Communications World International, Inc.
Form 10-SB/A
Exhibit 2 (f)
MERGER AGREEMENT
BY AND AMONG
COMMWORLD ACQUISITION CORPORATION,
WILLPOWER, INC. D/B/A RMS COMMUNICATIONS,
AND ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Dated as of September 30, 1999
TABLE OF CONTENTS
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Page
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1. DEFINITIONS......................................................... 1
1.1 General Definitions................................................. 1
2. MERGER.............................................................. 5
2.1 Terms of Merger..................................................... 5
(a) Merger; Surviving Company........................................ 5
(b) The Effective Date and Time...................................... 5
2.2 Purchase Price and Terms............................................ 5
2.3 Merger Certificates................................................. 6
2.4 Further Assurances.................................................. 6
(a) Assumed Contracts and Assumed Payables........................... 6
(b) Adjustment Period................................................ 7
(c) Payment to Seller................................................ 7
(d) Deduction from Note.............................................. 8
(e) Other Accounts................................................... 8
3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER................... 8
3.1 Transfer of and Title to Stock...................................... 8
3.2 Organization; Qualification......................................... 8
3.3 Authority Relative to this Agreement................................ 8
3.4 Capitalization...................................................... 9
3.5 Consents and Approvals.............................................. 9
3.6 No Violations....................................................... 9
3.7 Title to and Condition of Assets and Property....................... 10
3.8 Inventory........................................................... 10
3.9 Distributors and Suppliers.......................................... 10
3.10 Product Warranties.................................................. 10
3.11 Investigation or Litigation......................................... 10
3.12 Taxes............................................................... 11
3.13 No Brokers.......................................................... 11
3.14 Accounts............................................................ 11
3.15 Insurance........................................................... 11
3.16 Contracts; Oral Commitments; Defaults............................... 11
3.17 Corporate Matters................................................... 12
3.18 Permits............................................................. 12
3.19 Compliance with Laws................................................ 12
3.20 Corporate Name...................................................... 12
3.21 Disclosure.......................................................... 12
3.22 Employee Matters.................................................... 12
3.23 Plans............................................................... 13
3.24 Transactions with Affiliates........................................ 14
3.25 Financial Statements................................................ 14
3.26 Undisclosed Liabilities............................................. 14
3.27 Leases.............................................................. 14
3.28 Real Property....................................................... 14
3.29 Environmental Matters............................................... 15
(a) Compliance Generally............................................. 15
(b) Claims........................................................... 15
(i)
(c) Certain Environmental Liabilities................................ 15
(d) Operations....................................................... 15
(e) Liability for Others............................................. 15
3.30 Intellectual Property............................................... 15
3.31 Bank Accounts and Powers of Attorney................................ 16
3.32 Knowledge of Shareholder............................................ 16
3.33 Inspection Does Not Affect Warranties............................... 16
3.34 Rights and Assets................................................... 16
3.35 Absence of Certain Changes.......................................... 16
3.36 Books and Records................................................... 17
3.37 Understanding that CWII Shares Will Be Issued Without Registration.. 17
(a) Investment Intent................................................ 18
(b) Investor Awareness............................................... 18
3.38 Receipt of Information; Access to Information....................... 18
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER........................... 19
4.1 Organization......................................................... 19
4.2 Authority Relative to this Agreement................................. 19
4.3 Consents and Approvals............................................... 19
4.4 No Brokers........................................................... 19
5. ADDITIONAL AGREEMENTS................................................. 20
5.1 Conduct of the Company............................................... 20
5.2 Forbearances by Shareholder.......................................... 20
5.3 No Solicitation...................................................... 21
5.4 Investigation of the Company......................................... 21
5.5 Agreement to Consummate.............................................. 22
5.6 Approval of Third Parties............................................ 22
5.7 Agreement Regarding Brokers.......................................... 22
5.8 Notice............................................................... 22
5.9 Disclosure Schedules................................................. 23
5.10 Filings............................................................. 23
5.11 Taxes............................................................... 23
6. CONDITIONS PRECEDENT TO CLOSING....................................... 24
6.1 General Conditions................................................... 24
(a) No Injunction.................................................... 24
(b) Proceedings...................................................... 24
(c) Noncompetition and Employment Agreement.......................... 24
(d) Audited Financials............................................... 24
6.2 Conditions to Closing in Favor of Shareholder........................ 24
(a) Representations and Warranties of Purchaser...................... 24
(b) Purchaser's Officers' Certificate................................ 25
(c) Governmental Consents, Authorizations, Etc....................... 25
(d) Closing Consideration............................................ 25
6.3 Conditions to Closing in Favor of Purchaser.......................... 25
(a) Representations and Warranties of Shareholder.................... 25
(b) Governmental Consents, Authorizations, Etc....................... 25
(c) Shareholder Release.............................................. 25
(d) Shareholder's Certificate........................................ 26
(e) Opinion of Counsel............................................... 26
(f) Legislation...................................................... 26
(g) Litigation....................................................... 26
(h) No Adverse Change................................................ 26
(ii)
(i) Delivery of Documents/Acceptance of Disclosure Schedules........ 26
(j) Third Party Consents............................................ 26
(k) Purchaser's Investigation....................................... 26
(l) Approval........................................................ 26
(m) Certificate of Authorities...................................... 27
(n) Corporate Records and Books of Account.......................... 27
(o) Bank Accounts................................................... 27
(p) Loan Commitment................................................. 27
(q) Certificate of Merger........................................... 27
(r) Subscription Agreement.......................................... 27
(s) Pledge Agreement................................................ 27
(t) Other Matters................................................... 27
7. CLOSING AND TERMINATION.............................................. 28
7.1 Closing Date........................................................ 28
7.2 Termination......................................................... 28
7.3 Effect of Termination............................................... 28
7.4 Extension; Waiver................................................... 28
8. SURVIVAL AND INDEMNIFICATION......................................... 29
8.1 Survival of Representations and Warranties.......................... 29
8.2 Indemnity........................................................... 29
8.3 Indemnification Notice.............................................. 30
8.4 Offset.............................................................. 30
9. GENERAL PROVISIONS AND OTHER AGREEMENTS.............................. 31
9.1 Notices............................................................. 31
9.2 Fees and Expenses................................................... 32
9.3 Interpretation...................................................... 32
9.4 Counterparts........................................................ 32
9.5 Miscellaneous....................................................... 32
9.6 Publicity........................................................... 33
9.7 Invalid Provisions.................................................. 33
9.8 Binding Effect...................................................... 33
9.9 Captions............................................................ 33
9.10 Attorneys' Fees..................................................... 33
9.11 Jurisdiction and Venue.............................................. 33
9.12 Assignability....................................................... 34
9.13 Entirety............................................................ 34
9.14 Amendment........................................................... 34
9.15 Governing Law....................................................... 34
LIST OF EXHIBITS
Exhibit A - Form of Employment and Noncompetition Agreement
Exhibit B - Form of Subordinated Note
Exhibit C - Form of Shareholder Release
Exhibit D - Form of Opinion of Counsel
Exhibit E - Form of Subscription Agreement
Exhibit F - Form of Pledge Agreement
(iii)
LIST OF SCHEDULES
Schedule 2.5(a)(1) Assumed Contracts
Schedule 2.5(a)(2) Assumed Payables
Schedule 2.5(a)(3) Liabilities Paid at Closing
Schedule 3.4 Capitalization
Schedule 3.5 Consents and Approvals
Schedule 3.7 Title to and Condition of Assets
Schedule 3.8 Inventory
Schedule 3.9 Distributors and Suppliers
Schedule 3.10 Express Product Warranties and Guaranties
Schedule 3.11 Investigation or Litigation
Schedule 3.14 Accounts
Schedule 3.15 Insurance
Schedule 3.16 Contracts
Schedule 3.18 Permits
Schedule 3.22 Employee Matters
Schedule 3.23 Plans
Schedule 3.24 Transactions with Affiliates
Schedule 3.25 Financial Statements
Schedule 3.27 Leases
Schedule 3.28 Real Property
Schedule 3.30 Intellectual Property
Schedule 3.31 Bank Accounts and Powers of Attorney
Schedule 3.35 Certain Changes
(iv)
MERGER AGREEMENT
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THIS MERGER AGREEMENT (this "Agreement") is made as of September 30, 1999,
by and among COMMWORLD ACQUISITION CORPORATION, a Texas corporation
("Purchaser"), WILLPOWER, INC., a Texas corporation d/b/a RMS Communications
(the "Company"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the "Shareholder").
In consideration of the mutual covenants and agreements contained herein,
the parties covenant and agree as follows:
1. DEFINITIONS
1.1 General Definitions . Unless otherwise stated in this Agreement, the
following terms shall have the following meanings:
"Accounts": All accounts receivable of the Company and other rights of the
Company to payment for services rendered, including, without limitation, those
which are not evidence by instruments or whether or not they have been earned by
performance or have been written off or reserved against as a bad debt or
doubtful account in any financial statement, together with all instruments
representing any of the foregoing, and all rights, title, security and
guaranties in favor of the Company with respect to any of the foregoing.
"Affiliate": Any Person that, directly or indirectly, controls, or is
controlled by or under common control with, another Person. For the purposes of
this definition, "control" (including the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities or by
contract or otherwise.
"Assumed Contracts": As defined in Section 2.5(a) hereof.
"Assumed Payables": As defined in Section 2.5(a) hereof.
"Best Knowledge": Those matters of which either the Company or Shareholder has
or should have knowledge after (i) suitable inquiries of the appropriate
responsible employees or agents of the Company or Shareholder, and (ii) a
suitable review of appropriate corporate records and documents of the Company or
Shareholder in such parties actual or constructive possession or to which it has
access.
"Broker": As defined in Section 4.4 hereof.
"Closing": As defined in Section 7.1 hereof.
"Closing Date": As defined in Section 7.1 hereof.
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"Code": The Internal Revenue Code of 1986, as amended.
"CWII Stock": As defined in Section 2.2 hereof.
"Damages": As defined in Section 8.2 hereof.
"Disclosure Schedules": The package of Disclosure Schedules to this Agreement
delivered by Shareholder to Purchaser prior to the date hereof (and subsequently
supplemented and amended) which are approved by Purchaser (with reservation of
all rights with respect thereto) and incorporated by reference to the Section of
this Agreement to which each such schedule relates. The disclosure of an item
in a Disclosure Schedule or under a heading in a Disclosure Schedule
corresponding to that particular section or subsection of this Agreement shall
not be deemed a disclosure under (i) any other item of such Disclosure Schedule,
(ii) any other Disclosure Schedules or (iii) any other section or subsection
thereof. In the event of any inconsistency between the statements in the body of
this Agreement and those in the Disclosure Schedules hereto (other than an
exception expressly set forth as such in the schedules in relation to a
specifically identified representation or warranty), those in this Agreement
shall control.
"Environmental Requirements": All federal, state, foreign and local laws,
statutes, codes, rules, regulations, ordinances, judgments, orders, decrees and
the like of any Governmental Body, and all obligations concerning public health
and safety, worker health and safety, or pollution or protection of the
environment, including all those relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal, distribution,
labeling, testing, processing, discharge, release, Threatened release, control
or cleanup of any hazardous or otherwise regulated materials, substances or
wastes, chemical substances or mixtures, pesticides, pollutants, contaminants,
toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation.
"Financial Statements": As defined in Section 3.25 hereof.
"Governmental Body": Any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency, authority or
instrumentality, domestic or foreign.
"Indemnification Claim": As defined in Section 8.3 hereof.
"Indemnification Notice": As defined in Section 8.3 hereof.
"Indemnitor": As defined in Section 8.3 hereof.
"Intellectual Property": All domestic and foreign patents, patent applications,
registered trademarks and service marks owned by the Company, registered
copyrights owned by the Company and computer software programs owned by or
licensed to the Company.
"Liabilities" or "Liability": All claims, liabilities, debts, indebtedness and
obligations, whether asserted or unasserted, absolute, liquidated, contingent,
accrued or otherwise.
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"Lien": All mortgages, deeds of trust, claims, liens, security interests,
pledges, leases, conditional sale contracts, rights of first refusal, options,
charges, liabilities, obligations, agreements, easements, rights-of-way, powers
of attorney, limitations, reservations, restrictions and other encumbrances of
any kind.
"Material Adverse Effect": Any change (individually or in the aggregate) in the
general affairs, management, business, goodwill, results of operations,
condition (financial or otherwise), assets, liabilities or prospects (whether or
not the result thereof would be covered by insurance) that will or can
reasonably be expected to result in a cost, expense, charge, Liability, loss of
revenue or diminution in value equal to or greater than $10,000.
"Merger": shall mean the merger of the Company with and into the Purchaser in a
transaction qualifying as a tax-free reorganization under Section 368(a)(1)(A)
of the Code.
"Employment and Noncompetition Agreement": The Noncompetition and Employment
Agreement substantially in the form of Exhibit "A" attached hereto.
"Offset Notice": As defined in Section 8.4 hereof.
"Operative Documents": All agreements, instruments, documents, schedules,
exhibits and certificates executed and delivered by or on behalf of Shareholder,
the Company or Purchaser at or before the Closing pursuant to this Agreement.
"Order": Any order, writ, injunction, decree, judgment, award or determination
of any Governmental Body.
"Permits": All permits, authorizations, certificates, approvals, registrations,
variances, exemptions, rights-of-way, franchises, privileges, immunities,
grants, ordinances, licenses and other rights of every kind and character (a)
under any (1) federal, state, local or foreign statute, ordinance or regulation,
(2) Order or (3) contract with any Governmental Body or (b) granted by any
Governmental Body.
"Person": An individual, partnership, joint venture, corporation, company,
limited liability company, bank, trust, unincorporated organization,
Governmental Body or other entity or group.
"Plans": As defined in Section 3.23 hereof.
"Proceeding": Any action, order, claim, suit, proceeding, litigation,
investigation, inquiry, review or notice.
"Prorated Expenses": As defined in Section 2.7 hereof.
"Purchase Price": As defined in Section 2.2 hereof.
"Purchaser Indemnitees": As defined in Section 8.2 hereof.
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"Securities Act": As defined in Section 3.37 hereof.
"Shareholder Release": As defined in Section 6.3(c) hereof.
"Stock": One Hundred Thousand (100,000) shares of common stock, no par value
per share, of the Company, which shares represent all of the issued and
outstanding shares of capital stock of the Company.
"Subordinated Note": The Subordinated Note substantially in the form of Exhibit
"C" attached hereto.
"Subsidiary" or "Subsidiaries": with respect to any corporation shall mean any
other corporation of which at least a majority of the securities having by their
terms ordinary voting power to elect a majority of the Board of Directors of
such other corporation is at the time directly or indirectly owned or controlled
by such first corporation, or by such first corporation and one or more of its
Subsidiaries.
"Summary Plan Descriptions": The summary plan descriptions and summary of
material modifications that include the information required by (S)102(b) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and that
are written in a manner calculated to be understood by the average Plan
participant, and that are sufficiently accurate and comprehensive to reasonably
apprise such participants and beneficiaries of their rights and obligations
under the Plans.
"Taxes": Any federal, state, local or foreign income, sales, excise, real or
personal property or other taxes, assessments, fees, levies, imposts, duties,
deductions or other charges of any nature whatsoever (including, without
limitation, interest and penalties) imposed by any law, rule or regulation.
"Third Party Consents": As defined in Section 5.6 hereof.
"Threatened": Any matter or thing will be deemed to have been "Threatened" when
used herein with respect to any party if that party has received notice, in
writing, from the Person to whom the threat is attributable, or such Person's
agents, which makes specific reference to and clearly identifies the matter or
thing being threatened.
"Transaction" or "Transactions": The sale and purchase of the Stock and the
performance of the other covenants and transactions described in this Agreement.
"Transaction Expenses": The expenses incurred in connection with the
preparation, negotiation, execution and performance of this Agreement and the
Transactions, including all fees and expenses of counsel and representatives.
Other defined terms shall have the meanings ascribed to such terms elsewhere
herein.
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2. MERGER
2.1 Terms of Merger . Subject to the terms and conditions set forth
herein, on the Closing Date, the Company shall be merged into Purchaser as
described below.
(a) Merger; Surviving Company. In accordance with the applicable
laws of the State of Texas, upon the effectiveness of the Merger the
separate existence of the Company shall thereupon cease, and Purchaser, as
the surviving corporation in the Merger (the "Surviving Corporation"),
shall continue its corporate existence under the laws of the State of
Texas. The Surviving Corporation shall possess all of the rights,
privileges, immunities, powers, franchises and authority, whether of a
public or of a private nature, and be subject to all restrictions,
disabilities and duties of each of the constituent corporations, and all
the rights, privileges, immunities, powers, franchises and authority of
each of the constituent corporations, and all assets and property of every
description, real, personal, and mixed, and every interest therein,
wherever located, and all debts or other obligations belonging or due to
either of the constituent corporations on whatever account, as well as
stock subscriptions and all other choses in action or every other interest
of or belonging to each of such corporations shall be vested in the
Surviving Corporation; and all property, rights, privileges, immunities,
powers, franchises and authority, and all other interests, shall be
thereafter as effectually the property of the Surviving Corporation as they
were of the constituent corporations; but all rights of creditors and all
Liens upon any property of either of the constituent corporations shall be
preserved unimpaired, and the Surviving Corporation shall be liable for the
obligations of each of the constituent corporations and any claim existing,
or action or proceeding pending, by or against either of the constituent
corporations may be prosecuted to judgment with right of appeal, as if the
Merger had not taken place. The directors, officers, articles of
incorporation and bylaws of the Surviving Corporation shall be those of
Purchaser.
(b) The Effective Date and Time. The Certificate of Merger shall be
filed with and recorded by the Secretary of State of Texas concurrently
with the Closing, and the Merger shall be effective at midnight, local
Dallas time, on the date of such filings.
2.2 Purchase Price and Terms. At the Closing, subject to the terms and
conditions of this Agreement, in consideration for Purchaser's acquisition of
the Stock pursuant to the Merger, Purchaser shall (a) pay to Shareholder the sum
of THREE HUNDRED SEVENTY-FIVE THOUSAND AND NO/100 DOLLARS ($375,000.00) by
delivering to Shareholder: (i) by certified or cashier's cash, the sum of TWO
HUNDRED TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($225,000.00); and (ii) the
Subordinated Note in the original principal amount of ONE HUNDRED FIFTY THOUSAND
AND NO/100 DOLLARS ($150,000.00); and (b) issue to Shareholder an aggregate of
185,000 shares of Common Stock, no par value per share of Communications World
International, Inc. (the "CWII Stock") ((a) and (b) above, collectively, the
"Purchase Price). The portion of the Purchase Price to be paid to each
shareholder of the Company
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shall be equal to their pro-rata share of the Stock. The Purchase Price shall be
subject to adjustment as provided in Section 2.5 below.
2.3 Merger Certificates. At the Closing, in addition to such other
instruments as shall be reasonably required in order to fully consummate the
merger, Shareholder and the Company shall deliver to Purchaser articles of
merger, and such other documents, all in form and substance satisfactory to
Purchaser and its legal counsel, as shall be necessary to consummate the Merger.
2.4 Further Assurances. At the Closing, and at all times thereafter as may
be reasonably necessary, Shareholder and the Company shall execute and deliver
to Purchaser such instruments of transfer as shall be reasonably necessary or
appropriate to vest in Purchaser title of the type specified herein to the
assets of the Company and to otherwise comply with the terms, purposes and
intent of this Agreement.
2.5 Closing Adjustments.
(a) Assumed Contracts and Assumed Payables. On or prior to Closing, the
Company shall pay in full, discharge and satisfy completely all Liabilities of
the Company, except for (i) contracts of the Company that are not in default,
entered into in the ordinary course of business and described on Schedule
2.5(a)(1) (the "Assumed Contracts"), and (ii) current trade payables in place at
Closing (for this purpose, a "current" trade payable shall mean an amount
outstanding in accordance with the normal payment cycle of the Company for that
particular vendor, but in no event more than thirty (30) days past invoice date)
entered into or incurred in the ordinary course of business through arm's length
transactions and described on Schedule 2.5(a)(2) (the "Assumed Payables");
provided, however, that Purchaser shall pay at Closing, on behalf of the
Company, the Liabilities described on Schedule 2.5(a)(3) and deduct such
payments from the cash portion of the Purchase Price payable at Closing;
provided, further that Assumed Payables shall not include that portion of
invoices received prior to or within ninety (90) days after the Closing Date
that relate to inventory for pending jobs to be installed and/or services for
pending jobs to be rendered by the Company after the Closing Date to the extent
that Purchaser is entitled to receive payment therefor and such portion of such
invoices shall not be required to be paid, discharged or satisfied by the
Company prior to Closing and shall be assumed and paid by Purchaser; provided,
however, that any such invoices received prior to the Closing Date shall be
described on Schedule 2.5(a)(2) under a heading entitled "Non-Assumed Payables."
Purchaser and Seller acknowledge and agree that the Assumed Payables described
on Schedule 2.5(a)(2) shall be revised by the parties within thirty (30) days
after Closing to reflect invoices received on or after the Closing Date that
relate to inventory installed and/or services rendered by the Company on or
prior to the Closing Date that Seller is entitled to receive payment for
pursuant to Section 2.5(b) below. Any such invoices that relate to inventory
installed and/or services rendered prior to and after the Closing Date shall be
allocated between Purchaser and Seller in good faith and to the extent that any
such disagreements have not been resolved prior to the expiration of the
Resolution Period (hereinafter defined ), such disputes shall be resolved in
accordance with the procedures set forth in Section 2.5(b) below.
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(b) Adjustment Period. For a period of ninety (90) days after Closing
(the "Adjustment Period"), Purchaser shall collect (i) all Accounts existing as
of the day immediately prior to the Closing Date (for this purpose, Accounts
existing as of the date immediately prior to Closing shall mean that at Closing
the subject invoice giving rise to the Account has been deposited in the U.S.
Mail in accordance with normal business practices) and described on Schedule
2.5(b) (the "Pre-Closing Receivables"), and (ii) all Accounts arising on and
after the Closing Date and relating, either in whole or in part, to products
sold and services provided by the Company prior to 5:00 p.m. (Dallas time) on
the Closing Date (the "Post-Closing Receivables"). Within five (5) business days
after the Closing Date, Seller shall provide Purchaser with a proposed list (the
"Proposal") of Post-Closing Receivables and the percentage of each such Post-
Closing Receivable relating to the period prior to 5:00 p.m. (Dallas time) on
the Closing Date ("Seller's Portion"). Purchaser shall review the Proposal and
provide Seller with any objections or proposed changes thereto within five (5)
business days after Purchaser's receipt of the Proposal. For a period of
fourteen (14) days after Seller's receipt of Purchaser's objections and proposed
changes to the Proposal, (the "Resolution Period"), Seller and Purchaser shall
negotiate in good faith the resolution of any objections or proposed changes of
Purchaser with respect to the Proposal. If Purchaser and Seller shall fail to
reach an agreement with respect to any objection or proposed change to the
Proposal prior to the expiration of the Resolution Period, then all such
disputed objections or changes shall, not later than five (5) business days
after the earlier to occur of (i) the expiration of the Resolution Period, or
(ii) the date one of the parties affirmatively terminates discussions in writing
with respect to such objections or changes, be submitted for resolution to the
Dallas office of an impartial certified public accounting firm (the
"Accountants") selected by Purchaser and Seller. If Purchaser and Seller cannot
agree on the selection of the Accountants within such five (5) business day
period, then Purchaser and Seller shall each have the right to request the
American Arbitration Association to appoint as the Accountants a certified
public accounting firm that has not had a material relationship with Seller,
Purchaser or the Affiliates of either of them within the preceding five (5)
years. Seller and Purchaser agree to execute, if requested by the Accountants,
an engagement letter and shall share equally the cost of the Accountants. Seller
and Purchaser shall use their reasonable efforts to cause the report of the
Accountants, which shall be in the form of a written statement addressed and
delivered to Purchaser and Seller, to be rendered within thirty (30) days after
the Accountants' appointment. Seller and Purchaser shall request the Accountants
to act as an arbitrator to determine, based solely on presentations by Purchaser
and Seller, and not by independent review, only those issues still in disputes;
provided, however, that the role and the scope of investigation of the
Accountants may be modified by Seller and Purchaser in the event that the
Accountants would otherwise refuse such engagement. The Accountants'
determination as to the appropriateness and extent of such changes (if any) to
the Proposal shall be final and binding on the parties thereto.
(c) Payment to Seller. Within fourteen (14) days after the last to occur
of (i) the ninetieth (90th) day after the Closing Date, and (ii) the final
resolution of any objections or proposed changes with respect to the Proposal
and the Assumed Payables, Purchaser shall pay to Seller the excess, if any, by
which the sum of (i) the Pre-Closing Receivables, and (iii) Seller's Portion of
the Post Closing Receivables collected by Purchaser during the Adjustment Period
exceed the
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Assumed Payables. Seller and Purchaser shall use their best efforts to collect
any Pre-Closing Receivables and Seller's Portion of the Post-Closing Receivables
not collected by Purchaser during the Adjustment Period and such funds shall be
promptly paid by Purchaser to Seller after collection, provided that the
aggregate of the Pre-Closing Receivables and Seller's Portion of the Post-
Closing Receivables collected by Purchaser exceed the Assumed Payables and
Purchaser does not otherwise have any claims or offset rights against such
monies.
(d) Deduction from Note. If, at the end of the Adjustment Period, the
Assumed Payables paid by Purchaser during the Adjustment Period exceed the Pre-
Closing Receivables and Seller's Portion of the Post-Closing Receivables
collected by Purchaser during the Adjustment Period, Purchaser shall deduct such
excess from the principal amount of the Subordinated Convertible Promissory
Notes payable to Seller.
(e) Other Accounts. All Accounts of the Company, other than the Pre-
Closing Receivables and Seller's Portion of the Post-Closing Receivables, shall
be collected after Closing by Purchaser for its own account and Seller shall
have no claim or interest therein.
3. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
Shareholder and the Company hereby jointly and severally represent and
warrant to Purchaser that the following are true and correct as of the date of
this Agreement and will be true and correct (without limitation) through the
Closing Date, regardless of what investigations, if any, Purchaser shall have
made prior hereto or prior to Closing:
3.1 Transfer of and Title to Stock. Shareholder and ▇▇▇▇▇ ▇▇▇▇▇ have good
and marketable title to all shares of the Stock and are the sole record and
beneficial owners thereof. Shareholder has the full legal right, power, capacity
and authority to enter into this Agreement and transfer, convey and sell the
Stock by operation of law to Purchaser at Closing, and upon consummation of the
Merger, Shareholder and ▇▇▇▇▇ ▇▇▇▇▇ will transfer to Purchaser by operation of
law good and marketable title to the Stock, free and clear of all Liens.
3.2 Organization; Qualification. The Company (a) is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its formation or existence, (b) has all requisite power and authority to own and
lease all of the properties and assets it now owns and leases and to carry on
its businesses as now being conducted, and (c) is duly qualified or licensed to
do business as a foreign corporation and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary.
3.3 Authority Relative to this Agreement. The Company and Shareholder have
full power and authority (corporate and otherwise) to execute, deliver and
perform this Agreement (including, without limitation, execution, delivery and
performance of the Operative Documents to which each of them is a party) and to
consummate the Transactions. The execution and delivery by Shareholder and the
Company of this Agreement and the Operative Documents, and the
8
consummation of the Transactions, have been duly and validly authorized by the
Company and Shareholder and no other actions on the part of the Company and
Shareholder are necessary with respect thereto. This Agreement and the Operative
Documents have been duly and validly executed and delivered by the Company and
Shareholder, and constitute the legal, valid and binding obligations of
Shareholder and the Company, enforceable against them in accordance with its
terms. The Company will take all corporate action that is necessary for the
Company to complete the Transactions pursuant to this Agreement.
3.4 Capitalization.
(a) The authorized capital stock of the Company consists solely of one
hundred thousand (100,000) shares of common stock, no par value per share,
of which one hundred thousand (100,000) shares are issued and outstanding.
As of the date hereof, the shares of Stock are the only shares of capital
stock of the Company outstanding. All such outstanding shares of Stock
have been duly authorized and validly issued and are fully paid and
nonassessable. There are no outstanding options, warrants, rights,
subscriptions, claims of any character, agreements, obligations,
convertible or exchangeable securities or other commitments, contingent or
otherwise, relating to the capital stock of the Company, pursuant to which
the Company is or may become obligated to issue or exchange any share of
capital stock. There is not now nor has there ever been any Person who
holds shares of capital stock of the Company other than the Shareholders.
(b) Other than as set forth on Schedule 3.34 attached hereto, there is
no outstanding subscription, option, warrant, call, right, agreement or
commitment (including any right of conversion or exchange under any
outstanding security or other instrument) entitling any person to purchase
or otherwise acquire from Shareholder or the Company any capital stock of
the Company or any security convertible into or exchangeable therefor, or
any other right to acquire, any capital stock of the Company or relating to
the issuance, sale, delivery or transfer of Stock by Shareholder or the
Company. Other than as set forth on Schedule 3.34 attached hereto, there
are no outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any of its outstanding of the Company to
repurchase, redeem or otherwise acquire any of its outstanding capital
stock.
3.5 Consents and Approvals. Except as set forth on Schedule 3.5, the
execution, delivery and performance by Shareholder and the Company of this
Agreement and the Operative Documents and the consummation of the Transactions
by them requires no consent, approval, order or authorization of, action by or
in respect of, or registration or filing with, any Governmental Body or other
Person.
3.6 No Violations. The execution, delivery and performance of this
Agreement and the Operative Documents by Shareholder and the Company, the
consummation by Shareholder and the Company of the Transactions and compliance
by Shareholder and the Company with the provisions hereof does not and will not
(a) conflict with or result in any breach or violation of any provision of the
Articles of Incorporation or Bylaws of the Company, (b) result in a default, or
give rise to any
9
right of termination, cancellation or acceleration or loss under any of the
provisions of any note, bond, mortgage, indenture, license, trust, agreement,
lease or other instrument or obligation to which Shareholder or the Company are
a party or by which Shareholder or the Company may be bound, (c) result in the
creation or imposition of any Lien on any of the property of Shareholder or the
Company, (d) violate any Order, statute, rule or regulation applicable to
Shareholder or the Company, or (e) violate any territorial restriction on the
Company or Shareholder or any noncompetition or similar arrangement.
3.7 Title to and Condition of Assets and Property. Except as specifically
set forth on Schedule 3.7, the Company has good and marketable title to all its
properties and assets (real and personal, tangible and intangible), such
properties and assets are free and clear of all Liens, and such properties and
assets are in good operating condition and a state of good maintenance and
repair and are sufficient to conduct the Company's operations after Closing in
the ordinary course of business and consistent with past practices.
3.8 Inventory. Except as set for on Schedule 3.8, the Company has good
title to all inventory reflected on the Financial Statements and all inventory
purchased or created since the date of the Financial Statements (other than
inventory disposed of since such date in the ordinary course of business
consistent with past practices), free and clear of all Liens. The inventory is
adequate for the conduct of the Company's operations. The inventory levels are
not in excess of the normal operating requirements of the Company. The value at
which the inventory is carried on the Financial Statements reflects the normal
inventory policies of the Company and has been determined in accordance with
generally accepted accounting principles. Except as set forth on Schedule 3.8,
all inventory is or will be at Closing, located at the Company's offices at ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. The Company is under no obligation to
repurchase any inventory previously sold in connection with the operation of the
Company.
3.9 Distributors and Suppliers. Except as set forth on Schedule 3.9, the
Company is not involved in any controversy with any of the distributors,
customers, or suppliers of the Company. Schedule 3.9 lists all distributors,
customers and suppliers which, as of date of the Financial Statements and for
the period then ended, accounted for five percent (5%) or more of (i) the
Company's revenues, and (ii) purchases of products, supplies, equipment or parts
used exclusively in connection with the operation of the Company.
3.10 Product Warranties. Schedule 3.10 contains the forms of express product
and service warranties and guaranties which have been used by the Company.
Except as set forth on Schedule 3.10, the Company has not offered any materially
different forms of express product warranties and guaranties. To the Company's
and the Shareholder's Best Knowledge, no events have occurred or facts exist
which could result in a material increase to the Company's product warranty
expenses.
3.11 Investigation or Litigation. Except as set forth on Schedule 3.11,
there is no Proceeding pending or, to the Company's and the Shareholder's Best
Knowledge, Threatened against, relating to or affecting the Company. The Company
is not subject to any currently existing
10
Proceeding by any Governmental Body. There is no basis for the assertion of any
Proceeding by any Governmental Body or any Person regarding any violation of
federal or state laws.
3.12 Taxes. All Taxes that are due and payable by the Company, other than
those presently payable without penalty or interest, have been timely paid, and
the Company has timely filed (and, through the Closing Date, will timely file)
all Tax reports and returns required by law to be filed by them. All such Tax
reports and returns are true, complete and correct in all respects with regard
to the Company for the periods covered thereby. The Company is not delinquent in
the payment of any Tax. There is no Tax deficiency asserted against the Company,
and there is no unpaid assessment, proposal for additional Taxes, deficiency or
delinquency in the payment of any of the Taxes of the Company or any violation
of any Tax law that could be asserted by any taxing authority. There are no Tax
Liens upon any properties or assets of the Company nor has notice been given of
any event which could lead to any such Lien. No Internal Revenue Service, state
or local, audit, investigation or Proceeding of the Company is pending or
Threatened, and the results of any completed audits are properly reflected in
the Financial Statements. The Company has not granted any extension to any
taxing authority of the limitation period during which any Tax Liability may be
asserted. The Company has not committed any violation of any Tax laws. All
monies required for the payment of Taxes not yet due and payable with respect to
the operations of the Company through and including the Closing Date have been
approved, reserved against and entered upon the books and Financial Statements.
All monies required to be withheld by the Company from employees, if any,
independent contractors, or others or collected from customers for income taxes,
social security and unemployment insurance taxes and sales, excise and use
taxes, and the portion of any such taxes to be paid by the Company to
governmental agencies or set aside in accounts for such purpose have been
approved, reserved against and entered upon the books and Financial Statements.
3.13 No Brokers. Shareholder have not employed any broker, agent, or finder
or incurred any Liability for any brokerage fees, commissions or finders' fees
in connection with the Transactions.
3.14 Accounts. Schedule 3.14 contains a complete and accurate list of all
the Company's Accounts as of September 30, 1999, showing the name of each
account debtor and the amount due from each by invoice number and date. All of
such Accounts have arisen in the ordinary course of business for services
rendered or products sold. Except as set forth on Schedule 3.14, there is no
event or condition with respect to a specific customer that will cause such
Accounts to not be collected in full in due course without resort to litigation
and such Accounts will not be subject to counterclaim or setoff.
3.15 Insurance. All the insurance policies maintained by the Company are in
full force and effect, all insurance premiums have been timely paid to date, and
no such policy will be canceled prior to Closing. A description of the Company's
insurance policies (including, without limitation, insurance providing benefits
for employees) is attached hereto as Schedule 3.15. The insurance policies set
forth on Schedule 3.15 provide adequate coverage, less deductibles, against the
risks involved in the operation of the Company.
11
3.16 Contracts; Oral Commitments; Defaults. Schedule 3.16 sets forth a true
and correct list of all contracts and agreements of the Company (or summaries of
all oral commitments) and the Company has provided true, correct and complete
copies of such contracts and agreements to Purchaser prior to the date hereof.
There exists no breach or default under any of such contracts and no event
exists which, with the like giving of notice, passage of time, or happening of
any other event, would constitute a breach or default under such contract.
3.17 Corporate Matters. The Board of Directors and shareholders of the
Company have approved the execution and delivery of this Agreement and the
consummation of the Transactions contemplated hereby in accordance with
applicable law.
3.18 Permits. Schedule 3.18 lists all Permits held by the Company. Such
Permits are valid, and neither the Company nor Shareholder have received any
notice that any Governmental Body intends to cancel, terminate or not renew any
such Permit. The Company holds all licenses, franchise, permits and other
governmental authorizations required by any Governmental Body or any Order. The
Company is not being conducted, in violation of any statute, law, ordinance,
regulation, rule or Permit of any Governmental Body or any Order.
3.19 Compliance with Laws. The Company has complied with and is in compliance
with all federal, state, local and foreign statutes, laws, ordinances,
regulations, rules, permits, judgments, orders or decrees applicable to the
Company or any of its properties, assets, operations and businesses, and there
does not exist any basis for any claim or default under or violation of any such
statute, law, ordinance, regulation, rule, judgment, order or decree.
3.20 Corporate Name. The Company's use of the Company's corporate name and
any assumed names used by the Company, do not infringe upon the right of any
third party.
3.21 Disclosure.
(a) Shareholder have delivered or made available to Purchaser complete
and accurate copies of all documents listed on the Disclosure Schedules
delivered as a part hereof and all other information requested by Purchaser
pursuant hereto. No representation or warranty of Shareholder contained in
this Agreement or any statement in the Disclosure Schedules hereto contains
any untrue statement. No representation or warranty of Shareholder contained
in this Agreement or statement in the Disclosure Schedules hereto omits to
state a material fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading.
(b) There is no facts known to Shareholder which have specific
application to Purchaser and which could have a Material Adverse Effect on the
Company but which has not been set forth in this Agreement or the Disclosure
Schedules hereto.
3.22 Employee Matters. Schedule 3.22 contains a list of the names and current
aggregate annual cash compensation and identifies the other material benefits
with respect to
12
salaried employees, of each employee of the Company expected to be hired by
Purchaser and any employment contracts, secrecy or confidentiality agreements,
or noncompetition agreements to which the Company is a party. Except as set
forth on Schedule 3.22, no labor organization, collective bargaining
representative, or group represents or, to Shareholder' Best Knowledge, claims
to represent any of the Company's present employees, and except as set for on
Schedule 3.22, the Company has no collective bargaining or employment or
consulting agreements with any consultants or employees of the Company. As set
forth on Schedule 3.22, with respect to employees of the Company, (a) there is
no labor strike, work stoppage, organized slowdown, or lockout actually pending
or, to the Best Knowledge of Shareholder, Threatened against or affecting the
Company and no such action has been pending; (b) to the Best Knowledge of
Shareholder, no union organization campaign is in progress and no question
concerning representation exists; (c) the Company is in compliance in all
material respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment, and wages and hours, and is not
engaged in any unfair labor practice; (d) there is no unfair labor practice
charge or complaint against the Company pending or, to the Best Knowledge of
Shareholder, Threatened before the National Labor Relations Board; (e) there is
no pending or, to the Best Knowledge of Shareholder, Threatened grievance before
any Governmental Body; and (f) (i) no charges with respect to or relating to the
Company are pending or, to Shareholder' Best Knowledge, Threatened before the
Equal Employment Opportunity Commission or any state or local agency responsible
for the prevention of unlawful employment practices; and (ii) the Company has
received no notice of the intent of any federal or other Governmental Body
responsible for the enforcement of labor or employment laws to conduct an
investigation with respect to or relating to the Company, and no such
investigation is in progress.
3.23 Plans. Schedule 3.23 sets forth a complete and accurate description of
all employee benefit plans and all collective bargaining agreements relating to
employee benefits with respect to which the Company or any of its predecessors
contributes or is required to contribute and has or may incur any future or
contingent obligations, including, without limitation, all plans, agreements or
arrangements relating to deferred compensation, pension, profit sharing,
retirement income or other benefits, stock purchase and stock option plans,
bonuses, severance arrangements, health benefits, insurance benefits, welfare
benefits and all other material employee benefits or fringe benefits
(collectively referred to as the "Plans"). Except as set forth on Schedule 3.23:
(a) true, correct and complete copies of each Plan, all related Summary Plan
Descriptions and material employee communications, related trust agreements or
annuity contracts (or any other funding instruments), annual reports on the Form
5500 series required to be filed with any governmental agency for each Plan for
the two most recent Plan years and the most recent actuarial reports and
trustee's reports relating thereto (if applicable) have been furnished to
Purchaser; (b) each Plan has been administered and operated in accordance with
its terms and applicable law, and to the extent applicable, each Plan is
"qualified" within the meaning of Section 401(a) of the Code and each related
trust is exempt from tax under Section 501(a) of the Code; (c) each qualified
Plan has been amended to conform to the requirements of all applicable federal
statutes and regulations, and no Liability under any applicable law has been
incurred with respect to any Plan; (d) all reports and disclosures relating to
such Plans required to be filed with any agency of the federal, state or local
13
government or distributed to employees or beneficiaries have been or will be
properly and timely filed or distributed in compliance with applicable law; (e)
the Company does not maintain and has not been maintaining a "defined
contribution plan" or has incurred any Liability with respect to such a plan;
and (f) full payment has been made of all amounts which were required under the
terms of any of the Plans to have been paid as a contribution to such Plan.
3.24 Transactions with Affiliates. Schedule 3.24 contains a complete
and accurate description of all contracts, agreements and other arrangements
(whether written, oral, express or implied) between the Company and any
Affiliate of the Company.
3.25 Financial Statements. Attached to Schedule 3.25 are true,
complete and correct copies of the balance sheet of the Company as of December
31, 1998 and July 31, 1999, and the related statements of income, and changes in
shareholder's equity and net worth for the periods then ended of the Company
(the "Financial Statements") provided by Shareholder to Purchaser. The Financial
Statements are true, complete and correct, have been prepared in conformity with
generally accepted accounting principles consistently applied, present fairly
the financial position of the Company at the respective dates indicated and do
not omit to state or reflect any material fact concerning the Company required
to be stated or reflected therein or necessary to make the statements therein
not misleading, and shall be accompanied by an unqualified opinion audit report
of an independent accounting firm engaged at Shareholder' sole cost and expense.
3.26 Undisclosed Liabilities. The Company does not have any
Liabilities and there are no claims against the Company for any Liabilities,
except as disclosed in the Financial Statements or incurred subsequent to the
date of the Financial Statements in the ordinary course of business not
involving borrowing by the Company.
3.27 Leases. Schedule 3.27 contains an accurate and complete list and
description of the terms of all real and personal property leases to which the
Company is a party (as lessee or lessor). Each lease set forth on Schedule 3.27
(or required to be set forth on Schedule 3.27) is in full force and effect; all
rents and additional rents due to date on each such lease have been paid; in
each case, the lessee has been in peaceable possession since the commencement of
the original term of such lease and is not in default thereunder and no waiver,
indulgence or postponement of the lessee's obligations hereunder has been
granted by the lessor; and there exists no event of default or event,
occurrence, condition or act (including the purchase of the Stock hereunder)
which, with the giving of notice, the lapse of time or the happening of any
further event or condition, would become a default under such lease. The Company
has not violated any of the terms or conditions under any such lease in any
material respect, and, to the Best Knowledge of the Company, all of the
covenants to be performed by any other party under any such lease have been
fully performed. Any property leased by the Company is in a state of good
maintenance and repair and is adequate and suitable for the purposes for which
it is presently being used.
3.28 Real Property. Schedule 3.28 contains an accurate and complete
list of all real property owned in whole or in part by the Company and includes
the name of the record title holder thereof and a list of all indebtedness
secured by a lien, mortgage or deed of trust thereon. The
14
Company has good and marketable title in fee simple to all the real property
specified as owned by it on Schedule 3.28 (or required to be set forth on
Schedule 3.28), free and clear of all Liens. All of the buildings, structures
and appurtenances situated on the real property listed on Schedule 3.28 (or
required to be set forth on Schedule 3.28) are in good operating condition and
in a state of good maintenance and repair, are adequate and suitable for the
purposes for which they are presently being used and with respect to each, the
Company has adequate rights of ingress and egress in the ordinary course. None
of such buildings, structured or appurtenances (or any equipment therein), nor
the operation or maintenance thereof, violates any restrictive covenant or any
provision of any federal, state or local law, ordinance, rule or regulation, or
encroaches on any property owned by others. Except as set forth on Schedule
3.28, no condemnation proceeding is pending, or to the Best Knowledge of
Shareholder, Threatened which would preclude or impair the use of any such
property by the Company for the purposes for which it is currently used.
3.29 Environmental Matters.
(a) Compliance Generally. The Company complied and is in material
compliance with all Environmental Requirements.
(b) Claims. The Company has not received any claim, complaint,
citation, report or other notice regarding any liabilities or potential
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or corrective
obligations, arising under the Environmental Requirements.
(c) Certain Environmental Liabilities. The Company has not
stored, disposed of, arranged for or permitted the disposal of,
transported, handled or released any substance, including, without
limitation, any hazardous substance, pollutant, contaminant or waste,
or owned or operated any facility or property, so as to give rise to
Liabilities of the Company pursuant to the Environmental Requirements,
including, without limitation, any Liability of response costs,
corrective action, natural resources damages, personal injury, property
damage or attorneys fees.
(d) Operations. The Company has taken no action relating to the
past or present facilities, properties or operations of the Company
that will prevent, hinder or limit continued compliance with the
Environmental Requirements, give rise to any investigatory, remedial or
corrective obligations pursuant to the Environmental Requirements, or
give rise to any other Liabilities pursuant to the Environmental
Requirements, including any Environmental Requirements relating to
onsite or offsite releases or threatened releases of hazardous or
otherwise regulated materials, substances or wastes, personal injury,
property damages or natural resources damage.
(e) Liability for Others. The Company has not, either expressly or
by operation of law, assumed or undertaken any Liability or corrective
or remedial obligations of any other Person relating to Environmental
Requirements.
15
3.30 Intellectual Property. The operation of the Company, in the ordinary
course and as presently conducted, requires no rights under Intellectual
Property (as hereinafter defined) other than rights related to Intellectual
Property owned by the Company and listed on Schedule 3.30. Except as set forth
on Schedule 3.30, all licenses or similar agreements listed on Schedule 3.30 are
in full force and effect. Except as otherwise set forth on Schedule 3.30, with
respect to Intellectual Property which is owned by the Company, the Company owns
all right, title and interest in such Intellectual Property, including, without
limitation, exclusive rights to use and license the same to third parties.
Except as set forth on Schedule 3.30, during the past seven (7) years no claim
adverse to the interests of the Company in the Intellectual Property has been
made. To the Best Knowledge of Shareholder, except as set forth on Schedule
3.30, no such claim has been Threatened, no valid basis exists for any such
claim and no person has infringed or otherwise violated the Company's rights in
any of the Intellectual Property. Neither the execution of this Agreement and
the Operative Documents nor the consummation of the Transactions will materially
adversely alter or materially impair the rights of the Company to use any of the
Intellectual Property listed on Schedule 3.30.
3.31 Bank Accounts and Powers of Attorney. Set forth on Schedule 3.31 is an
accurate and complete list showing (a) the name and address of each bank in
which the Company has an account or safe deposit box, the number of any such
account or any such box and the names of all persons authorized to draw thereon
or to have access thereto, and (b) the names of all persons, if any, holding
powers of attorney from the Company and a summary statement of the terms
thereof.
3.32 Knowledge of Shareholder. Where any representations or warranty contained
in this Article III is expressly qualified by reference to the Best Knowledge of
Shareholder, Shareholder, who are officers of the Company, confirm that, as to
the matters that are the subject of such representations and warranties, they
have made suitable inquiries of the appropriate responsible Company employees
and have made a suitable review of appropriate corporate records and documents
within their possession or control, and Shareholder who are directors of the
Company confirm that, as to matters that are the subject of such representations
and warranties, they have made a suitable review of appropriate corporate
records and documents which have been furnished to them or are otherwise within
their possession or control.
3.33 Inspection Does Not Affect Warranties. The representations and warranties
of Shareholder contained in this Agreement shall in no way be abridged, reduced,
waived, be considered fulfilled or otherwise be affected by any examination or
inspection made by Purchaser at any time.
3.34 Rights and Assets. The Company shall receive at Closing all tangible and
intangible rights and assets necessary for the Company to operate the Company's
business after Closing in the same manner as the business of the Company was
conducted prior to Closing.
3.35 Absence of Certain Changes. Since the date of Financial Statements, there
has been no material adverse change in the assets or liabilities, or in the
results of operations of the
16
Company, and, to the Best Knowledge of Shareholder, no fact or condition (other
than general economic conditions) exists or is contemplated or Threatened which
might cause such a change in the future. Except as set forth on Schedule 3.35,
since the date of the Financial Statements, the Company has not, (a) incurred,
or assumed or become subject to, whether directly or by way of guarantee or
otherwise, any material Liability, (b) permitted any of its assets to be
subjected to any Lien, (c) sold, transferred or otherwise disposed of any
assets, except in the ordinary course of business, (d) made any material capital
expenditure, additions to property, plant or equipment or acquisition of other
property or assets or commitment therefor, (e) declared or paid any dividend or
made any distribution on any shares of its capital stock, or redeemed, purchased
or otherwise acquired any shares of its capital stock or any option, warrant or
other right to purchase or acquire any shares, (f) made any bonus or profit
sharing distribution or payment of any kind, (g) increased its indebtedness for
borrowed money or made any loan to any party, (h) written off as uncollectible
any notes or accounts receivable, (i) granted any increase in the rate of wages,
salaries, bonuses or other remuneration of any executive employee or other
employees, except in the ordinary course of business, (j) canceled or waived any
debts, claims or rights or material value, (k) made any change in any method of
accounting or auditing practice, (l) suffered any damage, destruction or loss
materially adversely affecting the properties or assets of the Company, (m) made
any change or amendment in its Articles of Incorporation or Bylaws or other
governing instruments, (n) issued or sold any of its capital stock or redemption
or otherwise, any such capital stock, reclassified, split up or otherwise
changed any such capital stock or granted or entered into any options, warrants,
calls or commitments of any kind with respect thereto, (o) paid, discharged or
satisfied any Liabilities, other than in the ordinary course of business, (p)
prepaid any material obligations having a maturity of more than ninety (90) days
from the date such obligation was issued or incurred, (q) disposed of or
permitted to lapse any rights to the use of any material patent, trademark,
copyright, license or other intellectual property owned or used by it, (r)
entered into any collective bargaining or union contract or agreement, (s)
incurred any material Liability required by generally accepted accounting
principles to be reflected on a balance sheet, other than in the ordinary course
of business, or (t) agreed, whether or not in writing, to do any of the
foregoing. As used in this Section 3.35 the reference to "material" Liabilities,
assets, capital expenditures or values of claims or rights shall mean such items
individually or in the aggregate in excess of $5,000.00.
3.36 Books and Records. The minute books and other corporate records of the
Company, as previously made available to Purchaser and its representatives,
constitute all of the minute books and other corporate records of the Company
and such corporate records of the Company and such books and records contain
accurate records of all meetings of and corporate actions or written consents by
the respective shareholders and Board of Directors of the Company and the
subsidiaries. The Company does not have any of its respective records, systems,
controls, data or information recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Company.
17
3.37 Understanding that CWII Shares Will Be Issued Without Registration.
Shareholder understands that the CWII Shares will be issued without registration
under the Securities Act of 1933, as amended (the "Securities Act"), in reliance
upon certain exemptions from registration under the Securities Act including,
without limitation, the safe harbor provided by Regulation D promulgated under
the Securities Act. Shareholder further understands that such exemptions depend
in part upon, and such shares will be issued in reliance on the representations
and warranties made by Shareholder in this Section 3.37. Accordingly,
Shareholder represents and warrants to Purchaser, as of the date of this
Agreement and as of the Closing Date as follows:
(a) Investment Intent. Shareholder will acquire the CWII Shares for
their own account for investment purposes only and not with a view to
resale or other distribution thereof, in whole or in part and Shareholder
will not assign, sell, hypothecate or otherwise transfer any of the CWII
Shares unless (i) a registration statement is in effect under the
Securities Act and all applicable state securities laws with respect to the
CWII Shares, (ii) a written opinion of counsel acceptable to Purchaser is
obtained to the effect that no such registration is required, or (iii) such
transfer is effected in accordance with Rule 144 promulgated under the
Securities Act.
(b) Investor Awareness. Shareholder acknowledges, agrees and is aware
that: (i) no federal, state or any foreign agency has made any finding or
determination as to the fairness of an investment in the CWII Shares; (ii)
there are substantial restrictions on the transferability of the CWII
Shares; (iii) the CWII Shares have not been registered under the Securities
Act or under the securities laws of any other jurisdiction; (iv) an offer
or sale of any of the CWII Shares by Shareholder in the absence of
registration under the Securities Act will require the availability of an
exemption thereunder; and (v) a restrictive legend shall be placed on the
certificates representing the CWII Shares and in the appropriate records of
Purchaser indicating that the CWII Shares are subject to restrictions on
transfer.
3.38 Receipt of Information; Access to Information. Shareholder
acknowledges that they:
(a) have been given the opportunity to ask questions of, and receive
answers from, Purchaser and its officers and employees concerning the terms
and conditions of their acquisition of the CWII Shares and other matters
pertaining to an investment in the CWII Shares, have been given the
opportunity to obtain such additional information necessary to evaluate the
merits and risks of acquiring the CWII Shares to the extent Purchaser
possesses such information, and have received all documents and information
that they have requested relating to an investment in the CWII Shares;
18
(b) have not relied upon any representations or other information
(whether oral or written) from Purchaser or its directors, officers or
Affiliates, or from any other persons, other than the representations of
Purchaser made in this Agreement;
(c) are familiar with the nature of and risks attendant to investments
in the business of Purchaser and securities in general and have carefully
considered and have, to the extent they believe such discussion necessary,
discussed with their professional legal, financial and tax advisers the
suitability of an investment in the CWII Shares for their particular
financial and tax situation and have determined that the CWII Shares are a
suitable investment for them; and
(d) have made, and are solely responsible for making, their own
independent evaluation of the economic and other risks involved in his
investment in the CWII Shares and their own independent decision to make
such investment.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Shareholder that the following are
true and correct as of the date of this Agreement and will be true and correct
through the Closing Date, regardless of what investigations, if any, Shareholder
shall have made prior hereto or prior to the Closing:
4.1 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas.
4.2 Authority Relative to this Agreement. Purchaser has full power and
authority (corporate and otherwise) to execute, deliver and perform this
Agreement (including, without limitation, execution, delivery and performance of
the Operative Documents to which it is a party) and to consummate the
Transactions. The execution and delivery by Purchaser of this Agreement, and the
consummation of the Transactions, have been duly and validly authorized by the
Board of Directors of Purchaser and no other corporate proceedings on the part
of Purchaser are necessary with respect thereto.
4.3 Consents and Approvals. Except as set forth in or otherwise required
by this Agreement or the Operative Documents, the execution, delivery and
performance by Purchaser of this Agreement and the consummation of the
Transactions by it requires no consent, approval, order or authorization of,
action by or in respect of, or registration or filing with, any Governmental
Body or other Person.
4.4 No Brokers. Purchaser has not employed any broker, agent or finder or
incurred any Liability for any brokerage fees, commissions or finders' fees in
connection with the Transactions.
19
5. ADDITIONAL AGREEMENTS
5.1 Conduct of the Company. After the date hereof and prior to the Closing
Date, Shareholder shall cause the Company to conduct its operations according to
its normal course of business to preserve its business organization, keep
available the services of its employees and independent contractors, maintain
satisfactory relationships with Governmental Bodies, suppliers, customers and
all others having business relationships with the Company and continue to
service and maintain all of its respective assets in a manner consistent with
past practices. All risk of loss arising out of fire and casualty and all
Liability to third parties arising out of the operations of the Company prior to
the Closing Date shall be that of Shareholder, and Purchaser shall have no
obligation or Liability in connection therewith.
5.2 Forbearances by Shareholder. Shareholder covenant that except as
contemplated by this Agreement, Shareholder shall not, after the date hereof and
prior to the Closing Date, without the prior written consent of Purchaser,
permit the Company to:
(a) change or amend its Articles of Incorporation or Bylaws (or other
similar documents);
(b) issue, encumber, sell or otherwise dispose of any shares of its
capital stock or any other securities (except upon the exercise of
currently outstanding options), pledge or agree to pledge any capital stock
or other securities owned by it, acquire directly or indirectly, by
redemption or otherwise, any such capital stock, reclassify, combine or
split up any such capital stock or grant or enter into any options,
warrants, calls or commitments of any kind with respect thereto;
(c) declare, set aside or pay any dividend payable in cash, stock or
property, or make any other distribution with respect to its capital stock
or redeem or otherwise acquire any of its securities;
(d) except in the ordinary course of business, incur or assume any
debt, or assume, guarantee or otherwise become liable or responsible for
the obligations of any other person or make any loans, advances or capital
contributions to, or investments in, any other person or entity, or grant
any security interest on any properties or assets of the Company;
(e) merge or consolidate with any other person or entity, or organize
any new subsidiary or other person or entity, acquire any capital stock or
other equity securities or all or substantially all of the assets of any
person or entity or acquire any equity or other ownership interest in any
business or person or entity;
(f) cancel any debt or waive any claim or right or cancel any debts or
waive any claims or rights;
20
(g) transfer, lease, license, sell, mortgage, pledge, dispose of or
encumber any of its properties or assets, other than property disposed of
in the ordinary course of business consistent with past practice;
(h) grant any increase in the compensation payable or to become
payable by the Company or enter into any new employment agreement,
severance agreement or other contract or arrangement with respect to the
performance of personal services, or adopt any new, or amend or otherwise
increase the amounts payable or to become payable under any existing,
bonus, incentive compensation, deferred compensation, profit sharing, stock
option, stock purchase, insurance, pension, retirement, health insurance or
other employee benefit plan (including, without limitation, the granting of
stock options, stock appreciation rights or restricted stock awards);
(i) change or alter the manner in keeping books, accounts or records
of the Company or change accounting principles or methods;
(j) enter into any agreement with any person or entity involving or
reasonably likely to involve an expenditure by the Company in excess of
$5,000.00.
(k) make any capital expenditure or acquire any property or assets
(other than inventory) for a cost in excess of $5,000.00 in the aggregate;
(l) enter into any agreement that materially restricts the Company
from carrying on its business;
(m) pay, discharge or satisfy any material Liability, other than
payment, discharge or satisfaction in the ordinary course of business of
Liabilities or obligations incurred in the ordinary course of business and
consistent with past practice;
(n) enter into or amend any lease of real or personal property; or
(o) write-off as uncollectible any notes or Accounts.
5.3 No Solicitation. Shareholder covenant and agree that they will not and
will not permit any of its agents or representatives (including, without
limitation, investment bankers, attorneys and accountants) to, directly or
indirectly (a) solicit, initiate or encourage submission of proposals or offers
by, or (b) furnish any information with respect to or otherwise cooperate in any
way with, or participate in any discussions or negotiations with, any Person
with respect to any proposal regarding the acquisition or purchase of all or a
material portion of the assets of the Company or any equity interest in the
Company or any business combination with the Company.
5.4 Investigation of the Company. Prior to the Closing Date, Purchaser may
make or cause to be made such investigation of the Company and of its financial
and legal condition as appropriate or advisable to familiarize itself therewith.
The Company agrees to furnish Purchaser and its employees, officers, agents,
accountants, legal counsel and other representatives with all
21
financial, operating and other data and information concerning the Company and
commitments of the Company as Purchaser shall from time to time reasonably
request and will afford Purchaser and its employees, officers, accountants,
attorneys, agents, investment bankers and other authorized representatives
access to the Company's offices (including access during normal business hours)
to review such documents and its books and records and will be given opportunity
to ask questions of, and receive answers from, representatives of the Company
with respect to such matters. No investigations by Purchaser or its employees,
representatives or agents shall reduce or otherwise affect the Liability of the
Company or Shareholder with respect to any representations, warranties,
covenants or agreements made herein or in an exhibit, schedule or other
certificate, instrument, agreement or document (including the Disclosure
Schedule), executed or delivered in connection with this Agreement. Any
confidential information disclosed by the Company to Purchaser shall be subject
to the non-disclosure obligations set forth in the Letter of Intent between
Shareholder and Purchaser with respect to the Transaction.
5.5 Agreement to Consummate. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use their best efforts to do all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective, as soon as reasonably practicable, the
Transactions contemplated by the Operative Documents, including, but not limited
to, the obtaining of all consents, authorizations, orders and approvals of any
Governmental Body required in connection therewith and initiating or defending
any legal action that is necessary or appropriate to permit the Transactions to
be consummated. At any time after the Closing Date, if any further action is
necessary, proper or advisable to carry out the purposes of this Agreement,
then, as soon as is reasonably practicable, each party to this Agreement shall
take, or cause its proper officers to take, such action. Each of the parties
hereto further agree that it will cooperate with the other after the
consummation of the Transactions for the purpose of providing Purchaser with the
information and access to information necessary to ensure Purchaser with a
reasonably smooth transition into the ownership of the Company. No party to this
Agreement shall take or cause to be taken any action that would cause the
representations or warranties expressed herein to be untrue or incorrect on the
Closing Date.
5.6 Approval of Third Parties. As soon as practicable after the execution
of this Agreement, Shareholder will use their best efforts to obtain all
necessary approvals and consents of all third parties required on the part of
Shareholder for the consummation of the Transactions (the "Third Party
Consents"). Purchaser will reasonably cooperate with Shareholder in securing any
necessary consents from, or in making any filings with or giving any notice to
any third parties necessary for Shareholder to comply with this Section 5.6.
5.7 Agreement Regarding Brokers. Each party agrees that it will pay or
dispute, and hold the other party harmless from, any claims of brokers or others
for finder's or brokerage fees asserted as a result of representations by such
party to such brokers or others, regardless of whether the existence of such
brokers or others are disclosed herein.
5.8 Notice. Shareholder shall promptly give written notice to Purchaser
upon becoming aware of the occurrence or failure to occur, or the impending or
Threatened occurrence or failure to
22
occur,of any event that would cause or constitute, any of their representations
or warranties being or becoming untrue.
5.9 Disclosure Schedules. Shareholder shall have delivered to Purchaser,
prior to the date hereof, the proposed final version of the Disclosure Schedules
containing all of the disclosures, exhibits and other information or items
required by the various provisions of this Agreement. Thereafter, Shareholder
shall deliver to Purchaser any supplements or amendments to such Disclosure
Schedule promptly after Shareholder become aware of any event which changes any
representation, warranty or disclosure made by Shareholder or the Company in
this Agreement or any statement made by the Disclosure Schedule or in any
supplement or amendment thereto. Within ten (10) business days after receipt of
any supplements or amendment to such Disclosure Schedule, if in Purchaser's sole
and absolute judgment such amendment and/or supplement represents, reflects or
results in a Material Adverse Effect on or to the Company, its business
prospects, assets, financial condition or result or operations (and in making
such judgment, Purchaser shall have the right to consider the effect of any such
amendment and/or supplement in the aggregate with all prior amendments and/or
supplements), this Agreement and the transactions contemplated hereby may be
terminated and abandoned by Purchaser by written notification to Shareholder.
5.10 Filings. The parties will each make or cause to be made any filings
and submissions under the laws of any jurisdiction, to the extent that such
filings are necessary to consummate the transactions contemplated hereby and
will take all actions necessary to consummate the transactions contemplated
hereby in a manner consistent with the applicable laws of such jurisdiction.
Each party will furnish to the other party such necessary information and
reasonable assistance as such other party may request in connection with its
preparation of necessary filings or submissions to any governmental entity.
5.11 Taxes.
(a) Shareholder shall pay, and shall hold Purchaser and the Company
harmless from, any and all Taxes, and any and all notarial or similar fees,
arising as a result of the purchase and sale of the shares of Stock
pursuant to this Agreement. Shareholder hereby agree to cooperate fully
with Purchaser and the Company in connection with the preparation of any
returns or reports, any examinations of the Company by any governmental
taxing authority, including, without limitation, making available records,
books of account or other materials reasonably necessary or helpful for the
preparation of such returns or reports or the defense against the
assertions of any taxing authority as to any tax returns.
(b) Shareholder shall be solely responsible for the payment of any
Taxes of the Company with respect to taxable periods that end on or prior
to the Closing Date and Shareholder shall timely pay same when due.
Shareholder shall reimburse Purchaser for their pro-rata share of any Taxes
of the Company with respect to taxable periods beginning prior to and
ending after the Closing Date within fifteen (15) days of the payment of
such Taxes. In the case of taxable periods beginning prior to and ending
after the Closing Date,
23
Shareholder pro-rata share of such Taxes shall be (i) in the case of any
Taxes other than Taxes based upon or related to income, the amount of such
Tax for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period ending on the Closing
Date and the denominator of which is the number of days in the entire
taxable period, and (ii) in the case of any Tax based upon or related to
income, the amount of such Tax that would have been payable if the relevant
taxable period ended on the Closing Date.
(c) This agreement terminates any and all sharing or other
allocation agreements or arrangements for Taxes in effect as of the Closing
to which the Company was a party.
6. CONDITIONS PRECEDENT TO CLOSING
6.1 General Conditions. Consummation of the Transactions shall be subject
to the fulfillment at the Closing Date of each of the following conditions:
(a) No Injunction. No court having jurisdiction shall have issued,
to the Best Knowledge of Purchaser or Shareholder, an injunction preventing
the consummation of the Transactions that shall not have been stayed or
dissolved prior to or on the Closing Date.
(b) Proceedings. All proceedings taken or to be taken in connection
with the Transactions, and all documents incident thereto shall be
reasonably satisfactory in form and substance to the parties and their
counsel, and the parties and their counsel shall have received all such
counterpart originals or certified or other copies of such documents as the
parties or their counsel may reasonably request.
(c) Noncompetition and Employment Agreement. At the Closing,
Purchaser and each Shareholder shall enter into a Noncompetition and
Employment Agreement.
(d) Audited Financials. The Company shall have provided Purchaser at
least fourteen (14) days prior to Closing, at the Company's sole cost and
expense, with audited financial statements of the Company, prepared by
independent auditors selected by Purchaser, as required by Item 310 of
Regulation S-B, which is the source of disclosure requirements for "small
business issuer" filings under the Securities Act and the Securities
Exchange Act of 1934, as amended.
6.2 Conditions to Closing in Favor of Shareholder. Consummation of the
Transactions shall be subject to the fulfillment, to the reasonable satisfaction
of Shareholder, or their written waiver, at or before the Closing Date, of each
of the following conditions:
(a) Representations and Warranties of Purchaser. The
representations, warranties and statements of Purchaser contained in this
Agreement and the Operative Documents shall be complete and accurate as of
the date of this Agreement and shall also
24
be complete and accurate at and as of the Closing Date, except for changes
contemplated by this Agreement, as if made on the Closing Date; and
Purchaser shall have performed or complied with all agreements and covenants
required by this Agreement to be performed or complied with by it at or
prior to the Closing Date.
(b) Purchaser's Officers' Certificate. Purchaser shall have
delivered to Shareholder an Officers' Certificate, dated the Closing Date,
of Purchaser certifying to (a) the due adoption by the Board of Directors of
the attached resolutions approving the execution and delivery of this
Agreement, and the consummation of the Transactions and (b) the incumbency
of the President, Secretary and other officers of Purchaser executing any of
the Operative Documents.
(c) Governmental Consents, Authorizations, Etc. All material
consents, authorizations, orders or approvals of, and filings or
registrations with, and any permits, licenses or other authorizations
required by, any applicable Governmental Body that are required for, or in
connection with, the execution and delivery of this Agreement by Purchaser
and the consummation by Purchaser of the Transactions shall have been
obtained or made.
(d) Closing Consideration. Purchaser shall have delivered to
Shareholder the Purchase Price required by Section 2.2 hereof, including the
Subordinated Note.
6.3 Conditions to Closing in Favor of Purchaser. Consummation of the
Transactions shall be subject to the fulfillment, to the reasonable satisfaction
of Purchaser, or its written waiver, at or before the Closing Date of the
following conditions:
(a) Representations and Warranties of Shareholder. The
representations, warranties and statements of Shareholder contained in this
Agreement, the exhibits hereto and the Disclosure Schedules shall be
complete and accurate as of the date of this Agreement and shall also be
complete and accurate at and as of the Closing Date, except for changes
contemplated by this Agreement, as if made at and as of the Closing Date;
and Shareholder shall have performed or complied with all agreements and
covenants required by this Agreement to be performed or complied with by
them at or prior to the Closing Date.
(b) Governmental Consents, Authorizations, Etc. All material consents,
authorizations, orders or approvals of, and filings or registrations with,
and any permits, licenses or other authorizations required by, any
applicable Governmental Body that are required for or in connection with,
the execution and delivery of this Agreement by Shareholder and the
consummation by Shareholder of the Transactions shall have been obtained or
made.
25
(c) Shareholder Release. Shareholder shall execute and deliver to
Purchaser a general release releasing any and all claims for compensation
or otherwise as directors, officers, employees and shareholders in the form
attached hereto as Exhibit "C".
(d) Shareholder's Certificate. Shareholder shall have delivered to
Purchaser Shareholder's certificates dated the Closing Date, certifying as
to the fulfillment of the conditions set forth in Section 6.3(a) and (b).
(e) Opinion of Counsel. Shareholder shall have furnished Purchaser
with an opinion dated the Closing Date of a law firm suitable to Purchaser
in the form attached as Exhibit "D" hereto, or with such modifications
thereto as are approved by Purchaser, in its sole and absolute discretion.
(f) Legislation. No law or legally binding regulation shall have
been enacted that does or would prohibit, restrict or delay consummation of
the Transactions or any of the conditions to the consummation of the
Transactions or that does or would have a Material Adverse Effect on the
Company.
(g) Litigation. There shall be no effective Order of any nature
(including any temporary restraining order) issued by a Governmental Body
of competent jurisdiction restraining or prohibiting consummation or
altering the terms of any of the Transactions, or actions seeking damages
based upon the foregoing which Purchaser reasonably deems material.
Shareholder shall not have become subject to any litigation, which, if
adversely determined, could, in the opinion of Purchaser, have a Material
Adverse Effect on the Company.
(h) No Adverse Change. There shall have occurred no adverse change
(whether or not covered by insurance) in operations, assets, liabilities,
properties or financial condition of the Company since the date of the
Financial Statements.
(i) Delivery of Documents/Acceptance of Disclosure. Shareholder
shall have timely delivered any Schedules and all amendments and/or
supplements to the Disclosure Schedules and all other documents,
instruments, schedules and financial statements required hereunder to
Purchaser. The Disclosure Schedules, as amended and supplemented, shall be
acceptable in form and substance to Purchaser, in its absolute discretion.
(j) Third Party Consents. Shareholder shall have delivered copies of
all Third Party Consents, if any, necessary to permit the consummation of
the Transactions contemplated by this Agreement shall have been obtained in
a form satisfactory to Purchaser.
(k) Purchaser's Investigation. The investigations by Purchaser and
its representatives in connection with the proposed Transactions shall not
have caused Purchaser or its representatives to become aware of any facts
or circumstances relating to
26
the Company that in the sole discretion of Purchasers make it inadvisable
for Purchaser to proceed with the Transactions.
(l) Approval. The Board of Directors of the Company and Shareholder
each shall have approved this Agreement and the transactions contemplated
hereby.
(m) Certificate of Authorities. Shareholder shall have furnished to
Purchaser (i) certificates of the Secretary of State of each state in which
the Company is organized or incorporated, dated as of a date not more than
five (5) business days prior to the Closing Date, attesting to the
incorporation and good standing of the Company, (ii) a copy, certified by
the Secretary of State of each state in which the Company is organized or
incorporated, as of a date not more than five (5) business days prior to
the Closing Date, of the Articles of Incorporation and all amendments
thereto for the Company, (iii) a copy, certified by the Secretary of the
Company, of the Bylaws of the Company, as amended and in effect as of the
Closing Date, and (iv) a copy, certified by the Secretary of the Company,
of resolutions duly adopted by the Board of Directors of the Company duly
authorizing the transactions contemplated in this Agreement.
(n) Corporate Records and Books of Account. The respective corporate
seals, articles of incorporation, bylaws, stock certificates, stock
transfer ledgers, and corporate books and records of the Company, updated
up to the Closing Date, shall be delivered to Purchaser.
(o) Bank Accounts. Shareholder shall have caused the Company to have
revoked all existing authorities and all instructions to banks in respect
of the operations of the bank accounts of the Company and new authorities
and instructions shall be given to such persons on such terms as Purchasers
may require.
(p) Loan Commitment. Purchaser shall have received a loan commitment
from Purchaser's lender to fund such portion of the acquisition as
Purchaser shall deem necessary in its sole and absolute discretion.
(q) Certificate of Merger. Purchaser shall have received fully
executed Certificates of Merger sufficient for filing with the State of
Delaware and State of Texas in order to consummate the Merger.
(r) Subscription Agreement. ▇▇▇▇▇ ▇▇▇▇▇ shall have executed and
delivered to Purchaser the Subscription Agreement in the from attached
hereto as Exhibit "E".
(s) Pledge Agreement. Shareholder shall have executed and delivered
to Purchaser the Pledge Agreement in the form attached hereto as Exhibit
"F", together with fully-executed blank stock powers and the original stock
certificates evidencing the CWII Stock.
27
(t) Other Matters. Shareholder shall have delivered to Purchaser, in
form and substance reasonably satisfactory to counsel for Purchaser, such
certificates and other evidence as Purchaser may reasonably request as to
the satisfaction of the conditions contained in this Section 6.3.
7. CLOSING AND TERMINATION
7.1 Closing Date. Subject to the right of Purchaser and Shareholder to
terminate this Agreement pursuant to Section 7.2 hereof, the closing of the
Transactions (the "Closing") shall, unless another date or place is agreed to in
writing by Shareholder and Purchaser, take place at the offices of ▇▇▇▇,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ PLLC, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
at 10:00 a.m. on September 30, 1999 (the "Closing Date") or such other place and
date as the parties may mutually agree upon in writing. Purchaser shall, at its
option, have the right, but not the obligation to extend the Closing Date by not
more than forty-five (45) days by giving written notice thereof to Shareholder
at least three (3) business days prior to the Closing Date referred to in the
preceding sentence. If Purchaser exercises its option hereunder to extend the
Closing Date, the term Closing Date as used herein shall mean and refer to such
Closing Date as extended.
7.2 Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual written agreement of Purchaser and Shareholder;
(b) by Shareholder if any representation or warranty of Purchaser or by
Purchaser if any representation or warranty of Shareholder contained herein
shall have been incorrect or breached in any material respect, as to which
notice shall have been given to the breaching party, and shall not have
been cured or otherwise resolved to the reasonable satisfaction of the
other party on or before the Closing Date, or by either Purchaser or
Shareholder if any condition to the consummation of the Transactions
contemplated hereunder that must be fulfilled to its satisfaction has
become impractical to be fulfilled;
(c) by either Purchaser or Shareholder if any permanent injunction or
other order of a court or other competent authority preventing the
consummation of the Transactions shall have become final and non-
appealable; or
(d) by Purchaser or Shareholder if the Closing has not occurred by
October 29, 1999; provided, however, that such date may be extended by
written agreement among the parties and provided, further, that no party
shall be permitted to terminate hereunder if such party is in violation of
this Agreement.
7.3 Effect of Termination. In the event of the termination of this
Agreement as provided herein, this Agreement shall become wholly void and have
no further force and effect except as hereinafter provided; and there shall be
no Liability on the part of Shareholder or Purchaser (or Purchaser's respective
officers of directors) except to comply with the provisions of Section 5.7
regarding brokers, to pay the fees and expenses as apportioned in Section 9.2
and
28
except as otherwise expressly provided herein. Nothing contained herein shall
relieve any party from Liability for its breach of this Agreement.
7.4 Extension; Waiver. At any time prior to the Closing Date, any party
hereto that is entitled to the benefits hereof (with respect to any such
corporate party by action taken by its Board of Directors or a duly authorized
officer), may (a) extend the time for the performance of any of the obligations
or other acts of any of the other parties hereto, (b) in whole or in part, waive
any inaccuracy in the representations and warranties of any of the other parties
hereto contained herein or in any exhibit or schedule hereto or in any document
delivered pursuant hereto, and (c) in whole or in part, waive compliance with
any of the agreements of any of the other parties hereto or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall only be valid if same is set forth in an instrument in writing
signed and delivered on behalf of such party.
8. SURVIVAL AND INDEMNIFICATION
8.1 Survival of Representations and Warranties. The respective
representations and warranties of Shareholder contained in this Agreement, the
Operative Documents and any investigation shall survive the consummation of the
Transactions contemplated in this Agreement and shall continue in full force and
effect after the Closing for a period of four (4) years from the Closing at
which time they shall expire, except as to claims made in respect thereof in
writing by Purchaser on or before the expiration of such period; provided,
however that (a) the representations and warranties contained in Section 3.12
shall survive until the expiration of the statutory period of limitations for
assessment of Tax deficiencies, including any extensions thereof, for each
taxable year of the Company which begins before the Closing, and (b) the
representations and warranties contained in Sections 3.1 and 3.29 shall survive
indefinitely. The covenants and agreements of Shareholder shall not be affected
by the expiration of any representation or warranty pursuant to this Section 8.1
and shall survive indefinitely.
8.2 Indemnity. Shareholder and the Company agree to jointly and severally
indemnify and hold Purchaser, its officers, directors, agents, attorneys and
accountants ("Purchaser Indemnitees") harmless from any and all damages, losses
(which shall include any diminution in value, liabilities, joint or several),
payments, obligations, penalties, claims, litigation, demands, defenses,
judgments, suits, proceedings, costs, disbursements or expenses (including
without limitation, fees, disbursements and expenses of attorneys, accountants
and other professional advisors and of expert witnesses and costs of
investigation and preparation) of any kind or nature whatsoever (collectively
"Damages"), directly or indirectly resulting from, relating to or arising out
of:
(a) any breach or nonperformance (partial or total) of or inaccuracy in
any representation or warranty or covenant or agreement of Shareholder
contained in this Agreement or any Operative Document which survives the
Closing hereof;
29
(b) Liability arising out of the Company's business conducted prior to
the Closing and not expressly assumed by Purchaser pursuant to this
Agreement;
(c) any losses or costs of defending against any claims which may be
made against Purchaser by any Person claiming violations by the Company of
any local, state, or federal law relating to the employment relationship,
including, but not limited to, wages, hours, concerted activity,
nondiscrimination, occupational health and safety and the payment and
withholding of Taxes, where such claims arise out of circumstances
occurring prior to the Closing Date;
(d) any actual or threatened violation of or non-compliance with, or
remedial obligation arising under, any environmental laws arising from any
event, condition, circumstance, activity, practice, incident, action or
plan existing or occurring prior to the Closing relating in any way to the
Company;
(e) any claims or demands made by ▇▇▇▇▇ ▇▇▇▇▇, or the failure of ▇▇▇▇▇
▇▇▇▇▇ to take any action or execute any documents requested by Purchaser,
or any Damages caused by or relating to any acts or omissions of ▇▇▇▇▇
▇▇▇▇▇; and
(f) the Transaction Expenses incurred by Shareholder.
8.3 Indemnification Notice. If a Purchaser Indemnitee intends to exercise
its right to indemnification provided in this Article 8, such Purchaser
Indemnitee shall provide the party or parties from whom the indemnification will
be sought (the "Indemnitor") at least fifteen (15) days prior written notice
(the "Indemnification Notice") of such Purchaser Indemnitee's intention to do so
and the facts or circumstances giving rise to the claim ("Indemnification
Claim"). Nothing contained herein shall preclude any Purchaser Indemnitee from
taking any actions deemed reasonably necessary or appropriate in response to any
third party claims during such interim period. An Indemnification Claim may, at
the option of Purchaser Indemnitee, be asserted as soon as any situation, event
or occurrence has been noticed by Purchaser Indemnitee regardless whether actual
harm has been suffered or out-of-pocket expenses incurred. During such fifteen
(15) day period, the Indemnitor shall be entitled to cure the defect or
situation giving rise to the Indemnification Claim to the satisfaction of
Purchaser Indemnitee. If the Indemnitor is unwilling or unable to cure the
defect giving rise to the Indemnification Claim during such fifteen (15) period,
Purchaser Indemnitee may, on the sixteenth (16th) day after the Indemnification
Notice, seek indemnification as provided in this Article 8.
8.4 Offset. At any time or from time to time prior to the final payment by
Purchaser to Shareholder of any amounts or sums due under or pursuant to this
Agreement or the Operative Documents, including, without limitation, the
Subordinated Note, Purchaser shall be entitled, in addition to, and not in lieu
of, any other right or remedy which Purchaser may have against Shareholder,
under or pursuant to this Agreement, or otherwise, to notify Shareholder in
writing (an "Offset Notice") that Purchaser reasonably believes that it is
entitled to indemnity for Damages under Section 8.2. Any Offset Notice provided
hereunder shall identify the provision
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of this Agreement which Purchaser believes entitles it to such indemnity for
Damages and shall briefly identify the facts which constitute the basis for each
such claim of indemnity and the dollar amount of such claim. If on or before
thirty (30) days after delivery of the Offset Notice, Shareholder shall not have
objected thereto, Purchaser may, but, shall not be required to, offset against
any portion of the amounts due under this Agreement then remaining unpaid, the
amount of the Damages claimed in the Offset Notice (and thus to reduce the
amounts due under this Agreement). Notwithstanding any offset exercised pursuant
to this Section 8.4, to the extent that the actual amount of any Damages arising
from a claim for indemnity set forth in an Offset Notice shall exceed the value
of the offset against the amounts due under this Agreement claimed, Shareholder
shall remain liable for, and shall promptly reimburse Purchaser the amount of,
any such excess Damages. If on or before thirty (30) days following delivery of
the Offset Notice, Shareholder shall notify Purchaser that Shareholder questions
the amount of any Damages for which indemnity is claimed therein (or the
entitlement to indemnity), Purchaser shall nonetheless be entitled to exercise
its rights of offset provided for in this Section 8.4, but in lieu of reducing
the amounts due under this Agreement immediately, shall defer payment of a
portion or portions of the amounts due under this Agreement remaining unpaid in
the amount of the disputed claim until such time as (i) Purchaser shall have
received written authorization from Shareholder to retain such unpaid portion of
the amounts due under this Agreement in partial or total satisfaction of
Purchaser's claim for indemnity, or (ii) Shareholder shall have delivered to
Purchaser, a certified or file-stamped copy of a final decision of a court of
competent jurisdiction establishing the amount of such Damages or directing a
specific distribution of all or any part of the amounts due under this Agreement
being held by Purchaser pursuant to this Section 8.4. It shall be a condition to
Purchaser's obligation to defer applying any unpaid portion of the amounts due
under this Agreement, subject to the resolution of Shareholder' objection to the
amount of Damages claimed or the entitlement to indemnity with regard thereto,
that Shareholder, as applicable, specify in writing the provisions of this
Agreement and other facts supporting such objection. Purchaser shall not be
obligated to exercise the rights of offset provided for in this Section 8.4, and
no failure to exercise any such right of offset shall relieve Shareholder of any
indemnity obligations under Section 8.2, or otherwise. This Section 8.4 shall
survive the Closing indefinitely.
9. GENERAL PROVISIONS AND OTHER AGREEMENTS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if and when delivered personally or
transmitted by telex, facsimile (receipt confirmed) or telegram, mailed by
registered or certified mail (return receipt requested) or sent by a recognized
next business day courier to the following persons at the following addresses
(or at such other address for a party as shall be specified by like notice):
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(a) If to Purchaser:
CommWorld Acquisition Corporation
c/o Communications World International, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ PLLC
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Shareholder or the Company:
RMS Communications
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
9.2 Fees and Expenses. Shareholder and Purchaser shall each pay all of
their own fees, costs and expenses (including without limitation, those of
accountants, appraisers and attorneys) incurred in connection with or related to
the preparation, negotiation, execution, delivery, satisfaction, compliance and
consummation of this Agreement and the Transactions contemplated hereby and the
closing conditions hereunder.
9.3 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement. Terms such as "herein," "hereof," "hereinafter" refer to this
Agreement as a whole and not to the particular sentence or paragraph where they
appear, unless the context otherwise requires. Terms used in the plural include
the singular, and vice versa, unless the context otherwise requires.
9.4 Counterparts. This Agreement may be executed by facsimile in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5 Miscellaneous. This Agreement (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof;
(b) is not intended to and shall not confer upon any
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other person any rights or remedies hereunder or otherwise with respect to the
subject matter hereof, except for rights that may expressly arise as a
consequence of the Transactions; (c) may not be assigned by operation of law or
otherwise; (d) has been drafted by all of the parties to this Agreement and
should not be construed against any of the parties hereto; and (e) shall be
governed in all respects, including validity, interpretation and effect by the
substantive laws of the State of Texas without regard to conflict of law
provisions.
9.6 Publicity. Prior to Closing, no party hereto shall issue any press
release or make any other public statement, in either case relating to or
connected with or arising out of this Agreement or the matters contained herein,
without obtaining the prior written approval of the other parties to the
contents and the manner of presentation and publication thereof, which approval
shall not be unreasonably withheld.
9.7 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable. This Agreement shall
be construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof; and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable
provision there shall be added automatically as part hereof a provision as
similar in terms, but in any event no more restrictive than, such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and
enforceable.
9.8 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legal representatives,
successors and permitted assigns.
9.9 Captions. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit or
amplify the provisions hereof.
9.10 Attorneys' Fees. In the event that any Proceeding is commenced by
any party hereto for the purpose of enforcing any provision of this Agreement,
the party to such Proceeding may receive as part of any award, judgment,
decision or other resolution of such Proceeding its costs and attorneys' fees as
determined by the person or body making such award, judgment, decision or
resolution. Should any claim hereunder be settled short of the commencement of
any such Proceeding, the parties in such settlement may mutually agree to
include as part of the damages alleged to have been incurred reasonable costs of
attorneys or other professionals in investigation or counseling on such claim.
9.11 Jurisdiction and Venue. Any judicial proceedings brought by or
against any party on any dispute arising out of this Agreement or any matter
related thereto shall be brought in the state or federal courts of Dallas
County, Texas and, by execution and delivery of this Agreement, each of the
parties accepts for itself the exclusive jurisdiction and venue of the
33
aforesaid courts as trial courts, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement after exhaustion of
all appeals taken (or by the appropriate appellate court if such appellate court
renders judgment).
9.12 Assignability. This Agreement may not be transferred, assigned,
pledged or hypothecated by any party hereto without the prior written consent of
the other parties to this Agreement.
9.13 Entirety. This Agreement and the documents executed and delivered
pursuant hereto, executed on the date hereof or in connection herewith, contain
the entire agreement among the parties with respect to the matters addressed
herein and supersede all prior representations, inducements, promises or
agreements, oral or otherwise, which are not embodied herein or therein.
9.14 Amendment. This Agreement and the exhibits and schedules hereto may be
amended by the parties hereto at any time prior to the Closing Date; provided,
however, that any amendment must be by an instrument or instruments in writing
signed and delivered on behalf of each of the parties hereto.
9.15 Governing Law. This Agreement shall be governed by the substantive
laws of the State of Texas without regard to principles of choice or conflict of
law.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers.
PURCHASER:
COMMWORLD ACQUISITION CORPORATION,
a Colorado corporation
By:__________________________________________
Printed Name:________________________________
Title:_______________________________________
COMPANY:
WILLPOWER, INC., d/b/a RMS COMMUNICATIONS,
a Texas corporation
By:__________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
SHAREHOLDER:
_____________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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