SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: - October 2, 2002
BRL HOLDINGS, INC.
(Exact name of registrant as specified in charter)
Delaware 000-15260 88-0218411
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Jurisdiction of Commission File I. R. S. Employer
Incorporation Number Identification
Number
200 Perimeter Road, Manchester, NH 03103-3326
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(Address of principal executive offices)
Registrant's telephone number:
(603) 641-8443
Item 1. Changes in Control of Registrant
Manchester, N.H. - October 2, 2002 - BRL Holdings (OTC/BB:BRLN) announced today
the signing of a definitive agreement to reorganize and acquire, in a reverse
acquisition, Element 21 Golf Company, a Delaware corporation, with headquarters
in Houston, Texas. Element 21 Golf is development stage high technology golf
equipment company whose technology is based on new alloys made from scandium. .
As a part of the reorganization, BRL will spin off two of its sponsored business
units: (a) Tech Ventures, which controls 30% of AssureTec Systems, Inc., a
development stage company active in travel and border document security; and (b)
Advanced Conductor Technologies, Inc. is in the process of acquiring Electric
Distribution Systems of Cambridge, England, which owns InfoWatt composite
reinforced conductor technology for producing advanced energy efficient
transmission cable. BRL will commence each of these spin-offs and forward split
its shares two for one upon the completion of the Element 21 Golf acquisition.
The record date for each of the spin offs and the forward split has been set at
the close of business October 4, 2002.
Item 2. Acquisition of 100% of Element 21 Golf Company
Currently BRL Holdings has 2,716,900 pre split shares outstanding following a
limited management buy back of AssureTec Systems shares in April, exclusive of
95,400 unexercised BRL option shares. Shareholders of Element 21 will be issued
24,452,210 pre split restricted shares at the closing of the acquisition by BRL
Holdings ("BRL"), inclusive of 2,700,000 pre split option shares to be issued to
Element 21 management and consultants, resulting in 27,264,400 pre split shares
outstanding on a fully-diluted basis. Immediately following the merger, the
agreement with Element 21 provides that BRL will implement a two for one forward
stock split and change its name to Element 21 Golf Company. Holders of one pre
split BRL share on the record date will be eligible to receive a second BRL
share resulting from the forward two for one split of BRL, two shares of Tech
Ventures and a single share of Advanced Conductor Technologies. Upon closing,
the current BRL directors and officers will resign. Dr. R. Bruce Reeves, the
current President and CEO of BRL Holdings, Inc. will retain his position the
completion of the merger. He will remain, post merger, as President and CEO of
the subsidiaries, Tech Ventures, Inc. and Advanced Conductor Technologies, Inc.
Founders of Element 21 Golf Company have spent years researching and developing
golf shafts and golf clubs made from scandium. Scandium is the 21st element in
the Periodic Table of Elements and when alloyed with aluminum has a much higher,
strength-to-weight ratio than titanium. Scandium alloy golf clubs provide
superior feel and workability for the player. The Company's objective is to
develop and market new golf products where scandium alloys can provide
measurable advantages over existing high-end golf clubs made of titanium,
stainless steel and composite materials.
Scandium is a little known element developed in secret aerospace programs in the
former Soviet Union. It was used as an additive to aluminum alloys to create the
highest strength aluminum-scandium alloys and alloys with significantly enhanced
weldability. These super-alloys are used in Russian missiles; MIG-29, MIG-31 and
SU-37 jet fighters as well as in components of the Space Station.
Scandium aluminum alloys for sports applications were developed using the
expertise of Russian and Ukrainian scientific institutes. In 1997 Easton Sports
baseball and softball bats was the first production of a large-scale scandium
sports product. The ultra-light, high strength Easton bats, known as the
Scandium/Sc 7000 Redline series, quickly became the most successful new product
launch in Easton's 75-year history. Scandium has also been used in bicycle
frames and bicycle handlebars. The lightweight scandium frame is now used by
many top racing teams. In addition to baseball bats and bicycle frames, scandium
lacrosse sticks, hockey stick and other sports equipment prototypes have been
developed.
Scandium golf products have outstanding potential in the golf industry. Results
of player and robotic testing indicated scandium aluminum alloys' superior
performance over leading titanium clubs. Scandium alloys have 55% reduced
density and 22% specific strength advantage over titanium thus allowing a larger
sweet spot for more consistency and accuracy. The reduced density and improved
strength allows flexibility in placing perimeter weighting that can affect the
trajectory of the ball. The specific yield strength advantage of scandium alloys
over steel and high-end aluminum alloys enables the design of shafts at
substantially reduced weight.
MANAGEMENT TEAM
Nataliya Hearn, Ph.D. will be the President and CEO of the new Company. Dr.
Hearn is a Canadian citizen with her Ph.D. in Civil Engineering from Cambridge
University in the United Kingdom. She is also a registered professional
engineer. Dr. Hearn is currently a tenured Associate Professor at the University
of Windsor and an Adjunct Professor at the University of Toronto. Dr. Hearn is
currently a Director of Magnesium Alloy Corporation, Director of New Product
Development and Marketing at Link-Pipe Inc., and Director of R&D at Materials
Service Life LLC. She has considerable experience in technology transfer,
evaluation, and government/industry grants.
Jim Morin of Mission Viejo, California will serve as Executive Vice President of
Product Development and has been associated with the golf industry for the past
20 years. Mr. Morin is an owner and officer of Hyper Industries, a golf
development and marketing company. In his capacity with Hyper Industries, Mr.
Morin has worked with Tommy Armour, Cleveland, Echelon, Calloway, Cobra, McHenry
Metals Golf, Taylor Made, Lynx and other golf companies. Mr. Morin has extensive
experience in high performance golf alloys, design, testing and production of
clubs and shafts that will be of particular value to the Company.
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Gerald Enloe of Houston, Texas will serve as a Director of the Company. Mr.
Enloe has served as President and CEO of Houston Industrial Materials, Inc.
since 1991. His business and practical experience will be invaluable to the new
Company.
A copy of the Agreement and Plan of Reorganization dated September 19th, 2002 is
attached to this Form 8K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BRL Holdings, Inc.
/S/ R. Bruce Reeves
--------------------------
R. Bruce Reeves, President
Dated: October 3, 2002
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ACQUISITION AGREEMENT
BY AND AMONG
BRL HOLDINGS, INC.
AND
Element 21 Golf Company
Dated as of September 19th, 2002
AGREEMENT AND PLAN OF REORGANIZATION
This ACQUISITION AGREEMENT is made and entered into as of September 19th, 2002,
among BRL HOLDINGS, Inc, a Delaware corporation ("HOLDINGS") and Element 21 Golf
Company, a Delaware corporation ("ELEMENT 21"), and the shareholders of ELEMENT
21, listed in Schedule A, which is attached hereto and made a part hereof
(collectively "ELEMENT 21 SHAREHOLDERS").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement
and in accordance with Delaware Law (as defined herein), HOLDINGS
intends to acquire all of the outstanding common stock of ELEMENT 21.
B. The Board of Directors of ELEMENT 21 and HOLDINGS have each:
(i) determined that the intended acquisition of ELEMENT 21 by HOLDINGS
is consistent with and in furtherance of the respective long-term
business strategy of their companies; and fair to, and in the best
interests of, their companies; and (ii) approved this Acquisition
Agreement(hereinafter "Agreement")and other transactions contemplated
by this Agreement.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE 1
DEFINITIONS
The terms defined in this Article shall have the following respective
meanings for all purposes of this Agreement:
1.1 "Acquisition" means the acquisition of all of the outstanding common
stock of ELEMENT 21 by HOLDINGS.
1.2 "Affiliate" means, with respect to any Person, any family member and
any other Person controlling, controlled by or under common control
with such Person.
1.3 "Closing" means the consummation and effectuation of the transactions
contemplated herein pursuant to the terms and conditions of this
Agreement. The Closing shall be held on the date and at the location
specified in Section 2.2.
1.4 "Closing Date" means the date on which the Closing actually occurs
pursuant to Section 2.2.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Consultant" means R.T. Robertson Consultants, Inc.
1.7 "Delaware Law" means the Delaware General Corporation Law.
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1.8 "Disclosure Schedule" means the disclosure schedule executed by each
party (referencing the appropriate section of paragraph numbers) that
are delivered to the other parties on or prior to the date of this
Agreement.
1.9 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
1.10 "GAAP" means generally accepted accounting principles as in effect in
the United States, consistently applied.
1.11 "Governmental Entity" means any federal or state court, administrative
agency, commission, governmental or regulatory authority.
1.12 "HOLDINGS Common Stock" means the shares of common stock of HOLDINGS to
be received by the ELEMENT 21 SHAREHOLDERS, in exchange for 100% of
their ELEMENT 21 shares.
1.13 "Knowledge" means, with respect to a party hereto or with respect to
any matter in question, that any of the Chairman, Chief Executive
Officer, Chief Operating Officer or Chief Financial Officer of such
party, has actual knowledge after a reasonable review of such matter.
1.14 "Material Adverse Effect" when used in connection with an entity means
any change, event, violation, circumstance or effect that is materially
adverse to the business, assets (including intangible assets),
capitalization, financial condition or results of operations of such
entity and its subsidiaries taken as a whole.
1.15 "OTCBB" means the OTC Bulletin Board that is operated by the National
Association of Securities Dealers but is separate from the NASDAQ stock
market.
1.16 "Person" means any individual, corporation (including any non-profit
corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company (including
any limited liability company or joint stock company), firm or other
enterprise, association, organization, entity or Governmental Entity.
1.17 "SEC" means the United States Securities and Exchange Commission.
1.18 "Securities Act" means the Securities Act of 1933, as amended.
1.19 "Tax Return" means any return, report or statement required to be filed
with any governmental authority with respect to Taxes.
1.20 "Taxes" means all taxes of any kind, including, without limitation,
those on or measured by or referred to as income, gross receipts,
sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
value added, property or windfall profits taxes, customs, duties or
similar fees, assessments or charges of any kind whatsoever, together
with any interest and any penalties, additions to tax or additional
amounts imposed by any governmental authority, domestic or foreign.
ARTICLE 2
THE ACQUISITION
2.1 The Acquisition. On the Closing Date and subject to and upon the terms
and conditions of this Agreement and the applicable provisions of
Delaware Law, HOLDINGS shall acquire 100% of the outstanding common
stock of ELEMENT 21. The complete list of ELEMENT 21's SHAREHOLDERS is
set forth in Schedule A of the ELEMENT 21 Disclosure Schedule.
2.2 Closing Date. Subject to the provisions of this Agreement, the parties
hereto shall cause the Acquisition to be consummated by exchanging all
of the documents required by this Agreement to be exchanged.
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The Closing of the Acquisition shall take place at the New York offices
of ELEMENT 21, at a time and date to be specified by the parties, which
shall be no later than the fifth (5th) business day after the
satisfaction or waiver of the conditions set forth in Article 7.
2.3 Effect of the Acquisition. At the Closing Date, the effect of the
Acquisition shall be as provided in this Agreement and the applicable
provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Closing Date, 100% of the common
stock of ELEMENT 21 shall vest in HOLDINGS.
2.4 Articles of Incorporation; Bylaws.
(a) At the Closing Date, the Certificate of Incorporation of HOLDINGS,
as in effect immediately prior to the Closing Date, shall remain the Certificate
of Incorporation of HOLDINGS until thereafter amended as provided by law and
such Certificate of Incorporation.
(b) At or before the Closing Date, HOLDINGS shall have authorized fifty
(50,000,000) million shares of common stock and five million (5,000,000) shares
of preferred stock.
(c) The Bylaws of HOLDINGS, as in effect immediately prior to the
Closing Date, shall be the Bylaws of HOLDINGS until thereafter amended.
2.5 Directors and Officers. The directors and officers of HOLDINGS shall be
the directors and officers of HOLDINGS until the Closing. On the
Closing Date, all of the directors and officers of HOLDINGS shall
resign and shall be replaced by the officers and directors designated
by ELEMENT 21.
2.6 Effect on Capital Stock. At the Closing Date, by virtue of the
Acquisition:
(a) Capital Stock of ELEMENT 21. One hundred (100%) percent of the
issued and outstanding common stock of ELEMENT 21 will be transferred, by
executed and notarized or guaranteed stock powers to HOLDINGS, in exchange for a
maximum total of 24,452,100 shares of HOLDINGS Common Stock as defined in
Section 1.12. At the Closing, each issued and outstanding share of common stock
of ELEMENT 21 shall be exchanged for ten thousand (10,000) validly issued, fully
paid and nonassessable share of HOLDINGS Common Stock. This shall be the total
number of HOLDINGS Common Stock to be paid for 100% of the ELEMENT 21 common
stock. At the Closing, there shall be no options, warrants or other agreements
to purchase shares of ELEMENT 21 common stock outstanding. In the event that any
ELEMENT 21 SHAREHOLDERS' certificates have been lost, stolen or destroyed, such
ELEMENT 21 SHAREHOLDER will be entitled to receive a stock certificate
representing HOLDINGS' Common Stock only after providing an affidavit of loss to
HOLDINGS. At Closing, the maximum number of common shares of Element 21 shall be
2,445 shares issued, 10,000 common shares authorized with no preferred shares
outstanding.
(b) Capital Stock of HOLDINGS. Each share of HOLDINGS Common Stock
issued and outstanding immediately prior to the Closing Date shall remain
unchanged as a result of the Acquisition. At the Closing, the options to
purchase 95,400 shares of Holdings common stock shall remain outstanding. Except
as set forth in this Section 2.6(b), at the Closing, there shall be no other
options, warrants or other agreements or rights to purchase shares of HOLDINGS'
capital stock outstanding and any other outstanding options, warrants or other
agreements or rights to purchase shares of HOLDINGS' capital stock shall be
cancelled or otherwise terminated.
2.7 Issuance of Certificates.
------------------------
(a) HOLDINGS to Provide Common Stock. On the Closing Date, HOLDINGS
shall deliver to the ELEMENT 21 SHAREHOLDERS stock certificates in accordance
with Section 2.6(a) totaling up to 24,452,100 shares of HOLDINGS Common Stock,
in exchange for 100% of ELEMENT 21's issued and outstanding common stock.
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(b) SHAREHOLDER Waiver. Each ELEMENT 21 SHAREHOLDER as a condition of
participating in the Acquisition, shall execute a ELEMENT 21 SHAREHOLDER Waiver
in the form of Exhibit B. This ELEMENT 21 SHAREHOLDER Waiver shall provide that
all holders of shares issued, as a part of the Acquisition by HOLDINGS, shall
forfeit any rights to receive stock dividends and distributions of any spin-off
of shares of AssureTec Systems, Inc. ("AssureTec"), Tech Ventures, Inc. ("Tech")
and Biorelease Technologies, Inc. ("BTI") held by HOLDINGS on the Closing Date.
This waiver shall not affect any other distributions of shares or cash other
than those shares resulting directly from the referenced companies held by
HOLDINGS.
2.8 [Intentionally Omitted]
2.9 Taking of Necessary Action; Further Action. If, at any time after
the Closing Date, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest HOLDINGS with full right, title and
possession to 100% of the common stock of ELEMENT 21, the management of ELEMENT
21 and HOLDINGS agree to take all such lawful and necessary further action.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ELEMENT 21
ELEMENT 21 represents and warrants to HOLDINGS, subject to such exceptions as
are specifically disclosed in the ELEMENT 21 Disclosure Schedule (referencing
the appropriate section and paragraph numbers) delivered by ELEMENT 21 to
HOLDINGS on or prior to the date of this Agreement, as follows:
3.1 Organization and Qualification; Subsidiaries. ELEMENT 21 is a corporation
duly organized, validly existing and in good standing under the laws of Delaware
and has the requisite corporate power and authority to own, lease and operate
its assets and properties and to carry on its business as it is now being
conducted. ELEMENT 21 is in possession of all material franchises,
authorizations, licenses, permits, easements, consents, certificates, approvals
and orders ("ELEMENT 21 Approvals") necessary to own, lease and operate the
properties it purports to own, operate or lease and to carry on its business as
it is now being conducted, except where the failure to have such ELEMENT 21
Approvals would not, individually or in the aggregate, have a Material Adverse
Effect on ELEMENT 21. ELEMENT 21 is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except where the
failure to be so duly qualified or licensed and in good standing would not,
either individually or in the aggregate, have a Material Adverse Effect on
ELEMENT 21. ELEMENT 21 does not directly own any equity interest in, or any
interest convertible or exchangeable or exercisable for, any equity interest in,
any corporation, partnership, joint venture or other business, association or
entity. ELEMENT 21 owns all of the assets and business set forth in Section 3.1
of the ELEMENT 21 Disclosure Schedule except as set forth in Section 3.1 of the
ELEMENT 21 Disclosure Schedule.
3.2 Articles of Incorporation and Bylaws. ELEMENT 21 has previously furnished to
HOLDINGS a complete and correct copy of its Certificate of Incorporation and
Bylaws as amended to date. Such Certificate of Incorporation and Bylaws are in
full force and effect. ELEMENT 21 is not in material violation of any of the
provisions of its Certificate of Incorporation or Bylaws.
3.3 Authority Relative to This Agreement. ELEMENT 21 has all necessary corporate
or other power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by ELEMENT 21
and the ELEMENT 21 SHAREHOLDERS and the consummation by ELEMENT 21 and the
ELEMENT 21 SHAREHOLDERS of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of ELEMENT
21 and the ELEMENT 21 SHAREHOLDERS and subject, to the ELEMENT 21 SHAREHOLDERS'
approval no other corporate proceedings on the part of ELEMENT 21 or the ELEMENT
21 SHAREHOLDERS are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
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and delivered by ELEMENT 21 and each ELEMENT 21 SHAREHOLDER signing this
Agreement, and, assuming the due authorization, execution and delivery by
HOLDINGS, constitutes legal and binding obligations of ELEMENT 21 and the
ELEMENT 21 SHAREHOLDERS, enforceable against ELEMENT 21 and the ELEMENT 21
SHAREHOLDERS in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws now or hereafter in effect relating to creditor's rights generally and the
application of principals of equity, including without limitation the principal
that equitable remedies, such as the remedy of specific performance are subject
to the discretion of the court before which any proceeding may therefore be
brought.
3.4 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement by ELEMENT 21 does
not, and the performance of this Agreement by ELEMENT 21 shall not, (i) conflict
with or violate its Articles of Incorporation or Bylaws, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
ELEMENT 21 by which ELEMENT 21 is bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or impair ELEMENT 21's rights or alter
the rights or obligations of any third party under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of a material lien or material encumbrance on any of the properties or
assets of ELEMENT 21 pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other similar
instrument or similar obligation to which ELEMENT 21 is a party or by which its
properties are bound or affected.
(b) The execution and delivery of this Agreement by ELEMENT 21 does
not, and the performance of this Agreement by ELEMENT 21 shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (A) for applicable requirements, if any, of
the Securities Act, the Exchange Act, state securities laws, and the rules and
regulations thereunder, the rules and regulations of the National Association of
Securities Dealers ("NASD"), and (B) where the failure to obtain such consents,
ELEMENT 21 Approvals, authorizations or permits, or to make such filings or
notifications, (i) would not prevent consummation of the Acquisition or
otherwise prevent ELEMENT 21 from performing its obligations under this
Agreement or (ii) could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on ELEMENT 21 or the ELEMENT 21
SHAREHOLDERS.
3.5 Compliance; Permits.
-------------------
(a) ELEMENT 21 is not in material default or material violation of, (i)
any law, rule, regulation, order, judgment or decree applicable to ELEMENT 21 or
by which its properties is bound or affected, or (ii) any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other similar instrument or similar obligation to which ELEMENT 21 is a party or
by which ELEMENT 21 or its properties is bound or affected, except for any
conflicts, defaults or violations which could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on ELEMENT 21.
To the Knowledge of ELEMENT 21, no investigation or review by any governmental
or regulatory body or authority is pending or threatened against ELEMENT 21, nor
has any Governmental Entity indicated an intention to conduct the same, other
than, in each such case, those the outcome of which could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
ELEMENT 21.
(b) ELEMENT 21 holds all permits, licenses, variances, exemptions,
orders and approvals from Governmental Entities which are material to operation
of the business of ELEMENT 21 (collectively, the "ELEMENT 21 Permits"). ELEMENT
21 is in compliance in all material respects with the terms of the ELEMENT 21
Permits, except where the failure to comply could not reasonably be expected to
have a Material Adverse Effect on ELEMENT 21.
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3.6 [Intentionally Omitted]
3.7 No Undisclosed Liabilities. To ELEMENT 21's Knowledge, ELEMENT 21 does not
have any liabilities (absolute, accrued, contingent or otherwise) of a nature
required to be disclosed on a balance sheet or in the related notes to the
financial statements prepared in accordance with GAAP (with the revenue
recognition principles thereof) which are, individually or in the aggregate,
material to the business, results of operations or financial condition of
ELEMENT 21 taken as a whole, except (i) banking, accounting, legal and printing
fees associated with the Acquisition, or (ii) liabilities incurred in the
ordinary course of ELEMENT 21's business since its formation.
3.8 [Intentionally Omitted]
3.9 Absence of Litigation. There are no material claims, actions, suits or
proceedings pending or, to the Knowledge of ELEMENT 21, threatened (or, to the
Knowledge of ELEMENT 21, any governmental or regulatory investigation pending or
threatened) against ELEMENT 21 as to which ELEMENT 21 has received any written
notice or assertion, or any properties or rights of ELEMENT 21, before any
court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign; and there are no claims, actions, suits, proceedings
or judgments against ELEMENT 21 which would affect ELEMENT 21's right and
authority to effect the transactions contemplated hereby.
3.10 Employee Benefit Plans. Other than as provided in Section 3.10 of the
ELEMENT 21 Disclosure Schedule, ELEMENT 21 is not a party to any oral or written
(i) contract for the employment of any officer or employee that is not
terminable on thirty (30) days (or less) notice, (ii) profit sharing, bonus,
deferred compensation, pension or retirement plan, agreement or arrangement; or
(iii) collective bargaining agreement. The only employee fringe or benefit plan,
commitment or other arrangements (whether or not set forth in a written document
and including, without limitation, all "employee benefit plans" within the
meaning of Section 3(3)of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) that covers any active, former employee, director or
consultant of ELEMENT 21, or with respect to which ELEMENT 21 has or may in the
future have liability, are listed in Section 3.10 the ELEMENT 21 Disclosure
Schedule (the "ELEMENT 21 Plans"). ELEMENT 21 has provided to HOLDINGS: (i)
correct and complete copies of all documents embodying each ELEMENT 21 Plan
including without limitation all amendments thereto, all related trust
documents, and all material written agreements and contracts relating to each
such ELEMENT 21 Plan and any other information requested by HOLDINGS regarding
the ELEMENT 21 Plan.
3.11 Labor Matters. There is no litigation pending or, to the Knowledge of
ELEMENT 21, threatened, between ELEMENT 21 and any of its respective employees.
As of the date of this Agreement, ELEMENT 21 is not a party to any collective
bargaining agreement or other labor union contract applicable to Persons
employed by ELEMENT 21 nor to ELEMENT 21's Knowledge are there any activities or
proceedings of any labor union to organize any such employees. As of the date of
this Agreement, ELEMENT 21 has no Knowledge of any strikes, slowdowns, work
stoppages or lockouts, or threats thereof, by or with respect to any employees
of ELEMENT 21.
3.12 Ability to Transfer ELEMENT 21 Stock. To the Knowledge of ELEMENT 21, each
ELEMENT 21 SHAREHOLDER is the sole owner of his or her ELEMENT 21 stock, and has
the full power and authority to transfer his or her shares of ELEMENT 21 to
HOLDINGS in accordance with this Agreement. Upon the transfer by ELEMENT 21
SHAREHOLDERS of all their common stock of ELEMENT 21 to HOLDINGS, HOLDINGS shall
be the owner 100% of such ELEMENT 21 common stock free and clear of any and all
material claims, liens and encumbrances of any kind or nature whatsoever.
3.13 Restrictions on Business Activities. There is no material agreement,
judgment, injunction, order or decree binding upon ELEMENT 21 which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of ELEMENT 21, any acquisition of property by ELEMENT 21
or the conduct of business by ELEMENT 21 as currently conducted.
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3.14 Title to Property. ELEMENT 21 owns the plans and designs for its products
free and clear of all liens, charges and encumbrances except liens for Taxes not
yet due and payable and such liens or other imperfections of title, if any, as
do not materially detract from the value of or interfere with the present use of
the license affected thereby; and all material licenses which ELEMENT 21 holds
and which are required for the operation of its business are in good standing,
valid and effective in accordance with their respective terms, and there is not,
under any of such licenses, any existing material default or event of default
(or any event which with notice or lapse of time, or both, would constitute a
material default and in respect of which ELEMENT 21 has not taken adequate steps
to prevent such default from occurring). All the plants, structures and
equipment of ELEMENT 21, are in good operating condition and repair, in all
material respects.
3.15 Taxes. Prior to the Closing Date, ELEMENT 21 will have timely filed all Tax
Returns required to be filed by it (other than those that are not, individually
or in the aggregate, material), have paid all Taxes shown thereon to be due and
have provided adequate accruals in all material respects in accordance with GAAP
in its financial statements for any Taxes that have not been paid, whether or
not shown as being due on any returns. In addition, (i) no material claim for
unpaid Taxes that are currently, or will be prior to the Closing Date, due and
payable has become a lien against the property of ELEMENT 21 or is being
asserted against ELEMENT 21, (ii) no audit of any material Tax Return of ELEMENT
21 is being conducted by a tax authority, (iii) no extension of the statute of
limitations on the assessment of any Taxes has been granted by ELEMENT 21 or any
of its subsidiaries and is currently in effect and (iv) there is no agreement,
contract or arrangement to which ELEMENT 21 is a party that may result in the
payment of any amount that would not be deductible pursuant to Sections 280G,
162(a) (by reason of being unreasonable in amount), 162(b) through (p) or 404 of
the Code.
3.16 Environmental Matters. To the Knowledge of ELEMENT 21, ELEMENT 21 (i) has
obtained all applicable permits, licenses and other authorizations which are
material to the business of ELEMENT 21 and required under federal, state or
local laws relating to pollution or protection of the environment, including
laws relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or wastes into ambient
air, surface water, ground water, or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by ELEMENT 21 (or its respective agents); (ii) are in
material compliance with all terms and conditions of such required permits,
licenses and authorizations, and also are in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in such laws or contained in any
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved there under; (iii) as of the date hereof, has
not received notice of any event, condition, circumstance, activity, practice,
incident, action or plan which is reasonably likely to interfere with or prevent
continued material compliance or which would give rise to any material common
law or statutory liability, or otherwise form the basis of any claim, action,
suit or proceeding, based on or resulting from ELEMENT 21's (or any of its
respective agents) manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission, discharge, or
release into the environment, of any pollutant, contaminant, or hazardous or
toxic material or waste; and (iv) have taken all actions necessary under
applicable requirements of federal, state or local laws, rules or regulations to
register any products or materials required to be registered by ELEMENT 21 (or
any of its respective agents) thereunder.
3.17 Intangible Assets. Section 3.17 of the ELEMENT 21 Disclosure Schedule
contains a true and complete list of all patents and patent applications
(pending or in the process of preparation), domestic or foreign, patent rights,
trademarks, trade names and licenses under the patents of others, trade secrets,
secret processes and other proprietary rights of every kind and nature used or
necessary for use by ELEMENT 21 in its business as presently conducted. To
ELEMENT 21's Knowledge, all such patents, patent applications, patent rights and
10
licenses are valid and effective in accordance with their terms, and all such
trade names, trade secrets, secret processes and other proprietary rights are
valid and effective. ELEMENT 21 has not received any notice of any claim of
infringement. Except as disclosed in Section 3.17 of the ELEMENT 21 Disclosure
Schedule, there are no agreements, contracts or obligations under which ELEMENT
21 is obligated with respect to, or is using, any patents, patent applications,
patent rights, trademarks, trade names, licenses under the patents of others,
trade secrets, secret processes or other proprietary rights. The trade secrets
and "know-how" of ELEMENT 21 are in such form and of such quality that,
following the Closing, ELEMENT 21 will be able to continue to sell the products
heretofore provided by ELEMENT 21.
3.18 Agreements, Contracts and Commitments. Except as set forth in Section 3.18
of the ELEMENT 21 Disclosure Schedule, ELEMENT 21 is not a party to and is not
bound by:
(a) any employment or consulting agreement, contract or commitment with
any officer, director or member of ELEMENT 21's Board of Directors, other than
those that are terminable by ELEMENT 21 on no more than thirty (30) days notice
and which do so with no express (whether by contract or by policy) liability or
financial obligation to ELEMENT 21;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(c) any agreement, contract or commitment containing any covenant
limiting in any respect the right of ELEMENT 21 to engage in any line of
business or to compete with any Person; or
(d) any agreement, contract or commitment currently in force relating
to the disposition or acquisition by ELEMENT 21 after the date of this Agreement
of a material amount of assets not in the ordinary course of business or
pursuant to which ELEMENT 21 has any material ownership interest in any
corporation, partnership, joint venture or other business enterprise.
ELEMENT 21 is not and, to ELEMENT 21's Knowledge, no other party to a ELEMENT 21
Contract (as defined below), is in material breach, violation or default under,
and ELEMENT 21 has not received written notice that it has breached, violated or
defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments to which ELEMENT 21 is a party or by which
it is bound that are required to be disclosed in Section 3.18 of the ELEMENT 21
Disclosure Schedule pursuant to this Section 3.18 hereof (any such agreement,
contract or commitment, a "ELEMENT 21 Contract") in such a manner as would
permit any other party to cancel or terminate any such ELEMENT 21 Contract, or
would permit any other party to seek material damages or other remedies (for any
or all of such breaches, violations or defaults, in the aggregate).
3.19 Insurance. ELEMENT 21 maintains insurance policies covering the assets,
business, equipment, properties, operations, employees, officers and directors
of ELEMENT 21 which are of the type and in amounts customarily carried by
Persons conducting businesses similar to those of ELEMENT 21.
3.20 Directors and Officers. Section 3.20 of the ELEMENT 21 Disclosure Schedule
contains a complete list of the current Board of Directors and executive
officers, and the management of ELEMENT 21.
3.21 Record Books. The record books of ELEMENT 21 are in good order, complete,
accurate and up to date.
3.22 Related Party Transactions. Except as set forth in Section 3.22 of the
ELEMENT 21 Disclosure Schedule, neither any officer nor any director or employee
of ELEMENT 21 has any direct interest in any competitor, supplier, or customer
of ELEMENT 21 or in any Person from whom or to whom ELEMENT 21 leases any real
or personal property, or in any other Person with whom ELEMENT 21 is doing
business.
11
3.23 Lack of Disputes. There is currently no material and adverse dispute,
pending or, to the Knowledge of ELEMENT 21, threatened, anticipated or
contemplated of any kind with any customer, supplier, source of financing,
employee, landlord, or licensee of ELEMENT 21 in an amount in excess of $50,000.
3.24 Board Approval. The Board of Directors of ELEMENT 21 has, as of the date of
this Agreement (i) approved this Agreement and the transactions contemplated
hereby and thereby, (ii) determined that the Acquisition is in the best
interests of the stockholders of ELEMENT 21 and is on terms that are fair to
such stockholders and (iii) recommended that ELEMENT 21 approve this Agreement
and the Acquisition.
3.25 ELEMENT 21 SHAREHOLDERS. ELEMENT 21 has received a written representation
from each of ELEMENT 21's SHAREHOLDERS, which ELEMENT 21 reasonably believes,
that each ELEMENT 21 SHAREHOLDER is an "accredited investor" as that term is
defined in the Rules and Regulations under the Securities Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF HOLDINGS
HOLDINGS represents and warrant to ELEMENT 21, subject to such exceptions as
specifically disclosed in the HOLDINGS Disclosure Schedule (referencing the
appropriate section and paragraph number) delivered by HOLDINGS to ELEMENT 21 on
or prior to the date of this Agreement, as follows:
4.1 Organization and Qualification; Subsidiaries. Each of HOLDINGS and its
subsidiaries are corporations duly organized, validly existing and in good
standing under the laws of Delaware and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each of HOLDINGS and its subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("HOLDINGS Approvals")
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being conducted, except where
the failure to have such HOLDINGS Approvals would not, individually or in the
aggregate, have a Material Adverse Effect on HOLDINGS. Each of HOLDINGS and its
subsidiaries is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing that would not, either
individually or in the aggregate, have a Material Adverse Effect on HOLDINGS.
HOLDINGS does not directly or indirectly own any equity or similar interest in,
or any interest convertible or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, joint venture or other
business, association or entity. AssureTec, Tech and BTI are the only
subsidiaries of HOLDINGS. All of the outstanding shares of capital stock of the
subsidiaries of HOLDINGS have been validly issued and are fully paid and
nonassessable and are owned free and clear of all liens and free of any other
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests).
4.2 Certificate of Incorporation and Bylaws. HOLDINGS has previously furnished
to ELEMENT 21 a complete and correct copy of its Certificate of Incorporation
and Bylaws as amended to date. Such Certificate of Incorporation and Bylaws and
equivalent organizational documents of each subsidiary are in full force and
effect. HOLDINGS is not in violation of any of the provisions of its Certificate
of Incorporation or Bylaws.
12
4.3 Capitalization. The authorized capital stock of HOLDINGS consists of
50,000,000 shares of common stock, par value $0.01 per share and 5,000,000
shares of Preferred Stock, par value $0.10 per share. At the close of business
on June 30, 2002, (i) HOLDINGS shares of common stock issued and outstanding
were 2,716,900 shares (after exchange of shares earlier issued to acquire
AssureTec Systems for a like number of AssureTec shares), all of which are
validly issued, fully paid and non-assessable, (ii) 95,400 shares of common
stock were reserved for issuance upon the exercise of outstanding options (after
exchange of options earlier issued to acquire AssureTec Systems for a like
number of AssureTec options) ("HOLDINGS Options") to purchase HOLDINGS common
stock; the HOLDINGS Options and the shares reserved for issuance are listed in
Section 4.3 of the HOLDINGS Disclosure Schedule; provided, however, that except
as set forth in Section 2.6(b)representing these 95,400 option shares, any and
all options to purchase capital stock of HOLDINGS shall be cancelled prior to
the Closing. All of the outstanding shares of HOLDINGS' capital stock are, and
all shares which may be issued pursuant to this Agreement will be, duly
authorized, validly issued and fully paid and non-assessable and are not subject
to preemptive rights and were issued in compliance with state and federal
securities laws. None of the preferred stock has been issued and none is
outstanding. All shares of HOLDINGS Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall, and the shares of
HOLDINGS Common Stock to be issued pursuant to this Agreement will be, duly
authorized, validly issued, fully paid and non-assessable. Except as set forth
in Section 4.3 of the HOLDINGS Disclosure Schedule, no change in such
capitalization has occurred except for the exchange of HOLDINGS shares of common
stock and for a like number of restricted shares in AssureTec Systems, Inc. and
the exchange of HOLDINGS Options for a like number of AssureTec options. Except
as set forth in this Section 4.3 or in Section 4.3 of the HOLDINGS Disclosure
Schedule, as of the date of this Agreement, there are no options, warrants or
other rights, agreements, puts, calls, contracts, arrangements or commitments of
any character relating to the issued or unissued capital stock of HOLDINGS or
obligating HOLDINGS to issue or sell any shares of capital stock of, or other
equity interests in, HOLDINGS. There are no obligations, contingent or
otherwise, of HOLDINGS to repurchase, redeem or otherwise acquire any shares of
HOLDINGS Common Stock or to provide funds to or make any investment (in the form
of a loan, capital contribution or otherwise) in any other entity. HOLDINGS is
not a party to any agreement restricting the transfer of, relating to the voting
of, requiring registration of, or granting any preemptive or, antidilutive
rights with respect to, any securities of HOLDINGS.
4.4 Authority Relative to This Agreement. HOLDINGS has all necessary corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement by HOLDINGS
and the consummation by HOLDINGS of the transactions contemplated hereby has
been duly and validly authorized by all necessary corporate action on the part
of HOLDINGS and no other corporate proceedings on the part of HOLDINGS are
necessary to authorize this Agreement, or to consummate the transactions so
contemplated. The execution and delivery of this Agreement by HOLDINGS and the
consummation by HOLDINGS of the transactions contemplated hereby do not require
the approval of the stockholders of Holdings. This Agreement has been duly and
validly executed and delivered by HOLDINGS and, assuming the due authorization,
execution and delivery by ELEMENT 21, constitutes legal and binding obligations
of HOLDINGS, enforceable against HOLDINGS in accordance with their respective
terms.
4.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by HOLDINGS does not,
and the performance of this Agreement by HOLDINGS shall not, (i) conflict with
or violate the Certificate of Incorporation, Bylaws or equivalent organizational
documents of HOLDINGS or any subsidiary, (ii) subject to compliance with the
requirements set forth in Section 4.5(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to HOLDINGS or any
subsidiary or by which its properties are bound or affected, or
13
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair
HOLDINGS' rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of HOLDINGS pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which HOLDINGS or any subsidiary is a party or
by which HOLDINGS or any subsidiary or any of their respective properties are
bound or affected.
(b) The execution and delivery of this Agreement by HOLDINGS does not,
and the performance of this Agreement by HOLDINGS shall not, require any
consent, notice, report, order, approval, authorization or permit of, or filing
with or notification to, any Governmental Entity except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, state securities
laws, and the rules and regulations thereunder, the rules and regulations of the
NASD, and the mailing to HOLDINGS Stockholders and filing with the SEC of a
notice pursuant to SEC Rule 14f-1 under the Exchange Act; and (ii) where the
failure to obtain such consents, HOLDINGS Approvals, authorizations or permits,
or to make such filings or notifications (a) would not prevent the consummation
of the Acquisition or otherwise prevent HOLDINGS from performing its obligations
under this Agreement, or (b) could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on HOLDINGS.
4.6 Compliance; Permits.
-------------------
(a) HOLDINGS is not in conflict with, or in default or violation of,
(i) any law, rule, regulation, order, judgment or decree applicable to HOLDINGS
or by which its properties is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which HOLDINGS is a party or by which HOLDINGS
or its properties is bound or affected, except for any conflicts, defaults or
violations which could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on HOLDINGS. To the Knowledge of
HOLDINGS, no investigation or review by any governmental or regulatory body or
authority is pending or threatened against HOLDINGS, nor has any governmental or
regulatory body or authority indicated an intention to conduct the same, other
than, in each such case, those the outcome of which could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
HOLDINGS.
(b) HOLDINGS holds all permits, licenses, variances, exemptions,
certifications, qualifications, requirements, registrations, orders and
approvals from governmental authorities which are material to operation of the
business of HOLDINGS (collectively, the "HOLDINGS Permits"). HOLDINGS is in
compliance in all respects with the terms of the HOLDINGS Permits, except where
failure to comply could not reasonably be expected to have a Material Adverse
Effect on HOLDINGS and all HOLDINGS Permits are outstanding and in good standing
and there are no existing actions, seeking to cancel, terminate or limit such
HOLDINGS Permits and HOLDINGS is in compliance with all obligations,
instructions or requirements thereof. HOLDINGS has never been the subject of an
Occupational and Safety Health Administration (or similar agency) inspection or
found by any agency to be in violation of any occupational safety or health law.
HOLDINGS has never been the subject of an inspection or inquiry regarding
violations or alleged violations of any law by the Environmental Protection
Agency, Federal Trade Commission, Food & Drug Administration, or similar
federal, state, or local agency, and has not been found (or the subject of an
allegation) by such agency to be in violation of any law. HOLDINGS has never
been a party to any illegal or improper payments.
4.7 Financial Statements; SEC Reports.
(a) Each set of consolidated financial statements (including, in each
case, any related notes thereto) contained in the HOLDINGS financial statements
was prepared in accordance with GAAP (including, without limitation, in
accordance with the revenue recognition provisions thereof) applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited statements, do not contain
footnotes as permitted by Form 10-K of the Exchange Act) and each fairly
presents the consolidated financial position of HOLDINGS and its subsidiaries as
at the respective dates thereof and the consolidated results of its operations
and cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal adjustments which were not or
are not expected to be material in amount.
14
(b) HOLDINGS has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other documents
(including exhibits and all other information incorporated therein) with the SEC
since January 1, 2000, (the "HOLDINGS SEC Documents"). As of their respective
dates, the HOLDINGS SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act, and the rules and
regulations of the SEC promulgated thereunder applicable to such HOLDINGS SEC
Documents, and none of the HOLDINGS SEC Documents when filed contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of HOLDINGS included in the HOLDINGS SEC Documents comply
as to form and substance, as of their respective dates of filing with the SEC,
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto.
(c) The unaudited consolidated financial statements of HOLDINGS for the
nine (9) months ended March 31, 2002, which are included in the HOLDINGS SEC
Documents, have previously been made available to the Company. The Financial
Statements comply as to form and substance in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto.
4.8 No Undisclosed Liabilities. HOLDINGS does not have any direct or indirect
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP (including, without
limitation, in accordance with the revenue recognition principles thereof) which
are, individually or in the aggregate, material to the business, results of
operations or financial condition of HOLDINGS taken as a whole, except (i)
liabilities provided for in HOLDINGS' balance sheet as of March 31, 2002, (ii)
liabilities incurred since March 31, 2002 in the ordinary course of business
consistent with past practices or (iii) banking, accounting, legal and printing
fees associated with the Acquisition. As of the Closing, HOLDINGS will have no
assets or liabilities except its investment in shares related to the spin-off of
Tech Ventures, inc., AssureTec and Biorelease Technologies, as described in
Section 4.13 herein.
4.9 Absence of Certain Changes or Events. Since its formation, except as set
forth in Section 4.9 of the HOLDINGS Disclosure Schedule and other than the
exchange of existing HOLDINGS shares and options for AssureTec shares and
options and the conversion of related party debt of outstanding option shares,
there has not been: (i) any Material Adverse Effect on HOLDINGS, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of HOLDINGS' capital
stock, or any purchase, redemption or other HOLDINGS by HOLDINGS of any of
HOLDINGS' capital stock or any other securities of HOLDINGS or any options,
warrants, calls or rights to acquire any such shares or other securities, (iii)
any split, combination or reclassification of any of HOLDINGS' capital stock,
(iv) any granting by HOLDINGS of any increase in compensation or fringe
benefits, except for normal increases of cash compensation in the ordinary
course of business consistent with past practice, or any payment by HOLDINGS of
any bonus, except for bonuses made in the ordinary course of business consistent
with past practice, or any granting by HOLDINGS of any increase in severance or
termination pay or any entry by HOLDINGS into any currently effective
employment, severance, termination or indemnification agreement or any agreement
the benefits of which are contingent or the terms of which are materially
altered upon the occurrence of a transaction involving HOLDINGS of the nature
contemplated hereby, (v) any material change by HOLDINGS in its accounting
methods, principles or practices, except as required by concurrent changes in
GAAP, or (vi) any revaluation by HOLDINGS of any of its assets, including,
without limitation, writing down the value of capitalized inventory or writing
off notes or accounts receivable other than in the ordinary course of business.
15
4.10 Absence of Litigation. Except as set forth in Section 4.10 of the HOLDINGS
Disclosure Schedule Reports, there are no material claims, actions, suits or
proceedings pending or, to the Knowledge of HOLDINGS, threatened (or to the
Knowledge of HOLDINGS, any governmental or regulatory investigation pending or
threatened) against HOLDINGS as to which HOLDINGS or any subsidiary has received
any written notice or assertion, or any properties or rights of HOLDINGS or any
subsidiary, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign. HOLDINGS is not subject to or
in violation or default under any outstanding order, injunction or decree.
4.11 Employee Benefit Plans. HOLDINGS is not a party to any oral or written (i)
contract for the employment of any officer or employee, (ii) profit sharing,
bonus, deferred compensation, pension or retirement plan, agreement or
arrangement, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan, arrangement
or understanding providing benefits to any current or former employee, officer
or director of HOLDINGS; or (iii) collective bargaining agreement. The only
employee fringe or benefit plan, commitment or other arrangements (whether or
not set forth in a written document and including, without limitation, all
"employee benefit plans" within the meaning of Section 3(3) of ERISA that covers
any active, former employee, director or consultant of HOLDINGS, or with respect
to which HOLDINGS has or may in the future have liability, are listed in Section
4.11 of the HOLDINGS Disclosure Schedule (the "HOLDINGS Plans") and the HOLDINGS
Plans are in compliance with ERISA. HOLDINGS has provided to ELEMENT 21: (i)
correct and complete copies of all documents embodying each HOLDINGS Plan
including (without limitation) all amendments thereto, all related trust
documents, and all material written agreements and contracts relating to each
such HOLDINGS Plan and any other information requested by ELEMENT 21 regarding
the HOLDINGS Plan.
4.12 Labor Matters. (a) There is no litigation pending or, to the Knowledge of
HOLDINGS, threatened, between HOLDINGS, its subsidiaries and any of their
respective employees. As of the date of this Agreement, HOLDINGS is not a party
to any collective bargaining agreement or other labor union contract applicable
to Persons employed by HOLDINGS nor does HOLDINGS know of any activities or
proceedings of any labor union to organize any such employees. As of the date of
this Agreement, HOLDINGS has no Knowledge of any strikes, slowdowns, work
stoppages or lockouts, or threats thereof, by or with respect to any employees
of HOLDINGS.
(b) Section 4.12 of the HOLDINGS Disclosure lists each employee
of HOLDINGS as well as the current position, the current annual salary, the date
of hire, any special arrangements including retirement benefits, whether written
or oral, with respect to each employee, including any director or officer of
HOLDINGS.
(c) To the Knowledge of HOLDINGS, HOLDINGS is in compliance with all
applicable laws regarding employment and employment practices.
(d) No present or former employee or contracted employee of HOLDINGS
has asserted any claim against HOLDINGS and, to the Knowledge of HOLDINGS no
basis for any such claim exists.
4.13 Spin-off of Tech Ventures, Inc. Prior to the Closing Date, HOLDINGS will
establish a record date for HOLDINGS shareholders who will be eligible to
receive stock of Tech, which includes the investments previously held by
HOLDINGS in AssureTec, Tech, BTI and other affiliated entities. Shares in Tech
will be distributed to those HOLDINGS shareholders as of the record date
following a registration of those shares. HOLDINGS will continue to have the
responsibility to cooperate in the Tech spin-off after the Closing, and for
which $33,333 (the "Spin-off Fee") will be advanced to Dr. Reeves by or on
behalf of ELEMENT 21 for the costs relating to the Tech spin-off. Reeves shall
diligently complete the Tech spin-off, with the cooperation of HOLDINGS, but
without any further cost to HOLDINGS.
16
4.14 Restrictions on Business Activities. There is no material agreement,
judgment, injunction, order or decree binding upon HOLDINGS which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of HOLDINGS, any HOLDINGS of property by HOLDINGS or the
conduct of business by HOLDINGS as currently conducted.
4.15 Title to Property. HOLDINGS owns no real property. HOLDINGS has good and
marketable title to all of its material properties and assets set forth in
Section 4.15 of the HOLDINGS Disclosure Schedule, free and clear of all liens,
charges and encumbrances except liens for Taxes not yet due and payable and such
liens or other imperfections of title, if any, as do not materially detract from
the value of or interfere with the present use of the property affected thereby;
and all leases pursuant to which HOLDINGS lease from others material amounts of
real or personal property are in good standing, valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing material default or event of default (or any event which
with notice or lapse of time, or both, would constitute a material default and
in respect of which HOLDINGS has not taken adequate steps to prevent such
default from occurring). All the plants, structures and equipment of HOLDINGS,
are in good operating condition and repair, in all material respects.
4.16 Taxes. (a) Within sixty (60) days following the Closing, HOLDINGS and its
current and former affiliated companies will have filed all Tax Returns required
to be filed by it (other than those that are not, individually or in the
aggregate, material) and all such returns and reports are complete and correct
in all respects, and any requests for extensions to file such returns or reports
have been timely filed, granted and have not expired, and HOLDINGS and its
subsidiaries have paid all Taxes shown thereon to be due and have provided
adequate accruals in all material respects in accordance with GAAP in its
financial statements for any Taxes that have not been paid, whether or not shown
as being due on any returns. Each of HOLDINGS and its subsidiaries has withheld
and paid all Taxes required to be withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, stockholder or
third party. In addition, (i) no material claim for unpaid Taxes that are
currently, or will be prior to the Closing Date, due and payable has become a
lien against the property of HOLDINGS or is being asserted against HOLDINGS,
(ii) no audit of any material Tax Return of HOLDINGS is being conducted by a tax
authority, (iii) no extension of the statute of limitations on the assessment of
any Taxes has been granted by HOLDINGS or any of its subsidiaries and is
currently in effect and (iv) there is no agreement, contract or arrangement to
which HOLDINGS is a party that may result in the payment of any amount that
would not be deductible pursuant to Sections 280G, 162(a) (by reason of being
unreasonable in amount), 162(b) through (p) or 404 of the Code.
(b) No director or officer (or employee responsible for tax matters) of
HOLDINGS or its subsidiaries expects any authority to assess any additional
taxes for any period for which Tax Returns have been filed. There is no dispute
or claim concerning any Tax liability of HOLDINGS or its subsidiaries, either:
(A) claimed or raised by any authority in writing, or (B) as to which the
directors and officers (and employees responsible for tax matters) of such
corporation has Knowledge based upon personal contact with any agent of such
authority. Section 4.16(b) of the HOLDINGS Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with respect to each
of HOLDINGS and its subsidiaries and with respect to both of them on a
consolidated or other basis for taxable periods ended on or after January 1,
1999, 2000, and 2001, indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit. Each of
HOLDINGS and its subsidiaries has delivered to ELEMENT 21 correct and complete
copies of all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by either HOLDINGS or its
subsidiaries since January 1, 1999.
17
(c) Neither HOLDINGS nor its subsidiaries has waived any statute of
limitations with respect to Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(d)The unpaid Taxes of HOLDINGS and its subsidiaries, respectively, (i)
did not, as of January 1, 2002 or the date of the most recent fiscal month-end
of HOLDINGS and its subsidiaries, exceed the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the balance sheet for such
fiscal month end (rather than in any notes thereto) and (ii) do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of HOLDINGS or its subsidiaries in
filing its Tax Returns.
4.17 Environmental Matters. HOLDINGS (i) has obtained all applicable permits,
licenses and other authorizations which are material to the business of HOLDINGS
and required under federal, state or local laws relating to pollution or
protection of the environment, including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, or hazardous or
toxic materials or wastes into ambient air, surface water, ground water, or land
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants, contaminants
or hazardous or toxic materials or wastes by HOLDINGS (or its respective
agents); (ii) are in material compliance with all terms and conditions of such
required permits, licenses and authorizations, and also are in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in such laws or
contained in any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder; (iii) as of
the date hereof, are not aware of nor have received notice of any event,
condition, circumstance, activity, practice, incident, action or plan which is
reasonably likely to interfere with or prevent continued material compliance or
which would give rise to any material common law or statutory liability, or
otherwise form the basis of any claim, action, suit or proceeding, based on or
resulting from HOLDINGS' (or any of its respective agents) manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, or release into the environment, of any
pollutant, contaminant, or hazardous or toxic material or waste; and (iv) have
taken all actions necessary under applicable requirements of federal, state or
local laws, rules or regulations to register any products or materials required
to be registered by HOLDINGS (or any of its respective agents) thereunder.
4.18 Intangible Assets. Section 4.18 of the HOLDINGS Disclosure Schedule
contains a true and complete list of all patents and patent applications
(pending or in the process of preparation), domestic or foreign, patent rights,
trademarks, trade names and licenses under the patents of others, trade secrets,
secret processes and other proprietary rights of every kind and nature used or
necessary for use by HOLDINGS in its business as presently conducted, or
controlled in whole or in part by HOLDINGS or directly or indirectly owned or
controlled in whole or in part by HOLDINGS or any of HOLDINGS' officers,
directors or key employees. All such patents, patent applications, patent rights
and licenses are valid and effective in accordance with their terms, and all
such trade names, trade secrets, secret processes and other proprietary rights
are valid and effective. The conduct of HOLDINGS' business does not infringe
upon the patents, trademarks, trade secrets, or copyrights or other intellectual
property rights, of any other party. HOLDINGS has not received any notice of any
claim of infringement. Except as disclosed in Section 4.18 of the HOLDINGS
Disclosure Schedule, there are no agreements, contracts or obligations under
which HOLDINGS is obligated with respect to, or is using, any patents, patent
applications, patent rights, trademarks, trade names, licenses under the patents
of others, trade secrets, secret processes or other proprietary rights. The
trade secrets and "know-how" of HOLDINGS are in such form and of such quality
that, following the Closing, HOLDINGS will be able to continue to sell the
products heretofore provided by HOLDINGS.
18
4.19 Agreements, Contracts and Commitments. Section 4.19 of the HOLDINGS
Disclosure Schedule contains a true and correct list of all material contracts,
agreements or other understandings or arrangements, written or oral, or
commitments therefor, relating to HOLDINGS, its business and assets or
liabilities (collectively, the "HOLDINGS Contracts"). Except as set forth in
Section 4.19 of the HOLDINGS Disclosure Schedule, HOLDINGS is not a party to and
is not bound by:
(a) Any employment or consulting agreement, contract or commitment with
any officer, director or member of HOLDINGS' Board of Directors;
(b) Any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(c) Any agreement, contract or commitment containing any covenant
limiting in any respect the right of HOLDINGS to engage in any line of business
or to compete with any Person or granting any exclusive distribution rights;
(d) Any agreement, contract or commitment currently in force relating
to the disposition or Acquisition by HOLDINGS after the date of this Agreement
of a material amount of assets not in the ordinary course of business or
pursuant to which HOLDINGS has any material ownership interest in any
corporation, partnership, joint venture or other business enterprise; or
(e) Any material contract (as such term is defined in item 601(b)(10)
of Regulation S-K of the SEC) of HOLDINGS.
HOLDINGS is not and, to HOLDINGS' Knowledge, no other party to a HOLDINGS
Contract, is in breach, violation or default under, and HOLDINGS has not
received written notice that it has breached, violated or defaulted under, any
of the material terms or conditions of any of the HOLDINGS Contracts in such a
manner as would permit any other party to cancel or terminate any such HOLDINGS
Contract, or would permit any other party to seek material damages or other
remedies (for any or all of such breaches, violations or defaults, in the
aggregate). Each HOLDINGS Contract is valid and binding on HOLDINGS and is in
full force and effect, and HOLDINGS has in all material respects performed all
obligations required to be performed by them to date under each HOLDINGS
Contract, except where such noncompliance, individually or in the aggregate,
would not have a Material Adverse Effect on HOLDINGS. Except as set forth on
Section 4.19(c) of the HOLDINGS Disclosure Schedule: (i) HOLDINGS maintains a
good business relationship with each of its customers and suppliers, and to the
Knowledge of HOLDINGS, no material unresolved complaint or dispute presently
exists and no customer or supplier is considering or intends to cease doing
business with HOLDINGS during the twelve (12) month period beginning the date
hereof; (ii) during the twelve (12) month period preceding the date hereof, no
material contract or agreement of HOLDINGS was terminated, expired, or not
renewed; and (iii) during the twelve (12) month period preceding the date
hereof, no material supplier or customer of HOLDINGS has ceased doing business
with HOLDINGS, as the case may be.
4.20 Insurance. HOLDINGS does not carry any insurance since it has no
employees and has not been an operating company. Prior to the Closing Date,
HOLDINGS and ELEMENT 21 shall agree upon appropriate insurance and coverage.
4.21 Directors, Officers and Affiliates. Section 4.21 of the HOLDINGS Disclosure
Schedule contains a complete list of the current Board of Directors and
executive officers of HOLDINGS and all Persons who are an Affiliate of HOLDINGS.
4.22 Prior Sales. Section 4.22 of the HOLDINGS Disclosure Schedule contains a
true, correct and complete current list of the names and addresses of the
purchasers of any securities of HOLDINGS that have been privately offered and
sold by HOLDINGS within the last two years from the date of this Agreement, the
prices paid by the purchasers of those securities, the rights of such
shareholders and a brief description of the facts upon which HOLDINGS relied in
claiming an exemption from the registration requirements of the state and
federal securities laws in making those sales.
19
4.23 Corporate Record Books. The books and records of HOLDINGS are in good
order, complete, accurate, up to date, with all necessary signatures, and set
forth all meetings and actions set forth in all certificates of votes of
stockholders or directors furnished to anyone at any time.
4.24 Related Party Transactions. Except as set forth in Section 4.24 of the
HOLDINGS Disclosure Schedule, neither any officer nor any director or employee
of HOLDINGS, nor any spouse or child of any of them, has any direct or indirect
interest in any competitor, supplier, or customer of HOLDINGS or in any Person
from whom or to whom HOLDINGS leases any real or personal property, or in any
other Person with whom HOLDINGS is doing business.
4.25 Lack of Disputes. There is currently no dispute, pending or, to the
Knowledge of HOLDINGS, threatened, anticipated or contemplated of any kind with
any customer, supplier, source of financing, employee, landlord, or licensee of
HOLDINGS.
4.26 Board Approval. The Board of Directors of HOLDINGS has, as of the date
hereof, (i) approved this Agreement, the Acquisition and the transactions
contemplated hereby and (ii) determined that the Acquisition is in the best
interests of the stockholders of HOLDINGS and is on terms that are fair to such
stockholders.
4.27 Disclosures. None of the information supplied or to be supplied by HOLDINGS
specifically for inclusion or incorporation by reference in any registration
statements, prospectuses, reports, schedules or other documents to be filed with
the SEC or any other governmental entity and no written disclosure of written
statement of fact furnished or to be furnished by HOLDINGS to ELEMENT 21
pursuant to this Agreement or pursuant to ELEMENT 21's due diligence, shall
contain any untrue statement of a material fact or omits or will omit to state
any item or any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. All SEC Filings will comply as to form and
substance in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by HOLDINGS with respect to statements made
or incorporated by reference therein based on information supplied by ELEMENT 21
specifically for inclusion or incorporation by reference in any subsequent SEC
Filing.
ARTICLE 5
CONDUCT PRIOR TO THE CLOSING DATE
5.1 Conduct of Business By ELEMENT 21. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Closing Date, ELEMENT 21 shall, except to
the extent that HOLDINGS shall otherwise consent in writing, carry on its
business, in all material respects, in the usual, regular and ordinary course,
in substantially the same manner as heretofore conducted and in compliance with
all applicable laws and regulations, pay its debts and Taxes when due subject to
good faith disputes over such debts or Taxes, pay or perform other material
obligations when due, and use its commercially reasonable efforts consistent
with past practices and policies to (i) preserve intact its present business
organization, (ii) keep available the services of its present officers and
employees and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings.
20
In addition, except as permitted by the terms of this Agreement, and except as
provided in Section 5.1 of the ELEMENT 21 Disclosure Schedule, without the prior
written consent of HOLDINGS, which consent will not be unreasonably withheld or
delayed, during the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement pursuant to its terms or the
Closing Date, ELEMENT 21 shall not do any of the following:
(a) Grant any severance or termination pay to any officer or employee
of ELEMENT 21 except pursuant to written agreements outstanding, or policies
existing, on the date hereof and as previously disclosed in writing or made
available to HOLDINGS, or adopt any new severance plan;
(b) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of ELEMENT 21
other than (i) in connection with the financing of ordinary course trade
payables consistent with past practice or (ii) in the ordinary course of
business;
(c) Make any individual or series of related payments outside of the
ordinary course of business in excess of $50,000, other than banking,
accounting, legal and printing fees associated with the Acquisition;
(d) Except in the ordinary course of business, modify, amend or
terminate any material contract or agreement to which ELEMENT 21 is a party or
waive, release or assign any material rights or claims there under;
(e) Materially revalue any of its assets or, except as required by
GAAP, make any change in accounting methods, principles or practices;
(f) Engage in any action with the intent to directly or indirectly
adversely impact any of the transactions contemplated by this Agreement; or
(g) Agree in writing or otherwise to take any of the actions described
in subsections (a) through (f) above.
5.2 Conduct of Business by HOLDINGS.
(a) During the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement pursuant to its terms or
the Closing Date, HOLDINGS shall, other than implementing the exchange of
HOLDINGS stock and options for AssureTec stock and options held by non-public
holders, except to the extent that ELEMENT 21 shall otherwise consent in
writing, carry on its business, in all material respects, in the usual, regular
and ordinary course, in substantially the same manner as heretofore conducted
and in compliance with all applicable laws and regulations, pay its debts and
Taxes when due subject to good faith disputes over such debts or Taxes, and pay
or perform other material obligations when due and use its commercially
reasonable efforts consistent with past practices and policies to (i) preserve
intact its present business organization, (ii) keep available the services of
its present officers and employees and (iii) preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others with which
it has business dealings.
(b) In addition, except as permitted by the terms of this Agreement,
without the prior written consent of ELEMENT 21, which consent will not be
unreasonably withheld or delayed, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Closing Date, HOLDINGS shall not do any of the
following and shall not permit its subsidiaries to do any of the following:
(1) Accelerate, amend or change the period of exercisability of
options or restricted stock, or re-price options granted under any employee,
consultant, director or other stock plans or authorize cash payments in exchange
for any options granted under any of such plans;
(2) Grant any severance or termination pay to any officer or
employee except pursuant to written agreements outstanding, or policies
existing, on the date hereof and as previously disclosed in writing or made
available to ELEMENT 21, or adopt any new severance plan;
21
(3) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(4) Issue, deliver, sell, authorize, pledge or otherwise encumber
or propose any of the foregoing of, any shares of capital stock or any
securities convertible into shares of capital stock, or subscriptions, rights,
warrants or options to acquire any shares of capital stock or any securities
convertible into shares of capital stock, or enter into other agreements or
commitments of any character obligating it to issue any such shares or
convertible securities, other than the issuance delivery and/or sale of shares
of HOLDINGS Common Stock pursuant to the exercise of stock options or warrants
therefore outstanding as of the date of this Agreement;
(5) Cause, permit or propose any amendments to its Articles of
Incorporation or Bylaws;
(6) Sell, lease, license, mortgage, encumber or subject to any
lien or otherwise dispose of any properties or assets of HOLDINGS;
(7) Create, incur or assume any indebtedness for borrowed money or
guarantee any such indebtedness of another Person, issue or sell any debt
securities or options, warrants, calls or other rights to acquire any debt
securities of HOLDINGS;
(8) Adopt or amend any employee benefit plan or employee stock
purchase or employee stock option plan, or enter into any employment contract or
collective bargaining agreement, pay any special bonus or special remuneration
to any director or employee, or increase the salaries or wage rates or fringe
benefits (including rights to severance or indemnification) of its directors,
officers, employees or consultants other than in the ordinary course of
business, consistent with past practice, or change in any material respect any
management policies or procedures;
(9) Make any individual or series of related payments outside of
the ordinary course of business in excess of $10,000, other than banking,
accounting, legal and printing fees associated with the Acquisition;
(10) Except in the ordinary course of business, modify, amend or
terminate any material contract or agreement to which HOLDINGS is a party or
waive, release or assign any material rights or claims thereunder;
(11) Materially revalue any of its assets or, except as required
by GAAP, make any change in accounting methods, principles or practices;
(12) Engage in any action that could reasonably be expected to
cause the Acquisition to fail to qualify as a "reorganization" under Section
368(a)(1)(B) of the Code;
(13) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Person;
(14) Engage in any action with the intent to directly or
indirectly adversely impact any of the transactions contemplated by this
Agreement; or
(15) Agree in writing or otherwise to take any of the actions
described in subsections (1) through (14) above.
22
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Filings; Board Recommendations. As promptly as practicable after the date of
this Agreement, each of ELEMENT 21 and HOLDINGS will prepare and file any
filings required to be filed by it under the Exchange Act, the Securities Act or
any other federal, foreign or state securities or related laws relating to the
Acquisition and the transactions contemplated by this Agreement. Specifically,
but not by way of limitation, promptly following the execution and delivery of
this Agreement, but no later than five (5) Business Days following the date
hereof HOLDINGS shall prepare and file a notice pursuant to Rule 14f-1, and one
or more Forms 8-K describing the Acquisition of ELEMENT 21 with respect to the
transactions contemplated by this Agreement in accordance with all applicable
rules and regulations of the Exchange Act. Not less than five (5) Business Days
prior to the filing with the SEC, HOLDINGS shall permit ELEMENT 21 and its legal
counsel to review the filing and make suggested revisions thereto. HOLDINGS
shall mail the Information Statement on Schedule 14f-1 to each HOLDINGS
shareholder in accordance with all applicable rules and regulations of the 1934
Act and the Delaware Code. Each of ELEMENT 21 and HOLDINGS will notify the other
promptly upon the receipt of any comments from the SEC or its staff or any other
government officials and of any request by the SEC or its staff or any other
government officials for amendments or supplements to any Filing or for
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Acquisition or any Filing. Each of ELEMENT 21 and
HOLDINGS will cause all documents that it is responsible for filing with the SEC
or other regulatory authorities under this Section 6.1 to comply in all material
respects with all applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever any event occurs which is required to be set
forth in an amendment or supplement to any Filing, ELEMENT 21 or HOLDINGS, as
the case may be, will promptly inform the other of such occurrence and cooperate
in filing with the SEC or its staff or any other government officials, and/or
mailing to stockholders of HOLDINGS, such amendment or supplement.
6.2 Confidentiality; Access to Information.
(a) Access to ELEMENT 21 Information. ELEMENT 21 will afford HOLDINGS
and its accountants, counsel and other representatives reasonable access during
normal business hours to the properties, books, records and personnel of ELEMENT
21 during the period prior to the Closing Date to obtain all information
concerning the business of ELEMENT 21 as HOLDINGS may reasonably request. No
information or Knowledge obtained by HOLDINGS in any investigation pursuant to
this Section will affect or be deemed to modify any representation or warranty
contained herein or the conditions to the obligations of the parties to
consummate the HOLDINGS.
(b)Access to HOLDINGS Information. HOLDINGS will afford ELEMENT 21 and
its accountants, counsel and other representatives reasonable access during
normal business hours to the properties, books, records and personnel of
HOLDINGS during the period prior to the Closing Date to obtain all information
concerning the business of HOLDINGS as ELEMENT 21 may reasonably request. No
information or Knowledge obtained by ELEMENT 21 in any investigation pursuant to
this Section will affect or be deemed to modify any representation or warranty
contained herein or the conditions to the obligations of the parties to
consummate the Acquisition.
(c) Confidentiality. HOLDINGS AND ELEMENT 21 shall hold, and shall use
their best efforts to cause their respective officers, directors, partners,
prospective lenders, financial advisors, counsel and other agents to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process, or, in the opinion of their counsel, by other requirements of law, all
documents and information concerning the HOLDINGS or ELEMENT 21, as the case may
be, furnished to the other in connection with the transactions contemplated by
this Agreement (except to the extent that such information can be shown to have
been (i) in the public domain through no fault of HOLDINGS or ELEMENT 21, or any
of their respective Affiliates; or (ii) later lawfully acquired without the
breach of any other agreement by HOLDINGS or ELEMENT 21 or their respective
officers, directors, partners, financial advisors, counsel and other agents from
other sources), and will not release or disclose such information to any other
23
Person, except its officers, directors, prospective lenders, financial advisors,
counsel and other agents in connection with this Agreement. If the transactions
contemplated by this Agreement are not consummated, such confidence shall be
maintained as hereinbefore provided for a period of two (2) years and, if
requested by HOLDINGS or ELEMENT 21, as the case may be, the other(s) will, and
will cause its officers, directors, partners, prospective lenders, financial
advisors, counsel and other agents to, return to HOLDINGS or ELEMENT 21 all
copies of written information furnished by or on behalf of HOLDINGS or ELEMENT
21 to the other(s) or their respective officers, directors, prospective lenders,
financial advisors, counsel and other agents.
6.3 Public Disclosure. HOLDINGS and ELEMENT 21 agree that all general notice
releases, statements and communications to the general public and the press
relating to the transactions contemplated by this Agreement, shall be made only
at such time and in such manner as shall be mutually agreed upon by them;
provided, however, that any party shall be entitled to make public announcements
of the proposed transaction if, in the opinion of its counsel, such announcement
is required to comply with any applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange and such
party shall to the extent practicable, consult with the other party hereto with
respect to such announcement and give reasonable prior notice of its intent to
issue such announcement.
6.4 Best Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Acquisition and the other transactions contemplated by this
Agreement, including using reasonable efforts to accomplish the following: (i)
the taking of all reasonable acts necessary to cause the conditions precedent
set forth in Article 7 to be satisfied, (ii) the obtaining of all necessary
actions or nonactions, waivers, consents, approvals, orders and authorizations
from Governmental Entities and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to avoid any suit, claim, action, investigation or proceeding by any
Governmental Entity, (iii) the defending of any suits, claims, actions,
investigations or proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed and (iv) the execution or
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement. In
connection with and without limiting the foregoing, each of HOLDINGS and ELEMENT
21 and its Board of Directors shall, if any state takeover statute or similar
statute or regulation is or becomes applicable to the Acquisition, this
Agreement or any of the transactions contemplated by this Agreement, use best
efforts to ensure that the Acquisition and the other transactions contemplated
by this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on the Acquisition, this Agreement and the transactions
contemplated hereby. Notwithstanding anything herein to the contrary, nothing in
this Agreement shall be deemed to require HOLDINGS or ELEMENT 21 or any
subsidiary or Affiliate thereof to agree to any divestiture by itself or any of
its Affiliates of shares of capital stock or of any business, assets or
property, or the imposition of any material limitation on the ability of any of
them to conduct their businesses or to own or exercise control of such assets,
properties and stock.
(b) ELEMENT 21 shall give prompt notice to HOLDINGS of any
representation or warranty made by either contained in this Agreement becoming
untrue or inaccurate, or any failure of ELEMENT 21 to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
24
forth in Section 7.3(a) or 7.3(b) would not be satisfied, provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
(c) HOLDINGS shall give prompt notice to ELEMENT 21 of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate, or any failure of HOLDINGS to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 7.2(a) or 7.2(b) would not be satisfied, provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
6.5 Third Party Consents. As soon as practicable following the date hereof,
HOLDINGS and ELEMENT 21 will each use their commercially reasonable efforts to
obtain any consents, waivers and approvals under any of their or their
subsidiaries' respective agreements, contracts, licenses or leases required to
be obtained in connection with the consummation of the transactions contemplated
hereby, including the consent and stock powers of the ELEMENT 21 SHAREHOLDERS.
6.6 ELEMENT 21 Investment Agreement. Each ELEMENT 21 SHAREHOLDER will deliver or
cause to be delivered to HOLDINGS before the Closing, an executed Investment
Agreement in substantially the form attached hereto as Exhibit A (the "ELEMENT
21 Investment Agreement"), which will be in full force and effect as of the
Closing Date. Each Element 21 Investment Agreement shall reflect the nature of
the share held under Rule 144 or Rule 701. HOLDINGS will place an appropriate
legend on the certificate evidencing HOLDINGS Common Stock to be received by
ELEMENT 21 SHAREHOLDERS pursuant to the terms of this Agreement, and will issue
appropriate stop transfer instructions to the transfer agent for the HOLDINGS
Common Stock, consistent with the terms of the ELEMENT 21 Investment Agreement.
6.7 Comfort Letter of HOLDINGS' Auditors. Prior to the Closing, HOLDINGS shall
cause Good, Swartz, Brown & Berns, certified public accountants to HOLDINGS, to
provide a letter reasonably acceptable to ELEMENT 21, relating to their audit of
the financial statements relating to HOLDINGS contained in or incorporated by
reference in the HOLDINGS annual report on Form 10K.
6.8 Comfort Letter of ELEMENT 21's Auditors. Prior to the Closing, ELEMENT 21
shall cause the certified public accountants to ELEMENT 21, to provide a letter
reasonably acceptable to HOLDINGS, relating to their forthcoming audit of the
financial statements relating to ELEMENT 21 contained in or incorporated by
reference in any public filings of HOLDINGS.
6.9 ELEMENT 21 Accountants' Consent. ELEMENT 21 shall cause their certified
public accountants to provide, upon request, an accountants' consent for the
inclusion, in any filings, of audit report(s) for the periods required to be
included in such filings (irrespective of whether an audit for such period is
required under SEC rules).
6.10 No Solicitation by HOLDINGS. HOLDINGS shall not, nor shall it permit any of
its subsidiaries to, nor shall it authorize or permit any of its directors,
officers or employees or any investment banker, financial advisor, agents,
attorney, partners, accountant or other representative retained by it or any of
its subsidiaries to, directly or indirectly through another Person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed to facilitate, any inquiries or the making of any proposal
which constitutes any HOLDINGS Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations or furnish any nonpublic
information to any Person other than ELEMENT 21 and their representatives in
connection with any HOLDINGS Takeover Proposal. For purposes of this Agreement,
"HOLDINGS Takeover Proposal" means any inquiry, proposal or offer from any
Person relating to any direct or indirect acquisition or purchase of a business
that constitutes 50% or more of the net revenues, net income or the assets of
HOLDINGS and its subsidiaries, taken as a whole, or 10% or more of any class of
equity securities of HOLDINGS, any tender offer, exchange offer or other
25
transactions that if consummated would result in any Person beneficially owning
10% or more of any class of equity securities of HOLDINGS, or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving HOLDINGS or the HOLDINGS capital stock (or any
HOLDINGS subsidiary whose business constitutes 50% or more of the net revenues,
net income or the assets of HOLDINGS and its subsidiaries, taken as a whole),
other than the transactions contemplated by this Agreement.
6.11 Bulletin Board Listing. HOLDINGS shall use its best efforts to maintain the
listing of its shares of common stock on the NASD OTC Bulletin Board.
6.12 HOLDINGS Liabilities. HOLDINGS shall terminate and extinguish all direct,
indirect, short term, long term, choate, unchoate, contingent, unmatured,
matured, known and unknown liabilities (collectively, "Liabilities") and all
other obligations of HOLDINGS in form and substance satisfactory to ELEMENT 21.
6.13 Post-Acquisition operations. Following the Closing Date, all bank accounts
of holdings shall be amended so that two nominees of ELEMENT 21 shall be the
only signatories with authority to engage in transactions for such accounts.
6.14 REGISTRATION OF SHARES. deleted
6.15 SHAREHOLDER APPROVAL. ELEMENT 21, acting through its Board of Directors,
shall convene and hold a special meeting of its stockholders or otherwise
solicit written consents for the purpose of considering and taking action upon
this Agreement in accordance with the bylaws of ELEMENT 21.
6.16 Financial Statements. Prior to the Closing, ELEMENT 21 shall deliver to
HOLDINGS (i) unaudited financial statements from inception (the " Financial
Statements"). The Financial Statements will be prepared accordance with the
books and records of ELEMENT 21 and will present fairly in all material respects
the financial position and results of operations of ELEMENT 21 as of the times
and for the periods referred to therein, in each case in accordance with GAAP.
6.17 Indemnification by Subsidiaries. Prior to the Closing, HOLDINGS shall have
entered into an agreement with all of its subsidiaries reasonably acceptable to
ELEMENT 21, whereby the subsidiaries agree to indemnify defend and hold harmless
HOLDINGS, ELEMENT 21 from and against any and all losses, damages, liabilities
(including punitive or exemplary damages and fines or penalties and any interest
thereon), expenses (including reasonable fees and disbursements of counsel and
expenses of investigation and defense), costs, claims, liens or other
obligations of any nature whatsoever whether existing or accruing prior or
subsequent to the Closing Date, suffered or incurred by the Indemnification
Group which, directly or indirectly, arise out of, result from or relate to such
subsidiaries (the "Indemnification Agreement")
ARTICLE 7
CONDITIONS TO THE ACQUISITION
7.1 Conditions to Obligations of Each Party to Effect the Acquisition.
The respective obligations of each party to this Agreement to effect the
Acquisition shall be subject to the satisfaction at or prior to the Closing Date
of the following condition:
(a) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Acquisition illegal or
otherwise prohibiting consummation of the Acquisition.
7.2 Additional Conditions to Obligations of ELEMENT 21. The obligation of
ELEMENT 21 to consummate and effect the Acquisition shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by ELEMENT 21:
(a)Representations and Warranties. Each representation and warranty of
HOLDINGS contained in this Agreement (i) shall have been true and correct as of
the date of this Agreement and (ii) shall be true and correct on and as of the
Closing Date with the same force and effect as if made on the Closing Date
except, (A) in each case, or in the aggregate, as does not constitute a Material
26
Adverse Effect on HOLDINGS, (B) for changes contemplated by this Agreement and
(C) for those representations and warranties which address matters only as of a
particular date (which representations shall have been true and correct except
as does not constitute a Material Adverse Effect on HOLDINGS as of such
particular date) (it being understood that, for purposes of determining the
accuracy of such representations and warranties, (i) all "Material Adverse
Effect" qualifications and other qualifications based on the word "material" or
similar phrases contained in such representations and warranties shall be
disregarded and (ii) any update of or modification to the HOLDINGS Disclosure
Schedule made or purported to have been made after the date of this Agreement
shall be disregarded). ELEMENT 21 shall have received a certificate with respect
to the foregoing signed on behalf of HOLDINGS by an authorized officer of
HOLDINGS.
(b)Agreements and Covenants. HOLDINGS shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date, and ELEMENT 21 shall have received a certificate to such effect signed on
behalf of HOLDINGS by an authorized officer of HOLDINGS.
(c) Material Adverse Effect. No Material Adverse Effect with respect to
HOLDINGS shall have occurred since the date of this Agreement.
(d) SHAREHOLDERS' Signatures. ELEMENT 21 SHAREHOLDERS owning at least
90% of ELEMENT 21's issued and outstanding common stock shall sign this
Agreement, the Investment Agreement (Exhibit A) and the Stockholder Waiver
(Exhibit B) and shall have presented stock powers and other documents as needed
to transfer their ELEMENT 21 stock to HOLDINGS, with signature(s) notarized or
guaranteed.
(e) deleted
(f) Quotation on Bulletin Board. The shares of the HOLDINGS Common
Stock shall be quoted for trading on the NASD OTC Bulletin Board without
restriction or qualification.
(g) HOLDINGS Liabilities. All HOLDINGS Liabilities shall have been
terminated and extinguished in form and substance satisfactory to ELEMENT 21.
(h) Officer and Directors. HOLDINGS shall have accepted the
resignations of all existing officers of HOLDINGS.
(i) Good Standing Certificate. HOLDINGS shall deliver such certificates
and documents of officers of HOLDINGS and public officials as shall be
reasonably requested by ELEMENT 21's counsel to establish the existence and good
standing of HOLDINGS and the due authorization of this Agreement and the
transactions contemplated by this Agreement.
(j) SEC Reports. All SEC Filings shall have been submitted to the SEC
in accordance with the requirements of the Exchange Act (and the rules,
regulations and guidance promulgated thereunder), in form and substance
satisfactory to ELEMENT 21, and all applicable waiting periods shall have been
expired or waived by ELEMENT 21.
(k) Delivery of the Stock Certificates. The ELEMENT 21 Shareholders
shall have received the stock certificates representing up to a maximum
24,452,100 shares of HOLDINGS Common Stock (less provision for unexercised
Element 21 options) at Closing.
(l) Closing Conditions. Documentation or other information shall have
been received in a form reasonably satisfactory to ELEMENT 21, which evidences
that the conditions set forth in this Section 7.2 have been satisfied.
(m) Due Diligence. ELEMENT 21 shall have completed its due diligence
examination of the HOLDINGS and shall have become satisfied with the results
thereof.
(n)Secretary's Certificate. HOLDINGS shall have delivered to the
ELEMENT 21 a certificate of the Secretary of HOLDINGS, in the form mutually
agreed upon by the parties, certifying to the resolutions of the Board of
Directors of HOLDINGS authorizing the transactions contemplated hereby and
certifying that (i) such resolutions have not been revoked, suspended or amended
and remain in full force and effect and (ii) this Agreement has been approved
and adopted by all requisite corporate action on the part of HOLDINGS.
27
(o) Indemnification Agreement. HOLDINGS shall have entered into the
Indemnification Agreement with all of its subsidiaries in form and substance
reasonably satisfactory to ELEMENT 21.
(p) Intentionally deleted
7.3 Additional Conditions to the Obligations of HOLDINGS. The obligations of
HOLDINGS to consummate and effect the Acquisition shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by HOLDINGS:
(a) Representations and Warranties. Each representation and warranty of
ELEMENT 21 contained in this Agreement: (i) shall have been true and correct as
of the date of this Agreement, and (ii) shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of the
Closing Date except (A) in each case, or in the aggregate, as does not
constitute a Material Adverse Effect on ELEMENT 21, (B) for changes contemplated
by this Agreement, and (C) for those representations and warranties which
address matters only as of a particular date (which representations shall have
been true and correct except as does not constitute a Material Adverse Effect on
ELEMENT 21 as of such particular date) (it being understood that, for purposes
of determining the accuracy of such representations and warranties, (i) all
"Material Adverse Effect" qualifications and other qualifications based on the
word "material" or similar phrases contained in such representations and
warranties shall be disregarded, and (ii) any update of or modification to the
ELEMENT 21 Disclosure Schedule made or purported to have been made after the
date of this Agreement shall be disregarded). HOLDINGS shall have received a
certificate with respect to the foregoing signed on behalf of ELEMENT 21 by
authorized officers of ELEMENT 21.
(b) Agreements and Covenants. ELEMENT 21 shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them at or prior to the
Closing Date, and HOLDINGS shall have received certificates to such effect
signed on behalf of ELEMENT 21 by an authorized officer of ELEMENT 21.
(c) Material Adverse Effect. No Material Adverse Effect with respect to
ELEMENT 21 and its subsidiaries shall have occurred since the date of this
Agreement.
(d) SHAREHOLDERS' Signatures. ELEMENT 21 SHAREHOLDERS owning at least
90% of ELEMENT 21's issued and outstanding common stock shall sign this
Agreement, the Investment Agreement (Exhibit A) and the Stockholder Waiver
(Exhibit B) and shall have presented stock powers and other documents as needed
to transfer their ELEMENT 21 stock to HOLDINGS, with signature(s) notarized or
guaranteed.
(e) Spin-off Costs. ELEMENT 21 shall have delivered to R. Bruce Reeves
a check for $33,333 for the costs relating to the spin-off, as described in
Section 4.13 herein.
(f) Consulting Agreement. ELEMENT 21 shall have approved the Consulting
Agreement between HOLDINGS and the Consultant, whereby at Closing, Consultant
shall be paid a one-time consulting fee of $120,000 by ELEMENT 21.
(g) Reimbursements. ELEMENT 21 shall have delivered in cash to HOLDINGS
or its assignee $55,684 in reimbursements at or prior to the Closing.
28
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date, whether before or after the requisite approvals of the Boards of
Directors of ELEMENT 21 or HOLDINGS:
(a) by mutual written consent duly authorized by the Boards of
Directors of HOLDINGS and ELEMENT 21;
(b) by either ELEMENT 21 or HOLDINGS if the Acquisition shall not have
been consummated by September 21, 2002 for any reason; provided, however, that
the right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Acquisition to occur on or before such date
and such action or failure to act constitutes a breach of this Agreement;
(c) by either ELEMENT 21 or HOLDINGS if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Acquisition, which order, decree, ruling or other action is final and
nonappealable;
(d) by either ELEMENT 21 or HOLDINGS if the required approval of
ELEMENT 21's SHAREHOLDERS shall not have been obtained; provided, that the right
to terminate this Agreement under this Section 8.1(d) shall not be available to
ELEMENT 21 where the failure to obtain such ELEMENT 21 SHAREHOLDER approval
shall have been caused by the action or failure to act of ELEMENT 21 and such
action or failure to act constitutes a breach by ELEMENT 21 of this Agreement;
(e) by ELEMENT 21, upon a breach of any representation, warranty,
covenant or agreement on the part of HOLDINGS set forth in this Agreement, or if
any representation or warranty of HOLDINGS shall have become untrue, in either
case such that the conditions set forth in Section 7.2(a) or Section 7.2(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that if such
inaccuracy in HOLDINGS' representations and warranties or breach by HOLDINGS is
curable by HOLDINGS through the exercise of its commercially reasonable efforts,
then ELEMENT 21 may not terminate this Agreement under this Section 8.1(e) for
thirty (30) days after delivery of written notice from ELEMENT 21 to HOLDINGS of
such breach, provided HOLDINGS continues to exercise commercially reasonable
efforts to cure such breach (it being understood that ELEMENT 21 may not
terminate this Agreement pursuant to this paragraph (e) if it shall have
materially breached this Agreement or if such breach by HOLDINGS is cured during
such thirty day period); or
(f) by HOLDINGS, upon a breach of any representation, warranty,
covenant or agreement on the part of ELEMENT 21 set forth in this Agreement, or
if any representation or warranty of ELEMENT 21 shall have become untrue, in
either case such that the conditions set forth in Section 7.3(a) or Section
7.3(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue, provided, that if such
inaccuracy in ELEMENT 21's representations and warranties or breach by ELEMENT
21 is curable by ELEMENT 21 through the exercise of its commercially reasonable
efforts, then HOLDINGS may not terminate this Agreement under this Section
8.1(f) for thirty (30) days after delivery of written notice from HOLDINGS to
ELEMENT 21 of such breach, provided ELEMENT 21 continue to exercise commercially
reasonable efforts to cure such breach (it being understood that HOLDINGS may
not terminate this Agreement pursuant to this paragraph (f) if it shall have
materially breached this Agreement or if such breach by ELEMENT 21 is cured
during such thirty day period).
8.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 8.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 8.1,
this Agreement shall be of no further force or effect and no party shall have
29
any further liability or obligation to the other parties hereto, except (i) as
set forth in this Section 8.2, Section 8.3, and Section 6.2(c), each of which
shall survive the termination of this Agreement, and (ii) nothing herein shall
relieve any party from liability for any willful breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
8.3 Fees and Expenses. Except as set forth in this Section 8.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Acquisition is consummated. As used herein, HOLDINGS expenses shall
refer to expenses that relate to periods after the date of this Agreement, and
any other costs not specifically stated in Section 8.3(b) herein.
(a) Expenses to be paid by ELEMENT 21. ELEMENT 21 shall pay the
following expenses relating to the Acquisition: the legal fees of its securities
counsel, all audit costs concerning the pre-closing and post-closing audit of
ELEMENT 21, (including the cost of producing any audited or unaudited pro-forma
financial statements and/or any audited or unaudited stub financial statements
for ELEMENT 21). ELEMENT 21 shall pay for the filing of Form 10KSB due on or
before October 14, 2002.
(b) Expenses to be paid by HOLDINGS. HOLDINGS shall pay the costs
related to initiating the following actions: the legal fees of its securities
counsel; the cost of an opinion letter by legal counsel regarding present or
past litigation; the cost of preparation of board minutes and resolutions of
HOLDINGS; cover letter to transfer agent; various letters to NASD, and other
regulatory agencies concerning the required advance notices of the transaction;
preparing and filing the Form 8-K describing the Acquisition of ELEMENT 21; the
cost of completing the spin-offs of Tech Ventures, AssureTec, BTI and Tech;
preparing and sending to HOLDINGS' stockholders and others notice of the
acquisition of ELEMENT 21.
8.4 Amendment. Subject to applicable law, this Agreement may be amended by the
parties hereto at any time by execution of an instrument in writing signed on
behalf of each of HOLDINGS and ELEMENT 21.
8.5 Extension; Waiver. At any time prior to the Closing Date any party hereto
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. Delay in exercising any right under this Agreement shall
not constitute a waiver of such right.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification.
(a) HOLDINGS agrees to indemnify, defend and hold harmless ELEMENT 21
and its stockholders on the Closing Date ("Indemnitees") from and against any
and all Losses suffered or incurred by the ELEMENT 21 Indemnitees which,
directly or indirectly, arise out of, result from or relate to (i) any
inaccuracy in or any breach of any representation or warranty of HOLDINGS
contained in this Agreement, or (ii) any breach of any covenant or agreement of
HOLDINGS contained in this Agreement.
(b) ELEMENT 21 agrees to indemnify, defend and hold harmless HOLDINGS
and its stockholders on the Closing Date ("Indemnitees") from and against any
and all Losses suffered or incurred by the HOLDINGS Indemnitees which, directly
or indirectly, arise out of, result from or relate to (i) any inaccuracy in or
any breach of any representation or warranty of ELEMENT 21 contained in this
Agreement, or (ii) any breach of any covenant or agreement of ELEMENT 21
contained in this Agreement.
30
ARTICLE 10
GENERAL PROVISIONS
10.1 Survival of Representations and Warranties. The representations and
warranties of HOLDINGS and ELEMENT 21 contained in this Agreement shall survive
for a period of two (2) years following the Closing Date.
10.2 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed given if delivered personally or by commercial delivery
service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to HOLDINGS, to:
BRL HOLDINGS, INC.
200 Perimeter Road
Manchester, N.H. 03103
Attn: Dr. Bruce Reeves, Ph. D., President &/CEO
Telephone: (603) 641-8443
Fax: (603) 641-9535
with a copy to:
John Lowy, P.C.
645 Fifth Ave., 4th Floor
New York, NY 10022
Attention: John Lowy
Telephone: (212) 371-7799
Fax: (212) 371-8527
(b) if to ELEMENT 21, to:
Tom Sawyer, Esq.
316 Main, Suite L
Humble, TX 77338
Telephone: 281 446-7122
Fax: 281 446-7711
10.3 Interpretation. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. When reference is made herein to
"the business of" an entity, such reference shall be deemed to include the
business of all direct and indirect subsidiaries of such entity. Reference to
the subsidiaries of an entity shall be deemed to include all direct and indirect
subsidiaries of such entity.
10.4 Counterparts. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other party, it being understood that all parties need not
sign the same counterpart.
10.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the ELEMENT 21 Disclosure
31
Schedule and the HOLDINGS Disclosure Schedule constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement. No third party is
entitled to rely on any of the representations, warranties and agreements of the
parties contained in this Agreement and the parties assume no liability to any
third party because of such reliance.
10.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
Persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
10.7 Other Remedies; Specific Performance. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to seek an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
10.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof;
provided that issues involving the corporate governance of any of the parties
hereto shall be governed by their respective jurisdictions of incorporation.
10.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
10.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
10.11 Waiver of Jury Trial. EACH OF HOLDINGS, ELEMENT 21 SHAREHOLDERS AND
ELEMENT 21 HEREIN IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF HOLDINGS OR
ELEMENT 21 IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
HEREOF.
10.12 Brokers and Finders. The parties have not employed any broker, financial
advisor or finder or incurred any liability for any broker, financial advisory
or finder's fee in connection with the Agreement.
10.13 FURTHER ASSURANCES. In addition to the actions, documents and instruments
specifically required to be taken or delivered hereby, prior to and after the
Closing and without further consideration, the parties shall execute,
acknowledge and deliver such other assignments, transfers, consents and other
documents and instruments and take such other actions as either Party, or its
counsel, may reasonably request in order to complete and perfect the
transactions contemplated by this Agreement.
32
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed individually and or by their duly authorized respective officers this
19th day of September 2002.
ELEMENT 21 Golf Company
By: /s/ Nataliya Hearn
--------------------
Name: Nataliya Hearn
Title: President and CEO
BRL HOLDINGS, INC.
By: /s/ R. Bruce Reeves
-------------------
Name: R. Bruce Reeves
Title: President and CEO
33
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed individually and or by their duly authorized respective officers this
19th day of September.
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SCHEDULE A
ELEMENT 21 SHAREHOLDERS
Counterpart Signature Page of ELEMENT 21 Shareholders
34