Securities Purchase Agreement - SheerVision Inc., Laurie C. Scala, Howard A. Scala and Clean Water Technologies Inc.
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT, dated as of November 30, 2005 (the
"AGREEMENT"), among SHEERVISION, INC., a California corporation with offices
located at 4030 Palos Verdes Drive North, Suite 104, Rolling Hills Estates,
California 90274 ("SHEERVISION"); LAURIE C. SCALA, an individual with an address
of 2716 St. Andrews Boulevard, Suite 200, Tarpon Springs, Florida 34688, and
HOWARD A. SCALA, an individual with an address of 2716 St. Andrews Boulevard,
Suite 200, Tarpon Springs, Florida 34688 (collectively, the "SELLERS"); and
CLEAN WATER TECHNOLOGIES, INC., a Delaware corporation with offices located at
2716 St. Andrews Boulevard, Suite 200, Tarpon Springs, Florida 34688 (the
"COMPANY").
INTRODUCTION
The Sellers collectively own beneficially and of record an aggregate of
4,517,800 shares (the "SHARES") of common stock, par value $0.001 per share (the
"COMMON STOCK"), of the Company, which includes all shares of Common Stock owned
beneficially or of record thereby, or issuable upon the exercise, conversion, or
exchange of securities or obligations held by, or owed to, any Seller other than
an aggregate of 14,330 shares of Common Stock held by the Sellers in a custodial
capacity and one or more individual retirement accounts. SheerVision desires to
acquire from the Sellers, and the Sellers desire to sell to SheerVision, the
Shares, in accordance with, and subject to, the terms hereof.
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties and covenants herein contained, the parties hereby
agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"BUSINESS DAY" shall mean any day which is not a Saturday or Sunday and
is not a day on which banking institutions are generally authorized or obligated
to close in the City of New York, New York.
"CLOSING" shall mean the closing of the purchase by SheerVision from
the Sellers of the Shares.
"CLOSING DATE" shall have the definition assigned thereto in Section
2.03(a) hereof.
"CODE" shall have the definition assigned thereto in Section 3.01(d).
"COMMON STOCK" shall have the definition assigned thereto in to
introduction hereto.
"COMPANY" shall have the definition assigned thereto in the
introductory paragraph hereto.
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"DGCL" shall mean the Delaware General Corporation Law.
"DISPOSE OF" shall mean to pledge, hypothecate, give away, sell, grant
an option (other than pursuant hereto) with respect to, or otherwise transfer.
"ENVIRONMENTAL LAWS" shall have the definition assigned thereto in
Section 3.01(q).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EXCHANGE ACT" shall have the definition assigned thereto in Section
3.01(a)(i).
"EXISTING DIRECTORS" shall have the definition assigned thereto in
Section 4.04.
"INVESTMENT COMPANY ACT" shall have the definition assigned thereto in
Section 3.01(n).
"LAST COMPANY FINANCIAL STATEMENT DATE" shall mean September 30, 2005.
"LAST COMPANY FINANCIAL STATEMENTS" shall mean the balance sheet,
statement of income, and statement of cash flows, and the notes thereto, of the
Company as of the Last Company Financial Statement Date.
"MAC" shall mean MAC Financial Corp., which has served as special
financial adviser in connection with the transactions contemplated hereby and in
connection herewith
"NEW DIRECTORS" shall have the definition assigned thereto in Section
4.04.
"REORGANIZATION" shall mean the proposed contribution to the Company by
the stockholders of SheerVision of all outstanding shares of capital stock of
SheerVision in exchange for shares of Common Stock, which transactions are
referenced in the unanimous consent of directors of the Company, dated as of
November 30, 2005.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall have the definition assigned thereto in Section
3.01(a)(i).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLER" shall have the definition assigned thereto in the introductory
paragraph hereto.
"SHARES" shall have the definition assigned thereto in the introduction
hereto.
"SHEERVISION" shall have the definition assigned thereto in the
introductory paragraph hereto.
"TAXES" shall have the definitions assigned thereto in Section 3.01(j).
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ARTICLE II
ACQUISITION AND EXCHANGE OF SHARES
SECTION 2.01 THE AGREEMENT. At the Closing, SheerVision shall acquire
from the Sellers, and each Seller shall sell to SheerVision, the portion of the
Shares set forth in Schedule 2.01(a) hereto in exchange for an aggregate
purchase price of US$625,000 in cash, of which $75,000 shall be payable at the
Closing as directed by MAC.
SECTION 2.02 CLOSING; EXCHANGES.
(a) The Closing shall take place on the date hereof (the "CLOSING
DATE") at the offices of Reitler Brown & Rosenblatt LLC, 800 Third Avenue, 21st
Floor, New York, New York 10022. At the Closing:
(i) the Sellers shall deliver or cause to be delivered to SheerVision
stock certificates evidencing the Shares, registered in the name of SheerVision
or its designee;
(ii) (A) SheerVision shall deliver to the Sellers the aggregate amount
of US$550,000 by certified or official bank check or by electronic wire transfer
in accordance with instructions theretofore provide by the Sellers to
SheerVision;
(B) SheerVision shall deliver to MAC the aggregate amount of US$75,000
by certified or official bank check or by electronic wire transfer in accordance
with instructions theretofore provide by MAC to SheerVision;
(iii) the Company will deliver to SheerVision an Officer's Certificate
in the form of Exhibit 2.02(a)(iii) hereto, dated the Closing Date, certifying,
among other things, that all representations, warranties, covenants, and
conditions set forth herein by the Sellers and the Company are true and correct
as of, or have been fully performed and complied with by, the Closing Date;
(iv) the Sellers will deliver to SheerVision and the Company a
certificate in the form of Exhibit 2.02(a)(iv) hereto, dated the Closing Date,
certifying that all representations, warranties, covenants, and conditions set
forth herein by the Seller and the Company are true and correct as of, or have
been fully performed and complied with by, the Closing Date;
(v) SheerVision, or a duly appointed agent thereof, will deliver to the
Sellers one or more Certificates in the form of Exhibit 2.02(a)(v) hereto, dated
the Closing Date, certifying that all representations, warranties, covenants and
conditions set forth herein by SheerVision are true and correct as of, or have
been fully performed and complied with by, the Closing Date; and
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(vi) the Sellers and SheerVision shall execute a cross-receipt in the
form of Exhibit 2.02(a)(vi) hereto.
(b) The Shares shall be authorized, issued, and outstanding shares of
Common Stock. All Shares shall be deemed "RESTRICTED SECURITIES" as defined in
paragraph (a) of Rule 144 under the Securities Act. The acquisition by
SheerVision of the Shares shall be subject to an exemption from the registration
requirements of the Securities Act, under Section 4(2) of the Securities Act and
the rules and regulations promulgated thereunder. Certificates representing the
Shares shall bear a restrictive legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED
FOR SALE, SOLD, OR OTHERWISE DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE
REGISTRATION PROVISIONS OF SUCH ACT OR PURSUANT TO AN EXEMPTION FROM
SUCH REGISTRATION PROVISIONS, THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
SECTION 2.03 APPROVAL. In anticipation of this Agreement, the Board of
Directors of the Company and of SheerVision has taken all necessary and
requisite corporate and other action in order to approve this Agreement and all
transactions contemplated hereby and in connection herewith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE
COMPANY. The Sellers and the Company, jointly and severally, represent and
warrant to, and agree with, SheerVision as follows:
(a) (i) The Common Stock has been registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and the Company
is subject to the periodic reporting requirements of Section 13 of the Exchange
Act. The Company has made available to SheerVision true, complete, and correct
copies of all forms, reports, schedules, statements, and other documents
required to be filed by it under the Exchange Act since at least July 1, 2001,
as such documents have been amended since the time of the filing thereof
(collectively, including all forms, reports, schedules, statements, exhibits,
and other documents filed by the Company therewith, the "SEC DOCUMENTS"). The
SEC Documents, including, without limitation, any financial statements and
schedules included therein, at the time filed or, if subsequently amended, as so
amended, (i) did not contain any untrue statement of a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading and (ii) complied in all respects with the applicable requirements of
the Exchange Act and the applicable rules and regulations thereunder. To the
Company's knowledge, each director and executive officer thereof has filed with
the SEC on a timely basis all statements required by Section 16(a) of the
Exchange Act and the rules and regulations thereunder since at least July 1,
2001.
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(ii) The Company maintains disclosure controls and procedures required
by Rule 13a-15 or 15d-15 under the Exchange Act; such controls and procedures
are effective to ensure that:
(A) all material information concerning the Company is made
known on a timely basis to the individuals responsible for the
preparation of the Company's filings with the SEC and other public
disclosure documents;
(B) transactions are executed in accordance with management's
general or specific authorizations;
(C) transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles and to maintain asset accountability;
(D) access to assets is permitted only in accordance with
management's general or specific authorization; and
(E) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
The Company has made available to SheerVision copies of, all written
descriptions of, and all policies, manuals and other documents promulgating,
such disclosure controls and procedures. The books, records and accounts of the
Company accurately and fairly reflect, in reasonable detail, the transactions
in, and dispositions of, the assets of, and the results of operations of, the
Company all to the extent required by generally accepted accounting principles.
(iii) The Chief Executive Officer and the Chief Financial
Officer of the Company have signed, and the Company has furnished to the SEC,
all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of
2002; such certifications contain no qualifications or exceptions to the matters
certified therein and have not been modified or withdrawn; and neither the
Company nor any of its officers has received notice from any governmental entity
questioning or challenging the accuracy, completeness, form or manner of filing
or submission of such certifications.
(iv) The Company has heretofore has provided to SheerVision
complete and correct copies of all certifications filed with the SEC pursuant to
Sections 302 and 906 of Sarbanes-Oxley Act of 2002 and hereby reaffirms,
represents and warrants to SheerVision the matters and statements made in such
certificates.
(b) At the date hereof and at the Closing Date:
(i) the Common Stock is eligible to trade and be quote on the
over-the-counter Bulletin Board market maintained by The Nasdaq Stock Market
(the "OTCBB");
(ii) the Company has and shall have performed or satisfied all
of its undertakings to, and of its obligations and requirements with, the SEC;
and
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(iii) the Company has not, and shall not have taken any action
that would preclude, or otherwise jeopardize, the inclusion of the Common Stock
for quotation on the OTCBB.
(c) The Company has no subsidiaries or affiliated corporation or owns
any interest in any other enterprise (whether or not such enterprise is a
corporation). The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware with full
power and authority (corporate and other) to own, lease and operate its
respective properties and conduct its respective business as described in the
SEC Documents; the Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the ownership
or leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be in good
standing would not have a material adverse effect on its business, prospects,
condition (financial or otherwise), and results of operations of the Company; no
proceeding has been instituted in any such jurisdiction, revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
qualification; the Company is in possession of, and operating in compliance
with, all authorizations, licenses, certificates, consents, orders and permits
from state, federal, foreign and other regulatory authorities that are material
to the conduct of its business, all of which are valid and in full force and
effect; the Company is not in violation of its charter or bylaws or in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any material bond, debenture, note or other evidence of
indebtedness, or in any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
it is a party or by which it or its properties or assets may be bound, which
violation or default would have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company; and the
Company is not in violation of any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or over its
properties or assets, which violation would have a material adverse effect on
the business, prospects, financial condition or results of operations of the
Company taken as a whole. The SEC Documents accurately describe any corporation,
association or other entity owned or controlled, directly or indirectly, by the
Company.
(d) (i) Each of the Sellers and the Company has all requisite power and
authority to execute, deliver, and perform this Agreement. All necessary
proceedings of the Company have been duly taken to authorize the execution,
delivery, and performance of this Agreement thereby. This Agreement has been
duly authorized, executed, and delivered by the Sellers and the Company,
constitutes the legal, valid, and binding obligation of each of the Seller and
the Company, and is enforceable as to the Sellers and the Company in accordance
with its terms. Except as otherwise set forth in this Agreement, no consent,
authorization, approval, order, license, certificate, or permit of or from, or
declaration or filing with, any federal, state, local, or other governmental
authority or any court or other tribunal is required by any Seller or the
Company for the execution, delivery, or performance of this Agreement thereby.
No consent, approval, authorization or order of, or qualification with, any
court, government or governmental agency or body, domestic or foreign, having
jurisdiction over any Seller or the Company or over its respective properties or
assets is required for the execution and delivery of this Agreement and the
consummation by the Sellers and the Company of the transactions herein
contemplated,
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except such as may be required under the Securities Act or under state or other
securities or blue sky laws, all of which requirements have been, or in
accordance therewith will be, satisfied in all material respects. No consent of
any party to any material contract, agreement, instrument, lease, license,
arrangement, or understanding to which any Seller or the Company is a party, or
to which its or any of its respective businesses, properties, or assets are
subject, is required for the execution, delivery, or performance of this
Agreement; and the execution, delivery, and performance of this Agreement will
not violate, result in a breach of, conflict with, or (with or without the
giving of notice or the passage of time or both) entitle any party to terminate
or call a default under, entitle any party to receive rights or privileges that
such party was not entitled to receive immediately before this Agreement was
executed under, or create any obligation on the part of any Seller or the
Company to which it was not subject immediately before this Agreement was
executed under, any term of any such material contract, agreement, instrument,
lease, license, arrangement, or understanding, or violate or result in a breach
of any term of the certificate of incorporation or by-laws of the Company or (if
the provisions of this Agreement are satisfied) violate, result in a breach of,
or conflict with any law, rule, regulation, order, judgment, decree, injunction,
or writ of any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over any Seller or the Company or over its
respective properties or assets.
(ii) Each Seller is an individual who has reached the age
majority in his or her state of residence.
(e) There is not any pending or, to the best of each Seller's and the
Company's knowledge, threatened, action, suit, claim or proceeding against any
Seller or the Company, or any of the Company's officers or any of the respective
properties, assets or rights of any Seller or of the Company, before any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over any Seller or the Company or over the Company's officers or
the properties of any Seller or the Company, or otherwise that (i) is reasonably
likely to result in any material adverse change in the respective business,
prospects, financial condition or results of operations of any Seller or the
Company or might materially and adversely affect their properties, assets or
rights taken as a whole, (ii) might prevent consummation of the transactions
contemplated by this Agreement, or (iii) alleging violation of any Federal or
state securities laws.
(f) The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, of which 8,217,855 shares of Common Stock are
outstanding. Each of such outstanding shares of Common Stock is duly and validly
authorized, validly issued, fully paid, and nonassessable, has not been issued
and is not owned or held in violation of any preemptive or similar right of
stockholders. Except as disclosed in the SEC Documents, (i) there is no
commitment, plan, or arrangement to issue, and no outstanding option, warrant,
or other right calling for the issuance of, any share of capital stock of, or
any security or other instrument convertible into, exercisable for, or
exchangeable for capital stock of, the Company, and (ii) except as described in
the SEC Documents, there is outstanding no security or other instrument
convertible into or exchangeable for capital stock of the Company. When
delivered by the Sellers against payment therefor in accordance with the terms
of this Agreement, the Shares will be duly and validly issued and fully paid and
nonassessable, and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest of any kind; and no
preemptive or similar right, co-sale right, registration right, right of first
refusal or other similar
<PAGE>
right of stockholders exists with respect to any of the Shares or the issuance
and sale thereof other than those that have been expressly waived prior to the
date hereof and those that will automatically expire upon the execution hereof.
No further approval or authorization of any stockholder, the Board of Directors
of the Company or others is required for the issuance and sale or transfer of
the Shares, except as may be required under the Securities Act, the rules and
regulations promulgated thereunder or under state or other securities or blue
sky laws. The description of the Company's stock option, stock bonus and other
stock plans or arrangements, and the options or other rights granted and
exercised thereunder, set forth in the SEC Documents accurately and fairly
presents the information required to be shown with respect to such plans,
arrangements, options and rights under the Securities Act, the Exchange Act, and
the rules and regulations promulgated thereunder.
(g) Baumann Raymondo & Company PA ("BRC"), which has examined the
financial statements of the Company, together with the related schedules and
notes, for the period from September 25, 2002 through June 25, 2005, and
Acquavella, Chiarelli & Shuster & Co., LLP ("ACS", and, together with BRC, the
"AUDITORS"), which has examined the financial statements of the Company,
together with the related schedules and notes, for the period from June 25, 2000
through September 25, 2002, in each case filed with the SEC as a part of the SEC
Documents, are independent accountants within the meaning of the Securities Act,
the Exchange Act, and the rules and regulations promulgated thereunder; the
audited financial statements of the Company, together with the related schedules
and notes, and the unaudited financial information, forming part of the SEC
Documents, fairly present and will fairly present the financial position and the
results of operations of the Company at the respective dates and for the
respective periods to which they apply; and all audited financial statements of
the Company, together with the related schedules and notes, and the unaudited
financial information, filed with the SEC as part of the SEC Documents, complied
and will comply as to form in all material respects with applicable accounting
requirements and with the rules and regulations of the SEC with respect hereto
when filed, have been and will be prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
except as may be otherwise stated therein (except as may be indicated in the
notes thereto or as permitted by the rules and regulations of the SEC) and
fairly present and will fairly present, subject in the case of the unaudited
financial statements, to customary year end audit adjustments, the financial
position of the Company as at the dates thereof and the results of its
operations and cash flows. The procedures pursuant to which the aforementioned
financial statements have been audited are compliant with generally accepted
auditing standards. The selected and summary financial and statistical data
included in the SEC Documents present and will present fairly the information
shown therein and have been compiled on a basis consistent with the audited
financial statements presented therein. No other financial statements or
schedules are required to be included in the SEC Documents. The financial
statements referred to in this Section 3.01(g) contain all certifications and
statements required under the SEC's Order, dated June 27, 2002, pursuant to
Section 21(a)(1) of the Exchange Act (File No. 4-460), Rule 13a-14 or 15d-14
under the Exchange Act, or 18 U.S.C. Section 1350 (Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002) with respect to the report relating thereto. Since
the Last Company Financial Statement Date:
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(i) There has at no time been a material adverse change in the
financial condition, results of operations, businesses, properties,
assets, liabilities, or future prospects of the Company and Subsidiary
taken as a whole;
(ii) The Company has not authorized, declared, paid, or
effected any dividend or liquidating or other distribution in respect
of its capital stock or any direct or indirect redemption, purchase, or
other acquisition of any stock of the Company or Subsidiary.
(iii) Except as set forth in the SEC Documents, the operations
and businesses of the Company have been conducted in all respects only
in the ordinary course.
There is no fact known to the Company which materially adversely affects or in
the future (as far as the Company can reasonably foresee) may materially
adversely affect the financial condition, results of operations, businesses,
properties, assets, liabilities, or future prospects of the Company; provided,
however, that the Company expresses no opinion as to political or economic
matters of general applicability. The Company has made known, or caused to be
made known, to the accountants or auditors who have prepared, reviewed, or
audited the aforementioned consolidated financial statements all material facts
and circumstances which could affect the preparation, presentation, accuracy, or
completeness thereof.
(h) Subsequent to the respective dates as of which information is given
in the SEC Documents, there has not been (i) any material adverse change in the
business, prospects, financial condition or results of operations of the
Company, (ii) any transaction committed to or consummated that is material to
the Company, (iii) any obligation, direct or contingent, that is material to the
Company incurred by the Company, except such obligations as have been incurred
in the ordinary course of business, (iv) any change in the capital stock or
outstanding indebtedness of the Company or Subsidiary that is material to the
Company, other than the issuance of 1,000,000 shares of Common Stock to the
Sellers in payment of the outstanding indebtedness of the Company thereto, (v)
any dividend or distribution of any kind declared, paid, or made on the capital
stock of the Company, or (vi) any loss or damage (whether or not insured) to the
property of the Company which has a material adverse effect on the business,
prospects, condition (financial or otherwise), or results of operations thereof.
(i) Except as set forth in the SEC Documents, (i) the Company has good
and marketable title to all properties and assets described in the SEC Documents
as owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest, other than such as would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company, (ii) the agreements to which the Company
is a party described in the SEC Documents are legal, valid and binding
agreements, enforceable by the Company in accordance with their terms, and, to
the best of the Company's knowledge, the other contracting party or parties
thereto are not in breach or default under any of such agreements, and (iii) the
Company has valid and enforceable leases for all properties described in the SEC
Documents as leased by it. Except as set forth in the SEC Documents, the Company
owns or leases all such properties as are necessary to its respective operations
as now conducted and as described in the SEC Documents.
(j) The Company has no material liability of any nature, accrued or
contingent, including, without limitation, liabilities for federal, state,
local, or foreign taxes and penalties,
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interest, and additions to tax ("TAXES"), and liabilities to customers or
suppliers, other than the following:
(i) Liabilities for which full provision has been
made on the balance sheet included in the Last Company
Financial Statements; and
(ii) Other liabilities arising since the Last Company
Financial Statement Date and prior to the Closing in the
ordinary course of business (which shall not include
liabilities to customers on account of defective products or
services) which are not inconsistent with the representations
and warranties of the Company or any other provision of this
Agreement.
Without limiting the generality of the foregoing, the amounts set up as
provisions for Taxes in the Last Company Financial Statements are sufficient for
all accrued and unpaid Taxes of the Company, whether or not due and payable and
whether or not disputed, under tax laws, as in effect on the Last Company
Financial Statement Date or now in effect, for the period ended on such date and
for all fiscal periods prior thereto. The execution, delivery, and performance
of this Agreement by the Company will not cause any Taxes to be payable (other
than those that may possibly be payable by the Seller as a result of the sale of
the Shares) or cause any lien, charge, or encumbrance to secure any Taxes to be
created either immediately or upon the nonpayment of any Taxes other than on the
properties or assets of the Sellers. The Internal Revenue Service has audited
and settled or the statute of limitations has run upon all federal income tax
returns of the Company and each Seller for all taxable years up to and including
the taxable year ended December 31, 1998. The Company has filed all federal,
state, local, and foreign tax returns required to be filed by it; has made
available to SheerVision a true and correct copy of each such return which was
filed in the past six years; has paid (or has established on the last balance
sheet included in the last Company Financial Statement a reserve for) all Taxes,
assessments, and other governmental charges payable or remittable by it or
levied upon it or its properties, assets, income, or franchises which are due
and payable; and has delivered to SheerVision a true and correct copy of any
report as to adjustments received by it from any taxing authority during the
past six years and a statement as to any litigation, governmental or other
proceeding (formal or informal), or investigation pending, threatened, or in
prospect with respect to any such report or the subject matter of such report.
Each Seller has paid all taxes payable thereby due on or prior to the date
hereof.
(k) The Company currently maintains no insurance; however, the Company
has at no time been refused any insurance coverage sought or applied for.
(l) (i) No labor disturbance by the employees of the Company exists or,
to the best of the Company's knowledge, is imminent. The Company is not aware of
any existing or imminent labor disturbance by the employees of any principal
suppliers or customers of the Company that might be expected to result in any
material adverse change in the business, prospects, financial condition, or
results of operations of the Company. No collective bargaining agreement exists
with any of the Company's employees and, to the best of each Seller's and the
Company's knowledge, no such agreement is imminent.
(ii) The Company does not have, or contribute to, and has
never maintained or contributed to, any pension, profit-sharing, option, other
incentive plan, or any other type of
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Employee Benefit Plan (as defined in Section 3(3) of ERISA) or Pension Plan (as
defined in ERISA) and the Company does not have any obligation to or customary
arrangement with employees for bonuses, incentive compensation, vacations,
severance pay, sick pay, sick leave, insurance, service award, relocation,
disability, tuition refund, or other benefits, whether oral or written.
(m) The Company owns or possesses adequate rights to use all patents,
patent rights, inventions, trade secrets, know-how, trademarks, service marks,
trade names, logos, and copyrights described or referred to in the SEC Documents
as owned by or used by it or that are necessary to conduct its respective
businesses as described in the SEC Documents; the Company has not received any
notice of, or has knowledge of, any infringement of or conflict with asserted
rights of the Company by others with respect to any patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names,
logos, or copyrights described or referred to in the SEC Documents as owned by
or used by it; and the Company has not received any notice of, or has no
knowledge of, any infringement of, or conflict with, asserted rights of others
with respect to any patents, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names, logos, or copyrights described or
referred to in the SEC Documents as owned by or used by it or which,
individually or in the aggregate, in the event of an unfavorable decision,
ruling or finding, would have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company.
(n) The Company has been advised concerning the Investment Company Act
of 1940, as amended (the "INVESTMENT COMPANY ACT"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the
future, to conduct its affairs in such a manner as to ensure that it is not and
will not become an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act and such
rules and regulations.
(o) (i) The Company has not, and no person or entity acting on behalf
or at the request of the Company has, at any time during the last five years (i)
made any unlawful contribution to any candidate for foreign office or failed to
disclose fully any contribution in violation of law, or (ii) made any payment to
any federal or state governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any other applicable jurisdiction.
(ii) Neither any Seller, nor any officer, director or
affiliate of the Company, has been, within the five years ending on the Closing
Date, a party to any bankruptcy petition against such person or against any
business of which such person was affiliated; convicted in a criminal proceeding
or subject to a pending criminal proceeding (excluding traffic violations and
other minor offenses); subject to any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or
otherwise limiting their involvement in any type of business, securities or
banking activities; or found by a court of competent jurisdiction in a civil
action, by the SEC or the Commodity Futures Trading Commission to have violated
a federal or state securities or commodities law, and the judgment has not been
reversed, suspended or vacated.
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(p) The Company has not, and no person acting on behalf thereof, has
taken or will take, directly or indirectly, any action designed to, or that
might reasonably be expected to cause or result in, stabilization in violation
of law, or manipulation, of the price of the Common Stock to facilitate the sale
or resale of the Shares.
(q) Except as set forth in the SEC Documents, (i) the Company is in
compliance in all material respects with all rules, laws and regulations
relating to the use, treatment, storage and disposal of toxic substances and
protection of health or the environment ("ENVIRONMENTAL LAWS") that are
applicable to its business, (ii) the Company has not received notice from any
governmental authority or third party of an asserted claim under Environmental
Laws, which claim is required to be disclosed in the SEC Documents, (iii) to the
best knowledge of the Company, the Company is not likely to be required to make
future material capital expenditures to comply with Environmental Laws (iv) no
property which is owned, leased or occupied by the Company has been designated
as a Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601, ET SEQ.), or otherwise
designated as a contaminated site under applicable state or local law, and (v)
the Company is not in violation of any federal or state law or regulation
relating to occupational safety or health.
(r) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to, or for the benefit of, any of the officers,
directors, or director-nominees of the Company or any of the members of the
families of any of them, except as disclosed in the SEC Documents.
(s) The Company has not incurred any liability, direct or indirect, for
finders' or similar fees on behalf of or payable by the Company or SheerVision
in connection with the Transaction Agreements or any other transaction involving
the Company and SheerVision.
(t) No stockholder of the Company has any right to request or require
the Company to register the sale of any shares owned by such stockholder under
the Securities Act on any registration statement.
(u) Neither Company, nor, to the best knowledge of any Seller nor the
Company, any director, officer, agent, employee, or other person associated
with, or acting on behalf of, the Company, has, directly or indirectly: used any
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended; or made any bribe,
rebate, payoff, influence payment, kickback, or other unlawful payment. The
Company's internal accounting controls and procedures are sufficient to cause
the Company to comply in all respects with the Foreign Corrupt Practices Act of
1977, as amended.
(v) The Company is in compliance with, and is not in violation of,
applicable federal, state, local or foreign statutes, laws and regulations
(including without limitation, any applicable building, zoning or other law,
ordinance or regulation) affecting its properties or the operation of its
business, including, without limitation, Sarbanes-Oxley Act of 2002 and the
rules and
<PAGE>
regulations promulgated pursuant thereto or thereunder. The Company is not
subject to any order, decree, judgment or other sanction of any court,
administrative agency or other tribunal.
(w) (i) The Shares are owned of record and beneficially solely by the
Sellers free and clear of any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer
(except as otherwise provided herein), receipt of income or other exercise of
any attributes of ownership. The Shares are not subject to any options,
warrants, convertible securities or other rights, agreements, arrangements or
commitments of any character relating to interests therein. There are no voting
trusts, member agreements, proxies, or other agreements or understandings in
effect with respect to the voting or transfer of any of the Shares. Other than
the Shares, the Sellers own beneficially or of record, no shares of capital
stock or other securities of the Company, and do not own beneficially or of
record, any securities exercisable for, or convertible into or exchangeable for,
securities of the Company, other than an aggregate of 14,330 shares of Common
Stock held by the Sellers in a custodial capacity and one or more individual
retirement accounts.
(ii) The Sellers acquired the Shares from the Company in
private transactions not involving a public offering and, on the dates of such
acquisitions, the Sellers paid the full purchase price therefor. The Shares are
"RESTRICTED SECURITIES" as defined in Rule 144(a) under the Securities Act.
(iii) Neither any Seller nor any affiliate thereof knows of
any material adverse information regarding the current or prospective operations
of the Company which has not been publicly disclosed.
(x) Neither the transactions contemplated hereby, nor the
Reorganization, shall be subject to Section 203 of the DGCL.
SECTION 3.02 REPRESENTATIONS AND WARRANTIES OF SHEERVISION. SheerVision
hereby represents and warrants to, and agrees with, each Seller:
(a) SheerVision has all requisite power and authority to
execute, deliver, and perform this Agreement. All necessary proceedings of
SheerVision have been duly taken to authorize the execution, delivery, and
performance of this Agreement thereby. This Agreement has been duly authorized,
executed, and delivered by SheerVision, constitutes the legal, valid, and
binding obligation of SheerVision, and is enforceable as to SheerVision in
accordance with its terms. Except as otherwise set forth in this Agreement, no
consent, authorization, approval, order, license, certificate, or permit of or
from, or declaration or filing with, any federal, state, local, or other
governmental authority or any court or other tribunal is required by SheerVision
for the execution, delivery, or performance of this Agreement thereby. No
consent, approval, authorization or order of, or qualification with, any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over SheerVision or over its respective properties or assets is
required for the execution and delivery of this Agreement and the consummation
by SheerVision of the transactions herein contemplated, except such as may be
required under the Securities Act or under state or other securities or blue sky
laws, all of which requirements have
<PAGE>
been, or in accordance therewith will be, satisfied in all material respects. No
consent of any party to any material contract, agreement, instrument, lease,
license, arrangement, or understanding to which SheerVision is a party, or to
which its or any of its businesses, properties, or assets are subject, is
required for the execution, delivery, or performance of this Agreement; and the
execution, delivery, and performance of this Agreement will not violate, result
in a breach of, conflict with, or (with or without the giving of notice or the
passage of time or both) entitle any party to terminate or call a default under,
entitle any party to receive rights or privileges that such party was not
entitled to receive immediately before this Agreement was executed under, or
create any obligation on the part of SheerVision to which it was not subject
immediately before this Agreement was executed under, any term of any such
material contract, agreement, instrument, lease, license, arrangement, or
understanding, or violate or result in a breach of any term of the operating
agreement of the Company or (if the provisions of this Agreement are satisfied)
violate, result in a breach of, or conflict with any law, rule, regulation,
order, judgment, decree, injunction, or writ of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over
SheerVision or over its properties or assets.
(b) SheerVision is an "accredited investor" as defined in Rule 501 of
Regulation D under the Securities Act. SheerVision is acquiring the Shares for
its own account (and not for the account of others) for investment and not with
a view to the distribution or resale thereof in violation of the Securities Act.
SheerVision understands that it may not sell or otherwise Dispose Of such Shares
in the absence of either an effective registration statement under the
Securities Act or an exemption from the registration provisions of the
Securities Act. SheerVision acknowledges being informed that the shares of
Common Stock acquired thereby shall be unregistered, shall be "RESTRICTED
SECURITIES" as defined in Rule 144(a) under the Securities Act, and must be held
indefinitely unless (i) they are subsequently registered under the Securities
Act, or (ii) an exemption from such registration is available. SheerVision
further acknowledges that the Company does not have an obligation to currently
register such securities for the account of SheerVision.
(c) By virtue of SheerVision's position, it has access to the same kind
of information which would be available in a registration statement filed
under the Securities Act. SheerVision acknowledges that it has been afforded
access to all material information which it has requested relevant to its
decision to acquire the Shares to acquired thereby and to ask questions of the
Company's management and that, except as set forth herein, neither Seller or
the Company nor anyone acting on behalf of the Seller or the Company, has made
any representations or warranties to SheerVision which have induced,
persuaded, or stimulated SheerVision to acquire such Shares.
(d) Either alone, or together with their investment advisor(s),
SheerVision has the knowledge and experience in financial and business matters
to be capable of evaluating the merits and risks of the prospective investment
in the Shares to be acquired thereby, and SheerVision is and will be able to
bear the economic risk of the investment in such Shares.
<PAGE>
ARTICLE IV
ADDITIONAL COVENANTS
SECTION 4.01 INDEMNITY. The Sellers, jointly and severally,
agree to indemnify and hold harmless SheerVision and its officers, directors,
employees, counsel, agents, and stockholders, in each case past, present, or as
they may exist at any time after the date of this Agreement, and each person, if
any, who controls, controlled, or will control any of them within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Securities Exchange Act
of 1934, as amended, against any and all losses, liabilities, damages, and
expenses whatsoever (which shall include, for all purposes of this Article IV,
but not be limited to, counsel fees and any and all expenses whatsoever incurred
in investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation) as and when incurred arising out of, based upon, or
in connection with (a) any breach of any representation, warranty, covenant, or
agreement of any Seller or the Company contained in this Agreement and (b), if
the Closing takes place, any act, alleged act, omission, or alleged omission
occurring at or prior to the Closing (including without limitation any which
arise out of, are based upon, or are in connection with any of the transactions
contemplated hereby). The foregoing agreement to indemnify shall be in addition
to any liability any Seller or the Company may otherwise have, including
liabilities arising under this Agreement.
SECTION 4.02 STOCKHOLDERS; OTHER SECURITIES. The Sellers hereby agree
that immediately prior to the Closing, the Company will have at least 500
stockholders. Prior to the date of this Agreement, all of the Company's
outstanding convertible debt, options, warrants and all other indebtedness of
the Company have been converted to shares of Common Stock.
SECTION 4.03 ASSETS AND LIABILITIES. At the Closing, the Company shall
have no material assets and no liabilities.
SECTION 4.04 CORPORATE GOVERNANCE. At the Closing, (a) the Board of
Directors of the Company shall consist of two current directors (the "EXISTING
DIRECTORS") and two directors appointed by SheerVision (the "NEW DIRECTORS"),
and (b) all officers of the Company shall resign and the Board of Directors
shall appoint the designees of SheerVision and the sole officers thereof.
ARTICLE V
MISCELLANEOUS
SECTION 5.01 EXPENSES. Whether or not the transactions contemplated in
this Agreement are consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby, will be paid by
the party incurring such expense or as otherwise agreed to herein.
<PAGE>
SECTION 5.02 NECESSARY ACTIONS. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In the event at any time after the Closing, any further action is necessary or
desirable to carry out the purposes of this Agreement, the Seller, the proper
executive officers and/or directors of the Company, or SheerVision, as the case
may be, will take all such necessary action.
SECTION 5.03 NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested or by the most nearly comparable method
if mailed from or to a location outside of the United States or by Federal
Express, Express Mail, or similar overnight delivery or courier service or
delivered (in person or by telecopy, telex, or similar telecommunications
equipment) against receipt to the party to which it is to be given at the
address of such party set forth in the introductory paragraph to this Agreement
(or to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 5.03.) Any notice shall be
addressed to the attention of the Corporate Secretary. A copy of any and all
notices to SheerVision shall be delivered in accordance with this section to
Reitler Brown & Rosenblatt LLC, 800 Third Avenue, 21st Floor, New York 10022,
Attention: Robert Steven Brown, Esq. A copy of any and all notices to any Seller
shall be delivered in accordance with this section to Edwin B. Kagan, P.A., 2709
Rocky Point Drive, Suite 102, Tampa, Florida 33607. Any notice or other
communication given by certified mail (or by such comparable method) shall be
deemed given at the time of certification thereof (or comparable act), except
for a notice changing a party's address which will be deemed given at the time
of receipt thereof. Any notice given by other means permitted by this Section
5.03 shall be deemed given at the time of receipt thereof.
SECTION 5.03 PARTIES IN INTEREST. Except as expressly provided in
Section 4.01 hereof, this Agreement will inure to the benefit of and be binding
upon the parties hereto and the respective successors and assigns. Nothing in
this Agreement is intended to confer, expressly or by implication, upon any
other person any rights or remedies under or by reason of this Agreement.
SECTION 5.04 ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth
the entire understanding of the parties with respect to the subject matter
hereof (except as provided in Section 5.04), supersedes all existing agreements
among them concerning such subject matter, and may be modified only by a written
instrument duly executed by each party hereto.
SECTION 5.05 AVAILABILITY OF EQUITABLE REMEDIES. Since a breach of the
provisions of this Agreement could not adequately be compensated by money
damages, any party shall be entitled, in addition to any other right or remedy
available to it, to an injunction restraining such breach or threatened breach
and to specific performance of any such provision of this Agreement, and no bond
or other security shall be required in connection therewith, and the
<PAGE>
parties hereby consent to the issuance of such an injunction and to the ordering
of specific performance.
SECTION 5.06 SURVIVAL. Each of the covenants, agreements,
representations, and warranties contained in this Agreement shall survive the
Closing Date until the date 18 months thereafter. The statements contained in
any document executed by either the Seller or the Company relating hereto or
delivered to SheerVision in connection with the transactions contemplated hereby
or thereby, or in any statement, certificate, or other instrument delivered by,
or on behalf of, either the Seller or the Company pursuant hereto or thereto or
delivered to SheerVision in connection with the transactions contemplated hereby
or thereby shall be deemed representations and warranties, covenants and
agreements, or conditions, as the case may be, of the Seller or the Company,
respectively, hereunder for all purposes of this Agreement (including all
statements, certificates, or other instruments delivered pursuant hereto or
thereto or delivered in connection with this Agreement, or any of the other
transactions contemplated hereby). The statements contained in any document
executed by SheerVision relating hereto or delivered to either the Seller or the
Company in connection with the transactions contemplated hereby or thereby, or
in any statement, certificate, or other instrument delivered by, or on behalf
of, SheerVision pursuant hereto or thereto or delivered to either the Seller or
the Company in connection with the transactions contemplated hereby or thereby
shall be deemed representations and warranties, covenants and agreements, or
conditions, as the case may be, of SheerVision hereunder for all purposes of
this Agreement (including all statements, certificates, or other instruments
delivered pursuant hereto or thereto or delivered in connection with this
Agreement, or any of the other transactions contemplated hereby).
SECTION 5.07 BINDING EFFECT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the Seller, the Company, and
SheerVision, and their respective successors and assigns; provided, however,
that no party hereto shall have the right to assign its rights and obligations
hereunder without the prior written consent of the other parties hereto.
SECTION 5.08 COUNTERPART. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all together will
constitute one document. The delivery by facsimile of an executed counterpart of
this Agreement will be deemed to be an original and will have the full force and
effect of an original executed copy.
SECTION 5.09 SEVERABILITY. The provisions of this Agreement will be
deemed severable and the invalidity or unenforceability of any provision hereof
will not affect the validity or enforceability of any of the other provisions
hereof. If any provisions of this Agreement, or the application thereof to any
person or any circumstance, is illegal, invalid or unenforceable, (a) a suitable
and equitable provision will be substituted therefor in order to carry out, so
far as may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision, and (b) the remainder of this Agreement and the
application of such provision to other persons or circumstances will not be
affected by such invalidity or unenforceability, nor will such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
<PAGE>
SECTION 5.10 HEADINGS. The Article and Section headings are provided
herein for convenience of reference only and do not constitute a part of this
Agreement and will not be deemed to limit or otherwise affect any of the
provisions hereof.
SECTION 5.11 GOVERNING LAW. This Agreement will be deemed to be made in
and in all respects will be interpreted, construed and governed by and in
accordance with the law of the State of New York, without regard to the conflict
of law principles thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement in a manner legally binding upon them as of the date first above
written.
SHEERVISION, INC.
BY /S/ SUZANNE LEWSADDER
---------------------------------
NAME: SUZANNE LEWSADDER
TITLE: CHIEF EXECUTIVE OFFICER
/S/ LAURIE C. SCALA
-------------------------------------
LAURIE C. SCALA
/S/ HOWARD A. SCALA
-------------------------------------
HOWARD A. SCALA
CLEAN WATER TECHNOLOGIES, INC.
BY /S/ LAURIE C. SCALA
----------------------------------
NAME: LAURIE C. SCALA
TITLE: PRESIDENT