1
EXHIBIT 8.1
ACQUISITION / MERGER AGREEMENT
THIS AGREEMENT, made and entered into as of the 11th day of November,
1998, by and between MEGAWORLD, INC. ("MegaWorld" herein), a Delaware
corporation whose address for purposes of this Agreement is 000 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000; TOTAL BUILDING SYSTEMS, INC. ("TBS" herein), a Texas
corporation whose address for purposes of this Agreement is 0000 Xxxxx Xxxxxxx
Xxxxxxx Xxxx Xxxxxxx, Xxxxx 00000-0000; and XXXXXXX X. XxXXXXX ("CDMP" herein),
whose address for purposes of this Agreement is 00000 Xxxx Xxxxx, Xxxxxxx, Xxxxx
00000 (collectively, the "Parties" and individually, each a "Party" herein);
W I T N E S S E T H:
WHEREAS, TBS is successfully involved in the business of constructing
buildings and crew quarters of various materials in its two facilities for
commercial and industrial usage; and
WHEREAS, CDMP is the major shareholder of TBS and its chief executive
officer and is responsible in large part for the growth and success of TBS; and
WHEREAS, in order to increase the net tangible assets of MegaWorld and
thereby enable MegaWorld to obtain a national market system listing for the
trading of its stock and enhance its ability to raise capital, the board of
directors of MegaWorld deems it desirable and in the best interest of the
corporation and its shareholders that MegaWorld acquire TBS, and that the
services and expertise of CDMP be secured by MegaWorld for the corporate
advancement of MegaWorld and to act as an officer and director thereof, all in
the manner herein provided; and
WHEREAS, in order to gain access to the public capital markets
available to MegaWorld and thereby enable TBS to continue to grow and prosper,
the board of directors of TBS deems it desirable that TBS be acquired by
MegaWorld; and
WHEREAS, the boards of directors of MegaWorld and TBS deem it desirable
and in the best interest of the corporations and their shareholders that a new
subsidiary ("TBS Texas" herein) of MegaWorld be formed, and that the acquisition
of TBS by MegaWorld be effected by merging TBS into TBS Texas in a forward
triangular merger; and
WHEREAS, the boards of directors of MegaWorld and TBS intend this
Agreement to set out the terms and conditions of their agreement in order to
effectuate the foregoing upon the terms and conditions hereinafter set forth;
and
NOW, THEREFORE, for and in consideration of the premises, and in
consideration of the mutual covenants and promises of the parties hereto, and of
the mutual benefit therefrom, the adequacy of which is hereby acknowledged by
each of the Parties, the Parties do hereby agree, pursuant to Part Five of the
Texas Business Corporation Act ("TBCA" herein), that TBS Texas be formed and
that TBS be merged into TBS Texas, with TBS Texas to survive as a single
corporation, and that CDMP be employed as a Director and Chief Executive Officer
of each of MegaWorld and of TBS Texas, subject to the following terms and
conditions:
Page 1 MegaWorld's Initial: /s/ ICR
MERGER AGREEMENT
By and between MegaWorld, Inc.,
and Total Building Systems, Inc. CDMP's Initial: /s/ CDM
2
ARTICLE I
MERGER
SEC. 1.1 THE COMPANIES.
1.1.1 TBS. Total Building Systems, Inc. is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Texas. The total number of shares of stock which TBS is authorized to issue is
100,000 shares of a single class of common stock, with $1.00 value, of which
10,000 shares will be outstanding at Closing, all such outstanding shares of TBS
to be duly authorized and validly issued and nonassessable and fully paid. As of
August 31, 1998, the shareholders of TBS are (i) CDMP and Xxxx X. XxXxxxx, (ii)
Xxxx Xxxxx XxXxxxx, (iii) Xxxx Xxxx XxXxxxx, and (iv) JoyVer Investments, L.L.C.
(collectively "M&J" herein).
1.1.2 MEGAWORLD. MegaWorld, Inc. is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware. The total number of shares of stock which MegaWorld is authorized to
issue is as follows:
(a) PREFERRED STOCK. No shares of Preferred Stock are
authorized or issued.
(b) COMMON STOCK. The following numbers of shares of the
following classes of Common Stock ("MegaWorld Common Stock" herein) are
authorized and the following number of shares of each are issued, to
wit:
(i) There are 1,191,741 shares authorized of
Class A Common Stock, with no shares issued.
(ii) There are 98,808,259 shares authorized of
Common Stock other than the aforesaid Class
A, with 10,554,405 shares issued.
All of the outstanding shares of MegaWorld Common Stock are duly
authorized and validly issued, and nonassessable and fully paid. All
shares of MegaWorld Common Stock have $0.0001 par value.
For purposes of this Agreement, an "affiliate" of MegaWorld shall be (i) any
entity, other than a subsidiary, in which MegaWorld owns an interest or
exercises control, (ii) any entity, other than CDMP, which owns an interest in,
or exercises control over MegaWorld, and (iii) any entity under common ownership
or control with MegaWorld of at least ten percent (10%). ITS Telephony, Inc.,ITM
Group, Inc. and MegaWorld Liesure, Inc. are subsidiaries or affiliates of
MegaWorld.
1.1.3 TBS TEXAS. MegaWorld shall, prior to Closing, as
provided herein, create, organize, and fund a corporation ("TBS Texas" herein)
under the laws of the State of Texas, with one class of common stock and
authorized to issue 10,001 shares of such common stock. TBS Texas shall be
organized with Articles of Incorporation and Bylaws in form acceptable to
MegaWorld and CDMP. The Articles of Incorporation and Bylaws of TBS Texas are
Closing Documents, the forms of which shall be negotiated in accordance with
Section 9.3 hereof.
Page 2 MegaWorld's Initial: /s/ ICR
MERGER AGREEMENT
By and between MegaWorld, Inc.,
and Total Building Systems, Inc. CDMP's Initial: /s/ CDM
3
SEC. 1.2 THE MERGER. The Parties agree that TBS Texas and TBS shall
merge (the "Merger" herein), as herein provided, with TBS Texas as the surviving
corporation. On or before Closing, the Parties agree to enter into a Plan of
Merger sufficient under Part Five of the TBCA, in strict accordance herewith,
which Plan of Merger shall be authorized by the shareholders of both TBS and TBS
Texas, and pursuant to which Articles of Merger shall be executed and filed. The
Articles of Merger and the Plan of Merger are Closing Documents, the forms of
which shall be negotiated in accordance with Section 9.3 hereof.
SEC. 1.3 RECRUITING OF TBS MANAGEMENT. The Parties agree that each of
TBS Texas and MegaWorld shall employ CDMP. TBS Texas shall employ CDMP as its
sole Director and its Chief Executive Officer and President by assuming the
Employment Agreement ("TBS Employment Agreement" herein) by and between TBS and
CDMP, which is a Closing Document and a copy of which shall be furnished to
MegaWorld no later than fourteen (14) days prior to Closing in accordance with
Section 9.3 hereof. MegaWorld shall employ CDMP as a Director and its Chief
Executive Officer under the Employment Agreement ("MegaWorld Employment
Agreement" herein), which is a Closing Document, the form of which shall be
negotiated in accordance with Section 9.3 hereof.
SEC. 1.4 EFFECTIVE TIME. This Agreement shall be effective as of 5:00
p.m. EDT on the date of execution by MegaWorld ("Effective Time" herein),
regardless of when it is executed by the other parties.
ARTICLE II
CONSIDERATION
SEC. 2.1 PURCHASE PRICE. Subject to compliance with all the terms and
conditions set forth herein, and in reliance on the representations and
warranties set forth herein, in partial consideration for the merger of TBS and
TBS Texas, the parties hereto agree to the following:
2.1.2 At Closing, MegaWorld shall issue to TBS Texas and cause
to be registered in the registry of shareholders in the corporate records of
MegaWorld 10,200,000 shares ("Closing Shares" herein) of MegaWorld Common Stock,
with suitable legend, distributed to TBS Texas, to fund that corporation and in
partial consideration of, and in exchange for, the issuance to MegaWorld of
10,000 shares of the authorized stock of TBS Texas. At Closing, TBS Texas shall
transfer the 10,200,000 shares of MegaWorld Common Stock, with suitable legend,
in partial consideration of, and in exchange for, their shares of TBS stock, to
be distributed to the following shareholders of TBS in the following amounts
stated below. For one year from the date of this Agreement, MegaWorld shall
issue to those listed below, in the same percentages, an amount of stock equal
(in addition to these amounts stated herein) to the same number of shares that
are issued to all others for whatever purposes except for acquisitions. all
shares listed below shall be diluted or increased in the same percentage amount
as all other present shareholders.
(a) CDMP and Xxxx X. XxXxxxx 900,000 shares
(b) Xxxx Xxxxx XxXxxxx 1,400,000 shares
(c) Xxxx Xxxx XxXxxxx 1,400,000 shares
(d) JoyVer Investments, L.L.C. 5,100,000 shares
(e) Xxxx X. XxXxxxx 1,400,000 shares
Page 3 MegaWorld's Initial: /s/ ICR
MERGER AGREEMENT
By and between MegaWorld, Inc.,
and Total Building Systems, Inc. CDMP's Initial: /s/ CDM
4
2.1.3 At Closing, further to fund TBS Texas, and in further
consideration for the issuance to MegaWorld of the said 10,000 shares of stock
in TBS Texas, MegaWorld shall execute and deliver a Promissory Note ("MegaWorld
Promissory Note" herein), which is a Closing Document, the form of which shall
be negotiated in accordance with Section 9.3 hereof, payable to TBS Texas in the
principal amount of Eight Million and 00/100 Dollars ($8,000,000.00), with a
term of five (5) years, bearing interest at the London Inter-Bank Offered Rate
("LIBOR" herein) plus two percent (2%) during the term thereof, payable in
semi-annual installments of principal and interest as provided herein.
Year 1 - Beginning November 13, 1998 - two payments
of accrued interest only payable on May 13, 1999 and
November 13, 1999.
Year 2 - Two semi-annual payments of principal based
on a twenty (20) year amortization plus accrued
interest payable on May 13, 2000 and November 13,
2000.
Year 3 - Same payment schedule as year 2 but due on
May 13, 2001 and November 13, 2001.
Year 4 - Same payment schedule as year 2 but due on
May 13, 2002 and November 13, 2002.
Year 5 - One semi-annual payment of principal based
on a twenty year amortization plus accrued interest
payable on May 13, 2003 and the remainder of the
principal plus the interest at the rate stipulated
above due on November 13,2003.
If at any time prior to November 13, 2003 that management deems that they
have available funds to be used to pay down this note, they are allowed to do so
with no prepayment penalty.
The MegaWorld Promissory Note and MegaWorld's performance thereunder
shall be unconditionally and absolutely guaranteed in all respects by TBS Texas,
which at Closing shall execute the MegaWorld Promissory Note as a Guarantor, and
shall execute and deliver to CDMP the TBS Texas Guaranty Agreement described in
Section 2.3.5 hereof. At Closing, and in further consideration for their shares
of stock in TBS, TBS Texas shall properly endorse the MegaWorld Promissory Note
and assign the MegaWorld Promissory Note to the following persons in the
following proportions:
(a) CDMP & Xxxx X. XxXxxxx 30%
(b) Xxxx Xxxxx XxXxxxx 10%
(c) Xxxx Xxxx XxXxxxx 10%
(d) JoyVer Investments, L.L.C. 50%
2.1.4 At Closing, TBS Texas shall issue and cause to be
registered in the registry of shareholders in the corporate records of TBS Texas
the 10,001 shares of stock to be distributed hereunder as follows:
(a) CDMP 1 share
(b) MegaWorld 10,000 shares
TBS Texas shall reserve and grant to MegaWorld the option on the share of stock
to be issued to CDMP, such that at the end of a period of five years after
Closing, if MegaWorld has been in strict compliance with this Agreement at all
times after execution hereof, MegaWorld may purchase the said share of stock
from CDMP for the quarterly average market price, calculated as provided in
Section 2.2 hereof; but on the condition that in the event of a default by
MegaWorld, subject to any applicable cure period as provided in Article
Page 4 MegaWorld's Initial: /s/ ICR
MERGER AGREEMENT
By and between MegaWorld, Inc.,
and Total Building Systems, Inc. CDMP's Initial: /s/ CDM
5
V hereof, in the performance of any obligation of MegaWorld under any of the
Closing Documents, including without limitation this Agreement, the option shall
automatically expire. At Closing, and in consideration of this Agreement, CDMP
and MegaWorld, as the Shareholders of TBS Texas, shall execute, together with
TBS Texas, the TBS Texas Shareholders' Agreement provided for in Section 2.3.1
hereof.
2.1.5 At Closing, the shareholders of TBS shall exchange the
following shares of TBS stock:
(a) CDMP and Xxxx X. XxXxxxx 3,000 shares
(b) Xxxx Xxxxx XxXxxxx 1,000 shares
(c) Xxxx Xxxx XxXxxxx 1,000 shares
(d) JoyVer Investments, L.L.C. 5,000 shares
for the partial consideration of the transfer to them of the shares of MegaWorld
stock and assignment to them of the MegaWorld Promissory Note, as provided in
Sections 2.1.2 and 2.1.3 above.
2.1.6 MegaWorld and CDMP have agreed that rather than enter
into the MegaWorld Employment Contract contemplated in Section 1.3 hereof, that
CDMP shall use the TBS Employment Contract as the Agreement by which he shall
work for MegaWorld. Nevertheless, both parties agree that the 400,000 shares
("Employment Shares" herein) of MegaWorld Common Stock, with suitable legend,
shall be issued to CDMP at Closing.
2.1.7 Prior to Closing, MegaWorld shall take all action
necessary and appropriate to fulfill its obligations under this Article II,
including without limitation amending its Certificate of Incorporation and its
Bylaws, as necessary, (i) to obtain authorization of the shares of stock to be
issued hereunder and authorization of the issuance thereof in compliance
herewith, and (ii) to eliminate authorization for the issuance of Class A
shares.
2.1.8 From and after Closing, in further consideration for
entering into this Agreement, MegaWorld adopts and accepts CDMP's Total Building
Systems, Inc Employment Contract in its entirety, as if it were an employment
agreement given to CDMP by MegaWorld. For a term of fifteen (15) years from and
after the Date of Closing, and for so long thereafter as CDMP and Xxxx X.
XxXxxxx, or either of them, shall survive (that is, for a term of the lives of
Xxxxxxx X. XxXxxxx and Xxxx X. XxXxxxx, and the survivor of them, but in no
event less than fifteen (15) years), MegaWorld shall pay to CDMP and Xxxx X.
XxXxxxx, their heirs, successors, and assigns, in cash or MegaWorld, Inc. stock,
at the option of MegaWorld, one percent (1%) of the gross revenue of MegaWorld,
Inc., as reported on the Profit and Loss Statement of MegaWorld's consolidated,
audited, quarterly financial statements, or if MegaWorld, Inc. files financial
statements with the Securities and Exchange Commission, as reported on
MegaWorld's Form 10Q. In the event the payment to be made under this Section is
made in MegaWorld, Inc. stock, the shares to be conveyed shall be Common Stock
and shall be valued at sixty percent (60%) of the quarterly average market price
(based on a weighted average of publicly traded shares sold during the relevant
calendar quarter) of such shares rounded up to the nearest whole number of
shares, to reflect the share commitment calculation. The formula for such
calculation is: the inverse of sixty percent (60%) times the amount due in cash
divided by the quarterly average market price; for example, if the cash amount
due is $1,000, and the quarterly average market price of a share is $2.00, the
number of shares to be conveyed is calculated as follows:
1.6667 x 1,000.00 / $2.00 = 834
Page 5 MegaWorld's Initial: /s/ ICR
MERGER AGREEMENT
By and between MegaWorld, Inc.,
and Total Building Systems, Inc. CDMP's Initial: /s/ CDM
6
If the stock price decreases by fifty percent (50%) or more during any one
calendar quarter, the payment of this obligation shall be in the form of cash,
unless CDMP consents in writing to accept stock. Any payment, whether in cash or
in stock, due hereunder shall be paid or delivered on or before the fifteenth
(15th) of the month following the quarter during or for which it accrued. In the
event that such financial statement is not available, such payment shall be made
on the best estimate of Xxxxx Xxxxxx, or his successor as the primary CPA for
MegaWorld, to be adjusted when such financial statement becomes available.
2.1.9 MegaWorld shall assume the obligations ("CDMP
Obligations" herein) of CDMP, as defined below, and shall, as of and after
Closing, indemnify and save and hold CDMP harmless from and against any and all
loss, cost, risk, and expense arising, directly or indirectly, in relation to
the CDMP Obligations. By June 1, 1999, MegaWorld shall use its best efforts to
cause CDMP to be formally and completely released by the respective obligees
from all of the CDMP Obligations and any further responsibility thereunder. For
purposes of this Agreement, the term "CDMP Obligations" shall mean all debts and
obligations of CDMP incurred as a shareholder, director, or officer of TBS,
including without limitation any and all guarantees of TBS debts and
obligations, and further including without limitation the specific guaranteed
debts and specific obligations of TBS for which CDMP is an obligor or
co-obligor, rather than a guarantor. Excluded from this provision are any debts
or obligations personal in nature and not related to TBS.
2.1.10 MegaWorld from the time of closing until June 30, 1999
grants to CDMP an option on behalf of the shareholders listed in 2.1.2 to obtain
more stock under this agreement should the price contemplated for the stock not
meet expectations. Based on 8,000,000 shares, CDMP has the one time option to
increase his shares by 10% at no cost to himself should the closing price on
December 31, 1998 be less than $3.00 per share. Should CDMP not chose to
exercise his option on December 31,1998 he will have an option on March 31,1999
to increase his 8,000,000 by 25% at no cost to himself should the price of a
share be less than $3.00 on that date. Finally, should CDMP still retain his
option on June 30, 1999,as a result of not exercising it on December 31,1998 or
March 31,1999 and the price of a share be less than $3.00 at closing then he
will have the option of increasing his 8,000,000 shares by 50%. Any exercise of
an option shall be accomplished by notification in writing to MegaWorld within
10 days of one of the three election dates. The distribution of the additional
shares under this provision shall be in accordance with the percentages in the
schedule set up in 2.1.2.
SEC. 2.2 SHARE PRICE ADJUSTMENTS. Wherever in this Agreement provision
is made for calculations based on the price of publicly traded shares of stock
of MegaWorld, there shall be excluded from the sales considered in such
calculations (i) sales of MegaWorld shares not sold through a public exchange or
the NASDAQ bulletin board, (ii) sales of MegaWorld shares to or by any officer
or director, or to or by any beneficial owner (holder of 10 percent or more) of
MegaWorld stock, including without limitation any beneficial owner disclosed as
such in any SEC Form 4 or 5 filed or required to be filed by such owner, (iii)
trades of lots in excess of 100,000 shares which lowers the price of shares, and
(iv) trades of odd lots of less than 100 shares.
SEC. 2.3 SECURITY AGREEMENTS, INTERESTS, AND GUARANTEES; TBS TEXAS
SHAREHOLDER AGREEMENT; MEGAWORLD SHAREHOLDER VOTING AGREEMENT.
Page 6 MegaWorld's Initial: /s/ ICR
MERGER AGREEMENT
By and between MegaWorld, Inc.,
and Total Building Systems, Inc. CDMP's Initial: /s/ CDM
7
2.3.1 MegaWorld and CDMP shall, as shareholders of TBS Texas'
shares, enter into a Shareholders' Agreement ("TBS Texas Shareholders'
Agreement" herein). The TBS Texas Shareholders' Agreement shall provide for, but
in no way be limited to, the following matters: (i) the term of the
Shareholders' Agreement, (ii) that MegaWorld shall elect and continue to elect
CDMP, or CDMP's nominee, as the sole director of TBS Texas, and no other
directors, (iii) that CDMP, or his nominee, shall be Chief Executive Officer and
President of TBS Texas, and (iv) that TBS Texas shall, under the TBS
Shareholders' Agreement, distribute the Closing Shares as set forth in Section
2.1.2 hereof. TBS Texas shall join in the TBS Texas Shareholders' Agreement as a
party thereto. The TBS Texas Shareholders' Agreement is a Closing Document, the
form of which shall be negotiated in accordance with Section 9.3 hereof.
2.3.2 MegaWorld shall guarantee all performance by TBS Texas
hereunder; which guarantee is to be expressed in writing in the Guaranty
Agreement ("MegaWorld Guaranty Agreement" herein), and which MegaWorld Guaranty
is a Closing Document, the form of which shall be negotiated in accordance with
Section 9.3 hereof.
2.3.3 Omitted
2.3.4 MegaWorld shall pledge to CDMP all of its TBS Texas
shares as security for performance hereunder by TBS Texas and MegaWorld. At
Closing, MegaWorld shall execute and deliver to CDMP the following documents:
(a) MegaWorld Guaranty Agreement in form required under
Section 2.3.2 above, guaranteeing the performance of all of the
obligations of TBS Texas to CDMP hereunder;
(b) Security Agreement ("MegaWorld Security Agreement"
herein), which is a Closing Document, the form of which shall be
negotiated in accordance with Section 9.3 hereof, securing the
performance of all obligations of MegaWorld to CDMP hereunder,
including without limitation performance under the MegaWorld Employment
Agreement and the MegaWorld Guaranty Agreement, providing for, among
other things, the security interest in all of its shares of TBS Texas;
and
(c) Pledge Agreement ("MegaWorld Pledge Agreement" herein), is
a Closing Document, the form of which shall be negotiated in accordance
with Section 9.3, pledging to CDMP all of MegaWorld's shares of stock
in TBS Texas, allowing thereby enforcement of the security interest
therein under the MegaWorld Security Interest.
2.3.5 TBS Texas shall guarantee all performance by MegaWorld
hereunder and all performance by the Required Shareholders under the MegaWorld
Shareholder Voting Agreement, which guarantee is to be expressed in writing in
the Guaranty Agreement ("TBS Texas Guaranty Agreement" herein), and which TBS
Texas Guaranty Agreement is a Closing Document, the form of which shall be
negotiated in accordance with Section 9.3 hereof.
2.3.6 TBS Texas shall assume all obligations of TBS, and shall
indemnify and hold CDMP harmless from and against all loss, cost, risk, and
expense arising from, or in any manner related to, any obligation of TBS,
including without limitation all obligations of TBS for which CDMP has given a
personal guarantee to any extent, and particularly including without limitation
any and all debt and other obligations of TBS to Compass Bank and all
obligations of CDMP under any guarantee of any part thereof. The assumption of
TBS's obligations by TBS Texas shall be unconditional and absolute, and TBS
Texas shall execute an Assumption
Page 7 MegaWorld's Initial: /s/ ICR
MERGER AGREEMENT
By and between MegaWorld, Inc.,
and Total Building Systems, Inc. CDMP's Initial: /s/ CDM
8
Agreement ("TBS Texas Assumption Agreement" herein), is a Closing Document, the
form of which shall be negotiated in accordance with Section 9.3 hereof, and
such assumption shall be further evidenced, from time to time, by execution by
TBS Texas of similar assumption agreements for particular obligations to
particular obligees, and by delivery of same to such obligees in lieu of copies
of the TBS Texas Assumption Agreement. The indemnification of CDMP by TBS Texas
provided for in this Section shall be unconditional and absolute, and TBS Texas
shall execute an Indemnification Agreement ("TBS Texas Indemnification
Agreement" herein), which is a Closing Document, the form of which shall be
negotiated in accordance with Section 9.3 hereof.
2.3.7 TBS Texas shall enter into the TBS Texas Shareholders'
Agreement provided for in Section 2.3.1 above.
2.3.8 TBS Texas shall grant to CDMP a security interest in all
of its assets, including without limitation the assets of TBS acquired in the
merger with TBS as security for TBS Texas' performance of all of its obligations
to CDMP, including without limitation its obligations under the TBS Texas
Guaranty Agreement and the TBS Texas Shareholders' Agreement. At Closing, TBS
Texas shall execute and deliver to CDMP the following documents:
(a) TBS Texas Assumption Agreement in form required under
Section 2.3.6 above, assuming all obligations of TBS;
(b) TBS Texas Indemnification Agreement in form required under
Section 2.3.6 above, indemnifying CDMP against all loss, cost, risk,
and expense arising from, or in any manner related to, any obligation
of TBS; and
(c) TBS Texas Guaranty Agreement in form required under
Section 2.3.5 above, guaranteeing the performance of all of the
obligations of TBS Texas to CDMP hereunder;
(d) Security Agreement ("TBS Texas Security Agreement"
herein), which is a Closing Document, the form of which shall be
negotiated in accordance with Section 9.3 hereof, securing the
performance of all obligations of TBS Texas and all obligations of TBS
to CDMP hereunder, including without limitation performance under the
TBS Employment Agreement and the TBS Texas Guaranty Agreement,
providing for, among other things, the security interest in all of the
assets of TBS Texas, including without limitation all assets acquired
in the merger with TBS hereunder; and
(e) Deed of Trust ("TBS Texas Deed of Trust" herein), which is
a Closing Document, the form of which shall be negotiated in accordance
with Section 9.3 hereof, securing the performance of all obligations of
TBS Texas and all obligations of TBS to CDMP hereunder, including
without limitation performance under the TBS Employment Agreement and
the TBS Texas Guaranty Agreement, providing for, among other things, a
lien against the real property and real property rights of TBS.
Page 8 MegaWorld's Initial: /s/ ICR
MERGER AGREEMENT
By and between MegaWorld, Inc.,
and Total Building Systems, Inc. CDMP's Initial: /s/ CDM
9
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SEC. 3.1 REPRESENTATIONS AND WARRANTIES OF TBS. TBS hereby represents
and warrants to MegaWorld and TBS Texas that, except as and to the extent set
forth in a Disclosure Schedule (the "TBS Disclosure Schedule") delivered to
MegaWorld in accordance with Section 9.3 hereof, setting forth additional
exceptions specified therein to the representations and warranties contained in
this Article III, which TBS Disclosure Schedule shall identify exceptions by
specific Section references:
3.1.1 CORPORATE ORGANIZATION. TBS is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Texas and has all requisite corporate power and authority and all necessary
governmental approvals to own or lease and operate its properties and assets and
to carry on its business as it is now being conducted, and is duly qualified or
licensed as a foreign corporation to do business and in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties owned or leased by it makes such
qualification or licensing necessary, except where the failure to be so
organized, existing, in good standing, qualified, or licensed would not have a
Material Adverse Effect on TBS. As used herein the term "Material Adverse
Effect" means any change or effect that, individually or in the aggregate, is or
is reasonably likely to be materially adverse to the business, operations,
properties, prospects, condition (financial or otherwise), assets, or
liabilities (including without limitation contingent liabilities) of the subject
entity.
3.1.2 CAPITALIZATION The authorized capital stock of TBS
consists of the following:
(a) PREFERRED STOCK. No shares of Preferred Stock are
authorized or issued.
(b) COMMON STOCK. 100,000 shares of Common Stock, par value
$1.00 (the "TBS Common Stock"), 10,000 shares of which will at Closing
be outstanding and duly authorized and validly issued and nonassessable
and fully paid.
(c) There are no voting trusts or other agreements or
understandings to which TBS is a party with respect to the voting of
the TBS Common Stock.
(d) All securities sold or issued by TBS have been sold or
issued in full and complete compliance with the requirements of the
federal securities law, order, rule, or regulation, and any applicable
state securities or "blue sky" laws, or under applicable exemptions and
exclusions therefrom.
3.1.3 SUBSIDIARIES. TBS does not own, directly or indirectly,
any equity or similar interest in, or any interest convertible into or
exchangeable for, any equity or similar interest in any corporation,
partnership, joint venture, or other business association or entity.
3.1.4 AUTHORITY. TBS has the full corporate power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the
Page 9 MegaWorld's Initial: /s/ ICR
MERGER AGREEMENT
By and between MegaWorld, Inc.,
and Total Building Systems, Inc. CDMP's Initial: /s/ CDM
10
consummation of the transactions contemplated hereby have been duly approved by
the Board of Directors of TBS and no other corporate proceedings on the part of
TBS are necessary to authorize this Agreement or to consummate the transactions
so contemplated (other than, with respect to the Merger, the approval of the
Merger and adoption of this Agreement by the shareholders of TBS, and such other
acts required by part five of TBCA). This Agreement has been duly executed and
delivered by, and, assuming the due authorization, execution, and delivery
thereof by MegaWorld and TBS Texas, constitutes a valid and binding obligation
of TBS, enforceable against TBS in accordance with its terms.
3.1.5 CONSENTS AND APPROVALS; NO VIOLATION. Neither the
execution and delivery of this Agreement by TBS nor the consummation by TBS of
the transactions contemplated hereby will (i) conflict with or result in any
breach or violation of any provision of the Articles of Incorporation or Bylaws
of TBS, or (ii) constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or give rise to a right of
termination, cancellation, or acceleration of any obligation contained in or to
the loss of a benefit under, or result in the creation of any lien or other
encumbrance upon any of the properties or assets of TBS under, any of the terms,
conditions, or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation, permit, concession,
franchise, judgment, order, decree, statute, law, ordinance, rule, or regulation
applicable to TBS or to which it or any of its properties or assets may be
subject, except for such violations, conflicts, breaches, terminations,
accelerations, or creations of liens or other encumbrances, which will not have
a Material Adverse Effect on TBS, or (iii) require any consent, approval,
authorization, or permit of, or filing with, or notification to, any
governmental entity, including without limitation filings under the HSR Act,
except (A) filing articles of merger pursuant to the TBCA, or (B) consents,
approvals, authorizations, permits, filings, or notifications which if not
obtained or made will not have a Material Adverse Effect on TBS or prevent or
materially delay consummation of the Merger.
3.1.6 FINANCIAL INFORMATION. Schedule 3.1.6 in the TBS
Disclosure Schedule consists of the following financial statements of TBS:
Annual financial statements for the year ended December 31, 1997; and (ii)
unaudited internally prepared consolidated balance sheets, operating statements,
and related schedules as of, and for the periods ended March 31, 1998, the trade
date. The financial statements referred to in clause (i) of this Section 3.1.6
and the unaudited financial statements referred to in clause (ii) of this
Section 3.1.6, together with the footnotes and supporting schedules in respect
of such financial statements, are collectively referred to as the "TBS Financial
Statements."
(a) The TBS Financial Statements are true and correct with
respect to each material item shown or reflected thereon, and have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be indicated therein or in
the notes thereto) and fairly present the financial position of TBS as
of the dates thereof and the results of operations and cash flows for
the periods then ended, subject to normal year end adjustments.
(b) The TBS Financial Statements set forth all the liabilities
of TBS (direct and indirect, contingent and accrued) of whatever nature
at the date thereof, whether arising out of contract, tort, statute, or
otherwise, except liabilities and obligations under contracts,
commitments, agreements, torts, statutes, or otherwise set forth on
Schedule 3.1.6(b) in the TBS Disclosure Schedule.
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(c) The TBS Financial Statements shall be updated at Closing
through August 31, 1998.
3.1.7 CONDUCT OF BUSINESS.
(a) The business of TBS, as presently conducted, is not being
conducted in default or violation of any term, condition, or provision
of (i) its charter or bylaws, or (ii) any note, bond, mortgage,
indenture, deed of trust, lease, agreement, or other instrument or
obligation of any kind to which TBS is a party or by which TBS or any
of its properties or assets may be bound, or (iii) any federal, state,
local, or foreign statue, law, ordinance, rule, regulation, judgment,
decree, order, concession, grant, franchise, permit, or license or
other governmental authorization or approval applicable to TBS,
excluding from the foregoing clauses (ii) and (iii) defaults or
violations that could not reasonably be expected to have a Material
Adverse Effect on TBS.
(b) TBS has all licenses, permits, orders, or approvals of,
and has made all required registrations with, all governmental entities
that are material to the conduct of the business of TBS (collectively
"TBS Permits" herein). To TBS's knowledge: (i) all TBS Permits are in
full force and effect; (ii) no material violations are or have been
recorded in respect of any TBS Permit; and (iii) no proceeding is
pending or threatened to revoke or limit any TBS Permit. Upon request,
TBS shall provide to MegaWorld copies of any or all of the TBS Permits.
(c) TBS has not received any written communication from a
governmental entity or any landlord or purchaser of assets that alleges
that TBS is not in compliance with any Environmental Law. TBS has no
knowledge of any environmental materials or information, including
on-site or off-site disposal or releases of Hazardous Materials, that
could reasonably be expected to have a Material Adverse Effect on TBS.
As used in this Agreement, the term "Environmental Laws" means any
applicable treaties, laws, regulations, enforceable requirements,
orders, decrees, or judgments issued, promulgated, or entered into by
any governmental entity, which relate to (A) pollution or protection of
the environment, or (B) the generation, storage, use, handling,
disposal, or transportation of or exposure to Hazardous Materials,
including the Comprehensive Environmental Response, Compensation and
Liability Act of 1930, as amended, 42 U.S.C Section 9601, et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. Section 9601, et seq., the Federal Water Pollution Control Act,
as amended, 33 U.S.C. Section 1251, et seq., the Clean Air Act of 1970,
as amended, 42 U.S.C. Section 7401, et seq., the Toxic Substances
Control Act of 1976, 15 U.S.C. Section 2601, et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1301, et seq., any
other similar or implementing state or local law, and all amendments or
regulations promulgated thereunder; and the term "Hazardous Materials"
means all explosive or regulated radioactive materials or substances,
biological hazards, genotoxic or mutagenic hazards, hazardous or toxic
substances, medical wastes or other wastes or chemicals, petroleum or
petroleum distillates, asbestos or asbestos-containing materials, and
all other materials or chemicals regulated pursuant to any
Environmental Law, including materials listed in 49 C.F.R. Section
172.101, and materials defined as hazardous pursuant to Section 101(14)
of CERCLA.
(d) TBS has either multiple sources of supply or satisfactory
long term contractual arrangements with respect to the acquisition of
all essential parts and components used by it in the manufacture and
assembly of all products material to its business.
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3.1.8 LITIGATION. There is no suit, action, or proceeding
pending or, to the knowledge of TBS, threatened against TBS that, individually
or in the aggregate, could reasonably be expected to (i) have a Material Adverse
Effect on TBS, (ii) materially impair the ability of TBS to perform its
obligations under this Agreement, or (iii) prevent the consummation of any of
the transactions contemplated by this Agreement, nor is there any judgment,
decree, injunction, rule, or order of any governmental entity outstanding
against TBS having or that could reasonably be expected to have, any such
effect. The litigation , if any, to which TBS is a party is listed in Schedule
3.1.8 in the TBS Disclosure Schedule.
3.1.9 LABOR AGREEMENTS AND ACTIONS.
(a) TBS is not bound by or subject to (and none of its assets
or properties is bound by or subject to) any written or oral, express
or implied, contract, commitment, or arrangement with any labor union,
and no labor union has requested or, to the knowledge of TBS, has
sought to represent any of the employees, representatives, or agents of
TBS. There is no strike or other labor dispute involving TBS pending,
or to the knowledge of TBS, threatened which could have a Material
Adverse Effect on TBS, nor is TBS aware of any labor organization
activity involving its employees.
(b) Except as provided in Schedule 3.1.9 in the TBS Disclosure
Schedule, (i) the employment of each officer and employee of TBS is
terminable at the will of TBS, and (ii) TBS has not entered into any
oral or written agreements with any of its officers or employees that
provide for severance or termination pay or acceleration of vesting of
stock options or restricted stock.
(c) TBS has complied in all material respects with all
applicable and effective state and federal equal employment opportunity
laws and with other laws related to employment.
(d) TBS is not aware that any officer or key employee, or that
any group of key employees, intends to terminate the employment of such
officer or employee(s) with TBS, nor does TBS have any present
intention to terminate the employment of any officer or key employee.
3.1.10 CERTAIN AGREEMENTS AND EMPLOYEE BENEFIT PLANS. Except
as provided in Schedule 3.1.10 or 3.1.15 in the TBS Disclosure Schedule:
(a) TBS is not a party to any written (i) employment,
severance, collective bargaining, or consulting agreement not
terminable on 90 days' or less notice, (ii) agreement with any
executive officer or other key employee of TBS (A) the benefits of
which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving TBS of the nature of any
of the transactions contemplated by this Agreement, (B) providing any
term of employment or compensation guarantee extending for a period
longer than one year, or (C) providing severance benefits or other
benefits after the termination of employment of such executive officer
or key employee regardless of the reason for such termination of
employment, (iii) agreement, plan, or arrangement under which any
person may receive payments subject to the tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), or (iv)
agreement or plan, including without
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limitation any stock option plan, stock appreciation right plan,
restricted stock plan, or stock purchase plan, the benefits of which
would be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement. The 401(k) Plan of TBS is non-contributing on the part of
TBS.
(b) Schedule 3.l0(b) contains a true and complete Summary or
list of, or otherwise describes (i) all employee benefit plans (within
the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock
purchase, restricted stock, incentive, deferred compensation, retiree,
medical, or life insurance, supplemental retirement, severance or other
benefit plans, programs, or arrangements, and all employment,
termination, severance, or other contracts or agreements to which TBS
is a party, with respect to which TBS has any obligations which are
material in amount and which are maintained, contributed to, or
sponsored by TBS for the benefit of any current or former employee,
officer, or director of TBS, and (ii) each employee benefit plan for
which TBS could incur liability under Section 4069 of ERISA, in the
event such plan were terminated, or under Section 4212(c) of ERISA, or
in respect of which TBS remains secondarily liable under Section 4204
of ERISA (collectively, the "TBS Material Plans"). Each TBS Material
Plan is in writing and TBS shall before Closing, at the request of
MegaWorld, provide to MegaWorld a true and complete copy of each TBS
Material Plan and a true and complete copy of each material document
prepared in connection with each such TBS Material Plan, including
without limitation: (i) a copy of each trust or other funding
arrangement, (ii) the most current summary plan description and summary
of material modifications, (iii) the most recently filed Internal
Revenue Service ("IRS") Form 5500, (iv) the most recently received IRS
determination letter for each such TBS Material Plan, and (v) the most
recently prepared actuarial report and financial statement in
connection with each such TBS Material Plan. TBS has no express or
implied commitment (i) to create, incur liability with respect to or
cause to exist any other employee benefit plan, program, or
arrangement, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual, or (iii) to modify, change,
or terminate any TBS Material Plan, other than with respect to a
modification, change, or termination required by ERISA or the Code. To
the extent applicable, the TBS Material Plans comply with the material
requirements of ERISA and the Code, and any TBS Material Plan intended
to be qualified under Section 401(a) of the Code has been determined by
the IRS to be so qualified and has been so qualified during the period
from its adoption to date. No TBS Material Plan is covered by Title IV
of ERISA or Section 412 of the Code. Neither TBS nor, to TBS's
knowledge, any officer or director of TBS has incurred any liability or
penalty under Sections 4975 through 4980 of the Code or Title I of
ERISA. To the knowledge of TBS, each TBS Material Plan has been
maintained and administered in all material respects in compliance with
its terms and with the requirements prescribed by any and all statutes,
orders, rules, and regulations, including but not limited to ERISA and
the Code, which are applicable to such TBS Material Plans. There are no
pending or, to TBS's knowledge, anticipated claims against or otherwise
involving any of the TBS Material Plans and no suit, action, or other
litigation (excluding claims for benefits incurred in the ordinary
course of TBS Material Plan activities) has been brought or, to the
knowledge of TBS, is threatened, against or with respect to any such
TBS Material Plan. All material contributions, reserves, or premium
payments required to be made or accrued as of the date hereof to the
TBS Material Plans have been made or accrued.
(c) The only shareholders of TBS, as of August 31,1998, will
be as shown in Section 2.1.5 hereof, and there will be no outstanding
Stock Options representing rights to acquire shares of stock in TBS.
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3.1.11 TAXES. TBS has duly and timely filed all returns,
reports, statements and other filings including, without limitation, any
schedule or attachment thereto or any amendment thereof (collectively, "TBS
Returns," true and complete copies of which have been furnished to MegaWorld)
required (by law, election, or otherwise) to be filed by it with respect to any
and all U.S. Federal, state (of the United States), or the District of Columbia,
or any of their respective political subdivisions, or any other applicable
United States or foreign income, franchise, capital, ad valorem, sales, use,
transfer, gains, employment, bulk transfer, severance, occupancy, value added or
other taxes, levies, license fees, assessments, or excises or other taxes of any
kind whatsoever, including any interest, penalty, charge, fee, or addition
thereto, whether disputed or not (collectively, the "Taxes") imposed by any
revenue or other law, rule, regulation, ordinance; or other official action of
or by any such jurisdiction or any board, commission, agency, or other
instrumentality thereof (collectively, "Taxing Authority") for all fiscal years
or other taxable periods (collectively "Tax Periods") ending on or prior to
Closing. Each TBS Return has included the assets, income, operations, and other
attributes of TBS, and each TBS Return was true, correct, and complete as filed.
TBS has duly and timely paid in full all Taxes shown or required to be shown as
due on each TBS Return. TBS has no deficiency or any other unsatisfied liability
with respect to any Taxes that are due and payable, whether or not assessed,
which is not fully disclosed and adequately provided for in the TBS Financial
Statements set forth in Schedule 3.1.11 of the TBS Disclosure Schedule. The
Returns of TBS have never been audited or examined by any governmental or taxing
authority, except for audits concluded with a "No Action" notice from the
auditing Taxing Authority, nor is any such audit in process, or to TBS's
knowledge, pending or threatened (either in writing or orally, formally or
informally). TBS has disclosed on its Returns all positions taken thereon that
could give rise to a penalty within the meaning of Section 6662 of the Code, or
any similar provision of law in any other taxing jurisdiction. There have been
no waivers of limitations periods or deadlines for assessments by TBS except as
set forth in Schedule 3.1.11. Schedule 3.1.11 sets forth elections that have
been made by, for, or with respect to TBS in respect of Taxes and a list of all
TBS Returns that will be due (without regard to extensions) by TBS within thirty
(30) days after Closing, together with an accurate and complete description of
TBS's basis in its assets, TBS's current and accumulated tax carry-overs, net
operating losses, or other tax attributes presently (including by reason of the
transaction contemplated hereby) subject to limitations under Code sections 382,
383, or 384, or any similar provision of law in any other taxing jurisdiction.
As of Closing, TBS will not be a party to or owe any money under any tax sharing
or similar agreement in respect of Taxes. TBS has never been a member of an
affiliated group filing consolidated returns.
3.1.12 ABSENCE OF CERTAIN CHANCES OR EVENTS. Except as
provided in Schedule 3.1.12 of the TBS Disclosure Schedule, since June 30, 1998,
except as contemplated by this Agreement, TBS has conducted its business only in
the ordinary course consistent with past practice, and there has not been (i)
any damage, destruction, or loss, whether covered by insurance or not, having or
which, insofar as reasonably can be foreseen, in the future would have a
Material Adverse Effect on TBS, (ii) any declaration, setting aside, or payment
of any dividend (whether in cash, stock, or property) with respect to Preferred
Stock or Common Stock, or any redemption, purchase, or other acquisition of any
of its securities, (iii) any change in the business, operations, properties,
prospects, condition (financial or otherwise), assets, or liabilities (including
without limitation contingent liabilities) of TBS having a Material Adverse
Effect on TBS, (iv) any labor dispute, other than routine matters, none of which
is material to TBS, (v) any entry into any material commitment or transaction
(including without limitation any borrowing or capital expenditure) other than
in the ordinary course of business consistent with past practice, (vi) any
material change by TBS in its accounting methods, principles, or practices,
(vii) any revaluation by TBS of any asset (including without limitation any
writing down of the value of inventory or writing off of notes or accounts
receivable), or (viii) other than the Sales Incentive Program adopted on or
about August 1, 1998, any increase in or establishment of any bonus, insurance
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including without limitation
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the granting of stock options, stock appreciation rights, performance awards, or
restricted stock awards), stock purchase, or other employee benefit plan, or any
other increase in the compensation payable or to become payable to any officers
or key employees of TBS. The assumption by TBS Texas of the TBS Employment
Agreement between TBS and CDMP is a condition of the execution of this
Agreement.
3.1.13 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES;
CONDITION OF EQUIPMENT.
(a) Subject to the liens shown on the TBS Disclosure Schedule,
TBS owns marketable and indefeasible title to all real property owned
by TBS. Schedule 3.1.13(a) of the TBS Disclosure Schedule sets forth a
complete and accurate list of all real property owned by TBS.
(b) Complete and accurate copies of all of the existing real
property leases to which TBS is a party have been or shall be delivered
to MegaWorld prior to Closing. Schedule 3.l3(b) sets forth a complete
and accurate list of all real property leased by TBS.
(c) TBS owns or has valid leasehold interests in all of its
tangible properties and assets (real, personal, and mixed) used in its
business, free and clear of any liens (other than liens for Taxes that
are not yet delinquent), charges, pledges, security interests, or other
encumbrances, except for such imperfections of title and encumbrances,
if any, that are not substantial in character, amount or extent, and
that do not and are not reasonably likely to materially detract from
the value, or interfere with the use of the property subject thereto or
affected thereby. TBS shall, prior to Closing, deliver to MegaWorld
correct and complete copies of each lease identified in Schedule
3.l3(b) and such leases are valid and enforceable by TBS in accordance
with their terms. TBS has received no notice that, and, to TBS's
knowledge, no circumstance exists which, with the passage of time or
the giving of notice, or both, could constitute a default under any
such leases, nor are there any unsatisfied obligations on the part of
TBS under any of the leases for real property to which TBS is a party.
(d) Each item of machinery and equipment owned or leased by
TBS is (i) adequate for the conduct of the business of TBS consistent
with its past practice, (ii) suitable for the uses to which it is
currently employed, (iii) in good operating condition, ordinary wear
and tear excepted, and (iv) regularly and properly maintained.
3.1.14 INTELLECTUAL PROPERTY.
(a) TBS either owns, or has a valid license with respect to,
all patents, copyrights, trademarks, trade secrets, and other
intellectual property used in, by, or necessary to, the operation or
conduct of its business as presently conducted (such intellectual
property and the rights thereto are collectively referred to herein as
the "TBS Intellectual Property Rights").
(b) The execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated hereby (i) will
not constitute a material breach of any instrument or agreement to
which TBS is a party governing any patent, copyright, trademark, trade
secret, or other intellectual property rights licensed by, or to, TBS,
and (ii) will not cause
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the forfeiture or termination, or give rise to a right of forfeiture or
termination, of any TBS Intellectual Property Rights or materially
impair the right of TBS, TBS Texas, or MegaWorld in or to use, sell,
enforce, license, or otherwise exploit any TBS Intellectual Properly
Rights or portion thereof.
(c) Neither the operation of TBS's business, the exploitation
of the TBS Intellectual Property Rights, nor the manufacture,
marketing, license, sale, or intended use of any product, service, or
technology currently licensed, manufactured, created, distributed,
authored, used, sold, or under development by TBS (i) violates in any
material respect any license or agreement between TBS and any third
party, or (ii) infringes any patents, copyright, trademark, trade
secret, or other intellectual property right of any other party. There
is no pending or, to the knowledge of TBS, threatened claim or
litigation involving TBS contesting the validity, ownership, or right
to use, sell, enforce, license, or dispose of any TBS Intellectual
Property Rights, nor has TBS received any written notice asserting that
any TBS Intellectual Property Rights or the proposed use, sale,
license, or disposition thereof conflicts or will conflict with the
rights of any other party.
3.1.15 MATERIAL CONTRACTS. Except for stock option grants as
identified in Schedule 3.1.10 or 3.1.15 of the TBS Disclosure Schedule, there
are no agreements, understandings, or proposed transactions between TBS and any
of its officers, directors, affiliates, or any affiliate thereof. Except as
identified in Schedule 3.1.10 or 3.1.15, there are no agreements,
understandings, instruments, contracts, or proposed transactions to which TBS is
a party or by which it is bound that involve (i) obligations (contingent or
otherwise) of or payments to, TBS in excess of $250,000.00, other than purchase
orders in individual amounts of less than $500,000.00 received in the ordinary
course of business, (ii) the license of any patent, copyright, trade secret, or
other proprietary right to or from TBS, or (iii) the grant of rights to
manufacture, produce, assemble, license, market, or sell its products to any
other person or affect TBS's exclusive right to develop, manufacture, assemble,
distribute, market, or sell its products (the "TBS Material Contracts"). To the
knowledge of TBS: (i) each TBS Material Contract is in full force and effect
except as the same may have expired in accordance with its terms; (ii)TBS has
not received any written assertion of default under any TBS Material Contract;
and (iii) TBS has not received any notice related to any termination or material
change to, or proposal with respect to, any of the TBS Material Contracts as a
result of the transactions contemplated by this Agreement. TBS is not a party
to, nor has it any obligation under, any contract or agreement, written or oral,
which contains any covenants, currently or prospectively, limiting the freedom
of TBS to engage in its business as currently conducted anywhere in the world or
to compete in its business with any entity anywhere in the world.
3.1.16 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS.
Visitors to TBS, including without limitation consultants to or vendors of TBS
with access to confidential information of TBS, are parties to a written
agreement substantially in the form or forms attached to Schedule 3.1.16 under
which, among other things, each such visitor is obligated to maintain the
confidentiality of confidential information of TBS. TBS is not aware of any
violations thereof.
3.1.17 XXXX-XXXXX-XXXXXX. TBS's total assets and annual net
sales do not satisfy the "Size of the Parties Test" for an acquired person under
Section 7A(a)(2) of the HSR Act and the regulations promulgated thereunder.
3.1.18 NO CONFLICT OF INTEREST. Except as provided in Schedule
3.1.18 to the TBS Disclosure Schedule, TBS is not indebted, directly or
indirectly, to any of its officers or directors or to their respective spouses
or children, in any amount whatsoever
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other than in connection with expenses or advances of expenses incurred in the
ordinary course of business or relocation expenses of employees. To TBS's
knowledge, none of TBS's officers or directors, or any members of their
immediate families, directly or indirectly, are indebted to TBS or have any
direct or indirect ownership interest in any firm or corporation with which TBS
is affiliated or with which TBS has a business relationship, or any firm or
corporation which competes with TBS, except that officers, directors and/or
stockholders of TBS may own stock in (but not exceeding two percent of the
outstanding capital stock of) any publicly traded company that may compete with
TBS. To TBS's knowledge, none of TBS's officers or directors or any member of
their immediate families, is interested, directly or indirectly, in any Material
Contract with TBS. TBS is not a guarantor or indemnitor of any indebtedness of
any other person, firm, or corporation.
3.1.19 TAKEOVER STATUTES INAPPLICABLE. No "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover statute
or regulation (each a "Takeover Statute") is applicable to TBS, the Preferred
Stock, the Common Stock the Merger or any of the other transactions contemplated
by this Agreement.
3.1.20 BROKERS AND FINDERS. TBS has not employed any broker or
finder or incurred any liability for any fee or commission to any broker,
finder, or intermediary in connection with the transactions contemplated hereby.
3.1.21 NO MISSTATEMENTS. No representation or warranty made by
TBS in this Agreement, or in any Schedule to this Agreement, or certificate
delivered or deliverable pursuant to the terms hereof, or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits, or will omit, to state a material fact necessary in
order to make the statements made, in light of the circumstances under which it
was made, not misleading.
SEC. 3.2 REPRESENTATIONS AND WARRANTIES OF MEGAWORLD. MegaWorld hereby
represents and warrants to TBS, TBS Texas, and CDMP that, except as and to the
extent set forth in a Disclosure Schedule (the "MegaWorld Disclosure Schedule")
delivered to CDMP in accordance with Section 9.3 hereof, setting forth
additional exceptions specified therein to the representations and warranties
contained in this Article III, which MegaWorld Disclosure Schedule shall
identify exceptions by specific Section references:
3.2.1 CORPORATE ORGANIZATION.
(a) MegaWorld is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority and all necessary
governmental approvals to own or lease and operate its properties and
assets and to carry on its business as it is now being conducted, and
is duly qualified or licensed as a foreign corporation to do business
and in good standing in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties
owned or leased by it makes such qualification or licensing necessary,
except where the failure to be so organized, existing, in good
standing, qualified, or licensed would not have a Material Adverse
Effect on MegaWorld.
(b) MegaWorld has corporate authority to enter into and effect
the transactions contemplated by this Agreement.
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(c) The transactions contemplated by this Agreement, if
carried out as provided herein, are authorized by, and comply with all
applicable governmental laws, orders, rules, and regulations, including
without limitation the corporation laws of Delaware and federal
securities law, order, rule, or regulation; and MegaWorld makes this
representation and warranty on the advice from its legal counsel.
3.2.2 CAPITALIZATION The authorized corporate stock of
MegaWorld consists of the following:
(a) PREFERRED STOCK. No shares of Preferred Stock are
authorized or issued.
(b) COMMON STOCK. 100,000,000 shares of Common Stock,
authorized, with number issued and outstanding, and of par value and
class as set forth in Section 1.1.2 hereof.
(c) There are no voting trusts or other agreements or
understandings to which MegaWorld is a party with respect to the voting
of the MegaWorld Common Stock, except for those agreements and
understandings required hereby and those other agreements set forth in
Schedule 3.2.2 to the MegaWorld Disclosure Schedule.
(d) All securities sold or issued by MegaWorld have been sold
or issued in full and complete compliance with the requirements of the
federal securities law, order, rule, or regulation, and any applicable
state securities or "blue sky" laws, or under applicable exemptions and
exclusions therefrom.
3.2.3 SUBSIDIARIES. MegaWorld does not own, directly or
indirectly, any equity or similar interest in, or any interest convertible into
or exchangeable for, any equity or similar interest in any corporation,
partnership, joint venture, or other business association or entity, except as
set forth in Schedule 3.2.3 to the MegaWorld Disclosure Schedule. ITS Telephony
is either a subsidiary or an affiliate of MegaWorld, as described in Section
1.1.2, but must be a wholly owned corporate subsidiary by the time of Closing.
3.2.4 AUTHORITY. MegaWorld has the full corporate power and
authority to enter into this Agreement, to perform its obligations hereunder,
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly approved by the Board of Directors of MegaWorld and no
other corporate proceedings on the part of MegaWorld are necessary to authorize
this Agreement or to consummate the transactions so contemplated (other than
with respect to the merger, the approval, filing, and recordation of the
appropriate merger documents as required by part Five of TBCA, and delivery of
certain notices pursuant to the DGCL and/or MegaWorld's charter documents). This
Agreement has been duly executed and delivered by, and, upon the execution and
delivery thereof by MegaWorld and TBS Texas, constitutes a valid and binding
obligation of MegaWorld, enforceable against MegaWorld in accordance with its
terms.
3.2.5 CONSENTS AND APPROVALS; NO VIOLATION. Neither the
execution and delivery of this Agreement by MegaWorld nor the consummation by
MegaWorld of the transactions contemplated hereby will (i) conflict with or
result in any breach or violation of any provision of the Amended and Restated
Certificate of Incorporation or Bylaws of MegaWorld, or (ii) constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or give rise to a right of termination,
cancellation,
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or acceleration of any obligation contained in or to the loss of a benefit
under, or result in the creation of any lien or other encumbrance upon any of
the properties or assets of MegaWorld under any of the terms, conditions, or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement, or other instrument or obligation, permit, concession,
franchise, judgment, order, decree, statute, law, ordinance, rule, or regulation
applicable to MegaWorld or to which it or any of its properties or assets may be
subject, except for such violations, conflicts, breaches, terminations,
accelerations, or creations of liens or other encumbrances, which will not have
a Material Adverse Effect on MegaWorld, its subsidiaries, divisions, and
affiliates, or (iii) require any consent, approval, authorization, or permit of,
or filing with, or notification to, any governmental entity, including without
limitation filings under the HSR Act, except consents, approvals,
authorizations, permits, filings, or notifications which if not obtained or made
will not have a Material Adverse Effect on MegaWorld, its subsidiaries,
divisions, and affiliates or prevent or materially delay consummation of the
Merger.
3.2.6 FINANCIAL INFORMATION. Schedule 3.2.6 in the MegaWorld
Disclosure Schedule consists of the following financial statements of MegaWorld:
(i) Annual financial statements and Auditor's Report for the year ended December
31, 1997; and (ii) unaudited internally prepared consolidated balance sheets,
operating statements, and related schedules as of, and for the periods ended
March 31, 1998 (three months), May 31, 1998 (five months), and August 31, 1998
(eight months). The audited financial statements referred to in clause (i) of
this Section 3.2.6 and the unaudited financial statements referred to in clause
(ii) of this Section 3.2.6, together with the footnotes and supporting schedules
in respect of such financial statements, are collectively referred to as the
"MegaWorld Financial Statements."
(a) The MegaWorld Financial Statements are true and correct
with respect to each material item shown or reflected thereon, and have
been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present the financial
position of MegaWorld, its subsidiaries, divisions, and affiliates as
of the dates thereof and the results of operations and cash flows for
the periods then ended, subject to normal year end adjustments.
(b) The MegaWorld Financial Statements set forth all the
liabilities of MegaWorld, its subsidiaries, divisions, and affiliates
(direct and indirect, contingent and accrued) of whatever nature at the
date thereof, whether arising out of contract, tort, statute, or
otherwise, except liabilities and obligations under contracts,
commitments, agreements, torts, statutes, or otherwise set forth on
Schedule 3.1.6(b) in the MegaWorld Disclosure Schedule.
3.2.7 CONDUCT OF BUSINESS. Except as shown in Schedule 3.2.7
to the MegaWorld Disclosure Schedule,
(a) The business of MegaWorld, its subsidiaries, divisions,
and affiliates, as presently conducted, is not being conducted in
default or violation of any term, condition, or provision of (i) its
charter or bylaws, as amended, or (ii) any note, bond, mortgage,
indenture, deed of trust, lease, agreement, or other instrument or
obligation of any kind to which any of MegaWorld, its subsidiaries,
divisions, and affiliates is a party or by which any of MegaWorld, its
subsidiaries, divisions, and affiliates or any of its or their
properties or assets may be bound, or (iii) any federal, state, local,
or foreign statute, law, ordinance, rule, regulation, judgment, decree,
order, concession, grant, franchise, permit, or license, or other
governmental authorization or approval applicable to MegaWorld, its
subsidiaries, divisions, and affiliates, excluding from the foregoing
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clauses (ii) and (iii) defaults or violations that could not reasonably
be expected to have a Material Adverse Effect on MegaWorld, its
subsidiaries, divisions, and affiliates.
(b) Each of MegaWorld, its subsidiaries, divisions, and
affiliates has or shall apply for all licenses, permits, orders, or
approvals of, and has made all required registrations with, all
governmental entities that are material to the conduct of the business
of each of MegaWorld, its subsidiaries, divisions, and affiliates
(collectively, "MegaWorld Permits"). To the knowledge of each of
MegaWorld, its subsidiaries, divisions, and affiliates: (i) all
MegaWorld Permits are in full force and effect; (ii) no material
violations are or have been recorded in respect of any MegaWorld
Permit; and (iii) no proceeding is pending or threatened to revoke or
limit any MegaWorld Permit.
(c) None of MegaWorld, its subsidiaries, divisions, and
affiliates has received any written communication from a governmental
entity or any landlord (particularly including without limitation any
landlord of Castello Xxxxx Enterprises Srl) or purchaser of assets that
alleges that any of MegaWorld, its subsidiaries, divisions, and
affiliates is not in compliance with any Environmental Law, as defined
in Section 3.1.7(c) hereof. Each of MegaWorld, its subsidiaries,
divisions, and affiliates has no knowledge of any environmental
materials or information, including on-site or off-site disposal or
releases of Hazardous Materials, as defined in Section 3.1.7(c) hereof,
that could reasonably be expected to have a Material Adverse Effect on
MegaWorld, its subsidiaries, divisions, and affiliates.
(d) Each of MegaWorld, its subsidiaries, divisions, and
affiliates has either multiple sources of supply or satisfactory long
term contractual arrangements with respect to the acquisition of all
essential parts and components used by it in the manufacture and
assembly of all products material to its business.
3.2.8 LITIGATION. Except as disclosed in Schedule 3.2.8 to the
MegaWorld Disclosure Schedule, there is no suit, action, or proceeding pending
or, to the knowledge of any of MegaWorld, its subsidiaries, divisions, and
affiliates, threatened against any of MegaWorld, its subsidiaries, divisions,
and affiliates that, individually or in the aggregate, could reasonably be
expected to (i) have a Material Adverse Effect on MegaWorld, its subsidiaries,
divisions, and affiliates, (ii) materially impair the ability of MegaWorld to
perform its obligations under this Agreement, or (iii) prevent the consummation
of any of the transactions contemplated by this Agreement, nor is there any
judgment, decree, injunction, rule, or order of any governmental entity
outstanding against any of MegaWorld, its subsidiaries, divisions, and
affiliates having, or that could reasonably be expected to have, any such
effect. The litigation, if any, to which each of MegaWorld, its subsidiaries,
divisions, and affiliates is a party is listed in Schedule 3.2.8 in the
MegaWorld Disclosure Schedule.
3.2.9 LABOR AGREEMENTS AND ACTIONS.
(a) None of MegaWorld, its subsidiaries, divisions, and
affiliates is bound by or subject to (and none of its or their assets
or properties is bound by or subject to) any written or oral, express
or implied, contract, commitment, or arrangement with any labor union,
and no labor union has requested, or to the knowledge of any of
MegaWorld, its subsidiaries, divisions, and affiliates, has sought to
represent any of the employees, representatives, or agents of any of
MegaWorld, its subsidiaries, divisions, and affiliates. There is no
strike or other labor dispute involving any of MegaWorld, its
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subsidiaries, divisions, and affiliates pending, or to the knowledge of
any of MegaWorld, its subsidiaries, divisions, and affiliates,
threatened which could have a Material Adverse Effect on MegaWorld, its
subsidiaries, divisions, and affiliates, nor is any of MegaWorld, its
subsidiaries, divisions, and affiliates aware of any labor organization
activity involving its or their employees.
(b) Except as provided in Schedule 3.2.9 in the MegaWorld
Disclosure Schedule, (i) the employment of each officer and employee of
each of MegaWorld, its subsidiaries, divisions, and affiliates is
terminable at the will of MegaWorld, and (ii) none of MegaWorld, its
subsidiaries, divisions, and affiliates has entered into any oral or
written agreements with any of its officers or employees that provide
for severance or termination pay or acceleration of vesting of stock
options or restricted stock.
(c) Each of MegaWorld, its subsidiaries, divisions, and
affiliates has complied in all material respects with all applicable
and effective state and federal equal employment opportunity laws and
with other laws related to employment.
(d) None of MegaWorld, its subsidiaries, divisions, and
affiliates is aware that any officer or key employee, or that any group
of key employees, intends to terminate the employment of such officer
or employee(s) with any of MegaWorld, its subsidiaries, divisions, and
affiliates, nor does any of MegaWorld, its subsidiaries, divisions, and
affiliates have any present intention to terminate the employment of
any officer or key employee. Except as provided in Schedule 3.2.9(d) to
the MegaWorld Disclosure Schedule, each officer and key employee of
each of MegaWorld, its subsidiaries, divisions, and affiliates is
currently devoting 100 percent of his or her business time attending to
the affairs of MegaWorld, its subsidiaries, divisions, and affiliates.
3.2.10 CERTAIN AGREEMENTS AND EMPLOYEE BENEFIT PLANS. Except
as provided in Schedule 3.2.10 to the MegaWorld Disclosure Schedule,
(a) Each of MegaWorld, its subsidiaries, divisions, and
affiliates is not a party to any written (i) employment, severance,
collective bargaining, or consulting agreement not terminable on 90
days' or less notice, (ii) agreement with any executive officer or
other key employee of any of MegaWorld, its subsidiaries, divisions,
and affiliates (A) the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction
involving any of MegaWorld, its subsidiaries, divisions, and affiliates
of the nature of any of the transactions contemplated by this
Agreement, (B) providing any term of employment or compensation
guarantee extending for a period longer than one year, or (C) providing
severance benefits or other benefits after the termination of
employment of such executive officer or key employee regardless of the
reason for such termination of employment, (iii) agreement, plan, or
arrangement under which any person may receive payments subject to the
tax imposed by Section 4999 of the Code, or (iv) agreement or plan,
including without limitation any stock option plan, stock appreciation
right plan, restricted stock plan, or stock purchase plan, the benefits
of which would be increased, or the vesting of benefits of which will
be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement, or the value of any of the benefits of
which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
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(b) Schedule 3.l0(b) contains a true and complete Summary or
list of, or otherwise describes (i) all employee benefit plans (within
the meaning of Section 3(3) of ERISA), and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation,
retiree, medical, or life insurance, supplemental retirement,
severance, or other benefit plans, programs, or arrangements, and all
employment, termination, severance, or other contracts or agreements to
which any of MegaWorld, its subsidiaries, divisions, and affiliates is
a party, with respect to which any of MegaWorld, its subsidiaries,
divisions, and affiliates has any obligations which are material in
amount and which are maintained, contributed to, or sponsored by any of
MegaWorld, its subsidiaries, divisions, and affiliates for the benefit
of any current or former employee, officer, or director of any of
MegaWorld, its subsidiaries, divisions, and affiliates, and (ii) each
employee benefit plan for which any of MegaWorld, its subsidiaries,
divisions, and affiliates could incur liability under Section 4069 of
ERISA, in the event such plan were terminated, or under Section 4212(c)
of ERISA, or in respect of which any of MegaWorld, its subsidiaries,
divisions, and affiliates remains secondarily liable under Section 4204
of ERISA (collectively, the "MegaWorld Material Plans"). Each MegaWorld
Material Plan is in writing, and MegaWorld shall before Closing provide
to CDMP and TBS a true and complete copy or each MegaWorld Material
Plan and a true and complete copy of each material document prepared in
connection with each such MegaWorld Material Plan, including without
limitation: (i) a copy of each trust or other funding arrangement, (ii)
the most current summary plan description and summary of material
modifications, (iii) the most recently filed IRS Form 5500, (iv) the
most recently received IRS determination letter for each such MegaWorld
Material Plan, and (v) the most recently prepared actuarial report and
financial statement in connection with each such MegaWorld Material
Plan. Each of MegaWorld, its subsidiaries, divisions, and affiliates
has no express or implied commitment (i) to create, incur liability
with respect to, or cause to exist any other employee benefit plan,
program, or arrangement, (ii) to enter into any contract or agreement
to provide compensation or benefits to any individual, or (iii) to
modify, change, or terminate any MegaWorld Material Plan, other than
with respect to a modification, change, or termination required by
ERISA or the Code. To the extent applicable, the MegaWorld Material
Plans comply with the material requirements of ERISA and the Code, and
any MegaWorld Material Plan intended to be qualified under Section
401(a) of the Code has been determined by the IRS to be so qualified
and has been so qualified during the period from its adoption to date.
No MegaWorld Material Plan is covered by Title IV of ERISA or Section
412 of the Code. None of MegaWorld, its subsidiaries, divisions, and
affiliates, nor, to the knowledge of any of MegaWorld, its
subsidiaries, divisions, and affiliates, any officer or director of any
of MegaWorld, its subsidiaries, divisions, and affiliates has incurred
any liability or penalty under Sections 4975 through 4980 of the Code
or Title I of ERISA. To the knowledge of any of MegaWorld, its
subsidiaries, divisions, and affiliates, each MegaWorld Material Plan
has been maintained and administered in all material respects in
compliance with its terms and with the requirements prescribed by any
and all statutes, orders, rules, and regulations, including but not
limited to ERISA and the Code, which are applicable to such MegaWorld
Material Plans. There are no pending or, to the knowledge of any of
MegaWorld, its subsidiaries, divisions, and affiliates, anticipated
claims against or otherwise involving any of the MegaWorld Material
Plans and no suit, action, or other litigation (excluding claims for
benefits incurred in the ordinary course of MegaWorld Material Plan
activities) has been brought, or, to the knowledge of any of MegaWorld,
its subsidiaries, divisions, and affiliates, is threatened, against or
with respect to any such MegaWorld Material Plan. All material
contributions, reserves, or premium payments required to be made or
accrued as of the date hereof to the MegaWorld Material Plans have been
made or accrued.
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(c) Schedule 3.2.10(c) in the MegaWorld Disclosure Schedule
contains a true and correct list of each person who holds any Stock
Option as of the date hereof, together with (i) the number of shares of
Common Stock subject to such Stock Option, (i) the date of grant of
such Stock Option, (iii) the extent to which such Stock Option is
currently vested or scheduled to vest by August 31,1998, (iv) the
exercise price of such Stock Option, (v) whether such Stock Option is
intended to qualify as an incentive stock option within the meaning of
Section 422(b) of the Code (an "ISO"), and (vi) the expiration date of
such Stock Option. Schedule 3.1.10(c) also sets forth the aggregate
number of ISO's and nonqualified Stock Options outstanding as of the
date hereof.
3.2.11 TAXES. Each of MegaWorld, its subsidiaries, divisions,
and affiliates has duly and timely filed all returns, reports, statements, and
other filings, including without limitation any schedule or attachment thereto
or any amendment thereof (collectively, "MegaWorld Returns," true and complete
copies of which have been furnished or shall be furnished to TBS and CDMP)
required (by law, election, or otherwise) to be filed by it with respect to any
and all Taxes, as defined in Section 3.1.11 hereof, imposed by any Taxing
Authority, as defined in Section 3.1.11 hereof, for all Tax Periods, as defined
in Section 3.1.11 hereof, ending on or prior to Closing. Each MegaWorld Return
has included the assets, income, operations, and other attributes of each of
MegaWorld, its subsidiaries, divisions, and affiliates, insofar as relevant to
each such entity, and each MegaWorld Return was true, correct, and complete as
filed. Each of MegaWorld, its subsidiaries, divisions, and affiliates has duly
and timely paid in full all Taxes shown or required to be shown as due on each
MegaWorld Return. Each of MegaWorld, its subsidiaries, divisions, and affiliates
has no deficiency or any other unsatisfied liability with respect to any Taxes
that are due and payable, whether or not assessed, which is not fully disclosed
and adequately provided for in the MegaWorld Financial Statements set forth in
Schedule 3.2.11 of the Megaworld Statement. The Returns of each of MegaWorld,
its subsidiaries, divisions, and affiliates have never been audited or examined
by any governmental or taxing authority, nor is any such audit in process, or,
to the knowledge of any of MegaWorld, its subsidiaries, divisions, and
affiliates, pending or threatened (either in writing or orally, formally or
informally). Each of MegaWorld, its subsidiaries, divisions, and affiliates has
disclosed on their Returns all positions taken thereon that could give rise to a
penalty within the meaning of Section 6662 of the Code, or any similar provision
of law in any other taxing jurisdiction. There have been no waivers of
limitations periods or deadlines for assessments by any of MegaWorld, its
subsidiaries, divisions, and affiliates except as set forth in Schedule 3.2.11.
Schedule 3.2.11 sets forth elections that have been made by, for or with respect
to any of MegaWorld, its subsidiaries, divisions, and affiliates in respect of
Taxes and a list of all MegaWorld Returns that will be due (without regard to
extensions) by any of MegaWorld, its subsidiaries, divisions, and affiliates
within thirty (30) days after Closing, together with an accurate and complete
description of the basis of each of MegaWorld, its subsidiaries, divisions, and
affiliates in its assets, the tax carryovers, net operating losses, or other tax
attributes presently (including by reason of the transaction contemplated
hereby) subject to limitations under Code sections 382, 383, or 384, or any
similar provision of law in any other taxing jurisdiction. As of Closing, each
of MegaWorld, its subsidiaries, divisions, and affiliates will not be a party to
or owe any money under any tax sharing or similar agreement in respect of Taxes.
3.2.12 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as shown
in Schedule 3.1.12 to the MegaWorld Disclosure Schedule, since June 30, 1998,
except as contemplated by this Agreement, each of MegaWorld, its subsidiaries,
divisions, and affiliates has conducted its business only in the ordinary course
consistent with past practice, and there has not been (i) any damage,
destruction, or loss, whether covered by insurance or not, having or which,
insofar as reasonably can be foreseen, in the future would have a Material
Adverse Effect on MegaWorld, its subsidiaries, divisions, and affiliates, (ii)
any declaration, setting aside, or payment of any dividend (whether in cash,
stock, or property) with respect to Preferred Stock or Common Stock, or any
redemption, purchase, or other acquisition
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of any of its securities, (iii) any change in the business, operations,
properties, prospects, condition (financial or otherwise), assets, or
liabilities (including without limitation contingent liabilities) of MegaWorld,
its subsidiaries, divisions, and affiliates having a Material Adverse Effect on
any of MegaWorld, its subsidiaries, divisions, and affiliates, (iv) any labor
dispute, other than routine matters, none of which is material to any of
MegaWorld, its subsidiaries, divisions, and affiliates, (v) any entry into any
material commitment or transaction (including without limitation any borrowing
or capital expenditure) other than in the ordinary course of business consistent
with past practice, (vi) any material change by any of MegaWorld, its
subsidiaries, divisions, and affiliates in its accounting methods, principles,
or practices, (vii) any revaluation by any of MegaWorld, its subsidiaries,
divisions, and affiliates of any asset (including without limitation any writing
down of the value of inventory or writing off of notes or accounts receivable),
or (viii) any increase in or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including without limitation the granting of stock options, stock appreciation
rights, performance awards, or restricted stock awards), stock purchase, or
other employee benefit plan, or any other increase in the compensation payable
or to become payable to any officers or key employees of any of MegaWorld, its
subsidiaries, divisions, and affiliates. The MegaWorld Employment Agreement
between MegaWorld and CDMP is a condition of the execution of this Agreement and
is described in the MegaWorld Disclosure Schedule.
3.2.13 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES;
CONDITION OF EQUIPMENT.
(a) Each of MegaWorld, its subsidiaries, divisions, and
affiliates owns marketable and indefeasible title to all real property
owned by it. Schedule 3.2.13(a) of the MegaWorld Disclosure Schedule
sets forth a complete and accurate list of all real property owned by
any of MegaWorld, its subsidiaries, divisions, and affiliates.
(b) Complete and accurate copies of all of the existing real
property leases to which each of MegaWorld, its subsidiaries,
divisions, and affiliates is a party have been or shall be delivered to
TBS and CDMP prior to Closing. Schedule 3.l3(b) sets forth a complete
and accurate list of all real property leased by any of MegaWorld, its
subsidiaries, divisions, and affiliates.
(c) Each of MegaWorld, its subsidiaries, divisions, and affiliates owns
or has valid leasehold interests in all of its tangible properties and assets
(real, personal, and mixed) used in its business, free and clear of any liens
(other than liens for Taxes that are not yet delinquent), charges, pledges,
security interests, or other encumbrances, except for such imperfections of
title and encumbrances, if any, that are not substantial in character, amount,
or extent, and that do not and are not reasonably likely to materially detract
from the value, or interfere with the use of the property subject thereto or
affected thereby. MegaWorld has delivered or shall deliver to TBS prior to
Closing correct and complete copies of each lease identified in Schedule
3.2.l3(b). Such leases are valid and enforceable by the lessees named therein in
accordance with their terms. Each of MegaWorld, its subsidiaries, divisions, and
affiliates has received no notice that, and, to the knowledge of each of
MegaWorld, its subsidiaries, divisions, and affiliates, no circumstance exists
which, with the passage of time, or the giving of notice, or both, could
constitute a default under any such leases, nor are there any unsatisfied
obligations on the part of any of MegaWorld, its subsidiaries, divisions, and
affiliates under any of the leases for real property to which any of MegaWorld,
its subsidiaries, divisions, and affiliates is a party.
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(d) Each item of machinery and equipment owned or leased by each of
MegaWorld, its subsidiaries, divisions, and affiliates is (i) adequate for the
conduct of the business of that entity consistent with its past practice, (ii)
suitable for the uses to which it is currently employed, (iii) in good operating
condition, ordinary wear and tear excepted, and (iv) regularly and properly
maintained.
3.2.14 REPRESENTATIONS AND EXPECTATIONS OF CERTAIN
DEVELOPMENTS WITHIN MEGAWORLD AND ITS SUBSIDIARIES. MegaWorld has represented
that certain developments and milestones would occur within MegaWorld and its
subsidiaries, divisions, and affiliates, including without limitation
specifically Telephony JV, as defined herein, ITS Telephony, Inc., and MegaWorld
Leisure, Inc.; and TBS and CDMP have executed this Agreement based on the
reliance of each on the representations of MegaWorld and its Directors that
these developments and milestones would indeed occur. Therefore, it is
understood and agreed by all parties hereto that should any of MegaWorld, its
subsidiaries, divisions, and affiliates fail to achieve the following events
prior to the payment of the $8,000,000 to the holders of the TBS Texas note as
provided in Section 2.1.3, MegaWorld will be in default of this Agreement:
(a) After funding and the obtaining of the requisite permits,
MegaWorld on behalf of itself, its subsidiaries, divisions, and
affiliates, commits, represents, warrants and covenants that it will
sell or lease enough time share units in Castello Torre Xxxxx to
generate $3,000,000.00 per year gross. Such year shall begin on the
date which MegaWorld affirms that the requisite funding and permits
have been acquired.
(b) Commencing January 1, 1999, MegaWorld, on behalf of
itself, its subsidiaries, divisions, and affiliates, commits,
represents, warrants, and covenants to cause ITS Telephony, Inc. to
generate $3,000,000.00 per year gross, before commissions and other
overhead charges.
(c) Default, due to failure by MegaWorld to fund, as
stipulated in the ITS Telephony Joint Venture option to purchase
agreement dated October 28, 1998, shall be limited to the amount
approved by MegaWorld for the purchase of capital equipment and normal
expenses for the next installation. This default provision shall
automatically expire February 28, 2002. This default provision
supercedes and makes null and void all other default provisions
associated with said Joint Venture agreement.
3.2.15 INTELLECTUAL PROPERTY.
(a) Each of MegaWorld, its subsidiaries, divisions, and
affiliates either owns, or has a valid license with respect to, all
patents, copyrights, trademarks, trade secrets, and other intellectual
property used in, by, or necessary to, the operation or conduct of its
business as presently conducted (such intellectual property and the
rights thereto are collectively referred to herein as the "MegaWorld
Intellectual Property Rights").
(b) The execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated hereby (i) will
not constitute a material breach of any instrument or agreement to
which any of MegaWorld, its subsidiaries, divisions, and affiliates is
a party governing any patent, copyright, trademark, trade secret, or
other intellectual property rights licensed by, or to, any of
MegaWorld, its subsidiaries, divisions, and affiliates, and (ii) will
not cause the forfeiture or termination, or give rise to a right of
forfeiture or termination, of any MegaWorld Intellectual Property
Rights or materially impair the right of TBS, TBS Texas, or MegaWorld
in or to use, sell, enforce, license, or otherwise exploit any
MegaWorld Intellectual Properly Rights or portion thereof.
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(c) Neither the operation of the business of any of MegaWorld,
its subsidiaries, divisions, and affiliates, the exploitation of
MegaWorld Intellectual Property Rights, nor the manufacture, marketing,
license, sale, or intended use of any product, service, or technology
currently licensed, manufactured, created, distributed, authored, used,
sold, or under development by any of MegaWorld, its subsidiaries,
divisions, and affiliates (i) violates in any material respect any
license or agreement between any of MegaWorld, its subsidiaries,
divisions, and affiliates and any third party, or (ii) infringes any
patents, copyright, trademark, trade secret, or other intellectual
property right of any other party. There is no pending or, to the
knowledge of any of MegaWorld, its subsidiaries, divisions, and
affiliates, threatened claim or litigation involving any of MegaWorld,
its subsidiaries, divisions, and affiliates contesting the validity,
ownership, or right to use, sell, enforce, license, or dispose of any
MegaWorld Intellectual Property Rights, nor has any of MegaWorld, its
subsidiaries, divisions, and affiliates received any written notice
asserting that any MegaWorld Intellectual Property Rights or the
proposed use, sale, license, or disposition thereof conflicts or will
conflict with the rights of any other party.
3.2.16 MATERIAL CONTRACTS. Except for stock option grants as
identified in Schedule 3.2.15 to the MegaWorld Disclosure Schedule, there are no
agreements, understandings, or proposed transactions between any of MegaWorld,
its subsidiaries, divisions, and affiliates and any of its officers, directors,
affiliates, or any affiliate thereof. Except as identified in Schedule 3.2.15,
there are no agreements, understandings, instruments, contracts, or proposed
transactions to which any of MegaWorld, its subsidiaries, divisions, and
affiliates is a party or by which it is bound that involve (i) obligations
(contingent or otherwise) of or payments to any of MegaWorld, its subsidiaries,
divisions, and affiliates in excess of Twenty-five Thousand and No/100 Dollars
($25,000.00), other than purchase orders in individual amounts of less than One
Hundred Thousand and No/100 Dollars ($100,000.00) received in the ordinary
course of business, (ii) the license of any patent, copyright, trade secret, or
other proprietary right to or from any of MegaWorld, its subsidiaries,
divisions, and affiliates, or (iii) the grant of rights to manufacture, produce,
assemble, license, market, or sell its products to any other person or affect
the exclusive right of any of MegaWorld, its subsidiaries, divisions, and
affiliates to develop, manufacture, assemble, distribute, market, or sell its
products (the "MegaWorld Material Contracts"). To the knowledge of each of
MegaWorld, its subsidiaries, divisions, and affiliates: (i) each MegaWorld
Material Contract is in full force and effect except as the same may have
expired in accordance with its terms; (ii) each of MegaWorld, its subsidiaries,
divisions, and affiliates has not received any written assertion of default
under any MegaWorld Material Contract; and (iii) each of MegaWorld, its
subsidiaries, divisions, and affiliates has not received any notice related to
any termination or material change to, or proposal with respect to, any of the
MegaWorld Material Contracts as a result of the transactions contemplated by
this Agreement. Each of MegaWorld, its subsidiaries, divisions, and affiliates
is not a party to, nor has it any obligation under, any contract or agreement,
written or oral, which contains any covenants, currently or prospectively,
limiting the freedom of any of MegaWorld, its subsidiaries, divisions, and
affiliates to engage in its business as currently conducted anywhere in the
world or to compete in its business with any entity anywhere in the world.
3.2.17 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each
current and former employee and consultant of each of MegaWorld, its
subsidiaries, divisions, and affiliates has executed an agreement with it
regarding confidentiality and proprietary information substantially in the form
or forms attached to Schedule 3.2.16 to the MegaWorld Disclosure Schedule. Each
of MegaWorld, its subsidiaries, divisions, and affiliates is not aware that any
of its employees or consultants is in violation thereof. All consultants to or
vendors of each of MegaWorld, its subsidiaries, divisions, and affiliates with
access to confidential information of any of MegaWorld, its subsidiaries,
divisions, and affiliates are parties to a written agreement substantially in
the form or forms attached to Schedule 3.2.16
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under which, among other things, each such consultant or vendor is obligated to
maintain the confidentiality of confidential information of any of MegaWorld,
its subsidiaries, divisions, and affiliates. Each of MegaWorld, its
subsidiaries, divisions, and affiliates is not aware that any of its consultants
or vendors are in violation thereof.
3.2.18 XXXX-XXXXX-XXXXXX. The assets and annual net sales of
MegaWorld, its subsidiaries, divisions, and affiliates, individually and in the
aggregate, do not satisfy the "Size of the Parties Test" for an acquired person
under Section 7A(a)(2) of the HSR Act and the regulations promulgated
thereunder.
3.2.19 NO CONFLICT OF INTEREST. Each of MegaWorld, its
subsidiaries, divisions, and affiliates is not indebted, directly or indirectly,
to any of its officers or directors, or to their respective spouses or children,
in any amount whatsoever other than in connection with expenses or advances of
expenses incurred in the ordinary course of business or relocation expenses of
employees. To the knowledge of each of MegaWorld, its subsidiaries, divisions,
and affiliates, none of the officers or directors of any of MegaWorld, its
subsidiaries, divisions, and affiliates, or any members of their immediate
families, directly or indirectly, are indebted to any of MegaWorld, its
subsidiaries, divisions, and affiliates or have any direct or indirect ownership
interest in any firm or corporation with which any of MegaWorld, its
subsidiaries, divisions, and affiliates is affiliated or with which any of
MegaWorld, its subsidiaries, divisions, and affiliates has a business
relationship, or any firm or corporation which competes with any of MegaWorld,
its subsidiaries, divisions, and affiliates, except that officers, directors,
and/or stockholders of any of MegaWorld, its subsidiaries, divisions, and
affiliates may own stock in (but not exceeding two percent of the outstanding
capital stock of) any publicly traded company that may compete with any of
MegaWorld, its subsidiaries, divisions, and affiliates. To the knowledge of each
of MegaWorld, its subsidiaries, divisions, and affiliates, none of the officers
or directors of any of MegaWorld, its subsidiaries, divisions, and affiliates,
or any member of their immediate families, is interested, directly or
indirectly, in any MegaWorld Material Contract with any of MegaWorld, its
subsidiaries, divisions, and affiliates. Each of MegaWorld, its subsidiaries,
divisions, and affiliates is not a guarantor or indemnitor of any indebtedness
of any other person, firm, or corporation. The above is, however, exclusive of
the contract between MegaWorld, Inc and Xxxxxxx Xxxxxxxx concerning the Castello
Torre Xxxxx.
3.2.20 TAKEOVER STATUTES INAPPLICABLE. No Takeover Statute, as
defined in Section 3.1.19 hereof, is applicable to any of MegaWorld, its
subsidiaries, divisions, and affiliates, the Common Stock, the Merger, or any of
the other transactions contemplated by this Agreement.
3.2.21 BROKERS AND FINDERS. Each of MegaWorld, its
subsidiaries, divisions, and affiliates has not employed any broker or finder or
incurred any liability for any fee or commission to any broker, finder, or
intermediary in connection with the transactions contemplated hereby.
3.2.22 REGISTRATION AND LISTING AND OTHER SECURITIES MATTERS.
MegaWorld has the ability to become a reporting company, with the filing of its
Form 10Q Report, pursuant to the federal Securities Exchange Act of 1934, as
amended, and to become a nationally listed NASDAQ company. MegaWorld intends to
make such a filing as soon as it qualifies and asserts that it is not currently
in violation of any state or federal securities law, order, rule, or regulation,
and has not been in such violation for at least the last twenty four (24)
months.
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3.2.23 LIMITED RELIANCE. MegaWorld represents, warrants,
acknowledges, and confirms that, except for representations and warranties of
TBS and CDMP expressly contained herein or in the TBS Disclosure Schedule,
MegaWorld has relied on no representations or warranties by either of TBS or
CDMP, whether oral or written, express or implied, in any decision related to
this Agreement, including without limitation the execution of this Agreement.
Further, MegaWorld represents, warrants, acknowledges, and confirms that certain
Directors of MegaWorld have been privy to certain confidential information
regarding certain technology and associated product(s) ("Blast Guard Technology"
herein) sometimes referred to as "Blast Guard," whose patent rights are owned by
JoyVer, Inc., an entity owned and controlled by CDMP. While acknowledging this
disclosure, it is acknowledged by all parties hereto that CDMP has made
presentations to MegaWorld proposing MegaWorld's funding of a separate entity to
exploit the Blast Guard Technology. However, this proposal was declined and not
funded by MegaWorld, and all parties hereto agree that the Blast Guard
Technology does not comprise any part of the consideration for this Merger; and
MegaWorld, on behalf of itself, its subsidiaries, divisions, and affiliates,
expressly acknowledges (i) that the Blast Guard Technology is not in any way a
part of the transactions contemplated herein, (ii) that TBS owns no rights of
any nature in the Blast Guard Technology, and (iii) that any such arrangement
concerning the Blast Guard Technology would be the subject of a completely
separate and distinct agreement, to be negotiated, by and between JoyVer, Inc.
and MegaWorld.
3.2.24 INSURANCE. Each of MegaWorld, its subsidiaries,
divisions, and affiliates maintains adequate property and casualty insurance,
general public liability insurance, and such other insurance as would be
maintained by a reasonable and prudent business owner in the same or similar
circumstances covering all substantial risks to which the subject entity and its
assets are exposed with reasonable foreseeability.
3.2.25 NO MISSTATEMENTS. No representation or warranty made by
any of MegaWorld, its subsidiaries, divisions, and affiliates in this Agreement,
or in any Schedule to this Agreement, or certificate delivered or deliverable
pursuant to the terms hereof, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact or omits, or will omit, to state a material fact necessary in order to make
the statements made, in light of the circumstances under which it was made, not
misleading.
3.2.26 ACKNOWLEDGMENT OF UNDERSTANDING. The Board of Directors
of MegaWorld has made an independent determination of the value to MegaWorld of
the Merger and the consideration therefor, and the arrangements herein provided
securing all performance hereunder, as provided for in Articles II and III
hereof; and after consultation with such legal, financial, and tax advisers as
deemed necessary and prudent by the Board of Directors of MegaWorld, chosen and
retained by MegaWorld in its sole discretion, with respect thereto, and after
review and discussion of independently commissioned opinions regarding the
value, legal obligations, and remedies hereunder, has determined it is in the
best interest of MegaWorld to enter into the transactions contemplated
hereunder, and does so knowingly and with full understanding and disclosure of
the potential ramifications to the continued financial security of MegaWorld
should MegaWorld or TBS Texas default on any obligations hereunder or under any
of the other Closing Documents.
3.2.27 SURVIVAL. The representations, warranties,
acknowledgments, and agreements made by MegaWorld in this Agreement shall
survive Closing.
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ARTICLE IV
COVENANTS
SEC. 4.1 COVENANTS OF TBS. TBS covenants and agrees with MegaWorld as
follows:
4.1.1 TBS shall make a good-faith effort to give MegaWorld and
MegaWorld's representatives at any and all reasonable times before Closing,
access to (i) the facilities and real property of TBS, including without
limitation its leasehold facilities, for the purpose of inspecting and
evaluating them, including without limitation evaluating the environmental
condition thereof; and (ii) all business records, contracts, purchasing records,
sales, processing, and transportation agreements, ad valorem and severance tax
records, customer xxxxxxxx, permitting files, environmental records, process
reports, and production records, to the extent such data and records are in
TBS's possession or under TBS's control and relate to the assets or business of
TBS; provided, however, TBS shall have no obligation to provide MegaWorld such
access to any data or information which TBS is contractually or legally
prohibited from providing, including without limitation personnel records
protected by rights of privacy and confidential customer information. Except as
provided in Article III hereof, TBS makes no warranty or representation as to
the correctness or completeness of any such files, data, or information
furnished by TBS, and shall have no liability therefor. MegaWorld agrees to
maintain the confidentiality of such materials, and if Closing does not occur,
promptly to return to TBS any materials furnished by TBS hereunder.
4.1.2 TBS shall, after the execution hereof, promptly notify
MegaWorld of any suit, action, or other proceeding before any court, arbitrator,
or governmental agency not previously disclosed and (i) to which TBS is made a
party, or (ii) of which TBS receives actual notice that it is likely to be made
a party, or (iii) to which any officer, director, division, subsidiary, or
affiliate is made a party, or (iv) of which TBS receives actual notice that any
officer, director, division, subsidiary, or affiliate is likely to be made a
party; and any proceeding or procedure, whether judicial, administrative, or
private, including without limitation arbitration, foreclosure, and any in rem
action, which relates to the assets of TBS or which might result in impairment
or loss of TBS's interest in any portion of or the value thereof, or which might
hinder or impede TBS's operation, development, or marketing activities.
4.1.3 After execution of this Agreement and until Closing, TBS
shall do the following:
(a) Other than such activities done in the ordinary course of
business, refrain from taking any action, without the prior written
consent of MegaWorld, to sell, dispose of, distribute, or encumber any
of the assets of TBS or to enter into any transaction, the effect of
which would be to cause a Material Adverse Effect on TBS; and
(b) Act in prudent manner from the date hereof until the
Closing Date so as to avoid, without the prior written consent of
MegaWorld, waiving any material rights under any agreements to which it
is a party which affects the business of TBS; and
(c) Maintain insurance now in force with respect to the
business and assets of TBS.
4.1.4 The TBS Financial Statements shall, prior to Closing,
but not later than September 10, 1998, be updated through August 31, 1998.
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SEC. 4.2 COVENANTS OF MEGAWORLD. MegaWorld, on behalf of itself, its
subsidiaries, divisions, affiliates, and each of them, covenants and agrees with
TBS as follows:
4.2.1 MegaWorld, its subsidiaries, divisions, and affiliates
shall form TBS Texas as a validly existing corporation duly organized and in
good standing under the laws of the State of Texas, with the power and authority
to take part in the Closing as herein provided.
4.2.2 MegaWorld, its subsidiaries, divisions, and affiliates
shall make a good-faith effort to give TBS, CDMP, their representatives, and any
of them, at any and all reasonable times before Closing, access to (i) the
facilities and real property of MegaWorld, its subsidiaries, divisions, and
affiliates, including without limitation their leasehold facilities, for the
purpose of inspecting and evaluating them, including without limitation
evaluating the environmental condition thereof; and (ii) all business records,
contracts, purchasing records, sales, processing, and transportation agreements,
ad valorem and severance tax records, customer xxxxxxxx, permitting files,
environmental records, process reports, and production records, to the extent
such data and records are in the possession or under the control of any of
MegaWorld, its subsidiaries, divisions, and affiliates and relate to the assets
or business of any of MegaWorld, its subsidiaries, divisions, and affiliates;
provided, however, MegaWorld, its subsidiaries, divisions, and affiliates shall
have no obligation to provide TBS, CDMP, their representatives, and any of them,
such access to any data or information which MegaWorld, its subsidiaries,
divisions, and affiliates are contractually or legally prohibited from
providing, including without limitation personnel records protected by rights of
privacy and confidential customer information. Except as provided in Article III
hereof, MegaWorld, its subsidiaries, divisions, and affiliates make no warranty
or representation as to the correctness or completeness of any such files, data,
or information furnished by MegaWorld, its subsidiaries, divisions, and
affiliates, and shall have no liability therefor. TBS, CDMP, their
representatives and each of them, agree to maintain the confidentiality of such
materials, and if Closing does not occur, promptly to return to MegaWorld, its
subsidiaries, divisions, and affiliates any materials furnished by MegaWorld,
its subsidiaries, divisions, and affiliates hereunder.
4.2.3 MegaWorld, its subsidiaries, divisions, and affiliates
shall, promptly notify TBS of any suit, action, or other proceeding before any
court, arbitrator, or governmental agency not previously disclosed and (i) to
which any of MegaWorld, its subsidiaries, divisions, and affiliates is made a
party, or (ii) of which any of MegaWorld, its subsidiaries, divisions, and
affiliates receives actual notice that it is likely to be made a party, or (iii)
to which any officer, director, division, subsidiary, or affiliate is made a
party, or (iv) of which any of MegaWorld, its subsidiaries, divisions, and
affiliates receives actual notice that any officer, director, division,
subsidiary, or affiliate is likely to be made a party; and any proceeding or
procedure, whether judicial, administrative, or private, including without
limitation arbitration, foreclosure, and any in rem action, which relates to the
assets of any of MegaWorld, its subsidiaries, divisions, and affiliates or which
might result in impairment or loss of any of MegaWorld's, its subsidiaries',
divisions', and affiliates' interest in any portion of or the value thereof, or
which might hinder or impede MegaWorld's, its subsidiaries', divisions', and
affiliates' operation, development, or marketing activities.
4.2.4 MegaWorld shall, prior to Closing, commission
independent legal, financial, and/or tax advisors to investigate, as provided in
Section 3.2.26 hereof.
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4.2.5 After execution of this Agreement and until Closing,
MegaWorld, its subsidiaries, divisions, and affiliates shall do the following:
(a) Other than such activities done in the ordinary course of
business, refrain from taking any action, without the prior written
consent of CDMP, to sell, dispose of, distribute, or encumber any of
the assets of MegaWorld, its subsidiaries, divisions, and affiliates,
or enter into any transaction, the effect of which would be to cause a
Material Adverse Effect, as defined in Section 3.1.1, on any of
MegaWorld, its subsidiaries, divisions, and affiliates; and
(b) Act in prudent manner from the date hereof until the
Closing Date so as to avoid, without the prior written consent of TBS,
waiving any material rights under any agreements to which it is a party
affecting the business of MegaWorld, its subsidiaries, divisions, and
affiliates; and
(c) Maintain insurance now in force with respect to the
business and assets of MegaWorld, its subsidiaries, divisions, and
affiliates; and
(d) Continue diligently with the preparation of all documents
necessary for filing for national listing with NASDAQ, and continue
diligently to take all actions necessary for qualification as a
nationally listed NASDAQ company.
4.2.6 MegaWorld shall file as soon as it qualifies for its
Form 10Q in compliance with federal securities regulations.
4.2.7 MegaWorld, on behalf of itself, its subsidiaries,
divisions, and affiliates, shall use best-efforts to achieve those certain
expectations and milestones described in Section 3.2.14 hereof.
4.2.8 SURVIVAL. The covenants of this Section 4.2 shall
survive Closing.
ARTICLE V
DEFAULT AND REMEDIES
SEC. 5.1 EVENTS OF DEFAULT HEREUNDER.
5.1.1 DEFAULT BY MEGAWORLD. The following events shall each be
an "event of default of MegaWorld" for purposes of this instrument:
(a) Failure in the performance by MegaWorld of any obligation
hereunder or the violation by MegaWorld of any provision
hereof.
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(b) The occurrence of an event of default of any one or more of
MegaWorld, TBS Texas, and the subsidiaries, divisions, and
affiliates of either of them, under the terms and conditions
of any of the Closing Documents, beyond the applicable period
of grace, if any.
(c) If any representation or warranty made by or on behalf of
MegaWorld, or by or on behalf of any division, subsidiary, or
affiliate of MegaWorld, in, under, or pursuant to this
Agreement or any of the Closing Documents, or in any other
document or documents executed in connection therewith, or in
any documents made at any time available before Closing by or
for MegaWorld, its divisions, subsidiaries, or affiliates, to
CDMP or TBS under Section 3.2 or Section 4.2 or otherwise
reviewed by CDMP in the course of investigating the financial,
business, or regulatory status of MegaWorld, its divisions,
subsidiaries, and affiliates.
(d) The occurrence, prior to Closing, of any act or omission by,
for, or regarding any of MegaWorld, its divisions,
subsidiaries, or affiliates, which constitutes a material
violation of the securities law, order, rule, or regulation of
any state or of the United States, whether or not such act or
omission be the act or omission of any issuer, broker or
dealer, insider, officer, director, or shareholder, or any
other interested party.
(e) A material portion of the assets of any one or more of
MegaWorld, TBS Texas, and the subsidiaries, divisions, and
affiliates of either of them, shall be seized or taken by any
governmental or similar authority, or any order of attachment,
garnishment, or any other writ shall be issued, or any other
lawful creditor's remedy shall be exercised or attempted to be
exercised, with respect thereto.
(f) If any of MegaWorld, its divisions, subsidiaries, or
affiliates, or any Required Shareholder, or any surety or
guarantor for any of them shall (a) be adjudicated a bankrupt
or insolvent, (b) seek, consent to, or not contest the
appointment of a receiver or trustee for itself or for all or
any part of its property, (c) file a petition seeking relief
under the bankruptcy, arrangement, reorganization, or other
debtor relief laws of the United States or any state or any
other competent jurisdiction, (d) make a general assignment
for the benefit of its creditors, or (e) admit in writing its
inability to pay its debts as they mature.
(g) If either (a) any creditor or obligee files a petition putting
any of MegaWorld, its divisions, subsidiaries, or affiliates,
or any Required Shareholder, or any surety or guarantor for
any of them in involuntary bankruptcy, or (b) a court of
competent jurisdiction enters an order, judgment, or decree
appointing a receiver or trustee for any of them, or for all
or any part of its property, and (c) such petition, order,
judgment, or decree shall not be and remain dismissed or
stayed within a period of fifteen (15) days after its entry.
(h) The title of a material portion of the assets of any one or
more of MegaWorld, TBS Texas, and the subsidiaries, divisions,
and affiliates of either of them, or any substantial part
thereof shall become the subject matter of litigation which
would or might, in CDMP's opinion, upon final determination
result in substantial impairment or loss of the security CDMP
may have for the obligations owed CDMP hereunder, or under any
of the Closing Documents, which are secured under any of the
Closing Documents, and upon notice by CDMP to the obligor
hereunder or under any of the Closing Documents such
litigation is not dismissed within thirty (30) days of such
notice,
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(i) Omitted
(j) Omitted
(k) Omitted.
In the event that an event of default has occurred and is not cured within the
cure period, if any provided therefor hereunder, then MegaWorld shall be in
default for all purposes hereunder, and CDMP may exercise any remedy hereunder.
5.1.2 DEFAULT BY TBS. The following events shall each be an
"event of default of TBS for purposes of this instrument:
(a) Failure in the performance by TBS of any obligation hereunder
or the violation by TBS of any provision hereof.
(b) The occurrence of an event of default of TBS or CDMP under the
terms and conditions of any of the Closing Documents, beyond
the applicable period of grace, if any.
(c) If any representation or warranty made by or on behalf of TBS
pursuant to this Agreement or any of the Closing Documents, or
in any other document or documents executed in connection
therewith, to MegaWorld under Section 3.1 or Section 4.1.
5.1.3 NO DEFAULT OF CDMP. No act or omission related to this
Agreement or any transaction contemplated hereby shall be a default of CDMP,
except for an act or omission which constitutes a default of CDMP under the
MegaWorld Employment Agreement. It is understood and agreed that all acts and
omissions of CDMP related to this Agreement are the acts and omissions of TBS,
for purposes of this Section 5.1.3.
SEC. 5.2 NOTICE OF DEFAULT. In the event any Party considers that
another Party is not at any time in compliance with the terms and conditions of
this agreement (other than an obligation to pay money), the complaining Party
shall endeavor to notify the other Party of the facts relied upon as
constituting a breach hereof; provided, however, that failure to notify of a
possible default shall not be a default, nor shall such failure interfere with,
hinder, impede, or prevent the exercise of any right or remedy hereunder.
SEC. 5.3 CURE PERIODS. Unless provided for in this Section 5.3, there
shall be a 30 day period for cure of default by MegaWorld, as defined in Section
5.1.1, and for cure of default by TBS, as defined in Section 5.1.2, unless the
nature of the default is such that it would be impossible to cure in any length
of time.
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SEC. 5.4 REMEDIES FOR DEFAULT.
5.4.1 Each Party shall have all of the rights and remedies
provided for in this agreement and in any other agreements between Party and
each other Party including without limitation the Closing Documents, and all
rights and remedies available at law and in equity, all of which shall be
cumulative, including, in the case of CDMP, without limitation the right to take
possession of the collateral under the MegaWorld Security Agreement, the
MegaWorld Pledge Agreement, the TBS Texas Security Agreement, the TBS Texas Deed
of Trust, and any other Closing Document, or any of the same, with or without
process of law, and, in this connection, to enter any premises, without breach
of the peace, where the collateral is located to remove the same, to render it
unusable, or to dispose of the same on said premises and, in this connection, to
notify any one or more account debtors on the accounts constituting a part of
the collateral and to require any of such account debtors to make payment
directly to CDMP on such terms and conditions as CDMP, in his sole discretion,
deems appropriate, or to require, at CDMP's discretion, any such account debtors
to direct payments into a bank lockbox for handling by CDMP. Any public sale of
any of the collateral after repossession shall be held only after public notice
of no less than five (5) days, and shall be held in a commercially reasonable
manner. MegaWorld hereby waives any requirement for public notice of more than
five (5) days for any such sale and hereby agrees that five (5) days is a
reasonable period for notice.
5.4.2 Delay by a Party in invoking a remedy hereunder shall
not waive the remedy or the right to invoke the same, but shall merely
constitute a temporary forbearance. The failure of a Party to enforce any term
or condition or to exercise any rights hereunder shall not constitute a waiver
of the right in the future to enforce all of the terms and conditions hereof and
to exercise any rights hereunder, whether similar or dissimilar to any rights
previously waived or not previously enforced. It is understood by MegaWorld that
CDMP shall have the right, but not the obligation, from time to time temporarily
to forbear from invoking any remedy or remedies provided for herein, and
MegaWorld wishes to encourage such forbearance; therefore, MegaWorld covenants
that no such forbearance shall be interpreted as a waiver of any remedy, and
MegaWorld expressly agrees that after any such forbearance, for no matter how
long, CDMP may invoke any remedy or remedies provided for herein.
SEC. 5.5 ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement shall be settled by decision of a panel of three (3)
neutral arbitrators to be selected pursuant to the Commercial Arbitration Rules
of the American Arbitration Association. The venue of any such arbitration shall
be in Houston, Xxxxxx County, Texas, U.S.A., and the arbitration shall be
conducted pursuant to the rules of said Association.
ARTICLE VI
INDEMNIFICATIONS
SEC. 6.1 Notwithstanding anything herein to the contrary, each of TBS
Texas and MegaWorld agrees to assume from and after Closing any and all
obligations and responsibility which TBS and CDMP, or either of them, may have
under applicable agreements or governmental laws, orders, rules, and regulations
concerning the operation and business of TBS, including without limitation all
obligations to Compass Bank, and each of TBS Texas and MegaWorld agrees to
defend, indemnify, and hold harmless TBS and CDMP and their respective officers,
directors, agents, employees, affiliated companies, heirs, successors, and
assigns from and against any and all loss, cost, risk, and expense arising
directly or indirectly, whether before or after Closing, from the failure, or
alleged failure, by TBS Texas and MegaWorld, or either of them, to comply with
any applicable governmental laws, orders, rules, and regulations, or failure to
comply with any obligations, terms, or conditions of any contract, obligation,
or agreement of TBS.
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SEC. 6.2 In addition to Section 6.1 above, MegaWorld agrees to defend,
indemnify, and hold harmless CDMP, his agents, personal representatives, heirs,
successors, and assigns from and against all losses, costs, claims, demands,
suits, liability, and expense with respect to TBS which arise out of or relate
to the ownership or operation of the assets of TBS by TBS Texas and MegaWorld,
or either of them, or which in any manner relate to the condition of the
premises and equipment for any event which may occur or condition which may
arise from and after the Closing.
SEC. 6.3 Each below-signing Director of MegaWorld, together with each
of MegaWorld, its subsidiaries, divisions, and affiliates agrees to defend,
indemnify, and hold harmless CDMP, his agents, personal representatives, heirs,
successors, and assigns from and against all losses, costs, claims, demands,
suits, liability, and expense, whatsoever, known or unknown, which arise out of
or relate to, directly or indirectly, the governance or operation of, or the
raising of capital for or by any of MegaWorld, its subsidiaries, divisions, and
affiliates, whether through the use of market makers or otherwise, for any event
which may occur or condition which may arise from and prior to Closing,
including without limitation any liability or responsibility from or for any
misrepresentation or omission of a material fact in the sale or transfer of any
security, such as, but not limited to shares of stock of MegaWorld.
SEC. 6.4 The indemnifications contained in this Article VI shall
survive Closing, and shall continue in full force and effect for a period of
four (4) years after the latest to occur of either (i) final payment in full of
all indebtedness incurred by TBS to Compass Bank and unpaid at Closing, or (ii)
the latest date on which a payment is due on such indebtedness under the loan
documents, subject to any extensions, modifications, renewals, and
rearrangements.
ARTICLE VII
RISK OF LOSS
SEC. 7.1 CALAMITOUS EVENTS. If prior to Closing, any of the following
events ("Calamitous Events") occur, TBS and CDMP, or either of them, may elect
to terminate this Agreement. The Calamitous Events are as follows:
(a) Omitted
(b) Should any default occur under the Agreement dated April
21, 1998, by and between MegaWorld, Inc., and Xxxxxxx Xxxxxxxx.
SEC. 7.2 CASUALTY LOSS. If, prior to Closing, any assets of TBS having
aggregate value equal to or in excess of $1,000,000.00 shall be destroyed by
fire or other casualty ("Casualty Loss"), regardless of whether covered by
insurance, MegaWorld may elect to terminate this Agreement. If this Agreement is
not so terminated, the Consideration shall be adjusted downward in an amount
equal to the loss resulting from Casualty Loss. TBS and CDMP shall be entitled
to any insurance proceeds paid or payable as a result of such pre-Closing
Casualty Loss. The risk of loss of the assets of TBS shall pass from TBS to TBS
Texas at Closing.
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and Total Building Systems, Inc. CDMP's Initial: /s/ CDM
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ARTICLE VIII
CONDITIONS TO CLOSING
SEC. 8.1 TBS CONDITIONS. The obligations of TBS at the Closing are
subject, at the option of TBS, to the satisfaction at or prior to Closing of the
following conditions:
8.1.1 All representations and warranties of MegaWorld
contained in this Agreement shall be true in all material respects at and as of
Closing as if such representations and warranties were made at and as of the
Closing Date, and MegaWorld shall have preformed and satisfied all material
agreements in all material respects required by this Agreement to be performed
and satisfied by MegaWorld at or prior to Closing.
8.1.2 No suit, action, or other proceeding brought by a party
other than TBS or MegaWorld shall be pending or threatened, and no order shall
have been entered by any court or governmental agency having jurisdiction over
the parties or the subject matter of this contract that restrains or prohibits
the Merger contemplated by this Agreement and which remains in effect at the
Closing Date.
8.1.3 MegaWorld shall have taken all action necessary and
appropriate to amend its Certificate of Incorporation and its Bylaws, as
necessary, to (i) obtain authorization of the shares of stock to be issued
hereunder and authorization of the issuance thereof in compliance herewith, and
(ii) terminate the authority to issue Class A shares of MegaWorld Common Stock.
8.1.4 MegaWorld shall commission independent legal, financial,
and/or tax advisors to investigate, as provided in Section 3.2.26 hereof.
8.1.5 MegaWorld shall have executed, acknowledged, and
delivered, as appropriate, to TBS all Closing Documents described in Section 9.3
hereof.
8.1.6 Omitted.
8.1.7 Omitted
8.1.8 Omitted
SEC. 8.2 MEGAWORLD CONDITIONS. The obligations of MegaWorld at the
Closing are subject, at the option of MegaWorld, to the satisfaction at or prior
to Closing of the following conditions:
8.2.1 All representations of TBS contained in this Agreement
shall be true in all material respects at and as of Closing as if such
representations were made at and as of the Closing Date, and TBS shall have
preformed and satisfied all material agreements in all material respects
required by this Agreement to be performed and satisfied by TBS at or prior to
Closing.
8.2.3 All necessary third-party consents and assignments, or
similar agreements which affect the obligations of TBS, shall have been
obtained.
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8.2.4 There shall have occurred no adverse material change to
the financial position, as reflected in the unaudited financial statements of
Total Business Systems, Inc., dated March 31, 1998.
8.2.5 TBS shall have executed, acknowledged, and delivered, as
appropriate, to MegaWorld all Closing Documents described in Section 9.3 hereof.
ARTICLE IX
CLOSING
SEC. 9.1 CLOSING DATE. Unless the parties hereto mutually agree
otherwise in writing, and subject to the conditions stated in this Agreement,
the consummation of the Merger and related transactions contemplated hereby
(herein called the "Closing") shall be held on or before November 15, 1998. The
date Closing actually occurs is herein called the "Closing Date".
SEC. 9.2 PLACE OF CLOSING. Closing shall be held in the offices of TBS
in Houston, Xxxxxx County, Texas, or at such other place as TBS and MegaWorld
may agree in writing.
SEC. 9.3 CLOSING DOCUMENTS.
9.3.1 The Closing Documents are listed in Exhibit A hereto.
9.3.2 Those Closing Documents listed in Schedule A-1 of
Exhibit A shall be presented, in initial draft form, by TBS to MegaWorld no
later than fourteen (14) days before Closing; and on or before seven (7) days
before Closing, MegaWorld shall deliver to TBS in writing its objections, if
any, to the initial drafts of such Closing Documents.
9.3.3 Those Closing Documents listed in Schedule A-2 of
Exhibit A shall be presented, in initial draft form, by TBS to MegaWorld no
later than seven (7) days before Closing; and on or before four (4) days before
Closing, MegaWorld shall deliver to TBS in writing its objections, if any, to
the initial drafts of such Closing Documents.
9.3.4 Those Closing Documents listed in Schedule A-3 of
Exhibit A shall be presented, in initial draft form, by TBS to MegaWorld no
later than seven (7) days before the filing of the Articles of Incorporation of
TBS Texas with the Texas Secretary of State; and within three (3) days
thereafter, MegaWorld shall deliver to TBS in writing its objections, if any, to
the initial drafts of such Closing Documents.
9.3.5 Those Closing Documents listed in Schedule A-4 of
Exhibit A shall be fully executed and presented by TBS to MegaWorld no later
than fourteen (14) days before Closing; and within five (5) days thereafter,
MegaWorld shall deliver to TBS in writing its objections, if any, to such
Closing Documents.
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9.3.6 As to each Closing Document to which objections are not
timely delivered to TBS by MegaWorld, as required in this Article IX, MegaWorld
shall be deemed, for all purposes hereunder, to have accepted the initial draft
of that Closing Document. In the event that MegaWorld makes timely and proper
objection to a Closing Document, the Parties shall negotiate diligently and in
good faith to reach agreement on the final form of that Closing Document so that
the final form is agreed upon prior to or at Closing (or in the case of the
Closing Documents listed in Schedule A-3 of Exhibit A, the final form of each is
agreed upon within seven (7) days after the initial draft is delivered to
MegaWorld, in the case of Closing Documents listed in Schedule A-4, the final
form of each is agreed upon and a revised Closing Document executed in the
agreed form before Closing), failing which either Party may cancel the Closing.
SEC. 9.4 CLOSING OBLIGATIONS. At Closing, the following events shall
occur, each being a condition precedent to the other, and each being deemed to
have occurred simultaneously with the others.
9.4.1 TBS shall accomplish the following:
(i) Execute and cause its shareholders to execute the Plan of
Merger and deliver the same to MegaWorld.
(ii) Execute and deliver to MegaWorld the Articles of Merger.
(iii) Acknowledge the TBS Disclosure Schedule as true and
correct through the Closing Date.
(iv) Executing and delivering any other Closing Documents
required hereunder to be signed by TBS at Closing.
9.4.2 MegaWorld shall:
(i) Issue and deliver to TBS Texas the Closing Shares.
(ii) Execute and deliver to TBS Texas the MegaWorld Promissary
Note.
(iii) Execute the Plan of Merger and deliver the same to TBS.
(iv) Execute and deliver to TBS the Articles of Merger.
(v) Execute and deliver to CDMP the Employment Agreement.
(vi) Issue and deliver to CDMP the Employment Shares.
(vii) Execute and deliver to TBS Texas the MegaWorld
Promissory Note.
(viii) Execute and deliver to CDMP the MegaWorld Security
Agreement.
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(ix) Execute and deliver to CDMP the MegaWorld Guaranty
Agreement.
(x) Execute and deliver to CDMP the MegaWorld Pledge
Agreement.
(xi) Execute and deliver to CDMP the TBS Texas Shareholders'
Agreement.
(xii) Acknowledge the MegaWorld Disclosure Schedule as true
and correct through the Closing Date.
9.4.3 TBS Texas shall:
(i) Endorse, assign, and deliver to M&J the MegaWorld
Promissary Note.
(ii) Endorse, assign, and deliver to M&J the Execution Shares.
(iii) Assume and acknowledge the TBS Employment Agreement.
(iv) Execute the Plan of Merger and deliver the same to TBS.
(v) Execute and deliver to TBS the Articles of Merger.
(vi) Execute and deliver to CDMP the TBS Texas Security
Agreement.
(vii) Execute and deliver to CDMP the TBS Texas Guaranty
Agreement.
(viii) Execute and deliver to CDMP the TBS Texas Deed of
Trust.
(ix) Execute and deliver to CDMP the TBS Texas Shareholders'
Agreement.
(x) Execute and deliver to CDMP the TBS Texas Assumption
Agreement.
(xi) Execute and deliver to CDMP the TBS Texas Indemnification
Agreement.
9.4.3 CDMP shall:
(i) As a shareholder of TBS, execute and deliver to TBS Texas
the Plan of Merger.
(ii) As a shareholder of TBS, execute and deliver to TBS Texas
the Articles of Merger.
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(iii) Execute and deliver to MegaWorld the MegaWorld
Employment Agreement
(iv) Execute and deliver to TBS Texas the TBS Texas
Shareholders' Agreement.
(v) Omitted
9.4.4 Required Shareholders shall:
(i) Execute and deliver to MegaWorld the MegaWorld Shareholder
Voting Agreement.
9.5 In the event of any conflict between the terms of this
Acquisition/Merger Agreement and any of the closing documents then the terms of
this Acquisition/Merger Agreement shall prevail.
ARTICLE X
OBLIGATIONS AFTER CLOSING
SEC. 10.1 FEES AND EXPENSES. MegaWorld shall pay all sales taxes, if
any, occasioned by the merger of the corporations. MegaWorld shall pay all
documentary, filing, and recording fees required in connection with the
formation, creation, and registration of TBS Texas; filing of registration
statements, if any, required under the Securities Act; and filing of the
Articles of Merger. Ad valorem or other property taxes for 1998, not delinquent
at the time of Closing, and attributable to any property of TBS, if any, shall
be paid by TBS Texas.
SEC. 10.2 FURTHER ASSURANCES. After Closing, MegaWorld and TBS shall
execute, acknowledge, and deliver or cause to be executed, acknowledged, and
delivered, such instruments and take such other action as may be necessary or
advisable to carry out their obligations under this Agreement and under any
document, certificate, or other instruments delivered pursuant hereto.
SEC. 10.3 FINANCIAL DISCLOSURES; ACCOUNTING. Within forty-five (45)
days after the end of each calender quarter, MegaWorld and TBS Texas shall
deliver to CDMP an accurate, itemized statement reflecting the current financial
position of the respective businesses.
SEC. 10.4 AUDIT.
10.4.1 CDMP, upon notice in writing to TBS Texas, shall have
the right to audit TBS Texas' accounts and records for any calender year within
the twenty-four (24) month period following the end of such calender year. TBS
Texas shall bear no portion of the CDMP's audit cost incurred under this Section
10.4 unless agreed to by TBS Texas. The audits shall not be conducted more than
once each year without prior approval of TBS Texas and shall be made at the
expense of CDMP.
10.4.2 TBS Texas shall reply in writing to an audit report
within forty-five (45) days after receipt of such report.
Page 40 MegaWorld's Initial: /s/ ICR
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SEC. 10.5 RELEASE OF SECURITY INTERESTS. In the event of no default by
MegaWorld and TBS Texas hereunder, CDMP shall release MegaWorld and TBS Texas,
respectively, from the MegaWorld Security Agreement TBS Texas Security Agreement
(as provided in Sections 2.3.4(b) and 2.3.8(d) hereof), MegaWorld Pledge
Agreement (2.3.4(c) hereof), and TBS Texas Deed of Trust (2.3.8(e) hereof), but
shall not release the MegaWorld Guaranty Agreement and TBS Texas Guaranty
Agreement (as provided in Sections 2.3.2 and 2.3.5 hereof), at the earlier of
(i) timely payment in full by MegaWorld of the $8,000,000.00 under Section 2.1.3
hereof, or (ii) one year after delivery of all shares due in lieu of the
$8,000,000.00, or any unpaid portion thereof, under Section 2.1.3 hereof.
SEC. 10.6 NATIONAL LISTING AND OTHER SECURITIES MATTERS. MegaWorld
shall use its best efforts to file its Form 10Q in compliance with federal
securities regulations.
SEC. 10.7 DILIGENT PURSUIT OF MILESTONES. Section 3.2.14 hereof sets
out certain measurements of progress and success, or lack thereof, for sale of
timeshare units in Castello Torre Xxxxx and for sale of minutes of long distance
time by ITS Telephony, Inc. MegaWorld shall continue diligently and without
delay to pursue those goals, failure to reach which shall be a default
hereunder.
SEC. 10.8 WARRANTY AGAINST CERTAIN OCCURRENCES. Omitted
SEC. 10.9 RESTRICTIONS. Other than restrictions imposed by SEC Rule
145, all shares of MegaWorld stock issued hereunder shall be without restriction
against resale, and MegaWorld shall not oppose or object to removal of such
restrictions after the statutory one-year holding period expires.
SEC. 10.10 SURVIVAL. The obligations in this Article X shall survive
the Closing.
ARTICLE XI
TERMINATION OF AGREEMENT
SEC. 11.1 ALLOWED TERMINATION. This Agreement and the transactions
contemplated hereby may be terminated by Party under any provision hereof
allowing that Party to terminate if the conditions precedent required by such
provision are met, including without limitation failure of a condition of
Closing required by that Party under Article VII hereof.
SEC. 11.2 TERMINATION FOR CERTAIN EVENTS.
11.2.1 Should any legal action be initiated or taken by any
current officer or Director or shareholder of MegaWorld, as of July 20, 1998, or
by any future officer or Director or shareholder of MegaWorld, contesting any of
the actions contained or contemplated by this Agreement.
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ARTICLE XII
MISCELLANEOUS
SEC. 12.1 EXHIBITS. All Exhibits which are, or may be, attached to this
Agreement are to be considered to be incorporated herein by reference as if
fully set forth at length.
SEC. 12.2 NOTICES. Any notice under or by reason of this agreement
shall be in writing and shall be effective upon delivery to the party to whom it
is intended or upon either (a) the mailing thereof, by depositing the same in a
depository for the U.S. Postal Service, or successor thereof, enclosed in a
proper mailing wrapper addressed to the party for whom it is intended, via
certified or registered mail, postage prepaid, to the address for that party
stated above or such subsequent address for that party established by notice
hereunder, or (b) the depositing thereof with a commercial delivery service, so
wrapped and addressed, with the charges arranged to be paid by shipper, or (c)
the transmission thereof by telecopier or facsimile machine, so long as a
confirmation copy is mailed to the addressee within three (3) days of completion
of the transmission. The addresses of the parties for purposes of notice shall
be the addresses set out herein for the respective parties, subject to notice,
as herein provided, of change of such address.
SEC. 12.3 AMENDMENTS. This Agreement may not be amended except by an
instrument in writing signed by all parties hereto.
SEC. 12.4 ASSIGNMENT. Neither TBS nor MegaWorld may assign their
respective rights or obligations hereunder prior to Closing with the prior
written consent of the other party. Subject to the foregoing, this Agreement
shall be binding upon the parties hereto and their respective successors and
assigns; and nothing contained in this Agreement, express or implied, is
intended to confer upon any other person or entity any benefits, rights, or
remedies.
SEC. 12.5 ANNOUNCEMENTS. TBS and MegaWorld shall consult with each
other with regard to all press releases and other announcements issued at or
prior to Closing concerning this Agreement or the transactions contemplated
hereby and, except as may be required by applicable laws or the applicable rules
and regulations of any governmental agency or stock exchange, neither TBS nor
MegaWorld shall issue any such press release or other publicity without the
prior written consent of the other party.
SEC. 12.6 COUNTERPARTS; EXECUTION BY FACSIMILE. This Agreement may be
executed in separate counterparts, each of which is deemed to be an original and
all of which taken together constitute one and the same agreement. This
agreement and related documents may be executed and delivered by facsimile
transmission, and shall be binding upon the parties when so executed and
delivered by all parties, and the original documents will be exchanged by the
parties promptly thereafter. It is contemplated by the Parties that execution
hereof, in duplicate originals, shall be accomplished by exchange of executed
signature pages by facsimile transmission on the date of execution by MegaWorld,
with at least five (5) duplicate originals, fully executed by MegaWorld and the
Required Shareholders, to be delivered to TBS by overnight delivery within
twenty-four (24) hours of the exchange of signature pages by facsimile
transmission, and with all but two (2) of such duplicate originals executed by
TBS and the remaining Parties and returned to MegaWorld on or before Wednesday,
August 26, 1998, and if such exchange of signature pages so occurs on August 20,
1998, then notwithstanding anything herein to the contrary, this Agreement shall
be effective from and as of such exchange of signature pages, with the exchange
of executed originals to be purely ministerial.
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and Total Building Systems, Inc. CDMP's Initial: /s/ CDM
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SEC. 12.7 GOVERNING LAW AND VENUE. This Agreement shall be governed by,
and interpreted, construed, and enforced in accordance with, the laws of the
State of Texas. This Agreement is entered into and executed in Houston, Xxxxxx
County, Texas, and each party hereto hereby submits to the jurisdiction,
personal or otherwise, and venue of the federal and state courts sitting in
Houston, Xxxxxx County, Texas.
SEC. 12.8 ENTIRE AGREEMENT. It is the desire and intent of the parties
to provide certainty as to their future rights and undertakings herein. The
parties to this Agreement have incorporated all representations, warranties,
covenants, commitments, and understandings on which they have relied in entering
into this Agreement, and neither party makes any additional covenants or other
commitments, not expressly set forth herein, to the other concerning its future
action. Accordingly, this Agreement (i) constitutes the entire Agreement and
understanding between the parties and there are no promises, representations,
conditions, or terms related thereto other than those expressly set forth
herein, and (ii) supersedes all previous undertakings, agreements, and
representations between the parties, whether written or oral, with respect to
the subject matter hereof. No modification of, addition to, or waiver of any
provisions of this Agreement shall be binding upon either party hereto unless
the same shall be in writing duly executed by a duly authorized representative
of the parties hereto.
SEC. 12.9 WAIVER. No express or implied waiver by any party of any
right or remedy with respect to a default by any other party under any provision
of this Agreement shall be deemed, interpreted, or construed as a waiver of any
right or remedy with respect to any other default under the same or any other
provision hereof. Delay in the exercise of any right hereunder shall not be
construed as waiver of such right or remedy.
SEC. 12.10 CONSTRUCTION. Whenever the context requires, the singular
shall include the plural, the plural shall include the singular, the whole shall
include any part thereof, and any gender shall include both genders. "Person" as
used herein shall include any individual, corporation, limited liability
company, limited or general partnership, professional corporation, or other
entity recognized under the laws of the State of Texas. The paragraph headings,
captions, and titles contained in this Agreement are solely for purposes of
reference only and shall not limit, expand, or otherwise affect the construction
or interpretation of this Agreement or any provision hereof.
SEC. 12.11 COSTS. Except as expressly provided otherwise herein, each
party shall pay its own costs, including without limitation fees and expenses of
its own counsel and accountants, in connection with the performance hereunder.
SEC. 12.12 SURVIVAL. The provisions of this Merger Agreement shall
survive the Closing, with respect to obligations hereunder which, by their
terms, are to be performed after Closing or as expressly provided herein;
provided that in the event of conflict between this Agreement and any of the
Closing Documents, this Agreement shall control.
SEC. 12.13 SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
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SEC. 12.14 SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, personal representatives, transferees,
successors, and assigns.
SEC. 12.15 JOINDER BY SPOUSE OF CDMP. Xxxx X. XxXxxxx is the spouse of
CDMP, and joins in the execution of this Agreement for the purpose of (i)
acknowledging that CDMP's rights and privileges as a Shareholder of TBS, and his
shares of stock in TBS are and always have been subject to the sole management,
control, and disposition of CDMP, and (ii) authorizing the transfer hereunder of
any community claim she may have in the TBS Stock and other property, rights,
and privileges described herein, and (iii) ratifying this agreement.
SEC. 12.16 JOINDER BY DIRECTORS AND REQUIRED SHAREHOLDERS OF MEGAWORLD.
The below-signing Directors of MegaWorld and Required Shareholders of MegaWorld,
join in the execution of this Agreement, as Directors of MegaWorld and as
Required Shareholders, for the purposes of (i) Section 6.3 hereof, (ii)
acknowledging the binding effect of this Agreement upon MegaWorld and upon the
Required Shareholders, and (iii) ratifying this agreement.
SEC. 12.17 JOINDER BY JOYVER INVESTMENTS, L.L.C. JoyVer Investments,
L.L.C. joins in the execution of this Agreement for the purposes of (i)
acknowledging the binding effect of this Agreement upon MegaWorld, and (ii)
ratifying this agreement.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement under seal as if done so on the date first above written.
MEGAWORLD, INC.
(CORPORATE SEAL)
By: /s/ Xxxxx X. Roll
--------------------------------
Print Name: Xxxxx X. Roll
Authorized Officer: President
MEGAWORLD, INC., MEGAWORLD, INC.
By: /s/ Xxxxxx Xxxxxxxxx By: /s/ Xxxxx X. Roll
----------------------------- --------------------------------
XXXXXX XXXXXXXXX XXXXX X. ROLL
Director and Required Shareholder Director and Required Shareholder
MEGAWORLD, INC., MEGAWORLD, INC.
By: /s/ Xxxxxxx Xxxxxxxx By: /s/ Xxxxx X. Xxxx
----------------------------- --------------------------------
XXXXXXX XXXXXXXX XXXXX X. XXXX
Director and Required Shareholder Director and Required Shareholder
MEGAWORLD, INC.,
By: /s/ Xxxxxx Xxxx
---------------------------------
XXXXXX XXXX
Director
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TOTAL BUILDING SYSTEMS, INC.
(CORPORATE SEAL)
By: /s/ Xxxxxxx X. XxXxxxx
--------------------------------
Print Name:
Authorized Officer
/s/ Xxxxxxx X. XxXxxxx /s/ Xxxxxxx X. XxXxxxx agent
--------------------------------- --------------------------------
XXXXXXX X. XxXXXXX XXXX X. XxXXXXX
/s/ Xxxxxxx X. XxXxxxx agent /s/ Xxxxxxx X. XxXxxxx agent
--------------------------------- --------------------------------
XXXX XXXXX XxXXXXX XXXX XXXX XxXXXXX
JOYVER INVESTMENTS, L.L.C. JOYVER INVESTMENTS, L.L.C.
By: /s/ Xxxxxxx X. XxXxxxx By: /s/ Xxxxxxx X. XxXxxxx, agent
----------------------------- --------------------------------
XXXXXXX X. XxXXXXX, Member XXXX X. XxXXXXX, Member
[w7 tbs]mw merger agmnt (rlm) 8-20-98
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EXHIBIT A
Sched. Closing Document References in Agreement
------ ---------------- -----------------------
SCHEDULE X-0
X-0 Plan of Merger 1.2
A-1 Articles of Merger 1.2
A-1 MegaWorld Promissory Note 2.1.3, 2.1.5
A-1 MegaWorld Security Agreement 2.3.4(b), 5.4.1, 10.5
A-1 MegaWorld Pledge Agreement 2.3.4(c), 5.4.1, 10.5
A-1 TBS Texas Guaranty Agreement 2.3.5, 2.1.3, 2.3.8, 2.8.3(c), (d), and (e)
X-0 XXX Xxxxx Assumption Agreement 2.3.6, 2.3.8(a)
A-1 TBS Texas Indemnification Agreement 2.3.6, 2.3.8(b)
A-1 TBS Texas Security Agreement 2.3.8(d), 5.4.1, 10.5
A-1 TBS Texas Deed of Trust 2.3.8(e), 5.4.1, 10.5
SCHEDULE X-0
X-0 XXX Xxxxx Shareholders' Agreement 2.3.1, 2.1.4, 2.3.7, 2.3.8
A-2 MegaWorld Guaranty Agreement 2.3.2, 2.3.4(a), 2.3.4(b), 10.5
A-2 Omitted
A-2 Omitted
A-2 Castello Xxxxx funding Agreement
SCHEDULE A-3
A-3 Articles of Incorporation of TBS Texas 1.1.3, 3.1.5, 9.3.4
A-3 Bylaws of TBS Texas 1.1.3, 3.1.5
SCHEDULE A-4
A-4 TBS Employment Agreement 1.3, 2.3.8(d), 2.3.8(e), 3.1.12
SCHEDULE A-5
A-5 List of MegaWorld Shareholders as of 11/10/98
