EXHIBIT 2.1
PLAN OF REORGANIZATION AGREEMENT
THIS PLAN OF REORGANIZATION (the "Agreement") is made and entered into this
6th day of June, 2000, by and between XxXxx.xxx, Inc., a Delaware Corporation,
(the "Company"), BZ INVESTMENT TRUST, a California Trust, Xxx Xxxxxx, an
individual (hereinafter referred to jointly as the "Shareholders" and
individually as the "Shareholder"), and Tridon Enterprises, Inc., a Colorado
Corporation (hereinafter referred to as TEI).
R E C I T A L S:
TEI desires to acquire from the Shareholders, and the Shareholders desire to
transfer to TEI, all of the issued and outstanding stock of the Company solely
in exchange for whole shares of TEI's voting Common Stock on the terms and
conditions hereinafter set forth. TEI, the Shareholders and the Company believe
that it would be in their mutual best interests and in the best interest of the
shareholders of TEI for TEI to acquire all of the issued and outstanding stock
of the Company. TEI, the Shareholders and the Company desire to adopt a Plan of
Reorganization in accordance with the provisions of Section 354 and Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended, on the terms and
conditions hereinafter set forth.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the premises and the warranties and
mutual covenants set forth herein, the parties hereto agree as follows:
A. Adoption of Plan. TEI, the Shareholders and the Company hereby adopt
this Plan of Reorganization.
1.1. Reorganization of Company and TEI. At the Closing Date, the
Company shall be become a subsidiary of TEI (the "Reorganization"). TEI shall be
the parent corporation and the Company shall be a wholly owned subsidiary of
TEI. The corporate existence of the TEI shall continue to operate for the
purposes set forth in TEI's Articles of Incorporation and continue to be
governed by the laws of the State of Colorado. The corporate existence of the
Company shall continue to operate for the purposes set forth in the Company's
Articles of Incorporation and continue to be governed by the laws of the State
of Delaware.
1.2. Articles of Incorporation of TEI. At the Closing Date, the
Articles of Organization of TEI as in effect immediately prior to the effective
time of the Reorganization shall be the Articles of Organization immediately
after such effective time.
1.3. Articles of Incorporation of the Company. At the Closing Date the
Articles of Organization of the Company as in effect immediately prior to the
effective time of the Reorganization shall be the Articles of Organization
immediately after such effective time.
1.4. Effective Time of Reorganization. The Reorganization shall become
effective on the Closing Date. The Reorganization Agreement shall be filed with
the Secretary of State of the States of Delaware and Colorado, respectively, as
soon as practicable.
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1.5. Exchange and Payment of Shares of Company. Each share of the
Company stock outstanding on the Closing Date shall be transferred to TEI and
TEI shall concurrently issue its common stock to the Shareholders.
1.6 Execution of Further Documents By Company. From time to time as
and when requested by TEI and to the extent permitted by law, the officers and
directors of the Company in office shall and will execute and deliver such other
instruments and will take or cause to be taken such further or other actions as
shall be necessary in order to consummate and otherwise to carry out the purpose
of this Agreement.
1.7 Execution of Further Documents By TEI. From time to time as and
when requested by the Company and to the extent permitted by law, the officers
and directors of TEI in office shall and will execute and deliver such other
instruments and will take or cause to be taken such further or other actions as
shall be necessary in order to consummate and otherwise to carry out the purpose
of this Agreement.
2. Actions At the Closing. Subject to the terms and conditions hereof and
in exchange for the consideration hereinafter set forth, the parties hereto
agree to consummate the following transactions at a closing (hereinafter called
the "Closing") to be held as set forth in Section 3 hereof:
2.1 Conversion of Preferred Stock of TEI. Intentionally deleted.
2.2 Reverse Stock Split of TEI Stock. Prior to the Closing Date, TEI
shall cause a reverse stock split to be effectuated at a rate to be determined
by TEI and the Company such that at the Closing Date the Series A Preferred
Stock and common stock shareholders of TEI shall receive that number of shares
following the merger that will result in all of TEI's existing shareholders
(including those persons whose preferred stock has been converted) owning five
percent (5%) of the issued and outstanding shares of TEI following the
reorganization. Immediately following the Closing Date the capital stock of TEI
will consist of approximately 40,000,000 shares of the issued and outstanding
common stock to be owned as follows:
a. Shareholders: 38,000,000
b. TEI Insiders(1) and
c. TEI Shareholders: 2,000,000
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Total 40,000,000
(1) The number of shares to be provided to all existing shareholders,
option holders, insiders and persons holding convertible securities
will be distributed pro rata based upon the number of shares held by a
particular bears to the total number of shares issued and outstanding
after taking into consideration the exercise of all options, warrants
and convertible preferred shares.
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2.3 Transfer of Stock of the Company. The Shareholders agree to
transfer to TEI certificates, duly endorsed to TEI or with Assignments of Stock
attached thereto duly endorsed to TEI by the Shareholders, representing the
shares of Common Stock, without par value, of the Company presently issued and
outstanding and owned of record by the Shareholders. The certificates
representing the shares of Common Stock of the Company to be delivered to TEI
hereunder shall not contain any restrictive legends on their face other than a
legend stating that the securities have not been registered under the Securities
Act of 1933, as amended (the "Act"), or under any relevant state securities
laws. For convenience, the shares of stock to be transferred to TEI at the
Closing are sometimes referred to hereafter as the "Company Common Stock." TEI
hereby acknowledges that the certificates have been reissued to eliminate prior
restrictions against transfer which restrictions TEI understands to have been
eliminated in accordance with applicable law.
2.4 Delivery of TEI Stock. In exchange for the Company Common Stock
delivered to TEI at the Closing, TEI agrees to deliver to the Shareholders, pro
rata according to their ownership of Company Common Stock, certificates
representing that number of shares which, after taking into consideration all of
the issued and outstanding shares of TEI stock at the Closing will result in the
Shareholders owning ninety-five percent (95%) of the issued and outstanding
shares of the authorized and issued shares of TEI Common Stock, $.001 par value.
Such shares of TEI Common Stock will evidence ownership in TEI after taking into
account the TEI reverse stock split and conversion of Series A Preferred Stock
referred to in Section 2.1 hereof.
2.5 Officers and Directors Of The Company After Reorganization. The
officers and directors of the Company shall continue following the
reorganization until the election of their successors.
2.6 Officers and Directors Of TEI After Reorganization.
Immediately after the Closing Date, the following persons shall serve as
the officers of TEI following the Reorganization:
Chief Executive Officer: Xxx Xxxxxx
President Xxx Xxxxxx
Chief Operating Officer Xxx Xxxx
Secretary Xxxxxx Xxxxxxxxx
Treasurer Xxxxxxx Xxxxxxxxx
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Immediately after the Closing Date, the following persons shall serve as the
Directors of TEI following the Reorganization:
Mr. Xxxxx Xxxxx
Xx. Xxxxxxx Francisco
Xx. Xxx Xxxxxx
Xx. Xxxxxx Francisco
Xx. Xxxxxx Xxxxx
The existing directors of TEI shall, to the extent not remaining as a director
of TEI following the Reorganization, tender their written resignations to TEI no
less than three (3) business days prior to the Closing Date (as defined in
Section 3 hereof), whereby each of said persons designated by TEI resigns as a
director.
3. The Closing. The Closing hereunder shall take place at the offices of
TEI on July 31, 2000, at 10:00 a.m., or such other date as the parties hereto
may specify (the "Closing Date"). In no event shall the Closing occur until such
time as TEI shall have received approval from its existing shareholders to the
terms and conditions of this reorganization pursuant to proper shareholder
solicitation and duly held meeting in accordance with the requirements of the
Colorado corporation law and the statutes, rules and regulations of the
Securities and Exchange Commission.
4. Representations and Warranties of the Company. The Company hereby
represent and warrant to the best of its knowledge and belief as follows:
4.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has all necessary corporate power and authority to own its
properties and to conduct its business as now owned and conducted by it and is
duly qualified to transact intrastate business and is in good standing in each
jurisdiction where the nature of its business or the ownership of its properties
requires such qualification except, however, it has not filed any certificate of
assumed name or similar notice. The Company has not received a currently
effective notice or other currently effective communication from any
governmental body or agency to the effect that it should be qualified to do
intrastate business in any other jurisdiction.
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4.2 Capitalization. The authorized capitalization of the Company
consists solely of One Thousand Five Hundred (1,500) shares of Common Stock,
without par value per share, of which One Thousand (1,000) shares are issued and
outstanding and owned by the Shareholders as follows:
NAME OF SHAREHOLDER NUMBER OF SHARES
- ------------------- ----------------
BZ INVESTMENT TRUST 750
Xxx Xxxxxx 250
------------------
Total 1,000
All of such issued and outstanding shares of Common Stock have been duly issued
and are fully paid and non-assessable. On the Closing Date, there will be no
subscriptions, options, warrants, rights, or other agreements outstanding
provided for the purchase of, nor any securities convertible into, capital stock
or any other security of the Company.
4.3 Subsidiaries. Except as set forth in Schedule 4.3, the Company
does not own, directly or indirectly, any debt (other than accounts and notes
receivable arising in the ordinary course of business), equity or other interest
in any other corporation, business trust, joint stock company, partnership,
association or other business entity.
4.4 Financial Statements. Attached hereto as Schedule 4.4, and
incorporated herein by this reference, are the following unaudited internally
prepared financial statements: (i) a balance sheet of the Company as of May 31,
2000, together with the related Statement of Income and Retained Earnings for
the twelve (12)-month period then ended (the "Financial Statements"). The
foregoing Financial Statements have been prepared from the books and records of
the Company on a consistent basis throughout the period indicated. Because the
Company is a newly formed entity without a prior year operating history, there
are no comparable statements for any prior period. The Shareholders believe the
Financial Statements to be accurate in all material respects except as stated in
Schedule 4.4.
4.5 Absence of Certain Changes. Since the Balance Sheet Date, there has not
occurred (a) any net material adverse change in the assets, liabilities,
capitalization, condition (financial or otherwise), business or prospects of the
Company, (b) any damage, destruction or loss having a material adverse effect on
the assets, condition (financial or otherwise), business or prospects of the
Company, or (c) any event or condition, or threat thereof, which does, or
reasonably might, have a materially adverse effect on the assets, condition
(financial or otherwise), business or prospects of the Company. Since said date,
the Company has not directly or indirectly:
(i) Made any loan or advance to any person;
(ii) Declared or paid any dividends on its capital stock or
redeemed, purchased or otherwise acquired any shares of its capital stock;
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(iii) Subjected any of its assets to any mortgage, deed of trust,
lien, pledge, conditional sales contract, lease, encumbrance or charge;
(iv) Sold, leased or otherwise transferred any of its assets other
than in the ordinary course of business;
(v) Entered into any agreements either outside the ordinary
course of business or involving consideration given by the Company in amounts in
excess of Five Thousand Dollars ($5,000.00), other than those described or
referred to in schedules to this Agreement;
(vi) Modified, amended or terminated any agreement, or waived or
released any right, other than in the ordinary course of business or other than
as contemplated by this Agreement;
(vii) Incurred any obligation or liability for borrowed money, or
incurred any other obligation or liability except in the ordinary course of
business;
(viii) Issued or sold or agreed to issue or sell any equity or debt
securities;
(ix) Increased the salary, fringe benefits or other compensation
of, or paid any bonus or similar compensation to, any of its officers or
directors (except for payments of reimbursable expenses; or
(x) Agreed to do any of the things described in the preceding
clauses (i) through (ix).
4.6 Accounts Receivable. Attached hereto as Schedule 4.6, and
incorporated herein by this reference is a correct and complete aging of all
accounts receivable of the Company as at the Balance Sheet Date. Such accounts
receivable, as well as all accounts receivable of the Company arising between
that date and the Closing Date, are and will be valid and enforceable, incurred
in the ordinary course of business, and payable to and collectible in full by
the Company, or its successor in interest, on demand when due without any
set-off or counterclaim or any reduction (directly or indirectly) for any
payment, credit or allowance made or given by reason of return of defective
merchandise or otherwise and without suit or other collection efforts, except to
the extent of reserves for bad accounts set up by the Company on its books and
records in a manner consistent with the manner in which the reserve for such
purpose reflected in the Financial Statements was established. The accounts
receivable of the Company on the Closing Date will be the same as set forth in
said schedule, except for additions and reductions thereof made in the ordinary
course of business since the Closing Date.
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4.7 Inventory. Except as otherwise disclosed in this Agreement, the
Company has good and marketable title to all of its inventories, free and clear
of all liens (except to the extent of customer advances), leases, encumbrances,
equities, conditional sales contracts, security interests, charges and
restrictions (except for liens, if any, for personal property taxes not
delinquent). All inventories reflected in the Financial Statements are based on
quantities determined by physical inventories taken as of the Balance Sheet
Date, valued at cost and on a basis consistent with that of prior practice. The
values recorded in the Financial Statements for inventories of raw materials do
not, to a material extent, include any obsolete or unsalable items.
4.8 Tax Returns. Within the times and in the manner prescribed by law,
the Company has filed all federal, state, local and foreign tax returns required
by law. Such returns were correct and complete, and the Company has paid the
taxes due and payable in connection therewith. The federal income tax returns of
the Company have not been audited by the Internal Revenue Service.
4.9 Contracts and Agreements. Attached hereto as Schedule 4.9, and
incorporated herein by this reference, is a true and complete list of any and
all indentures, contracts, agreements, and arrangements, written and oral, or
other material obligations, if any, to which the Company is, as of the date of
this Agreement, a party, or by which it is bound, except those contracts and
agreements which involve less than One Thousand Dollars ($1,000.00) in
consideration, and except for those referred to in Schedule 4.9 hereto. Upon
request of TEI, the Company will deliver to TEI at the offices of TEI its copy
of any one or more of such contracts or agreements. All of the agreements and
contracts listed in Schedule 4.9, are valid and binding obligations of the
parties thereto in accordance with their respective terms, and there are no
liabilities of the Company or any other party thereto arising from any currently
asserted breach or default, prior to the date of this Agreement, of any
provision of any such contract or agreement by the Company, or such party, and
no event has occurred which, through the passage of time or the giving of
notice, or both, would constitute a material breach or default by the Company or
such party under any such contract or agreement or would cause the acceleration
of any obligation of any party thereto or the creation of a lien or encumbrance
upon any asset of the Company or such party, except as otherwise stated in this
Agreement. The Company is not a party to, nor are any of its assets bound by,
any agreement which is materially adverse to its business, assets or condition
(financial or otherwise).
4.10 Real Property. Attached hereto as Schedule 4.10, and
incorporated herein by this reference are: (i) a legal description of each
parcel of real property leased to the Company; (ii) a list of all leases of real
property under which the Company is either a lessee or lessor, including a list
of lease expiration dates, options to renew and annual lease payments with
respect thereto; (iii) a description of all buildings, fixtures and other
improvements located on said real properties; and (iv) an indication of which of
said real properties are used (listing the names of the stores located thereon),
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and which are not used in the conduct of the Company's business. There will be
made available to TEI by Company at its offices for examination correct and
complete copies of all of the leases referred to in the preceding sentence. The
Company has good and marketable title to all of the leaseholds described in
Schedule 4.10, which leaseholds are free and clear of all mortgages, liens,
encumbrances, leases, equities, claims, charges, easements, rights of way,
covenants, conditions and restrictions, except for liens, if any, for property
taxes not delinquent and except for such matters as are set forth in said
Schedule (none of which matters interferes in any way with the present or
intended use of any such real properties). As a whole, the buildings and
improvements described in said Schedule 4.10 and used in the conduct of the
Company's business are in good operating condition and repair, and the operation
thereof by the Company as presently conducted is not in violation of any
applicable building code, zoning ordinance or other law or regulation which
would render inoperable any of the stores operating on such properties. All of
the leases listed in said Schedule 4.10 are valid and in full force and effect,
and neither party thereto is currently assented to be, or is believed to be, in
default thereunder, and there does not exist any event which with notice or
lapse of time or both would constitute a default. No officer, director,
shareholder or employee of the Company, nor any spouse, child or other relative
thereof, directly or indirectly, owns any of the real properties described in
said Schedule 4.10, except to the extent indicated therein.
4.11 Tangible Personal Property. Attached hereto as Schedule 4.11, and
incorporated herein by this reference, is a correct and complete list of
tangible personal property prepared jointly by the Shareholders and the Company
(i) owned by, in the possession of or used in the business of the Company having
an initial cost of more than One Thousand Dollars ($1,000.00) for each item and
(ii) as to which any person other than the Company has any interest. Schedule
4.11 identifies such person and describes the circumstances under which such
property is used and describes or refers to any agreement relating to the use
thereof. All such property not owned entirely by the Company is in such
condition that upon the return of such property in its present condition to its
owner, the Company will have discharged all of its obligations to such owner.
The Company has good and marketable title to all other properties used in its
business, free and clear of all liens, leases, encumbrances, claims under
bailment and storage agreements, equities, conditional sales contracts, security
interests, charges and restrictions, except as shown on Schedule 4.11. As a
whole, the tangible personal property in the possession of or used in the
business of the Company is in usable condition and repair and is fit for its
intended purposes.
4.12 Intangible Personal Property. The Company owns no patents, patent
licenses, patent applications, trademarks, trademark registrations and
applications therefor, trade names, copyrights, copyright registrations and
applications therefor. The Company has not heretofore infringed and is not now
infringing upon any patent, trade name, trademark, copyright or trade secret
belonging to any other person, and it has not engaged in and is not now engaging
in any form of unfair competition. The Company holds adequate licenses or other
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rights to use all trademarks, trade names, copyrighted material, and other
intangible personal property necessary to the conduct of its business as
presently operated by it, and such use does not conflict with any rights of
others. The Company has not received any notice of infringement or other
complaint that its operations traverse or infringe the rights of others under
patents, trademarks, trade names, copyrights or otherwise.
4.13 Insurance. Attached hereto as Schedule 4.13, and incorporated
herein by this reference, is a correct and complete list and description of all
insurance policies owned by the Company, all of which are in full force and
effect in the amounts set forth and described in said schedule in accordance
with the terms of such policies. Such insurance policies cover the Company's
properties and assets in amounts and against such losses and risks as are
generally maintained for comparably situated businesses and properties. Upon the
request of TEI, the Company will deliver to TEI at its offices a true copy of
any of such insurance policies. Such insurance will be kept in full force and
effect until the Closing Date.
4.14 Labor, Benefit and Employment Agreements. Attached hereto as
Schedule 4.14, and incorporated herein by this reference, is a correct and
complete list of all current employment agreements, collective bargaining and
other labor agreements, and pension, bonus, profit sharing, stock option,
deferred compensation, stock purchase, retainer, consulting, retirement,
welfare, incentive or fringe benefit plans or agreements to which the Company is
a party or by which it is bound. No party to any such agreement or arrangement
is in default thereunder, and no event has occurred which with the passage of
time or the giving of notice or other would constitute such default. The Company
will deliver to TEI at the offices of TEI upon request correct and complete
copies of (i) all of the agreements, plans and programs listed in said Schedule
4.14, (ii) any descriptive literature concerning any of such agreements, plans
and programs which have been or are available for distribution to the employees
of the Company, (iii) all approvals of any of such agreements, plans or programs
which have been obtained from the Internal Revenue Service, (iv) the most recent
valuation and list of assets contained in any trust funds with respect to such
agreements, plans and programs, (v) the most recent actuary report (including
method of funding, actuarial assumptions and amounts of past service liability)
with respect to any such agreements, plans and programs and (vi) copies of the
latest reports, if any, prepared by the Company and filed with the United States
Department of Labor. There is not pending or threatened any labor dispute,
strike or work stoppage by Company's employees which may disrupt the continued
operation of the Company.
4.15 Employees, Officers and Directors. Attached hereto as Schedule
4.15, and incorporated herein by this reference, is a correct and complete list
of all salaried employees of the Company whose current rate of remuneration
(including wages and fringe benefits having ascertainable monetary value) from
the Company in the aggregate is Ten Thousand Dollars ($10,000.00) or more per
year; except as set forth in said Schedule 4.15, the Shareholders have no
information or facts indicating that any such employee intends to terminate his
employment relationship with the Company. Schedule 4.15 also lists job titles
and wage rates of all other employees of the Company. Said Schedule 4.15 also
contains a correct and complete list of all commission salesmen and
manufacturer's representatives of the Company, naming each and setting forth the
gross salary and the commission paid to each in respect of the prior fiscal year
of the Company, and the rate of salary and commission payable to each. Said
Schedule 4.15 also contains a correct and complete list of all of the officers
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and directors of the Company and the rate of compensation payable to each such
person in any and all capacities.
4.16 Litigation. Except as set forth in Schedule 4.16, attached hereto
and incorporated herein by this reference, there is no legal, administrative,
arbitration or other proceeding or governmental investigation pending or
threatened against or otherwise affecting the Company or any of its assets;
except as set forth in said Schedule 4.16, no such action is pending or
threatened against the Company or any of its Shareholders, officers, directors
or employees with respect to any matter arising out of the business of the
Company or in connection with its affairs. To the best knowledge and belief of
the Shareholders, no event or events have occurred which would give rise to an
action described in this Section 4.16. Except as set forth in said Schedule
4.16, there will not result any material adverse change in the assets,
liabilities, condition (financial or otherwise), business or prospects of the
Company if any of the matters listed in said Schedule 4.16 is decided adversely
to the Company or its interests. There will be furnished or made available to
TEI upon request copies of all relevant court papers and other documents
relating to the matters set forth in said Schedule. The Company is not presently
engaged in or contemplating any legal action to recover claims for monies due to
it or damages sustained by it except as indicated in said Schedule 4.16. The
Company is not a party to any order, writ, injunction or decree of any federal,
state, local or foreign court, department, agency or instrumentality, except as
set forth in said Schedule.
4.17 Business Operation. The Company has obtained all licenses,
permits and other governmental authorizations currently required for the conduct
of its businesses; such licenses, permits and other governmental authorizations
are in full force and effect; and the Company is in all material respects
complying therewith. The Company's business is currently being conducted in
compliance with the laws of all jurisdictions and localities where such business
is conducted and to the best of the Shareholders' knowledge, there is not
pending any legislation which would require the Company to alter the nature of
its business or spend more than Ten Thousand Dollars ($10,000.00) on capital
improvements or alterations.
4.18 Accounts Payable. Attached hereto as Schedule 4.18 is a true and
correct list of all accounts payable as of the Balance Sheet Date under which
the Company is or will become obligated to pay setting forth the age of each
account. Since the Balance Sheet Date, all of the Company's accounts payable are
trade payables arising in the ordinary and usual course of its business.
4.19 Indebtedness. No event has occurred which accelerates or which
entitles, or would on notice or lapse of time or both entitle, the holder of any
indebtedness of the Company to accelerate the maturity of any indebtedness or
obligation of the Company, and there is no default under any promissory note
given by the Company or under any mortgage, deed of trust or other encumbrance
or charge to which any of the property of the Company is subject.
4.20 Indebtedness to Officers, Directors and Shareholders. The Company
is not indebted to any Shareholder or to any officer or director of the Company
or to their respective spouses, children or other blood relatives in any amount
whatsoever other than for payment of salaries or other compensation for services
rendered and reasonable travel expenses not delinquent.
4.21 Minute Books. The corporate minute books of the Company contain
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a record of all meetings of directors and Shareholders for which written minutes
were prepared. Consistent with its past practice, Bylaws and customs, the
Company holds many meetings of directors and/or shareholders for which no formal
minutes have been prepared.
4.22 Ownership of Company Common Stock. On the date of this Agreement,
the Shareholders own, of record and beneficially, all of the outstanding shares
of Company Common Stock. Each Shareholder now has, and on the Closing Date will
have, (i) valid marketable title to the Company Common Stock agreed to be
transferred by him to TEI, free and clear of all liens, encumbrances, equities,
community property interests, and claims whatsoever, and (ii) full right, power
and authority to enter into this Agreement and to sell, assign, transfer and
deliver such stock hereunder; the certificates for such stock are genuine, and
no Shareholder has any knowledge of any fact which would impair the validity
thereof. Upon delivery of such stock hereunder and payment therefor pursuant
hereto, TEI will acquire valid marketable title to one hundred percent (100%) of
the outstanding capital stock of the Company free and clear of any voting trust
or other arrangements, liens, encumbrances, equities, community property
interests and claims whatsoever.
4.23 Company's and Shareholders' Authority. At the execution of this
Agreement by the Shareholders and the Company and its delivery of TEI and the
consummation by each Shareholder of the transactions contemplated hereby have
been duly authorized by all necessary action and no further authorization will
be necessary on the part of the Company or any Shareholder for the execution,
delivery, performance or consummation of this Agreement. No approval of any
federal, state or local authority or administrative agency is necessary to
authorize the execution and delivery of this Agreement by any Shareholder and
the Company or the consummation by any Shareholder of the transactions
contemplated hereby. This Agreement is a valid and binding agreement of each
Shareholder and the Company in accordance with its terms.
4.24 Violation of Other Instruments. Except as set forth in Schedule
4.24, incorporated herein by this reference, neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby will
result in a breach of any term or provision of or constitute a default, or an
event which, with notice or lapse of time or both, would constitute a default,
under the Articles of Incorporation or the Bylaws of the Company or under any
lease, license, promissory note, conditional sales contract, commitment,
indenture, mortgage, deed of trust, instrument or other agreement to which the
Company is a party or by which the Company or any of its properties is a party
or constitute an event which would permit any party to any such agreement to
terminate such agreement or to accelerate the maturity of any indebtedness or
other obligation evidenced by or incurred pursuant to such agreement or result
in the creation or imposition of any lien, charge or encumbrance upon any asset
of the Company.
4.25 Interest in Creditors. Except as set forth on Schedule 4.25, no
Shareholder, nor his spouse, nor any child or parent of any Shareholder, has any
direct or indirect material interest in any creditor, competitor, supplier
(including lessors) or customer (including lessees) of the Company. For the
purposes of this Section 4.25, no interest shall be considered material if it
represents less than one percent (1%) of a class of the outstanding securities
or interests of such creditor, competitor, supplier or customer or less than a
one percent (1%) interest in the profits, losses or capital of such entity.
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4.26 Conformity to Law. None of the contracts described or referred to
in the Schedules to this Agreement are in violation of any applicable provisions
of federal, state or local law.
4.27 Absence of Undisclosed Liabilities. Except to the extent
reflected in the Schedules attached to this Agreement, the Company as of the
date of this Agreement has no material liabilities or obligations of any nature,
whether absolute or contingent, except those incurred since the Balance Sheet
Date, in the ordinary course of business. Except as set forth in the Schedules
to this Agreement, no Shareholder has any knowledge of, or any reasonable basis
upon which to anticipate, the assertion against the Company, as of the date
hereof, of any material liability of any nature, or in any material amount, not
fully reflected or reserved against it in the Financial Statements.
4.28 Adequacy of Representations and Warranties. None of the (i)
warranties and representations made by the Shareholders herein or in the
Schedules, amended Schedules, or documents related thereto, (ii) financial
statements furnished by the Shareholders or the Company, or (iii) certificates
or memoranda furnished by the Shareholders or the Company, or on any of their
behalf, contains or will contain any untrue statements of a material fact or
omits or will omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading. All representations and
warranties of the Shareholders and the Company herein contained shall be true on
and as of the Closing Date with the same effect as if made on or as of such
date. The Shareholders and the Company further agree to deliver such additional
information and documents to TEI as TEI may reasonably request.
5. Covenants and Agreements of the Shareholders. In addition to their
agreements elsewhere set forth in this Agreement, the Shareholders each covenant
and agree with TEI as follows:
5.1 Retention of Employees. The Shareholders, to the extent that TEI
so requests prior to the Closing Date, will use their best efforts to persuade
the employees of the Company to continue in their respective employment
capacities after the Closing Date.
5.2 Access to Premises and Information. Prior to the Closing Date, the
Shareholders will cause the Company to permit TEI and its authorized
representatives to have full access to the premises and books, files and records
of the Company at any reasonable time and in any reasonable manner, and will
furnish TEI at such time such financial and operating data and other information
with respect to its business and properties as TEI shall reasonably request. The
Shareholders agree that any investigation or inquiry made by TEI pursuant to
this Agreement shall not in any way affect or lessen the representations and
warranties made by the Shareholders in this Agreement or their survival of the
Closing; however, Shareholders shall have the right anytime up to Closing to
amend the Schedules to their warranties and representations on the basis of the
investigation and inquiry by TEI or otherwise.
5.3 Consents. Each Shareholder shall individually, and shall cause the
Company to, execute and file or join and cooperate in the execution and filing
of any applications or other documents which may be necessary in order to obtain
the authorization, approval or consent of any governmental body, state or
federal, or any other persons, which may be required, or which TEI may
reasonably request in connection with the execution of this Agreement or
consummation of the transactions contemplated hereby, or in connection with any
12
past transactions of the Company or any predecessor of the Company or the
assignment of any lease, franchise, license or other intangible asset owned by
the Company or used in the business of the Company.
5.4 Approvals. At the Closing, the Shareholders will furnish to TEI
copies, appropriately certified by the Company's Secretary, of the resolutions
of the Company's Board of Directors authorizing the execution and delivery of
this Agreement and of the Company's Shareholders approving and authorizing the
implementation of this Agreement.
5.5 Information Kept Confidential By Shareholders. Each Shareholder
agrees that he and his agents and representatives will hold in strict confidence
all data and information obtained from TEI or any officer, agent or
representative of TEI, whether pertaining to the financial condition, results of
operations or products of TEI. If, for any reason, the transactions contemplated
by this Agreement are not consummated at the Closing Date, each Shareholder will
return to TEI all data, information and other written material respecting TEI
obtained by him in connection with matters contemplated by this Agreement.
5.6 Conduct of Business Prior to Closing. During the period from and
after the date of this Agreement through the Closing Date, unless specifically
contemplated in this Agreement, each Shareholder covenants and agrees that,
without TEI's prior written consent to the contrary, he will cause the Company
to operate so as:
(a) To carry on its business in substantially the same manner as
heretofore carried on, and not make any purchase, sale or lease (whether as a
lessor or lessee), or enter into any agreement, or introduce any method of
management or operation in respect of any such business except in the ordinary
course of business and in a manner not inconsistent with prior practice and with
the terms of this Agreement;
(b) Not to declare or pay any dividend or make any distribution
or payment in respect of its capital stock, nor directly or indirectly to
redeem, purchase or otherwise acquire or sell any of its capital stock;
(c) Not to acquire, sell, transfer, lease, mortgage, pledge,
encumber or otherwise dispose of any fixed asset (other than inventory and work
in progress, in the ordinary and usual course of business);
(d) Not to discharge or satisfy any lien or encumbrance or pay or
perform any obligation or liability other than (i) current liabilities set forth
in the balance sheets included in the Financial Statements, or (ii) current
liabilities incurred in the ordinary course of business since the Balance Sheet
Date;
(e) Not to change or alter the physical contents or character of
any of its inventory so as to affect the nature of any of its business or result
in a change of the total dollar valuation thereof as set forth on the latest
balance sheet contained in the Financial Statements other than as a result of
transactions in the ordinary course of business;
(f) Not to do any of the acts specified in Section 4.5 hereof;
(g) To reasonably seek to maintain and preserve its business
13
organization and goodwill intact and maintain its relationships with
franchisers, suppliers, customers (including lessees), creditors, employees and
others having business relationships with it;
(h) Not to make any changes or modifications in any agreement to
which it is a party or which affects it, except in the ordinary course of
business or in an amount not exceeding One Thousand Dollars ($1,000.00) in any
one transaction or as required by this Agreement;
(i) To take such action as may be necessary to maintain,
preserve, renew and keep in full force and effect its corporate existence,
rights and franchises;
(j) Not to make any commitment for any capital expenditures for a
single item exceeding One Thousand Dollars ($1,000.00) and not to make
commitments for capital expenditures exceeding Five Thousand Dollars ($5,000.00)
in the aggregate;
(k) Not to enter into any contracts, commitments or proposals for
the sale or lease of any of its products or sale of any of its services which
require the manufacture of new products costing in the aggregate Ten Thousand
Dollars ($10,000.00) or more or any amendment or extension of any contracts,
commitments or proposals for such sales or leases which require the manufacture
of new products costing in the aggregate Ten Thousand Dollars ($10,000.00) or
more;
(l) Not to file any income, franchise, sales or other tax return
or report without the prior reasonable opportunity for examination and approval
thereof by TEI; and
(m) To continue to maintain its existing insurance.
(n) Between the date of this Agreement and the Closing Date, TEI
shall not issue any preferred stock nor issue any common stock.
6. Representations and Warranties of TEI. TEI represents and warrants to
the best of its knowledge and belief to the Shareholders as follows:
6.1 Organization and Standing of TEI. TEI is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Colorado and has full corporate power to carry on its business as now
conducted and to execute, deliver and perform its obligations under this
Agreement.
6.2 Corporate Approvals. TEI has obtained all necessary authorization
and approvals required for the execution and delivery of this Agreement and the
consummation of the transaction contemplated hereunder. Following the execution
of this Agreement, TEI shall seek shareholder approval of the terms and
conditions of this Agreement and the transactions contemplated herein.
6.3 Capitalization. TEI's authorized capitalization consists of
100,000,000 shares of Common Stock authorized, of which 78,894,734 blank shares
are issued and outstanding. All of said shares are validly issued and
outstanding, fully paid and non-assessable, with a par value of $.001 per share.
As of the date of this Agreement, there are 78,894,734 shares of common stock
14
issued and outstanding and 20,000,000 shares of Convertible Preferred Stock,
with a par value of $.001 per share, of which 63,300 shares are issued and
outstanding.
6.4 Financial Statements. TEI's balance sheet as of January 31, 2000,
and statement of income for the twelve (12) months then ended, fairly present
the consolidated financial position of TEI and the results of its operations as
of the dates and for the periods involved, and such financial statements have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved. Since January 31,
2000, there has been no change in TEI's financial condition or results of
operations which have not already been publicly announced which have been in the
aggregate materially adverse.
6.5 Information Kept Confidential By TEI. TEI and its officers, agents
and representatives will hold in strict confidence all data and information
obtain from the Shareholders or the Company or any of its officers, agents or
representatives, whether pertaining to the financial condition, results of
operation, methods of operation, or products of the Company or otherwise. If the
transactions contemplated by this Agreement are not consummated at the Closing
Date, TEI will return to the Shareholders or the Company all data, information
and other written material with respect to the Company obtained by TEI in
connection with the negotiation or consummation of this Agreement or other
matters contemplated by this Agreement.
6.6 No Breach or Default. The consummation of the transactions
contemplated by this Agreement will not result in the breach of any terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust or other agreement or instrument to which TEI is a party or by which it is
bound.
6.7 Stock of TEI to be Delivered. The shares of TEI stock to be
delivered to the Shareholders pursuant to this Agreement will, when so
delivered, be duly authorized, validly issued and outstanding, fully paid and
non-assessable.
6.8 Subsidiaries. Except as set forth in Schedule 6.8, TEI does not
own, directly or indirectly, any debt (other than accounts and notes receivables
arising in the ordinary course of business), equity or other interest in any
other corporation, business trust, joint stock company, partnership, association
or other business entity. The parties agree that TEI shall, prior to as soon as
practicable after the Closing, cause to be transferred to its existing
shareholders all of the shares of stock in Vertex, Inc. The Shareholders waive
any and all rights to the shares of stock of Vertex, Inc.
6.9 Financial Statements. Attached hereto as Schedule 6.9, and
incorporated herein by this reference, are the following unaudited internally
prepared financial statements: (i) a balance sheet of TEI as of January 31,
1999, together with the related Statement of Income and Retained Earnings for
the twelve (12)-month period then ended; and (ii) a balance sheet of TEI as of
January 31, 1999 (the "Balance Sheet Date"), together with the related Statement
of Income and Retained Earnings for the approximate two (1)-month period then
ended (the "Financial Statements"). The foregoing Financial Statements (which
have not been prepared in accordance with generally accepted accounting
principles, and, therefore, do not include footnote disclosures) have been
prepared from the books and records of TEI on a consistent basis throughout the
15
period indicated and on a basis consistent with the prior years. The
Shareholders believe the Financial Statements to be accurate in all material
respects except as stated in Schedule 6.9 and except for (a) failure to accrue
vacation pay, (b) the failure to disclose deferred tax liabilities due to timing
differences, and (c) the failure to capitalize leases.
6.10 Absence of Certain Changes. Since the Balance Sheet Date, there
has not occurred (a) any net material adverse change in the assets, liabilities,
condition (financial or otherwise), business or prospects of TEI, (b) any
damage, destruction or loss having a material adverse effect on the assets,
condition (financial or otherwise), business or prospects of TEI, or (c) any
event or condition, or threat thereof, which does, or reasonably might, have a
materially adverse effect on the assets, condition (financial or otherwise),
business or prospects of TEI. Since said date, TEI has not directly or
indirectly:
(i) Made any loan or advance to any person;
(ii) Declared or paid any dividends on its capital stock or
redeemed, purchased or otherwise acquired any shares of its capital stock;
(iii) Subjected any of its assets to any mortgage, deed of trust,
lien, pledge, conditional sales contract, lease, encumbrance or charge;
(iv) Sold, leased or otherwise transferred any of its assets other
than in the ordinary course of business;
(v) Entered into any agreements either outside the ordinary
course of business or involving consideration given by TEI in amounts in excess
of Five Thousand Dollars ($5,000.00), other than those described or referred to
in schedules to this Agreement;
(vi) Modified, amended or terminated any agreement, or waived or
released any right, other than in the ordinary course of business or other than
as contemplated by this Agreement;
(vii) Incurred any obligation or liability for borrowed money, or
incurred any other obligation or liability except in the ordinary course of
business;
(viii) Issued or sold or agreed to issue or sell any equity or debt
securities;
(ix) Increased the salary, fringe benefits or other compensation
of, or paid any bonus or similar compensation to, any of its officers or
directors (except for payments of reimbursable expenses; or
(x) Agreed to do any of the things described in the preceding
clauses (i) through (ix).
6.11 Accounts Receivable. Attached hereto as Schedule 6.11, and
incorporated herein by this reference is a correct and complete aging of all
accounts receivable of TEI as at the Balance Sheet Date. Such accounts
receivable, as well as all accounts receivable of TEI arising between that date
and the Closing Date, are and will be valid and enforceable, incurred in the
ordinary course of business, and payable to and collectible in full by TEI, or
its successor in interest, on demand when due without any set-off or
16
counterclaim or any reduction (directly or indirectly) for any payment, credit
or allowance made or given by reason of return of defective merchandise or
otherwise and without suit or other collection efforts, except to the extent of
reserves for bad accounts set up by TEI on its books and records in a manner
consistent with the manner in which the reserve for such purpose reflected in
the Financial Statements was established. The accounts receivable of TEI on the
Closing Date will be the same as set forth in said schedule, except for
additions and reductions thereof made in the ordinary course of business since
the Closing Date.
6.12 Inventory. Except as otherwise disclosed in this Agreement, TEI
has good and marketable title to all of its inventories, free and clear of all
liens (except to the extent of customer advances), leases, encumbrances,
equities, conditional sales contracts, security interests, charges and
restrictions (except for liens, if any, for personal property taxes not
delinquent). All inventories reflected in the Financial Statements are based on
quantities determined by physical inventories taken as of the Balance Sheet
Date, valued at cost and on a basis consistent with that of prior practice. The
values recorded in the Financial Statements for inventories of raw materials do
not, to a material extent, include any obsolete or unsalable items.
6.13 Tax Returns. Within the times and in the manner prescribed by
law, TEI has filed all federal, state, local and foreign tax returns required by
law. Such returns were correct and complete, and TEI has paid the taxes due and
payable in connection therewith. The federal income tax returns of TEI have not
been audited by the Internal Revenue Service.
6.14 Contracts and Agreements. Attached hereto as Schedule 6.14, and
incorporated herein by this reference, is a true and complete list of any and
all indentures, contracts, agreements, and arrangements, written and oral, or
other material obligations, if any, to which TEI is, as of the date of this
Agreement, a party, or by which it is bound, except those contracts and
agreements which involve less than One Thousand Dollars ($1,000.00) in
consideration, and except for those referred to in Schedule 6.14 hereto. Upon
request of the Company, TEI will deliver to the Company at the offices of TEI
its copy of any one or more of such contracts or agreements. All of the
agreements and contracts listed in Schedule 6.14, are valid and binding
obligations of the parties thereto in accordance with their respective terms,
and there are no liabilities of TEI or any other party thereto arising from any
currently asserted breach or default, prior to the date of this Agreement, of
any provision of any such contract or agreement by TEI, or such party, and no
event has occurred which, through the passage of time or the giving of notice,
or both, would constitute a material breach or default by TEI or such party
under any such contract or agreement or would cause the acceleration of any
obligation of any party thereto or the creation of a lien or encumbrance upon
any asset of TEI or such party, except as otherwise stated in this Agreement.
TEI is not a party to, nor are any of its assets bound by, any agreement which
is materially adverse to its business, assets or condition (financial or
otherwise).
6.15 Real Property. Attached hereto as Schedule 6.15, and incorporated
herein by this reference are: (i) a legal description of each parcel of real
property leased to TEI; (ii) a list of all leases of real property under which
TEI is either a lessee or lessor, including a list of lease expiration dates,
options to renew and annual lease payments with respect thereto; (iii) a
description of all buildings, fixtures and other improvements
17
located on said real properties; and (iv) an indication of which of said real
properties are used (listing the names of the stores located thereon), and which
are not used in the conduct of TEI's business. There will be made available to
the Company by TEI at its offices for examination correct and complete copies of
all of the leases referred to in the preceding sentence. TEI has good and
marketable title to all of the leaseholds described in Schedule 6.15, which
leaseholds are free and clear of all mortgages, liens, encumbrances, leases,
equities, claims, charges, easements, rights of way, covenants, conditions and
restrictions, except for liens, if any, for property taxes not delinquent and
except for such matters as are set forth in said Schedule (none of which matters
interferes in any way with the present or intended use of any such real
properties). As a whole, the buildings and improvements described in said
Schedule 6.15 and used in the conduct of TEI's business are in good operating
condition and repair, and the operation thereof by TEI as presently conducted is
not in violation of any applicable building code, zoning ordinance or other law
or regulation which would render inoperable any of the stores operating on such
properties. All of the leases listed in said Schedule 6.15 are valid and in full
force and effect, and neither party thereto is currently assented to be, or is
believed to be, in default thereunder, and there does not exist any event which
with notice or lapse of time or both would constitute a default. No officer,
director, shareholder or employee of TEI, nor any spouse, child or other
relative thereof, directly or indirectly, owns any of the real properties
described in said Schedule 6.15, except to the extent indicated therein.
6.16 Tangible Personal Property. Attached hereto as Schedule 6.16, and
incorporated herein by this reference, is a correct and complete list of
tangible personal property prepared TEI (i) owned by, in the possession of or
used in the business of TEI having an initial cost of more than One Thousand
Dollars ($1,000.00) for each item and (ii) as to which any person other than TEI
has any interest. Schedule 6.16 identifies such person and describes the
circumstances under which such property is used and describes or refers to any
agreement relating to the use thereof. All such property not owned entirely by
TEI is in such condition that upon the return of such property in its present
condition to its owner, TEI will have discharged all of its obligations to such
owner. TEI has good and marketable title to all other properties used in its
business, free and clear of all liens, leases, encumbrances, claims under
bailment and storage agreements, equities, conditional sales contracts, security
interests, charges and restrictions, except as shown on Schedule 6.16. As a
whole, the tangible personal property in the possession of or used in the
business of TEI is in usable condition and repair and is fit for its intended
purposes.
6.17 Intangible Personal Property. TEI owns no patents, patent
licenses, patent applications, trademarks, trademark registrations and
applications therefor, trade names, copyrights, copyright registrations and
applications therefor. TEI has not heretofore infringed and is not now
infringing upon any patent, trade name, trademark, copyright or trade secret
belonging to any other person, and it has not engaged in and is not now engaging
in any form of unfair competition. TEI holds adequate licenses or other rights
to use all trademarks, trade names, copyrighted material, and other intangible
personal property necessary to the conduct of its business as presently operated
by it, and such use does not conflict with any rights of others. TEI has not
received any notice of infringement or other complaint that its operations
traverse or infringe the rights of others under patents, trademarks, trade
names, copyrights or otherwise.
18
6.18 Insurance. Attached hereto as Schedule 6.18, and incorporated
herein by this reference, is a correct and complete list and description of all
insurance policies owned by TEI, all of which are in full force and effect in
the amounts set forth and described in said schedule in accordance with the
terms of such policies. Such insurance policies cover TEI's properties and
assets in amounts and against such losses and risks as are generally maintained
for comparably situated businesses and properties. Upon the request of TEI, TEI
will deliver to TEI at its offices a true copy of any of such insurance
policies. Such insurance will be kept in full force and effect until the Closing
Date.
6.19 Labor, Benefit and Employment Agreements. Attached hereto as
Schedule 6.19, and incorporated herein by this reference, is a correct and
complete list of all current employment agreements, collective bargaining and
other labor agreements, and pension, bonus, profit sharing, stock option,
deferred compensation, stock purchase, retainer, consulting, retirement,
welfare, incentive or fringe benefit plans or agreements to which TEI is a party
or by which it is bound. No party to any such agreement or arrangement is in
default thereunder, and no event has occurred which with the passage of time or
the giving of notice or other would constitute such default. TEI will deliver to
the Company at the offices of TEI upon request correct and complete copies of
(i) all of the agreements, plans and programs listed in said Schedule 6.19, (ii)
any descriptive literature concerning any of such agreements, plans and programs
which have been or are available for distribution to the employees of TEI, (iii)
all approvals of any of such agreements, plans or programs which have been
obtained from the Internal Revenue Service, (iv) the most recent valuation and
list of assets contained in any trust funds with respect to such agreements,
plans and programs, (v) the most recent actuary report (including method of
funding, actuarial assumptions and amounts of past service liability) with
respect to any such agreements, plans and programs and (vi) copies of the latest
reports, if any, prepared by TEI and filed with the United States Department of
Labor. There is not pending or threatened any labor dispute, strike or work
stoppage by Company's employees which may disrupt the continued operation of
TEI.
6.20 Employees, Officers and Directors. Attached hereto as Schedule
6.20, and incorporated herein by this reference, is a correct and complete list
of all salaried employees of TEI whose current rate of remuneration (including
wages and fringe benefits having ascertainable monetary value) from TEI in the
aggregate is Ten Thousand Dollars ($10,000.00) or more per year; except as set
forth in said Schedule 6.20, TEI has no information or facts indicating that any
such employee intends to terminate his employment relationship with TEI.
Schedule 6.20 also lists job titles and wage rates of all other employees of
TEI. Said Schedule 6.20 also contains a correct and complete list of all
commission salesmen and manufacturer's representatives of TEI, naming each and
setting forth the gross salary and the commission paid to each in respect of the
prior fiscal year of TEI, and the rate of salary and commission payable to each.
Said Schedule 6.20 also contains a correct and complete list of all of the
officers and directors of TEI and the rate of compensation payable to each such
person in any and all capacities.
6.21 Litigation. Except as set forth in Schedule 6.21, attached hereto
and incorporated herein by this reference, there is no legal, administrative,
arbitration or other proceeding or governmental investigation pending or
threatened against or otherwise affecting TEI or any of its assets; except as
set forth in said Schedule 6.21, no such action is pending or
19
threatened against TEI or any of its shareholders, officers, directors or
employees with respect to any matter arising out of the business of TEI or in
connection with its affairs. To the best knowledge and belief of the TEI, no
event or events have occurred which would give rise to an action described in
this Section 6.21. Except as set forth in said Schedule 6.21, there will not
result any material adverse change in the assets, liabilities, condition
(financial or otherwise), business or prospects of TEI if any of the matters
listed in said Schedule 6.21 is decided adversely to TEI or its interests. There
will be furnished or made available to TEI upon request copies of all relevant
court papers and other documents relating to the matters set forth in said
Schedule 6.21. TEI is not presently engaged in or contemplating any legal action
to recover claims for monies due to it or damages sustained by it except as
indicated in said Schedule 6.21. TEI is not a party to any order, writ,
injunction or decree of any federal, state, local or foreign court, department,
agency or instrumentality, except as set forth in said Schedule.
6.22 Business Operation. TEI has obtained all licenses, permits and
other governmental authorizations currently required for the conduct of its
businesses; such licenses, permits and other governmental authorizations are in
full force and effect; and TEI is in all material respects complying therewith.
TEI's business is currently being conducted in compliance with the laws of all
jurisdictions and localities where such business is conducted and to the best of
TEI's knowledge, there is not pending any legislation which would require TEI to
alter the nature of its business or spend more than Ten Thousand Dollars
($10,000.00) on capital improvements or alterations.
6.23 Accounts Payable. Attached hereto as Schedule 6.23 is a true and
correct list of all accounts payable as of the Balance Sheet Date under which
TEI is or will become obligated to pay setting forth the age of each account.
Since the Balance Sheet Date, all of TEI's accounts payable are trade payables
arising in the ordinary and usual course of its business.
6.24 Indebtedness. No event has occurred which accelerates or which
entitles, or would on notice or lapse of time or both entitle, the holder of any
indebtedness of TEI to accelerate the maturity of any indebtedness or obligation
of TEI, and there is no default under any promissory note given by TEI or under
any mortgage, deed of trust or other encumbrance or charge to which any of the
property of TEI is subject.
6.25 Indebtedness to Officers, Directors and Shareholders. Except as
set forth on Schedule 6.25, TEI is not indebted to any shareholder or to any
officer or director of TEI or to their respective spouses, children or other
blood relatives in any amount whatsoever other than for payment of salaries or
other compensation for services rendered and reasonable travel expenses not
delinquent. TEI currently is indebted to Xx. Xxxx Xxxxxxx in the sum of Eight
Nine Thousand One Hundred Seventy Three Dollars ($89,173.00). Provided that the
proposed reorganization complies with the requirements of IRC Section
368(a)(1)(B) as a tax-free reorganization, the obligation of TEI to Xx. Xxxxxxx
will be assumed by Vertex Corp. In the event that the proposed reorganization
fails to comply with the requirements of IRC Section 368(a)(1)(B) as a tax-free
exchange, the obligation of TEI to Xx. Xxxxxxx will remain an obligation of TEI.
6.26 Minute Books. The corporate minute books of TEI contain a record
of all meetings of directors and shareholders for which written minutes were
prepared. Consistent with its past practice, Bylaws and customs, TEI holds
20
many meetings of directors and/or shareholders for which no formal minutes have
been prepared.
6.27 Violation of Other Instruments. Except as set forth in Schedule
6.27, incorporated herein by this reference, neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby will
result in a breach of any term or provision of or constitute a default, or an
event which, with notice or lapse of time or both, would constitute a default,
under the Articles of Incorporation or the Bylaws of TEI or under any lease,
license, promissory note, conditional sales contract, commitment, indenture,
mortgage, deed of trust, instrument or other agreement to which TEI is a party
or by which TEI or any of its properties is a party or constitute an event which
would permit any party to any such agreement to terminate such agreement or to
accelerate the maturity of any indebtedness or other obligation evidenced by or
incurred pursuant to such agreement or result in the creation or imposition of
any lien, charge or encumbrance upon any asset of TEI.
6.28 Interest in Creditors. Except as set forth on Schedule 6.28,
neither TEI nor any shareholder of TEI, has any direct or indirect material
interest in any creditor, competitor, supplier (including lessors) or customer
(including lessees) of TEI. For the purposes of this Section 6.28, no interest
shall be considered material if it represents less than one percent (1%) of a
class of the outstanding securities or interests of such creditor, competitor,
supplier or customer or less than a one percent (1%) interest in the profits,
losses or capital of such entity.
6.29 Conformity to Law. None of the contracts described or referred to
in the Schedules to this Agreement are in violation of any applicable provisions
of federal, state or local law.
6.30 Absence of Undisclosed Liabilities. Except to the extent
reflected in the Schedules attached to this Agreement, TEI as of the date of
this Agreement has no material liabilities or obligations of any nature, whether
absolute or contingent, except those incurred since the Balance Sheet Date, in
the ordinary course of business. Except as set forth in the Schedules to this
Agreement, TEI has no knowledge of, or any reasonable basis upon which to
anticipate, the assertion against TEI, as of the date hereof, of any material
liability of any nature, or in any material amount, not fully reflected or
reserved against it in the Financial Statements.
7. Covenants and Agreements of TEI. In addition to its agreements elsewhere
set forth in this Agreement, TEI covenants and agrees with the Shareholders as
follows:
7.1 Blue Sky Filing. If necessary, TEI will prepare and file with the
Colorado State securities authorities an application and other necessary
documents to register the sale of the TEI Common Stock being delivered to the
Shareholders pursuant to Section 2.2 of this Agreement. TEI and its officers,
agents and representatives will use their best efforts to cause the Colorado
State securities authorities to declare effective the Blue Sky application in
Colorado.
7.2 Listing TEI Common Stock On NASDAQ Stock Exchanges. TEI will file
the necessary additional listing applications and other documents required to
list on the NASDAQ Exchange the TEI Common Stock being delivered to the
Shareholders pursuant to Section 2.2 of this Agreement. TEI and its officers,
21
agents and representatives will use their best efforts to cause the NASDAQ
Exchange to approve the application as soon as practicable after the Closing
Date.
7.3 Information Learned By TEI. Any matter learned by TEI prior to the
Closing relating to the Company or its business which is inconsistent with any
warranty or representation contained in this Agreement shall be communicated to
the Shareholders by TEI prior to the Closing so as to allow the Shareholders an
opportunity to amend such representations and warranties to disclose such
information. If the Shareholders, as is their right in such circumstance, so
amend any representation and warranty prior to Closing, TEI may refuse to accept
such amended warranty and representation and, therefore, shall then not be
obligated to close hereunder.
7.4 Return of Profits On TEI Stock Sales. Intentionally Deleted
7.5 Lock-Up Provisions of TEI Stock. TEI and the Shareholders agree to
a "lock up" provision regarding the shares of stock to be issued in this
transaction such that shares of common stock received by the Shareholders, TEI's
present officers and directors, their respective insiders and their affiliates
in this transaction shall not be disposed for a period of one (1) year following
the Closing Date. However, in the event that TEI shall cause a registration
statement to be filed, TEI shall cause all shares to be issued to the
Shareholders to be "piggybacked " along with the shares to be registered in a
registration Statement.
8. Conditions Precedent to TEI's Obligation to Close. The obligation of TEI
hereunder to consummate this Agreement is expressly subject to the satisfaction,
on or prior to the Closing Date, of all of the following conditions (compliance
with which or the occurrence of which may be waived in whole or in part by TEI
in writing):
8.1 Representations, Warranties and Covenants.
(a) Except as may otherwise be permitted by this Agreement, all
representations and warranties of the Shareholders contained in this Agreement
shall be true and correct as of the Closing Date as if made at and as of such
date. Schedules or amended Schedules attached hereto shall likewise be true and
correct as of the Closing Date, except for changes permitted by the provisions
of this Agreement;
(b) The Shareholders shall have performed and satisfied all
covenants and conditions required by this Agreement to be performed or satisfied
by them on or prior to the Closing Date;
(c) TEI shall not have discovered any material error,
misstatement or omission in any of the Schedules, amended Schedules,
representations or warranties, or any material failure to perform or satisfy any
such covenants or conditions;
(d) There shall have been delivered to TEI on the Closing Date a
certificate in the form attached as Exhibit "B" signed by each Shareholder
confirming the matters set forth in subparagraphs (a) and (b) above and such
other certificates and documents as TEI may reasonably request consistent with
the terms of this Agreement;
22
(e) During the period from the date of this Agreement to the
Closing Date, there shall not have been any material adverse change in the
financial condition or results of operations or prospects of the Company, and it
shall not have sustained any loss or damage to its properties, whether or not
insured, which in the aggregate adversely affects its ability to conduct its
business; and TEI shall have received a certificate in the form of Exhibit "B"
dated the Closing Date, signed by each shareholder to the forgoing effect and to
the further effect that any liabilities of the Company at the Closing Date which
were not reflected on the Balance Sheets contained in the Financial Statements
are only liabilities incurred in the ordinary course of business subsequent to
the Balance Sheet Date, none of which was incurred in violation or contravention
of any provisions of this Agreement.
8.2 Opinion of Counsel. The Shareholders will have furnished TEI with
the legal opinion of legal counsel, selected by the Shareholders, dated the
Closing Date and in form and substance satisfactory to TEI and TEI's counsel, to
the effect that:
(a) The Company is a corporation duly organized and validly
existing and in good standing under the laws of the State of Delaware, and it
has all requisite power to own its assets and conduct its business as it is now
being conducted. Such opinion shall list each jurisdiction where the Company is
duly qualified to do business and is in good standing and state that counsel is
not aware that the Company does intrastate business in any other jurisdiction,
and has no knowledge of any notification from any governmental body or agency
that the Company should be qualified to do intrastate business in any other
jurisdiction;
(b) The authorization and outstanding capitalization of the
Company is as set forth in Section 4.2. All of the issued and outstanding shares
of capital stock of the Company have been authorized, validly issued and are
fully paid and non-assessable and the shares of Company Common Stock to be
delivered to TEI at the Closing are owned of record and beneficially by the
Shareholders free and clear of any voting trust or other arrangements, liens,
charges, encumbrances, equities, security interests, pledges, restrictions and
community property interests whatever;
(c) The consummation of the transactions contemplated by this
Agreement will not result in a breach of any term or provision of, or constitute
a default under, the Articles of Incorporation or Bylaws of the Company or any
indenture, deed of trust, mortgage or loan agreement to which it is a party or
by which it is bound. Counsel is unaware of any facts which would indicate that
the consummation or said transactions will accelerate any commitment or
obligation of the Company or result in the creation of any lien or encumbrance
upon any asset or property of the Company;
(d) To the best of such counsel's knowledge, the Company has good
and marketable title to all of its assets and properties (including those
described in the Schedules to this Agreement), free and clear of all liens,
charges, encumbrances, equities, security interests, chattel mortgages,
conditional sales agreements, pledges and restrictions, except as set forth in
this Agreement or in the Schedules hereto. All consents and other agreements
required for transfer and assignment to TEI of Company Common Stock to be
transferred hereunder have been obtained;
(e) No consent, approval, authorization or order of any
23
governmental agency or body or of any court not obtained and in effect on the
Closing Date is required for the consummation by the Shareholders of the
transactions contemplated by this Agreement;
(f) This Agreement has been duly and validly authorized, executed
and delivered by the Shareholders and the Company, is a valid and binding
agreement of the Shareholders and the Company (except as the same may be limited
by bankruptcy and insolvency laws and other similar laws affecting the rights of
creditors generally) enforceable in accordance with its terms, and no further
corporate action or proceedings whatsoever are required to authorize the
transactions contemplated herein;
(g) The certificates of stock and endorsements thereon or stock
powers delivered by the Shareholders to TEI under this Agreement are sufficient
to transfer to TEI all of the issued and outstanding Company Common Stock; and
(h) Except as set forth in the Schedules, such counsel has no
knowledge of, nor any reason to believe, that there is any action, suit or
proceeding pending or threatened before any court or governmental agency or body
or which is pending or threatened by any public body, agency or authority
against the Company.
8.3 Absence of Litigation. No action or proceeding shall have been
instituted or threatened prior to or at the Closing Date before any court or
governmental body or authority pertaining to the acquisition by TEI of the stock
to be transferred hereunder, the result of which could prevent or make illegal
the consummation of such acquisition or which could be adverse to the business
of the Company or TEI.
8.4 Obtaining of Consent. All necessary agreements and consents of any
parties to any of the transfer of the Company Common Stock to TEI or to any
other part of the transactions contemplated hereby shall have been obtained by
the Shareholders and the Company.
8.5 Covenants Not To Compete. RESERVED.
8.6 Approval of Documentation. The form and substance of all opinions,
certificates, instruments of transfer and all other documents hereunder, shall
be satisfactory in all reasonable respects to TEI's counsel.
8.7 Consents. The consents of all parties to all contracts, leases,
licenses, or franchise agreements to which Company or TEI is a party, which TEI
reasonably believes are necessary to obtain in for the lessees or franchisees
thereunder to continue to enjoy the rights and privileges under such contracts
or leases after the Closing Date, shall have been obtained and such consents
shall be in form and substance satisfactory to TEI and its counsel.
8.8 Receipt of Common Stock. TEI shall have received at the Closing
certificates or other documents acceptable to TEI representing all of the
Company Common Stock outstanding on the Closing Date and such certificates shall
not contain on their face or otherwise any restrictive legends or conditions
other than of the type referred to in Section 2.1 of this Agreement.
8.9 Receipt and Approval of Schedules. TEI shall have received on or
before the Closing Date each Schedule to this Agreement (or waived in writing
its right to receive any one or more of such Schedules) and the contents of each
24
Schedule so received shall meet with the express approval of TEI.
9. Conditions Precedent to the Shareholders' Obligation to Close. The
obligation of the Shareholders hereunder to consummate the transactions
contemplated by this Agreement is expressly subject to the satisfaction on or
prior to the Closing Date of all of the following conditions (compliance with
which or the occurrence of which may be waived in whole or in part in writing by
the Shareholders).
9.1 Representations, Warranties and Covenants. All representations,
covenants and warranties of TEI contained in this Agreement shall be true and
correct as of the Closing Date (except as contemplated by this Agreement), and
TEI shall have performed and satisfied all covenants and conditions of this
Agreement to be performed or satisfied by TEI at or prior to the Closing Date.
9.2 Opinion of Counsel. TEI shall have furnished the Shareholders with
the legal opinion, dated the Closing Date, of its counsel in form and substance
satisfactory to the Shareholders and their counsel, to the effect that:
(a) TEI is a corporation duly organized and validly existing and
in good standing under the laws of Colorado, and has all necessary corporate
power to execute, deliver and perform its obligations under this Agreement;
(b) TEI has obtained all necessary authorizations and approvals
of its Board of Directors for the execution and delivery of this Agreement and
the performance of its obligations hereunder. This Agreement is a valid and
binding agreement of TEI in accordance with its terms (except as the same may be
limited by bankruptcy and insolvency laws and other similar laws affecting the
rights of creditors generally);
(c) The TEI stock to be issued to the Shareholders pursuant to
this Agreement, will, when issued pursuant to this Agreement and qualification
by the requisite Blue Sky authorities, be authorized, validly issued, fully paid
and non-assessable.
9.3 Approval of Documentation. The form and substance of all opinions,
certificates, exhibits, instruments of transfer and other documents hereunder
shall be satisfactory in all reasonable respects to the Shareholders.
the Company and their counsel.
9.4 Absence of Litigation. No action or proceedings shall have been
instituted prior to or at the Closing Date before any court or other
governmental body, or instituted or threatened by any public authority
pertaining to the acquisition by TEI of the stock to be transferred hereunder to
TEI, the results of which could prevent or make illegal the consummation of such
acquisition or which could be adverse to the business of the Company or TEI.
9.5 Approval of Documentation. The form and substance of all opinions,
certificates, instruments of transfer and all other documents hereunder shall be
satisfactory in all reasonable respects to Company's counsel.
9.6 Consents. The consents of all parties to all contracts, leases,
licenses or franchise agreements to which the Company is a party which are
reasonably necessary to obtain in order for the Company to continue to enjoy the
rights and privileges under such contracts, leases, licenses and franchise
25
agreements after the Closing Date, shall have been obtained and such consents
shall be in form and substance satisfactory to Company and its counsel.
9.7 Receipt of Common Stock. Shareholders shall have received at the
Closing certificates or other documents acceptable to them representing the
shares of TEI Common Stock in conformity with the representations, warranties,
covenants and agreement of TEI. Such certificates shall contain such restrictive
legends and/or conditions as may be required by applicable law on their face or
otherwise.
10. Shareholder Acquiring Stock of TEI for Investment Purposes. RESERVED.
11. Finders' and Brokers' Fees. Except as set forth on Schedule 11, each of
the parties to this Agreement represents that he, she or it has not dealt with
any broker or finder or any other person who may claim entitlement to a broker's
or finder's fee, commission or similar compensation in connection with any of
the transactions contemplated by this Agreement, and that, insofar as he, she or
it knows, or his, her or its dealings or negotiations are concerned, no finder,
broker or other person is entitled to any finder's fee, broker's fee, commission
or similar compensation in connection with any of such transactions. Each of the
parties to this Agreement agrees to indemnify and hold harmless any other party
against any liability, damage, cost or expense incurred by reason of breach of
the representation and warranty contained in the first sentence of this Section
11.
12. Survival of Representations and Indemnification.
12.1 Survival. All statements contained in any Exhibit, Schedule,
amended Schedule, document, certificate or other instrument delivered by or on
behalf of any party hereto, or in connection with the transactions contemplated
hereby, shall be deemed to be representations and warranties made pursuant to
this Agreement by such party. All representations and warranties made pursuant
to this Agreement and all agreements made by the parties pursuant to this
Agreement shall survive the consummation of the transactions contemplated by
this Agreement and any investigations made by or on behalf of any of the parties
until one (1) year after the date of Closing, one of the parties has given
notice to the other of a claim for indemnification pursuant to this Section 12
in which case the representation or warranty claimed to have been breached shall
survive until resolution of the claim; provided, however, any tax liability
arising for a period ending on or prior to July 31, 1999, is the responsibility
of the Shareholders, without limitation hereunder, for the period of the
applicable Internal Revenue Service statute of limitations. However, as to any
such adjustments representing timing differences, to the extent the impact in
the next four (4) succeeding years produces a related tax benefit, the
Shareholders will not be responsible for said additional liability (excluding
penalties and interest).
12.2 Indemnification By TEI. TEI agrees to indemnify each Shareholder
and hold him harmless against and in respect of any and all damages, claims,
losses, expenses, costs, obligations and liabilities (including reasonable
attorneys' fees) in excess of Fifty Thousand Dollars ($50,000.00) which such
Shareholder may incur or may suffer by reason of (i) any breach of or failure by
TEI to perform any of its warranties, guarantees, commitments or covenants in
its Agreement or (ii) any act or omission of TEI which constitutes a breach or
default hereunder.
26
12.3 Indemnification By the Shareholders. Each Shareholder, jointly
and severally, agrees to indemnify TEI and hold it harmless against and in
respect of any and all claims, losses, expenses, obligations and liabilities
(including reasonable attorneys' fees) in excess of Fifty Thousand Dollars
($50,000.00) which TEI may incur or suffer by reason of any breach of or failure
by he, she or them to perform any of the Shareholders' warranties, guarantees,
commitments, covenants or agreements set forth in this Agreement. Consummation
of the transactions hereunder shall not be deemed or construed to be a waiver of
any right or remedy of Shareholders, notwithstanding any facts which TEI knows
or should have known at the time of the Closing.
13. Notices. Any notice or communication required or permitted hereunder
shall be in writing, and shall be deemed to have been given if placed in the
United States mail, registered or certified, postage prepaid, or if personally
delivered, addressed as follows:
If to the Shareholders:
c/o Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxxx Law Office, P.C.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
And one copy to each of the other Shareholders at such addresses as is
specified, if any, below their signature.
If to the Company:
c/o Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxxx Law Office, P.C.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX
If to TEI:
Mr. Xxxxx Xxxxx
000 Xxxxx Xxxxxx Xxxx.
Xxxxx 000
Xxxxx Xxxxxx, XX 00000
With a copy to:
Xxxxxx Xxxxxxx, Esq.
00000 Xxxx Xxxxxxx Xxxx., Xxxxx 000
Xxx Xxxxxxx, Xx. 00000
Each of the foregoing shall be entitled to specify a different address by giving
written notice as aforesaid to the other.
14. Entire Agreement; Modification; Waivers. This Agreement constitutes the
entire agreement among the parties hereto pertaining to the subject matter
hereof, and supersedes all prior and contemporaneous agreements (except those
contemplated hereunder), understandings, negotiations and discussions, whether
oral or written, of the parties, and there are no warranties, representations or
agreements among the parties in connection with the subject matter hereof except
as set forth or referred to herein. No supplement, modification, waiver or
termination of this Agreement or any provision hereof shall be binding unless
executed in writing by the parties to be bound thereby. No waiver of any of the
provisions of this Agreement shall constitute a waiver of any other provision
(whether or not similar), not shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
27
15. Extension of Closing Date. At any time prior to the Closing Date, the
parties hereto may, by written agreement extend the time for the performance of
any of the obligations or other acts of the other parties hereto, waive any
inaccuracies in the representations and warranties made by the other parties
contained in this Agreement or any other document delivered pursuant to this
Agreement and waive compliance with any of the covenants or agreements of the
other parties contained in this Agreement.
16. Headings. Section and subsection headings are not to be considered part
of this Agreement and are included solely for convenience and are not intended
to be full or accurate descriptions of the content thereof.
17. Exhibits. Notwithstanding that the parties hereto agree that the
Exhibits, Schedules, amended Schedules and other documents referred to in this
Agreement are an integral part of this Agreement, this Agreement is being
executed when all of the Exhibits, Schedules and amended Schedules have not been
prepared and attached hereto. It is the intention of the parties and it is
hereby agreed that TEI shall not be obligated to consummate this Agreement
unless and until (i) they have received from the Company each of the Schedules
to this Agreement (or waived in writing their right to receive any one or more
of such Schedules), and (ii) the contents of such Schedules meet with the
express approval of TEI.
18. Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors, assigns and legal
representatives.
19. Parties In Interest. Nothing in this Agreement (whether express or
implied) is intended to confer upon any person other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement, nor is anything in this Agreement intended to relieve
or discharge the liability of any other party hereto, nor shall any provision
hereof given any entity any right of subrogation against or action over or
against any party.
20. Governing Law. This Agreement shall be construed under and shall be
deemed governed by the laws of the State of Colorado. Venue shall reside in the
jurisdiction within which TEI maintains its principal business location.
21. Attorney's Fees. In the event any party is required to employ attorneys
to enforce the provisions of this Agreement, as part of any judgment entered
hereon, the court shall award the prevailing party reasonable attorneys' fees.
22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
23. Publicity. All notices to third parties and all other publicity
concerning the transactions contemplated by this Agreement, including, but not
limited to, press releases and other public announcements, shall be jointly
planned and coordinated by and among the parties hereto. None of the parties
hereto shall act unilaterally in this regard without the prior approval of the
other parties, which approval shall not be unreasonably withheld.
28
IN WITNESS WHEREOF, TEI and the Company, pursuant to authority given by
their respective Boards of Directors, have caused this Agreement to be entered
into and signed in their respective corporate names by duly authorized officers
and their corporate seals to be hereunto affixed, and each Shareholder has
signed this Agreement, all on the date and year hereinabove first set forth.
XxXxx.Xxx, Inc.
a Delaware Corporation
/s/ Xxx Xxxxxx
By: ------------------------
Xxx Xxxxxx, President
Tridon Enterprises, Inc.,
a Colorado corporation
/s/ Xxxxx Xxxxx
By: -------------------------
Xxxxx Xxxxx, Acting Chief Executive
Officer
SHAREHOLDERS:
BZ INVESTMENT TRUST
---------------------------------------
By:
---------------------------------------
Xxx Xxxxxx
29
SCHEDULES OF THE COMPANY
SCHEDULE
NUMBER ITEM
-------- ----
4.3 Subsidiaries
4.4 Financial Statements
4.6 Accounts Receivable
4.9 Contracts and Agreements
4.10 Real Property
4.11 Tangible Personal Property
4.13 Insurance
4.14 Labor, Benefit and
Employment Agreements
4.15 Employees, Officers and
Directors
4.16 Litigation
Accounts Payable
4.24 Violation of Other Instruments
4.25 Interest in Creditors
11 Finders' and Brokers' Fees
30
SCHEDULES OF TEI
SCHEDULE
NUMBER ITEM
6.8 Subsidiaries
6.9 Financial Statements
6.11 Accounts Receivable
6.14 Contracts and Agreements
6.15 Real Property
6.16 Tangible Personal Property
6.18 Insurance
6.19 Labor, Benefit and
Employment Agreements
31
6.20 Employees, Officers and
Directors
6.21 Litigation
6.23 Accounts Payable
6.25 Indebtedness to Officers,
Directors and Shareholders
6.27 Violation of Other
Instruments
6.28 Interest in Creditors
11 Finders' and Brokers' Fees
32
