1
Communications World International, Inc.
Form 8-K
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
IAC ACQUISITION CORPORATION,
APPLICATION CONSULTANTS, INC.,
COMMUNICATIONS WORLD INTERNATIONAL, INC.
AND
XXXXXXX X. XXXXXXX,
XXXXXX X. XXXXXXXX,
XXXXXX XXXXX XXXXXXX,
XXXXXXX X. XXXXX
AND
XXXXXX X. XXXXXXXXXXXXXX
DATED AS OF SEPTEMBER 30, 2000
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TABLE OF CONTENTS
PAGE
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1. DEFINITIONS.................................................................................................1
1.1 GENERAL DEFINITIONS......................................................................................1
2. MERGER......................................................................................................5
2.1 TERMS OF MERGER..........................................................................................5
(a) MERGER; SURVIVING COMPANY.............................................................................5
(b) THE EFFECTIVE DATE AND TIME...........................................................................6
2.2 PURCHASE PRICE AND TERMS.................................................................................6
2.3 MERGER CERTIFICATES......................................................................................6
2.4 FURTHER ASSURANCES.......................................................................................6
2.5 BONUS COMPENSATION.......................................................................................6
2.6 WORKING CAPITAL ADJUSTMENT...............................................................................7
2.7 WORKING CAPITAL ADVANCES.................................................................................7
2.8 CONVERSION OF STOCK......................................................................................8
3. REPRESENTATIONS AND WARRANTIES OF SELLER....................................................................8
3.1 TRANSFER OF AND TITLE TO STOCK...........................................................................8
3.2 ORGANIZATION; QUALIFICATION..............................................................................8
3.3 AUTHORITY RELATIVE TO THIS AGREEMENT.....................................................................9
3.4 CAPITALIZATION...........................................................................................9
3.5 CONSENTS AND APPROVALS..................................................................................10
3.6 NO VIOLATIONS...........................................................................................10
3.7 TITLE TO AND CONDITION OF ASSETS AND PROPERTY...........................................................10
3.8 INVENTORY...............................................................................................10
3.9 DISTRIBUTORS AND SUPPLIERS..............................................................................10
3.10 PRODUCT WARRANTIES...................................................................................11
3.11 INVESTIGATION OR LITIGATION..........................................................................11
3.12 TAXES................................................................................................11
3.13 NO BROKERS...........................................................................................11
3.14 ACCOUNTS.............................................................................................11
3.15 INSURANCE............................................................................................12
3.16 CONTRACTS; ORAL COMMITMENTS; DEFAULTS................................................................12
3.17 CORPORATE MATTERS....................................................................................12
3.18 PERMITS..............................................................................................12
3.19 COMPLIANCE WITH LAWS.................................................................................12
3.20 CORPORATE NAME.......................................................................................12
3.21 DISCLOSURE...........................................................................................12
3.22 EMPLOYEE MATTERS.....................................................................................13
3.23 PLANS................................................................................................13
3.24 TRANSACTIONS WITH AFFILIATES.........................................................................14
3.25 FINANCIAL STATEMENTS.................................................................................14
3.26 UNDISCLOSED LIABILITIES..............................................................................14
3.27 LEASES...............................................................................................14
3.28 REAL PROPERTY........................................................................................15
3.29 ENVIRONMENTAL MATTERS................................................................................15
(a) COMPLIANCE GENERALLY.................................................................................15
(b) CLAIMS...............................................................................................15
(c) CERTAIN ENVIRONMENTAL LIABILITIES....................................................................15
(i)
3
(d) OPERATIONS...........................................................................................15
(e) LIABILITY FOR OTHERS.................................................................................16
3.30 INTELLECTUAL PROPERTY................................................................................16
3.31 BANK ACCOUNTS AND POWERS OF ATTORNEY.................................................................16
3.32 KNOWLEDGE OF SELLER..................................................................................17
3.33 INSPECTION DOES NOT AFFECT WARRANTIES................................................................17
3.34 RIGHTS AND ASSETS....................................................................................17
3.35 ABSENCE OF CERTAIN CHANGES...........................................................................17
3.36 BOOKS AND RECORDS....................................................................................18
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER................................................................18
4.1 ORGANIZATION............................................................................................18
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT....................................................................19
4.3 CONSENTS AND APPROVALS..................................................................................19
4.4 NO BROKERS..............................................................................................19
4.5 NO VIOLATIONS...........................................................................................19
4.6 CWII COMMON STOCK.......................................................................................19
5. ADDITIONAL AGREEMENTS......................................................................................20
5.1 CONDUCT OF THE COMPANY..................................................................................20
5.2 FORBEARANCES BY SELLER..................................................................................20
5.3 NO SOLICITATION.........................................................................................21
5.4 INVESTIGATION OF THE COMPANY............................................................................21
5.5 AGREEMENT TO CONSUMMATE.................................................................................22
5.6 APPROVAL OF THIRD PARTIES...............................................................................22
5.7 AGREEMENT REGARDING BROKERS.............................................................................22
5.8 NOTICE..................................................................................................22
5.9 DISCLOSURE SCHEDULES....................................................................................23
5.10 FILINGS..............................................................................................23
5.11 TAXES................................................................................................23
5.12 AUDITED FINANCIALS...................................................................................24
5.13 REGISTRATION RIGHTS AGREEMENT........................................................................24
5.14 OBSERVER RIGHTS......................................................................................24
5.15 RELEASE OF SHARES OF CWII COMMON STOCK...............................................................24
5.16 TAX TREATMENT........................................................................................25
5.17 PERSONAL GUARANTIES..................................................................................25
6. CONDITIONS PRECEDENT TO CLOSING............................................................................25
6.1 GENERAL CONDITIONS......................................................................................25
(a) NO INJUNCTION........................................................................................25
(b) PROCEEDINGS..........................................................................................26
(c) NONCOMPETITION AGREEMENT.............................................................................26
6.2 CONDITIONS TO CLOSING IN FAVOR OF SELLER................................................................26
(a) REPRESENTATIONS AND WARRANTIES OF PURCHASER..........................................................26
(b) PURCHASER'S OFFICERS' CERTIFICATE....................................................................26
(c) GOVERNMENTAL CONSENTS, AUTHORIZATIONS, ETC...........................................................26
(d) CLOSING CONSIDERATION................................................................................26
(e) WARRANT AGREEMENTS...................................................................................26
(f) OPINION OF COUNSEL...................................................................................26
(g) LITIGATION...........................................................................................27
(h) NO ADVERSE CHANGE....................................................................................27
(i) DELIVERY OF DOCUMENTS/ACCEPTANCE OF DISCLOSURE SCHEDULES.............................................27
(j) SELLER'S INVESTIGATION...............................................................................27
(k) APPROVAL.............................................................................................27
(ii)
4
(l) CERTIFICATE OF AUTHORITIES...........................................................................27
(m) CERTIFICATE OF MERGER................................................................................27
(n) PLEDGE AGREEMENT.....................................................................................27
(o) OTHER MATTERS........................................................................................28
6.3 CONDITIONS TO CLOSING IN FAVOR OF PURCHASER.............................................................28
(a) REPRESENTATIONS AND WARRANTIES OF SELLER.............................................................28
(b) GOVERNMENTAL CONSENTS, AUTHORIZATIONS, ETC...........................................................28
(c) SHAREHOLDER RELEASE..................................................................................28
(d) SELLER'S CERTIFICATE.................................................................................28
(e) OPINION OF COUNSEL...................................................................................28
(f) LEGISLATION..........................................................................................28
(g) LITIGATION...........................................................................................28
(h) NO ADVERSE CHANGE....................................................................................29
(i) DELIVERY OF DOCUMENTS/ACCEPTANCE OF DISCLOSURE SCHEDULES.............................................29
(j) THIRD PARTY CONSENTS.................................................................................29
(k) PURCHASER'S INVESTIGATION............................................................................29
(l) APPROVAL.............................................................................................29
(m) CERTIFICATE OF AUTHORITIES...........................................................................29
(n) CORPORATE RECORDS AND BOOKS OF ACCOUNT...............................................................29
(o) BANK ACCOUNTS........................................................................................30
(p) CERTIFICATE OF MERGER................................................................................30
(q) SUBSCRIPTION AGREEMENT...............................................................................30
(r) PLEDGE AGREEMENT.....................................................................................30
(s) AFFILIATE DEBT.......................................................................................30
(t) OTHER MATTERS........................................................................................30
7. CLOSING AND TERMINATION....................................................................................30
7.1 CLOSING DATE............................................................................................30
7.2 TERMINATION.............................................................................................30
7.3 EFFECT OF TERMINATION...................................................................................31
7.4 EXTENSION; WAIVER.......................................................................................31
8. SURVIVAL AND INDEMNIFICATION...............................................................................31
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES..............................................................31
8.2 INDEMNITY...............................................................................................32
8.3 INDEMNITY...............................................................................................32
8.4 INDEMNIFICATION NOTICE..................................................................................33
8.5 LIMITATIONS OF LIABILITY................................................................................34
9. GENERAL PROVISIONS AND OTHER AGREEMENTS....................................................................34
9.1 NOTICES.................................................................................................34
9.2 FEES AND EXPENSES.......................................................................................35
9.3 INTERPRETATION..........................................................................................35
9.4 COUNTERPARTS............................................................................................36
9.5 MISCELLANEOUS...........................................................................................36
9.6 PUBLICITY...............................................................................................36
9.7 INVALID PROVISIONS......................................................................................36
9.8 BINDING EFFECT..........................................................................................36
9.9 CAPTIONS................................................................................................36
9.10 ATTORNEYS' FEES......................................................................................36
9.11 JURISDICTION AND VENUE...............................................................................37
9.12 ASSIGNABILITY........................................................................................37
9.13 ENTIRETY.............................................................................................37
9.14 AMENDMENT............................................................................................37
9.15 GOVERNING LAW........................................................................................37
(iii)
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LIST OF EXHIBITS
Exhibit A - Form of Noncompetition Agreement
Exhibit B - Form of Pledge Agreement
Exhibit C - Form of Subscription Agreement
Exhibit D - Form of Warrant Agreement
Exhibit E - Form of Shareholder Release
Exhibit F - Form of Opinion of Counsel for Seller
Exhibit G - Form of Opinion of Counsel for Purchaser
LIST OF SCHEDULES
Schedule 2.2 Allocation of Purchase Price
Schedule 2.6 Closing Balance Sheet
Schedule 3.4 Capitalization
Schedule 3.5 Consents and Approvals
Schedule 3.7 Title to and Condition of Assets and Property
Schedule 3.8 Inventory
Schedule 3.9 Distributors and Suppliers
Schedule 3.10 Express Product Warranties and Guaranties
Schedule 3.11 Investigation or Litigation
Schedule 3.14 Accounts
Schedule 3.15 Insurance
Schedule 3.16 Contracts
Schedule 3.18 Permits
Schedule 3.22 Employee Matters
Schedule 3.23 Employee Benefit Plans
Schedule 3.24 Transactions with Affiliates
Schedule 3.25 Financial Statements
Schedule 3.27 Leases
Schedule 3.28 Real Property
Schedule 3.30 Intellectual Property
Schedule 3.31 Bank Accounts and Powers of Attorney
Schedule 3.35 Certain Changes
(iv)
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AGREEMENT AND PLAN OF MERGER AND
REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "Agreement")
is made as of September 30, 2000, by and among IAC ACQUISITION CORPORATION, a
Colorado corporation ("Purchaser"), COMMUNICATIONS WORLD INTERNATIONAL, INC., a
Colorado corporation ("CWII"), APPLICATION CONSULTANTS, INC., a Colorado
corporation (the "Company"), and XXXXXXX X. XXXXXXX, XXXXXX X. XXXXXXXX, XXXXXX
XXXXX XXXXXXX, XXXXXXX X. XXXXX and XXXXXX X. XXXXXXXXXXXXXX (the foregoing
individuals, collectively, "Seller"), such individuals being all of the
shareholders of the Company.
In consideration of the mutual covenants and agreements contained
herein, the parties covenant and agree as follows:
1. DEFINITIONS
1.1 GENERAL DEFINITIONS. Unless otherwise stated in this Agreement, the
following terms shall have the following meanings:
"ACCOUNTS": All accounts receivable of the Company and other rights of the
Company to payment for services rendered, including, without limitation, those
which are not evidenced by instruments or whether or not they have been earned
by performance or have been written off or reserved against as a bad debt or
doubtful account in any financial statement, together with all instruments
representing any of the foregoing, and all rights, title, security and
guaranties in favor of the Company with respect to any of the foregoing.
"AFFILIATE": Any Person that, directly or indirectly, controls, or is controlled
by or under common control with, another Person. For the purposes of this
definition, "control" (including the terms "controlled by" and "under common
control with"), as used with respect to any Person, means the power to direct or
cause the direction of the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities or by contract or
otherwise.
"BEST KNOWLEDGE": Those matters of which either the Company or Seller has or
should have knowledge after (i) suitable inquiries of the appropriate
responsible employees or agents of the Company or Seller, and (ii) a suitable
review of appropriate corporate records and documents of the Company or Seller
in such parties actual or constructive possession or to which it has access.
"CLOSING": As defined in Section 7.1 hereof.
"CLOSING BALANCE SHEET": As defined in Section 2.5 hereof.
"CLOSING DATE": As defined in Section 7.1 hereof.
"CODE": The Internal Revenue Code of 1986, as amended.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 1
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"CREDITOR SHAREHOLDERS": Xxxxxx Xxxxx Xxxxxxx, Xxxxxxx X. Xxxxx and Xxxxxx X.
Xxxxxxxxxxxxxx.
"CURRENT ASSET VALUE": The Current Assets of the Company as of a specified date,
less Current Liabilities of the Company as of a specified date.
"CURRENT ASSETS": The Company's current assets as of a specified date as
determined on an accrual basis in accordance with GAAP, but excluding any assets
which represent obligations owing from Seller or its Affiliates to the Company.
"CURRENT LIABILITIES": The Company's current liabilities as of a specified date
as determined on an accrual basis in accordance with GAAP.
"CWII": Communications World International, Inc., a Colorado corporation.
"CWII COMMON STOCK": The Common Stock, no par value per share, of CWII.
"DISCLOSURE SCHEDULES": The package of Disclosure Schedules to this Agreement
delivered by Seller to Purchaser prior to the date hereof (and subsequently
supplemented and amended) which are approved by Purchaser and incorporated by
reference to the Section of this Agreement to which each such schedule relates.
The disclosure of an item in a Disclosure Schedule or under a heading in a
Disclosure Schedule corresponding to that particular section or subsection of
this Agreement shall not be deemed a disclosure under (i) any other item of such
Disclosure Schedule, (ii) any other Disclosure Schedules or (iii) any other
section or subsection thereof. In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Schedules
hereto (other than an exception expressly set forth as such in the schedules in
relation to a specifically identified representation or warranty), those in this
Agreement shall control.
"NONCOMPETITION AGREEMENT": The Noncompetition Agreement substantially in the
form of Exhibit "A" attached hereto.
"ENVIRONMENTAL REQUIREMENTS": All federal, state, foreign and local laws,
statutes, codes, rules, regulations, ordinances, judgments, orders, decrees and
the like of any Governmental Body, and all obligations concerning public health
and safety, worker health and safety, or pollution or protection of the
environment, including all those relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal, distribution,
labeling, testing, processing, discharge, release, Threatened release, control
or cleanup of any hazardous or otherwise regulated materials, substances or
wastes, chemical substances or mixtures, pesticides, pollutants, contaminants,
toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation.
"FINANCIAL STATEMENTS": As defined in Section 3.25 hereof.
"GAAP": Generally Accepted Accounting Principles.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 2
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"GOVERNMENTAL BODY": Any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency, authority or
instrumentality, domestic or foreign.
"INDEMNIFICATION CLAIM": As defined in Section 8.4 hereof.
"INDEMNIFICATION NOTICE": As defined in Section 8.4 hereof.
"INDEMNITOR": As defined in Section 8.4 hereof.
"INTELLECTUAL PROPERTY": All domestic and foreign patents, patent applications,
registered trademarks and service marks owned by the Company, registered
copyrights owned by the Company and computer software programs owned by or
licensed to the Company.
"LIABILITIES" OR "LIABILITY": All claims, liabilities, debts, indebtedness and
obligations, whether asserted or unasserted, absolute, liquidated, contingent,
accrued or otherwise.
"LIEN": All mortgages, deeds of trust, claims, liens, security interests,
pledges, leases, conditional sale contracts, rights of first refusal, options,
charges, liabilities, obligations, agreements, easements, rights-of-way, powers
of attorney, limitations, reservations, restrictions and other encumbrances of
any kind.
"MATERIAL ADVERSE EFFECT": Any change (individually or in the aggregate) in the
general affairs, management, business, goodwill, results of operations,
condition (financial or otherwise), assets, liabilities or prospects (whether or
not the result thereof would be covered by insurance) that will or can
reasonably be expected to result in a cost, expense, charge, Liability, loss of
revenue or diminution in value equal to or greater than $10,000.00, in the case
of the Company, or $100,000.00, in the case of Purchaser.
"MERGER": shall mean the merger of the Company with and into the Purchaser in a
transaction qualifying as a tax-free reorganization under Section 368(a)(1)(A)
of the Code.
"OBSERVER PERIOD": As defined in Section 5.14 hereof.
"OPERATIVE DOCUMENTS": All agreements, instruments, documents, schedules,
exhibits and certificates executed and delivered by or on behalf of Seller, the
Company or Purchaser at or before the Closing pursuant to this Agreement.
"OPINION OF PURCHASER'S COUNSEL": The Opinion of Counsel in the form of Exhibit
"G" attached hereto.
"OPINION OF SELLER'S COUNSEL": The Opinion of Counsel in the form of Exhibit "F"
attached hereto.
"ORDER": Any order, writ, injunction, decree, judgment, award or determination
of any Governmental Body.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 3
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"PERMITS": All permits, authorizations, certificates, approvals, registrations,
variances, exemptions, rights-of-way, franchises, privileges, immunities,
grants, ordinances, licenses and other rights of every kind and character (a)
under any (1) federal, state, local or foreign statute, ordinance or regulation,
(2) Order or (3) contract with any Governmental Body or (b) granted by any
Governmental Body.
"PERSON": An individual, partnership, joint venture, corporation, company,
limited liability company, bank, trust, unincorporated organization,
Governmental Body or other entity or group.
"PLANS": As defined in Section 3.23 hereof.
"PLEDGE AGREEMENT": The Pledge Agreement in the form of Exhibit "B" attached
hereto.
"PROCEEDING": Any action, order, claim, suit, proceeding, litigation,
investigation, inquiry, review or notice.
"PURCHASE PRICE": As defined in Section 2.2 hereof.
"PURCHASER INDEMNITEES": As defined in Section 8.2 hereof.
"SELLER INDEMNITEES": As defined in Section 8.3 hereof.
"SHAREHOLDER RELEASE": The Shareholder Release in the form of Exhibit "E"
attached hereto.
"STOCK": One Million (1,000,000) shares of common stock, no par value per share,
of the Company, which shares represent all of the issued and outstanding shares
of capital stock of the Company.
"SUBSCRIPTION AGREEMENT": The Subscription Agreement in the form of Exhibit "C"
attached hereto.
"SUBSIDIARY" OR "SUBSIDIARIES": with respect to any corporation shall mean any
other corporation of which at least a majority of the securities having by their
terms ordinary voting power to elect a majority of the Board of Directors of
such other corporation is at the time directly or indirectly owned or controlled
by such first corporation, or by such first corporation and one or more of its
Subsidiaries.
"SUMMARY PLAN DESCRIPTIONS": The summary plan descriptions and summary of
material modifications that include the information required by Section 102(b)
of the Employee Retirement Income Security Act of 1974, as amended, and that are
written in a manner calculated to be understood by the average Plan participant,
and that are sufficiently accurate and comprehensive to reasonably apprise such
participants and beneficiaries of their rights and obligations under the Plans.
"SURVIVING CORPORATION": As defined in Section 2.1(a) hereof.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 4
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"TAXES": Any federal, state, local or foreign income, sales, excise, real or
personal property or other taxes, assessments, fees, levies, imposts, duties,
deductions or other charges of any nature whatsoever (including, without
limitation, interest and penalties) imposed by any law, rule or regulation.
"THIRD PARTY CONSENTS": As defined in Section 5.6 hereof.
"THREATENED": Any matter or thing will be deemed to have been "Threatened" when
used herein with respect to any party if that party has received notice, in
writing, from the Person to whom the threat is attributable, or such Person's
agents, which makes specific reference to and clearly identifies the matter or
thing being threatened.
"THRESHOLD AMOUNT": As defined in Section 8.5(a) hereof.
"TRANSACTION" OR "TRANSACTIONS": The sale and purchase of the Stock and the
performance of the other covenants and transactions described in this Agreement.
"TRANSACTION EXPENSES": The expenses incurred in connection with the
preparation, negotiation, execution and performance of this Agreement and the
Transactions, including all fees and expenses of counsel and representatives.
"WARRANT AGREEMENT": The Warrant Agreement in the form attached hereto as
Exhibit "D".
Other defined terms shall have the meanings ascribed to such terms
elsewhere herein.
2. MERGER
2.1 TERMS OF MERGER. Subject to the terms and conditions set forth
herein, on the Closing Date, the Company shall be merged into Purchaser as
described below.
(a) MERGER; SURVIVING COMPANY. In accordance with the
applicable laws of the State of Colorado, upon the effectiveness of the
Merger the separate existence of the Company shall thereupon cease, and
Purchaser, as the surviving corporation in the Merger (the "Surviving
Corporation"), shall continue its corporate existence under the laws of
the State of Colorado. The Surviving Corporation shall possess all of
the rights, privileges, immunities, powers, franchises and authority,
whether of a public or of a private nature, and be subject to all
restrictions, disabilities and duties of each of the constituent
corporations, and all the rights, privileges, immunities, powers,
franchises and authority of each of the constituent corporations, and
all assets and property of every description, real, personal, and
mixed, and every interest therein, wherever located, and all debts or
other obligations belonging or due to either of the constituent
corporations on whatever account, as well as stock subscriptions and
all other choses in action or every other interest of or belonging to
each of such corporations shall be vested in the Surviving Corporation;
and all property, rights, privileges, immunities, powers, franchises
and authority, and all other interests, shall be thereafter as
effectually the property of the
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 5
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Surviving Corporation as they were of the constituent corporations; but
all rights of creditors and all Liens upon any property of either of
the constituent corporations shall be preserved unimpaired, and the
Surviving Corporation shall be liable for the obligations of each of
the constituent corporations and any claim existing, or action or
proceeding pending, by or against either of the constituent
corporations may be prosecuted to judgment with right of appeal, as if
the Merger had not taken place.
(b) THE EFFECTIVE DATE AND TIME. The Certificate of Merger
shall be filed with and recorded by the Secretary of State of Colorado
concurrently with the Closing, and the Merger shall be effective at
midnight, local Denver time, on the date of such filings.
2.2 PURCHASE PRICE AND TERMS. At the Closing, subject to the terms and
conditions of this Agreement and in consideration of the Merger, Purchaser shall
pay to Seller the sum of TWO MILLION SIX HUNDRED TWENTY FIVE THOUSAND and no/100
Dollars ($2,625,000.00) (the "Purchase Price"). The Purchase Price shall be paid
at Closing by delivering to Seller at Closing (a) 1,750,000 restricted shares of
CWII Common Stock, and (b) the Warrant Agreement representing the right to
acquire 250,000 shares of CWII Common Stock. The certificates representing the
shares of CWII Common Stock to be received at Closing shall contain a
restrictive legend with respect to the requirements for the transfer thereof by
Seller. Purchaser shall hold the certificates representing 250,000 of such
shares of CWII Common Stock for the benefit of Seller pursuant to the Pledge
Agreement, which shares shall serve as collateral to secure Seller's obligations
set forth in this Agreement, and such shares shall be released to Seller
according to the provisions set forth in Section 5.15 hereof. The Purchase Price
shall be allocated among Seller in accordance with Schedule 2.2. Purchaser, the
Company, Seller and CWII each acknowledge and agree that the consideration
described in this Section 2.2, and the assumption by Purchaser by operation of
law of the Company's liabilities described in the Closing Balance Sheet, is the
exclusive consideration for the Merger.
2.3 MERGER CERTIFICATES. At the Closing, in addition to such other
instruments as shall be reasonably required in order to fully consummate the
Merger, Seller and the Company shall deliver to Purchaser articles of merger,
and such other documents, all in form and substance satisfactory to Purchaser
and its legal counsel, as shall be necessary to consummate the Merger.
2.4 FURTHER ASSURANCES. At the Closing, and at all times thereafter as
may be reasonably necessary, Seller and the Company shall execute and deliver to
Purchaser such instruments of transfer as shall be reasonably necessary or
appropriate to vest in Purchaser title of the type specified herein to the
assets of the Company and to otherwise comply with the terms, purposes and
intent of this Agreement.
2.5 BONUS COMPENSATION. In satisfaction of the Company's obligations to
the Creditor Shareholders with respect to bonus compensation, the Creditor
Shareholders shall receive the working capital payments, if any, payable
pursuant to Section 2.6 and Section 2.7 below. The working capital payments made
pursuant to Section 2.6 and Section 2.7 below shall
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 6
12
be allocated among the Creditor Shareholders in accordance with Schedule 2.5.
Additionally, CWII hereby agrees that the non-Creditor Shareholders may, within
ninety (90) days after the Closing Date, by written notice to CWII, transfer
Warrants from themselves to the Creditor Shareholders to the extent that the
Sellers determine among themselves that the working capital payments are not
sufficient to satisfy the Company's obligations with respect to bonus
compensation.
2.6 WORKING CAPITAL ADJUSTMENT. At Closing, Seller shall prepare and
deliver to Purchaser a balance sheet of the Company as of the Closing Date
prepared in accordance with GAAP (and for these purposes, GAAP shall include (i)
all projects that have been completed but not billed, and (ii) all contracts
under which the Company has the right as of Closing to xxxx for the materials
provided thereunder), and in form and substance reasonably satisfactory to
Purchaser (the "Closing Balance Sheet"). Within sixty (60) days following the
Closing, Purchaser's independent certified public accountant shall make all
adjustments to the Closing Balance Sheet determined to be necessary by the
accountant and shall deliver a copy of the adjusted Closing Balance Sheet to
Seller. Purchaser shall have the opportunity after Closing to review and make
comments to the Closing Balance Sheet and shall have full and complete access to
all work papers used by Seller in connection with the preparation thereof. If
Seller disagrees with the adjusted Closing Balance Sheet prepared by Purchaser's
accountant, Seller shall give written notice thereof to Purchaser within twenty
(20) business days after Seller's receipt of the adjusted Closing Balance Sheet,
specifying in reasonable detail the nature and extent of such dispute. Ninety
(90) days after Closing, Purchaser shall pay the Creditor Shareholders the
amount, if any, by which the Current Asset Value at Closing is positive (less
any advances paid by Purchaser to the Creditor Shareholders pursuant to Section
2.7 below); provided, however, that the payment from Purchaser to the Creditor
Shareholders pursuant to this Section 2.6 shall not exceed $289,963.02. Any such
payment shall occur by a cash payment from Purchaser to the Creditor
Shareholders. If Seller and Purchaser cannot resolve any dispute over the
Closing Balance Sheet or any adjustment to the Purchase Price within forty-five
(45) days following the Closing, either Seller or Purchaser may request that the
Denver office of any national accounting firm not regularly employed by
Purchaser (or its Affiliates) or Seller resolve such dispute, with the decision
of such accounting firm to be final and binding on the parties. The costs of
such accounting firm shall be borne by the party that does not substantially
prevail in the dispute. The Closing Balance Sheet available at Closing shall be
attached hereto as Schedule 2.6 hereto and such attachment shall be revised to
reflect any adjustments subsequently made thereto in accordance with this
Section 2.6.
2.7 WORKING CAPITAL ADVANCES. Notwithstanding any provisions contained
in Section 2.5 above to the contrary, prior to the final determination of the
Closing Balance Sheet pursuant to Section 2.6 above, Purchaser shall advance to
the Creditor Shareholders the following payments after the amount of Accounts
contained on the Closing Balance Sheet set forth below beside such payment are
actually collected by Purchaser:
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 7
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Aggregate Amount of Collected Accounts
Payment on Closing Balance Sheet
------- --------------------------------------
1. $ 50,000.00 $ 100,000.00
2. $ 50,000.00 $ 600,000.00
3. $ 50,000.00 $1,000,000.00
----------- -------------
Total $150,000.00
Payments ===========
If, after the Closing Balance Sheet is finally determined pursuant to
Section 2.6 above, the Current Asset Value at Closing is not positive by at
least the amount advanced to the Creditor Shareholders under this Section 2.7,
then the Sellers shall be jointly and severally obligated to reimburse Purchaser
for the amount of such advances up to an amount equal to the lesser of (i) the
amount by which such Current Asset Value at Closing is less than $150,000.00,
and (ii) the aggregate amount of such advances.
2.8 CONVERSION OF STOCK. As of the effective date and time of the
Merger, each share of Stock issued and outstanding immediately prior to the
effective date and time, and all rights in respect thereof, shall forthwith
cease to exist and be converted into the right to receive 1.75 shares of CWII
Common Stock and warrants to purchase 0.25 shares of CWII Common Stock in
accordance with this Agreement and the Warrant Agreements.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and the Company hereby jointly and severally represent and
warrant to Purchaser that, except as set forth in the Disclosure Schedules, the
following are true and correct as of the date of this Agreement and will be true
and correct (without limitation) through the Closing Date, regardless of what
investigations, if any, Purchaser shall have made prior hereto or prior to
Closing; provided, however, that the representations and warranties set forth in
Sections 3.1, 3.3, 3.4(b), 3.5 and 3.6 shall be made severally, and not jointly,
to the extent that they relate to facts or circumstances pertaining only to a
particular Seller:
3.1 TRANSFER OF AND TITLE TO STOCK. Seller has good and marketable
title to all shares of the Stock and is the sole record and beneficial owners
thereof. Seller has the full legal right, power, capacity and authority to enter
into this Agreement and transfer, convey and sell the Stock to Purchaser at
Closing, and upon consummation of the Merger, Seller will transfer good and
marketable title to the Stock, free and clear of all Liens.
3.2 ORGANIZATION; QUALIFICATION. The Company (a) is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its formation or existence, (b) has all requisite power and authority to own and
lease all of the properties and assets it now owns
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 8
14
and leases and to carry on its businesses as now being conducted, and (c) is
duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary.
3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company and Seller have
full power and authority (corporate and otherwise) to execute, deliver and
perform this Agreement (including, without limitation, execution, delivery and
performance of the Operative Documents to which each of them is a party) and to
consummate the Transactions. The execution and delivery by Seller and the
Company of this Agreement and the Operative Documents, and the consummation of
the Transactions, have been duly and validly authorized by the Company and
Seller and no other actions on the part of the Company and Seller are necessary
with respect thereto. This Agreement and the Operative Documents have been duly
and validly executed and delivered by the Company and Seller, and constitute the
legal, valid and binding obligations of Seller and the Company, enforceable
against them in accordance with its terms. The Company will take all corporate
action that is necessary for the Company to complete the Transactions pursuant
to this Agreement.
3.4 CAPITALIZATION.
(a) The authorized capital stock of the Company consists
solely of five million (5,000,000) shares of common stock, $0.01 par
value per share, and one million (1,000,000) shares of preferred stock,
with an unstated par value per share, of which One Million (1,000,00)
shares of common stock and no (0) shares of preferred stock are issued
and outstanding. As of the date hereof, the shares of Stock are the
only shares of capital stock of the Company outstanding. All such
outstanding shares of Stock have been duly authorized and validly
issued and are fully paid and nonassessable. There are no outstanding
options, warrants, rights, subscriptions, claims of any character,
agreements, obligations, convertible or exchangeable securities or
other commitments, contingent or otherwise, relating to the capital
stock of the Company, pursuant to which the Company is or may become
obligated to issue or exchange any share of capital stock. There is not
now nor has there ever been any Person who holds shares of capital
stock of the Company other than the Shareholders.
(b) Other than as set forth on Schedule 3.4 attached hereto,
there is no outstanding subscription, option, warrant, call, right,
agreement or commitment (including any right of conversion or exchange
under any outstanding security or other instrument) entitling any
person to purchase or otherwise acquire from Seller or the Company any
capital stock of the Company or any security convertible into or
exchangeable therefor, or any other right to acquire, any capital stock
of the Company or relating to the issuance, sale, delivery or transfer
of Stock by Seller or the Company. Other than as set forth on Schedule
3.4 attached hereto, there are no outstanding contractual obligations
of the Company to repurchase, redeem or otherwise acquire any of its
outstanding of the Company to repurchase, redeem or otherwise acquire
any of its outstanding capital stock.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 9
15
3.5 CONSENTS AND APPROVALS. Except as set forth on Schedule 3.5, the
execution, delivery and performance by Seller and the Company of this Agreement
and the Operative Documents and the consummation of the Transactions by them
requires no consent, approval, order or authorization of, action by or in
respect of, or registration or filing with, any Governmental Body or other
Person.
3.6 NO VIOLATIONS. The execution, delivery and performance of this
Agreement and the Operative Documents by Seller and the Company, the
consummation by Seller and the Company of the Transactions and compliance by
Seller and the Company with the provisions hereof does not and will not (a)
conflict with or result in any breach or violation of any provision of the
Articles of Incorporation or Bylaws of the Company, (b) result in a default, or
give rise to any right of termination, cancellation or acceleration or loss
under any of the provisions of any note, bond, mortgage, indenture, license,
trust, agreement, lease or other instrument or obligation to which Seller or the
Company are a party or by which Seller or the Company may be bound, (c) result
in the creation or imposition of any Lien on any of the property of Seller or
the Company, (d) violate any Order, statute, rule or regulation applicable to
Seller or the Company, or (e) violate any territorial restriction on the Company
or Seller or any noncompetition or similar arrangement.
3.7 TITLE TO AND CONDITION OF ASSETS AND PROPERTY. Except as
specifically set forth on Schedule 3.7, the Company has good and marketable
title to all its properties and assets (real and personal, tangible and
intangible), such properties and assets are free and clear of all Liens, and
such properties and assets are in good operating condition and a state of good
maintenance and repair and are sufficient to conduct the Company's operations
immediately prior to Closing in the ordinary course of business and consistent
with past practices.
3.8 INVENTORY. Except as set forth on Schedule 3.8, the Company has
good title to all inventory reflected on the August 31, 2000 Financial
Statements and all inventory purchased or created since the date of the August
31, 2000 Financial Statements (other than inventory disposed of since such date
in the ordinary course of business consistent with past practices), free and
clear of all Liens. The inventory is adequate for the conduct of the Company's
operations. The inventory levels are not in excess of the normal operating
requirements of the Company. The value at which the inventory is carried on the
August 31, 2000 Financial Statements reflects the normal inventory policies of
the Company and has been determined in accordance with generally accepted
accounting principles. Except as set forth on Schedule 3.8, all inventory is or
will be at Closing, located at the Company's offices at 0000 Xxxxx Xxxxx, Xxxxx
000, Xxxxxxxxxxxx, Xxxxxxxx 00000 and 0000 X. 00xx Xxxxxx, Xxxxxx, Xxxxxxxx
00000. The Company is under no obligation to repurchase any inventory previously
sold in connection with the operation of the Company.
3.9 DISTRIBUTORS AND SUPPLIERS. Except as set forth on Schedule 3.9,
the Company is not involved in any controversy with any of the distributors,
customers, or suppliers of the Company. Schedule 3.9 lists all distributors,
customers and suppliers which, as of date of the August 31, 2000 Financial
Statements and for the period then ended, accounted for five percent (5%) or
more of (i) the Company's revenues, and (ii) purchases of products, supplies,
equipment or parts used exclusively in connection with the operation of the
Company.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 10
16
3.10 PRODUCT WARRANTIES. Schedule 3.10 contains the forms of express
product and service warranties and guaranties which have been used by the
Company. Except as set forth on Schedule 3.10, the Company has not offered any
materially different forms of express product warranties and guaranties. To the
Company's and the Seller's Best Knowledge, no events have occurred or facts
exist which could result in a material increase in such product warranty
expenses.
3.11 INVESTIGATION OR LITIGATION. Except as set forth on Schedule 3.11,
there is no Proceeding pending or, to the Company's and the Seller's Best
Knowledge, Threatened against, relating to or affecting the Company. The Company
is not subject to any currently existing Proceeding by any Governmental Body.
There is no basis for the assertion of any Proceeding by any Governmental Body
or any Person regarding any violation of federal or state laws.
3.12 TAXES. All Taxes that are due and payable by the Company, other
than those presently payable without penalty or interest, have been timely paid,
and the Company has timely filed (and, through the Closing Date, will timely
file) all Tax reports and returns required by law to be filed by them. All such
Tax reports and returns are true, complete and correct in all respects with
regard to the Company for the periods covered thereby. The Company is not
delinquent in the payment of any Tax. There is no Tax deficiency asserted
against the Company, and there is no unpaid assessment, proposal for additional
Taxes, deficiency or delinquency in the payment of any of the Taxes of the
Company or any violation of any Tax law that could be asserted by any taxing
authority. There are no Tax Liens upon any properties or assets of the Company
nor has notice been given of any event which could lead to any such Lien. No
Internal Revenue Service, state or local audit, investigation or Proceeding of
the Company is pending or Threatened, and the results of any completed audits
are properly reflected in the Financial Statements. The Company has not granted
any extension to any taxing authority of the limitation period during which any
Tax Liability may be asserted. The Company has not committed any violation of
any Tax laws. All monies required for the payment of Taxes not yet due and
payable with respect to the operations of the Company through and including the
Closing Date have been approved, reserved against and entered upon the books and
the Closing Balance Sheet. All monies required to be withheld by the Company
from employees, if any, independent contractors, or others or collected from
customers for income taxes, social security and unemployment insurance taxes and
sales, excise and use taxes, and the portion of any such taxes to be paid by the
Company to governmental agencies or set aside in accounts for such purpose have
been approved, reserved against and entered upon the books and the Closing
Balance Sheet.
3.13 NO BROKERS. Seller has not employed any broker, agent, or finder
or incurred any Liability for any brokerage fees, commissions or finders' fees
in connection with the Transactions.
3.14 ACCOUNTS. Schedule 3.14 contains a complete and accurate list of
all the Company's Accounts as of September 30, 2000, showing the name of each
account debtor and the amount due from each by invoice number and date. All of
such Accounts have arisen in the ordinary course of business for services
rendered or products sold. Except as set forth on Schedule 3.14, there is no
event or condition with respect to a specific customer that will cause such
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 11
17
Accounts to not be collected in full in due course without resort to litigation
and such Accounts will not be subject to counterclaim or setoff.
3.15 INSURANCE. All the insurance policies maintained by the Company
are in full force and effect, all insurance premiums have been timely paid to
date, and no such policy will be canceled prior to Closing. A description of the
Company's insurance policies (including, without limitation, insurance providing
benefits for employees) is attached hereto as Schedule 3.15. The insurance
policies set forth on Schedule 3.15 provide adequate coverage, less deductibles,
against the risks involved in the operation of the Company.
3.16 CONTRACTS; ORAL COMMITMENTS; DEFAULTS. Schedule 3.16 sets forth a
true and correct list of all contracts and agreements of the Company (or
summaries of all oral commitments) and the Company has provided true, correct
and complete copies of such contracts and agreements to Purchaser prior to the
date hereof. There exists no breach or default under any of such contracts and
no event exists which, with the like giving of notice, passage of time, or
happening of any other event, would constitute a breach or default under such
contract.
3.17 CORPORATE MATTERS. The Board of Directors and shareholders of the
Company have approved the execution and delivery of this Agreement and the
consummation of the Transactions contemplated hereby in accordance with
applicable law.
3.18 PERMITS. Schedule 3.18 lists all Permits held by the Company. Such
Permits are valid, and neither the Company nor any Seller has received any
notice that any Governmental Body intends to cancel, terminate or not renew any
such Permit. The Company holds all licenses, franchise, permits and other
governmental authorizations required by any Governmental Body or any Order. The
Company is not being conducted, in violation of any statute, law, ordinance,
regulation, rule or Permit of any Governmental Body or any Order.
3.19 COMPLIANCE WITH LAWS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes, laws,
ordinances, regulations, rules, permits, judgments, orders or decrees applicable
to the Company or any of its properties, assets, operations and businesses, and
there does not exist any basis for any claim or default under or violation of
any such statute, law, ordinance, regulation, rule, judgment, order or decree.
3.20 CORPORATE NAME. The Company's use of the Company's corporate name
and any assumed names used by the Company, do not infringe upon the right of any
third party.
3.21 DISCLOSURE.
(a) Seller has delivered or made available to Purchaser
complete and accurate copies of all documents listed on the Disclosure
Schedules delivered as a part hereof and all other information
requested by Purchaser pursuant hereto. No representation or warranty
of Seller contained in this Agreement or any statement in the
Disclosure Schedules hereto contains any untrue statement. No
representation or warranty of Seller contained in this Agreement or
statement in the Disclosure Schedules hereto omits to state a material
fact
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 12
18
necessary in order to make the statements herein or therein, in light
of the circumstances under which they were made, not misleading.
(b) There are no facts known to Seller which have specific
application to Purchaser and which could have a Material Adverse Effect
on the Company but which has not been set forth in this Agreement or
the Disclosure Schedules hereto.
3.22 EMPLOYEE MATTERS. Schedule 3.22 contains a list of the names and
current aggregate annual cash compensation, sales compensation and other
incentive and bonus plans, agreements or arrangements and identifies the other
material benefits with respect to salaried employees, of each employee of the
Company expected to be hired by Purchaser and any employment contracts, secrecy
or confidentiality agreements, or noncompetition agreements to which the Company
is a party. Except as set forth on Schedule 3.22, no labor organization,
collective bargaining representative, or group represents or, to Seller's Best
Knowledge, claims to represent any of the Company's present employees, and
except as set for on Schedule 3.22, the Company has no collective bargaining or
employment or consulting agreements with any consultants or employees of the
Company. As set forth on Schedule 3.22, with respect to employees of the
Company, (a) there is no labor strike, work stoppage, organized slowdown, or
lockout actually pending or, to the Best Knowledge of Seller, Threatened against
or affecting the Company and no such action has been pending; (b) to the Best
Knowledge of Seller, no union organization campaign is in progress and no
question concerning representation exists; (c) the Company is in compliance in
all material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and is not engaged in any unfair labor practice; (d) there is no unfair labor
practice charge or complaint against the Company pending or, to the Best
Knowledge of Seller, Threatened before the National Labor Relations Board; (e)
there is no pending or, to the Best Knowledge of Seller, Threatened grievance
before any Governmental Body; and (f) (i) no charges with respect to or relating
to the Company are pending or, to Seller' Best Knowledge, Threatened before the
Equal Employment Opportunity Commission or any state or local agency responsible
for the prevention of unlawful employment practices; and (ii) the Company has
received no notice of the intent of any federal or other Governmental Body
responsible for the enforcement of labor or employment laws to conduct an
investigation with respect to or relating to the Company, and no such
investigation is in progress.
3.23 PLANS. Schedule 3.23 sets forth a complete and accurate
description of all employee benefit plans and all collective bargaining
agreements relating to employee benefits with respect to which the Company or
any of its predecessors contributes or is required to contribute and has or may
incur any future or contingent obligations, including, without limitation, all
plans, agreements or arrangements relating to deferred compensation, pension,
profit sharing, retirement income or other benefits, stock purchase and stock
option plans, bonuses, severance arrangements, health benefits, insurance
benefits, welfare benefits and all other material employee benefits or fringe
benefits (collectively referred to as the "Plans"). Except as set forth on
Schedule 3.23: (a) true, correct and complete copies of each Plan, all related
Summary Plan Descriptions and material employee communications, related trust
agreements or annuity contracts (or any other funding instruments), annual
reports on the Form 5500 series required to be filed with any governmental
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 13
19
agency for each Plan for the two most recent Plan years and the most recent
actuarial reports and trustee's reports relating thereto (if applicable) have
been furnished to Purchaser; (b) each Plan has been administered and operated in
accordance with its terms and applicable law, and to the extent applicable, each
Plan is "qualified" within the meaning of Section 401(a) of the Code and each
related trust is exempt from tax under Section 501(a) of the Code; (c) each
qualified Plan has been amended to conform to the requirements of all applicable
federal statutes and regulations, and no Liability under any applicable law has
been incurred with respect to any Plan; (d) all reports and disclosures relating
to such Plans required to be filed with any agency of the federal, state or
local government or distributed to employees or beneficiaries have been or will
be properly and timely filed or distributed in compliance with applicable law;
(e) the Company does not maintain and has not been maintaining a "defined
contribution plan" or has incurred any Liability with respect to such a plan;
and (f) full payment has been made of all amounts which were required under the
terms of any of the Plans to have been paid as a contribution to such Plan.
3.24 TRANSACTIONS WITH AFFILIATES. Schedule 3.24 contains a complete
and accurate description of all contracts, agreements and other arrangements
(whether written, oral, express or implied) between the Company and any
Affiliate of the Company.
3.25 FINANCIAL STATEMENTS. Attached to Schedule 3.25 are true, complete
and correct copies of the balance sheet of the Company as of September 30, 1999
and August 31, 2000, and the related statements of income, and changes in
shareholder's equity and net worth for the year and eleven (11) month period
then ended of the Company (the "Financial Statements") provided by Seller to
Purchaser. The Financial Statements are true, complete and correct, have been
prepared in conformity with generally accepted accounting principles
consistently applied, present fairly the financial position of the Company at
the respective dates indicated and do not omit to state or reflect any material
fact concerning the Company required to be stated or reflected therein or
necessary to make the statements therein not misleading, and the September 30,
1999 Financial Statements shall be accompanied by an unqualified opinion audit
report of an independent accounting firm engaged at Seller' sole cost and
expense.
3.26 UNDISCLOSED LIABILITIES. The Company does not have any Liabilities
and there are no claims against the Company for any Liabilities, except as
disclosed on the Closing Balance Sheet.
3.27 LEASES. Schedule 3.27 contains an accurate and complete list and
description of the terms of all real and personal property leases to which the
Company is a party (as lessee or lessor). Each lease set forth on Schedule 3.27
(or required to be set forth on Schedule 3.27) is in full force and effect; all
rents and additional rents due to date on each such lease have been paid; in
each case, the lessee has been in peaceable possession since the commencement of
the original term of such lease and is not in default thereunder and no waiver,
indulgence or postponement of the lessee's obligations hereunder has been
granted by the lessor; and there exists no event of default or event,
occurrence, condition or act (including the Merger) which, with the giving of
notice, the lapse of time or the happening of any further event or condition,
would become a default under such lease. The Company has not violated any of the
terms or conditions under any such lease in any material
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 14
20
respect, and, to the Best Knowledge of the Company, all of the covenants to be
performed by any other party under any such lease have been fully performed. Any
property leased by the Company is in a state of good maintenance and repair and
is adequate and suitable for the purposes for which it is presently being used.
3.28 REAL PROPERTY. Schedule 3.28 contains an accurate and complete
list of all real property owned in whole or in part by the Company and includes
the name of the record title holder thereof and a list of all indebtedness
secured by a lien, mortgage or deed of trust thereon. The Company has good and
marketable title in fee simple to all the real property specified as owned by it
on Schedule 3.28 (or required to be set forth on Schedule 3.28), free and clear
of all Liens, except as set forth on Schedule 3.28. All of the buildings,
structures and appurtenances situated on the real property listed on Schedule
3.28 (or required to be set forth on Schedule 3.28) are in good operating
condition and in a state of good maintenance and repair, are adequate and
suitable for the purposes for which they are presently being used and with
respect to each, the Company has adequate rights of ingress and egress in the
ordinary course. None of such buildings, structured or appurtenances (or any
equipment therein), nor the operation or maintenance thereof, violates any
restrictive covenant or any provision of any federal, state or local law,
ordinance, rule or regulation, or encroaches on any property owned by others.
Except as set forth on Schedule 3.28, no condemnation proceeding is pending, or
to the Best Knowledge of Seller, Threatened which would preclude or impair the
use of any such property by the Company for the purposes for which it is
currently used.
3.29 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE GENERALLY. The Company complied and is in
material compliance with all Environmental Requirements.
(b) CLAIMS. The Company has not received any claim, complaint,
citation, report or other notice regarding any liabilities or potential
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or corrective
obligations, arising under the Environmental Requirements.
(c) CERTAIN ENVIRONMENTAL LIABILITIES. The Company has not
stored, disposed of, arranged for or permitted the disposal of,
transported, handled or released any substance, including, without
limitation, any hazardous substance, pollutant, contaminant or waste,
or owned or operated any facility or property, so as to give rise to
Liabilities of the Company pursuant to the Environmental Requirements,
including, without limitation, any Liability of response costs,
corrective action, natural resources damages, personal injury, property
damage or attorneys fees.
(d) OPERATIONS. The Company has taken no action relating to
the past or present facilities, properties or operations of the Company
that will prevent, hinder or limit continued compliance with the
Environmental Requirements, give rise to any investigatory, remedial or
corrective obligations pursuant to the Environmental Requirements, or
give rise
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 15
21
to any other Liabilities pursuant to the Environmental Requirements,
including any Environmental Requirements relating to onsite or offsite
releases or threatened releases of hazardous or otherwise regulated
materials, substances or wastes, personal injury, property damages or
natural resources damage.
(e) LIABILITY FOR OTHERS. The Company has not, either
expressly or by operation of law, assumed or undertaken any Liability
or corrective or remedial obligations of any other Person relating to
Environmental Requirements.
3.30 INTELLECTUAL PROPERTY. The operation of the Company, in the
ordinary course and as presently conducted, requires no rights under
Intellectual Property other than rights related to Intellectual Property owned
by the Company and listed on Schedule 3.30. Except as set forth on Schedule
3.30, all licenses or similar agreements listed on Schedule 3.30 are in full
force and effect. Except as otherwise set forth on Schedule 3.30, with respect
to Intellectual Property which is owned by the Company, the Company owns all
right, title and interest in such Intellectual Property, including, without
limitation, exclusive rights to use and license the same to third parties.
Except as set forth on Schedule 3.30, during the past seven (7) years no claim
adverse to the interests of the Company in the Intellectual Property has been
made. To the Best Knowledge of Seller, except as set forth on Schedule 3.30, no
such claim has been Threatened, no valid basis exists for any such claim and no
person has infringed or otherwise violated the Company's rights in any of the
Intellectual Property. Neither the execution of this Agreement and the Operative
Documents nor the consummation of the Transactions will materially adversely
alter or materially impair the rights of the Company to use any of the
Intellectual Property listed on Schedule 3.30. Schedule 3.30 hereto contains a
true and complete list of all domestic and foreign patents, patent applications,
patent licenses, computer software licenses ("Software"), trade names,
trademarks, service marks, trademark registrations and applications, service
xxxx registrations and applications, and copyright registrations and
applications owned by Seller or used in the operation of its business, including
any "object" or computer code libraries and all utilities, templates, concepts,
methods, techniques, formulas, specifications, data, designs, trade secrets,
inventions, know-how, processes. The Intellectual Property set forth on Schedule
3.30 hereto is all the Intellectual Property necessary for use in, or required
for the conduct of, Seller's business as presently conducted or as presently
contemplated to be conducted in the future. Seller owns or has the right to use,
as presently being used or contemplated to be used, without payment to or
interference from, by way of claim for infringement, misappropriation or
otherwise, any third party, all Intellectual Property listed in Schedule 3.30
hereto. Seller does not have any knowledge and has no reason to believe of the
development of any conflict with the asserted rights of others with respect to
any Intellectual Property. To the Knowledge of Seller, Seller has the full right
to use the names "Application Consultant" and "APCON" and all derivations to the
full extent necessary for the conduct of its business, and Seller has not
authorized any person in any jurisdiction, either within or outside the United
States, to use such names. Seller has a valid, fully-paid license from all
required licensers for all Software owned or used by Seller.
3.31 BANK ACCOUNTS AND POWERS OF ATTORNEY. Set forth on Schedule 3.31
is an accurate and complete list showing (a) the name and address of each bank
in which the Company
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 16
22
has an account or safe deposit box, the number of any such account or any such
box and the names of all persons authorized to draw thereon or to have access
thereto, and (b) the names of all persons, if any, holding powers of attorney
from the Company and a summary statement of the terms thereof.
3.32 KNOWLEDGE OF SELLER. Where any representations or warranty
contained in this Article III is expressly qualified by reference to the Best
Knowledge of Seller, Seller, who are officers of the Company, confirm that, as
to the matters that are the subject of such representations and warranties, they
have made suitable inquiries of the appropriate responsible Company employees
and have made a suitable review of appropriate corporate records and documents
within their possession or control, and Seller who are directors of the Company
confirm that, as to matters that are the subject of such representations and
warranties, they have made a suitable review of appropriate corporate records
and documents which have been furnished to them or are otherwise within their
possession or control.
3.33 INSPECTION DOES NOT AFFECT WARRANTIES. The representations and
warranties of Seller contained in this Agreement shall in no way be abridged,
reduced, waived, be considered fulfilled or otherwise be affected by any
examination or inspection made by Purchaser at any time.
3.34 RIGHTS AND ASSETS. The Company shall have at Closing all tangible
and intangible rights and assets necessary for the Company to operate the
Company's business after Closing in the same manner as the business of the
Company was conducted prior to Closing.
3.35 ABSENCE OF CERTAIN CHANGES. Since the date of the August 31, 2000
Financial Statements, there has been no material adverse change in the assets or
liabilities, or in the results of operations of the Company, and, to the Best
Knowledge of Seller, no fact or condition (other than general economic
conditions) exists or is contemplated or Threatened which might cause such a
change in the future. Except as set forth on Schedule 3.35, since the date of
the August 31, 2000 Financial Statements, the Company has not, (a) incurred, or
assumed or become subject to, whether directly or by way of guarantee or
otherwise, any material Liability, (b) permitted any of its assets to be
subjected to any Lien, (c) sold, transferred or otherwise disposed of any
assets, except in the ordinary course of business, (d) made any material capital
expenditure, additions to property, plant or equipment or acquisition of other
property or assets or commitment therefor, (e) declared or paid any dividend or
made any distribution on any shares of its capital stock, or redeemed, purchased
or otherwise acquired any shares of its capital stock or any option, warrant or
other right to purchase or acquire any shares, (f) made any bonus or profit
sharing distribution or payment of any kind, (g) increased its indebtedness for
borrowed money or made any loan to any party, (h) written off as uncollectible
any notes or accounts receivable, (i) granted any increase in the rate of wages,
salaries, bonuses or other remuneration of any executive employee or other
employees, except in the ordinary course of business, (j) canceled or waived any
debts, claims or rights or material value, (k) made any change in any method of
accounting or auditing practice, (l) suffered any damage, destruction or loss
materially adversely affecting the properties or assets of the Company, (m) made
any change or amendment in its Articles of Incorporation or Bylaws or other
governing instruments, (n) issued or sold any of its capital stock or redemption
or otherwise, any such capital stock,
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 17
23
reclassified, split up or otherwise changed any such capital stock or granted or
entered into any options, warrants, calls or commitments of any kind with
respect thereto, (o) paid, discharged or satisfied any Liabilities, other than
in the ordinary course of business, (p) prepaid any material obligations having
a maturity of more than ninety (90) days from the date such obligation was
issued or incurred, (q) disposed of or permitted to lapse any rights to the use
of any material patent, trademark, copyright, license or other intellectual
property owned or used by it, (r) entered into any collective bargaining or
union contract or agreement, (s) incurred any material Liability required by
generally accepted accounting principles to be reflected on a balance sheet,
other than in the ordinary course of business, or (t) agreed, whether or not in
writing, to do any of the foregoing. As used in this Section 3.35 the reference
to "material" Liabilities, assets, capital expenditures or values of claims or
rights shall mean such items individually or in the aggregate in excess of
$10,000.00. The Company has not, during the one (1) year period preceding the
date of this Agreement, sold, transferred or otherwise disposed of any assets,
except in the ordinary course of business.
3.36 BOOKS AND RECORDS. The minute books and other corporate records of
the Company, as previously made available to Purchaser and its representatives,
constitute all of the minute books and other corporate records of the Company
and such corporate records of the Company and such books and records contain
accurate records of all meetings of and corporate actions or written consents by
the respective shareholders and Board of Directors of the Company and the
subsidiaries. The Company does not have any of its respective records, systems,
controls, data or information recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Company.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser and CWII jointly and severally hereby represent and warrant to Seller
that the following are true and correct as of the date of this Agreement and
will be true and correct through the Closing Date, regardless of what
investigations, if any, Seller shall have made prior hereto or prior to the
Closing:
4.1 ORGANIZATION. Purchaser and CWII (a) are both corporations duly
organized, validly existing and in good standing under the laws of the State of
Colorado, (b) have all requisite power and authority to own and lease all of the
properties and assets they now own and lease and to carry on their businesses as
now being conducted, and (c) are duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
property owned, leased or operated by them or the nature of the business
conducted by them makes such qualification necessary. CWII owns all of the
issued and outstanding capital stock of Purchaser, and neither Purchaser nor
CWII owns any securities of the Company prior to the consummation of the Merger.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 18
24
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Purchaser and CWII have full
power and authority (corporate and otherwise) to execute, deliver and perform
this Agreement (including, without limitation, execution, delivery and
performance of the Operative Documents to which each of them is a party) and to
consummate the Transactions. The execution and delivery by Purchaser and CWII of
this Agreement and the Operative Documents, and the consummation of the
Transactions, have been duly and validly authorized by Purchaser and CWII and no
other actions on the part of Purchaser and CWII are necessary with respect
thereto. This Agreement and the Operative Documents have been duly and validly
executed and delivered by Purchaser and CWII, and constitute the legal, valid
and binding obligations of Purchaser and CWII, enforceable against them in
accordance with its terms. Purchaser and CWII will take all corporate action
that is necessary for Purchaser and CWII to complete the Transactions pursuant
to this Agreement.
4.3 CONSENTS AND APPROVALS. Except as set forth in or otherwise
required by this Agreement or the Operative Documents, the execution, delivery
and performance by Purchaser of this Agreement and the consummation of the
Transactions by it requires no consent, approval, order or authorization of,
action by or in respect of, or registration or filing with, any Governmental
Body or other Person.
4.4 NO BROKERS. Purchaser has not employed any broker, agent or finder
or incurred any Liability for any brokerage fees, commissions or finders' fees
in connection with the Transactions.
4.5 NO VIOLATIONS. The execution, delivery and performance of this
Agreement and the Operative Documents by Purchaser and CWII, the consummation by
Purchaser and CWII of the Transactions and compliance by Purchaser and CWII with
the provisions hereof does not and will not (a) conflict with or result in any
breach or violation of any provision of the Articles of Incorporation or Bylaws
of Purchaser or CWII, (b) result in a default, or give rise to any right of
termination, cancellation or acceleration or loss under any of the provisions of
any note, bond, mortgage, indenture, license, trust, agreement, lease or other
instrument or obligation to which Purchaser or CWII are a party or by which
Purchaser or CWII may be bound, (c) result in the creation or imposition of any
Lien on any of the property of Purchaser or CWII, (d) violate any Order,
statute, rule or regulation applicable to Purchaser or CWII, or (e) violate any
territorial restriction on CWII or Purchaser or any noncompetition or similar
arrangement.
4.6 CWII COMMON STOCK. The CWII Common Stock to be issued pursuant to
the Merger will be, as of the Effective Time, duly authorized, validly issued,
fully paid and non-assessable. CWII has furnished or made available to each
Seller a copy of (i) CWII's Annual Report on Form 10-KSB for the period ended
April 30, 2000; (ii) Buyer's Quarterly Report on Form 10-QSB for the period
ended July 31, 2000; and (iii) all other reports filed by CWII with the
Securities and Exchange Commission (the "Commission") under the Exchange Act
since July 31, 2000 (collectively, the "SEC Reports"). The SEC Reports comply in
all material respects with the applicable Commission rules and regulations
relating thereto, and, as of the date of this Agreement, no additional filing or
amendment to any previous Commission filing is required under such rules
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 19
25
and regulations. The SEC Reports do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained therein not misleading.
5. ADDITIONAL AGREEMENTS
5.1 CONDUCT OF THE COMPANY. After the date hereof and prior to the
Closing Date, Seller shall cause the Company to conduct its operations according
to its normal course of business to preserve its business organization, keep
available the services of its employees and independent contractors, maintain
satisfactory relationships with Governmental Bodies, suppliers, customers and
all others having business relationships with the Company and continue to
service and maintain all of its respective assets in a manner consistent with
past practices. All risk of loss arising out of fire and casualty and all
Liability to third parties arising out of the operations of the Company prior to
the Closing Date shall be that of Seller, and Purchaser shall have no obligation
or Liability in connection therewith.
5.2 FORBEARANCES BY SELLER. Seller covenants that except as
contemplated by this Agreement, Seller shall not, after the date hereof and
prior to the Closing Date, without the prior written consent of Purchaser,
permit the Company to:
(a) change or amend its Articles of Incorporation or Bylaws
(or other similar documents);
(b) issue, encumber, sell or otherwise dispose of any shares
of its capital stock or any other securities (except upon the exercise
of currently outstanding options), pledge or agree to pledge any
capital stock or other securities owned by it, acquire directly or
indirectly, by redemption or otherwise, any such capital stock,
reclassify, combine or split up any such capital stock or grant or
enter into any options, warrants, calls or commitments of any kind with
respect thereto;
(c) declare, set aside or pay any dividend payable in cash,
stock or property, or make any other distribution with respect to its
capital stock or redeem or otherwise acquire any of its securities;
(d) except in the ordinary course of business, incur or assume
any debt, or assume, guarantee or otherwise become liable or
responsible for the obligations of any other person or make any loans,
advances or capital contributions to, or investments in, any other
person or entity, or grant any security interest on any properties or
assets of the Company;
(e) merge or consolidate with any other person or entity, or
organize any new subsidiary or other person or entity, acquire any
capital stock or other equity securities or all or substantially all of
the assets of any person or entity or acquire any equity or other
ownership interest in any business or person or entity;
(f) cancel any debt or waive any claim or right or cancel any
debts or waive any claims or rights;
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 20
26
(g) transfer, lease, license, sell, mortgage, pledge, dispose
of or encumber any of its properties or assets, other than property
disposed of in the ordinary course of business consistent with past
practice;
(h) grant any increase in the compensation payable or to
become payable by the Company or enter into any new employment
agreement, severance agreement or other contract or arrangement with
respect to the performance of personal services, or adopt any new, or
amend or otherwise increase the amounts payable or to become payable
under any existing, bonus, incentive compensation, deferred
compensation, profit sharing, stock option, stock purchase, insurance,
pension, retirement, health insurance or other employee benefit plan
(including, without limitation, the granting of stock options, stock
appreciation rights or restricted stock awards);
(i) change or alter the manner in keeping books, accounts or
records of the Company or change accounting principles or methods;
(j) enter into any agreement with any person or entity
involving or reasonably likely to involve an expenditure by the Company
in excess of $5,000.00.
(k) make any capital expenditure or acquire any property or
assets (other than inventory) for a cost in excess of $5,000.00 in the
aggregate;
(l) enter into any agreement that materially restricts the
Company from carrying on its business;
(m) pay, discharge or satisfy any material Liability, other
than payment, discharge or satisfaction in the ordinary course of
business of Liabilities or obligations incurred in the ordinary course
of business and consistent with past practice;
(n) enter into or amend any lease of real or personal
property; or
(o) write-off as uncollectible any notes or Accounts.
5.3 NO SOLICITATION. Seller covenant and agree that they will not and
will not permit any of its agents or representatives (including, without
limitation, investment bankers, attorneys and accountants) to, directly or
indirectly (a) solicit, initiate or encourage submission of proposals or offers
by, or (b) furnish any information with respect to or otherwise cooperate in any
way with, or participate in any discussions or negotiations with, any Person
with respect to any proposal regarding the acquisition or purchase of all or a
material portion of the assets of the Company or any equity interest in the
Company or any business combination with the Company.
5.4 INVESTIGATION OF THE COMPANY. Prior to the Closing Date, Purchaser
may make or cause to be made such investigation of the Company and of its
financial and legal condition as appropriate or advisable to familiarize itself
therewith. The Company agrees to furnish Purchaser and its employees, officers,
agents, accountants, legal counsel and other representatives with all
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 21
27
financial, operating and other data and information concerning the Company and
commitments of the Company as Purchaser shall from time to time reasonably
request and will afford Purchaser and its employees, officers, accountants,
attorneys, agents, investment bankers and other authorized representatives
access to the Company's offices (including access during normal business hours)
to review such documents and its books and records and will be given opportunity
to ask questions of, and receive answers from, representatives of the Company
with respect to such matters. No investigations by Purchaser or its employees,
representatives or agents shall reduce or otherwise affect the Liability of the
Company or Seller with respect to any representations, warranties, covenants or
agreements made herein or in an exhibit, schedule or other certificate,
instrument, agreement or document (including the Disclosure Schedule), executed
or delivered in connection with this Agreement. Any confidential information
disclosed by the Company to Purchaser shall be subject to the non-disclosure
obligations set forth in the non-disclosure agreement between Seller and
Purchaser with respect to the Transaction.
5.5 AGREEMENT TO CONSUMMATE. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use their best efforts to do all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective, as soon as reasonably practicable, the
Transactions contemplated by the Operative Documents, including, but not limited
to, the obtaining of all consents, authorizations, orders and approvals of any
Governmental Body required in connection therewith and initiating or defending
any legal action that is necessary or appropriate to permit the Transactions to
be consummated. At any time after the Closing Date, if any further action is
necessary, proper or advisable to carry out the purposes of this Agreement,
then, as soon as is reasonably practicable, each party to this Agreement shall
take, or cause its proper officers to take, such action. Each of the parties
hereto further agree that it will cooperate with the other after the
consummation of the Transactions for the purpose of providing Purchaser with the
information and access to information necessary to ensure Purchaser with a
reasonably smooth transition into the ownership of the Company. No party to this
Agreement shall take or cause to be taken any action that would cause the
representations or warranties expressed herein to be untrue or incorrect on the
Closing Date.
5.6 APPROVAL OF THIRD PARTIES. As soon as practicable after the
execution of this Agreement, Seller will use their best efforts to obtain all
necessary approvals and consents of all third parties required on the part of
Seller for the consummation of the Transactions (the "Third Party Consents").
Purchaser will reasonably cooperate with Seller in securing any necessary
consents from, or in making any filings with or giving any notice to any third
parties necessary for Seller to comply with this Section 5.6.
5.7 AGREEMENT REGARDING BROKERS. Each party agrees that it will pay or
dispute, and hold the other party harmless from, any claims of brokers or others
for finder's or brokerage fees asserted as a result of representations by such
party to such brokers or others, regardless of whether the existence of such
brokers or others are disclosed herein.
5.8 NOTICE. Each party hereto shall promptly give written notice to the
other upon becoming aware of the occurrence or failure to occur, or the
impending or Threatened occurrence or
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 22
28
failure to occur, of any event that would cause or constitute, any of their
respective representations or warranties being or becoming untrue.
5.9 DISCLOSURE SCHEDULES. Seller shall have delivered to Purchaser,
prior to the date hereof, the proposed final version of the Disclosure Schedules
containing all of the disclosures, exhibits and other information or items
required by the various provisions of this Agreement. Thereafter, Seller shall
deliver to Purchaser any supplements or amendments to such Disclosure Schedule
promptly after Seller become aware of any event which changes any
representation, warranty or disclosure made by Seller or the Company in this
Agreement or any statement made by the Disclosure Schedule or in any supplement
or amendment thereto. Within ten (10) business days after receipt of any
supplements or amendment to such Disclosure Schedule, if in Purchaser's sole and
absolute judgment such amendment and/or supplement represents, reflects or
results in a Material Adverse Effect on or to the Company, its business
prospects, assets, financial condition or result or operations (and in making
such judgment, Purchaser shall have the right to consider the effect of any such
amendment and/or supplement in the aggregate with all prior amendments and/or
supplements), this Agreement and the transactions contemplated hereby may be
terminated and abandoned by Purchaser by written notification to Seller.
5.10 FILINGS. The parties will each make or cause to be made any
filings and submissions under the laws of any jurisdiction, to the extent that
such filings are necessary to consummate the transactions contemplated hereby
and will take all actions necessary to consummate the transactions contemplated
hereby in a manner consistent with the applicable laws of such jurisdiction.
Each party will furnish to the other party such necessary information and
reasonable assistance as such other party may request in connection with its
preparation of necessary filings or submissions to any governmental entity.
5.11 TAXES.
(a) Seller hereby agree to cooperate fully with Purchaser and
the Company in connection with the preparation of any returns or
reports, any examinations of the Company by any governmental taxing
authority, including, without limitation, making available records,
books of account or other materials reasonably necessary or helpful for
the preparation of such returns or reports or the defense against the
assertions of any taxing authority as to any tax returns.
(b) Seller shall be solely responsible for the payment of any
Taxes of the Company with respect to the period prior to the Closing
Date, but only to the extent that the Current Asset Value at Closing
determined in accordance with Section 2.5 above is not positive (which
determination is to be made in accordance with GAAP, including the
accrual of all Taxes). In case of a negative Current Asset Value at
Closing determined in accordance with Section 2.5 (including the
accrual of all Taxes), Seller shall reimburse Purchaser for their
pro-rata share of any such Taxes of the Company within fifteen (15)
days of the payment of such Taxes. In the case of taxable periods
beginning prior to and ending after the Closing Date, Seller's pro-rata
share of such Taxes shall be (i) in the case of any
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 23
29
Taxes other than Taxes based upon or related to income, the amount of
such Tax for the entire taxable period multiplied by a fraction the
numerator of which is the number of days in the taxable period ending
on the Closing Date and the denominator of which is the number of days
in the entire taxable period, and (ii) in the case of any Tax based
upon or related to income, the amount of such Tax that would have been
payable if the relevant taxable period ended on the Closing Date.
(c) This agreement terminates any and all sharing or other
allocation agreements or arrangements for Taxes in effect as of the
Closing to which the Company was a party.
5.12 AUDITED FINANCIALS. Seller shall use commercially reasonable
efforts to cooperate with CWII's preparation of audited financial statements of
the Company, prepared by independent auditors selected by CWII, as required by
Regulations S-X for filings under the Securities Exchange Act of 1934, as
amended; and Seller shall accrue as a liability on the Closing Balance Sheet
$6,000.00 of the cost of such audit.
5.13 REGISTRATION RIGHTS AGREEMENT. CWII hereby agrees to grant Seller
any registration rights granted by CWII , and to include shares of CWII Common
Stock in any registration statement of CWII to the same extent as shares of CWII
Common Stock owned by Xxxxx X. Xxxxxxxxxx or Xxxxxx Xxxxx. CWII hereby
represents to Seller that neither Xxxxx X. Xxxxxxxxxx nor Xxxxxx Xxxxx currently
have any registration rights from CWII.
5.14 OBSERVER RIGHTS. For so long as Seller owns at least 800,000
shares of CWII Common Stock in the aggregate (the "Observer Period"), Seller
shall have the observation rights set forth in this Section 5.14. Seller shall
have the right during the Observer Period to designate in writing one (1) person
to attend as an observer all meetings of the Board of Directors of CWII. Seller
shall have the right to designate a replacement or substitute observer from time
to time upon seven (7) days prior written notice to CWII. CWII shall thereafter
give notice of all meetings of the Board of Directors of CWII to such person at
the same time it gives such notice to the members of the Board of Directors and
CWII shall allow such designee of Seller to attend all meetings of the Board of
Directors in a non-voting, observer capacity and shall give such designee all
materials provided to CWII's directors at or prior to such meeting; provided,
however, that such designee shall agree to hold in confidence and trust and act
in a fiduciary manner with respect to all information so provided and sign a
non-disclosure agreement, if so requested by CWII (except that such designee may
disclose such information to each Seller); and, provided further, that CWII
reserves the right to withhold such information and to exclude such designee
from any meeting or a portion thereof if access to such information or
attendance at such meeting could adversely affect the attorney-client privilege
between CWII or the Board of Directors and counsel.
5.15 RELEASE OF SHARES OF CWII COMMON STOCK. Purchaser agrees to
release to Seller the 250,000 shares of CWII Common Stock from the restrictions
under the Pledge Agreement on the first (1st) anniversary of the Closing Date,
if, during the twelve (12) months preceding such anniversary date, Purchaser has
not provided Seller with a Indemnification Notice
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 24
30
pursuant to Section 8.3 with respect to which: (a) Seller has not reimbursed or
otherwise paid on behalf of Purchaser in accordance with the requirements of
this Agreement; or (b) Purchaser is dissatisfied, in its reasonable discretion,
that Seller is able to perform Seller's obligations with respect to
indemnification, repayment or reimbursement with respect thereto (in which case,
Purchaser shall release the shares of CWII Common Stock to Seller at such time
as Seller reimburses or otherwise pays on behalf of Purchaser such amounts as
required by this Agreement); provided, however, that Purchaser shall promptly
release such portion of the shares of CWII Common Stock scheduled to be released
that Purchaser does not reasonably need to secure or satisfy the amount of the
subject claim. In the event that Purchaser has provided Seller with an
Indemnification Notice pursuant to Section 8.3 hereof regarding a claim with
respect to which Seller has not satisfied under clauses (a) or (b) above,
Purchaser shall be entitled to satisfy such claim with respect to the shares of
CWII Common Stock in accordance with the terms of the Pledge Agreement, with
such shares of CWII Common Stock having a value per share equal to the average
of the high and low sales prices for the CWII Common Stock as reported on the
Small Cap Market of the automated quotation service operated by NASDAQ for the
five (5) business days preceding the date that Purchaser satisfies the claim out
of the shares of CWII Common Stock.
5.16 TAX TREATMENT. CWII, Purchaser and Seller each acknowledge and
agree that the transactions contemplated by this Agreement are intended to
constitute a tax-free reorganization under Section 368(a) of the Code. Neither
CWII nor Seller has any present intention of taking any acts which would
jeopardize the tax-free treatment of this transaction, and shall, among other
things, take those actions necessary to effect the tax-free reorganization
including those actions required by Treas. Reg. Section 1.368-3(a) (which
includes the adoption of a Plan of Reorganization), including, without
limitation, any present intention with respect to (a) the sale, transfer or
other disposition of any of the assets of Purchaser acquired pursuant to the
Merger, other than in the ordinary course of business, (b) the redemption or
other acquisition, either directly or indirectly, of any of the CWII Common
Stock issued to Seller pursuant to the Merger, or (c) the payment of any
extraordinary dividends with respect to any of the CWII Common Stock issued to
Seller pursuant to the Merger.
5.17 PERSONAL GUARANTIES. CWII agrees to use commercially reasonable
efforts after Closing to have Seller released from any personal guaranties of
the Company's obligations.
6. CONDITIONS PRECEDENT TO CLOSING
6.1 GENERAL CONDITIONS. Consummation of the Transactions shall be
subject to the fulfillment at the Closing Date of each of the following
conditions:
(a) NO INJUNCTION. No court having jurisdiction shall have
issued, to the Best Knowledge of Purchaser or Seller, an injunction
preventing the consummation of the Transactions that shall not have
been stayed or dissolved prior to or on the Closing Date.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 25
31
(b) PROCEEDINGS. All proceedings taken or to be taken in
connection with the Transactions, and all documents incident thereto
shall be reasonably satisfactory in form and substance to the parties
and their counsel, and the parties and their counsel shall have
received all such counterpart originals or certified or other copies of
such documents as the parties or their counsel may reasonably request.
(c) NONCOMPETITION AGREEMENT. At the Closing, Purchaser and
each of Xxxxxxx X. XxXxxxx, Xxxxxx X. Xxxxxxxx, Xxxxxx Xxxxx Xxxxxxx,
Xxxxxxx X. Xxxxx and Xxxxxx X. Xxxxxxxxxxxxxx shall enter into a
Noncompetition Agreement in the form attached hereto as Exhibit "A".
6.2 CONDITIONS TO CLOSING IN FAVOR OF SELLER. Consummation of the
Transactions shall be subject to the fulfillment, to the reasonable satisfaction
of Seller, or their written waiver, at or before the Closing Date, of each of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES OF PURCHASER. The
representations, warranties and statements of Purchaser contained in
this Agreement and the Operative Documents shall be complete and
accurate as of the date of this Agreement and shall also be complete
and accurate at and as of the Closing Date, except for changes
contemplated by this Agreement, as if made on the Closing Date; and
Purchaser shall have performed or complied with all agreements and
covenants required by this Agreement to be performed or complied with
by it at or prior to the Closing Date.
(b) PURCHASER'S OFFICERS' CERTIFICATE. Purchaser shall have
delivered to Seller an Officers' Certificate, dated the Closing Date,
of Purchaser certifying to (a) the due adoption by the Board of
Directors of the attached resolutions approving the execution and
delivery of this Agreement, and the consummation of the Transactions
and (b) the incumbency of the President, Secretary and other officers
of Purchaser executing any of the Operative Documents.
(c) GOVERNMENTAL CONSENTS, AUTHORIZATIONS, ETC. All material
consents, authorizations, orders or approvals of, and filings or
registrations with, and any permits, licenses or other authorizations
required by, any applicable Governmental Body that are required for, or
in connection with, the execution and delivery of this Agreement by
Purchaser and the consummation by Purchaser of the Transactions shall
have been obtained or made.
(d) CLOSING CONSIDERATION. Purchaser shall have delivered to
Seller the Purchase Price required by Section 2.2 hereof.
(e) WARRANT AGREEMENTS. Purchaser shall have executed and
delivered to Seller the Warrant Agreements in the form attached hereto
as Exhibit "D".
(f) OPINION OF COUNSEL. CWII shall have furnished Seller with
an opinion dated the Closing Date of a law firm suitable to Seller in
the form attached as Exhibit "G"
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 26
32
hereto, or with such modifications thereto as are approved by Seller,
in its sole and absolute discretion.
(g) LITIGATION. There shall be no effective Order of any
nature (including any temporary restraining order) issued by a
Governmental Body of competent jurisdiction restraining or prohibiting
consummation or altering the terms of any of the Transactions, or
actions seeking damages based upon the foregoing which Seller
reasonably deems material. Purchaser shall not have become subject to
any litigation, which, if adversely determined, could, in the opinion
of Seller, have a Material Adverse Effect on CWII.
(h) NO ADVERSE CHANGE. There shall have occurred no adverse
change (whether or not covered by insurance) in operations, assets,
liabilities, properties or financial condition of CWII since August 31,
2000.
(i) DELIVERY OF DOCUMENTS/ACCEPTANCE OF DISCLOSURE SCHEDULES.
Purchaser shall have timely delivered any and all documents,
instruments, schedules and financial statements required hereunder to
Seller.
(j) SELLER'S INVESTIGATION. The investigations by Seller and
its representatives in connection with the proposed Transactions shall
not have caused Seller or its representatives to become aware of any
facts or circumstances relating to Purchaser that in the sole
discretion of Seller makes it inadvisable for Seller to proceed with
the Transactions.
(k) APPROVAL. The Board of Directors of Purchaser and CWII
each shall have approved this Agreement and the transactions
contemplated hereby.
(l) CERTIFICATE OF AUTHORITIES. Purchaser shall have furnished
to Seller (i) certificates of the Secretary of State of the state in
which Purchaser and CWII is organized or incorporated, dated as of a
date not more than seven (7) business days prior to the Closing Date,
attesting to the incorporation and good standing of Purchaser and CWII,
(ii) a copy, certified by the Secretary of State of the state in which
Purchaser and CWII is organized or incorporated, as of a date not more
than seven (7) business days prior to the Closing Date, of the Articles
of Incorporation and all amendments thereto for Purchaser and CWII,
(iii) a copy, certified by the Secretary of Purchaser and CWII, of the
Bylaws of Purchaser, as amended and in effect as of the Closing Date,
and (iv) a copy, certified by the Secretary of Purchaser and CWII, of
resolutions duly adopted by the Board of Directors of Purchaser and
CWII duly authorizing the transactions contemplated in this Agreement.
(m) CERTIFICATE OF MERGER. Seller shall have received a fully
executed Certificate of Merger sufficient for filing with the State of
Colorado in order to consummate the Merger.
(n) PLEDGE AGREEMENT. Purchaser shall have executed and
delivered to Seller the Pledge Agreement in the form attached hereto as
Exhibit "B".
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 27
33
(o) OTHER MATTERS. Purchaser shall have delivered to Seller,
in form and substance reasonably satisfactory to counsel for Seller,
such certificates and other evidence as Seller may reasonably request
as to the satisfaction of the conditions contained in this Section 6.2.
6.3 CONDITIONS TO CLOSING IN FAVOR OF PURCHASER. Consummation of the
Transactions shall be subject to the fulfillment, to the reasonable satisfaction
of Purchaser, or its written waiver, at or before the Closing Date of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES OF SELLER. The
representations, warranties and statements of Seller contained in this
Agreement, the exhibits hereto and the Disclosure Schedules shall be
complete and accurate as of the date of this Agreement and shall also
be complete and accurate at and as of the Closing Date, except for
changes contemplated by this Agreement, as if made at and as of the
Closing Date; and Seller shall have performed or complied with all
agreements and covenants required by this Agreement to be performed or
complied with by them at or prior to the Closing Date.
(b) GOVERNMENTAL CONSENTS, AUTHORIZATIONS, ETC. All material
consents, authorizations, orders or approvals of, and filings or
registrations with, and any permits, licenses or other authorizations
required by, any applicable Governmental Body that are required for or
in connection with, the execution and delivery of this Agreement by
Seller and the consummation by Seller of the Transactions shall have
been obtained or made.
(c) SHAREHOLDER RELEASE. Seller shall have executed and
delivered to Purchaser a general release releasing any and all claims
for compensation or otherwise as directors, officers, employees and
shareholders in the form attached hereto as Exhibit "E".
(d) SELLER'S CERTIFICATE. Seller shall have delivered to
Purchaser Seller's certificates dated the Closing Date, certifying as
to the fulfillment of the conditions set forth in Section 6.3(a) and
(b).
(e) OPINION OF COUNSEL. Seller shall have furnished Purchaser
with an opinion dated the Closing Date of a law firm suitable to
Purchaser in the form attached as Exhibit "F" hereto, or with such
modifications thereto as are approved by Purchaser, in its sole and
absolute discretion.
(f) LEGISLATION. No law or legally binding regulation shall
have been enacted that does or would prohibit, restrict or delay
consummation of the Transactions or any of the conditions to the
consummation of the Transactions or that does or would have a Material
Adverse Effect on the Company.
(g) LITIGATION. There shall be no effective Order of any
nature (including any temporary restraining order) issued by a
Governmental Body of competent jurisdiction restraining or prohibiting
consummation or altering the terms of any of the Transactions, or
actions seeking damages based upon the foregoing which Purchaser
reasonably deems
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 28
34
material. The Company shall not have become subject to any litigation,
which, if adversely determined, could, in the opinion of Purchaser,
have a Material Adverse Effect on the Company.
(h) NO ADVERSE CHANGE. There shall have occurred no adverse
change (whether or not covered by insurance) in operations, assets,
liabilities, properties or financial condition of the Company since the
date of the Financial Statements.
(i) DELIVERY OF DOCUMENTS/ACCEPTANCE OF DISCLOSURE SCHEDULES.
Seller shall have timely delivered any and all amendments and/or
supplements to the Disclosure Schedules and all other documents,
instruments, schedules and financial statements required hereunder to
Purchaser. The Disclosure Schedules, as amended and supplemented, shall
be acceptable in form and substance to Purchaser, in its absolute
discretion.
(j) THIRD PARTY CONSENTS. Seller shall have delivered copies
of all Third Party Consents, if any, necessary to permit the
consummation of the Transactions contemplated by this Agreement shall
have been obtained in a form satisfactory to Purchaser.
(k) PURCHASER'S INVESTIGATION. The investigations by Purchaser
and its representatives in connection with the proposed Transactions
shall not have caused Purchaser or its representatives to become aware
of any facts or circumstances relating to the Company that in the sole
discretion of Purchasers make it inadvisable for Purchaser to proceed
with the Transactions.
(l) APPROVAL. The Board of Directors of the Company and Seller
each shall have approved this Agreement and the transactions
contemplated hereby.
(m) CERTIFICATE OF AUTHORITIES. Seller shall have furnished to
Purchaser (i) certificates of the Secretary of State of each state in
which the Company is organized or incorporated, dated as of a date not
more than seven (7) business days prior to the Closing Date, attesting
to the incorporation and good standing of the Company, (ii) a copy,
certified by the Secretary of State of each state in which the Company
is organized or incorporated, as of a date not more than seven (7)
business days prior to the Closing Date, of the Articles of
Incorporation and all amendments thereto for the Company, (iii) a copy,
certified by the Secretary of the Company, of the Bylaws of the
Company, as amended and in effect as of the Closing Date, and (iv) a
copy, certified by the Secretary of the Company, of resolutions duly
adopted by the Board of Directors of the Company duly authorizing the
transactions contemplated in this Agreement.
(n) CORPORATE RECORDS AND BOOKS OF ACCOUNT. The respective
corporate seals, articles of incorporation, bylaws, stock certificates,
stock transfer ledgers, and corporate books and records of the Company,
updated up to the Closing Date, shall be delivered to Purchaser.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 29
35
(o) BANK ACCOUNTS. Seller shall have caused the Company to
have revoked all existing authorities and all instructions to banks in
respect of the operations of the bank accounts of the Company and new
authorities and instructions shall be given to such persons on such
terms as Purchasers may require.
(p) CERTIFICATE OF MERGER. Purchaser shall have received fully
a executed Certificate of Merger sufficient for filing with the State
of Colorado in order to consummate the Merger.
(q) SUBSCRIPTION AGREEMENT. Seller shall have executed and
delivered to Purchaser the Subscription Agreement in the form attached
hereto as Exhibit "C".
(r) PLEDGE AGREEMENT. Seller shall have executed and delivered
to Purchaser the Pledge Agreement in the form attached hereto as
Exhibit "B".
(s) AFFILIATE DEBT. Except as provided in Section 2.6, the
Company shall have satisfied and paid in full any Liabilities owing to
Seller or his Affiliates and any such Liabilities shall not be forgiven
so as to cause the Company to realize taxable income associated with
such forgiveness.
(t) OTHER MATTERS. Seller shall have delivered to Purchaser,
in form and substance reasonably satisfactory to counsel for Purchaser,
such certificates and other evidence as Purchaser may reasonably
request as to the satisfaction of the conditions contained in this
Section 6.3.
7. CLOSING AND TERMINATION
7.1 CLOSING DATE. Subject to the right of Purchaser and Seller to
terminate this Agreement pursuant to Section 7.2 hereof, the closing of the
Transactions (the "Closing") shall, unless another date or place is agreed to in
writing by Seller and Purchaser, take place at the offices of 0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxx 00000, at 10:00 a.m. (Denver time) on
September 30, 2000 (the "Closing Date") or such other place and date as the
parties may mutually agree upon in writing. Purchaser shall, at its option, have
the right, but not the obligation to extend the Closing Date to not later than
November 1, 2000 by giving written notice thereof to Seller at least three (3)
business days prior to the Closing Date referred to in the preceding sentence.
If Purchaser exercises its option hereunder to extend the Closing Date, the term
Closing Date as used herein shall mean and refer to such Closing Date as
extended.
7.2 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by mutual written agreement of Purchaser and Seller;
(b) by Seller if any representation or warranty of Purchaser
or by Purchaser if any representation or warranty of Seller contained
herein shall have been incorrect or breached in any material respect,
as to which notice shall have been given to the breaching
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 30
36
party, and shall not have been cured or otherwise resolved to the
reasonable satisfaction of the other party on or before the Closing
Date, or by either Purchaser or Seller if any condition to the
consummation of the Transactions contemplated hereunder that must be
fulfilled to its satisfaction has become impractical to be fulfilled;
(c) by either Purchaser or Seller if any permanent injunction
or other order of a court or other competent authority preventing the
consummation of the Transactions shall have become final and
non-appealable; or
(d) by Purchaser or Seller if the Closing has not occurred by
November 1, 2000; provided, however, that such date may be extended by
written agreement among the parties and provided, further, that no
party shall be permitted to terminate hereunder if such party is in
violation of this Agreement.
7.3 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided herein, this Agreement shall become wholly void and have
no further force and effect except as hereinafter provided; and there shall be
no Liability on the part of Seller or Purchaser (or Purchaser's respective
officers of directors) except to comply with the provisions of Section 5.7
regarding brokers, to pay the fees and expenses as apportioned in Section 9.2
and except as otherwise expressly provided herein. Nothing contained herein
shall relieve any party from Liability for its breach of this Agreement.
7.4 EXTENSION; WAIVER. At any time prior to the Closing Date, any party
hereto that is entitled to the benefits hereof (with respect to any such
corporate party by action taken by its Board of Directors or a duly authorized
officer), may (a) extend the time for the performance of any of the obligations
or other acts of any of the other parties hereto, (b) in whole or in part, waive
any inaccuracy in the representations and warranties of any of the other parties
hereto contained herein or in any exhibit or schedule hereto or in any document
delivered pursuant hereto, and (c) in whole or in part, waive compliance with
any of the agreements of any of the other parties hereto or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall only be valid if same is set forth in an instrument in writing
signed and delivered on behalf of such party.
8. SURVIVAL AND INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of Seller contained in this Agreement, the
Operative Documents and any investigation shall survive the consummation of the
Transactions contemplated in this Agreement and shall continue in full force and
effect after the Closing for a period of fourteen (14) months from the Closing
at which time they shall expire, except as to claims made in respect thereof in
writing by Purchaser on or before the expiration of such period; provided,
however that (a) the representations and warranties contained in Section 3.12
shall survive until the expiration of the statutory period of limitations for
assessment of Tax deficiencies, including any extensions thereof, for each
taxable year of the Company which begins before the Closing, and (b) the
representations and warranties
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 31
37
contained in Sections 3.1 and 3.29 shall survive indefinitely. The covenants and
agreements of Seller shall not be affected by the expiration of any
representation or warranty pursuant to this Section 8.1 and shall survive
indefinitely.
8.2 INDEMNITY. Seller agrees to jointly and severally indemnify and
hold Purchaser, CWII and their officers, directors, agents, attorneys and
accountants ("Purchaser Indemnitees") harmless from any and all damages, losses
(which shall include any diminution in value, liabilities, joint or several),
payments, obligations, penalties, claims, litigation, demands, defenses,
judgments, suits, proceedings, costs, disbursements or expenses (including
without limitation, fees, disbursements and expenses of attorneys, accountants
and other professional advisors and of expert witnesses and costs of
investigation and preparation) of any kind or nature whatsoever, directly or
indirectly resulting from, relating to or arising out of:
(a) any breach or nonperformance (partial or total) of or
inaccuracy in any representation or warranty or covenant or agreement
of Seller contained in this Agreement or any Operative Document which
survives the Closing hereof;
(b) Liability arising out of the Company's business conducted
prior to the Closing and not expressly assumed by Purchaser pursuant to
this Agreement;
(c) any losses or costs of defending against any claims which
may be made against Purchaser by any Person claiming violations by the
Company of any local, state, or federal law relating to the employment
relationship, including, but not limited to, wages, hours, concerted
activity, nondiscrimination, occupational health and safety and the
payment and withholding of Taxes, where such claims arise out of
circumstances occurring prior to the Closing Date;
(d) any actual or threatened violation of or non-compliance
with, or remedial obligation arising under, any environmental laws
arising from any event, condition, circumstance, activity, practice,
incident, action or plan existing or occurring prior to the Closing
relating in any way to the Company; and
(e) the Transaction Expenses incurred by Seller;
provided, however, that the indemnification obligations with respect to
those representations and warranties set forth in Sections 3.1, 3.3, 3.4(b), 3.5
and 3.6 shall be several and not joint, to the extent that such representations
and warranties relate to facts or circumstances pertaining only to a particular
Seller.
8.3 INDEMNITY. Purchaser and CWII jointly and severally agree to
indemnify and hold each Seller and his agents, attorneys and accountants
("Seller Indemnitees") harmless from any and all damages, losses (which shall
include any diminution in value, liabilities, joint or several), payments,
obligations, penalties, claims, litigation, demands, defenses, judgments, suits,
proceedings, costs, disbursements or expenses (including without limitation,
fees, disbursements and expenses of attorneys, accountants and other
professional advisors and of expert witnesses and
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 32
38
costs of investigation and preparation) of any kind or nature whatsoever,
directly or indirectly resulting from, relating to or arising out of any breach
or nonperformance (partial or total) of or inaccuracy in any representation or
warranty or covenant or agreement of Purchaser or CWII contained in this
Agreement or any Operative Document which survives the Closing hereof.
8.4 INDEMNIFICATION NOTICE. If a Purchaser Indemnitee or Seller
Indemnitee intends to exercise its right to indemnification provided in this
Article 8, such Purchaser Indemnitee or Seller Indemnitee shall provide the
party or parties from whom the indemnification will be sought (the "Indemnitor")
at least fifteen (15) days prior written notice (the "Indemnification Notice")
of such Purchaser Indemnitee's or Seller Indemnitee's intention to do so and the
facts or circumstances giving rise to the claim ("Indemnification Claim").
Nothing contained herein shall preclude any Purchaser Indemnitee or Seller
Indemnitee from taking any actions deemed reasonably necessary or appropriate in
response to any third party claims during such interim period. An
Indemnification Claim may, at the option of Purchaser Indemnitee or Seller
Indemnitee, be asserted as soon as any situation, event or occurrence has been
noticed by Purchaser Indemnitee or Seller Indemnitee regardless whether actual
harm has been suffered or out-of-pocket expenses incurred. During such fifteen
(15) day period, the Indemnitor shall be entitled to cure the defect or
situation giving rise to the Indemnification Claim to the complete satisfaction
of Purchaser Indemnitee or Seller Indemnitee. If the Indemnitor is unwilling or
unable to cure, to the complete satisfaction and the Indemnitor, the defect or
situation giving rise to the Indemnification Claim during such fifteen (15)
period, the Indemnitor shall assume the defense of such claim at its sole
expense through counsel reasonably satisfactory to the Purchaser Indemnitee or
Seller Indemnitee; provided that (i) the Indemnitor shall not permit any lien,
encumbrance or other adverse charge upon any asset of any Purchaser Indemnitee;
(ii) the Indemnitor shall permit Purchaser Indemnitee or Seller Indemnitee to
participate in such settlement or defense through counsel selected by such
Purchaser Indemnitee or Seller Indemnitee at Indemnitor's expense, and (iii) the
Indemnitor shall agree to promptly reimburse such Purchaser Indemnitee or Seller
Indemnitee for the full amount of its liability to the third party claimant. If
the Indemnitor shall not have employed counsel reasonably satisfactory to the
Purchaser Indemnitee or Seller Indemnitee to defend such claim or if such
Purchaser Indemnitee or Seller Indemnitee shall have reasonably concluded (with
the written advice of counsel) that the position of such Purchaser Indemnitee or
Seller Indemnitee and the Indemnitor may be in conflict (in which case the
Indemnitor shall not have the right to direct the defense of any such claim on
behalf of such Purchaser Indemnitee or Seller Indemnitee), the Purchaser
Indemnitee or Seller Indemnitee may defend against such claim or related legal
proceeding with such counsel and in such manner as the Purchaser Indemnitee or
Seller Indemnitee deems appropriates, and may consent to the settlement or
compromise of, or consent to the entry of a judgment arising from, such claim or
legal proceeding without the consent of the Indemnitor and the reasonable legal
and other expenses incurred by such Purchaser Indemnitee or Seller Indemnitee
shall be borne by the Indemnitor. Notwithstanding the foregoing, each Purchaser
Indemnitee or Seller Indemnitee shall have the right to pay or settle any such
claim provided in such event it shall waive its right to indemnity therefore by
the Indemnitor.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 33
39
8.5 LIMITATIONS OF LIABILITY.
(a) No indemnitor shall be required to indemnify any
indemnitee under this Article 8 until the aggregate amount of all such
claims exceeds $10,000.00 (the "Threshold Amount"), and if such claims
exceed the Threshold Amount, the indemnitee shall be entitled to
recover all of its losses, including the Threshold Amount.
(b) Seller's liability under this Article 8 shall be limited
to losses or damages not exceeding in the aggregate the Purchase Price.
Seller shall be able to satisfy any claim for indemnification in either
cash or shares of CWII Common Stock, with such shares of CWII Common
Stock having a value per share equal to the average of the high and low
sales prices for the CWII Common Stock as reported on the Small Cap
Market of the automated quotation service operated by NASDAQ for the
five (5) business days preceding the date that Purchaser satisfies the
claim out of the shares of CWII Common Stock.
(c) If any damages suffered by an indemnitee for which a claim
for indemnification is made hereunder shall result in any insurance
recovery, then the amount of such damages payable by the indemnitor
shall be limited, in addition to the other limitations set forth
herein, to the excess over and above any insurance proceeds actually
received. The indemnitee shall exercise its business judgment, in good
faith, to determine whether insurance coverage exists with respect to
any damages otherwise payable by the Indemnitor hereunder and to the
extent the indemnitee determines insurance coverage exists, the
indemnitee shall file a claim under any insurance policy with respect
to such damages.
(d) If any damages suffered by an indemnitee for which a claim
for indemnification is made hereunder shall result in a recovery from
any third party, then the amount of such damages payable by the
Indemnitor shall be limited, in addition to the other limitations set
forth herein, to the excess over and above any such proceeds actually
received.
(e) The parties hereto acknowledge and agree that the rights
of indemnification provided for in this Article 8 shall be the sole and
exclusive remedy of the parties for any claim or cause of action
arising out of or relating to the negotiation, execution, delivery,
performance or breach of this Agreement (whether such claim or cause of
action is based on breach of contract, misrepresentations, tort,
violation of statute, or otherwise), other than claims for injunctive
relief, where appropriate.
9. GENERAL PROVISIONS AND OTHER AGREEMENTS
9.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if and when delivered personally or
transmitted by telex, facsimile (receipt confirmed) or telegram, mailed by
registered or certified mail (return receipt requested) or sent by a
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 34
40
recognized next business day courier to the following persons at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) If to Purchaser:
IAC Acquisition Corporation
0000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Chief Financial Officer
Facsimile: (000) 000-0000
with a copy to:
Xxxx, Xxxxxxxx & Xxxxxx LLP
0000 XxXxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
(b) If to Seller or the Company:
Application Consultants, Inc.
0000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. XxXxxxx, President
Facsimile: (000) 000-0000
with a copy to:
Xxxxx Xxxx LLP
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
9.2 FEES AND EXPENSES. Seller, the Company and Purchaser shall each pay
all of their own fees, costs and expenses (including without limitation, those
of accountants, appraisers and attorneys) incurred in connection with or related
to the preparation, negotiation, execution, delivery, satisfaction, compliance
and consummation of this Agreement and the Transactions contemplated hereby and
the closing conditions hereunder. All of Seller's and the Company's fees, costs
and expenses shall be reflected as an accrued liability on the Closing Balance
Sheet.
9.3 INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement. Terms such as "herein," "hereof," "hereinafter" refer to this
Agreement as a whole and not to the particular
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 35
41
sentence or paragraph where they appear, unless the context otherwise requires.
Terms used in the plural include the singular, and vice versa, unless the
context otherwise requires.
9.4 COUNTERPARTS. This Agreement may be executed by facsimile in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5 MISCELLANEOUS. This Agreement (a) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof; (b) is not intended to and shall not confer upon any other person any
rights or remedies hereunder or otherwise with respect to the subject matter
hereof, except for rights that may expressly arise as a consequence of the
Transactions; (c) may not be assigned by operation of law or otherwise; (d) has
been drafted by all of the parties to this Agreement and should not be construed
against any of the parties hereto; and (e) shall be governed in all respects,
including validity, interpretation and effect by the substantive laws of the
State of Colorado without regard to conflict of law provisions.
9.6 PUBLICITY. Prior to Closing, no party hereto shall issue any press
release or make any other public statement, in either case relating to or
connected with or arising out of this Agreement or the matters contained herein,
without obtaining the prior written approval of the other parties to the
contents and the manner of presentation and publication thereof, which approval
shall not be unreasonably withheld.
9.7 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable. This Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof; and the remaining provisions of
this Agreement shall remain in full force and effect and shall not be affected
by the illegal, invalid or unenforceable provision or its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable
provision there shall be added automatically as part hereof a provision as
similar in terms, but in any event no more restrictive than, such illegal,
invalid or unenforceable provision as may be possible and be legal, valid and
enforceable.
9.8 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns.
9.9 CAPTIONS. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit or
amplify the provisions hereof.
9.10 ATTORNEYS' FEES. In the event that any Proceeding is commenced by
any party hereto for the purpose of enforcing any provision of this Agreement,
the party to such Proceeding may receive as part of any award, judgment,
decision or other resolution of such Proceeding its costs and attorneys' fees as
determined by the person or body making such award, judgment,
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 36
42
decision or resolution. Should any claim hereunder be settled short of the
commencement of any such Proceeding, the parties in such settlement may mutually
agree to include as part of the damages alleged to have been incurred reasonable
costs of attorneys or other professionals in investigation or counseling on such
claim.
9.11 JURISDICTION AND VENUE. Any judicial proceedings brought by or
against any party on any dispute arising out of this Agreement or any matter
related thereto shall be brought in the state or federal courts of Arapaho
County, Colorado and, by execution and delivery of this Agreement, each of the
parties accepts for itself the exclusive jurisdiction and venue of the aforesaid
courts as trial courts, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement after exhaustion of all
appeals taken (or by the appropriate appellate court if such appellate court
renders judgment).
9.12 ASSIGNABILITY. This Agreement may not be transferred, assigned,
pledged or hypothecated by any party hereto without the prior written consent of
the other parties to this Agreement.
9.13 ENTIRETY. This Agreement and the documents executed and delivered
pursuant hereto, executed on the date hereof or in connection herewith, contain
the entire agreement among the parties with respect to the matters addressed
herein and supersede all prior representations, inducements, promises or
agreements, oral or otherwise, which are not embodied herein or therein.
9.14 AMENDMENT. This Agreement and the exhibits and schedules hereto
may be amended by the parties hereto at any time prior to the Closing Date;
provided, however, that any amendment must be by an instrument or instruments in
writing signed and delivered on behalf of each of the parties hereto.
9.15 GOVERNING LAW. This Agreement shall be governed by the substantive
laws of the State of Colorado without regard to principles of choice or conflict
of law.
SIGNATURE PAGE FOLLOWS
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 37
43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers.
PURCHASER:
IAC ACQUISITION CORPORATION
By:
--------------------------------------------
Xxxxx X. Xxxxxxxxxx, President
COMPANY:
APPLICATION CONSULTANTS, INC.
By:
--------------------------------------------
Xxxxxxx X. XxXxxxx, President
CWII:
COMMUNICATIONS WORLD INTERNATIONAL, INC.
By:
--------------------------------------------
Xxxxx X. Xxxxxxxxxx, Chief Executive Officer
SELLER:
-----------------------------------------------
Xxxxxxx X. XxXxxxx
-----------------------------------------------
Xxxxxx X. Xxxxxxxx
SIGNATURE PAGE FOLLOWS
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 38
44
-----------------------------------------------
Xxxxxx Xxxxx Xxxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxx
-----------------------------------------------
Xxxxxx X. Xxxxxxxxxxxxxx
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION - PAGE 39
