EXHIBIT 10.3
SHARE EXCHANGE AGREEMENT
BY AND AMONG
PHOENIX INTERNATIONAL INDUSTRIES, INC.,
INTUITIVE TECHNOLOGY CONSULTANTS, INC.,
AND
SHAREHOLDERS OF INTUITIVE TECHNOLOGY CONSULTANTS, INC.
FOR THE EXCHANGE OF
CAPITAL STOCK
OF
INTUITIVE TECHNOLOGY CONSULTANTS, INC.
DATED AS OF JUNE 2, 1997
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THIS SHARE EXCHANGE AGREEMENT, dated as of June 2, 1997, by and among
PHOENIX INTERNATIONAL INDUSTRIES, INC., a Florida corporation ("Phoenix") and
INTUITIVE TECHNOLOGY CONSULTANTS, INC., a Georgia corporation and the
Shareholders of INTUITIVE TECHNOLOGY CONSULTANTS, INC. ("ITC") as set forth on
Schedule "A" attached hereto and made a part hereof (individually a
"Shareholder" and collectively, the "Shareholders"),
WHEREAS, Phoenix is a corporation organized under the laws of the State of
Florida and is responsible for filing certain reports with the Securities and
Exchange Commission pursuant to Section 13 of the Securities Exchange Act of
1934;
WHEREAS, ITC is a corporation organized under the laws of the State of
Georgia;
WHEREAS ITC believes it is in the best interest of its shareholders (and
the shareholders of Phoenix after giving effect to the transactions contemplated
hereby) to avail itself of the advantages of being part of a "publicly traded
corporation";
WHEREAS, the Shareholders own 100% the issued and outstanding shares of
common stock (the "Shares") of ITC; and
WHEREAS, the Shareholders desire to exchange the Shares for shares of the
common stock, par value $.01 per share, of PHOENIX INTERNATIONAL INDUSTRIES,
INC., upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, THE PARTIES DESIRE THIS TO BE A TAX-FREE EXCHANGE UNDER THE
INTERNAL REVENUE CODE;
NOW, THEREFORE, in consideration of the mutual terms, conditions and other
agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
EXCHANGE OF SHARES FOR COMMON STOCK
SECTION 1.1. AGREEMENT TO EXCHANGE SHARES FOR COMMON STOCK. On the Closing
Date (as hereinafter defined) and upon the terms and subject to the conditions
set forth in this Agreement, the Shareholders shall sell, assign, transfer,
convey and deliver the Shares (representing 1,000,000 shares or 100% of the
common stock of ITC) to Phoenix, and Phoenix shall accept the Shares from the
Shareholders in exchange for the shares of Common Stock as defined below.
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SECTION 1.2. CLOSING. The closing of such exchange (the "Closing") shall
take place at 10:00 a.m. E.S.T. on the second business day after the conditions
to closing set forth in Articles VI and VII have been satisfied or waived, or at
such other time and date as the parties hereto shall agree in writing (the
"Closing Date"), at the offices of Phoenix, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇. At the Closing, the Shareholders shall deliver to Phoenix or its
designee(s) stock certificates representing the Shares, duly endorsed in blank
for transfer or accompanied by appropriate stock powers duly executed in blank.
In full consideration and exchange for the Shares, Phoenix shall exchange with
the Shareholders the Exchange Consideration as provided for in Section 1.3
hereof.
SECTION 1.3. EXCHANGE CONSIDERATION. In exchange for the Shares, Phoenix
will exchange with the Shareholders on the Closing Date, 1,500,000 shares of the
common stock, par value $.01 per share (the "Common Stock"), of PHOENIX
INTERNATIONAL INDUSTRIES, INC. (or 1.5 shares of Common Stock for each Share
exchanged) (the "Exchange Consideration"). No fractional shares will be issued
in connection with the exchange.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ITC
ITC hereby represents, warrants and agrees as follows:
SECTION 2.1. CORPORATE ORGANIZATION.
(a) ITC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida, and has all requisite
corporate power and authority to own its properties and assets and to conduct
its business as now conducted and is duly qualified to do business in good
standing in each jurisdiction in where the nature of the business conducted by
ITC or the ownership or leasing of its properties makes such qualification and
being in good standing necessary, except where the failure to be so qualified
and in good standing will not have a material adverse effect on the business,
operations, properties, assets, condition or results of operation of ITC (a "ITC
Material Adverse Effect");
(b) Copies of the Articles of Incorporation and By-laws of ITC, with
all amendments thereto to the date hereof, have been furnished to Phoenix, and
such copies are accurate and complete as of the date hereof. The minute books of
ITC are current as required by law, contain the minutes of all meetings of the
Board of Directors, committees of the Board of Directors and Shareholders from
date of incorporation to this date, and adequately reflect all material actions
taken by the Board of Directors, committees of the Board of Directors and
Shareholders of ITC.
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SECTION 2.2. CAPITALIZATION OF THE COMPANY. The authorized capital stock
of ITC consists of 1,000,000 shares of common stock, with a par value of $.01
per share, of which 1,000,000 shares are outstanding. All of the shares of
capital stock have been duly authorized and validly issued, and are fully paid
and nonassessable and no personal liability attaches to the ownership thereof.
Except as set forth in this Section 2.2, the Shares are the sole outstanding
shares of capital stock of ITC, and there are no outstanding options, warrants,
agreements, commitments, conversion rights, preemptive rights or other rights to
subscribe for, purchase or otherwise acquire any of the shares of capital stock
or any unissued or treasury shares of capital stock of ITC.
SECTION 2.3. SUBSIDIARIES AND EQUITY INVESTMENTS. ITC has no subsidiaries
or equity investments.
SECTION 2.4. AUTHORIZATION AND VALIDITY OF AGREEMENTS. ITC has all
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by ITC and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action and no other corporate proceedings on the part of ITC
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby.
SECTION 2.5. NO CONFLICT OR VIOLATION. The execution, delivery and
performance of this Agreement by ITC and each Shareholder does not and will not
violate or conflict with any provision of the Articles of Incorporation or
By-laws of ITC, and does not and will not violate any provision of law, or any
order, judgment or decree of any court or other governmental or regulatory
authority, nor violate nor will result in a breach of or constitute (with due
notice or lapse of time or both) a default under or give to any other entity any
right of termination, amendment, acceleration or cancellation of any contract,
lease, loan agreement, mortgage, security agreement, trust indenture or other
agreement or instrument to which ITC or any Shareholder is a party or by which
any of them is bound or to which any of its or their respective properties or
assets is subject, nor will result in the creation or imposition of any lien,
charge or encumbrance of any kind whatsoever upon any of the properties or
assets of ITC, nor will result in the cancellation, modification, revocation or
suspension of any of the licenses, franchises, permits to which ITC is bound.
SECTION 2.6. CONSENTS AND APPROVALS. If applicable, each party to this
agreement will set forth as Schedule 2.6; a true and complete list of each
consent, waiver, authorization or approval of any governmental or regulatory
authority, domestic or foreign, or of any other person, firm or corporation, and
each declaration to or filing or registration with any such governmental or
regulatory authority, that is required in
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connection with the execution and delivery of this Agreement by ITC and each
Shareholder or the performance by ITC and each Shareholder of its or their
obligations hereunder.
SECTION 2.7. FINANCIAL STATEMENTS. ITC has heretofore furnished to Phoenix
audited balance sheets as of April 30, 1997, accompanied by the reports thereon
of ITC's Accountants, (the audited balance sheets being hereinafter referred to
as the "balance sheet"). The balance sheet, including the notes thereto, (i)
were prepared in accordance with generally accepted accounting principles, (ii)
present fairly, in all material aspects, the financial position, results of
operations and changes in financial position of ITC as of such dates and for the
periods then ended, (iii) are complete, correct and in accordance with the books
of account and records of ITC, (iv) can be reconciled with the financial
statements and the financial records maintained and the accounting methods
applied by ITC for federal income tax purposes, (v) and contain all entries
recommended by ITC's Accountants.
SECTION 2.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since April 30, 1997
and except as set forth on Schedule 2.8, if applicable:
(a) ITC has operated in the ordinary course of business consistent
with past practice and there has not been any material adverse change in the
assets, properties, business, operations, prospects, net income or conditions
financial or otherwise of ITC. ITC does not know or has reason to know of any
event, condition, circumstance or prospective development which threatens or may
threaten to have a material adverse effect on the assets, properties,
operations, prospects, net income or financial condition of ITC;
(b) there has not been any substantive change in any method of
accounting or accounting practice of ITC;
(c) there has not been any declarations, setting aside or payment of
dividends or distributions with respect to shares of ITC or any redemption,
purchase or other acquisition of any other ITC's securities; and
(d) there has not been an increase in the compensation payable or to
become payable to any director or officer of ITC.
SECTION 2.9. TAX MATTERS. Except as reflected in ITC's audited balance
sheets, all returns, reports, or information return or other document (including
any relating or supporting information) required to be filed before the Closing
in respect of ITC has been filed, and ITC has paid, accrued or otherwise
adequately reserved for the payment of all Taxes required to be paid in respect
of the periods covered by such
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returns and has adequately reserved for the payment of all Taxes with respect to
periods ended on or before the Closing for which tax returns have not yet been
filed. All Taxes of ITC have been paid or adequately provided for and ITC knows
of no proposed additional tax assessment against ITC not adequately provided for
in the Financial Statements. No deficiency for any Taxes has been asserted or
assessed by a taxing authority against ITC, there is no outstanding audit
examination, deficiency or refund litigation with respect to any Taxes of ITC.
In the ordinary course, ITC makes adequate provision on its books for the
payment of Taxes (including for the current fiscal period) owed by ITC. ITC has
not executed an extension or waiver of any statute of limitations on the
assessment or collection of tax that is currently in effect.
"Taxes" shall, for purposes of this Agreement, mean all taxes however
denominated, including any interest, penalties or addition to tax that may
become payable in respect thereof, imposed by any governmental body which taxes
shall include, without limiting the generality of the foregoing, all income
taxes, payroll and employee withholding taxes, unemployment insurance, social
security, sales and use taxes, excise taxes, franchise taxes, receipts taxes,
occupations taxes, real and personal property taxes, stamp taxes, transfer
taxes, ▇▇▇▇▇▇▇'▇ compensation taxes and any other obligation of the same or a
similar nature.
SECTION 2.10. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 2.10, or as disclosed in its audited balance sheets of April 30, 1997,
ITC has no indebtedness or liability, absolute or contingent, known or unknown,
which is not shown or provided for on the balance sheet of ITC as of that date
included in the Financial Statements other than liabilities incurred or accrued
in the ordinary course of business since April 30, 1997. Except as shown in such
balance sheets or in the notes to the Financial Statements, ITC is not directly
or indirectly liable upon or with respect to (by discount, repurchase agreements
or otherwise), or obligated in any other way to provide funds in respect of, or
to guarantee or assume, any debt, obligation or dividend of any person.
SECTION 2.11. INTERESTS IN REAL PROPERTY. Schedule 2.11 sets forth an
accurate and complete list of the location of each item of real property ("Real
Property") owned or leased by ITC. ITC as of the closing date, owns no "Real
Property".
Schedule 2.11 sets forth an accurate and complete list (by lessee) in the
summary description of all leases of Real Property to which ITC is a party. ITC
has a valid leasehold interest in each Real Property lease held by it as lessee
or sub-lessee as of the date hereof, in each case free and clear of all Liens,
except for those Liens described in Schedule 2.11. All such Real Property leases
are in full force and effect and ITC has received no notice of any default
thereunder or waived or is aware of any event or circumstances with which the
giving of notice or lapse of time or both would
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constitute a default hereunder. ITC has received no notice nor has any knowledge
of any pending, threatened or contemplated condemnation proceeding affecting any
Real Property owned or leased by it or any part thereof or of any sale or other
disposition thereof in lieu of condemnation.
All of the buildings, fixtures and other improvements described in
Schedule 2.11 are in good operating condition, subject to ordinary wear and
tear.
SECTION 2.12. PERSONAL PROPERTY. ITC owns all personal property (including
properties that may be deemed to be a mix of personal property and Real
Property, ("Personal Property")) purported to be owned by it as of the date
hereof, in each case free and clear of all Liens, except for those Liens
described in Schedule 2.12. All of the Personal Property owned or leased by, and
commonly used or necessary for or in the operations of ITC: (i) is in such
operating condition repair as may be necessary to carry on the business of ITC
as it is now being conducted, subject only to ordinary wear and tear; and (ii)
is sufficient, in the aggregate, for all purposes of the business of ITC as
presently conducted.
SECTION 2.13. LICENSES, PERMITS AND GOVERNMENTAL APPROVALS. Schedule 2.13
sets forth a true and complete list of all licenses, permits, franchises,
authorizations and approvals issued or granted to ITC by any federal, state or
local government, or any department, agency, board, commission, bureau or
instrumentality of any of the foregoing (the "Licenses and Permits"), and all
pending applications therefor. Each License and Permit is valid and in full
force and effect, and, to ITC's best knowledge, is not subject to any pending or
threatened administrative or judicial proceeding to revoke, cancel, suspend or
declare such License and Permit invalid in any respect. The Licenses and Permits
are sufficient and adequate in all material respects to permit the continued
lawful conduct of ITC's business in the manner now conducted and as has been
proposed by ITC to be conducted. Except as set forth in Schedule 2.13, no such
License and Permit will in any way be affected by, or terminate or lapse by
reason of the transactions contemplated by this Agreement.
SECTION 2.14. COMPLIANCE WITH LAW. The operations of ITC have been
conducted in accordance with all applicable laws, regulations, orders and other
requirements of all courts and other governmental or regulatory authorities
having jurisdiction over ITC and its assets, properties and operations,
including, without limitation, all such laws, regulations, orders and
requirements promulgated by or relating to consumer protection, equal
opportunity, health, environmental protection, architectural barriers to the
handicapped, fire, zoning and building and occupation safety except where such
non-compliance would not have a ITC Material Adverse Effect. ITC has not
received notice of any violation of any such law, regulation, order or other
legal requirement, and is not in default with respect to any order, writ,
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judgment, award, injunction or decree of any national, state or local court or
governmental or regulatory authority or arbitrator, domestic or foreign,
applicable to ITC or any of its assets, properties or operations.
SECTION 2.15. LITIGATION. Except as set forth on Schedule 2.15, there are
no claims, actions, suits, proceedings, labor disputes or investigations pending
or, to the best of the ITC's knowledge, threatened before any federal, state or
local court or governmental or regulatory authority, domestic or foreign, or
before any arbitrator of any nature, brought by or against ITC or any of its
officers, directors, employees, agents or affiliates involving, affecting or
relating to any assets, properties or operations of ITC or the transactions
contemplated by this Agreement, nor is any basis known to it for any such
action, suit, proceeding or investigation. Schedule 2.15 sets forth a list and a
summary description of all such pending actions, suits, proceedings, disputes or
investigations. Neither ITC nor any of its assets or properties is subject to
any order, writ, judgment, award, injunction or decree of any federal, state or
local court or governmental or regulatory authority or arbitrator, that would
have a ITC Material Adverse Effect on its assets, properties, operations,
prospects, net income or financial condition or which would or might interfere
with the transactions contemplated by this Agreement.
SECTION 2.16. CONTRACTS. Schedule 2.16 sets forth a true and complete list
of all material contracts, agreements and other instruments to which ITC is a
party or otherwise relating to or affecting any of its assets, properties or
operations, including, without limitation, all written or oral, express or
implied, material, (a) contracts, agreements and commitments not made in the
ordinary course of business; (b) purchase and supply contracts; (c) contracts,
loan agreements, repurchase agreements, mortgages, security agreements, trust
indentures, promissory notes and other documents or arrangements relating to the
borrowing of money or for lines of credit; (d) leases and subleases of real or
personal property; (e) agreements and other arrangements for the sale of any
assets other than in the ordinary course of business or for the grant of any
options or preferential rights to purchase any assets, property or rights; (f)
contracts or commitments limiting or restraining ITC from engaging or competing
in any lines of business or with any person, firm, or corporation; (h)
partnership and joint venture agreements; and (i) all amendments, modifications,
extensions or renewals of any of the foregoing (the foregoing contracts,
agreements and documents are hereinafter referred to collectively as the
"Commitments" and individually as a "Commitment"). Each Commitment is valid,
binding and enforceable against the parties thereto in accordance with its
terms, and in full force and effect on the date hereof. ITC has performed all
obligations required to be performed by it to date under, and is not in default
in respect of, any Commitment, and to ITC's best knowledge no event has occurred
which, with due notice or lapse of time or both, would constitute such a
default. To the best of ITC's knowledge, no other party to any
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Commitment is in default in respect thereof, and no event has occurred which,
with due notice or lapse of time or both, would constitute such a default.
SECTION 2.17. EMPLOYEE PLANS. ITC has complied in all material respects
with the requirements of Section 4980B of the Internal Revenue Code of 1986, as
amended (the "Code"), and Sections 601 to 608 of ERISA relating to continuation
coverage for group health plans. Schedule 2.17 lists every pension, savings,
retirement, severance health, insurance or other employee benefit plan
(collectively referred to herein as the "Plans") which ITC maintains, or has any
obligation to contribute to.
SECTION 2.18. INSURANCE. Schedule 2.18 lists the fidelity bonds and the
aggregate coverage amount and type and generally applicable deductibles of all
policies of title, liability, fire, casualty, business interruption, workers'
compensation, disability and other forms of insurance insuring the properties,
assets and operations of the business of ITC. Except as set forth in Schedule
2.18, all such policies and bonds are in full force and effect, underwritten by
financially sound and reputable insurers (to ITC's best knowledge) and
sufficient for all applicable requirements of law and will not in any way be
effected by or terminated or lapsed by reason of the consummation of the
transactions contemplated by this Agreement. ITC is not in material default
under any provisions of any such policy of insurance and has not received notice
of cancellation of any such insurance. Except as set forth in Schedule 2.18,
there is no claim by ITC pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds.
SECTION 2.19. ENVIRONMENTAL MATTERS. ITC has obtained and maintained in
effect all licenses, permits and other authorizations required under all
applicable laws, regulations and other requirements of governmental or
regulatory authorities relating to pollution or to the protection of the
environment ("Environmental Laws") and is in compliance with all Environmental
Laws and with all such licenses, permits and authorizations except where the
failure to comply would not have a ITC Material Adverse Effect. ITC has not
performed or suffered any act which could give rise to, or has otherwise
incurred liability to any person (governmental or not) under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. S 9601 et seq.
or any other Environmental Laws, nor has ITC received notice of any such
liability or any claim therefor or submitted notice pursuant to Section 103 of
such Act to any governmental agency with respect to any of its respective
assets.
SECTION 2.20. LABOR MATTERS.
(a) Except as set forth in Schedule 2.20: (i) ITC is not a party to
any outstanding employment agreements or contracts with officers or employees
that are
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not terminable at will, or that provide for the payment of any bonus or
commission; (ii) ITC is not a party to any agreement, policy or practice that
requires it to pay termination or severance pay to salaried, non-exempt or
hourly employees (other than as required by law); (iii) ITC is not a party to
any collective bargaining agreement or other labor union contract applicable to
persons employed by ITC nor does ITC know of any activities or proceedings of
any labor union to organize any such employees. ITC has not breached or
otherwise failed to comply with any provisions of any employment or labor
agreement, and there are no grievances outstanding thereunder.
(b) Except as set forth in Schedule 2.20: (i) ITC is in compliance
in all material respects with all applicable laws relating to employment and
employment practices, wages, hours, and terms and conditions of employment; (ii)
there is no unfair labor practice charge or complaint pending before the
National Labor Relations Board ("NLRB"); (iii) there is no labor strike,
material slowdown or material work stoppage or lockout actually pending or, to
ITC's best knowledge, threatened against or affecting ITC, and ITC has not
experienced any strike, material slow down or material work stoppage, lockout or
other collective labor action by or written respect to employees of ITC since
its inception; (iv) there is no representation claim or petition pending before
the NLRB and no question concerning representation exists relating to the
employees of ITC; (v) there are no charges with respect to or relating to ITC
pending before the Equal Employment Opportunity Commission or any state, local
or foreign agency responsible for the prevention of unlawful employment
practices; (vi) ITC has received no formal notice from any federal, state, local
or foreign agency responsible for the enforcement of labor or employment laws of
an intention to conduct an investigation of ITC and no such investigation is in
progress.
SECTION 2.21. DISCLOSURE. This Agreement, the schedules hereto and any
certificate attached hereto or delivered in accordance with the terms hereby by
or on behalf of ITC in connection with the transactions contemplated by this
Agreement, when taken together, do not contain any untrue statement of a
material fact or omit any material fact necessary in order to make the
statements contained herein and/or therein not misleading.
SECTION 2.22. SURVIVAL. Each of the representations and warranties set
forth in this Article II shall be deemed represented and made by ITC at the
Closing as if made at such time and shall survive the Closing for a period
terminating on the third anniversary.
ARTICLE III
Attached separately as Addendum 1
ARTICLE IV
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REPRESENTATIONS AND WARRANTIES OF PHOENIX
Phoenix represents, warrants and agrees as follows:
SECTION 4.1. CORPORATE ORGANIZATION.
(a) Phoenix is a publicly traded, non reporting corporation (listed
on the NASDAQ Over the Counter Bulletin Board under the trading symbol "PHXU")
duly organized, validly existing and in good standing under the laws of the
State of Florida, and has all requisite corporate power and authority to own its
properties and assets and to conduct its business as now conducted and is duly
qualified to do business in good standing in each jurisdiction in where the
nature of the business conducted by Phoenix or the ownership or leasing of its
properties makes such qualification and being in good standing necessary, except
where the failure to be so qualified and in good standing will not have a
material adverse effect on the business, operations, properties, assets,
condition or results of operation of Phoenix (a "Phoenix Material Adverse
Effect").
SECTION 4.2. CAPITALIZATION OF THE COMPANY; TITLE TO THE SHARES. The
authorized capital stock of Phoenix consists of (a) 20,000,000 shares of common
stock, par value $.01 per share, of which approximately 4,800,000 shares are
outstanding and (b) 1,000 shares of preferred stock, none of which is issued or
outstanding (the "Phoenix Shares"). All of the outstanding shares of capital
stock have been duly authorized and validly issued, and are fully paid and
nonassessable and no personal liability attaches to the ownership thereof.
Exceptions, if any, are set forth on Schedule 4.2, the Phoenix Shares currently
are the sole outstanding shares of capital stock of Phoenix, and there are no
outstanding warrants, agreements, commitments, conversion rights, preemptive
rights or other rights to subscribe for, purchase or otherwise acquire any of
the shares of capital stock or any unissued or treasury shares of capital stock
of Phoenix. Phoenix reserves the right to issue additional shares as desired.
SECTION 4.3. SUBSIDIARIES AND EQUITY INVESTMENTS; prior to the date of
closing of this Agreement, Phoenix has no subsidiaries or equity investments.
SECTION 4.4 AUTHORIZATION AND VALIDITY OF AGREEMENTS: Phoenix has all
corporate power and authority to execute and deliver this Agreement to perform
its obligations hereunder and to consummate the transactions the transactions
contemplated hereby. The execution and delivery of this Agreement by Phoenix and
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the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Phoenix are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby.
SECTION 4.5 NO CONFLICT OR VIOLATION: Except as otherwise set forth on
Schedule 4.6, the execution, delivery and performance of this Agreement by
Phoenix does not and will not violate or conflict with any provision of the
Articles of Incorporation or by-laws of Phoenix, and does not and will not
violate any provision of law, or any order, judgment or decree of any court or
other governmental or regulatory authority, nor violate nor will result in a
breach of or constitute (with due notice or lapse of time or both) a default
under or give to any other entity any right of termination, amendment,
acceleration or cancellation of any contract, lease, loan agreement, mortgage,
security agreement , trust indenture or other agreement or instrument to which
Phoenix is a party or by which it is bound or to which any of its respective
properties or assets is subject, nor will result in the creation or imposition
any lien, charge or encumbrance of any kind whatsoever upon any of the
properties or assets of Phoenix, nor will result in the cancellation,
modification, revocation or suspension of any of the licenses, franchises,
permits to which Phoenix is bound.
SECTION 4.6. CONSENTS AND APPROVALS. Schedule 4.6 sets forth a true and
complete list, if applicable, of each consent, waiver, authorization or approval
of any governmental or regulatory authority, domestic or foreign, or of any
other person, firm or corporation, and each declaration to or filing or
registration with any such governmental or regulatory authority, that is
required in connection with the execution and delivery of this Agreement by
Phoenix or the performance by Phoenix of its obligations hereunder.
SECTION 4.7. FINANCIAL STATEMENTS. Phoenix has heretofore furnished to ITC
(a) financial statements as of and for the year ended on December 31, 1996,
accompanied by the reports thereon of Phoenix's Accountants, (the financial
statement listed above being hereinafter referred to as the "Financial
Statement"). The Financial Statement, including the notes thereto, (i) were
prepared in accordance with generally accepted accounting principles, (ii)
present fairly, in all material respects, the financial position, results of
operations and changes in financial position of Phoenix as of such dates and for
the periods then ended, (iii) are complete, correct and in accordance with the
books of account and records of Phoenix, (iv) can be reconciled with the
financial statements and the financial records maintained and the accounting
methods applied by Phoenix for federal income tax purposes, and (v) contain all
entries recommended by Phoenix's Accountants.
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SECTION 4.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1996, and except (i) as contemplated by this Agreement or(ii) as set forth on
Schedule 4.8:
(a) Phoenix has operated in the ordinary course of business
consistent with past practice and there has not been any material adverse change
in the assets, properties, business, operations, prospects, net income or
conditions financial or otherwise of Phoenix. Phoenix does not know or has
reason to know of any event, condition, circumstance or prospective development
which threatens or may threaten to have a material adverse effect on the assets,
properties, operations, prospects, net income or financial condition of Phoenix;
(b) there has not been any substantive change in any method of
accounting or accounting practice of Phoenix;
(c) there have not been any declarations, setting aside or payment
of dividends or distributions with respect to shares of Phoenix or any
redemption, purchase or other acquisition of any other Phoenix's securities; and
(d) there has not been an increase in the compensation payable or to
become payable to any director or officer of Phoenix other than pursuant to
employment agreements or consistent with prior past practices.
SECTION 4.9. TAX MATTERS. All returns, reports, or information return or
other document (including any relating or supporting information) required to be
filed before the Closing in respect of Phoenix has been filed, and Phoenix has
paid, accrued or otherwise adequately reserved for the payment of all Taxes
required to be paid in respect of the periods covered by such returns and has
adequately reserved for the payment of all Taxes with respect to periods ended
on or before the Closing for which tax returns have not yet been filed. All
Taxes of Phoenix have been paid or adequately provided for and Phoenix knows of
no proposed additional tax assessment against Phoenix not adequately provided
for in the Financial Statements. No deficiency for any Taxes has been asserted
or assessed by a taxing authority against Phoenix, there is no outstanding audit
examination, deficiency or refund litigation with respect to any Taxes of
Phoenix. In the ordinary course, Phoenix makes adequate provision on its books
for the payment of Taxes (including for the current fiscal period) owed by
Phoenix. Phoenix has not executed an extension or waiver of any statute of
limitations on the assessment or collection of tax that is currently in effect.
Taxes shall for purposes of this Agreement mean all taxes however
denominated, including any interest, penalties or addition to tax that may
become payable in respect thereof, imposed by any governmental body which taxes
shall
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include, without limiting the generality of the foregoing, all income taxes,
payroll and employee withholding taxes, unemployment insurance, social security,
sales and use taxes, excise taxes, franchise taxes, receipts taxes, occupations
taxes, real and personal property taxes, stamp taxes, transfer taxes, ▇▇▇▇▇▇▇'▇
compensation taxes and any other obligation of the same or a similar nature.
Schedule 4.9 sets forth an accurate and complete list of all tax loss
carry-forwards.
SECTION 4.10. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 4.10 or 4.16, Phoenix has no indebtedness or liability, absolute or
contingent, known or unknown, which is not shown or provided for on the balance
sheet of Phoenix as of December 31, 1996, other than liabilities incurred or
accrued in the ordinary course of business since December 31, 1996. Except as
shown in such balance sheets or in the notes to the Financial Statements,
Phoenix is not directly or indirectly liable upon or with respect to (by
discount, repurchase agreements or otherwise), or obligated in any other way to
provide funds in respect of, or to guarantee or assume, any debt, obligation or
dividend of any person, except endorsements in the ordinary course of business
in connection with the deposit of items for collection.
SECTION 4.11. INTERESTS IN REAL PROPERTY. Other than the office lease
relating to the property located at ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇
▇▇▇▇▇, Phoenix does not own or lease any real property.
SECTION 4.12. PERSONAL PROPERTY. Phoenix owns all personal property
(including properties that may be deemed to be a mix of personal property and
Real Property, ("Personal Property")) purported to be owned by it as of the date
hereof, in each case free and clear of all Liens, except for those Liens
described in Schedule 4.12. All of the Personal Property owned or leased by, and
commonly used or necessary for or in the operations of, any of, Phoenix: (i) is,
in the aggregate, in such operating condition repair as may be necessary to
carry on the business of Phoenix as it is now being conducted, subject only to
ordinary wear and tear; and (ii) is sufficient, in the aggregate, for all
purposes of the business of Phoenix.
SECTION 4.13. LICENSES, PERMITS AND GOVERNMENTAL APPROVALS. Schedule 4.13
sets forth a true and complete list of all licenses, permits, franchises,
authorizations and approvals issued or granted to Phoenix by any federal, state
or local government, or any department, agency, board, commission, bureau or
instrumentality of any of the foregoing (the "Licenses and Permits"), and all
pending applications therefor. Each License and Permit is valid and in full
force and effect, and, to Phoenix's best knowledge, is not subject to any
pending or threatened administrative or judicial proceeding to revoke, cancel,
suspend or declare such License and Permit invalid in
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any respect. The Licenses and Permits are sufficient and adequate in all
material respects to permit the continued lawful conduct of Phoenix's business
in the manner now conducted and as has been proposed by Phoenix to be conducted.
Except as set forth in Schedule 4.13, no such License and Permit will in any way
be affected by, or terminate or lapse by reason of the transactions contemplated
by this Agreement.
SECTION 4.14. COMPLIANCE WITH LAW. The operations of Phoenix have been
conducted in accordance with all applicable laws, regulations, orders and other
requirements of all courts and other governmental or regulatory authorities
having jurisdiction over Phoenix and its assets, properties and operations,
including, without limitation, all such laws, regulations, orders and
requirements promulgated by or relating to consumer protection, equal
opportunity, health, environmental protection, architectural barriers to the
handicapped, fire, zoning and building and occupation safety except where such
non-compliance would not have a Phoenix Material Adverse Effect. Phoenix has not
received notice of any violation of any such law, regulation, order or other
legal requirement, and is not in default with respect to any order, writ,
judgment, award, injunction or decree of any national, state or local court or
governmental or regulatory authority or arbitrator, domestic or foreign,
applicable to Phoenix or any of its assets, properties or operations.
SECTION 4.15. LITIGATION. Except as disclosed its financial statement
there are no claims, actions, suits, proceedings, labor disputes or
investigations pending or, to the best of the Phoenix's knowledge, threatened
before any federal, state or local court or governmental or regulatory
authority, domestic or foreign, or before any arbitrator of any nature, brought
by or against Phoenix or any of its officers, directors, employees, agents or
affiliates involving, affecting or relating to any assets, properties or
operations of Phoenix or the transactions contemplated by this Agreement, nor is
any basis known to Phoenix for any such action, suit, proceeding or
investigation. Schedule 4.15 sets forth a list and a summary description of all
such pending actions, suits, proceedings, disputes or investigations. Neither
Phoenix nor any of its assets or properties is subject to any order, writ,
judgment, award, injunction or decree of any federal, state or local court or
governmental or regulatory authority or arbitrator, that would have a Phoenix
Material Adverse Effect on its assets, properties, operations, prospects, net
income or financial condition or which would or might interfere with the
transactions contemplated by this Agreement.
SECTION 4.16. CONTRACTS. Schedule 4.16 sets forth a true and complete list
of all material contracts, agreements and other instruments to which Phoenix is
a party or otherwise relating to or affecting any of its assets, properties or
operations, including, without limitation, all written or oral, express or
implied, material, (a) contracts, agreements and commitments not made in the
ordinary course of business; (b) purchase and supply contracts; (c) contracts,
loan agreements, repurchase
15
agreements, mortgages, security agreements, trust indentures, promissory notes
and other documents or arrangements relating to the borrowing of money or for
lines of credit; (d) leases and subleases of real or personal property; (e)
agreements and other arrangements for the sale of any assets other than in the
ordinary course of business or for the grant of any options or preferential
rights to purchase any assets, property or rights; (f) contracts or commitments
limiting or restraining Phoenix from engaging or competing in any lines of
business or with any person, firm, or corporation; (h) partnership and joint
venture agreements; and (i) all amendments, modifications, extensions or
renewals of any of the foregoing (the foregoing contracts, agreements and
documents are hereinafter referred to collectively as the "Commitments" and
individually as a "Commitment"). Each Commitment is valid, binding and
enforceable against the parties thereto in accordance with its terms, and in
full force and effect on the date hereof. Phoenix has performed all obligations
required to be performed by it to date under, and is not in default in respect
of, any Commitment, and to Phoenix's best knowledge no event has occurred which,
with due notice or lapse of time or both, would constitute such a default. To
the best of Phoenix's knowledge, no other party to any Commitment is in default
in respect thereof, and no event has occurred which, with due notice or lapse of
time or both, would constitute such a default.
SECTION 4.17. EMPLOYEE PLANS. Phoenix has complied in all material
respects with the requirements of Section 4980B of the Code and Sections 601 to
608 of ERAS relating to continuation coverage for group health plans. Schedule
4.17 lists every pension, savings, retirement, severance health, insurance or
other employee benefit plan (collectively referred to herein as the "Plans")
which Phoenix maintains, or has any obligation to contribute to.
SECTION 4.18. INSURANCE. Schedule 4.18 lists the fidelity bonds and the
aggregate coverage amount and type and generally applicable deductibles of all
policies of title, liability, fire, casualty, business interruption, workers'
compensation, disability and other forms of insurance insuring the properties,
assets and operations of the business of Phoenix. Except as set forth in
Schedule 4.18, all such policies and bonds are in full force and effect,
underwritten by financially sound and reputable insurers (to Phoenix's best
knowledge) and sufficient for all applicable requirements of law and will not in
any way be effected by or terminated or lapsed by reason of the consummation of
the transactions contemplated by this Agreement. Phoenix is not in material
default under any provisions of any such policy of insurance and has not
received notice of cancellation of any such insurance. Except as set forth in
Schedule 4.18, there is no claim by Phoenix pending under any of such policies
or bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds.
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SECTION 4.19. ENVIRONMENTAL MATTERS. Phoenix has obtained and maintained
in effect all licenses, permits and other authorizations required under all
applicable laws, regulations and other requirements of governmental or
regulatory authorities relating to pollution or to the protection of the
environment ("Environmental Laws") and is in compliance with all Environmental
Laws and with all such licenses, permits and authorizations except where the
failure to comply would not have a Phoenix Material Adverse Effect. Phoenix has
not performed or suffered any act which could give rise to, or has otherwise
incurred liability to any person (governmental or not) under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. S 9601 et seq.
or any other Environmental Laws, nor has Company received notice of any such
liability or any claim therefor or submitted notice pursuant to Section 103 of
such Act to any governmental agency with respect to any of its respective
assets.
SECTION 4.20. LABOR MATTERS.
(a) Except as set forth in Schedule 4.20: (i) Phoenix is not a party
to any outstanding employment agreements or contracts with officers or employees
that are not terminable at will, or that provide for the payment of any bonus or
commission; (ii) Phoenix is not a party to any agreement, policy or practice
that requires it to pay termination or severance pay to salaried, non-exempt or
hourly employees (other than as required by law); (iii) Phoenix is not a party
to any collective bargaining agreement or other labor union contract applicable
to persons employed by Phoenix nor does Phoenix know of any activities or
proceedings of any labor union to organize any such employees. Phoenix has not
breached or otherwise failed to comply with any provisions of any employment or
labor agreement, and there are no grievances outstanding thereunder.
(b) Except as set forth in Schedule 4.20: (i) Phoenix is in
compliance in all material respects with all applicable laws relating to
employment and employment practices, wages, hours, and terms and conditions of
employment; (ii) there is no unfair labor practice charge or complaint pending
before the National Labor Relations Board ("NLRB"); (iii) there is no labor
strike, material slowdown or material work stoppage or lockout actually pending
or, to Phoenix's best knowledge, threatened against or affecting Phoenix, and
Phoenix has not experienced any strike, material slow down or material work
stoppage, lockout or other collective labor action by or written respect to
employees of Phoenix since September 30, 1995; (iv) there is no representation
claim or petition pending before the NLRB and no question concerning
representation exists relating to the employees of Phoenix; (v) there are no
charges with respect to or relating to Phoenix pending before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices; (vi) Phoenix
has received no formal notice from any federal,
17
state, local or foreign agency responsible for the enforcement of labor or
employment laws of an intention to conduct an investigation of Phoenix and no
such investigation is in progress.
SECTION 4.21. INVESTMENT INTENT. The Shares will be acquired hereunder
solely for the account of Phoenix and its specified designees, for investment,
and not with a view to the resale or distribution thereof.
SECTION 4.22. DISCLOSURE. This Agreement, the schedules hereto and any
certificate attached hereto or delivered in accordance with the terms hereby by
or on behalf of Phoenix in connection with the transactions contemplated by this
Agreement, when taken together, do not contain any untrue statement of a
material fact or omit any material fact necessary in order to make the
statements contained herein and/or therein not misleading.
SECTION 4.23. SURVIVAL. Each of the representations and warranties set
forth in this Article IV shall be deemed represented and made by Phoenix at the
Closing as if made at such time and shall survive the Closing for a period
terminating on the third anniversary.
ARTICLE V
COVENANTS
SECTION 5.1. CERTAIN CHANGES AND CONDUCT OF BUSINESS.
From and after the date of this Agreement and until the
Closing Date, ITC shall conduct, its business solely in the ordinary course
consistent with past practices and, in a manner consistent with all
representations or warranties of ITC and,
(A) without the prior written consent of Phoenix, ITC will
not, except as required or permitted pursuant to the terms hereof:
(i) make any material change in the conduct of its businesses
and operations enter into any transaction other than in the ordinary course of
business consistent with past practices;
(ii) make any change in its Articles of Incorporation or
By-laws; issue any additional shares of capital stock or equity securities or
grant any option, warrant or right to acquire any capital stock or equity
securities or issue any security convertible into or exchangeable for its
capital stock or alter in any material term of any
18
of its outstanding securities or make any change in its outstanding shares of
capital stock or its capitalization, whether by reason of a reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, stock dividend or otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate securities
or grant any option, warrant or right to purchase any thereof, except pursuant
to transactions in the ordinary course of business consistent with past
practices, or (B) issue any securities convertible or exchangeable for debt
securities of ITC;
(iv) subject any of its assets, or any part thereof, to any
Lien or suffer such to be imposed other than such Liens as may arise in the
ordinary course of business consistent with past practices by operation of law
which will not have a material adverse effect on ITC;
(v) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of business
consistent with past practices;
(vi) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general increase in the
compensation of officers or employees (including any such increase pursuant to
any bonus, pension, profit-sharing or other plan or commitment) or grant any
increase in the compensation payable or to become payable to any employee,
except in accordance with pre-existing contractual provisions or consistent with
past practices;
(vii) make or commit to make any material capital expenditure;
(viii) pay, loan or advance any amount to, or sell, transfer
or lease any properties or assets to, or enter into any agreement or arrangement
with, any of its affiliates;
(ix) guarantee any indebtedness for borrowed money or any
other obligation of any other person;
(x) fail to keep in full force and effect insurance comparable
in amount and scope to coverage maintained by it (or on behalf of it) on the
date hereof;
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(xi) take any other action that would cause any of the
representations and warranties made by it in this Agreement not to remain true
and correct in all material;
(xii) make any loan, advance or capital contribution to or
investment in any person;
(xiii) make any change in any method of accounting or
accounting principle, method, estimate or practice;
(xiv) settle, release or forgive any claim or litigation or
waive any right;
(xv) commit itself to do any of the foregoing
(B) ITC will commit itself to,
(i) continue to maintain, in all material respects, its
properties in accordance with present practices in a condition suitable for its
current use;
(ii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when due all
taxes, assessments, fees and other charges lawfully levied or assessed against
it, unless the validity thereof is contested in good faith and by appropriate
proceedings diligently conducted;
(iii) continue to conduct its business in the ordinary course
consistent with past practices;
(ix) keep its books of account, records and files in the
ordinary course and in accordance with existing practices; and
(v) continue to maintain existing business relationships with
suppliers and client.
SECTION 5.2. ACCESS TO PROPERTIES AND RECORDS. ITC shall afford Phoenix,
its accounts, counsel and representatives and Phoenix shall afford to ITC, its
accountants, counsel and representatives full access during normal business
hours throughout the period prior to the Closing Date (or the earlier
termination of this Agreement) to all of such parties properties, books,
contracts, commitments and records and, during such period, shall furnish
promptly to the requesting party all other information concerning the other
party's business, properties and personnel as the requesting party may
reasonably request, provided that no investigation or receipt of
20
information pursuant to this Section 5.2 shall affect any representation or
warranty of or the conditions to the obligations of any party.
SECTION 5.3. NEGOTIATIONS. From and after the date hereof until the
earlier of the Closing or the termination of this Agreement, no party to this
Agreement nor its officers or directors (subject to such director's fiduciary
duties) nor anyone acting on behalf of party or persons shall, directly or
indirectly, encourage, solicit, engage in discussions or negotiations with, or
provide any information to, any person, firm, or other entity or group
concerning any merger, sale of substantial assets, purchase or sale of shares of
common stock or similar transaction involving any party thereof. A party shall
promptly communicate to any other party any inquiries or communications
concerning any such transaction which they may receive or of which they may
become aware of.
SECTION 5.4. CONSENTS AND APPROVALS. The parties, (i) shall use their
reasonable commercial efforts to obtain all necessary consents, waivers,
authorizations and approvals of all governmental and regulatory authorities,
domestic and foreign, and of all other persons, firms or corporations required
in connection with the execution, delivery and performance by them of this
Agreement, and (ii) shall diligently assist and cooperate with each party in
preparing and filing all documents required to be submitted by a party to any
governmental or regulatory authority, domestic or foreign, in connection with
such transactions and in obtaining any governmental consents, waivers,
authorizations or approvals which may be required to be obtained connection with
such transactions .
SECTION 5.5. Public Announcement. Unless otherwise required by applicable
law, the parties hereto shall consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
and shall not issue any such press release or make any such public statement
prior to such consultation.
SECTION 5.6. EMPLOYMENT CONTRACT. Phoenix hereby acknowledges and accepts
all terms and conditions of the existing employment contract dated
____________________1997, between ITC and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
SECTION 5.7. RESIGNATIONS OF ITC'S OFFICERS AND DIRECTORS. On the Closing
Date, Phoenix shall receive the resignations of all officers and directors of
ITC and Phoenix shall cause ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ to be appointed to as a director
of both Phoenix and ITC and as President of ITC.
ARTICLE VI
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CONDITIONS TO OBLIGATIONS OF PHOENIX
The obligations of PHOENIX to consummate the transactions contemplated by
this Agreement are subject to the fulfillment, at or before the Closing Date, of
the following conditions, any one or more of which may be waived by Phoenix in
its sole discretion:
SECTION 6.1. REPRESENTATIONS AND WARRANTIES OF ITC. All representations
and warranties made by ITC in this Agreement shall be true and correct on and as
of the Closing Date as if again made by ITC on and as of such date.
SECTION 6.2. AGREEMENTS AND COVENANTS. ITC and the Shareholders shall have
performed and complied in all material respects to all agreements and covenants
required by this Agreement to be performed or complied with by any of them on or
prior to the Closing Date.
SECTION 6.3. CONSENTS AND APPROVALS. All consents, waivers, authorizations
and approvals of any governmental or regulatory authority, domestic or foreign,
and of any other person, firm or corporation, required in connection with the
execution, delivery and performance of this Agreement shall be in full force and
effect on the Closing Date.
SECTION 6.4. NO VIOLATION OF ORDERS. No preliminary or permanent
injunction or other order issued by any court or governmental or regulatory
authority, domestic or foreign, nor any statute, rule, regulation, decree or
executive order promulgated or enacted by any government or governmental or
regulatory authority, which declares this Agreement invalid in any respect or
prevents the consummation of the transactions contemplated hereby, or which
materially and adversely affects the assets, properties, operations, prospects,
net income or financial condition of ITC shall be in effect; and no action or
proceeding before any court or governmental or regulatory authority, domestic or
foreign, shall have been instituted or threatened by any government or
governmental or regulatory authority, domestic or foreign, or by any other
person, or entity which seeks to prevent or delay the consummation of the
transactions contemplated by this Agreement or which challenges the validity or
enforceability of this Agreement.
SECTION 6.5. EMPLOYMENT CONTRACT. On or before the Closing Date, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ shall have entered into an employment agreement with ITC.
22
SECTION 6.6. OPINION OF COUNSEL. Phoenix shall have received a favorable
opinion, dated as of the Closing Date from legal counsel to ITC, in form and
substance reasonably satisfactory to Phoenix and its counsel.
SECTION 6.7. OTHER CLOSING DOCUMENTS. Phoenix shall have received such
other certificates, instruments and documents in confirmation of the
representations and warranties of ITC or in furtherance of the transactions
contemplated by this Agreement as Phoenix or its counsel may reasonably request.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF ITC
The obligations of ITC and the Shareholders to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or before the
Closing Date, of the following conditions, any one or more of which may be
waived by ITC and the Shareholders in their sole discretion, as the case may be.
SECTION 7.1. REPRESENTATIONS AND WARRANTIES OF PHOENIX. All
representations and warranties made by Phoenix in this Agreement shall be true
and correct on and as of the Closing Date as if again made by Phoenix on and as
of such date.
SECTION 7.2. AGREEMENTS AND COVENANTS. Phoenix shall have performed and
complied in all material respects to all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
SECTION 7.3. CONSENTS AND APPROVALS. All consents, waivers, authorizations
and approvals of any governmental or regulatory authority, domestic or foreign,
and of any other person, firm or corporation, required in connection with the
execution, delivery and performance of this Agreement, shall have been duly
obtained and shall be in full force and effect on the Closing Date.
SECTION 7.4. NO VIOLATION OF ORDERS. No preliminary or permanent
injunction or other order issued by any court or other governmental or
regulatory authority, domestic or foreign, nor any statute, rule, regulation,
decree or executive order promulgated or enacted by any government or
governmental or regulatory authority, domestic or foreign, that declares this
Agreement invalid or unenforceable in any respect or which prevents the
consummation of the transactions contemplated hereby, or which materially and
adversely affects the assets, properties, operations, prospects, net income or
financial condition of Phoenix and its subsidiaries, taken as a
23
whole, shall be in effect; and no action or proceeding before any court or
government or regulatory authority, domestic or foreign, shall have been
instituted or threatened by any government or governmental or regulatory
authority, domestic or foreign, or by any other person, or entity which seeks to
prevent or delay the consummation of the transactions contemplated by this
Agreement or which challenges the validity or enforceability of this Agreement.
SECTION 7.5. OPINION OF COUNSEL. Phoenix shall have received a favorable
opinion, dated as of the Closing Date from legal counsel to Phoenix in form and
substance reasonably satisfactory to ITC and its counsel.
SECTION 7.6. OTHER CLOSING DOCUMENTS. ITC shall have received such other
certificates, instruments and documents in confirmation of the representations
and warranties of Phoenix or in furtherance of the transactions contemplated by
this Agreement as ITC or its counsel may reasonably request.
SECTION 7.7. NASDAQ, OTCBB LISTING. ITC shall have received satisfactory
confirmation that upon the Closing of the transaction contemplated by this
Agreement the shares of Phoenix's Common Stock will continue to be listed as a
publicly traded company.
ARTICLE VIII
TERMINATION AND ABANDONMENT
SECTION 8.1. METHODS OF TERMINATION. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any time before the
Closing:
(a) By the mutual written consent of the Shareholders, ITC, and
Phoenix.
(b) By Phoenix, upon a material breach of any representation,
warranty, covenant or agreement on the part of ITC and the Shareholders set
forth in this Agreement, or if any representation or warranty of ITC or the
Shareholders shall become untrue, in either case such that any of the conditions
set forth in Article VI hereof would not be satisfied (a "ITC Breach"), and such
breach shall, if capable of cure, have not been cured within ten (10) days after
receipt by the party in breach of a notice from the non-breaching party setting
forth in detail the nature of such breach;
(c) By the Shareholders and ITC, upon a material breach of any
representation, warranty, covenant or agreement on the part of Phoenix set forth
in this
24
Agreement, or, if any representation or warranty of Phoenix shall become untrue,
in either case such that any of the conditions set forth in Article VII hereof
would not be satisfied (a "Phoenix Breach"), and such breach shall, if capable
of cure, not have been cured within ten (10) days after receipt by the party in
breach of a notice from the non-breaching party setting forth in detail the
nature of such breach;
(d) By either the Shareholders and ITC or Phoenix, if the Closing
shall not have consummated before thirty (30) days after the date hereof;
provided, however, that this Agreement may be extended by written notice of
either ITC or Phoenix, if the Closing shall not have been consummated as a
result of Phoenix, the Shareholders or ITC having failed to receive all required
regulatory approvals or consents with respect to this transaction or as the
result of the entering of an order as described in this Agreement; and further
provided, however, that the right to terminate this Agreement under this Section
8.1(d) shall not be available to any party whose failure to fulfill any
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before this date.
(e) By either the Shareholders and ITC or Phoenix if a court of
competent jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action (which order, decree or ruling the parties hereto shall use its best
efforts to lift), which permanently restrains, enjoins or otherwise prohibits
the transactions contemplated by this Agreement.
SECTION 8.2. PROCEDURE UPON TERMINATION. In the event of termination and
abandonment of this Agreement by ITC, the Shareholders or Phoenix pursuant to
Section 8.1, written notice thereof shall forthwith be given to the other
parties and this Agreement shall terminate and the transactions contemplated
hereby shall be abandoned, without further action. If this Agreement is
terminated as provided herein, no party to this Agreement shall have any
liability or further obligation to any other party to this Agreement except as
provided in Sections 11.1, 11.4 hereof; provided, however, that no termination
of this Agreement pursuant to this Article VIII shall relieve any party of
liability for a breach of any provision of this Agreement occurring before such
termination.
ARTICLE IX
SHAREHOLDERS' REPRESENTATIVE
SECTION 9.1. SHAREHOLDERS' REPRESENTATIVE. Each of the Shareholders hereby
irrevocably makes, constitutes and appoints ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as his agent and
25
representative and attorney-in-fact (the "Shareholders' Representative") for all
purposes under this Agreement.
Each Shareholder hereby authorizes the Shareholders' Representative, on
behalf and in the name of such Shareholder, to:
(a) Receive all notices or documents given or to be given to him by
Phoenix pursuant hereto or in connection herewith and to receive and accept
service of legal process in connection with any suit or other proceeding arising
under this Agreement. The Shareholders' Representative promptly shall forward a
copy of such notice or process to each Shareholder ;
(b) Deliver at the Closing the certificates for the Shares of each
Shareholder in exchange for his portion of the Exchange Consideration;
(c) Sign and deliver to Phoenix at the Closing a receipt for his
portion of the Exchange Consideration and transmit the Exchange Consideration to
each Shareholder;
(d) Deliver to Phoenix at the Closing all certificates and documents
to be delivered to Phoenix by the Shareholders pursuant to this Agreement,
together with any other certificates and documents executed by each Shareholder
and deposited with the Shareholders' Representative for such purpose;
(e) Engage such legal counsel, and such accountants and other
advisors for Shareholders and incur such other expenses on behalf of
Shareholders in connection with this Agreement and the transactions contemplated
hereby as the Shareholders' Representative may deem appropriate; and
(f) Take such action on behalf of such Shareholders as the
Shareholders' Representative may deem appropriate in respect of:
(i) Waiving any inaccuracies in the representations or
warranties of Phoenix contained in this Agreement or in any document delivered
by it pursuant hereto;
(ii) Waiving the fulfillment of any of the conditions
precedent to the Shareholders' obligations hereunder;
(iii) Taking such other action as he is authorized to take
under this Agreement;
26
(iv) Receiving all documents or certificates and making all
determinations on behalf of the Shareholders required under this Agreement; and
(v) All such other matters as the Shareholders' Representative
may deem necessary or appropriate to consummate this Agreement and the
transactions contemplated hereby.
The appointment of the Shareholders' Representative hereunder is
irrevocable and is deemed coupled with an interest and any action taken by
Shareholders' Representative pursuant to the authority granted in this Section
9.1 shall be effective and absolutely binding on each Shareholder
notwithstanding any contrary action of or direction from a Shareholder. The
death or incapacity of any Shareholder shall not terminate the prior authority
and agency of the Shareholders' Representative.
ARTICLE X
POST-CLOSING AGREEMENTS
SECTION 10.1. CONSISTENCY IN REPORTING. Each party hereto agrees that: (i)
the transaction is intended to qualify as a tax-free transaction under the Code;
(ii) the transaction shall be reported for Federal income tax purposes as a
tax-free transaction; (iii) for purposes of all financial statements, tax
returns and reports, and communications with third parties, the transactions
contemplated in this agreement and ancillary or collateral transactions will be
treated as a tax-free transaction; and (iv) if the characterization of any
transaction contemplated in this agreement or any ancillary or collateral
transaction is challenged, each party hereto will testify, affirm and ratify
that the characterization contemplated in such agreement was with the
characterization intended by the party; provided, however, that nothing herein
shall be construed as giving rise to any obligation if the reporting position is
determined to be incorrect by final decision of a court of competent
jurisdiction.
SECTION 10.2. INDEMNITY. Phoenix shall honor the terms and conditions of
the indemnification agreements listed on Schedule 4.16 as in effect on the date
of Closing.
SECTION 10.3. FUNDING OF ITC BY PHOENIX. Phoenix agrees to fund ITC in the
manner set forth in the "ITC Twelve (12) Month Budget commencing June 1, 1997",
a copy of which is attached hereto as Exhibit "A". All funding and "Receivable
Financing" will be done by or through Phoenix, and ITC is not authorized to
borrow against any of its assets without the written consent of Phoenix. Other
than by or through Phoenix, ITC is not authorized to pledge, hypothecate or
receive loans against
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its receivables. All assets of ITC, including but not limited to receivables,
are considered the property of Phoenix. To ensure adequate funding is available
for ITC to meets its goals as set forth in Exhibit "A", Phoenix will make
available for the first six month period of Exhibit "A", a direct loan not to
exceed forty two thousand dollars ($42,000) per month, in addition, for as long
as needed, Phoenix will provide receivable financing of up to seventy five
percent (75%) for approved, creditworthy, accounts (as evidenced by the lenders
and lending institution, based upon the reasonable and necessary standards of
the industry). Accounts deemed to be non-creditworthy, will be reviewed by
Phoenix and ITC, on an individual basis, in an attempt to find alternative
financing. Should said review find the account(s) to be non-financeable, the
account(s) would be rejected by ITC and not be considered as revenue.
SECTION 10.4 PERFORMANCE OF ITC. ITC asserts that the "ITC Twelve (12)
Month Budget" (Exhibit "A") is sound and that the projected revenues and profits
are reasonable and will be attained. Based on the limited operating history of
ITC, monthly performance reviews will be conducted by Phoenix and should ITC
fail to achieve at least eighty five percent (85%) of the revenues and profits,
cumulative year to date as projected per Exhibit "A", notwithstanding that the
foregoing would constitute a breach of this agreement, changes and adjustments
may be implemented by Phoenix to reduce ITC's funding requirements and Phoenix's
capital exposure.
SECTION 10.5 REMEDIES FOR BREACH OF AGREEMENT BY PHOENIX. Should Phoenix
breach any term or condition of this agreement, the following shall, at the
option of ITC, occur;
(a) Phoenix shall execute a stock swap with the former shareholders
of ITC, whereby such shareholders shall return all Phoenix stock to Phoenix, and
shall receive one hundred percent (100%) of the capital stock, voting and
nonvoting of ITC. Phoenix shall guarantee that ITC shall be returned to the
Shareholders in the same or greater net worth determined in accordance with
standard accounting principles, as of the date of Phoenix's acquisition of ITC.
Any deficiency shall be funded by Phoenix as a capital contribution to ITC.
(b) These remedies shall not be exclusive.
SECTION 10.6 REMEDIES FOR BREACH OF AGREEMENT BY ITC. Should ITC breach
any term or condition of this agreement, the following shall, at the option of
Phoenix, occur;
(a) ITC and the former Shareholders of ITC shall execute a stock
swap with Phoenix, whereby such shareholders shall return all Phoenix stock to
Phoenix, and shall receive one hundred percent (100%) of the capital stock,
voting and nonvoting of ITC. Phoenix shall not guarantee that ITC shall be
returned to the Shareholders in the same or greater net worth determined in
accordance with standard accounting principles, as of the date of Phoenix's
acquisition of ITC. Any outstanding notes or
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unpaid loans to ITC by Phoenix, unless otherwise agreed upon by both parties,
will immediately become due and payable.
(b) These remedies shall not be exclusive.
SECTION 10.7 DIVESTURE OF THE ASSETS OF ITC. Phoenix agrees not to sell,
remove or divest in any manner the real or personal property of ITC that would
prohibit ITC from performing its normal business.
SECTION 10.8 DIVERSION OF FUNDS OF ITC. Phoenix agrees not to divert any
funds generated by ITC in any manner that would prohibit ITC from attaining its
goals of revenue and/or profit as projected in Exhibit "A" of this agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. SURVIVAL OF PROVISIONS. The respective representations,
warranties, covenants and agreements of each of the parties to this Agreement
(except covenants and agreements which are expressly required to be performed
and are performed in full on or before the Closing Date) shall survive the
Closing Date and the-consummation of the transactions contemplated by this
Agreement, subject to Sections 2.22 and 4.25. In the event of a breach of any of
such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach available to it under the provisions of this
Agreement or otherwise, whether at law or in equity, regardless of any
disclosure to, or investigation made by or on behalf of such party on or before
the Closing Date.
SECTION 11.2. PUBLICITY. Neither party shall cause the publication of any
press release or other announcement with respect to this Agreement or the
transactions contemplated hereby without the consent of the other party, unless
a press release or announcement is required by law. If any such announcement or
other disclosure is required by law, the disclosing party agrees to give the
nondisclosing party prior notice and an opportunity to comment on the proposed
disclosure.
SECTION 11.3. SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES. This
Agreement shall inure to the benefit of, and be binding upon, the parties hereto
and their respective successors and assigns; provided, however, that no party
shall assign or delegate any of the obligations created under this Agreement
without the prior written consent of the other party.
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SECTION 11.4. FEES AND EXPENSES. Except as otherwise expressly provided in
this Agreement, all legal and other fees, costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such fees, costs or expenses.
SECTION 11.5. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been given or
made if in writing and delivered personally or sent by registered or certified
mail (postage prepaid, return receipt requested) to the parties at the following
addresses:
(a) If to Phoenix, to:
Phoenix International Industries, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Pres.
(b) If to ITC and/or Shareholders, to:
Intuitive Technology Consultants, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Pres.
or to such other persons or at such other addresses as shall be furnished by
either party by like notice to the other, and such notice or communication shall
be deemed to have been given or made as of the date so delivered or mailed. No
change in any of such addresses shall be effective insofar as notices under this
Section 10.6 are concerned unless such changed address is located in the United
States of America and notice of such change shall have been given to such other
party hereto as provided in this Section 10.6.
SECTION 11.7. ENTIRE AGREEMENT. This Agreement, together with the exhibits
hereto, represents the entire agreement and understanding of the parties with
reference to the transactions set forth herein and no representations or
warranties have been made in connection with this Agreement other than those
expressly set forth herein or in the exhibits, certificates and other documents
delivered in accordance herewith. This Agreement supersedes all prior
negotiations, discussions, correspondence, communications, understandings and
agreements between the parties relating to the subject matter of this Agreement
and all prior drafts of this Agreement, all of which are merged into this
Agreement. No prior drafts of this Agreement and no words or phrases from any
such prior drafts shall be admissible into evidence in any action or suit
involving this Agreement.
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SECTION 11.8. SEVERABILITY. This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
SECTION 11.9. TITLES AND HEADINGS. The Article and Section headings
contained in this Agreement are solely for convenience of reference and shall
not affect the meaning or interpretation of this Agreement or of any term or
provision hereof.
SECTION 11.10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
SECTION 11.11. CONVENIENCE OF FORUM; CONSENT TO JURISDICTION. Any dispute
arising out of this agreement shall be resolved by binding arbitration in
accordance with the Civil Arbitration Rules of the American Arbitration
Association. The arbitration will be held in West Palm Beach, Florida and will
be conducted by one arbitrator mutually agreeable to ITC, Shareholders and
Phoenix. If the parties cannot agree within thirty (30) days of a written demand
by a party for arbitration, the arbitrator shall be selected by the American
Arbitration Association. Arbitration is final without appeal. Judgment upon any
arbitration award may be entered in any court of competent jurisdiction.
SECTION 11.12. ENFORCEMENT OF THE AGREEMENT. The parties hereto agree that
irreparable damage would occur if any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereto, this being in addition to any
other remedy to which they are entitled at law or in equity.
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SECTION 11.13. GOVERNING LAW. This Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the State of Florida
without giving effect to the choice-of-law provisions thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FOR: PHOENIX INTERNATIONAL INDUSTRIES, INC.
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Date
President
FOR: INTUITIVE TECHNOLOGY CONSULTANTS, INC.
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Date
President
