AGREEMENT AND PLAN OF REORGANIZATION
by and among
The Westwind Group, Inc.
a Delaware corporation
and
CTC Cosmetics Holding (BVI) Co., Ltd.
a British Virgin Islands corporation
effective as of March 21, 1997
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, is made and entered into this
21st day of March 1997, by and between The Westwind Group, Inc., a Delaware
corporation ("Westwind") and CTC Cosmetics Holding (BVI) Co., Ltd., a
British Virgin Islands corporation ("CTC"), and certain shareholders of CTC
listed on the attached Schedule I ("CTC Shareholders"), and specifically
incorporated herein by reference (CTC and CTC Shareholders shall be
hereinafter jointly referred to as "CTC Parties").
Premises
A. This Agreement provides for the reorganization of CTC with and into
Westwind, with CTC becoming a wholly-owned subsidiary of Westwind, and in
connection therewith, the exchange of the outstanding common stock of CTC
into shares of common voting stock of Westwind, all for the purpose of
effecting a tax-free reorganization pursuant to sections 354 and
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended ("IRC"). On
the terms and conditions set forth herein, the parties hereby adopt the Plan
of Reorganization embodied in this Agreement.
B. The boards of directors of CTC and Westwind have determined, subject
to the terms and conditions set forth in this Agreement, that the exchange
contemplated hereby, as a result of which CTC would become a wholly owned
subsidiary of Westwind is desirable and in the best interests of their
stockholders. This Agreement is being entered into for the purpose of
setting forth the terms and conditions of the proposed exchange.
Agreement
NOW, THEREFORE, on the stated premises and for and in consideration of the
mutual covenants and agreements hereinafter set forth and the mutual
benefits to the parties to be derived herefrom, it is hereby agreed as
follows:
ARTICLE I
REPRESENTATIONS, COVENANTS AND WARRANTIES OF
CTC AND CTC SHAREHOLDERS
CTC and each of CTC Shareholders, individually and neither jointly nor
severally, represents and warrants to Westwind, except as disclosed in this
Agreement or in the case of any representation qualified by its terms to a
particular Schedule, as hereinafter defined, of CTC attached hereto, that
the statements made in this Article I will be correct and complete at the
Effective Date, as hereinafter defined, provided, however, if there is no
Effective Date, then no party shall be liable for any inaccuracy.
SECTION 1.1 SHAREHOLDERS. Each of the CTC Shareholders is the owner of
all of the issued and outstanding shares of the capital stock of CTC
attributed to such Shareholder on Schedule I; each CTC Shareholder has full
legal title to all CTC Shares described in Schedule I as being owned by such
CTC Shareholder free from any and all claims, liens or other encumbrances.
CTC Shareholders have unqualified right to sell, transfer, and dispose of
their respective CTC Shares subject to the laws of bankruptcy, insolvency
and general creditors' rights. Each CTC Shareholder represents and warrants
that, in regards to such CTC Shareholder's shares of CTC, such CTC
Shareholder has full right and authority to execute this Agreement and to
transfer his shares of CTC to Westwind.
SECTION 1.2 ORGANIZATION. CTC is a corporation duly organized, validly
existing, and in good standing under the laws of British Virgin Islands and
has the corporate power and is duly authorized, qualified, franchised and
licensed under all applicable laws, regulations, ordinances and orders of
public authorities to own all of its properties and assets and to carry on
its business in all material respects as it is now being conducted,
including qualification to do business as a foreign corporation in the
jurisdiction in which the character and location of the assets owned by it
or the nature of the business transacted by it requires qualification.
Included in the CTC Schedules (as hereinafter defined) are complete and
correct copies of the articles of incorporation, bylaws and amendments
thereto of CTC as in effect on the date hereof. The execution and delivery
of this Agreement does not and the consummation of the transactions
contemplated by this Agreement in accordance with the terms hereof will not
violate any provision of CTC's articles of incorporation or bylaws. CTC has
full power, authority and legal right and has taken all action required by
law, its articles of incorporation, its bylaws or otherwise to authorize the
execution and delivery of this Agreement.
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SECTION 1.3 CAPITALIZATION. The authorized capitalization of CTC consists
of 50,000 Common Shares, $1.00 par value per share (the "CTC Common
Shares"). As of the date of this Agreement, all of the authorized common
shares are issued and outstanding. All issued and outstanding shares are
legally issued, fully paid and nonassessable and are not issued in violation
of the preemptive or other rights of any person. CTC has no other
securities, warrants or options authorized or issued.
SECTION 1.4 SUBSIDIARIES AND PREDECESSOR CORPORATIONS. Except as
otherwise set forth in the CTC Schedules, CTC does not have any other
subsidiaries and does not own, beneficially or of record, any shares of any
other corporation. For purposes herein, all references to CTC shall include
CTC and all of its subsidiaries.
SECTION 1.5 FINANCIAL STATEMENTS.
(a) Attached hereto as Schedule 1.5 are audited consolidated
financial statements for the years ended September 30, 1996, September 30,
1995 and September 30, 1994, together with the related footnotes and report
thereon of the auditors rendering such reports (the "CTC Audited Financial
Statements"). The CTC Audited Financial Statements are hereafter referred to
as the "CTC Financial Statements". The CTC Financial Statements are correct
and complete in all respects and fairly present, in accordance with
generally accepted accounting principles ("GAAP"), consistently applied, the
consolidated financial position of CTC as of such dates and the results of
operations and changes in financial position for such periods all in
accordance with GAAP.
(b) CTC has no liabilities with respect to the payment of any
federal, state, county, local or other taxes (including any deficiencies,
interest or penalties), except for taxes accrued but not yet due and
payable;
(c) CTC has filed all state, federal and local income tax returns
required to be filed by it from inception to the date hereof, if any;
(d) The books and records, financial and others, of CTC are in all
material respects complete and correct and have been maintained in
accordance with good business accounting practices; and
(e) except as and to the extent disclosed in the most recent CTC
balance sheet and the CTC Schedules, CTC has no material contingent
liabilities, direct or indirect, matured or unmatured.
SECTION 1.6 INFORMATION. The information concerning CTC set forth in this
Agreement and in the CTC Schedules to the best of CTC's knowledge, is
complete and accurate in all material respects and does not contain any
untrue statement of a material fact or omit to state a material fact
required to make the statements made, in light of the circumstances under
which they were made, not misleading.
SECTION 1.7 OPTIONS AND WARRANTS. There are no existing options,
warrants, calls or commitments of any character to which CTC is a party and
by which it is bound.
SECTION 1.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
this Agreement, the CTC Schedules, or as otherwise disclosed to Westwind,
since September 30, 1996:
(a) there has not been: (i) any material adverse change in the
business, operations, properties, assets or condition of CTC; or (ii) any
damage, destruction or loss to CTC (whether or not covered by insurance)
materially and adversely affecting the business, operations, properties,
assets or condition of CTC;
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(b) CTC has not: (i) amended its articles of incorporation or
bylaws; (ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to
stockholders or purchased or redeemed or agreed to purchase or redeem any of
its capital stock; (iii) waived any rights of value which in the aggregate
are extraordinary or material considering the business of CTC; (iv) made any
material change in its method of management, operation or accounting other
than in its ordinary course of business; (v) entered into any other material
transaction; (vi) made any accrual or arrangement for or payment of bonuses
or special compensation of any kind or any severance or termination pay to
any present or former officer or employee; (vii) increased the rate of
compensation; or (viii) made any increase in any profit sharing, bonus,
deferred compensation, insurance, pension, retirement or other employee
benefit plan, payment or arrangement made to, for, or with its officers,
directors or employees.
(c) CTC has not: (i) granted or agreed to grant any options,
warrants or other rights for its stocks, bonds or other corporate securities
calling for the issuance thereof; (ii) borrowed or agreed to borrow any
funds or incurred or become subject to, any material obligation or liability
(absolute or contingent) except liabilities incurred in the ordinary course
of business; (iii) paid any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown on the most
recent CTC balance sheet and current liabilities incurred since that date in
the ordinary course of business; (iv) sold or transferred, or agreed to sell
or transfer, any of its assets, properties or rights (except assets,
properties or rights not used or useful in its business which, in the
aggregate have a value of less than $10,000); (v) made or permitted any
amendment or termination of any contract, agreement or license to which it
is a party if such amendment or termination is material, considering the
business of CTC; or (vi) issued, delivered or agreed to issue or deliver any
stock, bonds or other corporate securities, including debentures (whether
authorized and unissued or held as treasury stock); and
(d) to the best knowledge of CTC, it has not become subject to any
law or regulation which materially and adversely affects, or in the future
may adversely affect, the business, operations, properties, assets or
condition of CTC.
SECTION 1.9 TITLE AND RELATED MATTERS. Except as provided herein or in
the CTC Schedules, CTC has good and marketable title to and is the sole and
exclusive owner of all of its properties, inventory, interests in properties
and assets, real and personal including technical information, copyrights,
trademarks, service marks and tradenames (collectively, the "Assets") which
are reflected in the most recent CTC unaudited balance sheet and the CTC
Schedules or acquired after that date (except properties, interests in
properties and assets sold or otherwise disposed of since such date in the
ordinary course of business), free and clear of all liens, pledges, charges
or encumbrances except: (a) statutory liens or claims not yet delinquent;
(b) such imperfections of title and easements as do not and will not,
materially detract from or interfere with the present or proposed use of the
properties subject thereto or affected thereby or otherwise materially
impair present business operations on such properties; and (c) as described
in the CTC Schedules. Except as set forth in the CTC Schedules, CTC owns
free and clear of any liens, claims, encumbrances, royalty interests or
other restrictions or limitations of any nature whatsoever, any and all
products it is currently manufacturing, including the underlying technology
and data, and all procedures, techniques, marketing plans, business plans,
methods of management or other information utilized in connection with CTC's
business. Except as set forth in the CTC Schedules, no third party has any
right to, and CTC has not received any notice of infringement of or conflict
with asserted rights of others with respect to any product, technology,
data, trade secrets, know-how, proprietary techniques, trademarks, service
marks, trade names or copyrights which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a
materially adverse affect on the business, operations, financial conditions
or income of CTC or any material portion of its properties, assets or
rights.
SECTION 1.10 LITIGATION AND PROCEEDINGS. To the best of CTC's knowledge
and belief, there are no actions, suits, proceedings or investigations
pending or threatened by or against CTC or affecting CTC or its properties,
at law or in equity, before any court or other governmental agency or
instrumentality, domestic or foreign or before any arbitrator of any kind
that would have a material adverse affect on the business, operations,
financial condition or income of CTC. CTC does not have any knowledge of
any default on its part with respect to any judgment, order, writ,
injunction, decree, award, rule or regulation of any court, arbitrator or
governmental agency or instrumentality or of any circumstances which, after
reasonable investigation, would result in the discovery of such a default.
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SECTION 1.11 CONTRACTS.
(a) Except as included or described in the CTC Schedules, there are
no material contracts, agreements, franchises, license agreements or other
commitments to which CTC is a party or by which it or any of its assets,
products, technology or properties are bound;
(b) Except as included or described in the CTC Schedules or
reflected in the most recent CTC balance sheet, CTC is not a party to any
oral or written: (i) contract for the employment of any officer or employee
which is not terminable on thirty (30) days or less notice; (ii) profit
sharing, bonus, deferred compensation, stock option, severance pay, pension
benefit or retirement plan, agreement or arrangement covered by Title IV of
the Employee Retirement Income Security Act, as amended; (iii) agreement,
contract or indenture relating to the borrowing of money; (iv) guaranty of
any obligation, other than one on which CTC is a primary obligor, for
collection and other guaranties of obligations, which, in the aggregate do
not exceed more than one year or providing for payments in excess of $10,000
in the aggregate; (v) consulting or other similar contracts with an
unexpired term of more than one year or providing for payments in excess of
$10,000 in the aggregate; (vi) collective bargaining agreements; (vii)
agreement with any present or former officer or director of CTC; or (viii)
contract, agreement or other commitment involving payments by it of more
than $10,000 in the aggregate; and
(c) To CTC's knowledge, all contracts, agreements, franchises,
license agreements and other commitments to which CTC is a party or by which
its properties are bound and which are material to the operations of CTC
taken as a whole, are valid and enforceable by CTC in all respects, except
as limited by bankruptcy and insolvency laws and by other laws affecting the
rights of creditors generally.
SECTION 1.12 MATERIAL CONTRACT DEFAULTS. Except as set forth in the CTC
Schedules, to the best of CTC's knowledge and belief, CTC is not in default
in any material respect under the terms of any outstanding contract,
agreement, lease or other commitment which is material to the business,
operations, properties, assets or condition of CTC, and there is no event of
default in any material respect under any such contract, agreement, lease or
other commitment in respect of which CTC has not taken adequate steps to
prevent such a default from occurring.
SECTION 1.13 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed
of trust or other material contract, agreement or instrument to which CTC is
a party or to which any of its properties or operations are subject.
SECTION 1.14 GOVERNMENTAL AUTHORIZATIONS. To the best of CTC's knowledge
and except as provided herein or in the CTC Schedules, CTC has all licenses,
franchises, permits or other governmental authorizations legally required to
enable CTC to conduct its business in all material respects as conducted on
the date hereof. Except for compliance with federal and state securities
and corporation laws, as hereinafter provided, no authorization, approval,
consent or order of, or registration, declaration or filing with, any court
or other governmental body is required in connection with the execution and
delivery by CTC of this Agreement and the consummation by CTC of the
transactions contemplated hereby.
SECTION 1.15 COMPLIANCE WITH LAWS AND REGULATIONS. To the best of CTC's
knowledge, except as disclosed in the CTC Schedules, CTC has complied with
all applicable statutes and regulations of any federal, state or other
governmental entity or agency thereof, except to the extent that
noncompliance would not materially and adversely affect the business,
operations, properties, assets or condition of CTC or would not result in
CTC's incurring any material liability.
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SECTION 1.16 INSURANCE. All of the insurable properties of CTC are
insured for CTC's benefit under valid and enforceable policies issued by
insurers of recognized responsibility. Such policy or policies containing
substantially equivalent coverage will be outstanding and in full force at
the Closing Date.
SECTION 1.17 APPROVAL OF AGREEMENT. The board of directors of CTC has
authorized the execution and delivery of this Agreement by CTC, has approved
the transactions contemplated hereby and approved the submission of this
Agreement and the transactions contemplated hereby to the stockholders of
CTC for their unanimous approval, which approval has been provided.
SECTION 1.18 MATERIAL TRANSACTIONS OR AFFILIATIONS. Except as disclosed
herein and in the CTC Schedules, there exists no material contract,
agreement or arrangement between CTC and any predecessor and any person who
was at the time of such contract, agreement or arrangement an officer,
director or person owning of record, or known by CTC to own beneficially,
ten percent (10%) or more of the issued and outstanding CTC Common Shares
and which is to be performed in whole or in part after the date hereof. In
all of such transactions, the amount paid or received, whether in cash, in
services or in kind, has been during the full term thereof, and is required
to be during the unexpired portion of the term thereof, no less favorable to
CTC than terms available from otherwise unrelated parties in arms length
transactions. There are no commitments by CTC, whether written or oral, to
lend any funds to, borrow any money from or enter into any other material
transactions with, any such affiliated person.
SECTION 1.19 LABOR RELATIONS. CTC has never had a work stoppage resulting
from labor problems. To the best knowledge of CTC, no union or other
collective bargaining organization is organizing or attempting to organize
any employee of CTC.
SECTION 1.20 PREVIOUS SALES AND ISSUANCE OF SECURITIES. Since inception,
CTC has issued CTC Common Shares in reliance upon applicable exemptions from
the registration requirements under the laws of the jurisdiction of British
Virgin Islands to the shareholders listed on Schedule I. The shares of CTC
Common Stock issued to the CTC Shareholders are legally issued, fully paid
and nonassessable and are not issued in violation of the preemptive or other
rights of any person All such sales were made in accordance with the
laws of British Virgin Islands and no sales were made to any resident of the
United States.
SECTION 1.21 REORGANIZATION RELATED REPRESENTATIONS.
(a) following the Effective Date, CTC will continue its historic
business or use a significant portion of its historic business assets in its
business;
(b) CTC is not an investment company as defined in section
368(a)(2)(f)(iii) and (iv) of IRC;
(c) CTC is not under the jurisdiction of a court in a title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the IRC.
SECTION 1.22 CTC SCHEDULES. Upon execution hereof, CTC will deliver to
Westwind the following schedules, which are collectively referred to as the
"CTC Schedules" and which consist of separate schedules dated as of the date
of this Agreement and instruments and data as of such date, all certified by
the chief executive officer of CTC as complete, true and correct in all
material respects:
(a) copies of the articles of incorporation, bylaws and all minutes
of shareholders' and directors' meetings of CTC;
(b) the financial statements of CTC referenced hereinabove in
Section 1.4;
(c) a list indicating the name and address of the stockholders of
CTC, together with the number of shares owned by them;
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(d) the CTC Business Plan which includes, among other matters,
information concerning all of CTC's material licenses, permits and other
governmental authorizations, requests or applications therefor, pursuant to
which CTC carries on or proposes to carry on its business (except those
which in the aggregate, are immaterial to the present or proposed business
of CTC), as well as a description of any material adverse change in the
business operations, property, inventory, assets or condition of CTC since
the most recent CTC balance sheet required to be provided pursuant to
Section 1.7; and CTC shall cause the CTC Schedules and the instruments and
data delivered to Westwind hereunder to be updated after the date hereof up
to and including the Closing Date, as hereinafter defined.
SECTION 1.23 TAXES. CTC has complied with applicable tax filing
requirements, if any.
Section 1.24 Additional Information Available. CTC will make available to
Westwind the opportunity to ask questions and receive answers concerning
acquisition of CTC shares in this transaction, and to obtain any additional
information related thereto which CTC possesses or can acquire without
unreasonable effort or expense.
SECTION 1.25 LIMITATION ON LIABILITY. Nothwithstanding anything to the
contrary contained in this Agreement, CTC shall not have any liability for
any misrepresentation or breach of any representation or warranty contained
in this Article I, if Westwind has actual knowledge (rather than Knowledge)
of such misrepresentation or breach.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
OF WESTWIND
As an inducement to, and to obtain the reliance of CTC, Westwind represents
and warrants as follows:
SECTION 2.1 ORGANIZATION. Westwind is a corporation duly organized,
validly existing and in good standing under the laws of the state of
Delaware and has the corporate power and is duly authorized, qualified,
franchised and licensed under all applicable laws, regulations, ordinances
and orders of public authorities to own all of its properties and assets and
to carry on its business in all material respects as it is now being
conducted, including qualification to do business as a foreign corporation
in the states in which the character and location of the assets owned by it
or the nature of the business transacted by it requires qualification.
Included in the Westwind Schedules (as hereinafter defined) are complete and
correct copies of the articles of incorporation, amended articles of
incorporation (collectively, hereinafter referred to as the "articles of
incorporation"), bylaws of Westwind as in effect on the date hereof and a
certificate of Good Standing. The execution and delivery of this Agreement
does not and the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not, violate any
provision of Westwind's articles of incorporation or bylaws. Westwind has
taken all action required by law, its articles of incorporation, its bylaws
or otherwise to authorize the execution and delivery of this Agreement.
Westwind has full power, authority and legal right and has taken all action
required by law, its articles of incorporation, bylaws or otherwise to
consummate the transactions herein contemplate.
SECTION 2.2 CAPITALIZATION. The authorized capitalization of Westwind
consists of 50,000,000 shares of Common Stock, par value $0.004 per share
and 10,000,000 shares of Preferred Stock, par value $0.01 per share. All
issued and outstanding shares are legally issued, fully paid and
nonassessable and are not issued in violation of the preemptive or other
rights of any person. Westwind has no other securities, warrants or options
authorized or issued.
SECTION 2.3 SUBSIDIARIES. At the Closing, other than as disclosed herein,
Westwind shall own no securities or have any interest in any corporation,
partnership, or other form of business organization, including its current
subsidiaries.
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SECTION 2.4 FINANCIAL STATEMENTS.
(a) Attached hereto as Schedule 2.4 are unaudited consolidated
financial statements of Westwind as of November 30, 1996 ("Westwind
Management Reports") and audited consolidated financial statements for the
years ended August 31, 1996 and August 31, 1995, together with the related
footnotes and report thereon of the auditors rendering such reports (the
"Westwind Audited Financial Statements"). The Westwind Management Reports
and the Westwind Audited Financial Statements are hereafter referred to as
the "Westwind Financial Statements". The Westwind Financial Statements are
correct and complete in all respects and fairly present, in accordance with
generally accepted accounting principles ("GAAP"), consistently applied, the
consolidated financial position of Westwind as of such dates and the results
of operations and changes in financial position for such periods all in
accordance with GAAP, subject, in case of the Management Reports, to normal
recurring year end adjustments (the effect of which will not, individually
or in the aggregate, be materially adverse) and the absence of the notes
(that if presented would not differ materially from those included in the
Westwind Audited Financial Statements).
(b) The books and records, financial and others, of Westwind are
in all material respects complete and correct and have been maintained in
accordance with good business accounting practices;
(c) Westwind has no liabilities with respect to the payment of any
federal, state, county, local or other taxes, current or accrued (including
any deficiencies, interest or penalties).
SECTION 2.5 INFORMATION. The information concerning Westwind as set forth
in this Agreement and in the Westwind Schedules, to the best of Westwind's
knowledge, is complete and accurate in all material respects and does not
contain any untrue statement of a material fact or omit to state a material
fact required to make the statements made, in light of the circumstances
under which they were made, not misleading.
SECTION 2.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as described
herein or in the Westwind Schedules, since November 30, 1996:
(a) Westwind has not: (i) amended its articles of incorporation or
bylaws; (ii) waived any rights of value which in the aggregate are
extraordinary or material considering the business of Westwind; (iii) made
any material change in its method of management, operation or accounting; or
(iv) made any accrual or arrangement for or payment of bonuses or special
compensation of any kind or any severance or termination pay to any present
or former officer or employee;
(b) Except as disclosed to CTC or as included in the Westwind
Schedules, Westwind has not: (i) granted or agreed to grant any options,
warrants or other rights for its stocks, bonds or other corporate securities
calling for the issuance thereof, which option, warrant or other right has
not been cancelled as of the Closing Date; (ii) borrowed or agreed to borrow
any funds or incurred or become subject to, any material obligation or
liability (absolute or contingent) except liabilities incurred in the
ordinary course of business; and
(c) to the best knowledge of Westwind, it has not become subject to
any law or regulation which materially and adversely affects, or in the
future may adversely affect, the business, operations, properties, assets or
condition of Westwind.
SECTION 2.7 TITLE AND RELATED MATTERS. As of the Closing Date, Westwind
will own no real, personal or intangible property, other than as disclosed
herein.
SECTION 2.8 LITIGATION AND PROCEEDINGS. There are no actions, suits or
proceedings pending or, to the best of Westwind's knowledge and belief,
threatened by or against or affecting Westwind, at law or in equity, before
any court or other governmental agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind that would have a material
adverse effect on the business, operations, financial condition, income or
business prospects of Westwind. Westwind does not have any knowledge of any
default on its part with respect to any judgment, order, writ, injunction,
decree, award, rule or regulation of any court, arbitrator or governmental
agency or instrumentality.
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SECTION 2.9 CONTRACTS. On the Closing Date and other than as disclosed
herein in Schedule 2.9 or otherwise:
(a) There are no material contracts, agreements, franchises,
license agreements, or other commitments to which Westwind is a party or by
which it or any of its properties are bound;
(b) Westwind is not a party to any contract, agreement,
commitment or instrument or subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree or award which
materially and adversely affects, or in the future may (as far as Westwind
can now foresee) materially and adversely affect, the business, operations,
properties, assets or conditions of Westwind; and
(c) Westwind is not a party to any material oral or written: (i)
contract for the employment of any officer or employee; (ii) profit sharing,
bonus, deferred compensation, stock option, severance pay, pension, benefit
or retirement plan, agreement or arrangement covered by Title IV of the
Employee Retirement Income Security Act, as amended; (iii) agreement,
contract or indenture relating to the borrowing of money; (iv) guaranty of
any obligation for the borrowing of money or otherwise, excluding
endorsements made for collection and other guaranties of obligations, which,
in the aggregate exceeds $1,000; (v) consulting or other similar contract
with an unexpired term of more than one year or providing for payments in
excess of $10,000 in the aggregate; (vi) collective bargaining agreement;
(vii) agreement with any present or former officer or director of Westwind;
or (viii) contract, agreement, or other commitment involving payments by it
of more than $10,000 in the aggregate.
SECTION 2.10 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed
of trust or other material contract, agreement or instrument to which
Westwind is a party or to which any of its properties or operations are
subject.
SECTION 2.11 MATERIAL CONTRACT DEFAULTS. To the best of Westwind's
knowledge and belief, Westwind is not in default in any material respect
under the terms of any outstanding contract, agreement, lease or other
commitment which is material to the business, operations, properties, assets
or condition of Westwind, and there is no event of default in any material
respect under any such contract, agreement, lease or other commitment in
respect of which Westwind has not taken adequate steps to prevent such a
default from occurring.
SECTION 2.12 GOVERNMENTAL AUTHORIZATIONS. To the best of Westwind's
knowledge, Westwind has all licenses, franchises, permits and other
governmental authorizations that are legally required to enable it to
conduct its business operations in all material respects as conducted on the
date hereof. Except for compliance with federal and state securities or
corporation laws, no authorization, approval, consent or order of, or
registration, declaration or filing with, any court or other governmental
body is required in connection with the execution and delivery by Westwind
of the transactions contemplated hereby.
SECTION 2.13 COMPLIANCE WITH LAWS AND REGULATIONS. To the best of
Westwind's knowledge and belief, Westwind has complied with all applicable
statutes and regulations of any federal, state or other governmental entity
or agency thereof, except to the extent that noncompliance would not
materially and adversely affect the business, operations, properties, assets
or condition of Westwind or would not result in Westwind's incurring any
material liability.
SECTION 2.14 INSURANCE. Westwind has no insurable properties and no
insurance policies will be in effect at the Closing Date, as hereinafter
defined.
SECTION 2.15 APPROVAL OF AGREEMENT. The board of directors of Westwind
has authorized the execution and delivery of this Agreement by Westwind and
has approved the transactions contemplated hereby. The approval of this
Agreement by Westwind's shareholders is not required.
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SECTION 2.16 MATERIAL TRANSACTIONS OR AFFILIATIONS. Except as stated
herein or in the Westwind Schedules, as of the Closing Date there will exist
no material contract, agreement or arrangement between Westwind and any
person who was at the time of such contract, agreement or arrangement an
officer, director or person owning of record, or known by Westwind to own
beneficially, ten percent (10%) or more of the issued and outstanding common
stock of Westwind and which is to be performed in whole or in part after the
date hereof. Westwind has no commitment, whether written or oral, to lend
any funds to, borrow any money from or enter into any other material
transactions with, any such affiliated person.
SECTION 2.17 LABOR RELATIONS. Westwind has never had a work stoppage
resulting from labor problems. Westwind has no employees other than its
officers and directors.
SECTION 2.18 TAXES. (a) Westwind has timely filed (within the applicable
extension periods) with the appropriate governmental agencies all
governmental tax returns, information returns, tax reports and declarations
which are monetary liabilities. All governmental tax returns, information
returns, tax reports and declarations filed by Westwind for years for which
the statute of limitations has not run (the "Tax Returns") are correct in
all material respects. Westwind has timely paid (or has collected and paid
over in the case of sales, use or similar taxes) all taxes, additions to
tax, penalties, interest, assessments, deposits, and other governmental
charges imposed by law upon it or any of its properties, tangible or
intangible assets, income, receipts, payrolls, transactions, capital, net
worth and franchises, or upon the sale, use or delivery of any item sold by
the Company, other than as may be disclosed in the Schedule of Taxes.
Except as set forth in the Schedule of Taxes, no tax returns have been
examined by the Internal Revenue Service or any other governmental
authority. Except as may be disclosed in the Schedule of Taxes or in any
document delivered to Westwind therewith, Westwind (i) is not currently
being audited with respect to any tax, assessment or other governmental
charge; (ii) has not received formal or informal notice from any
governmental agency that an audit or investigation with respect to any tax,
assessment or other governmental charge is to be initiated; (iii) is not
formally or informally discussing material pending ruling requests or other
material tax or assessment issues with the Internal Revenue Service or any
other governmental taxing authority in connection with any matter concerning
any member of Westwind's group; or (iv) has not been formally or informally
notified of any potential tax or assessment issue which the Internal Revenue
Service or any other governmental taxing authority intends to raise in
connection with any matter concerning any member of Westwind's group.
Except (i) as may be disclosed in the Schedule of Taxes, or (ii) in
connection with any pending audit or investigation, Westwind has not granted
or proposed any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment or collection of, or any offer in
compromise of any governmental tax. The accruals and reserves for taxes
reflected in the financial statements are adequate to cover substantially
all taxes (including additions to tax, interest, penalties, and other
charges or assessments, if any) which become due and payable or accruable by
reason of the business conducted by Westwind through the Closing Date
herein. Westwind is not now or has it ever been a corporation which meets
the tests of Section 542(b)(2) of the Internal Revenue Code. Westwind has
not participated in, or is required to participate in, for any period prior
to the date of this Agreement the filing of any consolidated tax return
other than (i) as set forth in the Schedule of Taxes, or (ii) as a member of
an affiliated group of which Westwind is the common parent.
SECTION 2.19 REPORTING ACT DOCUMENTS. Except as set forth in Westwind's
Schedules, Westwind has, in all reporting act documents, complied in all
material respects with the reporting requirements of the Exchange Act and
the rules and regulations of the Securities and Exchange Commission
promulgated thereunder, although Westwind had been late in filing the
reports required to be filed under the Exchange Act. The information
contained in each reporting act document of Westwind, to the best of
Westwind=s knowledge, is true and correct in all material respects as of the
date thereof, and no reporting act document contains any untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading as of the
date thereof. To the best knowledge of current management of Westwind,
there is no negative matters, such as pending investigation or formal
inquiry, which are outstanding concerning Exchange Act reports filed by
Westwind prior to the Closing hereof or with the Nasdaq.
9
SECTION 2.20 WESTWIND SCHEDULES. Upon execution hereof, Westwind shall
deliver to CTC the following schedules, which are collectively referred to
as the "Westwind Schedules" which are dated the date of this Agreement, all
certified by an officer of Westwind to be complete, true and accurate:
(a) complete and correct copies of the articles of incorporation,
bylaws and Certificate of Good Standing of Westwind as in effect as of the
date of this Agreement;
(b) copies of all financial statements of Westwind identified in
Section 2.4(a);
(c) the description of any material adverse change in the business,
operations, property, assets, or condition of Westwind since November 30,
1996 required to be provided pursuant to Section 2.6; and
(d) any other information, together with any required copies of
documents, required to be disclosed in the Westwind Schedules under this
Agreement.Westwind shall cause the Westwind Schedules and the instruments to
be delivered to CTC hereunder to be updated after the date hereof up to and
including the Closing Date.
SECTION 2.21 ADDITIONAL INFORMATION AVAILABLE. Westwind will make
available to each CTC Shareholder the opportunity to ask questions and
receive answers concerning the acquisition of Westwind Common Stock in the
transaction, and to obtain any additional information which Westwind
possesses or can acquire without unreasonable effort or expense.
SECTION 2.22 LIMITATION ON LIABILITY. Nothwithstanding anything to the
contrary contained in this Agreement, Westwind shall not have any liability
for any misrepresentation or breach of any representation or warranty
contained in this Article II, if CTC or any of the CTC Shareholders has
actual knowledge (rather than Knowledge) of such misrepresentation or
breach.
ARTICLE III
EXCHANGE PROCEDURE
SECTION 3.1 DELIVERY OF CTC SECURITIES. On the Closing Date, the holders
of the CTC Common Shares shall deliver to Westwind (i) certificates or other
documents evidencing all of the issued and outstanding CTC Common Shares,
duly endorsed in blank or with executed stock power attached thereto in
transferrable form and (ii) investment letters, the form of which is
attached hereto as Exhibit "A".
SECTION 3.2 ISSUANCE OF WESTWIND COMMON SHARES.
(a) In exchange for all of the CTC Common Share tendered pursuant to
Section 3.1, Westwind shall instruct its Transfer Agent to issue an
aggregate of 9,000,000 (post reverse split) "restricted" Westwind Common
Shares to the CTC shareholders on a pro rata basis and shall cause such
shares to be delivered to CTC. Each share of CTC shall be exchanged for 180
shares of Westwind.
(b) No fractional Westwind Common Shares shall be issued pursuant
to this Section 3.2. In lieu of such fractional shares, all shares to be
issued shall be rounded up or down to the nearest whole share.
(c) The 9,000,000 shares to be issued to the CTC shareholders by
Westwind (the "CTC Shares") are not being registered under the Securities
Act of 1933, as amended (the "Securities Act") and are to be issued as
"restricted securities", as that term is defined in Rule 144 promulgated
under the Act, and that the certificates representing the CTC Shares will
bear a legend to that effect, substantially in the form set forth in
Schedule 3.2, as follows:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF CERTAIN STATES, AND MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
AND ANY APPLICABLE STATE LAWS, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER
THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF
SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE
REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE.
10
SECTION 3.3 UNDERTAKINGS.
(a) Upon execution hereof or as soon thereafter as practical,
management of Westwind and CTC shall execute, acknowledge and deliver (or
shall cause to be executed, acknowledged and delivered) any and all
certificates, opinions, financial statements, schedules, agreements,
resolutions, rulings or other instruments required by this Agreement to be
so delivered, together with such other items as may be reasonably requested
by the parties hereto and their respective legal counsel in order to
effectuate or evidence the transactions contemplated hereby, subject only to
the conditions to Closing referenced hereinbelow. Furthermore, Westwind
specifically hereby undertakes and provides assurances to CTC that it will
prepare a report on Form 10-QSB for the quarter ended February 28, 1997,
which needs to be filed with the SEC no later than 45 days from February 28,
1997. Westwind further undertakes and provides assurances to CTC that it
will prepare a tax return for the fiscal year ended August 31, 1996 to be
filed by CTC, with the understanding of both parties that any tax assessment
to be paid to the Internal Revenue Service or to be refunded to the tax
filer, shall be an assumed liability or a benefit, as a case may be, of the
subsidiaries of Westwind, which are to be sold or otherwise separated from
Westwind pursuant to Section 6.6 of this Agreement.
(b) CTC hereby undertakes and provides assurances to Westwind that
it will file a current report on Form 8-K within 15 days of the Closing in
compliance with the Exchange Act, with the audited financial statements of
CTC and the pro forma statements required by the Exchange Act and by
Regulation S-B by amendment of the Form 8-K within the time parameters
established by the Exchange Act, and will otherwise comply with the
reporting requirements of the Exchange Act and all material requirements of
NASDAQ following the Closing. Additionally, CTC shall use its best efforts
to prepare and file an initial application for CTC's inclusion on the NASDAQ
Small Cap Market. CTC and its officers and directors hereby indemnify and
hold harmless Westwind's present officers and directors from any and all
liabilities which may arise out of CTC's failure to comply with the
undertakings described herein.
SECTION 3.4 CLOSING. The closing ("Closing") of the transactions
contemplated by this Agreement shall be as of the date in which all of the
shareholders of CTC have approved the terms of this Agreement ("Closing
Date"), all conditions to Closing referenced in this Agreement have been
satisfied or waived by CTC and all documentation referenced herein is
delivered to the respective party herein, unless a different date is
mutually agreed to in writing by the parties hereto.
SECTION 3.5 TERMINATION.
(a) This Agreement may be terminated by the board of directors of
either Westwind or CTC at any time prior to the Closing Date if:
(i) there shall be any action or proceeding before any court or
any governmental body which shall seek to restrain, prohibit or invalidate
the transactions contemplated by this Agreement and which, in the judgment
of such board of directors, made in good faith and based on the advice of
its legal counsel, makes it inadvisable to proceed with the exchange
contemplated by this Agreement; or
11
(ii) any of the transactions contemplated hereby are disapproved
by any regulatory authority whose approval is required to consummate such
transactions; or
(iii) the conditions described in Section 6.6 below have not been
satisfied in full; or In the event of termination pursuant to this
paragraph (a) of this Section 3.5, no obligation, right, or liability shall
arise hereunder and each party shall bear all of the expenses incurred by it
in connection with the negotiation, drafting and execution of this Agreement
and the transactions herein contemplated;
(b) This Agreement may be terminated at any time prior to the
Closing Date by action of the board of directors of Westwind if CTC shall
fail to comply in any material respect with any of its covenants or
agreements contained in this Agreement or if any of the representations or
warranties of CTC contained herein shall be inaccurate in any material
respect, which noncompliance or inaccuracy is not cured after 20 days'
written notice thereof is given to CTC. If this Agreement is terminated
pursuant to this paragraph (b) of this Section 3.5, this Agreement shall be
of no further force or effect and no obligation, right or liability shall
arise hereunder; and
(c) This Agreement may be terminated at any time prior to the
Closing Date by action of the board of directors of CTC if Westwind shall
fail to comply in any material respect with any of its covenants or
agreements contained in this Agreement or if any of the representations or
warranties of Westwind contained herein shall be inaccurate in any material
respect, which noncompliance or inaccuracy is not cured after 20 days
written notice thereof is given to Westwind. If this Agreement is
terminated pursuant to this paragraph (c) of Section 3.5, this Agreement
shall be of no further force or effect and no obligation, right or liability
shall arise hereunder.
SECTION 3.6 DIRECTORS OF WESTWIND. Upon the Closing, the present members
of Westwind's Board of Directors shall tender their resignations seriatim so
that the following persons are appointed directors of Westwind in accordance
with procedures set forth in the Westwind bylaws: Xxxx X.X. Xxx (who shall
be appointed Chairman of the Board of Directors), Xxxx X.X. Xxx, Xxxx Xxxx
Che, Xxxxxx X. X. Xxx and Xxxxxx X. Xxxxx. Each director shall hold office
until his successor shall have been duly elected and shall have qualified or
until his or her earlier death, resignation or removal.
SECTION 3.7 OFFICERS OF WESTWIND. Upon the Closing, the present officers
of Westwind shall tender their resignations and provide Westwind with
applicable releases concerning their respective employment agreements.
Simultaneous therewith, the following persons shall be elected as officers
of Westwind in accordance with procedures set forth in the Westwind bylaws:
NAME OFFICE
---- ------
Xxxx X. X. Xxx Chairman of the Board, Chief Executive Officer
Xxxx X. X. Xxx Vice-Chairman, President and Secretary
Xxxxxx Xxxxx Chief Financial Officer
Xxxx X. Xxx Vice President
SECTION 3.8 EFFECTIVE DATE. The parties hereto hereby agree that the
Effective Date of the transaction proposed herein shall be 11:50 P.M.
Eastern Time on March 21, 1997, unless the parties agree otherwise, in
writing.
12
ARTICLE IV
SPECIAL COVENANTS
SECTION 4.1 ACCESS TO PROPERTIES AND RECORDS. Westwind and CTC will each
afford to the officers and authorized representatives of the other full
access to the properties, books and records of Westwind and CTC, as the case
may be, in order that each may have full opportunity to make such reasonable
investigation as it shall desire to make of the affairs of the other and
each will furnish the other with such additional financial and operating
data and other information as to the business and properties of Westwind and
CTC, as the case may be, as the other shall from time to time prior to
Closing reasonably request. In addition, Westwind shall provide to CTC
subsequent to Closing all information necessary to allow CTC to properly
prepare and file all reports required to be filed pursuant to the Exchange
Act, including all information concerning Westwind's subsidiaries which
existed prior to Closing.
SECTION 4.2 INFORMATION FOR WESTWIND PUBLIC REPORTS. CTC will furnish
Westwind with all information concerning CTC and the CTC Stockholders,
including all financial statements, required for inclusion in any public
report to be filed by Westwind pursuant to the Securities Act, the Exchange
Act, or any other applicable federal or state law. CTC covenants that all
information so furnished to Westwind, including the financial statements
described in Section 1.4, shall be true and correct in all material respects
without omission of any material fact required to make the information
stated not misleading. Similarly, Westwind will provide all information
concerning its history and operations reasonably requested by CTC.
SECTION 4.3 SPECIAL COVENANTS AND REPRESENTATIONS REGARDING THE WESTWIND
COMMON SHARES TO BE ISSUED IN THE EXCHANGE. The consummation of this
Agreement, including the issuance of the Westwind Common Shares to the
stockholders of CTC as contemplated hereby, constitutes the offer and sale
of securities under the Securities Act, and applicable state statutes. Such
transaction shall be consummated in reliance on exemptions from the
registration and prospectus delivery requirements of such statutes which
depend, inter alia, upon the circumstances under which the CTC stockholders
acquire such securities. In connection with reliance upon exemptions from
the registration and prospectus delivery requirements for such transactions,
at the Closing, CTC shall cause to be delivered, and the CTC stockholders
shall deliver to Westwind, the investment letters referenced in Section
3.1.
SECTION 4.4 THIRD PARTY CONSENTS. Westwind and CTC agree to cooperate
with each other in order to obtain any required third party consents to this
Agreement and the transactions herein contemplated.
SECTION 4.5 ACTIONS PRIOR TO CLOSING.
(a) From and after the date of this Agreement until the Closing
Date and except as set forth in the Westwind or CTC Schedules or as
permitted or contemplated by this Agreement, CTC will each use its best
efforts to:
(i) carry on its business in substantially the same manner as it
has heretofore;
(ii) maintain and keep its properties in states of good repair
and condition as at present, except for depreciation due to ordinary wear
and tear and damage due to casualty;
(iii) maintain in full force and effect insurance comparable in
amount and in scope of coverage to that now maintained by it;
(iv) perform in all material respects all of its obligations
under material contracts, leases and instruments relating to or affecting
its assets, properties and business;
13
(v) maintain and preserve its business organization intact, to
retain its key employees and to maintain its relationship with its material
suppliers and customers; and
(vi) fully comply with and perform in all material respects all
obligations and duties imposed on it by all federal and state laws and all
rules, regulations and orders imposed by federal or state governmental
authorities.
(b) From and after the date of this Agreement until the Closing
Date, neither Westwind nor CTC will, without the prior consent of the other
party:
(i) except as otherwise specifically set forth herein, make any
change in their respective certificates or articles of incorporation or
bylaws;
(ii) declare or pay any dividend on its outstanding shares of
capital stock, except as may otherwise be required by law, or effect any
stock split or otherwise change its capitalization, except as provided
herein;
(iii) enter into or amend any employment, severance or similar
agreements or arrangements with any directors or officers;
(iv) grant, confer or award any options, warrants, conversion
rights or other rights not existing on the date hereof to acquire any shares
of its capital stock; or
(v) purchase or redeem any shares of its capital stock, except
as disclosed herein.
SECTION 4.6 INDEMNIFICATION.
(a) CTC and its chief executive officer and director hereby agrees
to indemnify Westwind and each of the officers, agents and directors of
Westwind as of the date of execution of this Agreement against any loss,
liability, claim, damage or expense (including, but not limited to, any and
all expense whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened or any claim
whatsoever), to which it or they may become subject arising out of or based
on any inaccuracy appearing in or misrepresentation made in this Agreement.
The indemnification provided for in this paragraph shall survive the Closing
and consummation of the transactions contemplated hereby and termination of
this Agreement for a period of 18 months; and
(b) Westwind and its chief executive officer and director hereby
agrees to indemnify CTC and each of the officers, agents, directors and
current shareholders of CTC as of the Closing Date against any loss,
liability, claim, damage or expense (including, but not limited to, any and
all expense whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened or any claim
whatsoever), to which it or they may become subject arising out of or based
on any inaccuracy appearing in or misrepresentation made in this Agreement
and particularly the representation regarding no liabilities referred to in
Section 2.4(b). The indemnification provided for in this Section shall
survive the Closing and consummation of the transactions contemplated hereby
and termination of this Agreement for a period of 18 months.
14
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS
OF WESTWIND
The obligations of Westwind under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
SECTION 5.1 ACCURACY OF REPRESENTATIONS. The representations and
warranties made by CTC in this Agreement were true when made and shall be
true at the Closing Date with the same force and effect as if such
representations and warranties were made at the Closing Date (except for
changes therein permitted by this Agreement), and CTC shall have performed
or complied with all covenants and conditions required by this Agreement to
be performed or complied with by CTC prior to or at the Closing. Westwind
shall be furnished with a certificate, signed by a duly authorized officer
of CTC and dated the Closing Date, to the foregoing effect.
SECTION 5.2 STOCKHOLDER APPROVAL. The stockholders of CTC shall have
unanimously approved this Agreement and the transactions contemplated
thereby as described in Section 4.1.
SECTION 5.3 OFFICER'S CERTIFICATE. Westwind shall have been furnished
with a certificate dated the Closing Date and signed by a duly authorized
officer of CTC to the effect that no litigation, proceeding, investigation
or inquiry is pending or, to the best knowledge of CTC, threatened, which
might result in an action to enjoin or prevent the consummation of the
transactions contemplated by this Agreement or, to the extent not disclosed
in the CTC Schedules, by or against CTC which might result in any material
adverse change in any of the assets, properties, business or operations of
CTC.
SECTION 5.4 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there
shall not have occurred any material adverse change in the financial
condition, business or operations of nor shall any event have occurred
which, with the lapse of time or the giving of notice, may cause or create
any material adverse change in the financial condition, business or
operations of CTC.
SECTION 5.5 OTHER ITEMS. Westwind shall have received such further
documents, certificates or instruments relating to the transactions
contemplated hereby as Westwind may reasonably request.
15
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF CTC
The obligations of CTC under this Agreement are subject to the satisfaction,
at or before the Closing Date (unless otherwise indicated herein), of the
following conditions:
SECTION 6.1 ACCURACY OF REPRESENTATIONS. The representations and
warranties made by Westwind in this Agreement were true when made and shall
be true as of the Closing Date (except for changes therein permitted by this
Agreement) with the same force and effect as if such representations and
warranties were made at and as of the Closing Date, and Westwind shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed or complied with by Westwind prior to or at the
Closing. CTC shall have been furnished with a certificate, signed by a duly
authorized executive officer of Westwind and dated the Closing Date, to the
foregoing effect.
SECTION 6.2 OFFICER'S CERTIFICATE. CTC shall be furnished with a
certificate dated the Closing Date and signed by a duly authorized officer
of Westwind to the effect that no litigation, proceeding, investigation or
inquiry is pending or, to the best knowledge of Westwind, threatened, which
might result in an action to enjoin or prevent the consummation of the
transactions contemplated by this Agreement or, to the extent not disclosed
in the Westwind Schedules, by or against Westwind which might result in any
material adverse change in any of the assets, properties, business or
operations of Westwind.
SECTION 6.3 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there
shall not have occurred any material adverse change in the financial
condition, business or operations of nor shall any event have occurred
which, with the lapse of time or the giving of notice, may cause or create
any material adverse change in the financial condition, business or
operations of Westwind.
SECTION 6.5 COMPLIANCE WITH REPORTING REQUIREMENTS. As of the Closing
Date, Westwind shall be current in, and in compliance with all requirements
of, all filings required to be tendered to the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended.
SECTION 6.6 ROLL-OUT OF SUBSIDIARIES AND RELATED MATTERS. Westwind has two
(2) wholly owned subsidiaries, including Westwind Productions, Inc. and
Westwind Releasing Corp. Prior to the transaction proposed herein, Westwind
shall undertake all action necessary in order to sell or otherwise assign
all of the capital stock of these subsidiaries. Westwind does not own,
beneficially or of record, any other corporation. As of the Closing Date,
Westwind shall own no securities or have interest in any corporation,
partnership, or other form of business organization, including its current
subsidiaries. Westwind is party to certain leases, as well as guarantor of
a certain office lease. Westwind represents that it has requested releases
from the applicable lessors. At Closing, these leases shall be assigned to
and assumed by those existing Westwind subsidiary companies. As part of the
material terms of this Agreement, the interest in and to the stock of these
subsidiaries is to be disposed of in accordance with this Section 6.6
herein. In the event a release of Westwind from each applicable lease is
not obtained, each applicable subsidiary company and appropriate current
officers and "inside" directors of Westwind shall provide Westwind with an
indemnification and hold harmless agreement relevant to the leases
obligations referenced herein.
SECTION 6.7 REVERSE SPLIT. Simultaneous with the Closing of this
Agreement, the Board of Directors and the shareholders of Westwind shall
authorize and approve undertake a reverse split of the Westwind issued and
outstanding Common Stock, whereby 1 share of Common Stock shall be issued in
exchange for every 14.85 shares of Common Stock presently issued and
outstanding, which reverse split shall have an effective date of March 21,
1997. As a result and on Closing Date, as defined herein, there will be no
more than 500,000 common shares issued and outstanding and reserved for
issuance (including shares reserved for issuance applicable to issued and
outstanding Common Stock Purchase Warrants, if any) (the "Westwind Common
Shares"). All issued and outstanding Westwind Common Shares have been
legally issued, fully paid and are nonassessable.
SECTION 6.8 NAME CHANGE. Westwind shall deliver to CTC an amendment to
Westwind's certificate of incorporation changing the company's name to "CTC
Cosmetics Holding Company, Inc."
SECTION 6.9 NO LIABILITIES. As of the Closing Date, as defined herein the
Westwind balance sheet and the notes thereto, shall reflect that Westwind
has: (i) no receivables; (ii) no accounts payable; (iii) except as stated
herein or in the Westwind Schedules, no liabilities, whether absolute,
accrued, known or unknown, contingent or otherwise, whether due or to become
due, including, without limitation, liabilities as guarantor under any
guaranty or other governmental charges. In the event Westwind is bound by
or otherwise liable for any contract, lease or other agreement or any other
liability at the date of Closing, Westwind's existing "inside" officers and
directors shall execute and deliver a binding Indemnification and Hold
Harmless Agreement at Closing relevant to such obligations.
SECTION 6.10 OTHER ITEMS. CTC shall have received such further documents,
certificates, or instruments relating to the transactions contemplated
hereby as CTC may reasonably request.
16
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 BROKERS AND FINDERS. Except as set forth in Schedule 7.1,
each party hereto hereby represents and warrants that it is under no
obligation, express or implied, to pay certain finders in connection with
the bringing of the parties together in the negotiation, execution, or
consummation of this Agreement. The parties each agree to indemnify the
other against any claim by any third person not listed in Schedule 7.1 for
any commission, brokerage or finder's fee or other payment with respect to
this Agreement or the transactions contemplated hereby based on any alleged
agreement or understanding between the indemnifying party and such third
person, whether express or implied from the actions of the indemnifying
party.
SECTION 7.2 LAW. FORUM AND JURISDICTION. This Agreement shall be
construed and interpreted in accordance with the laws of the State of
California.
SECTION 7.3 NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered to
it or sent by registered mail or certified mail, postage prepaid, or by
prepaid telegram addressed as follows:
If to Westwind: Xxxxxxx Xxxx
-------------- Westwind Productions, Inc.
1746 0 Xxxxxxxx Xxxx.
Xxx Xxxxxxx, Xxxxxxxxxx 00000
With copies to: X.X. Xxxxxxx, Xx., Esq.
-------------- Cohne, Xxxxxxxxx & Xxxxx
000 Xxxx Xxxxx Xxxxx, 0xx Xx.
Xxxx Xxxx Xxxx, Xxxx 00000
If to CTC: CTC Cosmetics Holding (BVI) Co., Ltd.
--------- Xx. 00 Xxx Xxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxx
With copies to: Xxxxx Xxxxx, Esq.
-------------- 00000 Xxxxxx Xxxxxxx, Xxxxx X
Xxxxxx Xxxxxx, XX 00000
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication
shall be deemed to have been given as of the date so delivered, mailed, or
telegraphed.
SECTION 7.4 ATTORNEYS' FEES. The prevailing party in any proceeding
brought to enforce or interpret any provision of this Agreement shall be
entitled to recover its reasonable attorney's fees, costs and disbursements
incurred in connection with such proceeding, including but not limited to
the costs of experts, accountants and consultants and all other costs and
services reasonably related to the proceeding, including those incurred in
any bankruptcy or appeal, from the non-prevailing party or parties.
SECTION 7.5 CONFIDENTIALITY. Each party hereto agrees with the other
parties that, unless and until the reorganization contemplated by this
Agreement has been consummated, they and their representatives will hold in
strict confidence all data and information obtained with respect to another
party or any subsidiary thereof from any representative, officer, director
or employee, or from any books or records or from personal inspection, of
such other party, and shall not use such data or information or disclose the
same to others, except: (i) to the extent such data is a matter of public
knowledge or is required by law to be published; and (ii) to the extent that
such data or information must be used or disclosed in order to consummate
the transactions contemplated by this Agreement.
17
SECTION 7.6 SCHEDULES; KNOWLEDGE. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules
delivered pursuant to this Agreement.
SECTION 7.7 THIRD PARTY BENEFICIARIES. This contract is solely between
Westwind and CTC and, except for the CTC shareholders or as otherwise
specifically provided herein, no director, officer, stockholder, employee,
agent, independent contractor or any other person or entity shall be deemed
to be a third party beneficiary of this Agreement.
SECTION 7.8 ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties relating to the subject matter hereof. This
Agreement alone fully and completely expresses the agreement of the parties
relating to the subject matter hereof. There are no other courses of
dealing, understandings, agreements, representations or warranties, written
or oral, except as set forth herein. This Agreement may not be amended or
modified, except by a written agreement signed by all parties hereto.
SECTION 7.9 SURVIVAL; TERMINATION. The representations, warranties and
covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated for three years.
SECTION 7.10 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
taken together shall be but a single instrument.
SECTION 7.11 AMENDMENT OR WAIVER. Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether conferred
herein, at law, or in equity, and may be enforced concurrently herewith, and
no waiver by any party of the performance of any obligation by the other
shall be construed as a waiver of the same or any other default then,
theretofore, or thereafter occurring or existing. At any time prior to the
Closing Date, this Agreement may be amended by a writing signed by all
parties hereto, with respect to any of the terms contained herein, and any
term or condition of this Agreement may be waived or the time for
performance hereof may be extended by a writing signed by the party or
parties for whose benefit the provision is intended.
SECTION 7.12 INCORPORATION OF RECITALS. All of the recitals hereof are
incorporated by this reference and are made a part hereof as though set
forth at length herein.
SECTION 7.13 EXPENSES. Each party herein shall bear all of their
respective costs and expenses incurred in connection with the negotiation of
this Agreement and in the consummation of the transactions provided for
herein and the preparation therefor.
SECTION 7.14 HEADINGS; CONTEXT. The headings of the sections and
paragraphs contained in this Agreement are for convenience of reference only
and do not form a part hereof and in no way modify, interpret or construe
the meaning of this Agreement.
SECTION 7.15 BENEFIT. This Agreement shall be binding upon and shall
insure only to the benefit of the parties hereto, and their permitted
assigns hereunder. This Agreement shall not be assigned by any party
without the prior written consent of the other party.
SECTION 7.16 PUBLIC ANNOUNCEMENTS. Except as may be required by law,
neither party shall make any public announcement or filing with respect to
the transactions provided for herein without the prior consent of the other
party hereto.
SECTION 7.17 SEVERABILITY. In the event that any particular provision or
provisions of this Agreement or the other agreements contained herein shall
for any reason hereafter be determined to be unenforceable, or in violation
of any law, governmental order or regulation, such unenforceability or
violation shall not affect the remaining provisions of such agreements,
which shall continue in full force and effect and be binding upon the
respective parties hereto.
18
SECTION 7.18 FAILURE OF CONDITIONS; TERMINATION. In the event any of the
conditions specified in this Agreement shall not be fulfilled on or before
the Closing Date, either of the parties have the right either to proceed or,
upon prompt written notice to the other, to terminate and rescind this
Agreement without liability to any other party. The election to proceed
shall not affect the right of such electing party reasonably to require the
other party to continue to use its efforts to fulfill the unmet conditions.
SECTION 7.19 NO STRICT CONSTRUCTION. The language of this Agreement shall
be construed as a whole, according to its fair meaning and intendment, and
not strictly for or against either party hereto, regardless of who drafted
or was principally responsible for drafting the Agreement or terms or
conditions hereof.
SECTION 7.20 EXECUTION KNOWING AND VOLUNTARY. In executing this
Agreement, the parties severally acknowledge and represent that each: (a)
has fully and carefully read and considered this Agreement; (b) has been or
has had the opportunity to be fully apprised of its attorneys of the legal
effect and meaning of this document and all terms and conditions hereof; and
(c) is executing this Agreement voluntarily, free from any influence,
coercion or duress of any kind.
SECTION 7.21 JOINT PREPARATION. This Agreement is to be deemed to have
been prepared jointly by the parties hereto and any uncertainty or ambiguity
existing herein, if any, shall not be interpreted against any party, but
shall be interpreted according to the application of the rules of
interpretation for arm's length agreements.
SECTION 7.22 ARBITRATION AND VENUE. Any controversy arising out of or
relating to this Agreement or any modification or extension thereof,
including any claim for damages and/or recision, shall be settled by
arbitration in Los Angeles, California in accordance with the Commercial
Arbitration Rules of the American Arbitration Association before one
arbitrator. The arbitrator sitting in any such controversy shall have no
power to alter or modify any express provisions of this Agreement or to
render any award which by its terms effects any such alteration, or
modification. The parties consent to the jurisdiction of the Superior Court
of California, and of the United States District Court for the Central
District of California for all purposes in connection with such arbitration
including the entry of judgment on any award. The parties consent that any
process or notice of motion or other application to either of said courts,
and any paper in connection with arbitration, may be served by certified
mail or the equivalent, return receipt requested, or by personal service or
in such manner as may be permissible under the rules of the applicable court
or arbitration tribunal, provided a reasonable time for appearance is
allowed, The parties further agree that arbitration proceedings must be
instituted within one year after the claimed breach occurred, and that such
failure to institute arbitration proceedings within such period shall
constitute an absolute bar to the institution of any proceedings and a
waiver of all claims. Each of the parties shall, subject to the award of
the arbitrators, pay an equal share of the arbitrators' fees except the
arbitrators shall have the power to award recovery of all costs (including
the attorneys' fees, administrative fees, arbitrators' fees and court fees)
to the prevailing party, as determined by the arbitrators. This section
shall survive the termination of this Agreement.
19
IN WITNESS WHEREOF, the corporate parties hereto have caused
this Agreement to be executed by their respective officers, hereunto duly
authorized, and entered into as of the date first above written.
The Westwind Group, Inc.
ATTEST:
_________________________ By:______________________________
Secretary or President
Assistant Secretary
ATTEST: CTC Cosmetics Holding
(BVI) Co., Ltd.
____________________________ By: _____________________________
Secretary or President
Assistant Secretary
CTC Shareholders:
____________________________
Xxxx X.X. Xxx
____________________________
Xxxx X.X. Xxx
____________________________
Xxxxxx X. Xxxxx
____________________________
Xxxx Xxxx Che
____________________________
Corrie X.X. Xxx
20
SCHEDULE I
------------------------------
LIST OF CTC SHAREHOLDERS
------------------------------
21
List of CTC Shareholders
# of CTC Shares # of Westwind Shares
Name to be Exchanged to be Issued
---- --------------- ------------
Xxxx X.X. Xxx 28,485 5,127,300
Xxxx X.X. Xxx 7,765 1,397,700
Xxxxxx X. Xxxxx 3,865 695,700
Xxxx Xxxx Che 3,865 695,700
Corrie X. X. Xxx 6,020 1,083,600
---------- ------------
TOTAL 50,000 9,000,000
22
EXHIBIT "A"
-------------------------
FORM OF INVESTMENT LETTER
--------------------------
23
INVESTMENT LETTER
March , 1997
The Westwind Group, Inc.
0000 0/0 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
Gentlemen:
The undersigned herewith deposits certificate(s) for shares of common stock
of CTC Cosmetics Holding (BVI) Co., Ltd., ("CTC"), as described below
(endorsed, or having executed stock powers attached) in acceptance of and
subject to the terms and conditions of that certain Agreement and Plan of
Reorganization (the "Agreement"), between CTC and The Westwind Group, Inc.
("Westwind" or the "Company"), dated March , 1997, receipt of which is
hereby acknowledged, in exchange for shares of Common Stock of Westwind (the
"Exchange Shares"). If any condition precedent to the Agreement is not
satisfied within the relevant time parameters established in the Agreement
(or any extension thereof), the certificate(s) are to be returned to the
undersigned.
The undersigned hereby represents, warrants, covenants and agrees with
you that, in connection with the undersigned's acceptance of the Exchange
Shares and as of the date of this letter:
1. The undersigned is aware that his, her or its acceptance of the
Exchange Shares is irrevocable, absent an extension of the Expiration Date
of any material change to any of the terms and conditions of the Agreement.
2. The undersigned warrants full authority to deposit all shares
referred to above and that Westwind will acquire a good and unencumbered
title thereto.
3. The undersigned has full power and authority to enter into this
agreement and that this agreement constitutes a valid and legally binding
obligation of the undersigned.
4. By execution hereof, the undersigned hereby confirms that the
Westwind common stock to be received in exchange for CTC common stock (the
"Securities"), will be acquired for investment for the undersigned's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that the undersigned has no present
intention of selling, granting any participation in, or otherwise
distributing the same. By execution hereof, the undersigned further
represents the undersigned does not have any contract, undertaking,
agreement or arrangement with any third party, with respect to any of the
Securities.
5. The undersigned understands that the Securities are being issued
pursuant to available exemption thereto and have not been registered under
the Securities Act of 1933, as amended (the "1933 Act"), or under any state
securities laws. The undersigned understands that no registration statement
has been filed with the United States Securities and Exchange Commission nor
with any other regulatory authority and that, as a result, any benefit which
might normally accrue to a holder such as me by an impartial review of such
a registration statement by the Securities and Exchange Commission or other
regulatory authority will not be forthcoming. The undersigned understands
that he/she/it cannot sell the Securities unless such sale is registered
under the 1933 Act and applicable state securities laws or exemptions from
such registration become available. In this connection the undersigned
understands that the Company has advised the Transfer Agent for the Common
Shares that the Securities are "restricted securities" under the 1933 Act
and that they may not be transferred by the undersigned to any person
without the prior consent of the Company, which consent of the Company will
require an opinion of my counsel to the effect that, in the event the
Securities are not registered under the 1933 Act, any transfer as may be
proposed by the undersigned must be entitled to an exemption from the
registration provisions of the 1933 Act. To this end, the undersigned
acknowledges that a restrictive legend will be placed upon the certificate
representing the Securities and that the Transfer Agent has been advised of
such facts.
24
6. The undersigned represents that it is experienced in evaluation and
investing in securities of companies and acknowledges that he/she/it is able
to fend for itself, can bear the economic risk of this investment and has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the investment in the
Securities.
In Witness Whereof, the undersigned has duly executed this Investment
Letter as of the date indicated hereon.
Dated: , 1997
Very truly yours,
____________________________
(signature)
____________________________
(print name in full)
____________________________
( address)
25
