AGREEMENT AND PLAN OF MERGER
By and Among
PACIFIC AUTO GROUP, INC.,
AUTOCORP EQUITIES, INC.
and
PAG ACQUISITION CORP.
Dated as of June 20, 2003
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER...........................................................1
Section 1.01. The Merger.....................................................1
Section 1.02. Effective Time.................................................1
Section 1.03. Effect of the Merger...........................................1
Section 1.04. Articles of Incorporation......................................2
Section 1.05. Bylaws.........................................................2
Section 1.06. Additional Actions.............................................2
Section 1.07. Conversion of Securities.......................................2
Section 1.08. Surrender of Shares, Stock Transfer Books......................3
ARTICLE II CLOSING.............................................................4
Section 2.01. Closing........................................................4
Section 2.02. Deliveries by the Company......................................4
Section 2.03. Deliveries by Acquiror and Parent to the Company...............4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................5
Section 3.01. Organization and Qualification of the Company..................5
Section 3.02. Power and Capacity; Charter Documents of the Company...........5
Section 3.03. Capitalization and Ownership of the Company and the
Company Subsidiaries...........................................5
Section 3.04. No Conflicts...................................................6
Section 3.05. Consents and Approvals.........................................6
Section 3.06. Financial and Operating Statements.............................6
Section 3.07. No Undisclosed or Contingent Liabilities.......................7
Section 3.08. Assets of the Company and the Company Subsidiaries.............7
Section 3.09. Absence of Certain Changes.....................................8
Section 3.10. Contracts and Commitments.....................................10
Section 3.11. Accounts Receivable...........................................12
Section 3.12. Litigation....................................................12
Section 3.13. Compliance with Law...........................................13
Section 3.14. Permits.......................................................13
Section 3.15. Tax Matters...................................................13
Section 3.16. Labor Matters.................................................15
Section 3.17. Pension and Other Employee Plans and Agreements...............15
Section 3.18. Title to Assets...............................................16
Section 3.19. Bank Accounts.................................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND PARENT..............17
Section 4.01. Organization and Qualification - Acquiror.....................17
Section 4.02. Organization and Qualification - Parent.......................17
Section 4.03. Power and Capacity; Charter Documents of Acquiror.............17
Section 4.04. Power and Capacity; Charter Documents of Parent...............17
Section 4.05. No Conflicts..................................................18
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Section 4.06. Consents and Approvals........................................18
Section 4.07. Financial and Operating Statements............................19
Section 4.08. No Undisclosed or Contingent Liabilities......................19
Section 4.09. Assets of the Parent..........................................19
Section 4.10. Absence of Certain Changes....................................20
Section 4.11. Contracts and Commitments.....................................22
Section 4.12. Accounts Receivable...........................................24
Section 4.13. Litigation....................................................25
Section 4.14. Compliance with Law...........................................25
Section 4.15. Permits.......................................................25
Section 4.16. Tax Matters...................................................26
Section 4.17. Labor Matters.................................................27
Section 4.18. Pension and Other Employee Plans and Agreements...............27
Section 4.19. Title to Assets...............................................29
Section 4.20. Bank Accounts.................................................29
ARTICLE V OTHER OBLIGATIONS OF THE PARTIES....................................29
Section 5.01. Conduct of Company Business...................................29
Section 5.02. Access to Books and Records...................................31
Section 5.03. Consents......................................................31
Section 5.04. Governmental Filings..........................................31
Section 5.05. Covenant to Satisfy Conditions................................32
Section 5.06. Confidentiality...............................................32
Section 5.07. Employees.....................................................32
Section 5.08. Stockholder Meeting of the Company............................32
ARTICLE VI CONDITIONS PRECEDENT...............................................32
Section 6.01. Conditions Precedent to Obligations of Acquiror
and Parent ...................................................32
Section 6.02. Conditions Precedent to Obligations of the Company............34
ARTICLE VII TERMINATION OF AGREEMENT..........................................35
Section 7.01. Termination of Agreement......................................35
Section 7.02. Procedure Upon Termination....................................35
ARTICLE VIII INDEMNIFICATION..................................................36
Section 8.01. Indemnification by the Company................................36
Section 8.02. Indemnification by Parent.....................................36
Section 8.03. Limitation Upon Indemnification Remedies......................36
Section 8.04. Indemnification if Negligence of Indemnitee...................37
Section 8.05. No Third-Party Beneficiaries..................................37
Section 8.06. Survival......................................................37
ARTICLE IX MISCELLANEOUS......................................................37
Section 9.01. Survival of Representations and Warranties....................37
Section 9.02. Commissions...................................................37
Section 9.03. Definition of Knowledge.......................................37
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Section 9.04. Definition of Material Adverse Effect and
Material Adverse Change ......................................37
Section 9.05. Expenses, Taxes, Etc..........................................38
Section 9.06. Section 338 Election..........................................38
Section 9.07. Successors and Assigns........................................38
Section 9.08. No Third-Party Benefit........................................38
Section 9.09. Entire Agreement; Amendment...................................38
Section 9.10. Reformation and Severability..................................38
Section 9.11. Notices.......................................................39
Section 9.12. Number and Gender.............................................40
Section 9.13. GOVERNING LAW.................................................40
Section 9.14. Counterparts..................................................40
APPENDICES:
Appendix I - 2002 Company Financial Statements
Appendix II - 2002 Parent Financial Statements
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June 20,
2003, is by and among Pacific Auto Group, Inc., a Nevada corporation (the
"Company" and sometimes the "Surviving Corporation"), AutoCorp Equities, Inc., a
Nevada corporation ("Parent") and PAG Acquisition Corp., a Nevada corporation
("Acquiror").
INTRODUCTORY STATEMENTS
The Company, Acquiror and Parent desire to effect the merger of the Company
with Acquiror, with the Company as the surviving corporation, pursuant to the
terms hereof (the "Merger").
Accordingly, for and in consideration of the foregoing and the mutual
agreements, representations, warranties, covenants and conditions herein set
forth, and other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.01. The Merger.
Upon the terms and subject to the conditions hereof, the Merger shall be
consummated in accordance with Chapter 92A of the Nevada Revised Statutes (the
"Nevada Law") as soon as practicable following the satisfaction or waiver of the
conditions set forth in Article VI hereof. At the Effective Time (as hereinafter
defined) and subject to and upon the terms and conditions of this Agreement and
the Nevada Law, Acquiror shall be merged with the Company, the separate
corporate existence of Acquiror shall cease, and the Company shall continue as
the Surviving Corporation.
Section 1.02. Effective Time.
As promptly as practicable after the satisfaction or waiver of the
conditions set forth in Article VI hereof, the parties hereto shall cause the
Merger to be consummated by filing a Certificate of Merger with the Secretary of
State of the State of Nevada in such form as required by, and executed in
accordance with, the relevant provisions of the Nevada Law. The Merger shall
become effective upon the filing of such Certificate of Merger with the
Secretary of State of the State of Nevada (the "Effective Time").
Section 1.03. Effect of the Merger.
At the Effective Time, the effect of the Merger in Nevada shall be as
provided in Section 92A.250 of the Nevada Law.
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Section 1.04. Articles of Incorporation.
At the Effective Time, the Articles of Incorporation of the Company, as
currently amended, shall become the Articles of Incorporation of the Surviving
Corporation.
Section 1.05. Bylaws.
The Bylaws of the Company shall become the Bylaws of the Surviving
Corporation.
Section 1.06. Additional Actions.
If, at any time after the Effective Time, the Surviving Corporation shall
consider or be advised that any deeds, bills of sale, assignments, assurances,
or any other actions or things are necessary or desirable to vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation its right, title
or interest in, to or under any of the rights, properties or assets of the
Company or Acquiror acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of the Company and
Acquiror, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of the Company and Acquiror or otherwise, all
such other actions and things as may be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
Section 1.07. Conversion of Securities.
At the Effective Time, by virtue of the Merger and without any action on
the part of the Company, Parent, Acquiror or the holder of any of the following
securities:
(a) Each share of Common Stock, par value $.001 per share, of the Company
(the "Company Stock") held in the treasury of the Company [or by any of the
Company Subsidiaries] immediately prior to the Effective Time shall be canceled
and extinguished without any conversion thereof and no payment shall be made
with respect thereto.
(b) Each outstanding share of Company Stock (other than the shares of
Company Stock referred to in Section 1.7 (a)) shall be converted into the right
to receive (i) 100,000,000 shares of Common Stock, par value $.001 per share, of
Parent (the "Parent Common Stock") and (ii) 4,086,856 shares of Series A
Cumulative Convertible Preferred Stock, par value $0.001 per share, of Parent
(the "Parent Preferred Stock"), which shares of Parent Preferred Stock shall be
convertible at the option of the holder into not less than 40,868,560 shares of
Parent Common Stock (collectively, the "Merger Consideration"). The Merger
Consideration shall be paid and delivered to Pacific Holdings Group on the
Closing Date.
(c) Each share of Common Stock, par value $.001 per share, of Acquiror
issued and outstanding immediately prior to the Effective Time shall be
converted into and thereafter represent one share, validly issued, fully paid
and nonassessable, of Common Stock of the Surviving Corporation. Immediately
following the Effective Time, the Common Stock of the Surviving Corporation held
by Parent shall represent all of the issued and outstanding capital stock of the
Surviving Corporation.
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(d) From and after the Effective Time, holders of certificates evidencing
Company Stock that were issued prior to the Merger shall cease to have any
rights as stockholders of the Company or the Surviving Corporation, except as
provided otherwise by Law.
Section 1.08. Surrender of Shares, Stock Transfer Books.
(a) Each holder of a certificate or certificates representing any Company
Stock canceled upon the Merger pursuant to Section 1.07 may thereafter surrender
such certificate or certificates to the Secretary of the Surviving Corporation,
as agent for such holder, to effect the surrender of such certificate or
certificates on such holder's behalf for a period ending six months after the
Effective Time. Parent agrees that as soon as practicable after the Effective
Time it shall distribute or shall cause the Secretary of the Surviving
Corporation to distribute to each holder of record of Company Stock as of the
Effective Time a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to such certificates shall pass,
only upon proper delivery thereof to the Secretary of the Surviving Corporation)
and instructions for use in effecting the surrender of such certificates for
payment therefor. (Any holders of Company Stock who have lost or destroyed the
certificates representing their Company Stock shall be required to execute an
affidavit regarding such matters in a form to be distributed by the Parent to
indemnify the Surviving Corporation and Parent against any other claimants of
such Company Stock, but no bond or other security shall be required for such
indemnity.) Upon surrender by such holder to the Secretary of the Surviving
Corporation of a certificate (or such executed affidavit and indemnity),
together with such letter of transmittal duly executed, the holder of such
certificate shall be entitled to receive in exchange therefor the consideration
to be paid to such holder under Section 1.07. Each certificate surrendered
hereunder shall forthwith be canceled. Notwithstanding anything in this
Agreement to the contrary, no payment shall be made to any holder of Company
Stock until Parent or the Surviving Corporation has received written
confirmation of the effectiveness of the Merger under the Nevada Law from the
Secretary of State of the State of Nevada. Any amounts paid, released or
distributed to any holder of Company Stock under this Agreement shall have
deducted therefrom the amount of any withholding taxes, if any, due thereon
regarding such holder.
(b) If payment in respect of Company Stock is to be made to a Person (as
defined herein) other than the Person in whose name a surrendered certificate or
instrument is registered, it shall be a condition to such payment that the
certificate or instrument so surrendered shall be properly endorsed or shall be
otherwise in proper form for transfer and that the Person requesting such
payment shall have paid any transfer and other taxes required by reason of such
payment in a name other than that of the registered holder of the certificate or
instrument surrendered or shall have established to the satisfaction of the
Surviving Corporation or Parent that such tax either has been paid or is not
payable. The registered holder of each certificate surrendered in accordance
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with the preceding sentence shall indemnify and hold Parent and the other
parties hereto harmless against any claims by third parties (and any direct or
indirect damages relating thereto) as to the title of such certificate or the
Company Stock evidenced thereby. At the Effective Time, the stock transfer books
of the Company shall be closed and there shall be no further registration of
transfers of Company Stock issued prior to the Merger on the records of the
Company or the Surviving Corporation. If, after the Effective Time, certificates
for Company Stock are presented to the Surviving Corporation, they shall be
entitled only to be canceled and exchanged for the amounts provided for such
shares in Sections 1.07 and 1.09 hereof.
ARTICLE II
CLOSING
Section 2.01. Closing.
The Closing of the transactions contemplated hereby (the "Closing") shall,
subject to the provisions of Article VI hereof, take place on or about June 24,
2003 at the offices of the Company, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ or at such other date, time and place as the Company and Acquiror
mutually agree. The date on which the Closing actually occurs is referred to
herein as the "Closing Date".
Section 2.02. Deliveries by the Company.
At the Closing, the Company shall deliver, or cause to be delivered, to
Acquiror and Parent (unless delivered previously) the following:
(a) the Officers' Certificate referred to in Section 6.01(e) hereof;
(b) the Certificate of the Secretary of the Company referred to in Section
6.01(f) hereof;
(c) executed counterparts of any consents required to be obtained by the
Company pursuant to Section 5.03 hereof; and
(d) all other previously undelivered documents, instruments and writings
required to be delivered by the Company to Acquiror or Parent at or prior to the
Closing pursuant to this Agreement or otherwise required in connection herewith.
Section 2.03. Deliveries by Acquiror and Parent to the Company and Pacific
Holdings Group.
At the Closing, Acquiror and Parent shall deliver, or cause to be
delivered, to the Company (unless delivered previously) the following:
(a) the Officers' Certificates referred to in Section 6.02(e) hereof;
(b) the Secretary's Certificates referred to in Section 6.02(f) hereof;
(c) the Merger Consideration (to Pacific Holdings Group); and
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(d) all other previously undelivered documents, instruments and writings
required to be delivered by Acquiror or Parent to the Company at or prior to the
Closing pursuant to this Agreement or otherwise required in connection herewith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Acquiror and Parent as follows,
except as otherwise set forth in the relevant section of the Disclosure
Schedule:
Section 3.01. Organization and Qualification of the Company.
The Company is a corporation duly organized and validly existing under the
laws of the State of Nevada. Except for its ownership interests in American
Finance Company, Inc. and AFCO Receivables Funding Corporation (collectively,
the "Company Subsidiaries"), the Company owns no equity interest in any
corporation, partnership, joint venture, limited liability company or other
entity.
Section 3.02. Power and Capacity; Charter Documents of the Company.
(a) The Company has all requisite power and authority (corporate and
otherwise) to enter into, execute and deliver this Agreement and, upon requisite
approval of the Merger by the stockholders of the Company, to and perform its
obligations hereunder. The Company has the corporate power and authority to
carry on its business as now being conducted and to own and lease its
properties. This Agreement has been duly executed and delivered by the Company
and is a valid and binding obligation of the Company, enforceable in accordance
with its terms.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by the Company will not
result in a violation or breach of or constitute a default under any term or
provision of the Articles of Incorporation or Bylaws of the Company. The Company
has made available to Acquiror true and complete copies of the Articles of
Incorporation and the Bylaws of the Company, as in effect on the date hereof.
Section 3.03. Capitalization and Ownership of the Company and the Company
Subsidiaries.
Section 3.03 of the Disclosure Schedule lists, for the Company and the
Company Subsidiaries, their respective authorized capitalization, the number of
shares of their respective capital stock (or other equity interests) that are
issued and outstanding, and the number of shares of their respective capital
stock (or other equity interests) that are owned of record by each stockholder.
All of the outstanding shares of the capital stock of the Company and the
Company Subsidiaries are validly issued, fully paid and non-assessable and were
not issued in violation of any preemptive rights or any applicable Law. All such
shares are owned free and clear of any lien, claim or encumbrance of any type
whatsoever imposed by the Company or the Company Subsidiaries. Except as set
forth in Section 3.03 of the Disclosure Schedule, there are no outstanding
options, warrants or other rights to acquire any share of capital stock of the
Company or the Company Subsidiaries, there are no outstanding securities
authorized, granted or issued by the Company or the Company Subsidiaries that
are convertible into or exchangeable for shares of its capital stock and there
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are no phantom stock rights, stock appreciation rights or similar rights
regarding the Company or the Company Subsidiaries. There are no rights of any
Person (as defined in Section 3.09(i) below) to have the Company or the Company
Subsidiaries repurchase any capital stock of the Company or the Company
Subsidiaries.
Section 3.04. No Conflicts.
The execution, delivery and performance of this Agreement by the Company
and the consummation of the transactions contemplated hereby will not:
(a) result in the creation or imposition of any security interest, lien,
charge or other encumbrance against the Company Assets (as defined herein), with
or without the giving of notice and/or the passage of time, or
(b) violate, conflict with, affect acceleration of, or result in
termination, cancellation or modification of, or constitute a default under (i)
any contract, agreement or other instrument to which the Company is a party or
by which the Company or its assets is bound or (ii) any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which the
Company is a party or by which the Company may be bound or affected, or to which
any of the Company Assets may be subject, or
(c) violate any statute or Law or any judgment, decree, order, writ,
injunction, regulation or rule of any court or any local, state or federal
governmental or regulatory authority.
Section 3.05. Consents and Approvals.
The Company is not required to obtain, transfer or cause to be transferred
any consent, approval, license, permit or authorization of, or make any
declaration, filing or registration with, any third party or any public body or
authority in connection with (a) the execution and delivery by the Company of
this Agreement, or (b) the consummation of the Merger and the other transactions
contemplated hereby or (c) the future conduct by the Surviving Corporation of
the business of the Company (the "Company Business") other than those that may
be required solely by reason of Acquiror's or Parent's participation in the
transactions contemplated hereby.
Section 3.06. Financial and Operating Statements.
Attached hereto as Appendix I is a true and complete copy of the
consolidated financial statements of the Company and the Company Subsidiaries
for the year ended December 31, 2002 (collectively, the "2002 Company Financial
Statements"). The 2002 Company Financial Statements include a consolidated
balance sheet of the Company and the Company Subsidiaries as of December 31,
2002 (such balance sheet being termed herein the "2002 Company Balance Sheet").
The 2002 Company Financial Statements are accurate and correct in all material
respects and fairly present the financial position and the results of operations
of the Company and the Company Subsidiaries for the periods therein identified
in conformity with generally accepted accounting principles ("GAAP")
consistently applied.
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Section 3.07. No Undisclosed or Contingent Liabilities.
Except for (a) liabilities or obligations incurred by the Company and the
Company Subsidiaries in the ordinary course of business and not required by GAAP
applied on a consistent basis to be set forth on the 2002 Company Balance Sheet
(all of which items are described in Section 3.07 of the Disclosure Schedule),
and (b) liabilities and obligations incurred by the Company and the Company
Subsidiaries in the ordinary course of business since the date of the 2002
Company Balance Sheet (none of which could reasonably be expected to cause a
Material Adverse Effect on the Company or the Company Subsidiaries), there is no
basis for the assertion against the Company or the Company Subsidiaries of any
liability or obligation of any nature whatsoever (whether absolute, accrued,
contingent or otherwise) or the transactions contemplated hereby which is not
fully reflected or reserved against on the 2002 Company Balance Sheet.
Section 3.08. Assets of the Company and the Company Subsidiaries.
The assets of the Company and the Company Subsidiaries (collectively, the
"Company Assets") include the assets referenced below:
(a) Intellectual Property. All patents, trade or service names and marks,
assumed names, slogans, copyrights, formulas, processes, techniques, know-how
and similar property and all permits, licenses, registrations and applications
relating thereto in which the Company or the Company Subsidiaries has an
interest (collectively, "Company Intellectual Property"), including without
limitation those listed on Section 3.08(a) of the Disclosure Schedule;
(b) Receivables. All accounts receivable, bills and notes receivable,
commercial paper and acceptances or any other evidences of indebtedness to the
Company or the Company Subsidiaries, including without limitation those listed
on Section 3.11 of the Disclosure Schedule;
(c) Company Equipment. All furniture, fixtures and equipment of the Company
and the Company Subsidiaries (the "Company Equipment"), including without
limitation those items listed on Section 3.08(c) of the Disclosure Schedule,
whether or not such items are in any way attached or affixed to real property;
(d) Vehicles. All automobiles, trucks, trailers and other vehicles owned or
leased by the Company and its subsidiaries, including without limitation those
listed on Section 3.08(d) of the Disclosure Schedule;
(e) Contracts. All leases, contracts, agreements, arrangements, commitments
and understandings (whether written or oral), including without limitation all
license agreements, agreements with suppliers, leases, security deposits and
options under leases, acquisition agreements and confidentiality agreements, to
which the Company or any Company Subsidiary is a party, including without
limitation all material contracts listed or referred to on Section 3.10(a) of
the Disclosure Schedule;
(f) Insurance. All insurance policies covering the Company and the Company
Subsidiaries, their respective properties or equipment, and their respective
directors, officers, employees and agents (and all rights and claims thereunder
for damage to, or otherwise relating to, the Company Assets), including without
limitation those listed on Section 3.08(f) of the Disclosure Schedule; and
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(g) Permits. All licenses, permits and authorizations issued by any
federal, state, local or foreign governmental authority (the "Permits") relating
to the Company and the Company Subsidiaries, the Company Assets or the conduct
of the Company Business, including without limitation those listed on Section
3.08(g) of the Disclosure Schedule.
Section 3.09. Absence of Certain Changes.
Since December 31, 2002, neither the Company nor the Company Subsidiaries
has:
(a) experienced any adverse change in its financial condition, assets,
results of operation, or prospects or material decrease in the book value of the
Company Assets from the amounts reflected on the 2002 Company Balance Sheet,
other than decreases resulting from depreciation in accordance with accounting
practices in effect at all times since January 1, 2003; or
(b) incurred any liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise and whether due or to become due,
except (i) liabilities or obligations for rent under the Leases (as defined
herein) and (ii) liabilities or obligations for other items incurred in the
ordinary course of business of the Company and the Company Subsidiaries and
consistent with past practice, none of which other items exceeds $25,000 in the
aggregate, considering liabilities or obligations arising from one transaction
or a series of similar transactions, and all periodic installments or payments
under any lease (other than the Leases) or other agreement providing for
periodic installments or payments, as a single obligation or liability; or
(c) increased (other than increases resulting from the calculation of
reserves in the ordinary course of business and in a manner consistent with past
practice), or experienced any change in any assumptions underlying or methods of
calculating, any bad debt, contingency or other reserves; or
(d) paid, discharged or satisfied any claims, encumbrances, liabilities or
obligations (whether absolute, accrued, contingent or otherwise and whether due
or to become due) other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities and
obligations reflected or reserved against in the 2002 Company Balance Sheet or
incurred in the ordinary course of business and consistent with past practice
since the date thereof; or
(e) permitted, allowed or suffered any of the Company Assets, including,
without limitation, real property, personal property or any leasehold interest,
to be subjected to any mortgage, pledge, lien, encumbrance, restriction or
charge of any kind, except for liens for Taxes (as defined herein) not yet
owing; or
(f) determined as collectible any notes or accounts receivable or any
portion thereof which were previously considered uncollectible, or written off
as uncollectible any notes or accounts receivable or any portion thereof, except
for write-downs in the ordinary course of business, consistent with past
practice in accordance with GAAP consistently applied; or
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(g) canceled any material amount of indebtedness or waived any material
claims or rights; or
(h) sold, transferred, licensed or otherwise disposed of any Company Assets
except in the ordinary course of business and consistent with past practice; or
(i) disposed of or permitted to lapse any right to the use of any patent,
trademark, assumed name, service ▇▇▇▇, trade name, copyright, license or
application therefor or disposed of or disclosed to any corporation,
association, partnership, organization, business, individual, government or
political subdivision thereof or government agency (each, a "Person") other than
representatives of Acquiror and Parent any trade secret, formula, technique,
process or know-how not theretofore a matter of public knowledge; or
(j) granted any increase in the salary, compensation, rate of compensation,
commissions or bonuses payable to or to become payable by the Company or the
Company Subsidiaries to any officer or director of the Company or the Company
Subsidiaries (including, without limitation, any increase or change pursuant to
any bonus, pension, profit-sharing, retirement or other plan or commitment); or
(k) granted any increase in the salary, compensation, rate of compensation,
commissions or bonuses payable to or to become payable by the Company or the
Company Subsidiaries to any employee of the Company or the Company Subsidiaries
(including, without limitation, any increase or change pursuant to any bonus,
pension, profit-sharing, retirement or other plan or commitment); or
(l) paid, loaned or advanced any amount to any officer, director, employee
or stockholder of the Company or the Company Subsidiaries except for amounts
advanced to employees of the Company or the Company Subsidiaries in the ordinary
course of business consistent with past practice (none of which advances were
loans for personal purposes), or sold, transferred, licensed or leased any
Company Assets to, or entered into any agreement (other than this Agreement) or
arrangement with, any officer, director, employee or stockholder of the Company
or the Company Subsidiaries; or
(m) entered into any collective bargaining or labor agreement, or
experienced any labor dispute or difficulty; or
(n) made any single capital expenditure or commitment in excess of $15,000
for additions to property, plant, equipment or for any other purpose or made
aggregate capital expenditures or commitments in excess of $25,000 for additions
to property, plant, equipment or for any other purpose; or
(o) made any change in any method of accounting or accounting practice or
policy; or
(p) suffered any casualty loss in excess of $10,000 (whether or not insured
against) or suffered aggregate casualty losses in excess of $15,000 (whether or
not insured against); or
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(q) issued any additional shares of capital stock of the Company or the
Company Subsidiaries or any option, warrant, right or other security exercisable
for, convertible into or exchangeable for shares of capital stock of the Company
or the Company Subsidiaries; or
(r) paid its suppliers or other vendors in a manner and time not consistent
with past practice; or
(s) paid dividends on or made other distributions or payments in respect of
the capital stock of the Company or the Company Subsidiaries, except as
disclosed in Section 3.09(s) of the Disclosure Schedule; or
(t) taken any other action not either in the ordinary course of business
and consistent with past practice or provided for in this Agreement; or
(u) entered into or agreed to any transaction not in the ordinary course of
business; or
(v) agreed, whether in writing or otherwise, to take any of the actions set
forth in this Section 3.09.
Section 3.10. Contracts and Commitments.
(a) All of the agreements, contracts and commitments to which the Company
or any Company Subsidiary is a party or is bound, whether individually or when
aggregated with all related agreements, contracts or commitments, under which
the Company or any Company Subsidiary is obligated to pay more than $25,000 or
that are otherwise material to the business, operations, condition (financial or
otherwise), liabilities, assets, earnings or working capital of the Company or
the Company Subsidiaries are described in Section 3.10(a) of the Disclosure
Schedule.
(b) Neither the Company nor any Company Subsidiary is a party to or bound
by any agreements, contracts or commitments which individually or when
aggregated with all related agreements, contracts or commitments, provide for
the grant of any preferential rights to purchase or lease any of the Company
Assets.
(c) The Company has delivered or made available to Acquiror or Parent true
and complete copies of each written agreement, contract or commitment listed in
Section 3.10(a) of the Disclosure Schedule, as well as true and accurate
summaries of any oral agreement listed thereon.
(d) The enforceability of the agreements, contracts and commitments
referred to in this Section 3.10 will not be affected in any respect by the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(e) No currently outstanding purchase contracts or commitments of the
Company or the Company Subsidiaries are in excess of the normal, ordinary and
usual requirements of the Company or the Company Subsidiaries, or to the best
knowledge of the Company, were entered into at prices in excess of those
available in the industry in arm's length transactions on the respective dates
thereof.
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(f) Neither the Company nor any Company Subsidiary is a party to or bound
by any outstanding agreements, arrangements or contracts with any of its
officers, directors, stockholders, employees, agents, consultants, advisors,
salesmen or sales representatives (or any affiliates of such Persons) that (i)
are not cancelable by it on notice of not longer than 30 days and without the
imposition of any liability, penalty or premium, (ii) require non-cancelable
obligations for payment by the Company or such Company Subsidiary of over
$15,000, or (iii) provide for any bonus or other payment based on the sale of
the Company or any portion thereof.
(g) Neither the Company nor any Company Subsidiary is a party to or bound
by any employment agreement, consulting agreement or any other agreements that
contains any provision for severance or termination pay liabilities or
obligations.
(h) Neither the Company nor any Company Subsidiary is a party to or bound
by:
(i) any mortgage, security agreement, indenture, note, installment
obligation or other instrument, agreement or arrangement for or relating to
any borrowing of money by the Company or such Company Subsidiary, except as
disclosed in Section 3.10(a) of the Disclosure Schedule;
(ii) any guaranty, direct or indirect, by the Company or any Company
Subsidiary of any obligation for borrowings or otherwise, excluding
endorsements made for collection in the ordinary course of business, except
as disclosed in Section 3.10(a) of the Disclosure Schedule;
(iii) any obligation to make payments, contingent or otherwise, of
over $5,000 arising out of any prior acquisition of the business, assets or
stock of other persons;
(iv) any collective bargaining agreement with any labor union;
(v) any lease or similar arrangement for the use by the Company or any
Company Subsidiary of personal property requiring payments by the Company
or any Company Subsidiary, on an annual basis, of over $10,000;
(vi) any agreement containing noncompetition or other limitations
restricting the conduct of the business of the Company or any Company
Subsidiary; and
(vii) any partnership, joint venture or similar agreement.
(i) Neither the Company nor, to the best knowledge of the Company, any of
its officers, directors, stockholders or affiliates is a party to or bound by
any agreement (other than this Agreement) or arrangement for the sale of any of
the assets or capital stock of the Company or the Company Subsidiaries or for
the grant of any preferential rights to purchase any of the assets or capital
stock of the Company or the Company Subsidiaries.
(j) The Company is not bound by any agreement to redeem the Common Shares
or Preferred Shares held by any stockholder, which agreement will not be
effectively and properly terminated by the consummation of the Merger.
11
(k) With respect to each contract and agreement listed in Section 3.10(a)
of the Disclosure Schedule, except as set forth therein, (i) each of such
contracts and agreements is valid, binding and in full force and effect and is
enforceable by the Company in accordance with its terms, subject to bankruptcy,
insolvency, reorganization and other Laws and judicial decisions of general
applicability relating to or affecting creditors' rights and to general
principles of equity; (ii) there have been no cancellations or, to the best
knowledge of the Company, threatened cancellations thereof nor are there any
outstanding disputes thereunder; (iii) neither the Company, nor, to the best
knowledge of the Company, any other party is in breach of any material provision
thereof; and (iv) there does not exist any default under, or any event or
condition which with the giving of notice or passage of time or both would
become a breach or default under, the terms of any such contract or agreement on
the part of the Company or, to the best knowledge of the Company, on the part of
any other party thereto.
Section 3.11. Accounts Receivable.
(a) Set forth in Section 3.11 of the Disclosure Schedule is a true and
complete listing of the aging status of each of the accounts receivable of the
Company and the Company Subsidiaries as of the most recent practicable date.
(b) All accounts receivable of the Company and the Company Subsidiaries,
whether reflected in the 2002 Company Balance Sheet or accrued since the date
thereof, represent revenue generated in the ordinary course of business and are
collectible net of any reserves shown on the 2002 Company Balance Sheet or
reserves for accounts receivable accrued since the date thereof, which reserves
are adequate.
(c) Subject to the reserves established on the 2002 Company Balance Sheet
or accrued since the date thereof, each of the accounts receivable either has
been collected in full or will be collected in full, without any set-off, in a
period of time consistent with the historical collection results of the Company
and the Company Subsidiaries, but in no event in excess of 150 days after the
day on which each such account receivable became due and payable.
(d) A list of any promissory notes held by the Company or the Company
Subsidiaries that have been accepted by the Company or the Company Subsidiaries
as payment of accounts receivable of the Company or the Company Subsidiaries is
set forth in Section 3.11 of the Disclosure Schedule.
Section 3.12. Litigation.
There are no open and unresolved claims, actions, suits, proceedings,
investigations or inquiries that have been made or served against the Company or
the Company Subsidiaries or, to the best knowledge of the Company, that are
pending (without having been so served) or threatened either (1) against the
Company or the Company Subsidiaries or (2) that would adversely affect the
transactions contemplated hereby at law or in equity or before or by any
federal, state, local, foreign or other governmental department, commission,
board, agency, or authority; and no other such claim, action, suit, proceeding,
inquiry or investigation could be brought against the Company or the Company
12
Subsidiaries for which valid defenses are not available. No claim, action, suit,
proceeding, inquiry or investigation set forth in Section 3.12 of the Disclosure
Schedule would, if adversely decided, have a Material Adverse Effect on the
Company or the Company Subsidiaries or the transactions contemplated hereby.
Neither the Company nor any Company Subsidiary is a party to or a recipient of
service of process regarding (and has not otherwise been named and noticed in)
any judgment, order or decree entered in any lawsuit or proceeding which has had
or may have a Material Adverse Effect on the Company or such Company Subsidiary
or on their respective ability to acquire any property or conduct their
respective business in any way.
Section 3.13. Compliance with Law.
(a) Each of the Company and the Company Subsidiaries is in material
compliance with all federal, state, foreign and local laws (whether statutory or
otherwise), ordinances, rules, regulations, orders, judgments, decrees, writs
and injunctions of any governmental authority (collectively, "Laws") applicable
to the Company and the Company Subsidiaries.
(b) Neither the Company nor any Company Subsidiary has received written
notification from any governmental or regulatory authority within the past five
years of any asserted present or past failure to so comply, which failure has
not been appropriately and completely resolved.
(c) Neither the Company nor any Company Subsidiary has been notified by any
governmental or regulatory authority that the Company or such Company Subsidiary
is in violation or alleged violation of any Law applicable to the Company or
such Company Subsidiary which violation has not been appropriately and
completely resolved, or that any governmental or regulatory authority
contemplates any investigation or proceeding with respect to any such violation
or alleged violation which has not been appropriately and completely resolved.
Section 3.14. Permits.
Each of the Company and the Company Subsidiaries has all Permits necessary
for the ownership or leasing of its properties and the conduct of the Company
Business as now being conducted. All such Permits are in full force and effect.
No violations exist or, to the best knowledge of the Company, have been reported
in respect of such Permits. No notice of any proceeding has been served or
otherwise given to the Company or the Company Subsidiaries or, to the best
knowledge of the Company, is pending (without service or other notice) or
threatened seeking the revocation or limitation of any of such Permits.
Section 3.15. Tax Matters.
(a) For purposes of this Agreement, (i) "Tax Return" means any report,
statement, form, return or other document or information required to be supplied
to a taxing authority in connection with Taxes and (ii) "Tax" or "Taxes" means
any United States or foreign federal, state, or local tax, including without
limitation income tax, ad valorem tax, excise tax, sales tax, use tax, franchise
tax, gross receipts tax, withholding tax, social security tax, occupation tax,
service tax, license tax, payroll tax, transfer and recording tax, severance
tax, customs tax, import tax, export tax, employment tax, or any similar or
13
other tax, assessment, duty, fee, levy or other governmental charge, together
with and including, without limitation, any and all interest, fines, penalties,
assessments and additions to tax resulting from, relating to, or incurred in
connection with any such tax or any contest or dispute thereof.
(b) Except as set forth in Section 3.15 of the Disclosure Schedule, all Tax
Returns required to be filed on or before the Closing Date by the Company have
been or will be filed within the time prescribed by Law (including extensions of
time approved by the appropriate taxing authority). The Tax Returns so filed are
complete, correct and accurate representations of the Tax liabilities of the
Company and such Tax Returns accurately set forth or will accurately set forth
all items to the extent required to be reflected or included in such returns.
(c) Except as set forth in Section 3.15 of the Disclosure Schedule, the
Company has timely paid or has made adequate provision in the 2002 Company
Balance Sheet for the payment of all Taxes due on such Tax Returns that have
been filed or will be filed for periods ending on or before the date of the 2002
Company Balance Sheet.
(d) There is no action, suit, investigation, proceeding, audit or claim
that has been served against or otherwise properly noticed to the Company or the
Company Subsidiaries, or, to the best knowledge of the Company, pending or
proposed against or with respect to the Company or the Company Subsidiaries in
respect of any Tax. There are no liens for Taxes upon any of the Company Assets.
(e) The Company and each Company Subsidiary has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor, or other Person.
(f) Neither the Company nor any Company Subsidiary has waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(g) Neither the Company nor any Company Subsidiary has in effect a consent
under Section 341(f) of the Code concerning collapsible corporations.
(h) Neither the Company nor any Company Subsidiary has made any payment,
and nor is obligated to make any payment, nor is a party to any agreement that
could obligate it to make any payment that will not be deductible under section
280G of the Code or will be subject to Tax under section 4999 of the Code.
(i) There has never been a Tax sharing or allocation agreement in place
between the Company and any other Person other than those, if any, with respect
to which the applicable statute of limitations has run, and those described in
Section 3.15 of the Disclosure Schedule.
(j) Neither the Company nor any Company Subsidiary is liable for a Tax
incurred by any other corporation that was a member of a consolidated group of
corporations (within the meaning of Treasury regulation section 1.1502) that
included the Company or the Company Subsidiaries.
14
Section 3.16. Labor Matters.
(a) The employees of the Company and the Company Subsidiaries are listed in
Section 3.16 of the Disclosure Schedule. Except as set forth in Section 3.16 of
the Disclosure Schedule, all of the employees of the Company and the Company
Subsidiaries are "at will" employees. There are no agreements with labor unions
or associations representing employees of the Company or the Company
Subsidiaries. No work stoppage against the Company or the Company Subsidiaries
is pending or, to the Company's Knowledge, threatened. Neither the Company nor
the Company Subsidiaries is involved in or, to the Company's Knowledge, is
threatened with any labor dispute, arbitration, lawsuit, or administrative
proceeding relating to labor matters involving the employees of the Company or
the Company Subsidiaries (excluding routine workers' compensation claims).
Section 3.17. Pension and Other Employee Plans and Agreements.
(a) Section 3.17 of the Disclosure Schedule sets forth, as of the date of
this Agreement, all of the pension, profit sharing, stock option, stock
purchase, stock bonus, employee stock ownership, incentive, bonus, life, health,
disability or accident plans, deferred compensation plans, and other employee
compensation or benefit plans, agreements, practices, policies, customs,
contracts, arrangements or commitments, including, without limitation, changes
in control or severance agreements, holiday, vacation or other similar plans,
programs or arrangements, employee benefit plans (within the meaning of section
3(3) of ERISA), and labor union agreements under or with respect to which the
Company or any Person ("ERISA Affiliate") who would be treated as being a
"single employer" with the Company under section 414 of the Internal Revenue
Code of 1986, as amended (the "Code"), has any liability or obligation, whether
current, contingent, secondary or otherwise (collectively, the "Plans" and
individually, a "Plan"), and the Company has furnished to Acquiror and Parent
complete copies of all of the foregoing as amended and in effect on the date
hereof, including, where applicable, any trust agreements, insurance contracts
or other funding mediums related to any Plan and Summary Plan Descriptions. The
Company has heretofore delivered to Acquiror and Parent the most recent
liability valuation report with respect to each Plan for which a report or
estimate has been prepared, the most recent assets valuation report provided to
the Company with respect to each Plan for which such report must be filed, and
the most recent favorable IRS determination letter received with respect to each
Plan that is intended to be qualified under section 401(a) of the Code or trust
intended to be exempt under section 501(a) or section 501(c)(9) of the Code.
Section 3.17 of the Disclosure Schedule also sets forth any other plans or
arrangements which would be required to be listed pursuant to the preceding
provisions of this section but for the fact that they were terminated within
three years of the date of this Agreement (collectively, "Terminated Plan").
(b) With respect to each Plan and each Terminated Plan, the Company and its
ERISA Affiliates have complied in all material respects with, and each Plan and
each Terminated Plan conforms in all material respects to and has from its
inception been operated in all material respects with, all applicable laws and
regulations, including but not limited to ERISA and the Code, and each Plan and
each Terminated Plan has been administered in all material respects in
accordance with its terms. Each Plan and each Terminated Plan intended to be
qualified under section 401(a) of the Code or trust intended to be exempt under
section 501(a) or section 501(c)(9) of the Code is, or with respect to a
15
Terminated Plan was at the time it terminated, and for each prior year for which
any applicable statute of limitations has not expired, was, qualified or exempt,
as the case may be, and each such Plan and Terminated Plan is (or was) a single
plan, as defined in section 414(1) of the Code and the regulations thereunder,
in which the Company is the sole employer. Neither the Company nor any ERISA
Affiliate has ever had an obligation or liability, to or with respect to, a
multiemployer plan, as defined in section 4001(a)(3) of ERISA. Neither the
Company nor any ERISA Affiliate has any commitment and has not taken any action
to adopt or establish any additional Plans or to increase the benefits under any
Plan; no event or condition has occurred or exists with respect to any Plan or
Terminated Plan, whether or not terminated prior to the date of this Agreement
and whether or not maintained or contributed to by the Company or any ERISA
Affiliate, which individually or collectively could result in a material
liability to the Company or any ERISA Affiliate; all contributions required to
any Plan and each Terminated Plan and all premiums for insurance coverage for
each fiscal year of each Plan and each Terminated Plan ended before the date of
this Agreement and for any portion of a fiscal year ending on the Closing Date
have been timely paid and payments to be made but not yet due properly accrued
and recorded in the 2002 Company Financial Statements through their relevant
dates; no Plan or Terminated Plan has incurred any "accumulated funding
deficiency" (as defined in section 302 of ERISA and section 412 of the Code),
whether or not waived; there is no pending or, to the best knowledge of the
Company, threatened or anticipated litigation, arbitration, proceeding, claim
(other than an undisputed claim for payment of benefits in accordance with the
terms thereof or a pending or final qualified domestic relations order), demand,
grievance, or allegation of unfair labor practice (or any basis therefor)
involving any of the Plans or Terminated Plans or any investigation, proceeding,
administrative review or other administrative agency process which could result
in imposition on the Company or any ERISA Affiliate of any penalty, assessment
or liability in connection with any of the Plans or Terminated Plans,
individually or collectively; no Plan or Terminated Plan has engaged or is about
to engage in a prohibited transaction as defined in section 406 of ERISA or
section 4975 of the Code; and no "reportable event," as defined in section 4043
of ERISA, has occurred or is about to incur that could result in a material
liability to the Company or any ERISA Affiliate.
(c) No Plan provides (or has any commitment to provide) health benefits
with respect to any current or former employees or independent contractors (or
beneficiary thereof) of the Company or any ERISA Affiliate beyond their
retirement or other termination of service (other than coverage mandated by
COBRA). Each Plan can be unilaterally terminated at any time by the Company
without material liability.
Section 3.18. Title to Assets.
The Company and each Company Subsidiary has good and valid title to the
Company Assets owned by it, including without limitation those assets set forth
on the 2002 Company Balance Sheet. At the Closing the Company Assets will be
free and clear of all mortgages, liens, claims, charges, pledges, security
interests or encumbrances of any nature whatsoever.
Section 3.19. Bank Accounts.
Section 3.19 of the Disclosure Schedule sets forth the names and locations
of all banks, trust companies, savings and loan associations, stock brokerages
and other financial institutions at which the Company and the Company
Subsidiaries maintain accounts of any nature and the name of all persons
authorized to draw thereon or make withdrawals therefrom.
16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND PARENT
Acquiror and Parent hereby jointly represent and warrant to the Company as
follows, except as otherwise set forth in the relevant section of the Disclosure
Schedule:
Section 4.01. Organization and Qualification - Acquiror.
Acquiror is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. Acquiror owns no equity interest
in any corporation, partnership, joint venture, limited liability company or
other entity.
Section 4.02. Organization and Qualification - Parent.
Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. Except for its 100% ownership
interest AutoCorp Financial Services, Inc. and ACE Motor Company (collectively,
the "Parent Subsidiaries") and the Acquiror, the Parent owns no equity interest
in any corporation, partnership, joint venture, limited liability company or
other entity. Each Parent Subsidiary is duly organized, validly existing and in
good standing under the laws of the State of Texas.
Section 4.03. Power and Capacity; Charter Documents of Acquiror.
(a) Acquiror has all requisite power and authority (corporate and
otherwise) to enter into, execute and deliver this Agreement and perform its
obligations hereunder. This Agreement has been duly executed and delivered by
Acquiror and is a valid and binding obligation of Acquiror, enforceable in
accordance with its terms.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by Acquiror will not result
in a violation or breach of or constitute a default under any term or provision
of the Articles of Incorporation or Bylaws of Acquiror. Acquiror has delivered
to the Company true and complete copies of the Articles of Incorporation and the
Bylaws of Acquiror, as in effect on the date hereof.
Section 4.04. Power and Capacity; Charter Documents of Parent.
(a) Parent has all requisite power and authority (corporate and otherwise)
to enter into, execute and deliver this Agreement and perform its obligations
hereunder. This Agreement has been duly executed and delivered by Parent and is
a valid and binding obligation of Parent, enforceable in accordance with its
terms.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by Parent will not result
in a violation or breach of or constitute a default under any term or provision
of the Articles of Incorporation or Bylaws of Parent. Parent has delivered to
the Company true and complete copies of the Articles of Incorporation and the
Bylaws of Parent, as in effect on the date hereof.
17
Section 4.05. Capitalization and Ownership of the Parent.
Section 4.05 of the Disclosure Schedule lists, for the Parent and the
Parent Subsidiaries, their respective authorized capitalization, the number of
shares of their respective capital stock (or other equity interests) that are
issued and outstanding, and the number of shares of their respective capital
stock (or other equity interests) that are owned of record by each stockholder.
All of the outstanding shares of the capital stock of the Parent and the Parent
Subsidiaries are validly issued, fully paid and non-assessable and were not
issued in violation of any preemptive rights or any applicable Law. All such
shares are owned free and clear of any lien, claim or encumbrance of any type
whatsoever imposed by the Parent or the Parent Subsidiaries. Except as set forth
in Section 4.05 of the Disclosure Schedule, there are no outstanding options,
warrants or other rights to acquire any share of capital stock of the Parent or
the Parent Subsidiaries, there are no outstanding securities authorized, granted
or issued by the Parent or the Parent Subsidiaries that are convertible into or
exchangeable for shares of their respective capital stock and there are no
phantom stock rights, stock appreciation rights or similar rights regarding the
Parent and the Company Subsidiaries. There are no rights of any Person to have
the Parent repurchase any capital stock of the Parent or the Parent
Subsidiaries.
Section 4.06. No Conflicts.
The execution, delivery and performance of this Agreement by Acquiror and
Parent and the consummation of the transactions contemplated hereby will not:
(a) result in the creation or imposition of any security interest, lien,
charge or other encumbrance against Acquiror' assets, the Parent's assets or any
assets of the Parent Subsidiaries, with or without the giving of notice and/or
the passage of time, or
(b) violate, conflict with, affect acceleration of, or result in
termination, cancellation or modification of, or constitute a default under (i)
any contract, agreement or other instrument to which Acquiror, Parent or any
Parent Subsidiary is a party or by which Acquiror, Parent, any Parent Subsidiary
or their respective assets is bound or (ii) any note, bond, mortgage, indenture,
deed of trust, license, lease, contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which Acquiror, Parent or
any Parent Subsidiary is a party or by which Acquiror, Parent or any Parent
Subsidiary may be bound or affected or to which any of their respective assets
may be subject, or
(c) violate any statute or law or any judgment, decree, order, writ,
injunction, regulation or rule of any court or any local, state or federal
governmental or regulatory authority, which violation, conflict, acceleration,
requirement, termination, modification or default described in (a), (b), or (c)
above could result in a Material Adverse Effect on Acquiror, Parent or any
Parent Subsidiary or the transactions contemplated by this Agreement.
18
Section 4.07. Consents and Approvals.
None of Acquiror, Parent or any Parent Subsidiary is required to obtain,
transfer or cause to be transferred any consent, approval, license, permit or
authorization of, or make any declaration, filing or registration with, any
third party or any public body or authority in connection with (a) the execution
and delivery by Acquiror or Parent of this Agreement, or (b) the consummation of
the Merger and the other transactions contemplated hereby or (c) the future
conduct by the Surviving Corporation of the Company Business, other than those
that may be required solely by reason of the Company's (as opposed to any other
third party's) participation in the transactions contemplated hereby.
Section 4.08. Financial and Operating Statements.
Attached hereto as Appendix II is a true and complete copy of the
consolidated financial statements of the Parent and the Parent Subsidiaries for
the fiscal quarter ended December 31, 2002 (collectively, the "2002 Parent
Financial Statements"). The 2002 Parent Financial Statements include a balance
sheet of the Parent and the Parent Subsidiaries as of December 31, 2002 (such
balance sheet being termed herein the "2002 Parent Balance Sheet"). The 2002
Parent Financial Statements are accurate and correct in all material respects
and fairly present the financial position and the results of operations of the
Parent for the periods therein identified in conformity with generally accepted
accounting principles ("GAAP") consistently applied.
Section 4.09. No Undisclosed or Contingent Liabilities.
Except for (a) liabilities or obligations incurred by the Parent and the
Parent Subsidiaries in the ordinary course of business and not required by GAAP
applied on a consistent basis to be set forth on the 2002 Parent Balance Sheet
(all of which items are described in Section 4.09 of the Disclosure Schedule),
and (b) liabilities and obligations incurred by the Parent and the Parent
Subsidiaries in the ordinary course of business since the date of the 2002
Parent Balance Sheet (none of which could reasonably be expected to cause a
Material Adverse Effect on the Parent or the Parent Subsidiaries), there is no
basis for the assertion against the Parent or the Parent Subsidiaries of any
liability or obligation of any nature whatsoever (whether absolute, accrued,
contingent or otherwise) or the transactions contemplated hereby which is not
fully reflected or reserved against on the 2002 Parent Balance Sheet.
Section 4.10. Assets of the Parent.
The assets of the Parent and the Parent Subsidiaries (collectively, the
"Parent Assets") include the assets referenced below:
(a) Intellectual Property. All patents, trade or service names and marks,
assumed names, slogans, copyrights, formulas, processes, techniques, know-how
and similar property and all permits, licenses, registrations and applications
relating thereto in which the Parent or the Parent Subsidiaries has an interest
(collectively, "Parent Intellectual Property"), including without limitation
those listed on Section 4.10(a) of the Disclosure Schedule;
(b) Receivables. All accounts receivable, bills and notes receivable,
commercial paper and acceptances or any other evidences of indebtedness to the
Parent or the Parent Subsidiaries, including without limitation those listed on
Section 4.13 of the Disclosure Schedule;
19
(c) Parent Equipment. All furniture, fixtures and equipment of the Parent
and its Subsidiaries (the "Parent Equipment"), including without limitation
those items listed on Section 4.10(c) of the Disclosure Schedule, whether or not
such items are in any way attached or affixed to real property;
(d) Vehicles. All automobiles, trucks, trailers and other vehicles owned or
leased by the Parent and the Parent Subsidiaries, including without limitation
those listed on Section 4.10(d) of the Disclosure Schedule;
(e) Contracts. All leases, contracts, agreements, arrangements, commitments
and understandings (whether written or oral), including without limitation all
license agreements, agreements with suppliers, leases, security deposits and
options under leases, acquisition agreements and confidentiality agreements, to
which the Parent or any Parent Subsidiary is a party, including without
limitation all material contracts listed or referred to on Section 4.12(a) of
the Disclosure Schedule;
(f) Insurance. All insurance policies covering the Parent and its
Subsidiaries, their respective properties or equipment, and their respective
directors, officers, employees and agents (and all rights and claims thereunder
for damage to, or otherwise relating to, the Parent Assets), including without
limitation those listed on Section 4.10(f) of the Disclosure Schedule; and
(g) Permits. All licenses, permits and authorizations issued by any
federal, state, local or foreign governmental authority (the "Permits") relating
to the Parent and the Parent Subsidiaries, the Parent Assets or the conduct of
the business of the Parent and the Parent Subsidiaries, including without
limitation those listed on Section 4.10(g) of the Disclosure Schedule.
Section 4.11. Absence of Certain Changes.
Since December 31, 2002, neither the Parent nor the Parent Subsidiaries
has:
(a) experienced any adverse change in its financial condition, assets,
results of operation, or prospects or material decrease in the book value of the
Parent Assets from the amounts reflected on the 2002 Parent Balance Sheet, other
than decreases resulting from depreciation in accordance with accounting
practices in effect at all times since January 1, 2003; or
(b) incurred any liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise and whether due or to become due,
except (i) liabilities or obligations for rent under the Leases (as defined
herein) and (ii) liabilities or obligations for other items incurred in the
ordinary course of business of the Parent and the Parent Subsidiaries and
consistent with past practice, none of which other items exceeds $25,000 in the
aggregate, considering liabilities or obligations arising from one transaction
or a series of similar transactions, and all periodic installments or payments
under any lease (other than the Leases) or other agreement providing for
periodic installments or payments, as a single obligation or liability; or
(c) increased (other than increases resulting from the calculation of
reserves in the ordinary course of business and in a manner consistent with past
practice), or experienced any change in any assumptions underlying or methods of
calculating, any bad debt, contingency or other reserves; or
20
(d) paid, discharged or satisfied any claims, encumbrances, liabilities or
obligations (whether absolute, accrued, contingent or otherwise and whether due
or to become due) other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities and
obligations reflected or reserved against in the 2002 Parent Balance Sheet or
incurred in the ordinary course of business and consistent with past practice
since the date thereof; or
(e) permitted, allowed or suffered any of the Parent Assets, including,
without limitation, real property, personal property or any leasehold interest,
to be subjected to any mortgage, pledge, lien, encumbrance, restriction or
charge of any kind, except for liens for Taxes (as defined herein) not yet
owing; or
(f) determined as collectible any notes or accounts receivable or any
portion thereof which were previously considered uncollectible, or written off
as uncollectible any notes or accounts receivable or any portion thereof, except
for write-downs in the ordinary course of business, consistent with past
practice in accordance with GAAP consistently applied; or
(g) canceled any material amount of indebtedness or waived any material
claims or rights; or
(h) sold, transferred, licensed or otherwise disposed of any Parent Assets
except in the ordinary course of business and consistent with past practice; or
(i) disposed of or permitted to lapse any right to the use of any patent,
trademark, assumed name, service ▇▇▇▇, trade name, copyright, license or
application therefor or disposed of or disclosed to any corporation,
association, partnership, organization, business, individual, government or
political subdivision thereof or government agency (each, a "Person") other than
representatives of the Company any trade secret, formula, technique, process or
know-how not theretofore a matter of public knowledge; or
(j) granted any increase in the salary, compensation, rate of compensation,
commissions or bonuses payable to or to become payable by the Parent or the
Parent Subsidiaries to any officer or director of the Parent or the Parent
Subsidiaries (including, without limitation, any increase or change pursuant to
any bonus, pension, profit-sharing, retirement or other plan or commitment); or
(k) granted any increase in the salary, compensation, rate of compensation,
commissions or bonuses payable to or to become payable by the Parent or the
Parent Subsidiaries to any employee of the Parent or the Parent Subsidiaries
(including, without limitation, any increase or change pursuant to any bonus,
pension, profit-sharing, retirement or other plan or commitment); or
(l) paid, loaned or advanced any amount to any officer, director, employee
or stockholder of the Parent or the Parent Subsidiaries except for amounts
advanced to employees of the Parent or the Parent Subsidiaries in the ordinary
course of business consistent with past practice (none of which advances were
loans for personal purposes), or sold, transferred, licensed or leased any
Parent Assets to, or entered into any agreement (other than this Agreement) or
arrangement with, any officer, director, employee or stockholder of the Parent
or the Parent Subsidiaries; or
21
(m) entered into any collective bargaining or labor agreement, or
experienced any labor dispute or difficulty; or
(n) made any single capital expenditure or commitment in excess of $15,000
for additions to property, plant, equipment or for any other purpose or made
aggregate capital expenditures or commitments in excess of $25,000 for additions
to property, plant, equipment or for any other purpose; or
(o) made any change in any method of accounting or accounting practice or
policy; or
(p) suffered any casualty loss in excess of $10,000 (whether or not insured
against) or suffered aggregate casualty losses in excess of $15,000 (whether or
not insured against); or
(q) issued any additional shares of capital stock of the Parent or the
Parent Subsidiaries or any option, warrant, right or other security exercisable
for, convertible into or exchangeable for shares of capital stock of the Parent
or the Parent Subsidiaries; or
(r) paid its suppliers or other vendors in a manner and time not consistent
with past practice; or
(s) paid dividends on or made other distributions or payments in respect of
the capital stock of the Parent or the Parent Subsidiaries; or
(t) taken any other action not either in the ordinary course of business
and consistent with past practice or provided for in this Agreement; or
(u) entered into or agreed to any transaction not in the ordinary course of
business; or
(v) agreed, whether in writing or otherwise, to take any of the actions set
forth in this Section 4.11.
Section 4.12. Contracts and Commitments.
(a) All of the agreements, contracts and commitments to which the Parent or
any Subsidiary is a party or is bound, whether individually or when aggregated
with all related agreements, contracts or commitments, under which the Parent or
any Parent Subsidiary is obligated to pay more than $25,000 or that are
otherwise material to the business, operations, condition (financial or
otherwise), liabilities, assets, earnings or working capital of the Parent or
any Parent Subsidiary are described in Section 4.12(a) of the Disclosure
Schedule.
(b) Neither the Parent nor any Parent Subsidiary is a party to or bound by
any agreements, contracts or commitments which individually or when aggregated
with all related agreements, contracts or commitments, provide for the grant of
any preferential rights to purchase or lease any of the Parent Assets.
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(c) The Parent has delivered or made available to the Company true and
complete copies of each written agreement, contract or commitment listed in
Section 4.12(a) of the Disclosure Schedule, as well as true and accurate
summaries of any oral agreement listed thereon.
(d) The enforceability of the agreements, contracts and commitments
referred to in this Section 4.12 will not be affected in any respect by the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(e) No currently outstanding purchase contracts or commitments of the
Parent or the Parent Subsidiaries are in excess of the normal, ordinary and
usual requirements of the Parent or the Parent Subsidiaries, or to the best
knowledge of the Parent, were entered into at prices in excess of those
available in the industry in arm's length transactions on the respective dates
thereof.
(f) Neither the Parent nor any Parent Subsidiary is a party to or bound by
any outstanding agreements, arrangements or contracts with any of its officers,
directors, stockholders, employees, agents, consultants, advisors, salesmen or
sales representatives (or any affiliates of such Persons) that (i) are not
cancelable by it on notice of not longer than 30 days and without the imposition
of any liability, penalty or premium, (ii) require non-cancelable obligations
for payment by the Parent or such Parent Subsidiary of over $15,000, or (iii)
provide for any bonus or other payment based on the sale of equity or debt
securities of the Parent.
(g) Neither the Parent nor any Parent Subsidiary is a party to or bound by
any employment agreement, consulting agreement or any other agreements that
contains any provision for severance or termination pay liabilities or
obligations.
(h) Neither the Parent nor any Parent Subsidiary is a party to or bound by:
(i) any mortgage, security agreement, indenture, note, installment
obligation or other instrument, agreement or arrangement for or relating to
any borrowing of money by the Parent or such Parent Subsidiary;
(ii) any guaranty, direct or indirect, by the Parent or any Parent
Subsidiary of any obligation for borrowings or otherwise, excluding
endorsements made for collection in the ordinary course of business;
(iii) any obligation to make payments, contingent or otherwise, of
over $5,000 arising out of any prior acquisition of the business, assets or
stock of other persons;
(iv) any collective bargaining agreement with any labor union;
(v) any lease or similar arrangement for the use by the Parent or any
Parent Subsidiary of personal property requiring payments by the Parent or
any Parent Subsidiary, on an annual basis, of over $10,000;
23
(vi) any agreement containing noncompetition or other limitations
restricting the conduct of the business of the Parent or any Parent
Subsidiary; and
(vii) any partnership, joint venture or similar agreement.
(i) Neither the Parent nor, to the best knowledge of the Parent, any of its
officers, directors, stockholders or affiliates is a party to or bound by any
agreement (other than this Agreement) or arrangement for the sale of any of the
assets or capital stock of the Parent or any of its Subsidiaries or for the
grant of any preferential rights to purchase any of the assets or capital stock
of the Parent or the Parent Subsidiaries.
(j) The Parent is not bound by any agreement to redeem the Common Shares or
Preferred Shares held by any stockholder.
(k) With respect to each contract and agreement listed in Section 4.12(a)
of the Disclosure Schedule, except as set forth therein, (i) each of such
contracts and agreements is valid, binding and in full force and effect and is
enforceable by the Parent or the applicable Parent Subsidiary, as applicable, in
accordance with its terms, subject to bankruptcy, insolvency, reorganization and
other Laws and judicial decisions of general applicability relating to or
affecting creditors' rights and to general principles of equity; (ii) there have
been no cancellations or, to the best knowledge of the Parent, threatened
cancellations thereof nor are there any outstanding disputes thereunder; (iii)
none of the Parent, the applicable Parent Subsidiary or, to the best knowledge
of the Parent, any other party is in breach of any material provision thereof;
and (iv) there does not exist any default under, or any event or condition which
with the giving of notice or passage of time or both would become a breach or
default under, the terms of any such contract or agreement on the part of the
Parent, the applicable Parent Subsidiary or, to the best knowledge of the
Parent, on the part of any other party thereto.
Section 4.13. Accounts Receivable.
(a) Set forth in Section 4.13 of the Disclosure Schedule is a true and
complete listing of the aging status of each of the accounts receivable of the
Parent and the Parent Subsidiaries as of the most recent practicable date.
(b) All accounts receivable of the Parent and the Parent Subsidiaries,
whether reflected in the 2002 Parent Balance Sheet or accrued since the date
thereof, represent revenue generated in the ordinary course of business and are
collectible net of any reserves shown on the 2002 Parent Balance Sheet or
reserves for accounts receivable accrued since the date thereof, which reserves
are adequate.
(c) Subject to the reserves established on the 2002 Parent Balance Sheet or
accrued since the date thereof, each of the accounts receivable either has been
collected in full or will be collected in full, without any set-off, in a period
of time consistent with the historical collection results of the Parent and the
Parent Subsidiaries, but in no event in excess of 150 days after the day on
which each such account receivable became due and payable.
24
(d) A list of any promissory notes held by the Parent or any Parent
Subsidiary that have been accepted by the Parent or such Parent Subsidiary as
payment of accounts receivable of the Parent or such Parent Subsidiary is set
forth in Section 4.13 of the Disclosure Schedule.
Section 4.14. Litigation.
There are no open and unresolved claims, actions, suits, proceedings,
investigations or inquiries that have been made or served against the Parent or
the Parent Subsidiaries or, to the best knowledge of the Parent, that are
pending (without having been so served) or threatened either (1) against the
Parent or any Parent Subsidiary or (2) that would adversely affect the
transactions contemplated hereby at law or in equity or before or by any
federal, state, local, foreign or other governmental department, commission,
board, agency, or authority; and no other such claim, action, suit, proceeding,
inquiry or investigation could be brought against the Parent or any Parent
Subsidiary for which valid defenses are not available. No claim, action, suit,
proceeding, inquiry or investigation set forth in Section 4.14 of the Disclosure
Schedule would, if adversely decided, have a Material Adverse Effect on the
Parent, any Parent Subsidiary or the transactions contemplated hereby. Neither
the Parent nor any Parent Subsidiary is a party to or a recipient of service of
process regarding (and has not otherwise been named and noticed in) any
judgment, order or decree entered in any lawsuit or proceeding which has had or
may have a Material Adverse Effect on the Parent or any Parent Subsidiary or on
the ability of the Parent or any Parent Subsidiary to acquire any property or
conduct its business in any way.
Section 4.15. Compliance with Law.
(a) Each of the Parent and the Parent Subsidiaries is in material
compliance with all federal, state, foreign and local laws (whether statutory or
otherwise), ordinances, rules, regulations, orders, judgments, decrees, writs
and injunctions of any governmental authority (collectively, "Laws") applicable
to the Parent and the Parent Subsidiaries.
(b) Neither the Parent nor any Parent Subsidiary has received written
notification from any governmental or regulatory authority within the past five
years of any asserted present or past failure to so comply, which failure has
not been appropriately and completely resolved.
(c) Neither the Parent nor any Parent Subsidiary has been notified by any
governmental or regulatory authority that the Parent or such Parent Subsidiary
is in violation or alleged violation of any Law applicable to the Parent or such
Parent Subsidiary which violation has not been appropriately and completely
resolved, or that any governmental or regulatory authority contemplates any
investigation or proceeding with respect to any such violation or alleged
violation which has not been appropriately and completely resolved.
Section 4.16. Permits.
The Parent and each Parent Subsidiary has all Permits necessary for the
ownership or leasing of its properties and the conduct of its business as
currently being conducted. All such Permits are in full force and effect. No
violations exist or, to the best knowledge of the Parent, have been reported in
respect of such Permits. No notice of any proceeding has been served or
otherwise given to the Parent or any Parent Subsidiary or, to the best knowledge
of the Parent, is pending (without service or other notice) or threatened
seeking the revocation or limitation of any of such Permits.
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Section 4.17. Tax Matters.
(a) For purposes of this Agreement, (i) "Tax Return" means any report,
statement, form, return or other document or information required to be supplied
to a taxing authority in connection with Taxes and (ii) "Tax" or "Taxes" means
any United States or foreign federal, state, or local tax, including without
limitation income tax, ad valorem tax, excise tax, sales tax, use tax, franchise
tax, gross receipts tax, withholding tax, social security tax, occupation tax,
service tax, license tax, payroll tax, transfer and recording tax, severance
tax, customs tax, import tax, export tax, employment tax, or any similar or
other tax, assessment, duty, fee, levy or other governmental charge, together
with and including, without limitation, any and all interest, fines, penalties,
assessments and additions to tax resulting from, relating to, or incurred in
connection with any such tax or any contest or dispute thereof.
(b) Except as set forth in Section 4.17 of the Disclosure Schedule, all Tax
Returns required to be filed on or before the Closing Date by the Parent have
been or will be filed within the time prescribed by Law (including extensions of
time approved by the appropriate taxing authority). The Tax Returns so filed are
complete, correct and accurate representations of the Tax liabilities of the
Parent and such Tax Returns accurately set forth or will accurately set forth
all items to the extent required to be reflected or included in such returns.
(c) Except as set forth in Section 4.17 of the Disclosure Schedule, each of
the Parent has timely paid or has made adequate provision in the 2002 Parent
Balance Sheet for the payment of all Taxes due on such Tax Returns that have
been filed or will be filed for periods ending on or before the date of the 2002
Parent Balance Sheet.
(d) There is no action, suit, investigation, proceeding, audit or claim
that has been served against or otherwise properly noticed to the Parent or the
Parent Subsidiaries, or, to the best knowledge of the Parent, pending or
proposed against or with respect to the Parent or the Parent Subsidiaries in
respect of any Tax. There are no liens for Taxes upon any of the Parent Assets.
(e) The Parent and each Parent Subsidiary has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor, or other Person.
(f) Neither the Parent nor any Parent Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(g) Neither the Parent nor any Parent Subsidiary has in effect a consent
under Section 341(f) of the Code concerning collapsible corporations.
(h) Neither the Parent nor any Parent Subsidiary has made any payment, and
is not obligated to make any payment, and is not a party to any agreement that
could obligate it to make any payment that will not be deductible under section
280G of the Code or will be subject to Tax under section 4999 of the Code.
26
(i) There has never been a Tax sharing or allocation agreement in place
between the Parent or any Parent Subsidiary and any other Person other than
those, if any, with respect to which the applicable statute of limitations has
run.
(j) Neither the Parent nor any Parent Subsidiary is liable for a Tax
incurred by any other corporation that was a member of a consolidated group of
corporations (within the meaning of Treasury regulation section 1.1502) that
included the Parent or the Parent Subsidiaries. Section 4.18. Labor Matters.
(a) The employees of the Parent and the Parent Subsidiaries are listed in
Section 4.18 of the Disclosure Schedule. All of the employees of the Parent and
the Parent Subsidiaries are "at will" employees. There are no agreements with
labor unions or associations representing employees of the Parent or the Parent
Subsidiaries. No work stoppage against the Parent or any Parent Subsidiary is
pending or, to the Parent's Knowledge, threatened. Neither the Parent nor any
Parent Subsidiary is involved in or, to the Parent's Knowledge, threatened with
any labor dispute, arbitration, lawsuit, or administrative proceeding relating
to labor matters involving the employees of the Parent or the Parent
Subsidiaries (excluding routine workers' compensation claims).
Section 4.19. Pension and Other Employee Plans and Agreements.
(a) Section 4.19 of the Disclosure Schedule sets forth, as of the date of
this Agreement, all of the pension, profit sharing, stock option, stock
purchase, stock bonus, employee stock ownership, incentive, bonus, life, health,
disability or accident plans, deferred compensation plans, and other employee
compensation or benefit plans, agreements, practices, policies, customs,
contracts, arrangements or commitments, including, without limitation, changes
in control or severance agreements, holiday, vacation or other similar plans,
programs or arrangements, employee benefit plans (within the meaning of section
3(3) of ERISA), and labor union agreements under or with respect to which the
Parent or any Person ("ERISA Affiliate") who would be treated as being a "single
employer" with the Parent under section 414 of the Internal Revenue Code of
1986, as amended (the "Code"), has any liability or obligation, whether current,
contingent, secondary or otherwise (collectively, the "Plans" and individually,
a "Plan"), and the Parent has furnished to the Company complete copies of all of
the foregoing as amended and in effect on the date hereof, including, where
applicable, any trust agreements, insurance contracts or other funding mediums
related to any Plan and Summary Plan Descriptions. The Parent has heretofore
delivered to the Company the most recent liability valuation report with respect
to each Plan for which a report or estimate has been prepared, the most recent
assets valuation report provided to the Parent with respect to each Plan for
which such report must be filed, and the most recent favorable IRS determination
letter received with respect to each Plan that is intended to be qualified under
section 401(a) of the Code or trust intended to be exempt under section 501(a)
or section 501(c)(9) of the Code. Section 4.19 of the Disclosure Schedule also
sets forth any other plans or arrangements which would be required to be listed
pursuant to the preceding provisions of this section but for the fact that they
were terminated within three years of the date of this Agreement (collectively,
"Terminated Plan").
27
(b) With respect to each Plan and each Terminated Plan, the Parent and its
ERISA Affiliates have complied in all material respects with, and each Plan and
each Terminated Plan conforms in all material respects to and has from its
inception been operated in all material respects with, all applicable laws and
regulations, including but not limited to ERISA and the Code, and each Plan and
each Terminated Plan has been administered in all material respects in
accordance with its terms. Each Plan and each Terminated Plan intended to be
qualified under section 401(a) of the Code or trust intended to be exempt under
section 501(a) or section 501(c)(9) of the Code is, or with respect to a
Terminated Plan was at the time it terminated, and for each prior year for which
any applicable statute of limitations has not expired, was, qualified or exempt,
as the case may be, and each such Plan and Terminated Plan is (or was) a single
plan, as defined in section 414(1) of the Code and the regulations thereunder,
in which the Parent is the sole employer. Neither the Parent nor any ERISA
Affiliate has ever had an obligation or liability, to or with respect to, a
multiemployer plan, as defined in section 4001(a)(3) of ERISA. Neither the
Parent nor any ERISA Affiliate has any commitment and has not taken any action
to adopt or establish any additional Plans or to increase the benefits under any
Plan; no event or condition has occurred or exists with respect to any Plan or
Terminated Plan, whether or not terminated prior to the date of this Agreement
and whether or not maintained or contributed to by the Parent or any ERISA
Affiliate, which individually or collectively could result in a material
liability to the Parent or any ERISA Affiliate; all contributions required to
any Plan and each Terminated Plan and all premiums for insurance coverage for
each fiscal year of each Plan and each Terminated Plan ended before the date of
this Agreement and for any portion of a fiscal year ending on the Closing Date
have been timely paid and payments to be made but not yet due properly accrued
and recorded in the Year End Financial Statements and 2000 Financial Statements
through their relevant dates; no Plan or Terminated Plan has incurred any
"accumulated funding deficiency" (as defined in section 302 of ERISA and section
412 of the Code), whether or not waived; there is no pending or, to the best
knowledge of the Parent, threatened or anticipated litigation, arbitration,
proceeding, claim (other than an undisputed claim for payment of benefits in
accordance with the terms thereof or a pending or final qualified domestic
relations order), demand, grievance, or allegation of unfair labor practice (or
any basis therefor) involving any of the Plans or Terminated Plans or any
investigation, proceeding, administrative review or other administrative agency
process which could result in imposition on the Parent or any ERISA Affiliate of
any penalty, assessment or liability in connection with any of the Plans or
Terminated Plans, individually or collectively; no Plan or Terminated Plan has
engaged or is about to engage in a prohibited transaction as defined in section
406 of ERISA or section 4975 of the Code; and no "reportable event," as defined
in section 4043 of ERISA, has occurred or is about to incur that could result in
a material liability to the Parent or any ERISA Affiliate.
(c) No Plan provides (or has any commitment to provide) health benefits
with respect to any current or former employees or independent contractors (or
beneficiary thereof) of the Parent or any ERISA Affiliate beyond their
retirement or other termination of service (other than coverage mandated by
COBRA). Each Plan can be unilaterally terminated at any time by the Parent
without material liability.
28
Section 4.20. Title to Assets.
The Parent and each Parent Subsidiary has good and valid title to the
Parent Assets owned by it, including without limitation those assets set forth
on the 2002 Parent Balance Sheet. At the Closing the Parent Assets will be free
and clear of all mortgages, liens, claims, charges, pledges, security interests
or encumbrances of any nature whatsoever.
Section 4.21. Bank Accounts.
Section 4.21 of the Disclosure Schedule sets forth the names and locations
of all banks, trust companies, savings and loan associations, stock brokerages
and other financial institutions at which the Parent and the Parent Subsidiaries
maintain accounts of any nature and the name of all persons authorized to draw
thereon or make withdrawals therefrom.
ARTICLE V
OTHER OBLIGATIONS OF THE PARTIES
Section 5.01. Conduct of Company Business.
From the date hereof to the Closing, except as otherwise expressly set
forth in this Agreement, the Company shall conduct the business, operations,
activities and practices of the Company only in the ordinary course, in
accordance with prudent practice and consistent with past practice. Without
limiting the generality of the foregoing, from the date hereof to the Closing,
without the prior written consent of Acquiror or Parent, the Company shall not:
(a) incur any liabilities or obligations of any nature whatsoever (whether
absolute, accrued, contingent or otherwise and whether due or to become due),
except for liabilities or obligations for (i) rent under the Leases (provided,
that the Company shall not enter into any new, modified or extended leases for
real property without the consent of Acquiror), (ii) loans to the Company from
one or more of its stockholders as deemed necessary to fund ongoing operations
of the Company in amounts previously disclosed to Parent (which, together with
any such loans previously made and disclosed to Parent, shall be termed "Bridge
Loans"), and (iii) other items incurred in the ordinary course of business and
consistent with past practice, none of which other items shall exceed $10,000
(considering liabilities or obligations arising from one transaction or a series
of similar transactions, and all periodic installments or payments under any
lease (other than the Leases) or other agreement providing for periodic
installments or payments, as a single obligation or liability);
(b) increase (other than an increase resulting from the calculation of
reserves in the ordinary course of business and in a manner consistent with past
practice) or change any assumptions underlying, or methods of calculating, any
bad debt, contingency or other reserves;
(c) pay, discharge or satisfy any claim, encumbrance, liability or
obligation (whether absolute, accrued, contingent or otherwise and whether due
or to become due), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities and
29
obligations which are reflected or reserved against in the 2000 Balance Sheet or
which have been incurred since the date thereof in the ordinary course of
business and consistent with past practice, or prepay any liability or
obligation having a fixed maturity of more than 90 days from the date such
liability or obligation was issued or incurred;
(d) permit, allow or suffer any of the Company Assets to be subjected to
any new or additional mortgage, pledge, lien, encumbrance, restriction or charge
of any kind (except for liens arising as a result of Taxes not yet owing) except
for capital equipment leases not to exceed $15,000 in the aggregate;
(e) determine as collectible any notes or accounts receivable or any
portion thereof which was previously considered uncollectible or write off as
uncollectible any notes or accounts receivable or any portion thereof other than
in the ordinary course of business, but in no event to exceed $15,000 in the
aggregate,
(f) cancel any amount of indebtedness in excess of $10,000 or waive any
claims or rights of value in excess of $10,000;
(g) sell, transfer or otherwise dispose of any of the Company Assets with
an aggregate value of more than $10,000;
(h) dispose of or permit to lapse any right to use any patent, trademark,
assumed name, service ▇▇▇▇, trade name, copyright, license or application
therefor or dispose of or disclose to any Person other than representatives of
Acquiror or Parent any trade secret, formula, process or know-how not
theretofore a matter of public knowledge (other than disclosures in the ordinary
course of business and consistent with past practice that would not materially
diminish the value of such trade secrets, formulae, processes or know-how to the
Company);
(i) grant any increase in the compensation payable to any employee of the
Company (including, without limitation, any increase or change pursuant to any
bonus, pension, profit-sharing, retirement or other plan or commitment);
(j) pay, loan or advance any amount (except for advances in the ordinary
course of business and consistent with past practice that do not in the
aggregate exceed $5,000 and are not made as advances for personal loans) to, or
sell, transfer or lease any of the Company Assets to, or enter into any
agreement or arrangements with, any of the officers, directors, stockholders or
employees of any Company or any of their respective affiliates;
(k) enter into any collective bargaining or labor agreement;
(l) make any single capital expenditure or commitment in excess of $5,000
for additions to property, plant, equipment or intangible capital assets or for
any other purpose or make aggregate capital expenditures or commitments in
excess of $15,000 for additions to property, plant, equipment or for any other
purpose;
(m) make any change in any method of accounting or accounting practice or
policy;
30
(n) enter into any agreement or contract or commitment of the type required
to be disclosed pursuant to Section 3.10 hereof or outside the ordinary course
of business;
(o) terminate or amend in any material respect any material contract,
lease, license, or other agreement to which the Company is a party;
(p) permit any option to renew any Lease or any option to purchase any
property to expire or exercise any such option;
(q) issue any additional shares of capital stock of the Company or options,
warrants, rights (including, without limitation, stock appreciation rights and
phantom stock rights) or other securities exercisable for, convertible into or
exchangeable for shares of capital stock of the Company, or pay any dividend (or
make any other distribution) to the holders of capital stock of the Company;
(r) omit to do any act, or permit any act or omission to act, which may
cause a breach of any contract, commitment or obligation of the Company, or any
breach of any representation, warranty, covenant or agreement made by the
Company herein;
(s) take any other action not in the ordinary course of business and
consistent with past practice and prudent business practice or provided for in
this Agreement; or
(t) agree, whether in writing or otherwise, to do any of the foregoing.
Section 5.02. Access to Books and Records.
In order that Acquiror and Parent may have full opportunity to make
investigations of the Company in connection with the actions contemplated by
this Agreement, the Company shall permit Acquiror and Parent and their counsel,
accountants, auditors, lenders, environmental consultants and other
representatives reasonable access, upon reasonable notice during normal business
hours, to all of the plants, offices, properties, books and records, contracts
and commitments of the Company from the date hereof through the Closing Date.
Section 5.03. Consents.
The Company agrees to use its reasonable efforts to obtain prior to the
Closing all consents necessary, in the reasonable determination of Acquiror and
Parent, to consummate the transactions contemplated hereby, including without
limitation each of the consents, approvals, licenses, permits and authorizations
(and the declarations, filings and registrations) listed or referred to in
Section 3.05 of the Disclosure Schedule. All such consents shall be in writing
and in form and substance reasonably satisfactory to Acquiror and Parent, and
executed counterparts thereof shall be delivered to Acquiror and Parent promptly
after receipt thereof by the Company but in no event later than the Closing.
Section 5.04. Governmental Filings.
As soon as practicable, the Company, Acquiror and Parent shall make any and
all filings and submissions to any governmental agency that are required to be
made in connection with the transactions contemplated hereby. The Company shall
furnish to Acquiror and Parent, and Acquiror and Parent shall furnish to the
Company, such information and assistance as the other party or parties may
reasonably request in connection with the preparation of any such filings or
submissions.
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Section 5.05. Covenant to Satisfy Conditions.
The Company, Acquiror and Parent shall each use their reasonable efforts to
insure that the conditions set forth in Article VI hereof are satisfied, insofar
as such matters are within their respective control.
Section 5.06. Confidentiality.
The parties acknowledge and affirm their obligations regarding
confidentiality set forth in the Letter of Intent dated as of June 22, 2003. No
party shall release any information regarding this Agreement or the transactions
contemplated hereby without the prior written consent of each other party hereto
except as may be required to be disclosed by law.
Section 5.07. Employees.
From the date hereof the Company shall use its reasonable efforts to retain
as employees of the Company through the Closing Date the active employment of
the Company's current employees, except as may be otherwise agreed by the
parties. The Company agrees in this regard to cooperate with Acquiror and Parent
by permitting Acquiror and Parent throughout the period prior to the Closing
Date to meet with the employees of the Company at such times as shall be
approved by a representative of the Company (which approval shall not be
unreasonably withheld).
Section 5.08. Stockholder Meeting of the Company.
The Company shall, at a meeting of its sole stockholder duly called by its
Board of Directors to be held as soon as practicable following execution of this
Agreement (or by a written consent that has the same effect) submit this
Agreement and the consummation of the Merger to a vote of its sole stockholder
in accordance with the Nevada Law.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01. Conditions Precedent to Obligations of Acquiror and Parent.
The obligations of Acquiror and Parent under this Agreement are subject to
the satisfaction or, unless prohibited by Law, the waiver by Acquiror and
Parent, at or before the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company contained herein shall be true, complete and accurate as of the date
when made and at and as of the Closing Date as though such representations,
warranties and statements were made at and as of such date.
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(b) Performance. The Company shall have performed and complied with all
agreements, obligations and conditions required by this Agreement to be so
performed or complied with by it at or prior to the Closing.
(c) No Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction restraining or prohibiting the
consummation of the transactions contemplated hereby.
(d) No Litigation. There shall not be threatened, instituted or pending any
suit, action, investigation, inquiry or other proceeding by or before any court
or governmental or other regulatory or administrative agency or commission
requesting or looking toward an order, judgment or decree that (i) restrains or
prohibits the consummation of the transactions contemplated hereby or (ii) would
have a Material Adverse Effect on the business, operations, condition (financial
or otherwise), liabilities, Company Assets or earnings of the Surviving
Corporation.
(e) Officers' Certificate. The Company shall have delivered to Acquiror and
Parent a certificate, dated the Closing Date, executed by an executive officer
certifying the fulfillment of the conditions specified in Sections 6.01(a) and
(b) hereof.
(f) Secretary's Certificate. The Company shall have delivered to Acquiror
and Parent a certificate, dated the Closing Date, executed by its Secretary or
Assistant Secretary and certifying as to the Company's Articles of
Incorporation, bylaws, enabling resolutions, incumbency of officers and other
reasonably related matters.
(g) Consents and Approvals. All licenses, permits, consents, approvals and
authorizations of all third parties and governmental bodies and agencies (other
than approvals from the Company's Board of Directors and sole stockholder, which
are provided for elsewhere in this Agreement) shall have been obtained which are
necessary, in the reasonable determination of counsel to Acquiror and Parent, in
connection with (a) the execution and delivery by each of the parties, as
appropriate, of this Agreement, (b) the consummation by each of the parties of
the transactions contemplated hereby or thereby or (c) the conduct by the
Surviving Corporation of the Company Business substantially as conducted on the
date hereof.
(h) Stockholder Approval. The sole stockholder of the Company shall have
duly approved the Merger and the other transactions contemplated hereby.
(i) Documents. All documents to be delivered by the Company to Acquiror at
the Closing shall be duly executed and in form and substance reasonably
satisfactory to Acquiror and Parent.
(j) No Options, Warrants or Other Rights. There shall be no (x) outstanding
options, warrants or other rights authorized, granted or issued to acquire any
share of capital stock of the Company, (y) outstanding securities authorized,
granted or issued by the Company that are convertible or exchangeable for shares
of capital stock of the Company, or (z) stock rights, stock appreciation rights
or similar rights regarding the Company.
(k) Other. Acquiror and Parent shall have received such other documents or
certificates as Acquiror and Parent may reasonably have requested, including,
without limitation, certificates of good standing with respect to the Company
from the appropriate authority in its jurisdiction of incorporation and
certificates of good standing with respect to the Company from the appropriate
authority in each jurisdiction in which it is qualified to do business.
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Section 6.02. Conditions Precedent to Obligations of the Company.
The obligations of the Company under this Agreement are subject to the
satisfaction or, unless prohibited by Law, the waiver by the Company at or
before the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Acquiror and Parent contained herein shall be true, complete and accurate as of
the date when made and at and as of the Closing Date as though such
representations and warranties were made at and as of such date.
(b) Performance. Acquiror and Parent shall have performed and complied with
all agreements, obligations and conditions required by this Agreement to be so
performed or complied with by them at or prior to the Closing.
(c) No Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction restraining or prohibiting
consummation of the transactions contemplated hereby.
(d) No Litigation. There shall not be threatened, instituted or pending any
suit, action, investigation, inquiry or other proceeding by or before any court
or governmental or other regulatory or administrative agency or commission
requesting or looking toward an order, judgment or decree that restrains or
prohibits the consummation of the transactions contemplated hereby.
(e) Officers' Certificates. Each of the Acquiror and Parent shall have
delivered to the Company a certificate, dated the Closing Date and executed by
an executive officer certifying the fulfillment of the conditions specified in
Sections 7.02(a) and (b) hereof.
(f) Secretary's Certificates. Each of Acquiror and Parent shall have
delivered to the Company a certificate, dated the Closing Date, executed by its
Secretary or Assistant Secretary and certifying as to its organizational
documents, enabling resolutions, incumbency of officers and other related
matters.
(g) Consents and Approvals. All licenses, permits, consents, approvals and
authorizations of all third parties and governmental bodies and agencies (other
than approvals from the Acquiror's Board of Directors and sole stockholder,
which are provided for elsewhere in this Agreement) shall have been obtained
which are necessary, in the reasonable determination of counsel to the Company,
in connection with (a) the execution and delivery by each of the parties, as
appropriate, of this Agreement, (b) the consummation by each of the parties of
the transactions contemplated hereby or thereby or (c) the conduct by the
Surviving Corporation of the Company Business substantially as conducted on the
date hereof.
(h) Stockholder Approval. The sole stockholder of Acquiror shall have duly
approved the Merger and the other transactions contemplated hereby.
(i) Documents. All documents to be delivered by each of Acquiror and Parent to
the Company at the Closing shall be duly executed and in form and substance
reasonably satisfactory to the Company.
(j) Other. The Company shall have received such other documents or
certificates as the Company may reasonably have requested, including, without
limitation, certificates of good standing with respect to Parent and Acquiror
from the appropriate authority in their respective jurisdictions of
incorporation and certificates of good standing with respect to Parent and
Acquiror from the appropriate authority in each jurisdiction in which each is
qualified to do business.
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ARTICLE VII
TERMINATION OF AGREEMENT
Section 7.01. Termination of Agreement.
This Agreement may be terminated at any time prior to the Closing:
(a) by mutual agreement of the Company, Acquiror and Parent;
(b) by Acquiror or Parent, on or after September 30, 2003, if any of the
conditions provided in Section 6.01 hereof of this Agreement have not been met
or, to the extent permitted by applicable law, have not been waived in writing
by Acquiror prior to such date;
(c) by the Company, on or after September 30, 2003, if any of the
conditions provided in Section 6.02 hereof have not been met or, to the extent
permitted by applicable law, have not been waived in writing by the Company
prior to such date; or
(d) by the Company, if the stockholders of the Company do not approve the
Merger at a meeting held in accordance with the requirements of Nevada law.
Section 7.02. Procedure Upon Termination.
In the event of termination by the Company, Acquiror or Parent pursuant to
Section 7.01 hereof, written notice thereof shall promptly be given to the other
parties and the transactions contemplated by this Agreement shall be terminated,
without further action by any party. If the transactions contemplated by this
Agreement are terminated as provided herein:
35
(a) The Company, Acquiror and Parent shall return all documents, work
papers and other material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to the party furnishing the same; and
(b) all confidential information received by the Company, Acquiror or
Parent with respect to the business of any other party or its subsidiaries or
affiliates shall be treated in accordance with Section 5.06 hereof, and Section
5.06 hereof shall remain in full force and effect notwithstanding the
termination of this Agreement.
ARTICLE VIII
INDEMNIFICATION
Section 8.01. Indemnification by the Company.
Subject to Section 8.6, the Company hereby covenants and agrees that it
will severally indemnify, defend, protect, and hold harmless the Parent and its
officers, directors, employees, stockholders, agents, representatives, and
Affiliates (the "Parent Indemnitees") at all times from and after the date of
this Agreement from and against all claims, damages, losses, liabilities (joint
or several), obligations, penalties, defenses, actions, lawsuits, proceedings,
judgments, demands, assessments, adjustments, costs, and expenses (including
specifically, but without limitation, fees, disbursements, and expenses of
attorneys, accountants, other professional advisors and of expert witnesses and
costs of investigation and preparation)(collectively "Damages"), directly
resulting from or arising out of:
(a) any breach of or inaccuracy in any representation or warranty by the
Company set forth herein or in the Disclosure Schedules; and
(b) any breach or non-performance, partial or total, by the Company of any
covenant or agreement of the Company Stockholder (or any Affiliate thereof)
contained in this Agreement.
Section 8.02. Indemnification by Parent. Parent covenants and agrees that
it will indemnify, defend, protect and hold harmless the Company and its
officers, directors, employees, stockholders, agents, representatives, and
Affiliates (the "Company Indemnitees") at all times from and after the date of
this Agreement from and against all Damages, directly resulting from or arising
out of:
(a) any breach of any representation or warranty of Parent set forth herein
or in the Disclosure Schedules or certificates delivered in connection herewith;
and
(b) any breach or non-performance, partial or total, by Parent of any
covenant or agreement of Parent (or any Affiliate thereof) contained in this
Agreement.
Section 8.03. Limitation Upon Indemnification Remedies
Notwithstanding anything herein to the contrary, the sole remedy for any
claim for indemnification hereunder shall be limited to an appropriate
adjustment in the number of shares of Parent Stock issued to the stockholders of
the Company pursuant to Section 1.07(b) hereof. For example, the sole remedy of
the Parent Indemnitees in the event of a claim for indemnification against the
Company would be cancellation of the number of shares of Parent Stock issued to
Pacific Holdings Group pursuant to Section 1.07(b) hereof with an aggregate
market value equal to the indemnified Damage amount (based upon the average of
36
the bid and asked prices of the Parent Stock as of May 22, 2003). Likewise, the
sole remedy of the Company Indemnitees in the event of a claim for
indemnification against the Parent under this Article III would be the issuance
of additional shares of Parent Stock to Pacific Holdings Group with an aggregate
market value equal to the indemnified Damage amount (based upon the average of
the bid and asked prices of the Parent Stock as of May 22, 2003).
Section 8.04. Indemnification if Negligence of Indemnitee.
The indemnification provided in this Article VIII shall be applicable
whether or not negligence of the Indemnitee is alleged or proven.
Section 8.05. No Third-Party Beneficiaries.
The foregoing indemnification is given solely for the purpose of protecting
the Parent Indemnitees and the Company Indemnitees and shall not be deemed
extended to, or interpreted in a manner to confer any benefit, right, or cause
of action upon, any other Person.
Section 8.06. Survival.
The obligations of the parties under this Article VIII shall survive for a
period of 18 months after the Closing Date.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Survival of Representations and Warranties.
All representations and warranties made hereunder shall survive the
Closing. Unless explicitly stated otherwise, each covenant and agreement of the
parties hereunder shall expire at the Closing.
Section 9.02. Commissions.
No party hereto has employed any investment banker, broker, finder or
similar agent in connection with any transaction contemplated by this Agreement.
Section 9.03. Definition of Knowledge.
For the purpose of this Agreement, the Exhibits and Appendices to this
Agreement and the Disclosure Schedule, the phrases "to the best knowledge" of
any party and "known" and words of like effect shall mean to the knowledge of
such party and each officer of such party.
Section 9.04. Definition of Material Adverse Effect and Material Adverse
Change.
"Material Adverse Effect" or "Material Adverse Change" means, with respect
to any party, any changes, occurrences or effects (direct or indirect) on the
business, operations, properties (including tangible properties), condition
(financial or otherwise), assets, prospects, obligations or liabilities (whether
absolute, contingent or otherwise and whether due or to become due) of such
party and its subsidiaries taken as a whole that, when combined, reasonably
could be expected to exceed $100,000. "Material" or "materially" or words of
37
like effect shall refer to items capable of producing a monetary effect of at
least $100,000 on the business, operations, properties (including intangible
properties), condition (financial or otherwise), assets, prospects, obligations
or liabilities (whether absolute, contingent or otherwise and whether due or to
become due) of the relevant party and its subsidiaries taken as a whole.
Section 9.05. Expenses, Taxes, Etc.
Except as otherwise provided herein, in the event of the termination of
this Agreement prior to Closing, each of the parties hereto shall pay all fees
and expenses incurred by it or any of its affiliates in connection with the
transactions contemplated by this Agreement.
Section 9.06. Section 338 Election.
In addition, so long as such election will have no adverse tax consequences
(that is, no more adverse than if such election were not made) to the Company or
its present stockholders, the Company hereby consents to and recognizes that
Acquiror and Parent intend to make an election under Section 338(g) of the
Internal Revenue Code of 1986 and the Treasury regulations promulgated
thereunder to treat the Merger as a sale/purchase of assets for federal income
tax purposes. Subject to the foregoing, if Acquiror and Parent make such
election, the Company agrees to make any election or take whatever acts as are
necessary to effectuate such election. The parties agree that the Company's
representations and warranties regarding Taxes do not cover the taxes resulting
from such election.
Section 9.07. Successors and Assigns.
No party shall have the right to assign all or any part of its interest in
this Agreement without the prior written consent of the other parties, and any
attempted transfer without such consent shall be null and void.
Section 9.08. No Third-Party Benefit.
Nothing in this Agreement shall be deemed to create any right or obligation
in any Person not a party hereto and this Agreement shall not be construed in
any respect to be a contract or agreement in whole or in part for the benefit of
or binding upon any Person not a party hereto.
Section 9.09. Entire Agreement; Amendment.
This Agreement, the Exhibits, the Appendices and the Disclosure Schedule
hereto constitute the entire agreement among the parties hereto with respect to
the transactions contemplated herein and supersede all prior oral and written
agreements, memoranda, understandings and undertakings between the parties
hereto relating to the subject matter hereof. This Agreement may not be
modified, amended, altered or supplemented except by a written instrument
executed and delivered by each of the parties hereto.
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Section 9.10. Reformation and Severability.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws effective during the term hereof and
such illegality, invalidity or unenforceability does not result in a material
failure of consideration, then;
(a) in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Agreement a provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible
and be legal, valid and enforceable; and (b) the legality, validity and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
Section 9.11. Notices.
All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed (registered or certified mail,
postage prepaid, return receipt requested) as follows:
If to Acquiror:
PAG Acquisition Corp.
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
If to Parent:
AutoCorp Equities, Inc
▇▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
If to the Company:
Pacific Auto Group, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
Pacific Holdings Group
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
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Section 9.12. Number and Gender.
When the context in which words are used in this Agreement indicates that
such is the intent, words in the singular number shall include the plural and
the masculine gender shall include the neuter or female gender as the context
may require.
Section 9.13. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA, WITHOUT REGARD TO ITS
CONFLICTS OF LAW RULES.
Section 9.14. Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
The remainder of this page is intentionally left blank.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by parties hereto on the date first above written.
ACQUIROR:
PAG ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇, Vice President
PARENT:
AUTOCORP EQUITIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
THE COMPANY:
PACIFIC AUTO GROUP, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer
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