Assets attached hereto (the
"Assets"). Without limiting the generality of the foregoing, the Assets
to be acquired by Purchaser hereunder shall include:
(a) All of Sellers' goodwill and business as a going concern relating to the operation of AQUA VISION INTERNATIONAL, including the name "AQUA VISION INTERNATIONAL", or any variation thereof.
(b) All of Sellers' accounts receivable relating to the operation of AQUA VISION INTERNATIONAL (a recent listing of which is attached hereto), including miscellaneous accounts receivable, and notes receivable or other rights to receive payments, whether arising out of the manufacture, sale, distribution, or use of AQUA VISION INTERNATIONAL'S products, technology, services, or otherwise.
(c) All of Sellers' inventories of finished goods, work-in-process, raw materials, and other miscellaneous supplies and materials relating to the operation of AQUA VISION INTERNATIONAL (a recent listing of which is attached hereto).
(d) All of Sellers' prepaid expenses relating to the operation of AQUA VISION INTERNATIONAL (excluding those, if any, pertaining to taxes, to pension or other benefits plans, or to insurance policies that are listed on any Schedule as not to be acquired by Purchaser pursuant to this Agreement).
(e) All machinery, equipment, tools, molds, motor vehicles, transportation, packing and delivery equipment and supplies, furniture and fixtures of every kind and description owned by Seller or ordered by it and used in the operation of AQUA VISION INTERNATIONAL (a recent listing of which is attached hereto) on or before the Closing Date (as defined in Section 3).
(f) All of Sellers' right, title, and interest of every kind and description in and to the following assets relating to the operation of AQUA VISION INTERNATIONAL:
(i) All of Sellers' rights and privileges under "Assigned Contracts" (as defined in Section 1.4) and unfilled purchase and sales orders.
(ii) All of Sellers' rights to or under all trademarks, service marks, certification marks, United States and foreign trademark registrations and applications, trade names, copyrights, United States and foreign patents and patent applications, if any, relating to the operation of AQUA VISION INTERNATIONAL including international priority rights associated therewith, and all patent and other license, trade secrets, inventions, and royalties and rights to sue for past infringements, including, without limitation, those items listed or otherwise described on the Schedules hereto.
(iii) All of Sellers' customer lists, uncollected invoices, credit files, payroll records, schedules of fixed assets, books of account, contracts, sales representation agreements, and sales agency agreements (if any), files, papers, books, records, designs, drawings, specifications and engineering data, and all
other public or confidential business records, in each case to the extent related to the operation of AQUA VISION INTERNATIONAL, and to the extent reasonably required for the orderly continuation of the business operations of AQUA VISION INTERNATIONAL (excluding the minute books, stock books or organizational documents, including trust agreements, of Sellers, and any other business records of Sellers unrelated to the operations of AQUA VISION INTERNATIONAL)(collectively, the "Business Records").
(g) Except as otherwise specified on the Schedules hereto, all of Sellers' causes of action, judgements, claims and demands of whatever nature, memberships, agencies and permits, claims for refunds and rights of offset and credits, to the extent related to the operation of AQUA VISION INTERNATIONAL, and all to the extent that they are assignable by Sellers.
1.2 Assumption of Certain Liabilities. Purchaser shall assume as of the date of this Agreement those liabilities of Sellers specifically listed on the Schedule of Assumed Liabilities hereto (the "Assumed Liabilities"), and Purchaser shall not assume, incur, guarantee, or be otherwise obligated with respect to any liability whatsoever of Sellers other than as so stated. With respect to any Assumed Liability, such assumption by Purchaser is for the benefit only of the Sellers and shall not expand, increase, broaden, or enlarge the rights or remedies of any other party, nor create in any other party any right against Purchaser that such party would not have against Sellers if this Agreement had not been consummated.
1.3 Other Liabilities Not Assumed. Purchaser shall not assume any liabilities of Sellers that are not listed on the Schedule of Assumed Liabilities, and, with respect to each Assumed Liability listed on the Schedule of Assumed Liabilities, Purchaser does not assume and shall not have or be under any liability or obligation over and above any amount, or after the occurrence of any limitation or expiration date, of such liability or obligation stated on such schedule. Without limiting the generality of the foregoing and except as otherwise provided on the Schedule of Assumed Liabilities, the Assumed Liabilities will not include, and Purchaser shall not assume under this Agreement, any of the following obligations or liabilities of Sellers:
(a) Any cost, expense, or tax liability of Sellers arising from or growing out of the sale provided for by this Agreement.
(b) Any debt, obligation, or liability to any person or any entity owned or controlled in whole or in part by Sellers under any sales, representation, or similar agreement not identified as an Assigned Contract (as defined below).
(c) Any debt, liability, or obligation of Sellers (or costs and expenses in connection therewith) to the extent that such debt, liability, or obligation is actually satisfied or paid on behalf of Sellers by an insurer or insurers under a policy issued to such Sellers.
(d) Any liability or obligation arising from any violation by Sellers or by their employees or agents of any statute (or rule or regulation thereunder) or executive regulation of the United States or any State or any political subdivision or agency thereof or any statutes (or rule or regulation thereunder) or executive, administrative, or quasi-judicial regulation of any foreign government.
(e) Any liability or obligation whose existence violates or is contrary to any representation or warranty of Sellers.
(f) Federal and other domestic or foreign income tax or other tax liabilities known or unknown, existing, or arising from operations prior to the Closing.
(g) Any liability or obligation for or arising under any claim for workers' compensation or for any tort, breach of any legal duty, breach or violation of any contract or violation or breach of any law, statute, ordinance, rule, regulation, injunction, or decree, or any liability or obligation for any "product liability" or other claim connected in any manner with any products, events, or activities produced or taking place prior to the Closing.
1.4 Assignment of Certain Contracts. At the Closing, Purchaser shall succeed to the rights and privileges of Sellers, and shall assume the express obligations of Sellers performable after the Closing pursuant to those leases, insurance policies, contracts, and other agreements, and only those leases, insurance policies, contracts, and other agreements of Sellers that are listed as "Assigned Contracts" on the Disclosure Schedule hereto ("Assigned Contracts") as and in the form of the copies thereof (or, if oral, as and in the form of the written statements of the terms thereof) furnished or made available to Purchaser pursuant to Sections
5.9, 5.11, 5.12, and 5.18 hereto. Without limiting the generality of
the foregoing, Purchaser shall not assume and shall have no liability
with respect to any obligations of Sellers under any Assigned Contract
(a) required therein to be performed by Sellers at or prior to the
Closing or (b) arising out of any breach thereof not included in the
copies (or written statements of the terms) of such Assigned Contracts
delivered or made available to Purchaser pursuant hereto.
1.5 Instruments of Conveyance, Assumption, or Assignment. The sale, conveyance, transfer, assignment, and delivery of the Assets, the Assigned Contracts and the assumption of the Assumed Liabilities, as herein provided, shall be effected by bills of sale, endorsements, assignments, deeds, drafts, checks, stock powers, or other instruments in such reasonable and customary form as shall be requested by Purchaser, and Sellers shall at any time and from time to time after the Closing, upon reasonable request, execute, acknowledge, and deliver such additional bills of sale, endorsements, assignments, deeds, drafts, checks, stock powers, or other instruments and take such other actions as may be reasonably required to effectuate the transactions contemplated by this Agreement.
2. PURCHASE PRICE.
2.1 Purchase Price. In consideration for the sale, conveyance, transfer, and delivery of the Assets and the Assigned Contracts and upon the terms and subject to the conditions set forth in this Agreement, Purchaser shall pay to Sellers the "Purchase Price", which shall be a cash payment of Nine Million Five Hundred Thousand Dollars($9,500,000), of which the sum of One Hundred Twenty-Five Thousand Dollars ($125,000) has already been paid. A payment of Six Million Eight Hundred Seventy-Five Thousand ($6,875,000) shall be paid in cash or certified funds at the Closing specified in Section 3 below. The remaining Two Million Five Hundred Thousand Dollars ($2,500,000) shall be due and payable in cash or certified funds as follows: One Million Dollars ($1,000,000) will be paid within sixty (60) days of the Closing specified in Section 3 below. An additional Five Hundred Thousand Dollars ($500,000) will be paid thereafter within each succeeding sixty (60) day period until the Purchase Price has been paid in full. The said payments under this paragraph shall be paid as follows: The TAM Irrevocable Trust, a California trust (60%); and Select Property Investments, LLC, a Nevada Limited Liability Company (40%).
3. CLOSING.
3.1 Closing. The closing of the sale and purchase (the "Closing") shall take place at the offices of the Purchaser, as of January 31, 1998(the "Closing Date"). At or after the Closing, Sellers shall deliver to Purchaser such bills of sale, endorsements, assignments, deeds, drafts, checks, stock powers, or other instruments as shall be effective to vest in Purchaser good and marketable title to the Assets subject to no liens, encumbrances, or rights in any other party whatsoever, except as are described in the Disclosure Schedule.
4. TAXES AND PREPAID ITEMS.
Except as otherwise provided herein, Sellers will pay all sales, use, franchise, and other taxes and charges, including, without limitation, ad valorem, or other taxes which may become payable in connection with the sale of the Assets pursuant to the terms of this Agreement, and any and all other taxes and charges accruing out of the operation of Sellers' businesses prior to the Closing Date.
5. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby represent and warrant, covenant and agree that:
5.1 Organization and Authority. Aqua Vision International is a sole proprietorship duly organized, validly existing, and in good standing under the laws of its jurisdiction of operation and is duly qualified and in good standing in each other jurisdiction in which it owns or leases properties, conducts operations, or maintains a stock of goods, with full power and authority to carry on the business in which it is engaged (a true and correct list of each such jurisdiction is set forth in the Disclosure Schedule) and to execute and deliver and carry out the transactions contemplated by this Agreement.
5.2 Due Authorization; Effect of Transaction. No provisions of any agreement, instrument, or understanding, or any judgment, decree, rule, or regulation, to which Aqua Vision International is a party or by which it is bound, has been or will be violated by the execution and delivery by Sellers of this Agreement or the performance or satisfaction of any agreement or condition herein contained upon its part to be performed or satisfied, and all requisite authorizations for such execution, delivery, performance, and satisfaction have been duly obtained. Upon execution and delivery, this
Agreement will be a legal, valid, and binding obligation of Sellers, enforceable in accordance with its terms.
5.3 Financial Statements. Except as set forth on the Disclosure Schedule, Sellers have delivered to Purchaser the balance sheet of Aqua Vision International as at the close of its fiscal year for the year ending December 31, 1997, together with related consolidated statements of operations, consolidated statements of changes in owner's equity, and consolidated statements of cash flows for the year then ended. The financial statements specified above, including in each case the notes to such financial statements, are hereinafter sometimes collectively referred to as the "Financial Statements." All of the Financial Statements are true, correct, and complete, have been prepared in accordance with generally accepted accounting principles consistently followed throughout the periods (except as set forth in such notes or statements) and fairly present the financial condition of Aqua Vision International and the results of its operations as at the dates thereof and throughout the periods covered thereby. The Financial Statements reflect or provide for all claims against, and all debts and liabilities of, Aqua Vision International, fixed or contingent, as at the dates thereof, and there has not been any change between the date of the most recent Financial Statements and the date of this Agreement that has materially or adversely affected the business or properties or condition or prospects, financial or other, or results of operations of Aqua Vision International, and no fact or condition exists or is contemplated or threatened, which might cause any such change at any time in the future.
5.4 Accounts Receivable. Subject to the bad debt reserve shown in the Financial Statements, all customer and trade notes and accounts receivable owned by Aqua Vision International on the date of the most recent balance sheet included in the Financial Statements are fully collectible in the aggregate, to the extent of the aggregate face value thereof as indicated on such balance sheet.
5.5 Liabilities. Aqua Vision International has no liabilities of any nature, whether absolute, contingent, or otherwise, except as set forth in the most recent balance sheet included in the Financial Statements, other than liabilities subsequently incurred in the ordinary course of business. Aqua Vision International is not in breach or default or in arrears in respect of the terms or conditions of any such liabilities and no waiver or forbearance has been granted by any holder of any such liability with respect to
any such liability. All liabilities of Aqua Vision International, other than the Assumed Liabilities, will be paid in full on or before the Closing Date.
5.6 Distributions. From the end of their most recent fiscal year to the date hereof Sellers have not made any distribution whatsoever, either in cash or other property with respect to Aqua Vision International.
5.7 Subsidiaries. Aqua Vision International does not own, directly or indirectly, any of the capital stock of any corporation, association, trust or similar entity, any interest in the equity of any partnership or similar entity, any share in any joint venture, or any other equity or proprietary interest in any entity or enterprise, however organized and however such interest may be denominated or evidenced.
5.8 Personal Properties. Sellers own and have good and marketable title to all the tangible and intangible personal property and assets, other than the leaseholds referred to in the Disclosure Schedule, reflected upon the most recent balance sheet included in the Financial Statements or used by Sellers in the business of AQUA VISION INTERNATIONAL if not so reflected, free and clear of all mortgages, liens, encumbrances, equities, claims, and obligations to other persons, of whatever kind and character, except as set forth in the Disclosure Schedule. The Disclosure Schedule contains an identification of certain major items of fixed assets and machinery and equipment. None of the fixed assets and machinery and equipment is subject to contracts of sale, and none is held by Sellers as lessee or as conditional sales vendee under any lease or conditional sales contract and none is subject to any title retention agreement, except as set forth in the Disclosure Schedule. The fixed assets and machinery and equipment, taken as a whole, are in a state of good repair and maintenance and are in good operating condition; inventory is up to normal commercial standards and no inventory that is obsolete or unmarketable is reflected in the most recent balance sheets included in the Financial Statements. All items included in such inventory are covered on the books of Aqua Vision International, and are valued on the Financial Statements at the lower of cost or market and, in any event, at not greater than their net realizable value, on an item by item basis. Upon the sale, assignment, transfer, and delivery of the Assets to Purchaser hereunder, there will be vested in Purchaser good and marketable title to the tangible and intangible personal property constituting a
part thereof, free and clear of all mortgages, liens, encumbrances, equities, claims, and obligations to other persons, of whatever kind and character, except for the rights of third persons arising under contracts for the sale of inventory in the ordinary course of business, each of which is listed in the Disclosure Schedule.
5.9 Material Contracts and Arrangements. Except as set forth in the
Disclosure Schedule, Sellers have no contract or arrangement,
including, without limitation, any commitments or obligations,
contingent or otherwise, under any contract or arrangement (i) for the
purchase or sale of inventory in excess of $1,000 in any one instance,
(ii) for the purchase or sale of supplies, services or other items in
excess of $500 in any one instance, (iii) for the purchase, sale or
lease of any equipment or machinery, (iv) for the performance of
service for others in excess of $500 in any one instance, or (v)
extending beyond January 15, 1998. All contracts of less than $500 do
not in the aggregate exceed $5,000, Each of such contracts and
arrangements is valid, binding, subsisting, and enforceable in
accordance with its terms and Sellers have performed all obligations
required to be performed under any such contract or arrangement and are
not in breach or default or in arrears in any material respect or in
any other respect that would permit the other party to cancel such
contract or arrangement under the terms thereof. To the best knowledge
of Sellers after due inquiry, each of the contracts, if any, set forth
in the Disclosure Schedule calling for the performance of services or
the sale of inventory can be satisfied or performed by Sellers without
any loss to them.
5.10 Ordinary Course of Business. Sellers, from the date of the balance sheet of Aqua Vision International contained in the most recent Financial Statements to the date hereof,
(a) have operated the business of Aqua Vision International in the normal, usual, and customary manner and in the ordinary and regular course of business;
(b) have not sold or otherwise disposed of any of the properties or assets of Aqua Vision International, other than inventory sold in the ordinary course of business;
(c) except in each case in the ordinary course of business,
(i) have not amended or terminated any outstanding lease, contract, or agreement,
(ii) have not incurred any obligations or liabilities (fixed, contingent, or other), and
(iii) have not entered any commitments;
(d) have not made any transactions outside the ordinary course of business in the inventory of Aqua Vision International or any additions to its property or any purchases of machinery or equipment, except for normal maintenance and replacements;
(e) have not discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent) of Aqua Vision International other than current liabilities or obligations under contracts then existing or thereafter entered into in the ordinary course of business, and commitments under leases existing on that date or incurred since that date in the ordinary course of business;
(f) have not mortgaged, pledged, or subjected to lien or any other encumbrances, any of Aqua Vision International's assets, tangible or intangible;
(g) have not sold or transferred any tangible asset or canceled any debts or claims of Aqua Vision International except in each case in the ordinary course of business;
(h) have not sold, assigned, or transferred any patents, trademarks, trade names, trade secrets, copyrights, or other intangible assets of Aqua Vision International;
(i) have not suffered any material damage, destruction, or loss (whether or not covered by insurance) or any acquisition or taking of property of Aqua Vision International by any governmental authority;
(j) have not waived any rights of Aqua Vision International that individually or in the aggregate exceed $1,000;
(k) have not experienced any organized work stoppage or industrial action of Aqua Vision International; or
(l) have not entered into any other transaction or transactions that individually or in the aggregate are material to the business of Aqua Vision International, other than in the ordinary course of business.
5.11 Litigation and Compliance with Laws. The Disclosure Schedule contains a brief description of all litigation or legal or other actions, suits, proceedings, or investigations, at law or in equity or admiralty, or before any federal, state, municipal, or other governmental department (including, without limitation, the National Labor Relations Board), commission, board, agency, or instrumentality, domestic or foreign, in which Sellers, as the owners of Aqua Vision International, are engaged, or, to the knowledge and belief of Sellers, with which Aqua Vision International is threatened in connection with the business or affairs or properties or assets of Aqua Vision International. Aqua Vision International is and at all times since its inception has been in compliance with all laws and governmental rules and regulations, domestic and foreign, and all requirements of insurance carriers, applicable to its business or affairs or properties or assets, including, without limitation, those relating to environmental protection, water or air pollution, and similar matters.
5.12 Tax Returns. Sellers have filed, in accordance with applicable law, all federal, state, county, and local income and franchise tax returns and all real and personal property tax returns that are required to be filed for Aqua Vision International, and the provision for taxes shown on the most recent balance sheet included in the Financial Statements is sufficient to satisfy all taxes of any kind of Aqua Vision International, including interest and penalties in respect thereof, whether disputed or not, and whether accrued, due, absolute, deferred, contingent, or other for all periods ended on or prior to the date of such balance sheet. As of the date hereof no tax liabilities have been assessed or proposed that remain unpaid, and Sellers have not caused Aqua Vision International to sign any extension agreement with the Internal Revenue Service or any state or local taxing authority. Sellers have paid all taxes regarding Aqua Vision International that have become due pursuant to such returns and have paid all installments of estimated taxes due. All taxes and other assessments and levies that Sellers are required by law for the benefit of Aqua Vision International to withhold or to collect have been duly withheld and collected, and have been paid over to the proper governmental authorities to the extent due and payable. From the end of its most recent fiscal year to the date hereof Sellers have not made any payment of or on account of any federal, state, or local income, franchise, or any real or personal property taxes regarding Aqua Vision International, except as set forth in the Disclosure Schedule. Sellers are not aware of any
basis upon which any assessment for a material amount of additional federal income taxes could be made. The information shown on the federal income tax returns of Aqua Vision International heretofore delivered to Purchaser is true, accurate, and complete and fairly presents the information purported to be shown.
5.13 Environmental Matters. Without limiting the generality of this
Section 5.13:
(i) Sellers are in compliance in all material respects with all applicable Environmental Laws (as such term is defined in Exhibit A hereto);
(ii) Sellers have obtained all material permits and approvals required under Environmental Laws, including, without limitation, all material environmental, health and safety permits, licenses, approvals, authorizations, variances, agreements, and waivers of federal, state, and local governmental authorities ("Permits") necessary for the conduct of the business and the operation of the facilities of Aqua Vision International, and all such Permits are in good standing and Sellers are in compliance with all terms and conditions of such Permits;
(iii) Neither Sellers nor any of their currently or previously owned or leased property utilized in the operation of AQUA VISION INTERNATIONAL has been named as a potentially responsible party or is subject to any outstanding written order from or agreement with any federal, state, or local governmental authority or other person or is subject to any judicial or docketed administrative proceeding respecting (x) Environmental Laws, (y) Remedial Action (as such term is defined in Exhibit A hereto), or (z) any material Environmental Liabilities and Costs (as such term is defined in Exhibit A hereto);
(iv) Except as set forth on the Disclosure Schedule, there are no conditions or circumstances associated with the currently or previously owned or leased properties or operations of Sellers related to the operation of AQUA VISION INTERNATIONAL that may give rise to Environmental Liabilities and Costs.
(v) Sellers have not received any notice or claim to related to the operation of AQUA VISION INTERNATIONAL to the effect that they are or are reasonably expected to be liable to any person as a result of a Release (as such term is
defined in Exhibit A hereto) or threatened Release or any notice letter or request for information under CERCLA (as such term is defined in Exhibit A hereto); and
(vi) No Environmental Lien (as such term is defined in Exhibit A hereto) and no unrecorded Environmental Lien of which Sellers have notice has attached to any property of Seller which relates to Aqua Vision International.
5.14 Trademarks, Trade Secrets, Licenses, Etc. The Disclosure Schedule sets forth all of the trademarks, trade secrets, trade names, service marks, patents, copyrights, registrations, or applications with respect thereto, and licenses or rights under them owned, used, or intended to be acquired or used by Sellers in the business of Aqua Vision International, and, to the extent indicated in the Disclosure Schedule, they have been duly registered in such offices as are indicated therein. Sellers are the sole and exclusive owners of the trademarks, trade secrets, trade names, service marks, and copyrights, the holders of the full record title to the trademark registrations and the sole owner of the inventions covered by the patents and patent applications, all as set forth in the Disclosure Schedule; Sellers have the sole and exclusive right, to the extent listed in the Disclosure Schedule, to use such trademarks, trade secrets, trade names, service marks, patents and copyrights, and, except to the extent set forth on the Disclosure Schedule, all of them are free and clear of any mortgages, liens, encumbrances, equities, licenses, claims, and obligations to other persons of whatever kind and character.
5.15 Insurance Policies. The insurance policies listed and described briefly in the Disclosure Schedule constitute all of the policies in force and effect in respect of the business, properties and assets, including, without limitation, insurance on personnel, of Aqua Vision International. Sellers are not in default under any such policy. The insurance policies so listed and identified are sufficient in nature, scope, and amounts to insure adequately (and, in any event, in amounts sufficient to prevent Sellers from becoming a co-insurer within the terms of such policies) the business, properties, and assets of Aqua Vision International. Sellers have not been refused insurance by any insurance carrier to which they have applied for insurance on behalf of Aqua Vision International.
5.16 Extraordinary Events. From the end of its most recent fiscal year to the date hereof, neither the business nor
properties nor condition, financial or other, nor results of operations of Aqua Vision International have been materially and adversely affected in any way as the result of any fire, explosion, accident, casualty, labor disturbance, requisition, or taking of property by any governmental body or agency, flood, embargo, or Act of God or the public enemy, or cessation, interruption, or diminution of operations, whether or not covered by insurance.
5.17 Adverse Restrictions. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby are not events that of themselves or with the giving of notice or the passage of time or both, could constitute, on the part of Sellers, a violation of or conflict with or result in any breach of, or default under the terms, conditions, or provisions of, any judgment, law, or regulation, or any agreement or instrument to which Sellers are a party or by which they are bound, or result in the creation or imposition of any lien, charge, or encumbrance of any nature whatsoever on the property or assets of Aqua Vision International and no such event of itself or with the giving of notice or the passage of time or both will result in the acceleration of the due date of any obligation of Sellers as it relates to Aqua Vision International.
5.18 Material Information. Neither the Financial Statements nor this Agreement (including the Schedules and Exhibits hereto) nor any certificate or other information or document furnished or to be furnished by Sellers to Purchaser contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact required to be stated herein or therein or necessary to make the statements herein or therein not misleading.
5.19 Products in Warranty. Attached as part of the Disclosure Schedule are true and correct copies of Aqua Vision International's standard warranty agreements used in connection with its business operations. Aqua Vision International's standard warranty agreements apply to each product in warranty except as otherwise indicated on the Disclosure Schedule. Sellers are not in violation in any material respect of any such warranty agreement.
5.20 Certain Transactions. Sellers are not presently parties to any transaction with Aqua Vision International, including, without limitation, any contract, agreement, or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from Sellers, any member of Sellers' family or any corporation, partnership, trust, or other entity in which Sellers have a substantial interest or are an officer, director, trustee, or partner.
5.21 No Governmental Authorizations or Approvals Required. No authorization or approval of, or filing with, any governmental agency, authority, or other body will be required in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.
5.22 Continuing Representations. The representations and warranties of Sellers herein contained (a) relating to non-tax matters shall survive the Closing for a period of three (3) years and (b) relating to tax matters shall survive the Closing for the applicable statute of limitations.
6. REPRESENTATIONS, WARRANTIES, AND AGREEMENTS OF PURCHASER.
6.1 Due Authorization; Effect of Transaction. Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of its jurisdiction of operation and is duly qualified and in good standing in each other jurisdiction in which it owns or leases properties, conducts operations, or maintains a stock of goods, with full power and authority to carry on the business in which it is engaged (a true and correct list of each such jurisdiction is set forth in the Disclosure Schedule) and to execute and deliver and carry out the transactions contemplated by this Agreement. No provision of Purchaser's Certificate of Incorporation or By-Laws, or of any agreement, instrument, or understanding, or any judgment, decree, rule, or regulation, to which Purchaser is a party or by which it is bound, has been, or will be violated by the execution by Purchaser of this Agreement or the performance or satisfaction of any agreement or condition herein contained upon its part to be performed or satisfied, and all requisite corporate and other authorizations, including all necessary governmental authorizations, for such execution, delivery, performance, and satisfaction have been duly obtained. Upon execution and delivery, this Agreement will be a legal, valid, and binding obligation of Purchaser, enforceable in accordance with its terms. Purchaser is not in default in the performance, observance, or fulfillment of any of the terms or conditions of its Certificate of Incorporation or By-Laws.
6.2 Continuing Representations. The representations and warranties of Purchaser herein contained (a) relating to
non-tax matters shall survive the Closing for a period of three
(3) years and (b) relating to tax matters shall survive the Closing for
the applicable statute of limitations.
7. COVENANTS AND AGREEMENTS.
7.1 Sellers, Covenants and Agreements Pending Final Delivery of All Documents. Sellers, from the Closing Date until the date upon which all documents have been delivered and all requirements under this Agreement have been performed,
(a) will operate the business of Aqua Vision International in the normal, usual, and customary manner in the ordinary and regular course of business;
(b) will not sell or otherwise dispose of any of the properties or assets related to the operation of AQUA VISION INTERNATIONAL, other than inventory of finished goods sold in the ordinary course of business;
(c) except in each case in the ordinary course of business,
(i) will not amend or terminate any outstanding lease, contract, or agreement related to the operation of AQUA VISION INTERNATIONAL,
(ii) will not incur any obligations or liabilities (fixed, contingent, or other) related to the operation of AQUA VISION INTERNATIONAL, and
(iii) will not enter into any commitments related to the operation of AQUA VISION INTERNATIONAL;
(d) will not make any unusual transactions in its inventory or any additions to its property or any purchases of machinery or equipment, except for normal maintenance and replacements;
(e) will not discharge or satisfy any lien or encumbrance or pay any obligation or liability (absolute or contingent) other than current liabilities or obligations under contracts now existing or hereafter entered into in the ordinary course of business, and commitments under leases now existing;
(f) will not mortgage, pledge, or subject to lien or any other encumbrances, any of its assets, tangible or intangible
unless such mortgage, pledge, lien, or encumbrance is discharged before the Closing;
(g) will not sell or transfer any tangible asset or cancel any debts or claims except in each case in the ordinary course of business;
(h) will not sell, assign, or transfer any patents, trademarks, trade names, trade secrets, copyrights, or other intangible assets;
(i) will not increase the compensation payable or to become payable to any of its employees or agents;
(j) will not suffer any material damage, destruction, or loss (whether or not covered by insurance) or any acquisition or taking of property by any governmental authority;
(k) will not waive any rights of substantial value; or
(l) will not enter into any other transaction or transactions that individually or in the aggregate are material to the business of Aqua Vision International.
8. CONDITIONS OF PURCHASER'S OBLIGATIONS.
The obligations of Purchaser hereunder are subject to the fulfillment to the reasonable satisfaction of the Purchaser, prior to or at the Closing, of each of the following conditions:
8.1 No Opposition. No suit, action, or proceeding shall be pending or threatened at any time prior to or on the Closing Date before or by any court or governmental body (a) seeking to restrain or prohibit, or to obtain damages or other relief in connection with, the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby; or (b) that might materially and adversely affect the business or properties or condition, financial or other, or results of operations of Sellers.
8.2 Permits, Etc. Sellers shall have assigned to Purchaser, or Purchaser shall have obtained, all such permits, licenses, approvals, authorizations, variances, agreements, and warranties from federal, state, and local governmental authorities related to the operation of Aqua Vision International, which Purchaser shall, in the exercise of its sole discretion, deem necessary or desirable for the operation
by Purchaser of the businesses of Aqua Vision International after the Closing.
8.3 Insurance. Sellers shall have obtained appropriate binders or consents as to policies of insurance to be assigned to Purchaser hereunder.
8.4 Representations and Covenants. The representations and warranties of Sellers contained in this Agreement or otherwise made in writing by it or him or on his behalf pursuant hereto or otherwise made in connection with the transactions contemplated hereby shall be true and correct at and as of the Closing Date with the same force and effect as though made on and as of such date; each and all of the covenants, agreements, and conditions to be performed or satisfied by Sellers hereunder at or prior to the Closing Date shall have been duly performed or satisfied; and Sellers shall have furnished Purchaser with such certificates and other documents evidencing the truth of such representations and warranties and the performance and satisfaction of such covenants, agreements, and conditions as Purchaser shall have reasonably requested.
8.5 Instruments of Transfer. Sellers shall have delivered to Purchaser bills of sale, assignments, deeds, stock powers, and other instruments of transfer and assignment in accordance with the provisions hereof, transferring to Purchaser all of Sellers' right, title, and interest in and to the Assets, including the Assigned Contracts, to be transferred, sold, assigned, and conveyed by Sellers to Purchaser pursuant to the provisions of this Agreement.
8.6 Tax Waiver. Sellers, if applicable, shall have received copies of a waiver of lien certificate from the appropriate tax authorities of all applicable jurisdictions (other than the U.S. Internal Revenue Service).
8.7 Tax Allocation. Sellers and Purchaser shall have finalized tax allocation as of December 31, 1997.
8.8 Solvency Certificate. Sellers shall have delivered a solvency certificate, dated the Closing Date, (in form and substance satisfactory to Purchaser) signed by the appropriate representative of Sellers.
8.9 Diligence. Purchaser shall have completed its diligence review of the business, properties, assets, and liabilities of Sellers to the extent related to the operation of AQUA VISION
INTERNATIONAL, with results satisfactory to Purchaser.
9. CONDITIONS OF SELLERS OBLIGATIONS.
The obligations of Sellers hereunder are subject to the fulfillment to the reasonable satisfaction of Sellers prior to or at the Closing of each of the following conditions:
9.1 Representations and Covenants. The representations and warranties of Purchaser contained in this Agreement or otherwise made in writing by it or on its behalf pursuant hereto or otherwise made in connection with the transactions contemplated hereby shall be true and correct at and as of the Closing Date with the same force and effect as though made on and as of such date; each of the covenants, agreements, and conditions to be performed or satisfied by Purchaser hereunder at or prior to the Closing Date shall have been duly performed or satisfied; and Purchaser shall have furnished Sellers with such certificates or other documents evidencing the truth of such representations and warranties and the performance and satisfaction of such covenants, agreements, and conditions as Sellers shall have reasonably requested.
9.2 No Opposition. No suit, action, or proceeding shall be pending or threatened on the Closing Date before or by any court or governmental authority seeking to restrain or prohibit the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.
10. INDEMNIFICATION BY SELLERS.
10.1 Indemnification.
(a) Sellers hereby agree to indemnify, defend, and hold Purchaser and its shareholders (collectively with Purchaser, the "Purchasing Parties") harmless from and against the amount of any actual (or potential in the case of any litigation or claims by any person not a party to this Agreement) damage, loss, cost, or expense (including reasonable attorneys' fees and settlement costs) to Purchasing Parties("Loss") occasioned or caused by, resulting from, or arising out of:
(i) Any failure by Sellers to perform, abide by, or fulfill any of the agreements, covenants, or obligations set forth in or entered into, in connection with this Agreement to be so performed or fulfilled by Sellers.
(ii) Any material inaccuracy in or breach of any of
the representations or warranties of Sellers set forth in this Agreement, or any certificate or Schedule or other writing furnished pursuant hereto.
(iii) Any failure on the part of Purchaser to withhold from the Purchase Price any amount due by Sellers to any governmental authority or other person that results in a loss to Purchaser.
(iv) Any claim, known or unknown, arising out of or by virtue of or based upon any liability or obligation of Sellers that is not an Assumed Liability.
(v) Any claim, known or unknown, arising out of or by virtue of or based upon any contract or agreement of Sellers that (I) is not an Assigned Contract, or (ii) is connected with any breach by Sellers of an Assigned Contract or any failure by Sellers to have performed any obligation or satisfied any liability thereunder to the extent required to be performed or satisfied at or prior to the Closing, or (iii) is not set forth (or described) in writing and furnished or made available to Purchasing Parties pursuant hereto.
(vi) Any liability or obligation for any tort or any breach or violation of any contractual, quasi-contractual, legal, fiduciary, or equitable duty by Sellers, whether before, at, or after the Closing.
The amount of any Loss shall be the amount of cash reimbursement or set-off that, when received by the Purchasing Party or Purchasing Parties incurring such loss, shall place such Purchasing Party or Purchasing Parties in the same financial position it or they would have been in if such Loss has not occurred. Sellers' liability under this paragraph shall not however, exceed the aggregate amount of $2,500,000. Notwithstanding any other provision of this agreement, the Sellers shall not be liable to the Purchasing Parties on any warranty, representation, or covenant made by Sellers in this agreement, or under any of their indemnities in this agreement, regarding any single claim, loss, expense, obligation, or other liability that does not exceed $50,000; provided, however, that when the aggregate amount of all such claims, losses, expenses, obligations, and liabilities not exceeding $50,000 each reaches $50,000, the Sellers shall, subject to the above limitation on their maximum aggregate liability, thereafter be liable in full for all those breaches and indemnities and regarding all those claims, losses, expenses, obligations, and liabilities.
10.2 Notice of Claim. Purchasing Parties shall give prompt written notice to Sellers of any claim (actual or threatened) or other event that in the judgment of either Purchasing Party might result or has resulted in a Loss by a Purchasing Party hereunder, and Sellers shall have the right to assume the defense of such claim or any litigation resulting therefrom; provided that counsel for the Sellers, who shall conduct the defense of such claim (actual, threatened, or asserted) or litigation, shall be reasonably satisfactory to the Purchasing Parties, and Purchasing Parties may participate in such defense at their expense, and provided, further, that the omission by Purchasing Parties to give notice as provided herein shall not relieve Sellers of their obligations hereunder except to the extent that the omission results in a failure of actual notice to the Sellers, and Sellers are damaged solely as a result of the failure to give notice. Sellers, in the defense of any such claim or litigation, shall not, except with the consent of each Purchasing Party, consent to the entry of any judgment or decree or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to Purchasing Parties of a release from all liability in respect to such claim or litigation, and Sellers shall not have liability with respect to any payment made by a Purchasing Party in connection with the settlement, satisfaction, or compromise of any claim unless the Sellers shall have approved thereof in advance in writing, which approval shall not unreasonably be withheld or delayed. If the Purchasing Parties shall not have received notice that the Sellers shall assume the defense of such claim within twenty (20) days after the notice is sent to the Sellers of the existence of such claim, the Purchasing Parties shall be free to proceed with the defense of such claim. Each such notice shall be accompanied (or followed as promptly as is reasonably practicable after the amount of such Loss becomes determinable) by a certificate signed by the President of Purchaser and setting forth in reasonable detail the calculation of the amount of such Loss in accordance with the provisions hereof, and accompanied by copies of all relevant documents and records. The omission to give such notice or provide such certificate by Purchasing Parties shall not relieve Sellers of their obligation under this Section 10.2 except to the extent such omission results in a failure of actual notice to the Sellers, and Sellers are damaged solely by such failure to give notice. No Loss shall be considered to have occurred with respect to any payment made by any Purchasing Parties in settlement, satisfaction, or
compromise of any claim unless the Sellers shall have approved thereof in advance and in writing.
10.3 Set-Off or Reimbursement. Purchasing Parties shall have the right to set-off against the payment of the Purchase Price payable by Purchaser as provided for herein (or, if such amounts have theretofore been paid, then to receive prompt reimbursement from Sellers of an amount equal to) the amount of all Losses incurred by Purchasing Parties. Purchasing Parties shall deliver to Sellers a written notice explaining the nature and amount of each such set-off or required reimbursement as promptly as is reasonably practicable after Purchasing Parties shall have determined to make such set-off or to require such reimbursement. Purchasing Parties may make such set-offs or require such reimbursements in any order they choose.
11. INDEMNIFICATION BY PURCHASER.
11.1 Indemnification.
(a) Purchaser hereby agrees to indemnify, defend, and hold Sellers and its owners (collectively with Sellers, the "Selling Parties") harmless from and against the amount of any actual (or potential in the case of any litigation or claims by any person not a party to this Agreement) damage, loss, cost, or expense (including reasonable attorneys' fees and settlement costs) to Selling Parties("Loss") occasioned or caused by, resulting from, or arising out of:
(i) Any failure by Purchaser to perform, abide by, or fulfill any of the agreements, covenants, or obligations set forth in or entered into, in connection with this Agreement to be so performed or fulfilled by Purchaser.
(ii) Any material inaccuracy in or breach of any of the representations or warranties of Purchaser set forth in this Agreement, or any certificate or Schedule or other writing furnished pursuant hereto.
(iii) Any liability or obligation for any tort or any breach or violation of any contractual, quasi-contractual, legal, fiduciary, or equitable duty by Purchaser, whether before, at, or after the Closing.
The amount of any Loss shall be the amount of cash reimbursement that, when received by the Selling Parties
incurring such loss, shall place such Selling Parties in the same financial position it or they would have been in if such Loss has not occurred. Notwithstanding any other provision of this agreement, Purchaser shall not be liable to the Selling Parties on any warranty, representation, or covenant made by Purchaser in this agreement, or under any of its indemnities in this agreement, regarding any single claim, loss, expense, obligation, or other liability that does not exceed $50,000; provided, however, that when the aggregate amount of all such claims, losses, expenses, obligations, and liabilities not exceeding $50,000 each reaches $50,000, the Purchaser shall, subject to the above limitation on its maximum aggregate liability, thereafter be liable in full for all those breaches and indemnities and regarding all those claims, losses, expenses, obligations, and liabilities.
11.2 Notice of Claim. Selling Parties shall give prompt written notice to Purchaser of any claim (actual or threatened) or other event that in the judgment of any Selling Party might result or has resulted in a Loss by a Selling Party hereunder, and Purchaser shall have the right to assume the defense of such claim or any litigation resulting therefrom; provided that counsel for the Purchaser, who shall conduct the defense of such claim (actual, threatened, or asserted) or litigation, shall be reasonably satisfactory to the Selling Parties, and Selling Parties may participate in such defense at their expense, and provided, further, that the omission by Selling Parties to give notice as provided herein shall not relieve Purchaser of its obligations hereunder except to the extent that the omission results in a failure of actual notice to the Purchaser, and Purchaser is damaged solely as a result of the failure to give notice. Purchaser, in the defense of any such claim or litigation, shall not, except with the consent of each Selling Party, consent to the entry of any judgment or decree or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to Selling Parties of a release from all liability in respect to such claim or litigation, and Purchaser shall not have liability with respect to any payment made by a Selling Party in connection with the settlement, satisfaction, or compromise of any claim unless the Purchaser shall have approved thereof in advance in writing, which approval shall not unreasonably be withheld or delayed. If the Selling Parties shall not have received notice that the Purchaser shall assume the defense of such claim within twenty (20) days after the notice is sent to the Purchaser of the existence of such claim, the Selling Parties shall be free to proceed with the defense of such claim. Each
such notice shall be accompanied (or followed as promptly as is reasonably practicable after the amount of such Loss becomes determinable) by a certificate signed by the President of Purchaser and setting forth in reasonable detail the calculation of the amount of such Loss in accordance with the provisions hereof, and accompanied by copies of all relevant documents and records. The omission to give such notice or provide such certificate by Selling Parties shall not relieve Purchaser of their obligation under this Section 11.2 except to the extent such omission results in a failure of actual notice to the Purchaser, and Purchaser are damaged solely by such failure to give notice. No Loss shall be considered to have occurred with respect to any payment made by any Selling Parties in settlement, satisfaction, or compromise of any claim unless the Purchaser shall have approved thereof in advance and in writing.
12. BULK SALES ACT.
The Purchaser and the Sellers both acknowledge that, in effecting the transactions contemplated hereby, neither the Purchaser nor the Sellers have taken any steps to comply with the California Bulk Sales Law. Notwithstanding the foregoing, the Sellers covenant and agree to pay and discharge promptly and when due, and in all respects to defend the Purchaser against, all claims of creditors (other than the Assumed Liabilities) that are asserted against the Purchaser by reason of noncompliance with this Bulk Sales Law. The Sellers hereby agree to defend and to indemnify and hold the Purchaser harmless from, against, and in respect of (and shall on receipt of evidence of loss, liability, or damage reimburse the Purchaser for) any loss, liability, damage, cost, or expense, including, without limitation, reasonable attorneys' fees (other than the Assumed Liabilities), suffered or incurred by the Purchaser by reason of any failure of the Sellers to pay or discharge any such claim promptly and when due or the failure of the parties to comply with the Bulk Sales Law.
13. BROKERAGE FEE.
Sellers and Purchaser each represent that no broker has been involved in this transaction and each party agrees to indemnify and hold the others harmless from payment of any brokerage fee, finder's fee, or commission claimed by any party who claims to have been involved because of association with such party.
14. AMENDMENTS; WAIVERS.
This Agreement constitutes the entire agreement of the parties related to the subject matter of this Agreement, supersedes all prior or contemporary agreements, representations, warranties, covenants, and understandings of the parties. This Agreement may not be amended, nor shall any waiver, change, modification, consent, or discharge be effected, except by an instrument in writing executed by or on behalf of the party against whom enforcement of any amendment, waiver, change, modification, consent, or discharge is sought.
Any waiver of any term or condition of this Agreement, or of the breach of any covenant, representation, or warranty contained herein, in any one instance, shall not operate as or be deemed to be or construed as a further or continuing waiver of such term, condition, or breach of covenant, representation, or warranty, nor shall any failure at any time or times to enforce or require performance of any provision hereof operate as a waiver of or affect in any manner such party's right at a later time to enforce or require performance of such provision or of any other provision hereof; and no such written waiver, unless it, by its own terms, explicitly provides to the contrary, shall be construed to effect a continuing waiver of the provision being waived and no such waiver in any instance shall constitute a waiver in any other instance or for any other purpose or impair the right of the party against whom such waiver is claimed in all other instances or for all other purposes to require full compliance with such provision.
15. ASSIGNMENT; SUCCESSORS AND ASSIGNS.
This Agreement shall not be assignable by any party without the written consent of the others. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.
16. SEVERABILITY.
If any provision or provisions of this Agreement shall be, or shall be found to be, invalid, inoperative, or unenforceable as applied to any particular case in any jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflict of any provision with any constitution or statute or rule of public policy or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question invalid, inoperative, or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative, or
unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute, or rule of public policy, but this Agreement shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative, or unenforceable provision had never been contained herein and such provision reformed so that it would be valid, operative, and enforceable to the maximum extent permitted in such jurisdiction or in such case.
17. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument, and in pleading or proving any provision of this Agreement it shall not be necessary to produce more than one such counterpart.
18. SECTION AND OTHER HEADINGS.
The headings contained in this Agreement are for reference purposes only and shall not in any way effect the meaning or interpretation of this Agreement.
19. NOTICES.
All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered or mailed, postage prepaid, certified mail, return receipt requested:
(a) TO SELLERS: If to Sellers:
c/o Select Property Investments, LLC 4012 S. Rainbow Blvd, Ste 111 Las Vegas, Nevada 89103-2010
(b) TO PURCHASER: If to Purchaser, to:
1920 Main Street, Suite 1020 Irvine, CA 92714
with a copy to:
David Wagner & Associates, P.C.
Penthouse Suite
8400 East Prentice Ave.
Englewood, CO 80111
and/or to such other person(s) and address(es) as either party
shall have specified in writing to the other.
19. GENDER.
Whenever used herein, the singular number shall include the plural, the plural shall include the singular, and the use of any gender shall include all genders.
20. LAW TO GOVERN.
This Agreement shall be governed by and construed and enforced in accordance with the law (other than the law governing conflict of law questions) of Nevada.
21. COURTS.
Any action to enforce, arising out of, or relating in any way to, any of the provisions of this Agreement may be brought and prosecuted in such court or courts located in Nevada as is provided by law; and the parties consent to the jurisdiction of the court or courts located in Nevada and to service of process by registered mail, return receipt requested, or in any other manner provided by law.
IN WITNESS WHEREOF, Sellers and Purchaser have caused this Agreement to be executed as of the date first above written.
[PURCHASER]
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
THE TAM IRREVOCABLE TRUST
EXHIBIT A
Certain Defined Terms
"CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), as amended or supplemented from time to time.
"Contaminant" means any waste, pollutant, hazardous material, hazardous substance, toxic substance, hazardous waste, special waste, petroleum, or petroleum-derived substance or waste, or any constituent of any such pollutant material, substance or waste, including, without limitation, any pollutant material, substance, or waste regulated under any Environmental Law.
"Environmental Laws" means all federal, state, local, and foreign laws or regulations, codes, orders, decrees, judgments, or injunctions issued, promulgated, approved, or entered thereunder relating to pollution or protection of the environment or occupational health and safety, including, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances, materials, or wastes (including, without limitation, oil, asbestos, and radiation) into the environment (including, without limitation, ambient air, surface water, ground water, land surface, or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals or industrial, toxic, or hazardous substances, material, or wastes. Environmental Laws shall include, without limitation, CERCLA, the Hazardous Material Transportation Act (49 U.S.C. Section 1801 et seq.), the Solid Waste Disposal Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.), the Food, Drug, and Cosmetic Act (21 U.S.C. Section 301 et seq.), the Medical Waste Tracking Act of 1988, Pub. L. No. 100-582, 102 Stat. 2950 (1988), as such laws have been amended or supplemented from time to time, and any analogous future federal, or present or future state, local, or foreign, statutes, ordinances, or bylaws.
"Environmental Liabilities and Costs" means, as to the Sellers, all liabilities, obligations, responsibilities, remedial actions, losses, damages, punitive damages, consequential damages, treble damages, costs, and expenses (including, without limitation, all reasonable fees,
disbursements and expenses of counsel, expert and consulting fees, and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand, by any corporation, partnership, trust, individual, or other entity ("Person"), whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, including, without limitation, any Environmental Law, permit, order, approval, authorization, license, variance, or agreement with a federal, state, or local governmental authority or other person, arising from environmental, health, or safety conditions or a Release or threatened Release resulting from the past operations of the Sellers (or any of its predecessors in interest), or any release for which the Sellers are otherwise responsible under any Environmental Law.
"Environmental Lien" means any lien or similar interest in favor of any federal, state, or local governmental authority for Environmental Liabilities and Costs.
"Release" means, as to the Sellers, any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, pouring, emptying, escaping, dumping, discarding, leaching, or migration of a Contaminant into the indoor or outdoor environment or into or out of any property owned, leased, or controlled by Sellers, including, without limitation, the movement of Contaminants through or in the air, soil, surface water, groundwater, or property, including, without limitation, the abandonment or discarding of barrels, containers, and other closed receptacles containing any contaminant.
"Remedial Action" means all actions necessary to (i) clean up, remove, treat, or in any other way address Contaminants in the indoor or outdoor environment, (ii) prevent a Release or condition that is reasonably likely to result in a Release or minimize further release of Contaminants so they do not migrate or endanger or threaten to endanger present or future public health or welfare or the indoor or outdoor environment, or (iii) perform pre-remedial studies and investigations and post-remedial monitoring and care.
DISCLOSURE SCHEDULE
SCHEDULE OF ASSETS
I. Home Savings - General Operation Account (See Exhibit "A") Copy of Account Status as of 2/18/98
II. Investments - Cash $65,000
III. Accounts Receivable (See Exhibit "B") - Report of Accounts Receivable run 2/20/98 showing 2/28/98 end.
IV. Inventory (See Exhibit "C") - Report of all Inventory on hand run 2/20/98 reports to 2/28/98.
V. Property and Equipment Tooling:
Pump n'Pure housing - injection mold;
Filters - 3 18 cavity 1 1/4" x 2 1/2", check valve
filter, aqua mist primary filter;
Bottle cap and poppet;
Bottles - 18 oz, 30 oz bottoms-up, 32 oz, canteen,
and baby bottle, Adapter; check valve; baby bottle
adapter; adapter/bottoms-up; designer cap;
counter-top housing; All silk-screen artwork (2 dozen
private labels)
Vehicles:
1996 Plymouth Breeze - automatic
1995 Chevrolet Tahoe - 4x4/auto
Furniture & Fixtures:
2 - oak coffee tables, 1 - oak sofa table, 1 small couch, 1 - glass reception desk, 4-6 various executive chairs, 3 - wall display panels, 1 - refrigerator, 1 - coffee pot, 1 - microwave, 1 - storage cabinet, 1 - executive desk and return, 2 - office desks, 1 - HON sectional desk system, 1 - computer desk, 2 - desk lights, 4 - 2 drawer filing cabinets, 2 - 4 drawer file cabinets, 1 small supply cabinet, 1 - 2 piece wall unit, 1 - bookcase, misc.
Shop Equipment:
1 - bagging machine, 1 - air compressor, 2 -
production carts, 5 - 8'steel rack systems, 2 - 10'
production tables, 2 portable production tables, 2 -
glue pots, 4 - glue guns, 2 - motorized glue
stations, 1 - drill press, 1 - shop scale, 1 - shipping table, 1 - packing table, 2 - tape guns, packing tape, 1 - socket set, 1 - hand-truck, miscellaneous manual and electrical hand-tools, chairs, light fixtures, heaters.
Computer Equipment:
1 - 386 computer, 1 - Pentium 486 PC to include software: Peachtree, Corel Draw, MS Word, Excel...; 1- NEC laser printer, 1 - dot matrix continuous feed printer, 1 - Panasonic plain paper fax machine, 2 - 2 line phones, 2 - portable phones, 1 - Kyocera laser printer.
VI. Business Goodwill and going concern value.
VII. Trade secret - All process, design, production and use technology including contracts: confidentiality, source of supply, and exclusive manufacturing agreements (Exhibit "F").
VIII. Trademark (See Exhibit "D") - copy of U.S. Dept. of Comm. - TM.
IX. Patent - all right, title and interest in and to United States Patent Application SN08/813,286 "Portable water filtration system and method" filed 12-23-96, and all related domestic or international rights (case #96567) (See Exhibit "E") - copy of patent pending.
X. Insurance Policy - Essex Insurance Company; Policy #3CB2904 (See Exhibit "F") - copy of policy.
XI. Assigned Contracts - refer to VII above. (See Exhibit "G") - copies of each supplier contract Kx, Barneby Sut Cliff, Interflo, Englehard.
XII. All Product Drawing & Designs - on file.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE PURCHASE
AGREEMENT OF WHICH THIS SCHEDULE FORMS A PART, THE PARTIES EXPRESSLY
ACKNOWLEDGE AND AGREE THAT THE INTELLECTUAL PROPERTY AND RELATED RIGHTS
OF THE SELLERS CONVEYED HEREBY DOES NOT INCLUDE ALL OR ANY PART OF THE
INVENTIONS, CONCEPTS OR OTHER INTELLECTUAL PROPERTY RIGHTS DEVELOPED BY
CARL AND MICHELLE PALMER, COMMONLY REFERRED TO AS THE "BABY BOTTLE" AND
"POINT OF ENTRY" CONCEPTS, THE "BOTTOMS UP" DESIGN CONCEPT AND PATENT
APPLICATION ("BOTTOMS-UP" DESIGN/UTILITY APPLICATION FEBRUARY 17,
1998), OR THE STERILIZATION PRODUCT LINE.
Listing of Assigned Contracts:
None.
Listing of Liens Affecting the Assets:
None.
Disclosure regarding Financial Statements:
The Parties agree to accept the financial statements as presented and accept any deviations therein from compliance with GAAP standards.
SCHEDULE OF LIABILITIES
I. Accounts Payable, including without limitation (See Exhibit "H").
10B
Amended Purchase Agreement with Aqua Vision
AMENDED
PURCHASE AGREEMENT
between
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
("Purchaser")
and
The TAM Irrevocable Trust and Select Property Investments, LLC
(Collectively "Sellers")
FEBRUARY 26, 1999
AMENDED PURCHASE AGREEMENT
THIS AMENDED PURCHASE AGREEMENT (this "Agreement"), entered into this 26th day of February, 1999 by and between SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC, a Nevada corporation ("Purchaser"), and THE TAM IRREVOCABLE TRUST, a California Trust and SELECT PROPERTY INVESTMENTS, LLC, a Nevada Limited Liability Company (collectively, "Sellers");
W I T N E S S E T H T H A T:
WHEREAS, Purchaser and Sellers had entered into an agreement dated January 31, 1998 for the sale to Purchaser all of the assets of AQUA VISION INTERNATIONAL, a California sole proprietorship, upon the terms and subject to the conditions set forth therein, which Agreement is attached as Exhibit A hereto; and
WHEREAS, the parties hereto wish to modify their prior agreement; and
WHEREAS, the parties wish to make only those changes to the agreement dated January 31, 1998 as indicated herein.
NOW, THEREFORE, in consideration of the agreements of the parties hereto, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Purchase and Sale of Assets. Sellers have previously sold, conveyed, transferred, assigned, and delivered to Purchaser, and Purchaser agreed to purchase from Sellers all of the assets, properties, and business of every kind and description and wherever situated used by Sellers in the operation of AQUA VISION INTERNATIONAL.
2. Purchase Price. In consideration for the sale, conveyance, transfer, and delivery of the assets, properties, and business of every kind and description and wherever situated used by Sellers in the operation of AQUA VISION INTERNATIONAL, Purchaser shall now pay to Sellers a payment of 8,000 shares of Series AAA 12% Cumulative Convertible Preferred Shares of the Purchaser in lieu of all consideration remaining unpaid under the agreement dated January 31, 1998, consisting of approximately $8,375,000. The said payments under this paragraph shall be paid as follows: The TAM Irrevocable Trust, a California trust (60%); and Select Property Investments, LLC, a Nevada Limited Liability Company (40%). It is agreed by the parties that, upon written notice of conversion from the Sellers, the Purchaser shall have 45 days from receipt of such notice to repurchase for cash up to 2,000 shares of the Series AAA 12% Cumulative Convertible
Preferred Shares. The parties acknowledge that there is current litigation involving Purchaser and Dusean Berkich, in which Purchaser is seeking to rescind the issuance of all common shares in the Purchaser previously issued to Sellers and Dusean Berkich. The Purchase Price in this Agreement has been determined by assuming the complete cancellation, as a result of this litigation, of the common shares now held by Sellers. It is specifically agreed by the parties to this Agreement that the number of common shares issuable to Sellers pursuant to the conversion provisions of the Series AAA 12% Cumulative Convertible Preferred Shares shall be reduced share for share (but after pro rata adjustments, if any, for stock dividends, stock splits, reverse stock splits, and any other similar capital stock adjustments of a general nature for the Purchaser) by the number of common shares of Purchaser held by Sellers which are not canceled as a result of such litigation.
3. Sellers' Representations and Warranties. Sellers hereby represent and warrant, covenant and agrees that:
a) Organization and Authority. Aqua Vision International is a sole proprietorship duly organized, validly existing, and in good standing under the laws of its jurisdiction of operation and is duly qualified and in good standing in each other jurisdiction in which it owns or leases properties, conducts operations, or maintains a stock of goods, with full power and authority to carry on the business in which it is engaged and to execute and deliver and carry out the transactions contemplated by this Agreement.
b) Due Authorization; Effect of Transaction. No provisions of any agreement, instrument, or understanding, or any judgment, decree, rule, or regulation, to which Aqua Vision International is a party or by which it is bound, has been or will be violated by the execution and delivery by Sellers of this Agreement or the performance or satisfaction of any agreement or condition herein contained upon its part to be performed or satisfied, and all requisite authorizations for such execution, delivery, performance, and satisfaction have been duly obtained. Upon execution and delivery, this Agreement will be a legal, valid, and binding obligation of Sellers, enforceable in accordance with its terms.
4. Due Authorization; Effect of Transaction. Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of its jurisdiction of operation and is duly qualified and in good standing in each other jurisdiction in which it owns or leases properties, conducts operations, or maintains a stock of goods, with full power and authority to carry on the business in which it is engaged and to execute and deliver and carry out the transactions
contemplated by this Agreement. No provision of Purchaser's Certificate of Incorporation or By-Laws, or of any agreement, instrument, or understanding, or any judgment, decree, rule, or regulation, to which Purchaser is a party or by which it is bound, has been, or will be violated by the execution by Purchaser of this Agreement or the performance or satisfaction of any agreement or condition herein contained upon its part to be performed or satisfied, and all requisite corporate and other authorizations, including all necessary governmental authorizations, for such execution, delivery, performance, and satisfaction have been duly obtained. Upon execution and delivery, this Agreement will be a legal, valid, and binding obligation of Purchaser, enforceable in accordance with its terms. Purchaser is not in default in the performance, observance, or fulfillment of any of the terms or conditions of its Certificate of Incorporation or By-Laws.
5. Entire Agreement. This Agreement, and the agreement dated January 31, 1998, which is attached hereto, constitutes the entire agreement of the parties related to the subject matter of this Agreement. This Agreement supersedes all prior or contemporary agreements, representations, warranties, covenants, and understandings of the parties. This Agreement may not be amended, nor shall any waiver, change, modification, consent, or discharge be effected, except by an instrument in writing executed by or on behalf of the party against whom enforcement of any amendment, waiver, change, modification, consent, or discharge is sought.
Any waiver of any term or condition of this Agreement, or of the breach of any covenant, representation, or warranty contained herein, in any one instance, shall not operate as or be deemed to be or construed as a further or continuing waiver of such term, condition, or breach of covenant, representation, or warranty, nor shall any failure at any time or times to enforce or require performance of any provision hereof operate as a waiver of or affect in any manner such party's right at a later time to enforce or require performance of such provision or of any other provision hereof; and no such written waiver, unless it, by its own terms, explicitly provides to the contrary, shall be construed to effect a continuing waiver of the provision being waived and no such waiver in any instance shall constitute a waiver in any other instance or for any other purpose or impair the right of the party against whom such waiver is claimed in all other instances or for all other purposes to require full compliance with such provision.
6. Assignment. This Agreement shall not be assignable by any party without the written consent of the others. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
7. Severability. If any provision or provisions of this Agreement shall be, or shall be found to be, invalid, inoperative, or unenforceable as applied to any particular case in any jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflict of any provision with any constitution or statute or rule of public policy or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question invalid, inoperative, or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute, or rule of public policy, but this Agreement shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative, or unenforceable provision had never been contained herein and such provision reformed so that it would be valid, operative, and enforceable to the maximum extent permitted in such jurisdiction or in such case.
8. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument, and in pleading or proving any provision of this Agreement it shall not be necessary to produce more than one such counterpart.
9. Headings. The headings contained in this Agreement are for reference purposes only and shall not in any way effect the meaning or interpretation of this Agreement.
10. Notices. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered or mailed, postage prepaid, certified mail, return receipt requested:
(a) TO SELLERS: If to Sellers:
c/o Select Property Investments, LLC
4012 S. Rainbow Blvd, Ste 111
Las Vegas, Nevada 89103-2010
(b) TO PURCHASER: If to Purchaser, to:
1046 Calle Recodo, Unit B
San Clemente, California 92673
with a copy to:
David Wagner & Associates, P.C.
Penthouse Suite
8400 East Prentice Ave.
Englewood, CO 80111
and/or to such other person(s) and address(es) as either party shall have specified in writing to the other.
11. Law To Govern. This Agreement shall be governed by and construed and enforced in accordance with the law (other than the law governing conflict of law questions) of Nevada.
12. Courts. Any action to enforce, arising out of, or relating in any way to, any of the provisions of this Agreement may be brought and prosecuted in such court or courts located in Nevada as is provided by law; and the parties consent to the jurisdiction of the court or courts located in Nevada and to service of process by registered mail, return receipt requested, or in any other manner provided by law.
IN WITNESS WHEREOF, Sellers and Purchaser have caused this Agreement to be executed as of the date first above written.
[PURCHASER]
SEYCHELLE ENVIRONMENTAL
TECHNOLOGIES, INC.
[SELLERS]
SELECT PROPERTY INVESTMENTS, LLC
THE TAM IRREVOCABLE TRUST