LLC INTEREST AND ASSET CONTRIBUTION AGREEMENT
THIS LLC INTEREST AND ASSET CONTRIBUTION AGREEMENT ("Agreement") is made
and entered into effective as of this 30th day of May, 1997 by and among White
Cloud Exploration, Inc. Corp., a Utah corporation ("White Cloud"); Goldpoint
International, LLC, a Delaware limited liability company (the "Company");
Xxxxxxx X. Xxxxx, an individual ("Xxxxx") and each of the persons (including
Xxxxx) listed on Schedule A hereto (each, a "Selling Member" and collectively
the "Selling Members").
W I T N E S S E T H:
WHEREAS, White Cloud is a public company; and
WHEREAS, the Company is engaged in the business of the design, manufacture
and marketing of fine writing instruments (all such activities of the Company,
together with all other business activities of the Company, being hereinafter
referred to as the "Business"); and
WHEREAS, Selling Members own the number of limited liability company
interests set forth opposite their names on Schedule A which, in the aggregate,
represent 100% of the interests in the Company (the "Selling Members
Interests"); and
WHEREAS, Selling Members desire to contribute to White Cloud Selling
Members' Interests for an aggregate consideration of 2,140,000 shares of White
Cloud restricted Common Stock (the "Goldpoint Transaction") (based on 1,250,000
shares of White Cloud common stock being outstanding prior to the Goldpoint
Transaction. In the event that a greater or lesser number of White Cloud shares
of common stock are outstanding prior to the Goldpoint Transaction, the
2,000,000 shares of White Cloud common stock shall be increased or
decreasedaccordingly (the foregoing, the "Adjustment")), all upon the terms and
conditions contained herein; and
WHEREAS, simultaneous with, and as a condition precedent to, the Goldpoint
Transaction, White Cloud shall acquire all of the issued and outstanding shares
of Common Stock of Watchout!, a California corporation ("Watchout") in exchange
for 11,640,003 shares of White Cloud restricted Common Stock, subject to the
Adjustment (the "Watchout Transaction"); and
WHEREAS, the Goldpoint Transaction, together with the Watchout Transaction,
are components of a single integrated transaction that is intended to qualify
for the treatment provided in Section 351 of the Internal Revenue Code of 1986,
as amended (the "Code"); and
WHEREAS, following the Goldpoint Transaction and the Watchout Transaction,
it is intended that a private offering of White Cloud securities ( the "Private
Placement") be consummated pursuant to that certain Selling Agreement dated as
of February 5, 1997 between the Company and Sands Brothers & Co., Ltd. ("Sands
Brothers")
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants hereinafter set forth, the parties
hereto hereby agree as follows:
SECTION I
CONTRIBUTION OF SELLING MEMBERS' INTERESTS
1.01. Conveyance of Selling Members' Interests. At Closing, Selling Members
shall contribute, transfer, assign, convey and deliver certificates or other
written evidence of their Selling Members' Interests to White Cloud in the
amounts set forth on Exhibit A hereto. Each of such certificates or other
written evidence of their Selling Members' Interests shall be duly endorsed for
transfer and duly executed in favor of White Cloud. All transfer taxes, if any,
payable by reason of transferring Selling Members' Interests shall be paid by
White Cloud.
1.02. Consideration for Selling Members' Interests. In exchange for Selling
Members' Interests, White Cloud shall issue stock certificates evidencing an
aggregate of 2,140,000 restricted shares of White Cloud's Common Stock, subject
to the Adjustment (the "New Shares") in the denominations and in the names of
the persons and entities set forth on Exhibit A hereto.
SECTION II
ADDITIONAL AGREEMENTS
2.01. Lock-Up Agreement. In the event that the Private Placement is
completed upon consummation of the Private Placement, each of Selling Members
will enter into a lock-up agreement with White Cloud in form and substance
reasonably satisfactory to Sands Brothers ("Lock-Up Agreement") pursuant to
which Selling Members will agree to certain restrictions, as established by
Sands Brothers, on the transferability of the New Shares acquired by them
pursuant to this Agreement.
SECTION III
CLOSING
3.01. Closing. The consummation of the contribution of the Selling Members'
Interests, and the other transactions contemplated hereby ("Closing") shall take
place at the offices of Sands Brothers, 00 Xxxx Xxxxxx, XX, XX 00000 on June 25,
1997, or as soon as practical after all conditions precedent set forth in
Sections IX and X hereof have been satisfied or waived, whichever is later, at
10:00 a.m. (local time), or at such other date, time and place as shall be fixed
in writing by the mutual consent of the parties hereto (the "Closing Date"). The
Closing shall be deemed to be effective as of the opening of business on the
Closing Date.
3.02. Selling Members' and the Company's Deliveries. At the Closing, in
addition to such certificates, opinions, documents and agreements as are
specified in Articles IX and X, Members and/or the Company shall do, execute and
deliver, or cause to be done, executed and delivered, the following:
(a) Selling Members' Interests duly endorsed for transfer. 3.03. White
Cloud's Deliveries. At the Closing, in addition to such certificates,
opinions, documents and agreements as are specified in Articles IX and X,
White Cloud shall do, execute and deliver, or cause to be done, executed
and delivered, the following:
(a) the New Shares;
SECTION IV
Representations and Warranties Concerning Selling Members
Each Selling Member on behalf of himself, herself or itself represents and
warrants to, and agrees with, White Cloud as follows:
4.01. Ownership of Selling Member's Interests. Such Selling Member is the
owner, beneficially and of record, of all of Selling Members' Interests as set
forth in Exhibit A and there exists no pledge, lien, security interest,
encumbrance, claim or equity of any kind with respect to such shares. Such
Selling Member is not a party to any operating or similar agreement, voting
trust or other voting or similar agreement with respect to such Selling Member's
Interests. Such Selling Member has full right and authority to transfer such
Selling Member's Interests and, upon delivery of such Selling Member's Interests
to White Cloud pursuant to this Agreement, White Cloud will receive good and
marketable title thereto, free and clear of any pledge, lien, security interest,
encumbrance, claim or equity of any kind.
4.02. Authority of Selling Members. Such Selling Member is of full age and
has the full right, capacity, power and authority to enter into this Agreement
and the Documents and to consummate the transactions contemplated hereby and
thereby. This Agreement and the Documents (as hereinafter defined) have been
duly executed and delivered by each Selling Member and constitute the valid and
binding obligations of such Selling Member enforceable against each such Selling
Member in accordance with their respective terms, subject, as to enforcement, to
the discretion of the courts in awarding equitable relief and to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
the rights of creditors generally.
4.03. No Violations. Neither the execution and delivery of this Agreement
or any of the Documents, the performance by such Selling Member of his
obligations hereunder and thereunder nor the consummation of the transactions
contemplated hereby or thereby will, directly or indirectly, with or without the
giving of notice or the passage of time, or both (i) violate, or be in conflict
with, or constitute a default under, or cause or permit the termination or the
acceleration of the maturity of, any agreement, personal guarantee, lease,
mortgage, debt or obligation of such Selling Member or require the payment or
any pre-payment or other penalty with respect thereto; (ii) require notice to or
the consent of any party to or beneficiary of any agreement, personal guarantee,
lease, mortgage, debt or obligation to which such Selling Member is a party or
by which he or his properties is bound or subject, including without limitation,
any agreement or obligation containing a right of first refusal or similar right
or permitting any party to renegotiate, receive a refund, modify or otherwise
change any such agreement or obligation; (iii) result in the creation or
imposition of any lien, security interest, claim or other encumbrance upon any
property or assets of such Selling Member under any agreement, personal
guarantee, lease, mortgage, debt or obligation to which he is a party or by
which he or his properties is bound or subject; or (iv) violate any statute or
law or any judgment, decree, order, regulation or rule of any court or
governmental authority to which such Selling Member or his properties is or may
be bound or subject.
4.04. Consents and Approvals of Governmental Authorities. No consent,
approval or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority is required to be made or obtained by such
Selling Member in connection with the execution, delivery or performance by such
Selling Members of this Agreement or the Documents or the consummation by such
Selling Member of the transactions contemplated hereby or thereby.
4.05. Affiliate Transactions. Such Selling Member has no direct or indirect
interest in any firm, corporation, association or business enterprise which
competes with the Company or is a supplier, client, customer or agent of, or is
otherwise engaged in the business engaged in by, the Company.
4.06. Investment Intent. The New Shares are being acquired for such Selling
Member's own account, for investment purposes only and not with a view towards
distribution or resale to others. The New Shares have not been registered under
the Securities Act and Selling Members will not sell or otherwise transfer the
New Shares unless they are registered under the Securities Act or unless in the
opinion of counsel satisfactory to White Cloud an exemption from such
registration is available. Such Selling Member understand that the New Shares
have not been registered under the Securities Act by reason of a claimed
exemption under the provisions of the Securities Act which depends, in part,
upon such Selling Member's investment intention. Such Selling Member has
reviewed, or has had the opportunity to review, such documents, ask questions
and obtain additional information concerning White Cloud in connection with the
transactions contemplated hereby. Furthermore, such Selling Member has, or has
had the opportunity to, consult his own counsel, accountants and other
professional advisors as to the financial, legal, tax and related matters
concerning an investment in White Cloud. Until (a) the New Shares are
effectively registered under the Securities Act, or (b) the holder of the New
Shares, at such holder's expense, deliver to White Cloud a written opinion of
counsel reasonably acceptable to White Cloud to the effect that such legend is
no longer necessary under the Securities Act, White Cloud will cause each
certificate(s) representing the New Shares to be stamped or otherwise imprinted
with a legend to substantially the following effect:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and thus may not be transferred
unless so registered or unless an exemption from registration is available."
4.07. Finders' Fee. There is no investment banker, broker, finder or other
intermediary which has been retained by, or is authorized to act on behalf of,
such Selling Member who might be entitled to any fee or commission from White
Cloud or the Company or any of their affiliates upon the consummation of the
transactions contemplated by this Agreement or the Documents, except Sands
Brothers.
4.08. Disclosure. No representation or warranty of such Selling Member
contained in this Agreement or any of the Documents or in any statement or
certificate furnished or to be furnished to White Cloud or the Company pursuant
hereto or thereto in connection with the transactions contemplated hereby or
thereby contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
made herein or therein, in the light of the circumstances in which they were
made, not misleading.
SECTION V
Representations and Warranties Concerning the Company
Subject to the Disclosure Schedule attached hereto the Company represents
and warrants to, and agrees with, White Cloud as follows:
5.01. Organization; Authority.
(a) The Company, and each of the Companies under its control (each a
"Subsidiary, and collectively, the "Subsidiaries") is a limited liability
company duly organized, validly existing and in good standing under the laws of
its jurisdiction of formation and has all requisite power and authority to carry
on its business as such business is now being conducted and to own and lease the
properties it now owns or leases. The Company is duly qualified to do business
in the states or jurisdictions set forth in the Disclosure Schedule. Except as
set forth in the Disclosure Schedule, there is no jurisdiction in which the
conduct of the Company's business or ownership or leasing of its properties
requires it to be qualified to do business as a foreign limited liability
company, except where such qualifications have been obtained or the failure to
be so qualified would not have a material adverse effect on the business,
financial condition or prospects of the Company taken as a whole. The Company
has all requisite power and authority to execute and deliver this Agreement and
to carry out the transactions contemplated by this Agreement.
(b) The limited liability company records of the Company have been
delivered or made available to White Cloud. Such records are complete, correct
and current in all material respects, with all necessary signatures, and have
been maintained in accordance with good business practices in all material
respects.
5.02. Capitalization. Exhibit A hereto lists the authorized and the
equitable ownership of the limited liability company interests of the Company
(the "Interests") and the name and number of shares of Interests owned by each
member of the Company. Except as set forth in Exhibit A, there are no other
classes of capital stock or other securities authorized by the Company.
(ii) The Company has no obligation (contingent or otherwise make any other
distribution in respect of any of its membership interests, except as set forth
in the Company's operating agreement. The Company is not a party to, and has no
knowledge of, voting trusts or agreements, pledge agreements, buy-sell
agreements, rights of first refusal or proxies relating to any securities of the
Company (whether or not the Company is a party thereto). All of the outstanding
securities of the Company were issued, in all material respects, in compliance
with all applicable federal and state securities laws. The Company has no
obligation (contingent or otherwise) to repurchase, redeem or otherwise acquire
any membership interests.
(iii) The Members of record and the holders of subscriptions, warrants,
options, preemptive rights, convertible securities and other rights (contingent
or otherwise) to purchase or otherwise acquire equity securities of the Company
are as set forth in Exhibit A. The designations, powers, preferences, rights,
privileges, qualifications, limitations and restrictions in respect of
Membership Interests are as set forth in the Operating Agreement and all such
designations, powers, preferences, rights, privileges, qualifications,
limitations and restrictions are valid, binding and enforceable in accordance
with all applicable laws (subject, as to enforcement, to the discretion of the
courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the rights of
creditors generally). Except as disclosed in Exhibit A or the Disclosure
Schedule, no person owns of record, or is known to the Company to own
beneficially, any Membership Interest of the Company; no subscription, warrant,
option, preemptive right, convertible security, agreement or other right
(contingent or otherwise) to purchase or otherwise acquire equity securities of
the Company is authorized or outstanding; and there is no commitment by the
Company to issue membership interests, subscriptions, warrants, options,
preemptive rights, convertible securities or other such rights or to distribute
to holders of any of its equity securities any evidence of indebtedness or
asset. An appropriate number of membership interests have been reserved for
issuance upon the conversion or exercise, as the case may be, of any of the
securities referred to in this Section.
5.03. Subsidiaries and Investments. The Company does not own, directly or
indirectly, any capital stock, or other equity ownership or proprietary
interest, in any other corporation, association, trust, partnership, joint
venture or other entity.
5.04. Financial Statements. The audited consolidated balance sheet of the
Company as of December 31, 1996 (the "1996 Balance Sheet") and the related
consolidated statements of operations, shareholders equity and statements of
cash flow for the fiscal year ended December 31, 1996 certified by Comprehensive
Systems, Inc. and the unaudited consolidated balance sheet (the "February
Balance Sheet") of the Company as of February 28, 1997 (the "Balance Sheet
Date"), and the related unaudited consolidated statements of operations,
shareholders equity and statements of cash flow for the two month period ending
February 28, 1997 (collectively, the "Financial Statements"), are attached
hereto as Exhibit B. Except as may be otherwise indicated herein and therein and
in the notes thereto, the Financial Statements have been prepared in conformity
with Generally Accepted Accounting Principles consistently applied and present
fairly in all material respects the financial position and results of operations
of the Company as of the dates and for the periods indicated.
5.05 Keeping of Records and Books of Account. The Company has maintained
adequate records and books of account, in which complete entries have been made
in accordance with Generally Accepted Accounting Principles, consistently
applied, reflecting all financial transactions of the Company and in which, for
each fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business have been made. The records and books of account of the Company are in
good order and have been properly maintained in all material respects.
5.06 Access to Corporate Documents. The minute books of the Company and of
its Subsidiaries have been made available to White Cloud and such minute books
reflect in all material respect the meetings and actions of the managers,
member-managers and Members of the Company or of its Subsidiaries, respectively,
since the time of their respective formation and reflect all transactions
referred to in such minutes accurately in all material respects.
5.07. Absence of Undisclosed Liabilities. The Company has no material
outstanding claims, liabilities, obligations or indebtedness, contingent or
otherwise, whether asserted or unasserted, except as set forth in the 1996
Balance Sheet, or referred to in any of the notes thereto. All liabilities of
the Company and its Subsidiaries incurred subsequent to the Balance Sheet Date
have been incurred in the ordinary course of business and do not involve
borrowings which individually exceed $5,000 and which do not exceed $10,000 in
the aggregate. Neither the Company nor its Subsidiaries is in default in respect
of the terms or conditions of any indebtedness.
5.08. Absence of Changes. Since the Balance Sheet Date, there has not been
any material change in the condition, financial or otherwise, of the Company or
of any of its Subsidiaries, which materially adversely affects the ability of
the Company or the ability of any of its Subsidiaries to conduct its operations
s currently conducted and neither the Company nor any of its Subsidiaries have
incurred any material liabilities or obligations, direct or contingent, not in
the ordinary course of business since such Balance Sheet Date.
5.09. Accounts Receivable. The accounts receivable of the Company reflected
on the 1996 Balance Sheet, and all accounts receivable of the Company arising
since the 1996 Balance Sheet Date, are not subject to discount (other than
discounts and allowances provided by normal trade terms), rebate or offset and
have arisen from bona fide transactions in the ordinary course of business.
5.10. Title to Properties; Encumbrances.
(i) Except for properties and assets reflected in the 1996 Balance Sheet or
acquired since the 1996 Balance Sheet Date which have been sold or otherwise
disposed of in the ordinary course of business since such date, the Company and
each of its Subsidiaries has good, valid and marketable title to (A) all of its
properties and assets (personal, tangible and intangible), reflected as owned in
the 1996 Balance Sheet, except as indicated in the notes thereto; and (B) all
the properties and assets purchased or otherwise acquired by the Company or by
any Subsidiary since the 1996 Balance Sheet Date; in each case clear of all
encumbrances, liens, claims, charges or other restrictions of whatever kind or
character ("Liens"), except for (1) liens reflected in the 1996 Balance Sheet,
(2) liens for current taxes, assessments or governmental charges or levies on
property not yet due and delinquent and (3) such Liens as do not materially and
adversely affect the value of such property and do not materially interfere with
the use made or proposed to be made of such property by the Company.
(ii) The Company and its Subsidiaries own no real property. To the best of
the Company's knowledge after due inquiry, there are no condemnation,
environmental, zoning or other land use regulation proceedings, either
instituted or planned to be instituted, which would materially and adversely
affect the use or operation of the Company's and its Subsidiaries' properties
and assets for their respective intended uses and purposes or the value of such
properties, and the Company and its Subsidiaries have not received notice of any
special assessment proceedings which would affect such properties and assets.
5.11. Condition of Equipment, Machinery and Fixtures. The equipment,
machinery and fixtures leased and/or owned by the Company and utilized by the
Company and its Subsidiaries in the conduct of their business are in good
operating condition and are fit for their intended purpose.
5.12. Leased Property. Each real property and personal property lease or
sublease to which the Company or any of its Subsidiaries is a party is valid and
binding and is in full force and effect; all rent and other sums, and charges
payable by the Company or by each Subsidiary as lessee or sublessee thereunder,
are current through the last day of the immediately preceding calendar month; no
notice of default or termination under any lease is outstanding; no termination
event or condition or uncured default on the part of the Company or any
Subsidiary, or the landlord, exists under any lease; the Company and its
Subsidiaries currently occupy or use the premises leased pursuant to the real
property leases; and no event has occurred and no condition exists which with
the giving of notice or the lapse of time or both, would constitute such a
default or termination event or condition. Neither the Company, nor its
Subsidiaries, nor any of the officers or directors of the Company or of its
Subsidiaries has any ownership, financial or other interest in the landlord
under any real property lease. Each lease was negotiated on an arm's-length
basis.
5.13. Inventories. All inventory reflected in the 1996 Balance Sheet of the
Company and of its Subsidiaries and all inventory acquired by the Company and by
its Subsidiaries subsequent to the 1996 Balance Sheet Date, were acquired
subsequent to the 1996 Balance Sheet Date, were acquired and have been
maintained in accordance with the regular business practices of the relevant
entity, consists of items of quality and quantity reasonably expected to be
useable or saleable in the ordinary course of business consistent with past
practice, are valued in accordance with United States Generally Accepted
Accounting Principles, and such inventory which is known or reasonably believed
to be obsolete or slow moving has been adequately reserved to reduce such
inventory to net realizable value. Subject to amounts reserved therefor on the
Financial Statements, the values at which all inventories of the Company and of
its Subsidiaries (collectively, the "Inventories") are carried on the Financial
Statements reflect the historical inventory valuation policy of the Company and
of its Subsidiaries of stating such Inventories. at the lower of cost
(determined on the first-in, first-out method) or market value and all
Inventories are valued such that the Company and its Subsidiaries will earn
its/their customary gross margins thereon. The Company has good and marketable
title to the Inventories free and clear of all encumbrances. The Inventories do
not consist of any items held on consignment. The Company is under no obligation
or liability with respect to accepting returns of items of Inventory or
merchandise in the possession of its customers other than in the ordinary course
of business consistent with past practice. No clearances or extraordinary sale
of the Inventories has been conducted since the Balance Sheet Date. Neither the
Company or any of its Subsidiaries has manufactured Inventory for sale which is
not of a quality and quantity usable in the ordinary course of business
consistent with past practice and within a reasonable period of time nor has the
Company or any of its Subsidiaries changed the price of any Inventory except (i)
for reductions to reflect any reduction in the cost thereof to the Company or to
any of its Subsidiaries; (ii) for reductions and increases responsive to normal
competitive conditions and consistent with the Company's or the Subsidiaries'
past sales practices; and (iii) to reflect any increase in the cost thereof to
the Company or to the Subsidiaries. The Inventories are in good and merchantable
condition in all material respects, are suitable and usable for the purposes for
which they are intended and are in a condition such that they can be sold in the
ordinary course of business consistent with past practice.
5.14. Patents, Trademarks and Copyrights, Etc. The Company and its
Subsidiaries own or are licensed or otherwise entitled to use all patents,
trademarks, trade names, service marks, copyrights, technology, know-how,
processes and other intellectual property used in the conduct of its business as
currently conducted. The Company and its Subsidiaries have received no notice of
any claims, and have no knowledge of any threatened claims, and know of no facts
which would form the basis of any claim, asserted by any person, to the effect
that the sale or use of any product or process now used or offered by the
Company or any Subsidiary infringes on any patents or infringes upon the use of
any such trademarks, trade names, service marks, copyrights, technology,
know-how, processes or other intellectual property of another person or
challenges or questions the validity or effectiveness of any such license or
agreement. To the Company's knowledge, the sale and use of any such products and
processes by the Company and its Subsidiaries, and the use of any such patents,
trademarks, trade names, service marks, copyrights, technology, know-how,
processes or other intellectual property by the Company and its Subsidiaries,
does not infringe on the rights of any person.
5.15. Litigation. There is no action, suit, investigation, customer
complaint, claim or proceeding at law or in equity by or before any arbitrator,
governmental instrumentality or other agency now pending or, to the Company's
knowledge, threatened against or affecting the Company or any Subsidiary, nor,
to the best of the Company's knowledge, does there exist any basis therefor.
Neither the Company nor any Subsidiary is subject to any judgment, order,
writ, injunction or decree of any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
5.16. Non-Defaults; Non-Contravention. Neither the Company nor its
Subsidiaries is in default in the performance or observance of any obligation
(i) under its Certificate of Formation, as amended, or its Operating Agreement,
or any indenture, mortgage, contract, purchase order or other agreement or
instrument to which the Company is a party or by which it or any of its property
is bound or affected; or (ii) with respect to any order, writ, injunction or
decree of any court of any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, except for such defaults as would not, individually or in the
aggregate, result in a material adverse effect on the business or operations of
the Company as a whole, and there exists no condition, event or act which
constitutes, nor which after notice, the lapse of time or both, would
constitute, a material default under any of the foregoing.
5.17. Employment of Officers, Employees and Consultants. To the Company's
knowledge, no third party may assert any valid claim against the Company or its
Subsidiaries with respect to the (i) continued employment by, or association
with, the Company or its Subsidiaries of any of its present officers, employees
or consultants; or (ii) the use by the Company or its Subsidiaries of any
information which the Company or its Subsidiaries would be prohibited from using
under any prior agreements or arrangements or any laws applicable to unfair
competition, trade secrets or proprietary information.
5.18. Taxes. The Company and its Subsidiaries have filed all federal,
state, local and foreign tax returns which are required to be filed by them or
have requested extensions thereof, and all such returns are true and correct in
all material respects. The Company and its Subsidiaries have paid all taxes
pursuant to such returns or pursuant to any assessments received by them and
have withheld all amounts which they are obligated to withhold from amounts
owing to any employee, creditor or third party. The tax returns of the Company
and of its Subsidiaries have never been audited by any state, local or federal
authorities. The Company and its Subsidiaries have not waived any statute of
limitations with respect to taxes or agreed to any extension of time with
respect to any tax assessment or deficiency. All tax elections have been made by
the Company and its Subsidiaries in accordance with generally accepted
practices. No deficiency assessment with respect to or proposed adjustment of
the Company's and its Subsidiaries federal, state, county or local taxes is
pending or, to the best of the Company's knowledge, threatened. There is no tax
lien, whether imposed by any federal, state, county or local taxing authority,
outstanding against the assets, properties or business of the Company or of its
Subsidiaries.
5.19. Agreements. Except as set forth in the Disclosure Schedule, neither
the Company nor any Subsidiary is a party to any written or oral contract not
made in the ordinary course of business and, whether or not made in the ordinary
course business, neither the Company nor any Subsidiary is a party to any
written or oral (i) collective bargaining agreement or any other contract with
any labor union; (ii) contract for the future purchase of fixed assets or for
the future purchase of materials, supplies or equipment in excess of $10,000;
(iii) contract for the employment of any officer, key employee or other key
person on a full-time basis or any contract with any person on a consulting
basis requiring the payment of any amount in the future; (iv) bonus, pension,
profit-sharing, vacation, deferred compensation, retirement, stock purchase,
stock option, hospitalization, health, medical insurance, life insurance,
disability insurance or similar plan, contract or understanding in effect with
respect to employees, or any other employee benefit plan, including, without
limitation, any employee benefit plan" as defined in Section 3(l) of the
Employee Retirement Income Security Act of 1974 and the rules and regulations
thereunder, as amended from time to time (collectively, "ERISA"), to which the
Company or any Subsidiary contributes or is a party, or is bound, or under which
it may have liability and under which employees or former employees of the
Company or any Subsidiary (or their beneficiaries) are eligible to participate
or derive a benefit; (v) agreement, indenture or other instrument relating to
the borrowing of money or to the mortgaging, pledging or otherwise placing a
lien on any assets ofthe Company or of any Subsidiary; (vi) guaranty of any
obligation for borrowed money or otherwise; (vii) agreement or other commitment
for capital expenditures in excess of $10,000; (viii) contract or agreement
under which the Company or any Subsidiary is obligated to pay any broker's fees,
finder's fees or any such similar fees, to any third party other than in
conjunction with the transactions contemplated by this Agreement; (ix) sales
agency, marketing, distributorship or continuing brokerage agreements or
franchises between the Company or any Subsidiary and any other person; (x)
partnership or joint venture agreement of any kind to which the Company or any
Subsidiary or their assets may be bound; (xi) licenses to or from others with
respect to the business or assets of the Company or any Subsidiary; (xii)
contracts or commitments limiting the freedom of the Company or any Subsidiary
or any of their officers or employees to compete with respect to the business of
the Company or any Subsidiary in any geographic area or with any person or
otherwise restricting the conduct of the Company's business or that of any
Subsidiary; (xiii) contract, agreement, arrangement, or understanding with
respect to the sale of the business of the Company or of any Subsidiary or of a
substantial portion of the Company's or any Subsidiary's assets to any third
party, including any option agreement for any such sale or disposition; or (xiv)
contract, agreement, arrangement or understanding which is material to the
business of the Company or to the business of any Subsidiary. Each material
contract of the Company or of any of its Subsidiaries is valid and binding on
the Company or on such Subsidiary (subject, as to enforcement, to the discretion
of the courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the rights of
creditors generally), and neither the Company nor any of its Subsidiaries has
received notice that anysuch contract is not binding on any party thereto. The
Company and its Subsidiaries have performed in all material respects all
obligations to have been performed on such contracts through the date hereof,
and neither the Company nor any Subsidiary is in default in any material respect
under any such contract.
5.20. Compliance with Laws; Environmental Matters, Licenses, Etc. The
Company and its Subsidiaries have received no notice of any violation of, or
noncompliance with, any federal, state, local or foreign laws, ordinances,
regulations or orders (including, without limitation, those relating to
environmental protection, occupational safety and health and other labor laws,
ERISA, federal drug laws, federal securities laws, equal employment opportunity,
consumer protection, credit reporting, "truth-in-lending," and warranties and
trade practices) applicable to its business or the business of any Subsidiary,
the violation of, or noncompliance with which, would have a material adverse
effect on the Company's business or operations, taken as a whole, or that of any
Subsidiary, and the Company knows of no facts or set of circumstances which
would give rise to such a notice. The Company and its Subsidiaries have all
licenses and permits and other governmental certificates, authorizations and
permits and approvals (collectively, "Licenses") required by every federal,
state and local government or regulatory body for the operation of their
business and the use of their properties, the absence of which would have a
material adverse affect on the business of the Company, taken as a whole. The
Licenses are in full force and effect and no violations are or have been
recorded in respect of any License and no proceeding is pending or, to the
Company's knowledge threatened to revoke or limit any thereof.
The Company and its Subsidiaries have not received any written opinion or
memorandum from legal counsel providing that it/they has taken any action which
has resulted in, or is reasonably likely to result in, the Company or any of its
Subsidiaries incurring any liability which may be material to its/their
respective business, prospects, financial condition, operations, property or
affairs.
5.21. Authorization of Agreement, Etc. Each of this Agreement, the
Registration Rights Agreement and all other agreements or documents required to
be executed and delivered by the Company in connection with the transactions
contemplated by this Agreement (collectively the "Documents") has been or will
be duly executed and delivered by the Company and the execution, delivery and
performance by the Company of this Agreement and the Documents has been duly
authorized by all requisite corporate action by the Company; and each
constitutes, or will constitute, the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, except as enforce ability may
be limited by bankruptcy, insolvency, reorganization, usury or other similar
laws affecting the enforcement of creditors' rights generally and except as
rights to indemnification hereunder may be limited by applicable law. The
execution, delivery and performance of this Agreement will not (i) violate any
provision of law or statute or any order of any court or other agency of
government binding on the Company or its Subsidiaries; or (ii) conflict with or
result in any breach of any of the terms, conditions or provisions of, or
constitute (with due notice or lapse of time or both) a default under, or result
in the creation of any lien, security interest, charge or encumbrance upon any
of the properties or assets of the Company or of its Subsidiaries under the
Certificate of Formation, as amended, or Operating Agreement or ByLaws of the
Company or of its Subsidiaries or any indenture, mortgage, lease agreement or
other agreement or instrument to which the Company or any of its Subsidiaries is
a party or by which it or any of its property is bound or affected, except for
such conflict, breach or default (x) as to which requisite waivers or consents
shall have been obtained by the Company or by its Subsidiaries and delivered to
White Cloud by the time of Closing or (y) which individually or int he aggregate
would not result in a material adverse effect on the business of the Company,
taken as a whole.
5.22. Related Transactions. Except as set forth in the Disclosure Schedule,
no current or former member, manager, member-manager, officer or employee of the
Company, nor any affiliate of any such person, is presently, or since the
inception of the Company has been, directly or indirectly, through his, her or
its affiliation with any other person or entity, a party to any loan from the
Company or from any of its Subsidiaries.
5.23. Intentionally Omitted.
5.24. Salaries and Bonuses. The Disclosure Schedule contains a true and
complete list of all current officers, managers, member managers and employees
of the Company and of its Subsidiaries who received during the fiscal year ended
December 31, 1996 remuneration from the Company or from any of its Subsidiaries
in excess of $50,000, together with the current aggregate base salary rate for
each such person.
5.25. Insurance. All insurable assets and properties of the Company and its
Subsidiaries are insured, for the benefit of the Company and its Subsidiaries,
against all risks usually insured against by persons owning or operating similar
properties in the localities where such properties are located, through
insurance policies all of which are in full force and effect. The Company and
each Subsidiary are insured, for their benefit, against all claims relating to
their services to the same extent that the risks of such claims are usually
insured against by persons providing similar services. Each of the insurance
policies referred to in this Section is issued by an insurer of recognized
responsibility, and neither the Company nor its Subsidiaries has received any
notice or threat of the cancellation or nonrenewal of any such policy. The
Company will make available to the White Cloud, upon its request, a list of all
insurance coverage carried by the Company or its Subsidiaries, the carrier and
the terms and amount of coverage.
5.26. Employee Benefit Plans.
(i) Welfare Plans. Each welfare plan of the Company and its Subsidiaries is
in compliance with the applicable provisions of ERISA and the Internal Revenue
Code of 1986, as amended (the "Code"). The Company and each Subsidiary have no
contingent, future or other obligations or liabilities under or with respect to
any welfare plan which provides for the continuation of benefits at the expense
of the Company or any Subsidiary after retirement or other termination of
employment.
(ii) Pension Plans. Each pension plan of the Company and of each Subsidiary
is in compliance with the applicable provisions of ERISA and the Code including,
without limitation, any applicable minimum funding requirements. There have been
no reportable events within the meaning of Section 4043 of ERISA with respect to
any pension plan. In the event of the termination of all pension plans, the
Company and each Subsidiary would have no liability under Sections 4062, 4063 or
4064 of ERISA.
(iii) Effect of Transactions. The execution and delivery of this Agreement
by the Company and the consummation of the transactions contemplated hereby will
not involve any prohibited transactions with respect to the Company or any of
its Subsidiaries within the meaning of ERISA.
5.27. Brokers. The Company has not, nor have any of its Subsidiaries, or
any of its/their respective officers, directors, employees or shareholders,
employed any broker or finder in connection with the transactions contemplated
by this Agreement, other than Sands Brothers.
5.28. No Consents. No permit, consent, approval, authorization, order or
filing with any court or governmental authority is required to consummate the
transactions contemplated by this Agreement, except as required under applicable
state and federal securities laws with respect to the issuance of securities as
contemplated pursuant to the Watchout Transaction, the Goldpoint Transaction and
the Private Placement.
5.29. Employee Relations. Each of the Company and its Subsidiaries has
generally enjoyed a satisfactory employer-employee relationship with its
employees and is in material compliance with all federal, state, local, and
foreign laws and regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours. There are no pending
investigations involving the Company or any of its Subsidiaries by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state, local, or foreign laws and regulations.
There is no unfair labor practice charge or complaint against the Company or its
Subsidiaries pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or involving the Company or its Subsidiaries, or any predecessor entity, and
none has ever occurred. No representation question exists respecting the
employees of the Company or the employees of any of its Subsidiaries, and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company or its Subsidiaries. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company or any of its Subsidiaries. No labor dispute with the
employees of the Company or its Subsidiaries exists, or, is imminent.
5.30. Foreign Corrupt Practices Act. None of the Company, its Subsidiaries
nor to their knowledge any of their respective members, managers,
manager-members, officers, employees, agents or any other person acting on
behalf of the Company or any of its Subsidiaries has, directly or indirectly,
given or agreed to give any money, gift or similar benefit (other than legal
price concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer or supplier, or official or
employee of any governmental agency (domestic or foreign) or instrumentality of
any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who was, is, or may be in a
position to help or hinder the business of the Company or the business of any of
its Subsidiaries (or to assist the Company or any of its Subsidiaries in
connection with any actual or proposed transaction which (a) might subject the
Company or any of its Subsidiaries, or any other such person, to any damage or
penalty in any civil, criminal or governmental litigation or proceeding
(domestic or foreign); (b) if not given in the past, might have had a material
adverse effect on the assets, business or operations of the Company or of any of
its Subsidiaries; or (c) if not continued in the future, might adversely affect
the assets, business, operations or prospects of the Company and of its
Subsidiaries, taken as a whole. The Company believes that its and its
Subsidiaries' international accounting controls are sufficient to cause the
Company and its Subsidiaries to comply with the Foreign Corrupt Practices Act of
1977, as amended.
5.31. Affiliations. Except as set forth in the Disclosure Schedule, member
or manager of the Company or of any of its Subsidiaries, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under the
Securities Act of 1933, as amended) of any such person or entity or of the
Company or its Subsidiaries, has or has had, either directly or indirectly (i)
an interest in any person or entity which (A) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company or its Subsidiaries; or (B) purchases from or sells or furnishes to
the Company or any of its Subsidiaries any goods or services; or (ii) a
beneficiary interest in any contract or agreement to which the Company or any of
its Subsidiaries is a party or by which it may be bound or affected. Except as
set forth in the Disclosure Schedule, there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company or
any of its Subsidiaries, and any member or manager of the Company or any of its
Subsidiaries, or any affiliate or associate of any such person or entity.
5.32. Limited Liability Company Representations. Any certificate signed by
any manager or manager-member of the Company or by an officer of any of the
Company's Subsidiaries and delivered to White Cloud or to the White Cloud's
counsel pursuant to this Agreement, shall be deemed a representation and
warranty by the Company and by any of its Subsidiaries to White Cloud as to the
matters covered thereby.
5.33. Disclosure. Neither this Agreement nor any other document,
certificate or written statement to be furnished to White Cloud by or on behalf
of the Company in connection with the transactions contemplated hereby contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained herein
and therein not misleading. There is no fact known to the Company which
materially adversely affects the business operations, affairs, prospects,
conditions, properties or assets of the Company or of its Subsidiaries
(hereinafter "Material Facts") which has not been set forth in this Agreement.
To the extent Material Facts become known to the Company subsequent to the date
hereof and up and through the Closing Date, such facts will be set forth in the
documents, certificates or statements furnished to White Cloud by or on behalf
of the Company pursuant hereto.
SECTION VI
Representations and Warranties of White Cloud
White Cloud hereby represents and warrants to, and agrees with the Company
and the Selling Members as follows:
6.01. Organization; Etc. White Cloud is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. White Cloud has full corporate power and authority to carry on
its business as such business is now being conducted and to own the properties
and assets it now owns.
6.02. Authority of White Cloud. White Cloud has full corporate power and
authority to enter into this Agreement and the Documents applicable to it and to
consummate the transactions contemplated hereby and thereby. The Board of
Directors and shareholders of White Cloud (to the extent, if any, required) have
taken all action required to authorize the execution and delivery of this
Agreement and the Documents by White Cloud, the issuance of the New Shares, the
performance of the obligations of White Cloud hereunder and thereunder and the
consummation by White Cloud of the transactions contemplated hereby and thereby.
No other corporate proceedings on the part of White Cloud are necessary to
authorize the execution and delivery by White Cloud of this Agreement or the
Documents or the performance by either White Cloud of its obligations hereunder
or thereunder. This Agreement is, and each Document will be, a valid and binding
agreement of White Cloud, enforceable against it in accordance with their terms.
6.03. No Violation. Neither the execution and delivery of this Agreement or
any of the Documents, the performance by White Cloud of its obligation hereunder
and thereunder nor the consummation of the transactions contemplated hereby or
thereby will, directly or indirectly, with or without the giving of notice or
lapse of time, or both: (i) violate any provisions of the Certificate of
Incorporation or By-laws of White Cloud; (ii) violate, or be in conflict with,
or constitute a default under, or cause or permit the termination or the
acceleration of the maturity of, any agreement, lease, mortgage, debt or
obligation of White Cloud or require the payment, any pre-payment or other
penalty with respect thereof; (iii) require notice to or the consent of any
party to any agreement or commitment to which either White Cloud is a party, or
by which it or its properties is bound or subject, including without limitation,
any lease, license or any agreement containing a right of first refusal or
similar right or permitting any such party to re-negotiate, receive a refund,
modify or otherwise change any agreement or commitment; (iv) result in the
creation or imposition of any security interest, lien, claim or other
encumbrance upon any property or assets of White Cloud, as the case may be,
under any agreement or commitment to which it is a party or by which it or its
properties is bound or subject; or (v) violate any statute or law or any
judgment, decree, order, regulation or rule of any court or governmental
authority to which either White Cloud or its properties is bound or subject.
6.04. Finders' and Investment Bankers' Fees. There is no investment banker,
broker, finder or other intermediary which has been retained by White Cloud who
might be entitled to any fee or commission from Selling Members or any of his
affiliates in connection with the transactions contemplated by this Agreement or
the Documents, except for Sands Brothers and WCM Investments, Inc.
6.05. Investment Intent. White Cloud is acquiring the Selling Members'
Interests for investment purposes only and not with a view to a sale or
distribution thereof within the meaning of the Securities Act.
6.06. New Shares. When issued to the Selling Members, the New Shares will
be duly and validly issued, fully paid and non-assessable shares of White
Cloud's Common Stock.
6.07. Securities Law Compliance. White Cloud will have filed all reports
and other documents required to be filed by it with the Securities and Exchange
Commission under the Act and the Securities Exchange Act of 1934, as amended
(the "Exchange Act") within 30 days of the Closing and, to White Cloud's
knowledge, each such report or other document, at the time it was filed and when
filed, did not and will not contain any untrue statement of a material fact or
omitted to state a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading. To White Cloud's best knowledge, no event has occurred or
is likely to occur that required or would require an amendment to any report or
document referred to in this Section 6.07 that has not been filed or distributed
as required. White Cloud has made and will make , within 30 days of Closing, all
reports and provided all information and materials to shareholders and to the
Securities and Exchange Commission required by law to be made or provided by
White Cloud.
6.08. Organization; Authority.
(a) White Cloud, and each of the companies under its control (each a "White
Cloud Subsidiary, and collectively, the "White Cloud Subsidiaries") is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority to carry on its business as such business is now being conducted and
to own and lease the properties it now owns or leases. White Cloud is duly
qualified to do business in the states or jurisdictions set forth in the White
Cloud Disclosure Schedule. Except as set forth in the White Cloud Disclosure
Schedule, there is no jurisdiction in which the conduct of White Cloud's
business or ownership or leasing of its properties requires it to be qualified
to do business as a foreign corporation, except where such qualifications have
been obtained or the failure to be so qualified would not have a material
adverse effect on the business, financial condition or prospects of White Cloud
taken as a whole. White Cloud has all requisite power and authority to execute
and deliver this Agreement and to carry out the transactions contemplated by
this Agreement.
(b) The corporate records of White Cloud have been delivered or made
available to the Company. Such records are complete, correct and current in all
material respects, with all necessary signatures, and have been maintained in
accordance with good business practices in all material respects.
6.09. Capitalization. Exhibit D hereto lists the authorized and the
equitable ownership of the capital stock of White Cloud (the "Capital Stock")
and the name and number of shares of Capital Stock owned by each shareholder of
White Cloud as of a specified record date. Each such share is validly paid,
fully paid and nonassessable. Except as set forth in Exhibit D, there are no
other classes of capital stock or other securities authorized by White Cloud.
(ii) White Cloud has no obligation (contingent or otherwise) to pay any
dividend or make any other distribution in respect of any of its capital stock.
White Cloud is not a party to, and has no knowledge of, voting trusts or
agreements, Members' agreements, pledge agreements, buy- sell agreements, rights
of first refusal or proxies relating to any securities of White Cloud (whether
or not White Cloud is a party thereto). All of the outstanding securities of
White Cloud were issued, in all material respects, in compliance with all
applicable federal and state securities laws. White Cloud has no obligation
(contingent or otherwise) to repurchase, redeem or otherwise acquire any shares
of its capital stock.
(iii) The Members of record and the holders of subscriptions, warrants,
options, preemptive rights, convertible securities and other rights (contingent
or otherwise) to purchase or otherwise acquire equity securities of White Cloud,
and the number of shares of capital stock of White Cloud and the number of such
subscriptions, warrants, options, preemptive rights, convertible securities and
other such rights held by each, are as set forth in Exhibit F. The designations,
powers, preferences, rights, privileges, qualifications, limitations and
restrictions in respect of each class and series of authorized capital stock of
White Cloud are as set forth in the Certificate of Incorporation and all such
designations, powers, preferences, rights, privileges, qualifications,
limitations and restrictions are valid, binding and enforceable in accordance
with all applicable laws (subject, as to enforcement, to the discretion of the
courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the rights of
creditors generally). Except as disclosed in Exhibit F or the White Cloud
Disclosure Schedule, no person owns of record, or is known to White Cloud to own
beneficially, any share of capital stock of White Cloud; no subscription,
warrant, option, preemptive right, convertible security, agreement or other
right (contingent or otherwise) to purchase or otherwise acquire equity
securities of White Cloud is authorized or outstanding; and there is no
commitment by White Cloud to issue shares, subscriptions, warrants, options,
preemptive rights, convertible securities or other such rights or to distribute
to holders of any of its equity securities any evidence of indebtedness or
asset. An appropriate number of shares of the Common Stock have been reserved
for issuance upon the conversion or exercise, as the case may be, of any of the
securities referred to in this Section.
6.10. Subsidiaries and Investments. Except as set forth in the White Cloud
Disclosure Schedule, White Cloud does not own, directly or indirectly, any
capital stock, or other equity ownership or proprietary interest, in any other
corporation, association, trust, partnership, joint venture or other entity.
Each White Cloud Subsidiary is wholly owned by White Cloud.
6.11. Financial Statements. The audited consolidated balance sheet of White
Cloud as of June 30, 1996 (the "White Cloud 1996 Balance Sheet") and the related
consolidated statements of operations, shareholders equity and statements of
cash flow for the fiscal year ended December 31, 1996 certified by Xxxxxxx X.
Xxxxxxx & Company and the unaudited consolidated balance sheet (the "White Cloud
April Balance Sheet") of White Cloud as of April 30, 1997 (the "White Cloud
Balance Sheet Date"), and the related unaudited consolidated statements of
operations, shareholders equity and statements of cash flow for the two month
period ending April
30, 1997 (collectively, the "White Cloud Financial Statements"), are attached
hereto as Exhibit F. Except as may be otherwise indicated herein and therein and
in the notes thereto, the White Cloud Financial Statements have been prepared in
conformity with Generally Accepted Accounting Principles consistently applied
and present fairly in all material respects the financial position and results
of operations of White Cloud as of the dates and for the periods indicated.
6.12. Keeping of Records and Books of Account. White Cloud has maintained
adequate records and books of account, in which complete entries have been made
in accordance with Generally Accepted Accounting Principles, consistently
applied, reflecting all financial transactions of White Cloud and in which, for
each fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business have been made. The records and books of account of White Cloud are in
good order and have been properly maintained in all material respects.
6.13. Intentionally omitted.
6.14. Absence of Undisclosed Liabilities. White Cloud has no material
outstanding claims, liabilities, obligations or indebtedness, contingent or
otherwise, whether asserted or unasserted, except as set forth in the 1996
Balance Sheet, or referred to in any of the notes thereto. All liabilities of
White Cloud and its White Cloud Subsidiaries incurred subsequent to the White
Cloud Balance Sheet Date have been incurred in the ordinary course of business
and do not involve borrowings which individually exceed $5,000 and which do not
exceed $10,000 in the aggregate. Neither White Cloud nor its White Cloud
Subsidiaries is in default in respect of the terms or conditions of any
indebtedness.
6.15. Absence of Changes. Since the White Cloud Balance Sheet Date, there
has not been any material change in the condition, financial or otherwise, of
White Cloud or of any of its White Cloud Subsidiaries, which materially
adversely affects the ability of White Cloud or the ability of any of its White
Cloud Subsidiaries to conduct its operations as currently conducted and neither
White Cloud nor any of its White Cloud Subsidiaries have incurred any material
liabilities or obligations, direct or contingent, not in the ordinary course of
business since such White Cloud Balance Sheet Date.
6.16. Title to Properties; Encumbrances.
(i) Except for properties and assets reflected in the White Cloud 1996
Balance Sheet or acquired since the White Cloud 1996 Balance Sheet Date which
have been sold or otherwise disposed of in the ordinary course of business since
such date, White Cloud and each of its White Cloud Subsidiaries has good, valid
and marketable title to (A) all of its properties and assets (personal, tangible
and intangible), reflected as owned in the White Cloud Balance Sheet, except as
indicated in the notes thereto; and (B) all the properties and assets purchased
or otherwise acquired by White Cloud or by any White Cloud Subsidiary since the
White Cloud 1996 Balance Sheet Date; in each case clear of all encumbrances,
liens, claims, charges or other restrictions of whatever kind or character
("White Cloud Liens"), except for (1) liens reflected in the White Cloud 1996
Balance Sheet, (2) liens for current taxes, assessments or governmental charges
or levies on property not yet due and delinquent and (3) such White Cloud Liens
as do not materially and adversely affect the value of such property and do not
materially interfere with the use made or proposed to be made of such property
by White Cloud.
(ii) White Cloud and its White Cloud Subsidiaries own no real property. To
the best of White Cloud's knowledge after due inquiry, there are no
condemnation, environmental, zoning or other land use regulation proceedings,
either instituted or planned to be instituted, which would materially and
adversely affect the use or operation of White Cloud's and its White Cloud
Subsidiaries' properties and assets for their respective intended uses and
purposes or the value of such properties, and White Cloud and its White Cloud
Subsidiaries have not received notice of any special assessment proceedings
which would affect such properties and assets.
6.17. Litigation. There is no action, suit, investigation, customer
complaint, claim or proceeding at law or in equity by or before any arbitrator,
governmental instrumentality or other agency now pending or, to White Cloud's
knowledge, threatened against or affecting White Cloud or any White Cloud
Subsidiary, nor, to the best of White Cloud's knowledge, does there exist any
basis therefor. Neither White Cloud nor any White Cloud Subsidiary is subject to
any judgment, order, writ, injunction or decree of any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
6.18. Non-Defaults; Non-Contravention. Neither White Cloud nor its White
Cloud Subsidiaries is in default in the performance or observance of any
obligation (i) under its Certificate of Incorporation, as amended, or its
By-laws, nor any indenture, mortgage, contract, purchase order or other
agreement or instrument to which White Cloud is a party or by which it or any of
its property is bound or affected; nor (ii) with respect to any order, writ,
injunction or decree of any court of any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, except for such defaults as would not, individually or in
the aggregate, result in a material adverse effect on the business or operations
of White Cloud as a whole, and there exists no condition, event or act which
constitutes, nor which after notice, the lapse of time or both, would
constitute, a material default under any of the foregoing.
6.19. Employment of Officers, Employees and Consultants. To White Cloud's
knowledge, no third party may assert any valid claim against White Cloud or its
White Cloud Subsidiaries with respect to the (i) continued employment by, or
association with, White Cloud or its White Cloud Subsidiaries of any of its
present officers, employees or consultants; or (ii) the use by White Cloud or
its White Cloud Subsidiaries of any information which White Cloud or its White
Cloud Subsidiaries would be prohibited from using under any prior agreements or
arrangements or any laws applicable to unfair competition, trade secrets or
proprietary information.
6.20. Taxes. White Cloud and its White Cloud Subsidiaries have filed all
federal, state, local and foreign tax returns which are required to be filed by
them or have requested extensions thereof, and all such returns are true and
correct in all material respects. White Cloud and its White Cloud Subsidiaries
have paid all taxes pursuant to such returns or pursuant to any assessments
received by them and have withheld all amounts which they are obligated to
withholdfrom amounts owing to any employee, creditor or third party. The tax
returns of White Cloud and of its White Cloud Subsidiaries have never been
audited by any state, local or federal authorities. White Cloud and its White
Cloud Subsidiaries have not waived any statute of limitations with respect to
taxes or agreed to any extension of time with respect to any tax assessment or
deficiency.
All tax elections have been made by White Cloud and its White Cloud
Subsidiaries in accordance with generally accepted practices. No deficiency
assessment with respect to or proposed adjustment of White Cloud's and its White
Cloud Subsidiaries federal, state, county or local taxes is pending or, to the
best of White Cloud's knowledge, threatened. There is no tax lien, whether
imposed by any federal, state, county or local taxing authority, outstanding
against the assets, properties or business of White Cloud or of its White Cloud
Subsidiaries. Neither White Cloud nor any of its White Cloud Subsidiaries nor
any of its/their respective present or former Members has ever filed an election
pursuant to Section 1362 of the Code, that White Cloud or any of its White Cloud
Subsidiaries be taxed as an S corporation.
6.21. Agreements. Except as set forth in the White Cloud Disclosure
Schedule, neither White Cloud nor any White Cloud Subsidiary is a party to any
written or oral contract not made in the ordinary course of business and,
whether or not made in the ordinary course business, neither White Cloud nor any
White Cloud Subsidiary is a party to any written or oral (i) collective
bargaining agreement or any other contract with any labor union; (ii) contract
for the future purchase of fixed assets or for the future purchase of materials,
supplies or equipment in excess of $10,000; (iii) contract for the employment of
any officer, key employee or other key person on a full-time basis or any
contract with any person on a consulting basis requiring the payment of any
amount in the future; (iv) bonus, pension, profit-sharing, vacation, deferred
compensation, retirement, stock purchase, stock option, hospitalization, health,
medical insurance, life insurance, disability insurance or similar plan,
contract or understanding in effect with respect to employees, or any other
employee benefit plan, including, without limitation, any employee benefit plan"
as defined in Section 3(l) of the Employee Retirement Income Security Act of
1974 and the rules and regulations thereunder, as amended from time to time
(collectively, "ERISA"), to which White Cloud or any White Cloud Subsidiary
contributes or is a party, or is bound, or under which it may have liability and
under which employees or former employees of White Cloud or any White Cloud
Subsidiary (or their beneficiaries) are eligible to participate or derive a
benefit; (v) agreement, indenture or other instrument relating to the borrowing
of money or to the mortgaging, pledging or otherwise placing a lien on any
assets of White Cloud or of any White Cloud Subsidiary; (vi) guaranty of any
obligation for borrowed money or otherwise; (vii) agreement or other commitment
for capital expenditures in excess of $10,000; (viii) contract or agreement
under which White Cloud or any White Cloud Subsidiary is obligated to pay any
broker's fees, finder's fees or any such similar fees, to any third party other
than in conjunction with the transactions contemplated by this Agreement; (ix)
sales agency, marketing, distributorship or continuing brokerage agreements or
franchises between White Cloud or any White Cloud Subsidiary and any other
person; (x) partnership or joint venture agreement of any kind to which White
Cloud or any White Cloud Subsidiary or their assets may be bound; (xi) licenses
to or from others with respect to the business or assets of White Cloud or any
White Cloud Subsidiary; (xii) contracts or commitments limiting the freedom of
White Cloud or any White Cloud Subsidiary or any of their officers or employees
to compete with respect to the business of White Cloud or any White Cloud
Subsidiary in any geographic area or with any person or otherwise restricting
the conduct of White Cloud's business or that of any White Cloud Subsidiary;
(xiii) contract, agreement, arrangement, or understanding with respect to the
sale of the business of White Cloud or of any White Cloud Subsidiary or of a
substantial portion of White Cloud's or any White Cloud Subsidiary's assets to
any third party, including any option agreement for any such sale or
disposition; or (xiv) contract, agreement, arrangement or understanding which is
material to the business of White Cloud or to the business of any White Cloud
Subsidiary. Each material contract of White Cloud or of any of its White Cloud
Subsidiaries is valid and binding on White Cloud or on such White Cloud
Subsidiary (subject, as to enforcement, to the discretion of the courts in
awarding equitable relief and to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the rights of creditors
generally), and neither White Cloud nor any of its White Cloud Subsidiaries has
received notice that any such contract is not binding on any party thereto.
White Cloud and its White Cloud Subsidiaries have performed in all material
respects all obligations to have been performed on such contracts through the
date hereof, and neither White Cloud nor any White Cloud Subsidiary is in
default in any material respect under any such contract.
6.22. Compliance with Laws; Environmental Matters, Licenses, Etc. White
Cloud and its White Cloud Subsidiaries have received no notice of any violation
of, or noncompliance with, any federal, state, local or foreign laws,
ordinances, regulations or orders (including, without limitation, those relating
to environmental protection, occupational safety and health and other labor
laws, ERISA, federal drug laws, federal securities laws, equal employment
opportunity, consumer protection, credit reporting, "truth-in-lending," and
warranties and trade practices) applicable to its business or the business of
any White Cloud Subsidiary, the violation of, or noncompliance with which, would
have a material adverse effect on White Cloud's business or operations, taken as
a whole, or that of any White Cloud Subsidiary, and White Cloud knows of no
facts or set of circumstances which would give rise to such a notice. White
Cloud and its White Cloud Subsidiaries have all licenses and permits and other
governmental certificates, authorizations and permits and approvals
(collectively, "Licenses") required by every federal, state and local government
or regulatory body for the operation of their business and the use of their
properties, the absence of which would have a material adverse affect on the
business of White Cloud, taken as a whole. The Licenses are in full force and
effect and no violations are or have been recorded in respect of any License and
no proceeding is pending or, to White Cloud's knowledge threatened to revoke or
limit any thereof. White Cloud and its White Cloud Subsidiaries have not
received any written opinion or memorandum from legal counsel providing that
it/they has taken any action which has resulted in, or is reasonably likely to
result in, White Cloud or any of its White Cloud Subsidiaries incurring any
liability which may be material to its/their respective business, prospects,
financial condition, operations, property or affairs.
6.23. Authorization of Agreement, Etc. Each of this Agreement and all other
agreements or documents required to be executed and delivered by White Cloud in
connection with the transactions contemplated by this Agreement (collectively
the "Documents") has been or will be duly executed and delivered by White Cloud
and the execution, delivery and performance by White Cloud of this Agreement and
the Documents has been duly authorized by all requisite corporate action by
White Cloud; and each constitutes, or will constitute, the legal, valid and
binding obligation of White Cloud, enforceable in accordance with its terms,
except as enforce ability may be limited by bankruptcy, insolvency,
reorganization, usury or other similar laws affecting the enforcement of
creditors' rights generally and except as rights to indemnification hereunder
may be limited by applicable law. The execution, delivery and performance of
this Agreement will not (i) violate any provision of law or statute or any order
of any court or other agency of government binding on White Cloud or its White
Cloud Subsidiaries; or (ii) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute (with due notice or lapse of
time or both) a default under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of White
Cloud or of its White Cloud Subsidiaries under the Certificate of Incorporation,
as amended, or By-Laws of White Cloud or of its White Cloud Subsidiaries or any
indenture, mortgage, lease agreement or other agreement or instrument to which
White Cloud or any of its White Cloud Subsidiaries is a party or by which it or
any of its property is bound or affected, except for such conflict, breach or
default (x) as to which requisite waivers or consents shall have been obtained
by White Cloud or by its White Cloud Subsidiaries and delivered to White Cloud
by the time of Closing or (y) which individually or int he aggregate would not
result in a material adverse effect on the business of White Cloud, taken as a
whole.
6.24. Related Transactions. Except as set forth in the White Cloud
Disclosure Schedule, no current or former shareholder, director, officer or
employee of White Cloud, nor any affiliate of any such person, is presently, or
since the inception of White Cloud has been, directly or indirectly, through
his, her or its affiliation with any other person or entity, a party to any loan
from White Cloud or from any of its White Cloud Subsidiaries.
6.25. Registration Rights. Except as may exist with respect to the holders
of the New Shares, (i) no person or entity has any right to cause White Cloud to
effect the registration under the Securities Act of any securities of White
Cloud and (ii) no person or entity holds any anti-dilution or "piggy back"
rights with respect to any securities of White Cloud.
6.26. Salaries and Bonuses. The White Cloud Disclosure Schedule contains a
true and complete list of all current officers, directors and employees of White
Cloud and of its White Cloud Subsidiaries who received during the fiscal year
ended December 31, 1996 remuneration from White Cloud or from any of its White
Cloud Subsidiaries in excess of $50,000, together with the current aggregate
base salary rate for each such person.
6.27. Foreign Corrupt Practices Act. None of White Cloud, its White Cloud
Subsidiaries nor to their knowledge any of their respective officers, employees,
agents or any other person acting on behalf of White Cloud or any of its White
Cloud Subsidiaries has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price concessions to customers
in the ordinary course of business) to any customer, supplier, employee or agent
of a customer or supplier, or official or employee of any governmental agency
(domestic or foreign) or instrumentality of any government (domestic or foreign)
or any political party or candidate for office (domestic or foreign) or other
person who was, is, or may be in a position to help or hinder the business of
White Cloud or the business of any of its White Cloud Subsidiaries (or to assist
White Cloud or any of its White Cloud Subsidiaries in connection with any actual
or proposed transaction) which (a) might subject White Cloud or any of its White
Cloud Subsidiaries, or any other such person, to any damage or penalty in any
civil, criminal or governmental litigation or proceeding (domestic or foreign);
(b) if not given in the past, might have had a material adverse effect on the
assets, business or operations of White Cloud or of any of its White Cloud
Subsidiaries; or (c) if not continued in the future, might adversely affect the
assets, business, operations or prospects of White Cloud and of its White Cloud
Subsidiaries, taken as a whole. White Cloud believes that its and its White
Cloud Subsidiaries' international accounting controls are sufficient to cause
White Cloud and its White Cloud Subsidiaries to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
6.28. Affiliations. Except as set forth in the White Cloud Disclosure
Schedule, no officer, director or shareholder of White Cloud or officer,
director or shareholder of any of its White Cloud Subsidiaries, or any
"affiliate" or "associate" (as these terms are defined in Rule 405 promulgated
under the Securities Act of 1933, as amended) of any such person or entity or of
White Cloud or its White Cloud Subsidiaries, has or has had, either directly or
indirectly (i) an interest in any person or entity which (A) furnishes or sells
services or products which are furnished or sold or are proposed to be furnished
or sold by White Cloud or its White Cloud Subsidiaries; or (B) purchases from or
sells or furnishes to White Cloud or any of its White Cloud Subsidiaries any
goods or services; or (ii) a beneficiary interest in any contract or agreement
to which White Cloud or any of its White Cloud Subsidiaries is a party or by
which it may be bound or affected. Except as set forth in the White Cloud
Disclosure Schedule, there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among White Cloud or any of its White
Cloud Subsidiaries, and any officer, director, or principal Member of White
Cloud or any of its White Cloud Subsidiaries, or any affiliate or associate of
any such person or entity.
6.29. Corporate Representations. Any certificate signed by any officer of
White Cloud or by an officer of any of White Cloud's Subsidiaries and delivered
to the Company or to the Company's counsel pursuant to this Agreement, shall be
deemed a representation and warranty by White Cloud and by any of its White
Cloud Subsidiaries to the Company as to the matters covered thereby.
6.30. Disclosure. Neither this Agreement nor any other document,
certificate or written statement to be furnished to the Company by or on behalf
of White Cloud in connection with the transactions contemplated hereby contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained herein
and therein not misleading. There is no fact known to White Cloud which
materially adversely affects the business operations, affairs, prospects,
conditions, properties or assets of White Cloud or of its White Cloud
Subsidiaries (hereinafter "Material Facts") which has not been set forth in this
Agreement. To the extent Material Facts become known to White Cloud subsequent
to the date hereof and up and through the Closing Date, such facts will be set
forth in the documents, certificates or statements furnished to White Cloud by
or on behalf of White Cloud pursuant hereto.
6.31. No Consents. No permit, consent, approval, authorization, order or
filing with any court or governmental authority is required to consummate the
transactions contemplated by this Agreement, except as required under applicable
state and federal securities laws with respect to the issuance of securities as
contemplated pursuant to the Watchout Transaction, the Goldpoint Transaction and
the Private Placement.
ARTICLE VII
Conduct of Business Pending Closing
From and after the date hereof until the Closing, and except as otherwise
specifically contemplated by this Agreement and the Documents and the Schedules
and Exhibits hereto or thereto, or consented to or approved by White Cloud or
the Company, as the case may be, in writing, the Company shall, on the one hand,
and White Cloud shall, on the other hand, conform to the following:
7.01. Regular Course of Business. Except as otherwise contemplated by this
Agreement or to the extent waived by the other parties in writing, the parties
shall, carry on their respective businesses in the same manner as heretofore
conducted, and shall not engage in any transaction or activity, enter into any
agreement or make any commitment with or to any Selling Member or any manager,
manager-member, officer, director or employee of such party, or any person
affiliated with any of the foregoing, except in the ordinary course of business.
7.02. Amendments. No change or amendment shall be made in the Certificate
of Formation, Operating Agreement, By-laws or other governing instrument of the
Company or White Cloud.
7.03. Capital Changes. Neither White Cloud nor the Company shall issue or
sell rights (including, without limitation, conversion rights), options,
warrants to purchase or to subscribe to, or enter into any arrangement or
contract with respect to, any shares of any of its Stock or any other securities
of, or equity interest in, the Company or White Cloud.
7.04. Dividends; Redemptions. Neither White Cloud nor the Company shall
declare, pay or set aside for payment any dividend or other distribution in
respect to any of its Stock or Member Shares or directly or indirectly redeem,
purchase or otherwise acquire any shares of its equity securities.
7.05. Organization. Both White Cloud and the Company shall use their best
efforts to preserve their respective properties, assets, and legal and business
relationships with their respective employees, suppliers, customers and others
having business relations with them, respectively.
7.06. Contracts. Except for purchase and sales orders entered into in the
ordinary course of business, no contracts or commitments involving,
individually, in excess of $25,000 (or $50,000 in the aggregate), or having a
term of more than one (1) year, shall be entered into by or on behalf of the
Company or White Cloud, respectively, including without limitation, any contract
or commitment: (i) to acquire additional real property or any interest therein;
(ii) to dispose of, amend, modify, terminate or encumber any real property
lease, or any interest therein or sublease the premises demised thereunder;
(iii) to enter into any lease for additional real property; or (iv) to amend,
modify, extend, renew or waive any right with respect to any existing agreement
or arrangement involving (or which, as the result of such amendment,
modification, extension, renewal or waivers would involve) in excess of $25,000
or having an unexpired term in excess of one (1) year.
7.07. Consultation with White Cloud and the Company. To the fullest extent
practicable, the Company, on the one hand, shall cause its Managers, Manager-
Members, executive officers to consult with and consider the views of White
Cloud in operating its business through the Closing Date, and White Cloud, on
the other hand, shall, to the fullest extent practicable, cause its executive
officers to consult with and consider the views of the Company in operating its
business through the Closing Date.
7.08. Maintain Properties. Both White Cloud the Company will maintain their
respective properties and assets, whether owned or leased, in good repair, order
and condition, reasonable wear and tear excepted.
7.09. Compensation. Neither White Cloud nor the Company will grant any
increase in compensation to any manager, manager-member, officer, employee or
agent or enter into or amend any Plan or any employment or consulting agreement.
7.10. Indebtedness/Loans. Other than in connection with certain proposed
bridge financing to White Cloud, neither White Cloud nor the Company will
create, incur or assume any indebtedness (including without limitation, under
existing lines of credit and revolving loans) other than in the ordinary course
of business and in an amount not to exceed $50,000 in the aggregate, or
guarantee or otherwise become liable with respect to any indebtedness for
borrowed money. Neither White Cloud nor the Company will make any capital
expenditures in excess of $50,000 in the aggregate and will not make any loan,
advance, capital contribution to or investment in, any other person.
7.11. Taxes. Except for Taxes contested in good faith, both White Cloud and
the Company will pay all Taxes upon their respective incomes, properties and
businesses as they become due and prepare and timely file all Tax Returns and
other returns and reports which are re quired to be filed in respect of Taxes.
7.12. No Disposition or Encumbrance. Neither White Cloud nor the Company
shall sell, lease, mortgage, pledge or otherwise dispose of or agree to sell,
lease, mortgage, pledge or otherwise dispose of any of their respective assets
or properties other than sales, leases, mortgages, pledges and dispositions of
assets and properties except in the ordinary course of business.
7.13. Insurance. Both White Cloud and the Company will maintain insurance
upon their respective businesses and properties and insurance in respect of the
kinds of risks currently insured against, in accordance with their current
practice.
7.14. No Mergers. Neither White Cloud nor the Company will nor shall agree
to merge or consolidate with any other corporation, or acquire any stock,
business, or substantially all or any substantial portion of the property or
assets of, any other person, firm, association, corporation or other business
organization.
7.15. No Breach. Neither White Cloud nor the Company, shall do any act or
omit to do any act which, with or without the giving of notice or the passage of
time, or both, would result in a breach of or default under any contract,
commitment or obligation of the Company or White Cloud, as the case may be.
7.16. Due Compliance. Both White Cloud and the Company will duly comply
with all laws applicable to them and to the conduct of their respective
Businesses.
7.17. Accounting Practice. Neither White Cloud nor the Company shall change
any method of accounting practice currently employed by them.
ARTICLE VIII
Additional Covenants and Agreements
8.01. Continued Effectiveness of Representations and Warranties; Advice of
Change.
(a) Selling Members and the Company will promptly advise White Cloud, on
the one hand, and White Cloud will promptly advise the Selling Members and the
Company, on the other hand, in writing, upon obtaining knowledge of: (i) any
event which occurred on or prior to the date of execution of this Agreement that
is not disclosed herein and any event which occurs after the date of this
Agreement, in each case that would, under this Agreement or any Exhibit or
Schedule delivered pursuant hereto, have been required to be disclosed on the
date of execution of this Agreement by Selling Members and the Company, on the
one hand, and by White Cloud, on the other hand; and (ii) any change in the
business, operations, prospects, properties, assets or condition, financial or
otherwise, of the Company, or White Cloud, as the case may be.
(b) From the date hereof through the Closing Date, Selling Members shall
use their best efforts, and the Company shall use its best efforts, to conduct
their respective affairs in such a manner so that, except as otherwise
contemplated or permitted by this Agreement, the representations and warranties
contained in Articles IV and V respectively, hereof shall continue to be true
and correct on and as of the Closing Date as if made on and as of the Closing
Date and Selling Members and the Company shall promptly notify White Cloud of
any event, condition or circumstance occurring from the date hereof through the
Closing Date that would constitute a material violation or breach by Selling
Members or the Company of any of such representations and warranties.
(c) From the date hereof through the Closing Date, White Cloud shall use
its best efforts to conduct its affairs in such a manner so that, except as
otherwise contemplated or permitted by this Agreement, the representations and
warranties contained in Article VI hereof shall continue to be true and correct
on and as of the Closing Date as if made on and as of the Closing Date and White
Cloud shall promptly notify the Company of any event, condition or circumstance
occurring from the date hereof through the Closing Date that would constitute a
material violation or breach by White Cloud of any of such representations and
warranties.
8.02. Reasonable Access. Both White Cloud and the Company shall (i) afford
the other and its authorized representatives, during normal business hours, full
and free access to the properties, personnel, books and records of such party in
order that the other party shall have a full opportunity to make such
investigation as it shall reasonably desire to make of the affairs of such other
party and to obtain copies of relevant documents in connection therewith, (ii)
provide additional financial and other information as to the Business of such
party as the other party or its representatives shall reasonably request and
(iii) otherwise fully cooperate with such other party or its representatives.
8.03. Books and Records. On the Closing Date, the Company shall to deliver
to White Cloud all of the books and records of the Company, including without
limitation, the limited liability company minute book of the Company.
8.04. Cooperation Regarding Plans. The parties will cooperate with each
other and their advisers in preparing, filing, and diligently pursuing any and
all filings, applications, or notifications that may be necessary or advisable
with respect to any of the Plans in connection with the transactions
contemplated by this Agreement, including, without limitation the Watchout
Transaction and the Private Placement.
8.05. Satisfaction of Closing Conditions.
(a) Each Selling Member and the Company shall use their respective best
efforts to cause all of the conditions to the obligations of Selling Members and
the Company set forth in Article IX and Article X hereof to be satisfied with
respect to the Closing.
(b) White Cloud shall use its best efforts to cause all of the conditions
to the obligations of White Cloud set forth in Article IX and Article X hereof
to be satisfied with respect to the Closing.
8.06. Confidentiality; Publicity.
(a) Each of White Cloud, Selling Members and the Company shall, and shall
cause the respective directors, officers, employees and authorized
representatives of White Cloud and the Company to, hold in strictest confidence
and not disclose to others for any reason whatsoever any information received
from White Cloud or the Company or their respective directors, officers,
employees and authorized representatives, in connection with the transactions
contemplated hereby or by the Documents, except as otherwise required by law.
(b) Neither the Company, nor any Selling Member (nor any of their
affiliates or members of their respective families) shall utilize any
confidential information in connection with the purchase or sale of White
Cloud's Common Stock in open market transactions.
8.07. Other Offers.
(a) From the date hereof until the termination hereof, Selling Members
shall not, and Xxxxxx shall use his best efforts to cause the Company and its
Manager, Manager-Members, officers, employees, affiliates and their
representatives not to, (i) take any action to solicit or solicit any offer from
any person with respect to any Acquisition Proposal (as hereinafter defined) or
(ii) engage in negotiations with or disclose any nonpublic information relating
to the Company or its business or afford access to the properties, books or
records of the Company to any person with respect to an Acquisition Proposal
without the express written consent of White Cloud. "Acquisition Proposal" means
any proposal for a merger or other business transaction to which Selling
Members, or the Company is or would be a party or involving the acquisition of
any substantial equity interest in, or a substantial portion of the assets of,
the Company or Selling Members' Interests, other than the transactions
contemplated by this Agreement. Selling Members shall promptly notify White
Cloud if they or the Company receive any inquiry from any person with respect to
an Acquisition Proposal, which notice shall contain the name of the person
involved and the nature of the Acquisition Proposal.
(b) From the date hereof until the termination hereof, White Cloud and its
directors, officers, employees, affiliates and their representatives shall not,
(i) take any action to solicit or solicit any offer from any person with respect
to any Acquisition Proposal (as hereinafter defined) or (ii) engage in
negotiations with or disclose any nonpublic information relating to White Cloud
or its business or afford access to the properties, books or records of White
Cloud to any person with respect to an Acquisition Proposal without the express
written consent of the Company. "Acquisition Proposal" means any proposal for a
merger or other business transaction to which White Cloud is or would be a party
or involving the acquisition of any substantial equity interest in, or a
substantial portion of the assets of White Cloud other than the transactions
contemplated by this Agreement. White Cloud shall promptly notify the Company if
it receives any inquiry from any person with respect to an Acquisition Proposal,
which notice shall contain the name of the person involved and the nature of the
Acquisition Proposal.
8.08. Additional Instruments. The Company, Selling Members, and White
Cloud, as the case may be, at the request of one of the others, at or after the
Closing will execute and deliver, or cause to be executed and delivered, to the
other, such documents and instruments as may reasonably be necessary or
desirable to carry out or implement any provision of this Agreement.
8.09. Litigation.
(a) From the date hereof through the Closing Date, the Company shall
promptly notify White Cloud of any actions or proceedings of the type referred
to in Section 5.15 hereof that from the date hereof are threatened or commenced
against the Company or any Manager, Manager- Member, officer, employee, property
or asset of the Company, and of any requests for additional information or
documentary materials by any governmental or regulatory body in connection with
the transactions contemplated hereby.
(b) From the date hereof through the Closing Date, White Cloud shall
promptly notify the Company of any actions or proceedings of the type referred
to in Section 6.17 hereof that from the date hereof are threatened or commenced
against White Cloud or any director, officer, employee, property or asset of
White Cloud, and of any requests for additional information or documentary
materials by any governmental or regulatory body in connection with the
transactions contemplated hereby.
8.10. Consents. The Company shall use its best efforts to obtain all
consents, approvals and waivers of third parties or authorities required under
Section 5.28 hereto and to satisfy the conditions set forth in Article IX hereof
no later than five (5) business days prior to the Closing and White Cloud shall
use its best efforts to obtain the consents approvals and waivers of third
parties or authorities required under Section 6.31 hereof and to satisfy the
conditions set forth in Article X hereof no later than five (5) business days
prior to the Closing.
8.11. Supplements to Exhibits. The parties shall deliver to each other, as
soon as possible after a party becomes aware thereof, but not later than the
Closing, supplemental information updating the information set forth in the
Schedules hereto so that such Schedules supplemented by such information shall
be true and correct as of the Closing Date as if then made, provided that the
foregoing shall not be deemed to permit any transaction not otherwise permitted
by this Agreement or to constitute a waiver by any party of any
misrepresentation or breach by any other party of any agreement, covenant or
warranty made therein. Each party agrees to disclose to the other parties any
misrepresentation or breach of any covenant or warranty of any such party when
such breach becomes known to any of them.
8.12. Private Placement. Following the Closing, White Cloud and the Company
shall cooperate in furtherance of the consummation of the Private Placement.
ARTICLE IX
Conditions to White Cloud's Obligations
The obligations of White Cloud to consummate the transactions contemplated by
this Agreement and the Documents with respect to the Closing shall be subject to
the satisfaction, on or before the Closing, of each of the following conditions:
9.01. Representations and Warranties. The representations and warranties
made by Selling Members and the Company in this Agreement and in the Documents
(including all Exhibits and Schedules hereto or thereto), shall be true and
correct, individually and in the aggregate, in all material respects on and as
of the Closing Date with the same force and effect as though made on and as of
the Closing Date.
9.02. Performance. With respect to agreements, covenants, obligations and
conditions required to be performed or complied with by Selling Members and the
Company at or prior to the Closing, Selling Members and the Company shall have
performed in all material respects, such agreements, covenants, obligations and
conditions, including, without limitation, the execution and delivery of the
agreements contemplated by Section 3.02.
9.03. Approvals and Filings. All approvals, consents, and authorizations
from, and all declarations, filings and registrations with, third parties and
government agencies required to consummate the transactions contemplated hereby
shall have been obtained or made, shall be in full force and effect and shall be
reasonably satisfactory in form and substance to White Cloud.
9.04. Certificates. At Closing, there shall be delivered to White Cloud a
certificate, in a form acceptable to White Cloud, dated the appropriate Closing
Date, and signed by a Manager or Manager-Member of the Company, certifying that
the conditions set forth in Sections 9.01, 9.02 and 9.03 hereof have been
fulfilled.
9.05. No Injunction. There shall not be in effect any preliminary or
permanent injunction or other order issued by any state or federal court or
governmental body of competent jurisdiction or any statute, rule or regulation
which prevents the transactions contemplated hereby. No action or proceeding
before any court or governmental body shall be pending or threatened wherein an
unfavorable judgment, decree or order would prevent the carrying out of this
Agreement, the Documents or any of the transactions contemplated hereby or
thereby, declare unlawful the transactions contemplated by this Agreement or the
Documents or cause such transactions to be rescinded.
9.06. Opinion of Counsel. There shall have been delivered to White Cloud an
opinion of Xxxxxx Xxxx, Esq, counsel to Selling Members and the Company, dated
the Closing Date, in the form of Exhibit C hereto.
9.07. Due Diligence. Prior to the Closing, White Cloud shall have concluded
a customary due diligence investigation of the Company to its reasonable
satisfaction.
9.08. Waiver of Rights as Members. At the Closing, each Selling Member
shall waive and release, pursuant to waiver and releases substantially in the
form of Exhibit E hereto, any and all rights and claims each of them may have
against the Company, arising out of or related to their status as members of the
Company.
9.09. Watchout Transaction. At or prior to Closing, White Cloud shall have
concluded the Watchout Transaction.
9.11. Board of Directors. At the Closing, the Board of Directors of White
Cloud shall be constituted in a manner reasonably satisfactory to White Cloud
and Sands Brothers.
ARTICLE X
Conditions to Selling Members' and Company's Obligations
The obligations of Selling Members and the Company to consummate the
transactions contemplated by this Agreement and the Documents shall be subject
to the satisfaction, on or before the Closing of each of the following
conditions:
10.01. Representations and Warranties. The representations and warranties
made by White Cloud in this Agreement and in the Documents (including all
Exhibits and Schedules hereto or thereto) shall be true and correct,
individually and in the aggregate, in all material respects on and as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date.
10.02. Performance. With respect to agreements, covenants, obligations and
conditions required to be performed or complied with by White Cloud at or prior
to the Closing, White Cloud shall have performed in the aggregate, in all
material respects, such agreements, covenants, obligations and conditions,
including, without limitation, the execution and delivery of the agreements
contemplated by Article 3.03.
10.03. Approvals and Filings. All approvals, consents, and authorizations
from, and all declarations, filings and registrations with, third parties and
government agencies required to consummate the transactions contemplated hereby
and by the Documents, to the extent required to be obtained by White Cloud,
including without limitation, such filings, registrations and qualifications
required under applicable federal and state securities laws, shall have been
obtained or made, shall be in full force and effect and shall be satisfactory in
form and substance to Selling Members or the Company and their counsel.
10.04. Certificates. At Closing, there shall be delivered to Selling
Members a certificate, in a form acceptable to Selling Members, dated the
appropriate Closing Date, and signed by an officer of White Cloud certifying
that the conditions set forth in Sections 10.01, 10.02 and 10.03 have been
fulfilled.
10.05. No Injunction. There shall not be in effect any preliminary or
permanent injunction or other order issued by any state or federal court or
governmental body of competent jurisdiction or any statute, rule or regulation
which prevents the transactions contemplated hereby. No action or proceeding
before any court or governmental body shall be pending or threatened wherein an
unfavorable judgment, decree or order would prevent the carrying out of this
Agreement, the Documents or any of the transactions contemplated hereby or
thereby, declare unlawful the transactions contemplated by this Agreement or the
Documents or cause such transactions to be rescinded.
10.06. Approval of Proceedings. All actions, proceedings, instruments and
documents required to carry out this Agreement and the transactions contemplated
hereby, or incidental thereto, and all other related legal matters shall have
been approved by counsel for Selling Members.
10.07 Opinion of Counsel. There shall have been delivered to the Company
and the Selling Members an opinion of Xxxxxxx X. Xxxxxxx, Esq., counsel to White
Cloud, dated the Closing date, in the form of Exhibit G hereto.
10.07. Due Diligence. Prior to the Closing, the Selling Members and the
Company shall have concluded a customary due diligence investigation of White
Cloud to their satisfaction.
10.08. Watchout Transaction. At or prior to Closing, White Cloud shall have
concluded the Watchout Transaction.
10.09. Board of Directors. At the Closing, the Board of Directors of White
Cloud shall be constituted in a manner reasonably satisfactory to White Cloud
and Sands Brothers.
ARTICLE XI
Termination
11.01. Right of Rescission. Notwithstanding any other provision of this
Agreement, in the event that, due to the inadequacy or deficiency of the
financial statements of the Company, White Cloud is unable to comply, after the
Closing Date, with the provisions of Form 8- K, within the time frame specified
under the rules governing the filing of Form 8-K, then White Cloud shall have
the unilateral right but not the duty, for a period of an additional 30 days
from the end of such period (the "Rescission Period"), by written notice to the
Company, to deem this Agreement rescinded and null and void ab initio. As a
result thereof, (i) the Watchout Transaction shall be reversed and the New
Shares be canceled and the Selling Stockholders' Shares transferred to White
Cloud by the Selling Stockholders be returned; (i) the directors and officers of
White Cloud as then constituted shall resign, nominating the officers and board
of directors of White Cloud as constituted prior to the Closing Date in their
stead, and (iii) all other things necessary to unwind the Transaction not
specifically set forth herein shall be completed.
11.02 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual consent of White Cloud, the Company, and the Majority in
Interest (as hereinafter defined) of Selling Members; or
(b) by Selling Members or the Company after June , 1997 if the Closing
shall not have been consummated on or prior to the Closing Date so long as the
party terminating this Agreement pursuant to this Section 11.02(b) has not made
any material misrepresentation or materially breached an agreement, covenant
obligation or condition of such party herein contained; or
(c) by White Cloud if Selling Members or the Company shall file a petition
or commence a voluntary case seeking to take advantage of any law relating to
bankruptcy, insolvency, reorganization or similar actions, shall make a general
assignment for the benefit of creditors or a proceeding shall be commenced
against Selling Members or the Company seeking the reorganization, liquidation,
dissolution or winding up of him or it or the appointment of a trustee or
receiver for any such person or his or its assets which is not dismissed within
sixty (60) days after filing; or
(d) by White Cloud if the contribution of Selling Members' Interests
contemplated hereby shall violate any non-appealable final order, decree or
judgment of any court or governmental body having competent jurisdiction or
there shall be a statute, rule or regulation which makes the contribution of the
Selling Members' Interests contemplated hereby illegal or otherwise prohibited;
or
(e) by the Company and the majority in interest of Selling Members, on the
one hand, and White Cloud, on the other hand, in the event the other(s) make a
material misrepresentation or breaches a covenant, agreement, warranty,
obligation or condition of such parties herein contained, but such
non-misrepresenting or non-breaching party's election to terminate shall not
limit, wave or prejudice such party's remedies at law, in equity or pursuant to
this Agreement.
(f) In the event this Agreement is terminated as provided in Section
11.02(a), (b), (c), (d) or (e), this Agreement shall become void and of no
further force and effect and no party hereto shall have any further liability to
any other party hereto.
ARTICLE XII
Indemnification
12.01. Indemnification by White Cloud. White Cloud agrees to indemnify,
defend and hold Selling Members and the Company harmless from and against any
and all Losses (as hereinafter defined) arising out of or resulting from the
misrepresentation or breach by White Cloud of any warranty, covenant or
agreement of White Cloud contained in this Agreement or the Documents (including
all Exhibits and Schedules hereto). For purposes of this Article XII, the term
"Losses" shall mean all liabilities, obligations, damages, losses, claims,
encumbrances, costs and expenses (including reasonable attorneys' fees) of every
kind, nature or description.
12.02. Indemnification by Selling Members. Each Selling Member, severally
and pro rata in accordance with their respective ownerships of Selling Members'
Interests, hereby agrees to indemnify, defend and hold White Cloud harmless from
and against any and all Losses arising out of or resulting from the
misrepresentation (or alleged misrepresentation) or breach (or alleged breach)
by such Selling Member, as the case may be, of any warranty, covenant or agree
ment of any Selling Member contained in this Agreement or the Documents
(including all Exhibits and Schedules hereto) made as of the date of this
Agreement or the Closing Date.
12.03. Indemnification by the Company. The Company hereby agrees to
indemnify, defend and hold White Cloud harmless from and against any and all
Losses arising out of or resulting from the misrepresentation (or alleged
misrepresentation) or breach (or alleged breach) by the Company of any warranty,
covenant or agreement of the Company contained in this Agreement or the
Documents (including all Exhibits and Schedules hereto) made as of the date of
this Agreement or the Closing Date.
12.04. Indemnification Procedure.
(a) An indemnified party shall notify the indemnifying party of any claim
of such indemnified party for indemnification under this Agreement within thirty
(30) days of the date on which such indemnified party first becomes aware of the
existence of such claim. Such notice shall specify the nature of such claim in
reasonable detail and the indemnifying party shall be given reasonable access to
any documents or properties within the control of the indemnified party as may
be useful in the investigation of the basis for such claim. The failure to so
notify the indemnifying party within such thirty (30) day period shall not
constitute a waiver of such claim but an indemnified party shall not be entitled
to receive any indemnification hereunder with respect to any Loss that occurred
as a result of the failure of such person to give such notice. The indem nifying
party shall have the right (without prejudice to the right of any indemnified
party to participate at its expense through counsel of its own choosing) to
defend or prosecute such claim at his or its expense and through counsel of his
or its own choosing if he or it gives written notice of his or its intention to
do so not later than twenty (20) days following notice thereof by the
indemnifying party or such shorter time period as required so that the interests
of the indemnified party would not be materially prejudiced as a result of his
or its failure to have received such notice; provided, however, that if the
defendants in any action shall include both an indemnifying party and an
indemnified party and the indemnified party shall have reasonably concluded that
counsel selected by the indemnifying party has a conflict of interest because of
the availability of different or additional defenses to the indemnified party,
the indemnified party shall have the right to select separate counsel to
participate in the defense of such action on its behalf, at the expense of the
indemnifying party. Notwithstanding the assumption of the defense of any claim
by an indemnifying party pursuant to this paragraph, the indemnified party shall
have the right to approve the terms of any settlement of a claim (which approval
shall not be unreasonably withheld).
(b) The indemnifying party and the indemnified party shall cooperate in
furnishing evidence and testimony and in any other manner which the other may
reasonably request, and shall in all other respects have an obligation of good
faith dealing, one to the other, so as not to unrea sonably expose the other to
an undue risk of loss. The indemnified party shall be entitled to reimbursement
for out-of-pocket expenses reasonably incurred by him or it in connection with
such cooperation.
ARTICLE XIII
Miscellaneous Provisions
13.01. Nature and Survival of Representations and Warranties. All
statements contained herein or in any certificate, schedule or other document
delivered pursuant hereto shall be deemed representations and warranties. All
representations and warranties shall survive the Closing and shall not be
affected by any investigation at any time made by or on behalf of any party
hereto.
13.02. Amendment and Modification. This Agreement may be amended, modified
or supplemented only by written agreement of the parties hereto, provided,
however, that an amendment of this Agreement may be made on behalf of all
Selling Members by an instrument in writing executed by that number of Selling
Members who are holders of 51% of the issued and outstanding Selling Members'
Interests (the "Majority in Interest").
13.03. Waiver. Any breach of any obligation, covenant, agreement or
condition contained herein shall be deemed waived by the non-breaching party,
only by a writing, setting forth with particularity the breach being waived and
the scope of the waiver, but such waiver shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other breach. No failure or duly by
any party in exercising any right, power or privilege hereunder or under the
Documents and no course of dealing by any party shall operate as a waiver and
any right, power or privilege hereunder or under any Document nor shall any
single or partial exercise thereof or the exercise of any other right, power or
privilege.
13.04. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand:
(a) If to the Company or any Selling Member, to:
Goldpoint International, LLC
00 Xxxxxx Xxxx
Xxxxxxx Xxxxx, XX 00000
Attn.: Xxxxxxx X. Xxxxx
With a copy to:
Xxxxxx Xxxx, Esq.
000 Xxxxxx xx xxx Xxxxxxxx
XX, XX 00000
or to such other person or address as the Company or any Selling Member shall
furnish White Cloud in writing.
(b) If to White Cloud to:
White Cloud Exploration, Inc.
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
with a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
00000 Xxxx 00xx Xxxxxx, #000
Xxxxx Xxxxx, Xxxxxxxx 00000
or to such other person or address as White Cloud shall furnish Selling Members
and the Company in writing.
13.05. Binding Nature; Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, but neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without prior written consent of the other parties; provided,
however that the rights of White Cloud hereunder may be assigned to any lender
or financing institution as security for a loan or loans granted or equity
raised in order to facilitate participation in the transaction contemplated
herein.
13.06. Governing Law; Submission to Jurisdiction. This Agreement and the
legal relations among the parties hereto shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and performed therein.
13.07. Public Announcements. Prior to the Closing, except as required by
applicable law the parties hereto agree not to make any disclosure or public
announcement concerning the transactions contemplated hereby without the prior
consent of the other parties hereto; provided, however, that in connection with
the transactions contemplated herein, with respect to any disclosure or public
announcement which a party reasonably deems to be necessary pursuant to any
state or federal law or regulation, such party may make such disclosure or
public announcement without the consent of any other party so long as the party
making such announcement or disclosure has used reasonable efforts to provide to
to each other party hereto advance notice of such disclosure or public
announcement. In connection with any disclosure required by law the party making
such disclosure shall use its best efforts to obtain, to the extent available,
confidential treatment with respect to information concerning the transaction
contemplated herein.
13.08. Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the Documents shall be
paid by the party incurring such cost or expense.
13.09. Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
13.10. Headings. The headings contained in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
13.11. Entire Agreement. This Agreement and the Documents together with the
Schedules herein and therein and Exhibits hereto and thereto, constitute the
entire agreement between the parties hereto pertaining to the subject matter
hereof and supersede all prior and contemporaneous agreements, understandings,
documents, negotiations and discussions, whether oral or written, of the parties
hereto.
13.12. Obligations of Predecessors. When any provision of this Agreement or
any Document refers to or contemplates: (i) any agreement, lease, license,
permit or authorization to which the Company is a party or by which its assets
are bound or subject; (ii) any other obligation or duty of the Company of any
kind or nature; or (iii) the existence or absence of any fact or matter such
provision existence or absence of any fact or matter such provision shall be
deemed to include, in addition to any contract, document, agreement, lease,
license, permit or authorization or other obligation or duty of the Company or
the existence or absence of any fact or matter; (x) any contract, document,
agreement, lease, license, permit or authorization or other obligation or duty
assigned to or assumed by the Company or its predecessors, directly or
indirectly, by agreement, by operation of law or otherwise and (y) the existence
of any fact or matter to the extent relevant to any such predecessor.
When any provision of this Agreement or any Document refers to a
"predecessor" such reference shall be deemed to include any corporation,
partnership, joint venture or other business, business organization or entity
which is the predecessor of the Company and shall include any or all of the
foregoing to the extent that the Company is the direct or indirect successor
thereof.
13.13. Knowledge of Selling Members and the Company. When any provision of
this Agreement or any Document refers to or contemplates the knowledge of a
party, it shall mean: (i) with respect to any matter relating to third parties,
actual knowledge of Selling Members, Managers, Manager-Members and executive
officers of the Company or White Cloud, as the case may be, with regard to such
third parties and (ii) with respect to Selling Members or any of their
obligations, rights or properties, the actual knowledge of such Selling Member,
after due inquiry.
13.14. Remedies Exclusive. Prior to the Closing, the rights, remedies and
obligations of the parties hereto under this Agreement and the Documents set
forth in Article XI hereof shall be deemed to be exclusive of all other rights,
remedies and obligations under this Agreement and the Documents that would
otherwise be available to the parties hereto. After the Closing, the rights,
remedies and obligations under this Agreement and the Documents of the parties
hereto set forth in Article XII hereof shall be deemed to be exclusive of all
other rights, remedies and obligations under this Agreement and the Documents
that would otherwise be available to the parties hereto. Notwithstanding the
foregoing, the parties agree that the business of the Company is unique and that
remedies at law may be inadequate, and accordingly, White Cloud, in addition to
other remedies it may have, shall have the right to enforce the obligation of
Selling Members to consummate the sale of Selling Members' Interests upon the
terms contemplated hereunder by an action or actions for specific performance,
injunction or other appropriate equitable remedies.
13.15. Disclosure on Schedules. For purposes of this Agreement, a
disclosure by any party hereto of any fact on any Schedule shall be deemed a
disclosure on every Schedule of any party hereto to the extent such disclosure
properly could have been made thereon but was not made.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed the day and year first above written.
By:
----------------------------------------
Selling Member
Goldpoint International, LLC
By:
----------------------------------------
Authorized Member
WHITE CLOUD EXPLORATION, INC.
By:
----------------------------------------
Authorized Officer
By:
----------------------------------------
Xxxxxxx X. Xxxxx, individually
LIST OF EXHIBITS
A. - Ownership of Selling Members /New Shares
B. - Financial Statements
C. - Form of Opinion of Counsel to the Company and Selling Members
D. - White Cloud Capitalization
E. - Form of Selling Members' Waiver
F. - White Cloud Financial Statements
G. - Form of Opinion of Counsel to White Cloud
LIST OF SCHEDULES
1. Disclosure Schedule
2. White Cloud Disclosure Schedule
