Communications World International, Inc.
Form 10-SB
Exhibit 2 (b)
MERGER AGREEMENT
BY AND AMONG
IAC ACQUISITION CORPORATION
XXXXXXXXX & ASSOCIATES, INC. D/B/A COMMUNICATIONS WORLD
AND
XXX XXXXXXXXX
AND
XXXXXXX XXXXXXX
Dated as of April ____, 1999
TABLE OF CONTENTS
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Page
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1. DEFINITIONS....................................................... 1
1.1 General Definitions............................................ 1
2. MERGER............................................................ 5
2.1 Terms of Merger................................................ 5
(a) Merger; Surviving Company................................. 5
(b) The Effective Date and Time............................... 6
2.2 Purchase Price and Terms....................................... 6
2.3 Merger Certificates............................................ 7
2.4 Further Assurances............................................. 7
2.5 Closing Payables and Closing Receivables....................... 7
(a) Assumed Contracts and Assumed Payables.................... 7
(b) Adjustment Period......................................... 8
(c) Payment to Xxxxxxxxx...................................... 9
(d) Deduction from Note....................................... 9
(e) Other Accounts............................................ 9
2.6 Cash........................................................... 9
3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS..................... 10
3.1 Transfer of and Title to Stock................................. 10
3.2 Organization; Qualification.................................... 10
3.3 Authority Relative to this Agreement........................... 10
3.4 Capitalization................................................. 10
3.5 Consents and Approvals......................................... 11
3.6 No Violations.................................................. 11
3.7 Title to and Condition of Assets and Property.................. 11
3.8 Inventory...................................................... 11
3.9 Distributors and Suppliers..................................... 12
3.10 Product Warranties............................................. 12
3.11 Investigation or Litigation.................................... 12
3.12 Taxes.......................................................... 12
3.13 No Brokers..................................................... 13
3.14 Accounts....................................................... 13
3.15 Insurance...................................................... 13
3.16 Contracts; Oral Commitments; Defaults.......................... 13
3.17 Corporate Matters.............................................. 13
3.18 Permits........................................................ 13
3.19 Compliance with Laws........................................... 14
3.20 Corporate Name................................................. 14
3.21 Disclosure..................................................... 14
3.22 Employee Matters............................................... 14
3.23 Plans.......................................................... 15
3.24 Transactions with Affiliates................................... 15
3.25 Financial Statements........................................... 15
3.26 Undisclosed Liabilities........................................ 16
3.27 Leases......................................................... 16
3.28 Real Property.................................................. 16
3.29 Environmental Matters.......................................... 17
(i)
(a) Compliance Generally......................................... 17
(b) Claims....................................................... 17
(c) Certain Environmental Liabilities............................ 17
(d) Operations................................................... 17
(e) Liability for Others......................................... 17
3.30 Intellectual Property........................................ 17
3.31 Bank Accounts and Powers of Attorney......................... 18
3.32 Knowledge of Sellers......................................... 18
3.33 Inspection Does Not Affect Warrants.......................... 18
3.34 Rights and Assets............................................ 18
3.35 Absence of Certain Changes................................... 18
3.36 Books and Records............................................ 19
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER......................... 19
4.1 Organization................................................... 19
4.2 Authority Relative to this Agreement........................... 19
4.3 Consents and Approvals......................................... 20
4.4 No Brokers..................................................... 20
5. ADDITIONAL AGREEMENTS............................................... 20
5.1 Conduct of the Company......................................... 20
5.2 Forbearances by Sellers........................................ 20
5.3 No Solicitation................................................ 21
5.4 Investigation of the Company................................... 22
5.5 Agreement to Consummate........................................ 22
5.6 Approval of Third Parties...................................... 22
5.7 Agreement Regarding Brokers.................................... 23
5.8 Notice......................................................... 23
5.9 Disclosure Schedules........................................... 23
5.10 Filings........................................................ 23
5.11 Taxes........................................................... 23
6. CONDITIONS PRECEDENT TO CLOSING..................................... 24
6.1 General Conditions........................................... 24
(a) No Injunction................................................ 24
(b) Proceedings.................................................. 24
(c) Employment and Noncompetition Agreement...................... 24
6.2 Conditions to Closing in Favor of Sellers..................... 24
(a) Representations and Warranties of Purchaser.................. 24
(b) Purchaser's Officers' Certificate............................ 25
(c) Governmental Consents, Authorizations, Etc................... 25
(d) Closing Consideration........................................ 25
(e) Security Agreement........................................... 25
6.3 Conditions to Closing in Favor of Purchaser................... 25
(a) Representations and Warranties of Sellers.................... 25
(b) Governmental Consents, Authorizations, Etc................... 25
(c) Shareholder Releases......................................... 26
(d) Seller's Certificate......................................... 26
(e) Opinion of Counsel........................................... 26
(f) Legislation.................................................. 26
(g) Litigation................................................... 26
(h) No Adverse Change............................................ 26
(i) Delivery of Documents/Acceptance of Disclosure Schedules..... 26
(j) Third Party Consents......................................... 26
(ii)
(k) Purchaser's Investigation................................... 26
(l) Approval.................................................... 27
(m) Certificate of Authorities.................................. 27
(n) Corporate Records and Books of Account...................... 27
(o) Bank Accounts............................................... 27
(p) Certificate of Merger....................................... 27
(q) Subscription Agreement...................................... 27
(r) Other Matters............................................... 27
7. CLOSING AND TERMINATION............................................. 27
7.1 Closing Date................................................... 27
7.2 Termination.................................................... 28
7.3 Effect of Termination.......................................... 28
7.4 Extension; Waiver.............................................. 28
8. SURVIVAL AND INDEMNIFICATION........................................ 29
8.1 Survival of Representations and Warranties..................... 29
8.2 Indemnity...................................................... 29
8.3 Indemnification Notice......................................... 30
8.4 Identification with Respect to Pending Litigation.............. 31
8.5 Offset......................................................... 31
9. GENERAL PROVISIONS AND OTHER AGREEMENTS............................. 32
9.1 Notices........................................................ 32
9.2 Fees and Expenses.............................................. 33
9.3 Interpretation................................................. 33
9.4 Counterparts................................................... 33
9.5 Miscellaneous.................................................. 33
9.6 Publicity...................................................... 33
9.7 Invalid Provisions............................................. 33
9.8 Binding Effect................................................. 34
9.9 Captions....................................................... 34
9.10 Attorneys' Fees................................................ 34
9.11 Jurisdiction and Venue......................................... 34
9.12 Assignability.................................................. 34
9.13 Entirety....................................................... 34
9.14 Amendment...................................................... 34
9.15 Governing Law.................................................. 35
LIST OF EXHIBITS
Exhibit A - Form of Employment and Noncompetition Agreement (Xxx Xxxxxxxxx)
Exhibit B - Form of Employment and Noncompetition Agreement (Xxxxxxx
Xxxxxxx)
Exhibit C - Form of Subordinated Convertible Promissory Note (Xxx
Xxxxxxxxx)
Exhibit D - Form of Subordinated Convertible Promissory Note (Xxx
Xxxxxxxxx)
Exhibit E - Form of Subordinated Convertible Promissory Note (Xxxxxxx
Xxxxxxx)
Exhibit F - Form of Shareholder Release
Exhibit G - Form of Opinion of Counsel
Exhibit H - Form of Guaranty
Exhibit I - Form of Subscription Agreement
(iii)
LIST OF SCHEDULES
Schedule 2.5(a)(1) Assumed Contracts
Schedule 2.5(a)(2) Assumed Payables and Non-Assumed Payables
Schedule 2.5(b) Pre-Closing Receivables
Schedule 2.6 Outstanding Checks, Deposits and Other Prepayments
Schedule 3.4 Capitalization
Schedule 3.5 Consents and Approvals
Schedule 3.7 Title to and Condition of Assets
Schedule 3.8 Inventory
Schedule 3.9 Distributors and Suppliers
Schedule 3.10 Express Product Warranties and Guaranties
Schedule 3.11 Investigation or Litigation
Schedule 3.14 Accounts
Schedule 3.15 Insurance
Schedule 3.16 Contracts
Schedule 3.18 Permits
Schedule 3.22 Employee Matters
Schedule 3.23 Plans
Schedule 3.24 Transactions with Affiliates
Schedule 3.25 Financial Statements
Schedule 3.27 Leases
Schedule 3.28 Real Property
Schedule 3.30 Intellectual Property
Schedule 3.31 Bank Accounts and Powers of Attorney
Schedule 3.35 Certain Changes
(iv)
MERGER AGREEMENT
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THIS MERGER AGREEMENT (this "Agreement") is made as of April ____, 1999, by
and among IAC ACQUISITION CORPORATION, a Colorado corporation ("Purchaser"),
XXXXXXXXX & ASSOCIATES, INC., a Colorado corporation d/b/a Communications World
(the "Company"), and XXX XXXXXXXXX ("Xxxxxxxxx") and XXXXXXX XXXXXXX ("Xxxxxxx")
(Xxxxxxxxx and Xxxxxxx hereinafter collectively referred to as, "Seller"), such
individuals being all of the shareholders of the Company.
In consideration of the mutual covenants and agreements contained herein,
the parties covenant and agree as follows:
1. DEFINITIONS
1.1 General Definitions. Unless otherwise stated in this Agreement, the
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following terms shall have the following meanings:
"Accountants": As defined in Section 2.5(b).
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"Accounts": All accounts receivable of the Company and other rights of the
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Company to payment for services rendered, including, without limitation, those
which are not evidence by instruments or whether or not they have been earned by
performance or have been written off or reserved against as a bad debt or
doubtful account in any financial statement, together with all instruments
representing any of the foregoing, and all rights, title, security and
guaranties in favor of the Company with respect to any of the foregoing.
"Adjustment Period": As defined in Section 2.5(b) hereof.
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"Affiliate": Any Person that, directly or indirectly, controls, or is
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controlled by or under common control with, another Person. For the purposes of
this definition, "control" (including the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities or by
contract or otherwise.
"Assumed Contracts": As defined in Section 2.5(a) hereof.
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"Assumed Payables": As defined in Section 2.5(a) hereof.
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"Best Knowledge": Those matters of which either the Company or Seller has or
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should have knowledge after (i) suitable inquiries of the appropriate
responsible employees or agents of the Company or Seller, and (ii) a suitable
review of appropriate corporate records and documents of the Company or Seller
in such parties actual or constructive possession or to which it has access.
MERGER AGREEMENT - Page 1
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"Broker": As defined in Section 4.4 hereof.
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"Closing": As defined in Section 7.1 hereof.
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"Closing Date": As defined in Section 7.1 hereof.
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"Code": The Internal Revenue Code of 1986, as amended.
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"CWII": Communications World International, Inc., a Colorado corporation.
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"CWII Common Stock": The Common Stock, no par value per share, of CWII.
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"Damages": As defined in Section 8.2 hereof.
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"Disclosure Schedules": The package of Disclosure Schedules to this Agreement
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delivered by Seller to Purchaser prior to the date hereof (and subsequently
supplemented and amended) which are approved by Purchaser (with reservation of
all rights with respect thereto) and incorporated by reference to the Section of
this Agreement to which each such schedule relates. The disclosure of an item
in a Disclosure Schedule or under a heading in a Disclosure Schedule
corresponding to that particular section or subsection of this Agreement shall
not be deemed a disclosure under (i) any other item of such Disclosure Schedule,
(ii) any other Disclosure Schedules or (iii) any other section or subsection
thereof. In the event of any inconsistency between the statements in the body of
this Agreement and those in the Disclosure Schedules hereto (other than an
exception expressly set forth as such in the schedules in relation to a
specifically identified representation or warranty), those in this Agreement
shall control.
"Employment and Noncompetition Agreement": The Noncompetition and Employment
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Agreements substantially in the forms of Exhibits A and B attached hereto.
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"Environmental Requirements": All federal, state, foreign and local laws,
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statutes, codes, rules, regulations, ordinances, judgments, orders, decrees and
the like of any Governmental Body, and all obligations concerning public health
and safety, worker health and safety, or pollution or protection of the
environment, including all those relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal, distribution,
labeling, testing, processing, discharge, release, Threatened release, control
or cleanup of any hazardous or otherwise regulated materials, substances or
wastes, chemical substances or mixtures, pesticides, pollutants, contaminants,
toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation.
"Escrow Account": As defined in Section 2.2(f).
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"Escrow Agent": As defined in Section 2.2(f).
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"Escrowed Amount": As defined in Section 2.2(f).
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MERGER AGREEMENT - Page 2
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"Financial Statements": As defined in Section 3.25 hereof.
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"Governmental Body": Any court or any federal, state, municipal or other
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governmental department, commission, board, bureau, agency, authority or
instrumentality, domestic or foreign.
"Guaranty": The Guaranty substantially in the form of Exhibit H attached
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hereto.
"Indemnification Claim": As defined in Section 8.3 hereof.
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"Indemnification Notice": As defined in Section 8.3 hereof.
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"Indemnitor": As defined in Section 8.3 hereof.
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"Intellectual Property": All domestic and foreign patents, patent applications,
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registered trademarks and service marks owned by the Company, registered
copyrights owned by the Company and computer software programs owned by or
licensed to the Company.
"Judgment": As defined in Section 2.2(f).
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"Lawsuit": shall mean the lawsuit styled Xxxxx Xxxxxx, et. al. x. Xxxxxxxxx and
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Associates, Inc., et. al., Case No. 98 CV 3985, Division 0, Xxxxxxxx Xxxxx,
Xxxxxxxx Xxxxxx, Xxxxxxxx.
"Liabilities" or "Liability": All claims, liabilities, debts, indebtedness and
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obligations, whether asserted or unasserted, absolute, liquidated, contingent,
accrued or otherwise.
"Lien": All mortgages, deeds of trust, claims, liens, security interests,
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pledges, leases, conditional sale contracts, rights of first refusal, options,
charges, liabilities, obligations, agreements, easements, rights-of-way, powers
of attorney, limitations, reservations, restrictions and other encumbrances of
any kind.
"Material Adverse Effect": Any change (individually or in the aggregate) in the
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general affairs, management, business, goodwill, results of operations,
condition (financial or otherwise), assets, liabilities or prospects (whether or
not the result thereof would be covered by insurance) that will or can
reasonably be expected to result in a cost, expense, charge, Liability, loss of
revenue or diminution in value equal to or greater than $10,000.00.
"Merger": shall mean the merger of the Company with and into the Purchaser in a
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transaction qualifying as a tax-free reorganization under Section 368(a)(1)(A)
of the Code.
"Offset Notice": As defined in Section 8.4 hereof.
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"Operative Documents": All agreements, instruments, documents, schedules,
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exhibits and certificates executed and delivered by or on behalf of Seller, the
Company or Purchaser at or before the Closing pursuant to this Agreement.
MERGER AGREEMENT - Page 3
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"Order": Any order, writ, injunction, decree, judgment, award or determination
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of any Governmental Body.
"Permits": All permits, authorizations, certificates, approvals, registrations,
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variances, exemptions, rights-of-way, franchises, privileges, immunities,
grants, ordinances, licenses and other rights of every kind and character (a)
under any (1) federal, state, local or foreign statute, ordinance or regulation,
(2) Order or (3) contract with any Governmental Body or (b) granted by any
Governmental Body.
"Person": An individual, partnership, joint venture, corporation, company,
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limited liability company, bank, trust, unincorporated organization,
Governmental Body or other entity or group.
"Plans": As defined in Section 3.23 hereof.
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"Post-Closing Receivables": As defined in Section 2.5(b) hereof.
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"Pre-Closing Receivables": As defined in Section 2.5(b) hereof.
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"Proceeding": Any action, order, claim, suit, proceeding, litigation,
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investigation, inquiry, review or notice.
"Purchase Price": As defined in Section 2.2 hereof.
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"Purchaser Indemnitees": As defined in Section 8.2 hereof.
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"Resolution Period": As defined in Section 2.5(d).
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"Settlement": As defined in Section 2.2(f).
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"Shareholder Release": As defined in Section 6.3(c) hereof.
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"Stock": One thousand (1,000) shares of common stock, no par value per share, of
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the Company, which shares represent all of the issued and outstanding shares of
capital stock of the Company.
"Subordinated Convertible Promissory Note": The Subordinated Convertible
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Promissory Notes substantially in the forms of Exhibits C, D and E attached
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hereto.
"Subscription Agreement": The Subscription Agreement substantially in the form
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of Exhibit I attached hereto.
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"Subsidiary" or "Subsidiaries": with respect to any corporation shall mean any
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other corporation of which at least a majority of the securities having by their
terms ordinary voting power to elect a majority of the Board of Directors of
such other corporation is at the time directly or indirectly owned or controlled
by such first corporation, or by such first corporation and one or more of its
Subsidiaries.
MERGER AGREEMENT - Page 4
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"Summary Plan Descriptions": The summary plan descriptions and summary of
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material modifications that include the information required by (S)102(b) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and that
are written in a manner calculated to be understood by the average Plan
participant, and that are sufficiently accurate and comprehensive to reasonably
apprise such participants and beneficiaries of their rights and obligations
under the Plans.
"Taxes": Any federal, state, local or foreign income, sales, excise, real or
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personal property or other taxes, assessments, fees, levies, imposts, duties,
deductions or other charges of any nature whatsoever (including, without
limitation, interest and penalties) imposed by any law, rule or regulation.
"Third Party Consents": As defined in Section 5.6 hereof.
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"Threatened": Any matter or thing will be deemed to have been "Threatened" when
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used herein with respect to any party if that party has received notice, in
writing, from the Person to whom the threat is attributable, or such Person's
agents, which makes specific reference to and clearly identifies the matter or
thing being threatened.
"Transaction" or "Transactions": The sale and purchase of the Stock and the
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performance of the other covenants and transactions described in this Agreement.
"Transaction Expenses": The expenses incurred in connection with the
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preparation, negotiation, execution and performance of this Agreement and the
Transactions, including all fees and expenses of counsel and representatives.
Other defined terms shall have the meanings ascribed to such terms
elsewhere herein.
2. MERGER
2.1 Terms of Merger. Subject to the terms and conditions set forth
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herein, on the Closing Date, the Company shall be merged into Purchaser as
described below.
(a) Merger; Surviving Company. In accordance with the applicable laws
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of the State of Colorado, upon the effectiveness of the Merger the separate
existence of the Company shall thereupon cease, and Purchaser, as the
surviving corporation in the Merger (the "Surviving Corporation"), shall
continue its corporate existence under the laws of the State of Colorado.
The Surviving Corporation shall possess all of the rights, privileges,
immunities, powers, franchises and authority, whether of a public or of a
private nature, and be subject to all restrictions, disabilities and duties
of each of the constituent corporations, and all the rights, privileges,
immunities, powers, franchises and authority of each of the constituent
corporations, and all assets and property of every description, real,
personal, and mixed, and every interest therein, wherever located, and all
debts or other obligations belonging or due to either of the constituent
corporations on
MERGER AGREEMENT - Page 5
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whatever account, as well as stock subscriptions and all other choses in
action or every other interest of or belonging to each of such corporations
shall be vested in the Surviving Corporation; and all property, rights,
privileges, immunities, powers, franchises and authority, and all other
interests, shall be thereafter as effectually the property of the Surviving
Corporation as they were of the constituent corporations; but all rights of
creditors and all Liens upon any property of either of the constituent
corporations shall be preserved unimpaired, and the Surviving Corporation
shall be liable for the obligations of each of the constituent corporations
and any claim existing, or action or proceeding pending, by or against
either of the constituent corporations may be prosecuted to judgment with
right of appeal, as if the Merger had not taken place.
(b) The Effective Date and Time. The Certificate of Merger shall be
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filed with and recorded by the Secretary of State of Colorado concurrently
with the Closing, and the Merger shall be effective at midnight, local
Denver time, on the date of such filings.
2.2 Purchase Price and Terms. At the Closing, subject to the terms and
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conditions of this Agreement and in consideration of the aforesaid sale,
conveyance, assignment, transfer and delivery, Purchaser shall pay to Seller the
sum of ONE MILLION TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($1,250,000.00)
(the "Purchase Price"). The Purchase Price shall be paid at Closing by
delivering:
(a) to Xxxxxxxxx by wire transfer of immediately available funds to
such bank account as shall have been delivered in writing by Xxxxxxxxx to
Purchaser at least (2) business days prior to the Closing Date, the sum of
FOUR HUNDRED THIRTY FIVE THOUSAND AND NO/100 DOLLARS ($435,000.00);
(b) to Bankoff by wire transfer of immediately available funds to
such bank account as shall have been delivered in writing by Bankoff to
Purchaser at least (2) business days prior to the Closing Date, the sum of
FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00);
(c) to Xxxxxxxxx the Subordinated Convertible Promissory Note in the
original principal amount of FOUR HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($450,000.00);
(d) to Xxxxxxxxx the Subordinated Convertible Promissory Note in the
original principal amount of TWO HUNDRED TWENTY FIVE THOUSAND AND NO/100
DOLLARS ($225,000.00);
(e) to Bankoff the Subordinated Convertible Promissory Note in the
original principal amount of TWENTY FIVE THOUSAND AND NO/100 DOLLARS
($25,000.00); and
MERGER AGREEMENT - Page 6
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(f) into an escrow account (the "Escrow Account") to be established
with Mega Bank of Arapahoe ("Escrow Agent") the sum of Sixty Five Thousand
and No/100 Dollars ($65,000.00) (the "Escrowed Amount") to be used to
satisfy any settlement or judgment arising out of the Lawsuit. Upon the
first to occur of (i) the settlement of the Lawsuit by all parties to the
Lawsuit and a general release by the plaintiff of all claims against the
Company (the "Settlement"), and (ii) a final non-appealable judgment from a
court of competent jurisdiction with respect to all claims arising out of
the Lawsuit (a "Judgment"), Purchaser and Xxxxxxxxx shall instruct the
Escrow Agent to pay to the plaintiff in the Lawsuit the amount required to
be paid by the Company and Xxxxxxxxx pursuant to the Settlement or
Judgment, as the case may be, and to pay any balance remaining in the
Escrow Account after such payment to the plaintiff in the lawsuit to
Xxxxxxxxx. Each of Xxxxxxxxx and Purchaser shall execute such agreements
with Escrow Agent, as Escrow Agent shall request, in connection with it
serving as Escrow Agent. Any Judgment or Settlement shall be subject to
the terms and conditions set forth in Section 8.4 below.
2.3 Merger Certificates. At the Closing, in addition to such other
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instruments as shall be reasonably required in order to fully consummate the
merger, Seller and the Company shall deliver to Purchaser articles of merger,
and such other documents, all in form and substance satisfactory to Purchaser
and its legal counsel, as shall be necessary to consummate the Merger.
2.4 Further Assurances. At the Closing, and at all times thereafter as
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may be reasonably necessary, Seller and the Company shall execute and deliver to
Purchaser such instruments of transfer as shall be reasonably necessary or
appropriate to vest in Purchaser title of the type specified herein to the
assets of the Company and to otherwise comply with the terms, purposes and
intent of this Agreement.
2.5 Closing Payables and Closing Receivables.
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(a) Assumed Contracts and Assumed Payables. On or prior to Closing,
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the Company shall pay in full, discharge and satisfy completely all
Liabilities of the Company, except for (i) contracts of the Company that
are not in default, entered into in the ordinary course of business and
described on Schedule 2.5(a)(1) (the "Assumed Contracts"), and (ii) current
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trade payables (for this purpose, a "current" trade payable shall mean an
amount outstanding in accordance with the normal payment cycle of the
Company for that particular vendor, but in no event more than thirty (30)
days past invoice date) entered into or incurred in the ordinary course of
business through arm's length transactions and described on Schedule
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2.5(a)(2) (the "Assumed Payables"), except that Assumed Payables shall not
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include that portion of invoices received prior to or within ninety (90)
days after the Closing Date that relate to inventory for pending jobs to be
installed and/or services for pending jobs to be rendered by the Company
after the Closing Date to the extent that Purchaser is entitled to receive
payment therefor and such portion of such invoices shall not be required to
be paid, discharged or satisfied by the Company prior to Closing and shall
be assumed and paid by Purchaser; provided, however, that any such invoices
received prior to
MERGER AGREEMENT - Page 7
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the Closing Date shall be described on Schedule 2.5(a)(2) under a heading
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entitled "Non-Assumed Payables." Purchaser and Seller acknowledge and agree
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that the Assumed Payables described on Schedule 2.5(a)(2) shall be revised
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by the parties within thirty (30) days after Closing to reflect invoices
received on or after the Closing Date that relate to inventory installed
and/or services rendered by the Company on or prior to the Closing Date
that Xxxxxxxxx is entitled to receive payment for pursuant to Section
2.5(b) below. Any such invoices that relate to inventory installed and/or
services rendered prior to and after the Closing Date shall be allocated
between Purchaser and Seller in good faith and to the extent that any such
disagreements have not been resolved prior to the expiration of the
Resolution Period (hereinafter defined ), such disputes shall be resolved
in accordance with the procedures set forth in Section 2.5(b) below.
(b) Adjustment Period. For a period of ninety (90) days after Closing
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(the "Adjustment Period"), Purchaser shall collect (i) all Accounts
existing as of the day immediately prior to the Closing Date (for this
purpose, Accounts existing as of the date immediately prior to Closing
shall mean that at Closing the subject invoice giving rise to the Account
has been deposited in the U.S. Mail in accordance with normal business
practices) and described on Schedule 2.5(b) (the "Pre-Closing
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Receivables"), and (ii) all Accounts arising on and after the Closing Date
and relating, either in whole or in part, to products sold and services
provided by the Company prior to 5:00 p.m. (Denver time) on the Closing
Date (the "Post-Closing Receivables"). Within five (5) business days after
the Closing Date, Xxxxxxxxx shall provide Purchaser with a proposed list
(the "Proposal") of Post-Closing Receivables and the percentage of each
such Post-Closing Receivable relating to the period prior to 5:00 p.m.
(Denver time) on the Closing Date ("Xxxxxxxxx'x Portion"). Purchaser shall
review the Proposal and provide Xxxxxxxxx with any objections or proposed
changes thereto within five (5) business days after Purchaser's receipt of
the Proposal. For a period of fourteen (14) days after Xxxxxxxxx'x receipt
of Purchaser's objections and proposed changes to the Proposal, (the
"Resolution Period"), Xxxxxxxxx and Purchaser shall negotiate in good faith
the resolution of any objections or proposed changes of Purchaser with
respect to the Proposal. If Purchaser and Xxxxxxxxx shall fail to reach an
agreement with respect to any objection or proposed change to the Proposal
prior to the expiration of the Resolution Period, then all such disputed
objections or changes shall, not later than five (5) business days after
the earlier to occur of (i) the expiration of the Resolution Period, or
(ii) the date one of the parties affirmatively terminates discussions in
writing with respect to such objections or changes, be submitted for
resolution to the Denver office of an impartial certified public accounting
firm (the "Accountants") selected by Purchaser and Xxxxxxxxx. If Purchaser
and Xxxxxxxxx cannot agree on the selection of the Accountants within such
five (5) business day period, then Purchaser and Xxxxxxxxx shall each have
the right to request the American Arbitration Association to appoint as
the Accountants a certified public accounting firm that has not had a
material relationship with Xxxxxxxxx, Purchaser or the Affiliates of either
of them within the preceding five (5) years. Xxxxxxxxx and Purchaser agree
to execute, if requested by the Accountants, an engagement letter and shall
share equally the cost of the Accountants. Xxxxxxxxx and Purchaser shall
MERGER AGREEMENT - Page 8
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use their reasonable efforts to cause the report of the Accountants, which
shall be in the form of a written statement addressed and delivered to
Purchaser and Xxxxxxxxx, to be rendered within thirty (30) days after the
Accountants' appointment. Xxxxxxxxx and Purchaser shall request the
Accountants to act as an arbitrator to determine, based solely on
presentations by Purchaser and Xxxxxxxxx, and not by independent review,
only those issues still in disputes; provided, however, that the role and
the scope of investigation of the Accountants may be modified by Xxxxxxxxx
and Purchaser in the event that the Accountants would otherwise refuse such
engagement. The Accountants' determination as to the appropriateness and
extent of such changes (if any) to the Proposal shall be final and binding
on the parties thereto.
(c) Payment to Xxxxxxxxx. Within fourteen (14) days after the last to
--------------------
occur of (i) the ninetieth (90/th/) day after the Closing Date, and (ii)
the final resolution of any objections or proposed changes with respect to
the Proposal and the Assumed Payables, Purchaser shall pay to Xxxxxxxxx the
excess, if any, by which the sum of (i) the Pre-Closing Receivables, and
(iii) Xxxxxxxxx'x Portion of the Post Closing Receivables collected by
Purchaser during the Adjustment Period exceed the Assumed Payables.
Xxxxxxxxx and Purchaser shall use their best efforts to collect any Pre-
Closing Receivables and Xxxxxxxxx'x Portion of the Post-Closing Receivables
not collected by Purchaser during the Adjustment Period and such funds
shall be promptly paid by Purchaser to Xxxxxxxxx after collection, provided
that the aggregate of the Pre-Closing Receivables and Xxxxxxxxx'x Portion
of the Post-Closing Receivables collected by Purchaser exceed the Assumed
Payables and Purchaser does not otherwise have any claims or offset rights
against such monies.
(d) Deduction from Note. If, at the end of the Adjustment Period, the
-------------------
Assumed Payables paid by Purchaser during the Adjustment Period exceed the
Pre-Closing Receivables and Xxxxxxxxx'x Portion of the Post-Closing
Receivables collected by Purchaser during the Adjustment Period, Purchaser
shall deduct such excess from the principal amount of the Subordinated
Convertible Promissory Notes payable to Xxxxxxxxx.
(e) Other Accounts. All Accounts of the Company, other than the Pre-
--------------
Closing Receivables and Xxxxxxxxx'x Portion of the Post-Closing
Receivables, shall be collected after Closing by Purchaser for its own
account and Seller shall have no claim or interest therein.
2.6 Cash. Except to the extent necessary to cover all outstanding checks
----
of the Company and deposits or other prepayments received from customers by
the Company set forth on Schedule 2.6, Seller shall be permitted to
------------
distribute to themselves all of the Company's cash and cash equivalents in
receipt by the Company on or prior to the day immediately prior to the
Closing Date.
MERGER AGREEMENT - Page 9
----------------
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and the Company hereby jointly and severally represent and warrant
to Purchaser that the following are true and correct as of the date of this
Agreement and will be true and correct (without limitation) through the Closing
Date, regardless of what investigations, if any, Purchaser shall have made prior
hereto or prior to Closing:
3.1 Transfer of and Title to Stock. Seller has good and marketable title
------------------------------
to all shares of the Stock and is the sole record and beneficial owners thereof.
Seller has the full legal right, power, capacity and authority to enter into
this Agreement and transfer, convey and sell the Stock to Purchaser at Closing,
and upon consummation of the Merger, Seller will transfer good and marketable
title to the Stock, free and clear of all Liens.
3.2 Organization; Qualification. The Company (a) is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the state of
its formation or existence, (b) has all requisite power and authority to own and
lease all of the properties and assets it now owns and leases and to carry on
its businesses as now being conducted, and (c) is duly qualified or licensed to
do business as a foreign corporation and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary.
3.3 Authority Relative to this Agreement. The Company and Seller have
------------------------------------
full power and authority (corporate and otherwise) to execute, deliver and
perform this Agreement (including, without limitation, execution, delivery and
performance of the Operative Documents to which each of them is a party) and to
consummate the Transactions. The execution and delivery by Seller and the
Company of this Agreement and the Operative Documents, and the consummation of
the Transactions, have been duly and validly authorized by the Company and
Seller and no other actions on the part of the Company and Seller are necessary
with respect thereto. This Agreement and the Operative Documents have been duly
and validly executed and delivered by the Company and Seller, and constitute the
legal, valid and binding obligations of Seller and the Company, enforceable
against them in accordance with its terms. The Company will take all corporate
action that is necessary for the Company to complete the Transactions pursuant
to this Agreement.
3.4 Capitalization.
--------------
(a) The authorized capital stock of the Company consists solely of
fifty thousand (50,000) shares of common stock, no par value per share, of
which one thousand (1,000) shares are issued and outstanding. As of the
date hereof, the shares of Stock are the only shares of capital stock of
the Company outstanding. All such outstanding shares of Stock have been
duly authorized and validly issued and are fully paid and nonassessable.
There are no outstanding options, warrants, rights, subscriptions, claims
of any character, agreements, obligations, convertible or exchangeable
securities or other commitments, contingent or otherwise, relating to the
capital stock of the Company, pursuant to which the Company is or may
become obligated to issue or exchange any share of capital stock.
MERGER AGREEMENT - Page 10
----------------
There is not now nor has there ever been any Person who holds shares of
capital stock of the Company other than the Shareholders.
(b) Other than as set forth on Schedule 3.34 attached hereto, there
-------------
is no outstanding subscription, option, warrant, call, right, agreement or
commitment (including any right of conversion or exchange under any
outstanding security or other instrument) entitling any person to purchase
or otherwise acquire from Seller or the Company any capital stock of the
Company or any security convertible into or exchangeable therefor, or any
other right to acquire, any capital stock of the Company or relating to the
issuance, sale, delivery or transfer of Stock by Seller or the Company.
Other than as set forth on Schedule 3.34 attached hereto, there are no
-------------
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any of its outstanding of the Company to repurchase,
redeem or otherwise acquire any of its outstanding capital stock.
3.5 Consents and Approvals. Except as set forth on Schedule 3.5, the
---------------------- ------------
execution, delivery and performance by Seller and the Company of this Agreement
and the Operative Documents and the consummation of the Transactions by them
requires no consent, approval, order or authorization of, action by or in
respect of, or registration or filing with, any Governmental Body or other
Person.
3.6 No Violations. The execution, delivery and performance of this
-------------
Agreement and the Operative Documents by Seller and the Company, the
consummation by Seller and the Company of the Transactions and compliance by
Seller and the Company with the provisions hereof does not and will not (a)
conflict with or result in any breach or violation of any provision of the
Articles of Incorporation or Bylaws of the Company, (b) result in a default, or
give rise to any right of termination, cancellation or acceleration or loss
under any of the provisions of any note, bond, mortgage, indenture, license,
trust, agreement, lease or other instrument or obligation to which Seller or the
Company are a party or by which Seller or the Company may be bound, (c) result
in the creation or imposition of any Lien on any of the property of Seller or
the Company, (d) violate any Order, statute, rule or regulation applicable to
Seller or the Company, or (e) violate any territorial restriction on the Company
or Seller or any noncompetition or similar arrangement.
3.7 Title to and Condition of Assets and Property. Except as specifically
---------------------------------------------
set forth on Schedule 3.7, the Company has good and marketable title to all its
------------
properties and assets (real and personal, tangible and intangible), such
properties and assets are free and clear of all Liens, and such properties and
assets are in good operating condition and a state of good maintenance and
repair and are sufficient to conduct the Company's operations after Closing in
the ordinary course of business and consistent with past practices.
3.8 Inventory. Except as set forth on Schedule 3.8, the Company has good
--------- ------------
title to all inventory reflected on the Financial Statements and all inventory
purchased or created since the date of the Financial Statements (other than
inventory disposed of since such date in the ordinary course of business
consistent with past practices), free and clear of all Liens. The inventory is
adequate for the conduct of the Company's operations. The inventory levels are
not in excess of
MERGER AGREEMENT - Page 11
----------------
the normal operating requirements of the Company. The value at which the
inventory is carried on the Financial Statements reflects the normal inventory
policies of the Company and has been determined in accordance with generally
accepted accounting principles. Except as set forth on Schedule 3.8, all
------------
inventory is or will be at Closing, located at the Company's offices at 0000
Xxxxxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000. The Company is
under no obligation to repurchase any inventory previously sold in connection
with the operation of the Company.
3.9 Distributors and Suppliers. Except as set forth on Schedule 3.9, the
-------------------------- ------------
Company is not involved in any controversy with any of the distributors,
customers, or suppliers of the Company. Schedule 3.9 lists all distributors,
------------
customers and suppliers which, as of date of the Financial Statements and for
the period then ended, accounted for five percent (5%) or more of (i) the
Company's revenues, and (ii) purchases of products, supplies, equipment or parts
used exclusively in connection with the operation of the Company.
3.10 Product Warranties. Schedule 3.10 contains the forms of express
------------------ -------------
product and service warranties and guaranties which have been used by the
Company. Except as set forth on Schedule 3.10, the Company has not offered any
-------------
materially different forms of express product warranties and guaranties. The
Company's product and service warranty expense in 1995, 1996, and 1997 with
respect to products manufactured or sold by the Company in connection with the
Company's operation was _______________, ___________, and ________________,
respectively. To the Company's and the Seller's Best Knowledge, no events have
occurred or facts exist which could result in a material increase in such
product warranty expenses.
3.11 Investigation or Litigation. Except as set forth on Schedule 3.11,
--------------------------- -------------
there is no Proceeding pending or, to the Company's and the Seller's Best
Knowledge, Threatened against, relating to or affecting the Company. The
Company is not subject to any currently existing Proceeding by any Governmental
Body. There is no basis for the assertion of any Proceeding by any Governmental
Body or any Person regarding any violation of federal or state laws.
3.12 Taxes. All Taxes that are due and payable by the Company, other than
-----
those presently payable without penalty or interest, have been timely paid, and
the Company has timely filed (and, through the Closing Date, will timely file)
all Tax reports and returns required by law to be filed by them. All such Tax
reports and returns are true, complete and correct in all respects with regard
to the Company for the periods covered thereby. The Company is not delinquent
in the payment of any Tax. There is no Tax deficiency asserted against the
Company, and there is no unpaid assessment, proposal for additional Taxes,
deficiency or delinquency in the payment of any of the Taxes of the Company or
any violation of any Tax law that could be asserted by any taxing authority.
There are no Tax Liens upon any properties or assets of the Company nor has
notice been given of any event which could lead to any such Lien. No Internal
Revenue Service, state or local, audit, investigation or Proceeding of the
Company is pending or Threatened, and the results of any completed audits are
properly reflected in the Financial Statements. The Company has not granted any
extension to any taxing authority of the limitation period during which any Tax
MERGER AGREEMENT - Page 12
----------------
Liability may be asserted. The Company has not committed any violation of any
Tax laws. All monies required for the payment of Taxes not yet due and payable
with respect to the operations of the Company through and including the Closing
Date have been approved, reserved against and entered upon the books and
Financial Statements. All monies required to be withheld by the Company from
employees, if any, independent contractors, or others or collected from
customers for income taxes, social security and unemployment insurance taxes and
sales, excise and use taxes, and the portion of any such taxes to be paid by the
Company to governmental agencies or set aside in accounts for such purpose have
been approved, reserved against and entered upon the books and Financial
Statements.
3.13 No Brokers. Seller have not employed any broker, agent, or finder or
----------
incurred any Liability for any brokerage fees, commissions or finders' fees in
connection with the Transactions.
3.14 Accounts. Schedule 3.14 contains a complete and accurate list of all
-------- -------------
the Company's Accounts as of ________________, 199__, showing the name of each
account debtor and the amount due from each by invoice number and date. All of
such Accounts have arisen in the ordinary course of business for services
rendered or products sold. Except as set forth on Schedule 3.14, there is no
-------------
event or condition with respect to a specific customer that will cause such
Accounts to not be collected in full in due course without resort to litigation
and such Accounts will not be subject to counterclaim or setoff.
3.15 Insurance. All the insurance policies maintained by the Company are in
---------
full force and effect, all insurance premiums have been timely paid to date, and
no such policy will be canceled prior to Closing. A description of the Company's
insurance policies (including, without limitation, insurance providing benefits
for employees) is attached hereto as Schedule 3.15. The insurance policies set
-------------
forth on Schedule 3.15 provide adequate coverage, less deductibles, against the
-------------
risks involved in the operation of the Company.
3.16 Contracts; Oral Commitments; Defaults. Schedule 3.16 sets forth a true
------------------------------------- -------------
and correct list of all contracts and agreements of the Company (or summaries of
all oral commitments) and the Company has provided true, correct and complete
copies of such contracts and agreements to Purchaser prior to the date hereof.
There exists no breach or default under any of such contracts and no event
exists which, with the like giving of notice, passage of time, or happening of
any other event, would constitute a breach or default under such contract.
3.17 Corporate Matters. The Board of Directors and shareholders of the
-----------------
Company have approved the execution and delivery of this Agreement and the
consummation of the Transactions contemplated hereby in accordance with
applicable law.
3.18 Permits. Schedule 3.18 lists all Permits held by the Company. Such
------- -------------
Permits are valid, and neither the Company nor Seller have received any notice
that any Governmental Body intends to cancel, terminate or not renew any such
Permit. The Company holds all licenses, franchise, permits and other
governmental authorizations required by any Governmental Body or
MERGER AGREEMENT - Page 13
----------------
any Order. The Company is not being conducted, in violation of any statute, law,
ordinance, regulation, rule or Permit of any Governmental Body or any Order.
3.19 Compliance with Laws. The Company has complied with and is in
--------------------
compliance with all federal, state, local and foreign statutes, laws,
ordinances, regulations, rules, permits, judgments, orders or decrees applicable
to the Company or any of its properties, assets, operations and businesses, and
there does not exist any basis for any claim or default under or violation of
any such statute, law, ordinance, regulation, rule, judgment, order or decree.
3.20 Corporate Name. The Company's use of the Company's corporate name and
--------------
any assumed names used by the Company, do not infringe upon the right of any
third party.
3.21 Disclosure.
----------
(a) Seller have delivered or made available to Purchaser complete and
accurate copies of all documents listed on the Disclosure Schedules
delivered as a part hereof and all other information requested by Purchaser
pursuant hereto. No representation or warranty of Seller contained in
this Agreement or any statement in the Disclosure Schedules hereto contains
any untrue statement. No representation or warranty of Seller contained in
this Agreement or statement in the Disclosure Schedules hereto omits to
state a material fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading.
(b) There is no facts known to Seller which have specific application
to Purchaser and which could have a Material Adverse Effect on the Company
but which has not been set forth in this Agreement or the Disclosure
Schedules hereto.
3.22 Employee Matters. Schedule 3.22 contains a list of the names and
---------------- -------------
current aggregate annual cash compensation, sales compensation and other
incentive and bonus plans, agreements or arrangements and identifies the other
material benefits with respect to salaried employees, of each employee of the
Company expected to be hired by Purchaser and any employment contracts, secrecy
or confidentiality agreements, or noncompetition agreements to which the Company
is a party. Except as set forth on Schedule 3.22, no labor organization,
-------------
collective bargaining representative, or group represents or, to Seller' Best
Knowledge, claims to represent any of the Company's present employees, and
except as set for on Schedule 3.22, the Company has no collective bargaining or
-------------
employment or consulting agreements with any consultants or employees of the
Company. As set forth on Schedule 3.22, with respect to employees of the
-------------
Company, (a) there is no labor strike, work stoppage, organized slowdown, or
lockout actually pending or, to the Best Knowledge of Seller, Threatened against
or affecting the Company and no such action has been pending; (b) to the Best
Knowledge of Seller, no union organization campaign is in progress and no
question concerning representation exists; (c) the Company is in compliance in
all material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and is not engaged in any unfair labor practice; (d) there is no unfair labor
practice charge or complaint
MERGER AGREEMENT - Page 14
----------------
against the Company pending or, to the Best Knowledge of Seller, Threatened
before the National Labor Relations Board; (e) there is no pending or, to the
Best Knowledge of Seller, Threatened grievance before any Governmental Body; and
(f) (i) no charges with respect to or relating to the Company are pending or, to
Seller' Best Knowledge, Threatened before the Equal Employment Opportunity
Commission or any state or local agency responsible for the prevention of
unlawful employment practices; and (ii) the Company has received no notice of
the intent of any federal or other Governmental Body responsible for the
enforcement of labor or employment laws to conduct an investigation with respect
to or relating to the Company, and no such investigation is in progress.
3.23 Plans. Schedule 3.23 sets forth a complete and accurate description
----- -------------
of all employee benefit plans and all collective bargaining agreements relating
to employee benefits with respect to which the Company or any of its
predecessors contributes or is required to contribute and has or may incur any
future or contingent obligations, including, without limitation, all plans,
agreements or arrangements relating to deferred compensation, pension, profit
sharing, retirement income or other benefits, stock purchase and stock option
plans, bonuses, severance arrangements, health benefits, insurance benefits,
welfare benefits and all other material employee benefits or fringe benefits
(collectively referred to as the "Plans"). Except as set forth on Schedule 3.23:
-------------
(a) true, correct and complete copies of each Plan, all related Summary Plan
Descriptions and material employee communications, related trust agreements or
annuity contracts (or any other funding instruments), annual reports on the Form
5500 series required to be filed with any governmental agency for each Plan for
the two most recent Plan years and the most recent actuarial reports and
trustee's reports relating thereto (if applicable) have been furnished to
Purchaser; (b) each Plan has been administered and operated in accordance with
its terms and applicable law, and to the extent applicable, each Plan is
"qualified" within the meaning of Section 401(a) of the Code and each related
trust is exempt from tax under Section 501(a) of the Code; (c) each qualified
Plan has been amended to conform to the requirements of all applicable federal
statutes and regulations, and no Liability under any applicable law has been
incurred with respect to any Plan; (d) all reports and disclosures relating to
such Plans required to be filed with any agency of the federal, state or local
government or distributed to employees or beneficiaries have been or will be
properly and timely filed or distributed in compliance with applicable law; (e)
the Company does not maintain and has not been maintaining a "defined
contribution plan" or has incurred any Liability with respect to such a plan;
and (f) full payment has been made of all amounts which were required under the
terms of any of the Plans to have been paid as a contribution to such Plan.
3.24 Transactions with Affiliates. Schedule 3.24 contains a complete and
---------------------------- -------------
accurate description of all contracts, agreements and other arrangements
(whether written, oral, express or implied) between the Company and any
Affiliate of the Company.
3.25 Financial Statements. Attached to Schedule 3.25 are true, complete
-------------------- -------------
and correct copies of the balance sheet of the Company as of March 31, 1999, and
the related statements of income, and changes in shareholder's equity and net
worth for the periods then ended of the Company (the "Financial Statements")
provided by Seller to Purchaser. The Financial Statements
MERGER AGREEMENT - Page 15
----------------
are true, complete and correct, have been prepared in conformity with generally
accepted accounting principles consistently applied, present fairly the
financial position of the Company at the respective dates indicated and do not
omit to state or reflect any material fact concerning the Company required to be
stated or reflected therein or necessary to make the statements therein not
misleading, and shall be accompanied by an unqualified opinion audit report of
an independent accounting firm engaged at Seller' sole cost and expense.
3.26 Undisclosed Liabilities. The Company does not have any Liabilities
-----------------------
and there are no claims against the Company for any Liabilities, except as
disclosed in the Financial Statements or incurred subsequent to the date of the
Financial Statements in the ordinary course of business not involving borrowing
by the Company.
3.27 Leases. Schedule 3.27 contains an accurate and complete list and
------ -------------
description of the terms of all real and personal property leases to which the
Company is a party (as lessee or lessor). Each lease set forth on Schedule 3.27
-------------
(or required to be set forth on Schedule 3.27) is in full force and effect; all
-------------
rents and additional rents due to date on each such lease have been paid; in
each case, the lessee has been in peaceable possession since the commencement of
the original term of such lease and is not in default thereunder and no waiver,
indulgence or postponement of the lessee's obligations hereunder has been
granted by the lessor; and there exists no event of default or event,
occurrence, condition or act (including the purchase of the Stock hereunder)
which, with the giving of notice, the lapse of time or the happening of any
further event or condition, would become a default under such lease. The
Company has not violated any of the terms or conditions under any such lease in
any material respect, and, to the Best Knowledge of the Company, all of the
covenants to be performed by any other party under any such lease have been
fully performed. Any property leased by the Company is in a state of good
maintenance and repair and is adequate and suitable for the purposes for which
it is presently being used.
3.28 Real Property. Schedule 3.28 contains an accurate and complete list
------------- -------------
of all real property owned in whole or in part by the Company and includes the
name of the record title holder thereof and a list of all indebtedness secured
by a lien, mortgage or deed of trust thereon. The Company has good and
marketable title in fee simple to all the real property specified as owned by it
on Schedule 3.28 (or required to be set forth on Schedule 3.28), free and clear
------------- -------------
of all Liens. All of the buildings, structures and appurtenances situated on
the real property listed on Schedule 3.28 (or required to be set forth on
-------------
Schedule 3.28) are in good operating condition and in a state of good
-------------
maintenance and repair, are adequate and suitable for the purposes for which
they are presently being used and with respect to each, the Company has adequate
rights of ingress and egress in the ordinary course. None of such buildings,
structured or appurtenances (or any equipment therein), nor the operation or
maintenance thereof, violates any restrictive covenant or any provision of any
federal, state or local law, ordinance, rule or regulation, or encroaches on any
property owned by others. Except as set forth on Schedule 3.28, no condemnation
-------------
proceeding is pending, or to the Best Knowledge of Seller, Threatened which
would preclude or impair the use of any such property by the Company for the
purposes for which it is currently used.
MERGER AGREEMENT - Page 16
----------------
3.29 Environmental Matters.
---------------------
(a) Compliance Generally. The Company complied and is in material
--------------------
compliance with all Environmental Requirements.
(b) Claims. The Company has not received any claim, complaint,
------
citation, report or other notice regarding any liabilities or potential
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or corrective
obligations, arising under the Environmental Requirements.
(c) Certain Environmental Liabilities. The Company has not stored,
---------------------------------
disposed of, arranged for or permitted the disposal of, transported,
handled or released any substance, including, without limitation, any
hazardous substance, pollutant, contaminant or waste, or owned or operated
any facility or property, so as to give rise to Liabilities of the Company
pursuant to the Environmental Requirements, including, without limitation,
any Liability of response costs, corrective action, natural resources
damages, personal injury, property damage or attorneys fees.
(d) Operations. The Company has taken no action relating to the past
----------
or present facilities, properties or operations of the Company that will
prevent, hinder or limit continued compliance with the Environmental
Requirements, give rise to any investigatory, remedial or corrective
obligations pursuant to the Environmental Requirements, or give rise to any
other Liabilities pursuant to the Environmental Requirements, including any
Environmental Requirements relating to onsite or offsite releases or
threatened releases of hazardous or otherwise regulated materials,
substances or wastes, personal injury, property damages or natural
resources damage.
(e) Liability for Others. The Company has not, either expressly or by
--------------------
operation of law, assumed or undertaken any Liability or corrective or
remedial obligations of any other Person relating to Environmental
Requirements.
3.30 Intellectual Property. The operation of the Company, in the ordinary
---------------------
course and as presently conducted, requires no rights under Intellectual
Property (as hereinafter defined) other than rights related to Intellectual
Property owned by the Company and listed on Schedule 3.30. Except as set forth
-------------
on Schedule 3.30, all licenses or similar agreements listed on Schedule 3.30 are
------------- -------------
in full force and effect. Except as otherwise set forth on Schedule 3.30, with
-------------
respect to Intellectual Property which is owned by the Company, the Company owns
all right, title and interest in such Intellectual Property, including, without
limitation, exclusive rights to use and license the same to third parties.
Except as set forth on Schedule 3.30, during the past seven (7) years no claim
-------------
adverse to the interests of the Company in the Intellectual Property has been
made. To the Best Knowledge of Seller, except as set forth on Schedule 3.30, no
-------------
such claim has been Threatened, no valid basis exists for any such claim and no
person has infringed or otherwise violated the Company's rights in any of the
Intellectual Property. Neither the execution of this Agreement and the
Operative
MERGER AGREEMENT - Page 17
----------------
Documents nor the consummation of the Transactions will materially adversely
alter or materially impair the rights of the Company to use any of the
Intellectual Property listed on Schedule 3.30.
-------------
3.31 Bank Accounts and Powers of Attorney. Set forth on Schedule 3.31 is
------------------------------------ -------------
an accurate and complete list showing (a) the name and address of each bank in
which the Company has an account or safe deposit box, the number of any such
account or any such box and the names of all persons authorized to draw thereon
or to have access thereto, and (b) the names of all persons, if any, holding
powers of attorney from the Company and a summary statement of the terms
thereof.
3.32 Knowledge of Seller. Where any representations or warranty contained
-------------------
in this Article III is expressly qualified by reference to the Best Knowledge of
Seller, Seller, who are officers of the Company, confirm that, as to the matters
that are the subject of such representations and warranties, they have made
suitable inquiries of the appropriate responsible Company employees and have
made a suitable review of appropriate corporate records and documents within
their possession or control, and Seller who are directors of the Company confirm
that, as to matters that are the subject of such representations and warranties,
they have made a suitable review of appropriate corporate records and documents
which have been furnished to them or are otherwise within their possession or
control.
3.33 Inspection Does Not Affect Warranties. The representations and
-------------------------------------
warranties of Seller contained in this Agreement shall in no way be abridged,
reduced, waived, be considered fulfilled or otherwise be affected by any
examination or inspection made by Purchaser at any time.
3.34 Rights and Assets. The Company shall receive at Closing all tangible
-----------------
and intangible rights and assets necessary for the Company to operate the
Company's business after Closing in the same manner as the business of the
Company was conducted prior to Closing.
3.35 Absence of Certain Changes. Since the date of Financial Statements,
--------------------------
there has been no material adverse change in the assets or liabilities, or in
the results of operations of the Company, and, to the Best Knowledge of Seller,
no fact or condition (other than general economic conditions) exists or is
contemplated or Threatened which might cause such a change in the future.
Except as set forth on Schedule 3.35, since the date of the Financial
-------------
Statements, the Company has not, (a) incurred, or assumed or become subject to,
whether directly or by way of guarantee or otherwise, any material Liability,
(b) permitted any of its assets to be subjected to any Lien, (c) sold,
transferred or otherwise disposed of any assets, except in the ordinary course
of business, (d) made any material capital expenditure, additions to property,
plant or equipment or acquisition of other property or assets or commitment
therefor, (e) declared or paid any dividend or made any distribution on any
shares of its capital stock, or redeemed, purchased or otherwise acquired any
shares of its capital stock or any option, warrant or other right to purchase or
acquire any shares, (f) made any bonus or profit sharing distribution or payment
of any kind, (g) increased its indebtedness for borrowed money or made any loan
to any party, (h) written off as uncollectible any notes or accounts receivable,
(i) granted any increase in the rate of wages, salaries, bonuses or other
remuneration of any executive employee or other employees, except in the
ordinary course of
MERGER AGREEMENT - Page 18
----------------
business, (j) canceled or waived any debts, claims or rights or material value,
(k) made any change in any method of accounting or auditing practice, (l)
suffered any damage, destruction or loss materially adversely affecting the
properties or assets of the Company, (m) made any change or amendment in its
Articles of Incorporation or Bylaws or other governing instruments, (n) issued
or sold any of its capital stock or redemption or otherwise, any such capital
stock, reclassified, split up or otherwise changed any such capital stock or
granted or entered into any options, warrants, calls or commitments of any kind
with respect thereto, (o) paid, discharged or satisfied any Liabilities, other
than in the ordinary course of business, (p) prepaid any material obligations
having a maturity of more than ninety (90) days from the date such obligation
was issued or incurred, (q) disposed of or permitted to lapse any rights to the
use of any material patent, trademark, copyright, license or other intellectual
property owned or used by it, (r) entered into any collective bargaining or
union contract or agreement, (s) incurred any material Liability required by
generally accepted accounting principles to be reflected on a balance sheet,
other than in the ordinary course of business, or (t) agreed, whether or not in
writing, to do any of the foregoing. As used in this Section 3.35 the reference
to "material" Liabilities, assets, capital expenditures or values of claims or
rights shall mean such items individually or in the aggregate in excess of
$5,000.00.
3.36 Books and Records. The minute books and other corporate records of
-----------------
the Company, as previously made available to Purchaser and its representatives,
constitute all of the minute books and other corporate records of the Company
and such corporate records of the Company and such books and records contain
accurate records of all meetings of and corporate actions or written consents by
the respective shareholders and Board of Directors of the Company and the
subsidiaries. The Company does not have any of its respective records, systems,
controls, data or information recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Company.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that the following are true
and correct as of the date of this Agreement and will be true and correct
through the Closing Date, regardless of what investigations, if any, Seller
shall have made prior hereto or prior to the Closing:
4.1 Organization. Purchaser is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Colorado.
4.2 Authority Relative to this Agreement. Purchaser has full power and
------------------------------------
authority (corporate and otherwise) to execute, deliver and perform this
Agreement (including, without limitation, execution, delivery and performance of
the Operative Documents to which it is a party) and to consummate the
Transactions. The execution and delivery by Purchaser of this Agreement, and
the consummation of the Transactions, have been duly and validly authorized by
the Board of Directors of Purchaser and no other corporate proceedings on the
part of Purchaser are necessary with respect thereto.
MERGER AGREEMENT - Page 19
----------------
4.3 Consents and Approvals. Except as set forth in or otherwise required
----------------------
by this Agreement or the Operative Documents, the execution, delivery and
performance by Purchaser of this Agreement and the consummation of the
Transactions by it requires no consent, approval, order or authorization of,
action by or in respect of, or registration or filing with, any Governmental
Body or other Person.
4.4 No Brokers. Purchaser has not employed any broker, agent or finder or
----------
incurred any Liability for any brokerage fees, commissions or finders' fees in
connection with the Transactions.
5. ADDITIONAL AGREEMENTS
5.1 Conduct of the Company. After the date hereof and prior to the Closing
----------------------
Date, Seller shall cause the Company to conduct its operations according to its
normal course of business to preserve its business organization, keep available
the services of its employees and independent contractors, maintain satisfactory
relationships with Governmental Bodies, suppliers, customers and all others
having business relationships with the Company and continue to service and
maintain all of its respective assets in a manner consistent with past
practices. All risk of loss arising out of fire and casualty and all Liability
to third parties arising out of the operations of the Company prior to the
Closing Date shall be that of Seller, and Purchaser shall have no obligation or
Liability in connection therewith.
5.2 Forbearances by Seller. Seller covenant that except as contemplated by
----------------------
this Agreement, Seller shall not, after the date hereof and prior to the Closing
Date, without the prior written consent of Purchaser, permit the Company to:
(a) change or amend its Articles of Incorporation or Bylaws (or other
similar documents);
(b) issue, encumber, sell or otherwise dispose of any shares of its
capital stock or any other securities (except upon the exercise of
currently outstanding options), pledge or agree to pledge any capital stock
or other securities owned by it, acquire directly or indirectly, by
redemption or otherwise, any such capital stock, reclassify, combine or
split up any such capital stock or grant or enter into any options,
warrants, calls or commitments of any kind with respect thereto;
(c) except as permitted by Section 2.6 above, declare, set aside or
pay any dividend payable in cash, stock or property, or make any other
distribution with respect to its capital stock or redeem or otherwise
acquire any of its securities;
(d) except in the ordinary course of business, incur or assume any
debt, or assume, guarantee or otherwise become liable or responsible for
the obligations of any other person or make any loans, advances or capital
contributions to, or investments in, any other person or entity, or grant
any security interest on any properties or assets of the Company;
MERGER AGREEMENT - Page 20
----------------
(e) merge or consolidate with any other person or entity, or organize
any new subsidiary or other person or entity, acquire any capital stock or
other equity securities or all or substantially all of the assets of any
person or entity or acquire any equity or other ownership interest in any
business or person or entity;
(f) cancel any debt or waive any claim or right or cancel any debts
or waive any claims or rights;
(g) transfer, lease, license, sell, mortgage, pledge, dispose of or
encumber any of its properties or assets, other than property disposed of
in the ordinary course of business consistent with past practice;
(h) grant any increase in the compensation payable or to become
payable by the Company or enter into any new employment agreement,
severance agreement or other contract or arrangement with respect to the
performance of personal services, or adopt any new, or amend or otherwise
increase the amounts payable or to become payable under any existing,
bonus, incentive compensation, deferred compensation, profit sharing, stock
option, stock purchase, insurance, pension, retirement, health insurance or
other employee benefit plan (including, without limitation, the granting of
stock options, stock appreciation rights or restricted stock awards);
(i) change or alter the manner in keeping books, accounts or records
of the Company or change accounting principles or methods;
(j) enter into any agreement with any person or entity involving or
reasonably likely to involve an expenditure by the Company in excess of
$5,000.00.
(k) make any capital expenditure or acquire any property or assets
(other than inventory) for a cost in excess of $5,000.00 in the aggregate;
(l) enter into any agreement that materially restricts the Company
from carrying on its business;
(m) pay, discharge or satisfy any material Liability, other than
payment, discharge or satisfaction in the ordinary course of business of
Liabilities or obligations incurred in the ordinary course of business and
consistent with past practice;
(n) enter into or amend any lease of real or personal property; or
(o) write-off as uncollectible any notes or Accounts.
5.3 No Solicitation. Seller covenant and agree that they will not and will
---------------
not permit any of its agents or representatives (including, without limitation,
investment bankers, attorneys and accountants) to, directly or indirectly (a)
solicit, initiate or encourage submission of proposals or offers by, or (b)
furnish any information with respect to or otherwise cooperate in any way with,
or
MERGER AGREEMENT - Page 21
----------------
participate in any discussions or negotiations with, any Person with respect to
any proposal regarding the acquisition or purchase of all or a material portion
of the assets of the Company or any equity interest in the Company or any
business combination with the Company.
5.4 Investigation of the Company. Prior to the Closing Date, Purchaser
----------------------------
may make or cause to be made such investigation of the Company and of its
financial and legal condition as appropriate or advisable to familiarize itself
therewith. The Company agrees to furnish Purchaser and its employees, officers,
agents, accountants, legal counsel and other representatives with all financial,
operating and other data and information concerning the Company and commitments
of the Company as Purchaser shall from time to time reasonably request and will
afford Purchaser and its employees, officers, accountants, attorneys, agents,
investment bankers and other authorized representatives access to the Company's
offices (including access during normal business hours) to review such documents
and its books and records and will be given opportunity to ask questions of, and
receive answers from, representatives of the Company with respect to such
matters. No investigations by Purchaser or its employees, representatives or
agents shall reduce or otherwise affect the Liability of the Company or Seller
with respect to any representations, warranties, covenants or agreements made
herein or in an exhibit, schedule or other certificate, instrument, agreement or
document (including the Disclosure Schedule), executed or delivered in
connection with this Agreement. Any confidential information disclosed by the
Company to Purchaser shall be subject to the non-disclosure obligations set
forth in the Letter of Intent between Seller and Purchaser with respect to the
Transaction.
5.5 Agreement to Consummate. Subject to the terms and conditions herein
-----------------------
provided, each of the parties hereto agrees to use their best efforts to do all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective, as soon as reasonably practicable, the
Transactions contemplated by the Operative Documents, including, but not limited
to, the obtaining of all consents, authorizations, orders and approvals of any
Governmental Body required in connection therewith and initiating or defending
any legal action that is necessary or appropriate to permit the Transactions to
be consummated. At any time after the Closing Date, if any further action is
necessary, proper or advisable to carry out the purposes of this Agreement,
then, as soon as is reasonably practicable, each party to this Agreement shall
take, or cause its proper officers to take, such action. Each of the parties
hereto further agree that it will cooperate with the other after the
consummation of the Transactions for the purpose of providing Purchaser with the
information and access to information necessary to ensure Purchaser with a
reasonably smooth transition into the ownership of the Company. No party to
this Agreement shall take or cause to be taken any action that would cause the
representations or warranties expressed herein to be untrue or incorrect on the
Closing Date.
5.6 Approval of Third Parties. As soon as practicable after the execution
-------------------------
of this Agreement, Seller will use their best efforts to obtain all necessary
approvals and consents of all third parties required on the part of Seller for
the consummation of the Transactions (the "Third Party Consents"). Purchaser
will reasonably cooperate with Seller in securing any necessary
MERGER AGREEMENT - Page 22
----------------
consents from, or in making any filings with or giving any notice to any third
parties necessary for Seller to comply with this Section 5.6.
5.7 Agreement Regarding Brokers. Each party agrees that it will pay or
---------------------------
dispute, and hold the other party harmless from, any claims of brokers or others
for finder's or brokerage fees asserted as a result of representations by such
party to such brokers or others, regardless of whether the existence of such
brokers or others are disclosed herein.
5.8 Notice. Seller shall promptly give written notice to Purchaser upon
------
becoming aware of the occurrence or failure to occur, or the impending or
Threatened occurrence or failure to occur, of any event that would cause or
constitute, any of their representations or warranties being or becoming untrue.
5.9 Disclosure Schedules. Seller shall have delivered to Purchaser, prior
--------------------
to the date hereof, the proposed final version of the Disclosure Schedules
containing all of the disclosures, exhibits and other information or items
required by the various provisions of this Agreement. Thereafter, Seller shall
deliver to Purchaser any supplements or amendments to such Disclosure Schedule
promptly after Seller become aware of any event which changes any
representation, warranty or disclosure made by Seller or the Company in this
Agreement or any statement made by the Disclosure Schedule or in any supplement
or amendment thereto. Within ten (10) business days after receipt of any
supplements or amendment to such Disclosure Schedule, if in Purchaser's sole and
absolute judgment such amendment and/or supplement represents, reflects or
results in a Material Adverse Effect on or to the Company, its business
prospects, assets, financial condition or result or operations (and in making
such judgment, Purchaser shall have the right to consider the effect of any such
amendment and/or supplement in the aggregate with all prior amendments and/or
supplements), this Agreement and the transactions contemplated hereby may be
terminated and abandoned by Purchaser by written notification to Seller.
5.10 Filings. The parties will each make or cause to be made any filings
-------
and submissions under the laws of any jurisdiction, to the extent that such
filings are necessary to consummate the transactions contemplated hereby and
will take all actions necessary to consummate the transactions contemplated
hereby in a manner consistent with the applicable laws of such jurisdiction.
Each party will furnish to the other party such necessary information and
reasonable assistance as such other party may request in connection with its
preparation of necessary filings or submissions to any governmental entity.
5.11 Taxes.
-----
(a) Seller hereby agree to cooperate fully with Purchaser and the
Company in connection with the preparation of any returns or reports, any
examinations of the Company by any governmental taxing authority,
including, without limitation, making available records, books of account
or other materials reasonably necessary or helpful for the preparation of
such returns or reports or the defense against the assertions of any taxing
authority as to any tax returns.
MERGER AGREEMENT - Page 23
----------------
(b) Seller shall be solely responsible for the payment of any Taxes
of the Company with respect to taxable periods that end on or prior to the
Closing Date and Seller shall timely pay same when due. Seller shall
reimburse Purchaser for their pro-rata share of any Taxes of the Company
with respect to taxable periods beginning prior to and ending after the
Closing Date within fifteen (15) days of the payment of such Taxes. In the
case of taxable periods beginning prior to and ending after the Closing
Date, Seller pro-rata share of such Taxes shall be (i) in the case of any
Taxes other than Taxes based upon or related to income, the amount of such
Tax for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period ending on the Closing
Date and the denominator of which is the number of days in the entire
taxable period, and (ii) in the case of any Tax based upon or related to
income, the amount of such Tax that would have been payable if the relevant
taxable period ended on the Closing Date.
(c) This agreement terminates any and all sharing or other allocation
agreements or arrangements for Taxes in effect as of the Closing to which
the Company was a party.
6. CONDITIONS PRECEDENT TO CLOSING
6.1 General Conditions. Consummation of the Transactions shall be subject
------------------
to the fulfillment at the Closing Date of each of the following conditions:
(a) No Injunction. No court having jurisdiction shall have issued, to
-------------
the Best Knowledge of Purchaser or Seller, an injunction preventing the
consummation of the Transactions that shall not have been stayed or
dissolved prior to or on the Closing Date.
(b) Proceedings. All proceedings taken or to be taken in connection
-----------
with the Transactions, and all documents incident thereto shall be
reasonably satisfactory in form and substance to the parties and their
counsel, and the parties and their counsel shall have received all such
counterpart originals or certified or other copies of such documents as the
parties or their counsel may reasonably request.
(c) Employment and Noncompetition Agreement. At the Closing,
---------------------------------------
Purchaser and each of Xxxxxxxxx and Xxxxxxx shall enter into a
Noncompetition and Employment Agreement.
6.2 Conditions to Closing in Favor of Seller. Consummation of the
----------------------------------------
Transactions shall be subject to the fulfillment, to the reasonable satisfaction
of Seller, or their written waiver, at or before the Closing Date, of each of
the following conditions:
(a) Representations and Warranties of Purchaser. The representations,
-------------------------------------------
warranties and statements of Purchaser contained in this Agreement and the
Operative Documents shall be complete and accurate as of the date of this
Agreement and shall also be complete and accurate at and as of the Closing
Date, except for changes contemplated by
MERGER AGREEMENT - Page 24
----------------
this Agreement, as if made on the Closing Date; and Purchaser shall have
performed or complied with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date.
(b) Purchaser's Officers' Certificate. Purchaser shall have delivered
---------------------------------
to Seller an Officers' Certificate, dated the Closing Date, of Purchaser
certifying to (a) the due adoption by the Board of Directors of the
attached resolutions approving the execution and delivery of this
Agreement, and the consummation of the Transactions and (b) the incumbency
of the President, Secretary and other officers of Purchaser executing any
of the Operative Documents.
(c) Governmental Consents, Authorizations, Etc. All material
-------------------------------------------
consents, authorizations, orders or approvals of, and filings or
registrations with, and any permits, licenses or other authorizations
required by, any applicable Governmental Body that are required for, or in
connection with, the execution and delivery of this Agreement by Purchaser
and the consummation by Purchaser of the Transactions shall have been
obtained or made.
(d) Closing Consideration. Purchaser shall have delivered to Seller
---------------------
the Purchase Price required by Section 2.2 hereof, including the
Subordinated Convertible Promissory Notes.
(e) Guaranty. CWII shall have delivered to Seller the Guaranty.
--------
6.3 Conditions to Closing in Favor of Purchaser. Consummation of the
-------------------------------------------
Transactions shall be subject to the fulfillment, to the reasonable satisfaction
of Purchaser, or its written waiver, at or before the Closing Date of the
following conditions:
(a) Representations and Warranties of Seller. The representations,
----------------------------------------
warranties and statements of Seller contained in this Agreement, the
exhibits hereto and the Disclosure Schedules shall be complete and accurate
as of the date of this Agreement and shall also be complete and accurate at
and as of the Closing Date, except for changes contemplated by this
Agreement, as if made at and as of the Closing Date; and Seller shall have
performed or complied with all agreements and covenants required by this
Agreement to be performed or complied with by them at or prior to the
Closing Date.
(b) Governmental Consents, Authorizations, Etc. All material
-------------------------------------------
consents, authorizations, orders or approvals of, and filings or
registrations with, and any permits, licenses or other authorizations
required by, any applicable Governmental Body that are required for or in
connection with, the execution and delivery of this Agreement by Seller and
the consummation by Seller of the Transactions shall have been obtained or
made.
MERGER AGREEMENT - Page 25
----------------
(c) Shareholder Release. Seller shall have executed and delivered to
-------------------
Purchaser a general release releasing any and all claims for compensation
or otherwise as directors, officers, employees and shareholders in the form
attached hereto as Exhibit F.
---------
(d) Seller's Certificate. Seller shall have delivered to Purchaser
--------------------
Seller's certificates dated the Closing Date, certifying as to the
fulfillment of the conditions set forth in Section 6.3(a) and (b).
(e) Opinion of Counsel. Seller shall have furnished Purchaser with an
------------------
opinion dated the Closing Date of a law firm suitable to Purchaser in the
form attached as Exhibit G hereto, or with such modifications thereto as
---------
are approved by Purchaser, in its sole and absolute discretion.
(f) Legislation. No law or legally binding regulation shall have been
-----------
enacted that does or would prohibit, restrict or delay consummation of the
Transactions or any of the conditions to the consummation of the
Transactions or that does or would have a Material Adverse Effect on the
Company.
(g) Litigation. There shall be no effective Order of any nature
----------
(including any temporary restraining order) issued by a Governmental Body
of competent jurisdiction restraining or prohibiting consummation or
altering the terms of any of the Transactions, or actions seeking damages
based upon the foregoing which Purchaser reasonably deems material. Seller
shall not have become subject to any litigation, which, if adversely
determined, could, in the opinion of Purchaser, have a Material Adverse
Effect on the Company.
(h) No Adverse Change. There shall have occurred no adverse change
-----------------
(whether or not covered by insurance) in operations, assets, liabilities,
properties or financial condition of the Company since the date of the
Financial Statements.
(i) Delivery of Documents/Acceptance of Disclosure Schedules. Seller
--------------------------------------------------------
shall have timely delivered any and all amendments and/or supplements to
the Disclosure Schedules and all other documents, instruments, schedules
and financial statements required hereunder to Purchaser. The Disclosure
Schedules, as amended and supplemented, shall be acceptable in form and
substance to Purchaser, in its absolute discretion.
(j) Third Party Consents. Seller shall have delivered copies of all
--------------------
Third Party Consents, if any, necessary to permit the consummation of the
Transactions contemplated by this Agreement shall have been obtained in a
form satisfactory to Purchaser.
(k) Purchaser's Investigation. The investigations by Purchaser and
-------------------------
its representatives in connection with the proposed Transactions shall not
have caused Purchaser or its representatives to become aware of any facts
or circumstances relating to
MERGER AGREEMENT - Page 26
----------------
the Company that in the sole discretion of Purchasers make it inadvisable
for Purchaser to proceed with the Transactions.
(l) Approval. The Board of Directors of the Company and Seller each
--------
shall have approved this Agreement and the transactions contemplated
hereby.
(m) Certificate of Authorities. Seller shall have furnished to
--------------------------
Purchaser (i) certificates of the Secretary of State of each state in which
the Company is organized or incorporated, dated as of a date not more than
five (5) business days prior to the Closing Date, attesting to the
incorporation and good standing of the Company, (ii) a copy, certified by
the Secretary of State of each state in which the Company is organized or
incorporated, as of a date not more than five (5) business days prior to
the Closing Date, of the Articles of Incorporation and all amendments
thereto for the Company, (iii) a copy, certified by the Secretary of the
Company, of the Bylaws of the Company, as amended and in effect as of the
Closing Date, and (iv) a copy, certified by the Secretary of the Company,
of resolutions duly adopted by the Board of Directors of the Company duly
authorizing the transactions contemplated in this Agreement.
(n) Corporate Records and Books of Account. The respective corporate
--------------------------------------
seals, articles of incorporation, bylaws, stock certificates, stock
transfer ledgers, and corporate books and records of the Company, updated
up to the Closing Date, shall be delivered to Purchaser.
(o) Bank Accounts. Seller shall have caused the Company to have
-------------
revoked all existing authorities and all instructions to banks in respect
of the operations of the bank accounts of the Company and new authorities
and instructions shall be given to such persons on such terms as Purchasers
may require.
(p) Certificate of Merger. Purchaser shall have received fully
---------------------
executed Certificates of Merger sufficient for filing with the State of
Colorado in order to consummate the Merger.
(q) Subscription Agreement. Seller shall have executed and delivered
----------------------
to Purchaser the Subscription Agreement.
(r) Other Matters. Seller shall have delivered to Purchaser, in form
-------------
and substance reasonably satisfactory to counsel for Purchaser, such
certificates and other evidence as Purchaser may reasonably request as to
the satisfaction of the conditions contained in this Section 6.3.
7. CLOSING AND TERMINATION
7.1 Closing Date. Subject to the right of Purchaser and Seller to
------------
terminate this Agreement pursuant to Section 7.2 hereof, the closing of the
Transactions (the "Closing") shall,
MERGER AGREEMENT - Page 27
----------------
unless another date or place is agreed to in writing by Seller and Purchaser,
take place at the offices of 0000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxxxxx 00000, at 10:00 a.m. (Denver time) on April _____, 1999 (the "Closing
Date") or such other place and date as the parties may mutually agree upon in
writing. Purchaser shall, at its option, have the right, but not the obligation
to extend the Closing Date by not more than forty-five (45) days by giving
written notice thereof to Seller at least three (3) business days prior to the
Closing Date referred to in the preceding sentence. If Purchaser exercises its
option hereunder to extend the Closing Date, the term Closing Date as used
herein shall mean and refer to such Closing Date as extended.
7.2 Termination. This Agreement may be terminated at any time prior to the
-----------
Closing Date:
(a) by mutual written agreement of Purchaser and Seller;
(b) by Seller if any representation or warranty of Purchaser or by
Purchaser if any representation or warranty of Seller contained herein
shall have been incorrect or breached in any material respect, as to which
notice shall have been given to the breaching party, and shall not have
been cured or otherwise resolved to the reasonable satisfaction of the
other party on or before the Closing Date, or by either Purchaser or Seller
if any condition to the consummation of the Transactions contemplated
hereunder that must be fulfilled to its satisfaction has become impractical
to be fulfilled;
(c) by either Purchaser or Seller if any permanent injunction or
other order of a court or other competent authority preventing the
consummation of the Transactions shall have become final and non-
appealable; or
(d) by Purchaser or Seller if the Closing has not occurred by April
1, 1999; provided, however, that such date may be extended by written
agreement among the parties and provided, further, that no party shall be
permitted to terminate hereunder if such party is in violation of this
Agreement.
7.3 Effect of Termination. In the event of the termination of this
---------------------
Agreement as provided herein, this Agreement shall become wholly void and have
no further force and effect except as hereinafter provided; and there shall be
no Liability on the part of Seller or Purchaser (or Purchaser's respective
officers of directors) except to comply with the provisions of Section 5.7
regarding brokers, to pay the fees and expenses as apportioned in Section 9.2
and except as otherwise expressly provided herein. Nothing contained herein
shall relieve any party from Liability for its breach of this Agreement.
7.4 Extension; Waiver. At any time prior to the Closing Date, any party
-----------------
hereto that is entitled to the benefits hereof (with respect to any such
corporate party by action taken by its Board of Directors or a duly authorized
officer), may (a) extend the time for the performance of any of the obligations
or other acts of any of the other parties hereto, (b) in whole or in part, waive
any inaccuracy in the representations and warranties of any of the other parties
hereto contained herein or in any exhibit or schedule hereto or in any document
delivered pursuant hereto, and (c) in whole
MERGER AGREEMENT - Page 28
----------------
or in part, waive compliance with any of the agreements of any of the other
parties hereto or conditions contained herein. Any agreement on the part of any
party hereto to any such extension or waiver shall only be valid if same is set
forth in an instrument in writing signed and delivered on behalf of such party.
8. SURVIVAL AND INDEMNIFICATION
8.1 Survival of Representations and Warranties. The respective
------------------------------------------
representations and warranties of Seller contained in this Agreement, the
Operative Documents and any investigation shall survive the consummation of the
Transactions contemplated in this Agreement and shall continue in full force and
effect after the Closing for a period of four (4) years from the Closing at
which time they shall expire, except as to claims made in respect thereof in
writing by Purchaser on or before the expiration of such period; provided,
however that (a) the representations and warranties contained in Section 3.12
shall survive until the expiration of the statutory period of limitations for
assessment of Tax deficiencies, including any extensions thereof, for each
taxable year of the Company which begins before the Closing, and (b) the
representations and warranties contained in Sections 3.1 and 3.29 shall survive
indefinitely. The covenants and agreements of Seller shall not be affected by
the expiration of any representation or warranty pursuant to this Section 8.1
and shall survive indefinitely.
8.2 Indemnity. Seller agrees to indemnify and hold Purchaser, its
---------
officers, directors, agents, attorneys and accountants ("Purchaser Indemnitees")
harmless from any and all damages, losses (which shall include any diminution in
value, liabilities, joint or several), payments, obligations, penalties, claims,
litigation, demands, defenses, judgments, suits, proceedings, costs,
disbursements or expenses (including without limitation, fees, disbursements and
expenses of attorneys, accountants and other professional advisors and of expert
witnesses and costs of investigation and preparation) of any kind or nature
whatsoever (collectively "Damages"), directly or indirectly resulting from,
relating to or arising out of:
(a) any breach or nonperformance (partial or total) of or inaccuracy
in any representation or warranty or covenant or agreement of Seller
contained in this Agreement or any Operative Document which survives the
Closing hereof;
(b) Liability arising out of the Company's business conducted prior
to the Closing and not expressly assumed by Purchaser pursuant to this
Agreement;
(c) any losses or costs of defending against any claims which may be
made against Purchaser by any Person claiming violations by the Company of
any local, state, or federal law relating to the employment relationship,
including, but not limited to, wages, hours, concerted activity,
nondiscrimination, occupational health and safety and the payment and
withholding of Taxes, where such claims arise out of circumstances
occurring prior to the Closing Date;
MERGER AGREEMENT - Page 29
----------------
(d) any actual or threatened violation of or non-compliance with, or
remedial obligation arising under, any environmental laws arising from any
event, condition, circumstance, activity, practice, incident, action or
plan existing or occurring prior to the Closing relating in any way to the
Company;
(e) the Transaction Expenses incurred by Seller; and
(f) the Lawsuit in accordance with this Article VIII and Section 2.2
(f) above.
8.3 Indemnification Notice. If a Purchaser Indemnitee intends to exercise
----------------------
its right to indemnification provided in this Article 8, such Purchaser
Indemnitee shall provide the party or parties from whom the indemnification will
be sought (the "Indemnitor") at least fifteen (15) days prior written notice
(the "Indemnification Notice") of such Purchaser Indemnitee's intention to do so
and the facts or circumstances giving rise to the claim ("Indemnification
Claim"). Nothing contained herein shall preclude any Purchaser Indemnitee from
taking any actions deemed reasonably necessary or appropriate in response to any
third party claims during such interim period. An Indemnification Claim may, at
the option of Purchaser Indemnitee, be asserted as soon as any situation, event
or occurrence has been noticed by Purchaser Indemnitee regardless whether actual
harm has been suffered or out-of-pocket expenses incurred. During such fifteen
(15) day period, the Indemnitor shall be entitled to cure the defect or
situation giving rise to the Indemnification Claim to the complete satisfaction
of Purchaser Indemnitee. If the Indemnitor is unwilling or unable to cure, to
the complete satisfaction and the Indemnitor, the defect or situation giving
rise to the Indemnification Claim during such fifteen (15) period, the
Indemnitor shall assume the defense of such claim at its sole expense through
counsel reasonably satisfactory to the Purchaser Indemnitee; provided that (i)
the Indemnitor shall not permit any lien, encumbrance or other adverse charge
upon any asset of any Purchaser Indemnitee; (ii) the Indemnitor shall permit
Purchaser Indemnitee to participate in such settlement or defense through
counsel selected by such Purchaser Indemnitee at Indemnitor's expense, and (iii)
the Indemnitor shall agree to promptly reimburse such Purchaser Indemnitee for
the full amount of its liability to the third party claimant. If the Indemnitor
shall not have employed counsel reasonably satisfactory to the Purchaser
Indemnitee to defend such claim or if such Purchaser Indemnitee shall have
reasonably concluded (with the written advice of counsel) that the position of
such Purchaser Indemnitee and the Indemnitor may be in conflict (in which case
the Indemnitor shall not have the right to direct the defense of any such claim
on behalf of such Purchaser Indemnitee), the Purchaser Indemnitee may defend
against such claim or related legal proceeding with such counsel and in such
manner as the Purchaser Indemnitee deems appropriates, and may consent to the
settlement or compromise of, or consent to the entry of a judgment arising from,
such claim or legal proceeding without the consent of the Indemnitor and the
reasonable legal and other expenses incurred by such Purchaser Indemnitee shall
be borne by the Indemnitor. Notwithstanding the foregoing, each Purchaser
Indemnitee shall have the right to pay or settle any such claim provided in such
event it shall waive its right to indemnity therefore by the Indemnitor.
MERGER AGREEMENT - Page 30
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8.4 Indemnification with Respect to Pending Litigation. Notwithstanding
--------------------------------------------------
the disclosure by the Company and the Seller of the Lawsuit in Schedule 3.11
attached hereto, and notwithstanding any other provisions of this Agreement to
the contrary, Seller hereby agrees to:
(a) defend the Lawsuit and pay all Damages incurred therewith in
accordance with this Article VIII;
(b) pay any Settlement or Judgment that may be imposed upon or paid
by any Purchaser Indemnitees or any of their successors with respect to the
Lawsuit (Purchaser and Seller acknowledging that the Escrowed Amount
deposited into the Escrowed Account pursuant to Section 2.2(f) above shall
be paid to the plaintiff in the Lawsuit prior to Seller being required to
pay additional funds with respect to the Lawsuit); and
(c) Provide Purchaser and its counsel with full and complete access
to all pleadings, correspondence, documents and other writings pertaining
to the Lawsuit.
8.5 Offset. At any time or from time to time prior to the final payment
------
by Purchaser to Seller of any amounts or sums due under or pursuant to this
Agreement or the Operative Documents, including, without limitation, the
Subordinated Convertible Promissory Notes, Purchaser shall be entitled, in
addition to, and not in lieu of, any other right or remedy which Purchaser may
have against Seller, under or pursuant to this Agreement, or otherwise, to
notify Seller in writing (an "Offset Notice") that Purchaser reasonably believes
that it is entitled to indemnity for Damages under Section 8.2. Any Offset
Notice provided hereunder shall identify the provision of this Agreement which
Purchaser believes entitles it to such indemnity for Damages and shall briefly
identify the facts which constitute the basis for each such claim of indemnity
and the dollar amount of such claim. If on or before thirty (30) days after
delivery of the Offset Notice, Seller shall not have objected thereto, Purchaser
may, but, shall not be required to, offset against any portion of the amounts
due under this Agreement then remaining unpaid, the amount of the Damages
claimed in the Offset Notice (and thus to reduce the amounts due under this
Agreement). Notwithstanding any offset exercised pursuant to this Section 8.4,
to the extent that the actual amount of any Damages arising from a claim for
indemnity set forth in an Offset Notice shall exceed the value of the offset
against the amounts due under this Agreement claimed, Seller shall remain liable
for, and shall promptly reimburse Purchaser the amount of, any such excess
Damages. If on or before thirty (30) days following delivery of the Offset
Notice, Seller shall notify Purchaser that Seller questions the amount of any
Damages for which indemnity is claimed therein (or the entitlement to
indemnity), Purchaser shall nonetheless be entitled to exercise its rights of
offset provided for in this Section 8.4, but in lieu of reducing the amounts due
under this Agreement immediately, shall defer payment of a portion or portions
of the amounts due under this Agreement remaining unpaid in the amount of the
disputed claim until such time as (i) Purchaser shall have received written
authorization from Seller to retain such unpaid portion of the amounts due under
this Agreement in partial or total satisfaction of Purchaser's claim for
indemnity, or (ii) Seller shall have delivered to Purchaser, a certified or
file-stamped copy of a final decision of a court of competent jurisdiction
establishing the amount
MERGER AGREEMENT - Page 31
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of such Damages or directing a specific distribution of all or any part of the
amounts due under this Agreement being held by Purchaser pursuant to this
Section 8.4. It shall be a condition to Purchaser's obligation to defer applying
any unpaid portion of the amounts due under this Agreement, subject to the
resolution of Seller' objection to the amount of Damages claimed or the
entitlement to indemnity with regard thereto, that Seller, as applicable,
specify in writing the provisions of this Agreement and other facts supporting
such objection. Purchaser shall not be obligated to exercise the rights of
offset provided for in this Section 8.4, and no failure to exercise any such
right of offset shall relieve Seller of any indemnity obligations under Section
8.2, or otherwise. This Section 8.4 shall survive the Closing indefinitely.
9. GENERAL PROVISIONS AND OTHER AGREEMENTS
9.1 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if and when delivered personally or
transmitted by telex, facsimile (receipt confirmed) or telegram, mailed by
registered or certified mail (return receipt requested) or sent by a recognized
next business day courier to the following persons at the following addresses
(or at such other address for a party as shall be specified by like notice):
(a) If to Purchaser:
IAC Acquisition Corporation
0000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxx, Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
Xxxx, Xxxxxxxx & Xxxxxx PLLC
0000 XxXxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
(b) If to Seller or the Company:
Communications World
0000 Xxxxxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxx Xxxxxxxxx, President
Facsimile: (000) 000-0000
MERGER AGREEMENT - Page 32
----------------
with a copy to:
Xxxx & Trinen, L.L.P.
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
9.2 Fees and Expenses. Seller and Purchaser shall each pay all of their
-----------------
own fees, costs and expenses (including without limitation, those of
accountants, appraisers and attorneys) incurred in connection with or related to
the preparation, negotiation, execution, delivery, satisfaction, compliance and
consummation of this Agreement and the Transactions contemplated hereby and the
closing conditions hereunder.
9.3 Interpretation. The headings contained in this Agreement are for
--------------
reference purposes only and shall not affect the meaning or interpretation of
this Agreement. Terms such as "herein," "hereof," "hereinafter" refer to this
Agreement as a whole and not to the particular sentence or paragraph where they
appear, unless the context otherwise requires. Terms used in the plural include
the singular, and vice versa, unless the context otherwise requires.
9.4 Counterparts. This Agreement may be executed by facsimile in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5 Miscellaneous. This Agreement (a) constitutes the entire agreement and
-------------
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof;
(b) is not intended to and shall not confer upon any other person any rights or
remedies hereunder or otherwise with respect to the subject matter hereof,
except for rights that may expressly arise as a consequence of the Transactions;
(c) may not be assigned by operation of law or otherwise; (d) has been drafted
by all of the parties to this Agreement and should not be construed against any
of the parties hereto; and (e) shall be governed in all respects, including
validity, interpretation and effect by the substantive laws of the State of
Colorado without regard to conflict of law provisions.
9.6 Publicity. Prior to Closing, no party hereto shall issue any press
---------
release or make any other public statement, in either case relating to or
connected with or arising out of this Agreement or the matters contained herein,
without obtaining the prior written approval of the other parties to the
contents and the manner of presentation and publication thereof, which approval
shall not be unreasonably withheld.
9.7 Invalid Provisions. If any provision of this Agreement is held to be
------------------
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable. This Agreement shall
be construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof; and the remaining
MERGER AGREEMENT - Page 33
----------------
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or its severance
from this Agreement. Furthermore, in lieu of such illegal, invalid or
unenforceable provision there shall be added automatically as part hereof a
provision as similar in terms, but in any event no more restrictive than, such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable.
9.8 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties hereto and their respective heirs, legal representatives,
successors and permitted assigns.
9.9 Captions. The captions, headings and arrangements used in this
--------
Agreement are for convenience only and do not in any way affect, limit or
amplify the provisions hereof.
9.10 Attorneys' Fees. In the event that any Proceeding is commenced by any
---------------
party hereto for the purpose of enforcing any provision of this Agreement, the
party to such Proceeding may receive as part of any award, judgment, decision or
other resolution of such Proceeding its costs and attorneys' fees as determined
by the person or body making such award, judgment, decision or resolution.
Should any claim hereunder be settled short of the commencement of any such
Proceeding, the parties in such settlement may mutually agree to include as part
of the damages alleged to have been incurred reasonable costs of attorneys or
other professionals in investigation or counseling on such claim.
9.11 Jurisdiction and Venue. Any judicial proceedings brought by or
----------------------
against any party on any dispute arising out of this Agreement or any matter
related thereto shall be brought in the state or federal courts of Arapaho
County, Colorado and, by execution and delivery of this Agreement, each of the
parties accepts for itself the exclusive jurisdiction and venue of the aforesaid
courts as trial courts, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement after exhaustion of all
appeals taken (or by the appropriate appellate court if such appellate court
renders judgment).
9.12 Assignability. This Agreement may not be transferred, assigned,
-------------
pledged or hypothecated by any party hereto without the prior written consent of
the other parties to this Agreement.
9.13 Entirety. This Agreement and the documents executed and delivered
--------
pursuant hereto, executed on the date hereof or in connection herewith, contain
the entire agreement among the parties with respect to the matters addressed
herein and supersede all prior representations, inducements, promises or
agreements, oral or otherwise, which are not embodied herein or therein.
9.14 Amendment. This Agreement and the exhibits and schedules hereto may be
---------
amended by the parties hereto at any time prior to the Closing Date; provided,
however, that any
MERGER AGREEMENT - Page 34
----------------
amendment must be by an instrument or instruments in writing signed and
delivered on behalf of each of the parties hereto.
9.15 Governing Law. This Agreement shall be governed by the substantive
-------------
laws of the State of Colorado without regard to principles of choice or conflict
of law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers.
PURCHASER:
IAC ACQUISITION CORPORATION
By:______________________________
Xxxxx X. Xxxxxxxxxx, President
COMPANY:
XXXXXXXXX & ASSOCIATES, INC.
By:______________________________
Xxx Xxxxxxxxx, President
SELLER:
_________________________________
Xxx Xxxxxxxxx
_________________________________
Xxxxxxx Xxxxxxx
MERGER AGREEMENT - Page 35
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