EXHIBIT 10.20
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
Among
SUNBASE ASIA, INC.
as Purchaser
SMITH ACQUISITION COMPANY, INC.
d/b/a
SOUTHWEST PRODUCTS COMPANY
as the Company
and
THOSE PERSONS SET FORTH ON THE SIGNATURE PAGES OF THIS AGREEMENT
as the Shareholders
Dated:
As of December 29, 1995
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER, dated and deemed
effective by the parties hereto as of December 29, 1995, is made and entered
into by and among Sunbase Asia, Inc., a Nevada corporation ("Purchaser"); those
persons set forth on the signature pages of this Agreement (collectively, the
"Shareholders" and individually, a "Shareholder"); and Smith Acquisition
Company, Inc., a California corporation, d/b/a Southwest Products Company (the
"Company") with reference to the following:
A. Prior to the conversion described below, the Shareholders own the
number of issued and outstanding shares of the (a) no par value common stock and
(b) the no par value preferred stock (the "Southwest Preferred Shares") of the
Company together with the principal amount of Subordinated Debt (the
"Subordinated Debt") set forth opposite the applicable Shareholder's name on
Schedule 5.3.
B. The Shareholders intend to recapitalize the Company so that
immediately prior to the consummation of this transaction all of the Southwest
Preferred Shares and the Subordinated Debt will be converted to Southwest Common
Stock.
C. The respective directors of Purchaser and the Company and the
Shareholders have determined that it is in the best interests of the Company,
Purchaser and the Shareholders for the Company to be merged with a California
corporation to be created by Purchaser ("Newco") upon the terms and conditions
set forth in this Agreement.
D. Pursuant to this Agreement, the Shareholders are hereby approving
the merger of the Company and Newco.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
ARTICLE I
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DEFINITIONS
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When used in this Agreement, the following terms shall have the
respective meanings set forth below:
"Affiliate" shall mean, with respect to any Person, (i) a Person
directly or indirectly controlling, controlled by or under common control with
such Person; (ii) a Person owning or controlling 10% or more of the outstanding
voting securities of such Person; or (iii) an officer, director or partner of
such Person. When the
Affiliate is an officer, director or partner of such Person, any other Person
for which the Affiliate acts in that capacity shall also be considered an
Affiliate. For these purposes, control means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether by the ownership of voting securities, by contract
or otherwise.
"Agreement" shall mean this Agreement and Plan of Reorganization and
Merger, including all exhibits and schedules thereto, as the same may hereafter
be amended, modified or supplemented from time to time.
"Authority" shall mean any governmental, regulatory or administrative
body, agency or authority, any court of judicial authority, any arbitrator or
any public, private or industry regulatory authority, whether international,
national, Federal, state or local.
"Business" shall mean the manufacture, assembly and sale of bearing
products.
"Closing" shall have the meaning specified in Section 3.1 hereof.
"Closing Date" shall mean the date upon which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as the same may
hereafter be amended from time to time. Any reference to a specific section of
the Code shall refer to the cited provision as the same may be subsequently
amended from time to time, as well as to any successor provision(s).
"Company" shall mean Smith Acquisition Company, Inc. d/b/a Southwest
Products Company, a California corporation.
"Company Documents" shall mean this Agreement and all other
agreements, instruments and certificates to be executed by the Company in
connection with this Agreement.
"Contracts and Other Agreements" shall mean all contracts, agreements,
warranties, guaranties, indentures, bonds, options, leases, subleases,
easements, mortgages, plans, collective bargaining agreements, licenses,
commitments or binding arrangements of any nature whatsoever, express or
implied, written or unwritten, and all amendments thereto, entered into or
binding upon the applicable party or to which the property of the applicable
party may be subject.
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"Effective Time" shall have the meaning specified in Section 2.1
hereof.
"Knowledge" shall mean, (i) with respect to any Shareholder who is not
a director, the actual knowledge of such person, and the Knowledge that such
person would have acquired by attending all of the meetings of the Board of
Directors of the Company and by reviewing all of the corporate minutes therefor,
(ii) with respect to any Shareholder who is also a director of Southwest, the
actual knowledge of each such person, the knowledge that such person would have
acquired upon reasonable inquiry, and the Knowledge that such person would have
acquired by attending all of the meetings of the Board of Directors of the
Company and by reviewing all of the corporate minutes therefor, and (iii) with
respect to the Company, the actual knowledge of each of its directors, executive
officers and key employees, the knowledge that each such person would have
acquired upon diligent inquiry and the knowledge that is imputed to each such
person and/or the Company by operation of Law.
"Labor Agreements" shall mean, collectively, (i) all employment
agreements, collective bargaining agreements or other labor agreements to which
the Company is a party or by which its properties is bound; (ii) all pension,
profit sharing, deferred compensation, bonus, stock option, stock purchase,
savings, retainer, consulting, non-competition, retirement, welfare or incentive
plans or contracts (including ERISA Plans) to which the Company is a party or by
which its properties is bound; and (iii) all plans or agreements under which
"fringe benefits" (including, but not limited to, hospitalization plans or
programs, medical insurance, vacation plans or programs, sick plans or programs
and related benefits) are afforded to any employees of the Company.
"Law" shall mean any law, statute, regulation, ordinance, requirement,
or other binding action or requirement of an Authority.
"Licenses and Permits" shall mean all licenses and permits issued to
the Company or in which the Company has any interest (including the right to
use).
"Lien or Other Encumbrance" shall mean any lien, pledge, mortgage,
security interest, lease, charge, conditional sales contract, option,
restriction, reversionary interest, right of first refusal, voting trust
arrangement, preemptive right, claim under bailment or storage contract,
easement or any other adverse claim or right whatsoever.
"Losses" shall have the meaning specified in Section 12.1 hereof.
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"Material Adverse Change" or "Material Adverse Effect" or other
similar phrase including the word "material" with respect to the condition
(financial or otherwise), assets, liabilities, Business, operations or prospects
of the Company shall mean any adverse change or effect or potential adverse
change or effect, or any series thereof, involving more than Fifty Thousand
Dollars ($50,000) in the aggregate.
"Merger" shall have the meaning specified in Section 2.1 hereof.
"Newco" shall have the meaning specified in Recital C above.
"Non-Competition Agreement" shall mean the agreement of William McKay
referred to in Section 7.6 hereof.
"Order" shall mean any decree, order, judgment, writ, award,
injunction, rule or consent of or by an Authority.
"Outside Date" shall have the meaning specified in Section 3.1 hereof.
"Person" shall mean any entity, corporation, company, association,
joint venture, joint stock company, partnership, trust, organization, individual
(including personal representatives, executors and heirs of a deceased
individual), nation, state, government (including agencies, departments,
bureaus, boards, divisions and instrumentalities thereof), trustee, receiver or
liquidator.
"Purchaser Financial Statements" shall mean the audited (a)
consolidated balance sheets of Purchaser as of December 31, 1993 and December
31, 1994; (b) the consolidated statement of income for the years ended December
31, 1993 and December 31, 1994; (c) consolidated statement of cash flows for the
years ended December 31, 1993 and December 31, 1994; and (d) consolidated
statements of changes in shareholder's equity for the years ended December 31,
1993 and December 31, 1994, including all notes thereto.
"Property Rights" shall have the meaning specified in Section 5.9
hereof.
"Purchaser Documents" shall mean this Agreement and all other
agreements, instruments and certificates to be executed and delivered by
Purchaser in connection with this Agreement.
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"Securities Act" shall have the meaning specified in Section 4.9
hereof.
"Shareholder Documents" shall mean this Agreement and all other
agreements, instruments and certificates to be executed and delivered by the
Shareholders in connection with this Agreement.
"Southwest Financial Statements" shall mean the unaudited balance
sheets as of June 30, 1995 and June 30, 1994 and the unaudited statements of
income and statements of cash flow of the Company, for the twelve month periods
then ended, including all notes thereto, and the unaudited balance sheets as of
September 30, 1995 and the unaudited statements of income and statements of cash
flow of the Company, for the three month period then ended, including all notes
thereto.
"Southwest Common Stock" shall mean any issued and outstanding shares
of the common stock of the Company.
"Southwest Preferred Shares" shall have the meaning specified in
Recital A above.
"Southwest Shares" shall mean all of the issued and outstanding shares
of the common stock of the Company after conversion of the Southwest Preferred
Shares and the Subordinated Debt, and the exercise or cancellation of all
outstanding options.
"Subordinated Debt" shall have the meaning specified in Recital A
above.
"Subsidiary" shall mean each corporation, partnership, joint venture,
trust or other entity in which the Company has, directly or indirectly, an
equity interest representing 10% or more of the capital stock thereof or other
equity interest therein.
"Subsidiary Merger Agreement" shall have the meaning specified in
Section 2.1 hereof.
"Sunbase Preferred Shares" shall have the meaning specified in Section
2.1 hereof.
"Sunbase Shares" shall have the meaning specified in Section 4.9
hereof.
"Taxes" shall mean, collectively, all taxes, including without
limitation, income, gross receipts, net proceeds, alternative, add-on, minimum,
ad valorem, value added, turnover, sales, use, property, personal property
(tangible and intangible), stamp, leasing, excise, duty,
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franchise, transfer, license, withholding, payroll, employment, fuel, excess
profits, environmental, occupational, interest equalization, windfall profits
and severance taxes, and all other like charges imposed by an Authority.
"Tax Returns" shall mean, collectively all Federal, state, foreign and
local tax reports, returns, information returns and other related documents
required to be filed with any relevant taxing Authority.
ARTICLE II
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SUBSCRIPTION OF NEW ISSUE SHARES AND SALE
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AND PURCHASE OF SHARES
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2.1 The Merger. Subject to the terms and conditions of this Agreement
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Newco shall be merged into the Company (with the Company being the surviving
corporation of the merger) in accordance with the applicable provisions of the
California Corporations Code (the "Merger") pursuant to the Agreement of Merger
attached to this Agreement as Schedule 2.1 (the "Subsidiary Merger Agreement").
The Merger shall be effective when the Subsidiary Merger Agreement shall have
been filed with the Secretary of State of the State of California. When used in
this Agreement, the term "Effective Time" shall mean the time of filing of the
Subsidiary Merger Agreement with the Secretary of State. The authorized and
issued capital stock of Newco, all of which shall be owned by Purchaser
immediately prior to the Effective Time, at the Effective Time, pursuant to the
Subsidiary Merger Agreement and without any further action on the part of
Purchaser, shall be converted into one share of the common stock of the Company
(the "Surviving Stock"). Each outstanding stock certificate which prior to the
Effective Time represented shares of capital stock of Newco automatically and
for all purposes shall be deemed to represent the number of shares of the
Company into which the shares of capital stock of Newco represented by such
certificate have been converted as provided herein. At the Effective Time, all
of the Southwest Shares shall be converted into and become the right to receive
an aggregate of six thousand three hundred (6,300) shares of Series B
Convertible Preferred Stock (the "Sunbase Preferred Shares") of Purchaser to be
distributed to the Shareholders in accordance with Schedule 5.3. The terms of
the Sunbase Preferred Shares shall be set forth on Schedule 2.1 and will include
the following:
(a) Each of the Sunbase Preferred shares, on an "as-converted" and
pro-rata basis, shall participate with the shares of the common stock of
Purchaser in any dividends paid by Purchaser thereon.
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(b) Each holder of the Sunbase Preferred Shares shall be entitled
to the number of votes equal to the number of shares of common stock of
Purchaser into which such Shares could be converted under 2.1(c) below and shall
have voting rights and powers equal to the voting rights and powers of the
common stock (voting together with the common stock as a single class), except
that any action to be taken by Purchaser which would adversely affect the rights
of the holders of the Sunbase Preferred Shares shall require the approval of a
majority in interest of such holders;
(c) At the option of each holder, the shares owned by such holder
may be redeemed from the proceeds of the next public offering of Purchaser, the
net proceeds of which are designated to be used to redeem the Sunbase Preferred
Shares. Purchaser shall provide to each holder (i) notice of its intention to
file a registration statement with the Securities and Exchange Commission with
respect to a public offering of its shares and (ii) a copy of Purchaser's most
recent reports and registration statements filed with the SEC. In the event that
such holder elects to redeem such holder's Sunbase Preferred Shares, such holder
shall provide notice to Purchaser within 15 days from the date of the notice
from Purchaser. The per share redemption price shall be $500 less the pro rata
portion of the underwriter's commission with respect to the public offering. By
way of example, if the redemption price otherwise payable to such holder is
$400,000 and the underwriter's commission is 10%, Purchaser shall pay the
redeeming holder $360,000. The redemption price payable to the redeeming holders
shall be paid by Purchaser to such holders within twenty (20) business days
after the closing of any public offering (as described herein) made by
Purchaser. In the event that a holder elects not to have such holder's Sunbase
Preferred Shares so redeemed, each Share not redeemed shall, on the same date
that the redemption price is paid to the redeeming holders, be automatically
converted into 100 shares of the common stock of Purchaser. The per share
redemption price and the number of shares of common stock to be issuable upon
conversion shall be subject to adjustment in the event of stock dividends,
combinations or splits with respect to the common stock.
(d) If, by that date which is two (2) years after the date on
which the Sunbase Preferred Shares are distributed to the holders (the "Two Year
Date"), such holders have not been able to redeem their Sunbase Preferred Shares
because Purchaser has not made a public offering, the net proceeds of which are
designated to be used to redeem the Sunbase Preferred Shares, the holder's
Sunbase Preferred Shares shall automatically convert into shares of the common
stock of Purchaser as follows: On the first business day following the Two Year
Date, each Sunbase Preferred Share
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shall automatically be converted into that number of shares of common stock of
Purchaser that equals $500 divided by the lesser of (a) $5.00 or (b) the average
closing price of the common stock of the Purchaser (subject to adjustment for
stock dividends, combinations or splits). As used herein, the average closing
price shall be computed by taking the then most recent 60 consecutive trading
days where Purchaser's common stock has traded at a minimum volume of 2,000
shares per day for 45 of those 60 trading days.
2.2 Transfer Taxes. The Shareholders shall be solely responsible for
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the payment of any and all Taxes, impositions, liens, levies, assessments and
similar charges incident to or incurred as a result of the transfer of the
Southwest Shares pursuant to the Merger contemplated herein.
ARTICLE III
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CLOSING
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3.1 Time and Place. Subject to the provisions of Sections 11.1 and
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11.2 hereof, the Closing (the "Closing") shall take place at the offices of Loeb
and Loeb, 1000 Wilshire Boulevard, Suite 1800, Los Angeles, California 90017, no
later than January 19, 1996 (the "Outside Date").
3.2 Transactions at the Closing. At the Closing, the following shall
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occur:
3.2.1 Pursuant to the Merger, the Shareholders shall receive
certificates representing the Sunbase Preferred Shares;
3.2.2 Pursuant to the Merger, the Southwest Shares will be
automatically converted into Sunbase Preferred Shares, and the Shareholders
shall surrender all of the certificates evidencing the Southwest Shares for
conversion into Sunbase Preferred Shares;
3.2.3 The Company shall deliver to Purchaser the opinion of
counsel referred to in Section 9.5 hereof;
3.2.4 Purchaser shall deliver to the Company and the Shareholders
the opinion of counsel referred to in Section 10.6 hereof;
3.2.5 All of the directors of the Company other than William McKay
shall deliver the resignations referred to in Section 7.5 hereof;
3.2.6 William McKay shall deliver the Non-Competition Agreement
referred to in Section 7.6 hereof;
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3.2.7 The Company and Purchaser on the one hand and, on the other
hand, William McKay, shall execute and deliver counterpart copies of the
employment agreement referred to in Section 8.3 hereof;
3.2.8 The Company shall provide to Purchaser a certificate of good
standing with respect to its jurisdiction of formation and each other
jurisdiction in which the Company has qualified to do business; and
3.2.9 The Company shall deliver to Purchaser any and all other
assignments, documents, instruments and conveyances requested by Purchaser or
necessary to effect the consummation of the transactions contemplated by this
Agreement.
The foregoing transactions shall be deemed to occur simultaneously at the
Closing.
ARTICLE IV
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REPRESENTATIONS AND WARRANTIES OF THE
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SHAREHOLDERS REGARDING THE SOUTHWEST SHARES AND THEIR STATUS
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Each Shareholder, individually, represents and warrants to Purchaser
that:
4.1 Title to Southwest Shares. Such Shareholder has good and
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marketable title to the Southwest Shares, which are free and clear of all Liens
or Other Encumbrances excepting only such restrictions upon transfer, if any, as
may be imposed by federal or state securities Laws.
4.2 Authority to Execute and Perform Agreements. Such
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Shareholder has the full right, power and authority to enter into, execute and
deliver this Agreement and all other Shareholder Documents.
4.3 Due Authorization; Enforceability. Such Shareholder has
---------------------------------
taken all actions necessary to authorize such Shareholder to enter into and
perform said Shareholder's obligations under this Agreement and all other
Shareholder Documents. This Agreement is, and as of the Closing Date the other
Shareholder Documents will be, the legal, valid and binding obligations of such
Shareholder, enforceable in accordance with their respective terms.
4.4 No Violation of Order or Law. Such Shareholder is not a
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party to, subject to or bound by any Law or Order which would prevent the
execution or delivery of this Agreement by such Shareholder or the performance
by such Shareholder of such Shareholder's obligations hereunder.
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4.5 Adverse Agreements; Consents. Neither the execution or
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delivery by such Shareholder of this Agreement or any other Shareholder Document
nor the consummation by such Shareholder of the transactions contemplated herein
or therein require the consent of any Person except, as applicable, the consent
of each Shareholder's spouse, which consent shall be given by such spouse
substantially in the form which is attached hereto as Schedule 4.5.
4.6 Securities Laws. Such Shareholder has obtained all necessary
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permits and other authorizations or Orders of exemption as may be necessary or
appropriate under any and all applicable state securities Laws with respect to
the transactions contemplated herein, except that no such representation or
warranty is made with respect to the issuance by Purchaser of the Sunbase
Preferred Shares or the Sunbase Shares.
4.7 No Adverse Litigation. To such Shareholder's Knowledge, such
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Shareholder is not a party to any pending or threatened litigation which seeks
to enjoin or restrict such Shareholder's own ability to sell or transfer his
Southwest Shares hereunder, nor is any such litigation threatened against such
Shareholder. Furthermore, to such Shareholder's Knowledge, there is no
litigation pending or threatened against such Shareholder which, if decided
adversely to such Shareholder, could adversely affect such Shareholder's ability
to consummate the transactions contemplated herein.
4.8 No Broker. No broker or finder has acted for such
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Shareholder in connection with this Agreement or the transactions contemplated
herein, and no broker or finder is entitled to any brokerage or finder's fees or
other commissions in respect of such transactions based in any way upon
agreements, arrangements or understandings made by or on behalf of such
Shareholder.
4.9 Investment Capacity. Each of the Shareholders understands
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and agrees that (a) the Sunbase Preferred Shares to be issued to the
Shareholders and the shares of Purchaser's Common Stock issuable upon conversion
of the Sunbase Preferred Shares (together with the Sunbase Preferred Shares, the
"Sunbase Shares") will not have been registered under the Securities Act of
1933, as amended (the "Securities Act") or the securities laws of any state,
based upon an exemption from such registration requirements under the Securities
Act; (b) the Sunbase Shares are and will be "restricted securities", as said
term is defined in Rule 144 of the Rules and Regulations promulgated under the
Securities Act; (c) the Sunbase Shares may not be sold or otherwise transferred
unless they have been first registered under the Securities Act and applicable
state securities
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laws, or unless exemptions from such registration provisions are available with
respect to said resale or transfer; (d) except as expressly set forth herein,
Purchaser is under no obligation to register the Sunbase Shares under the
Securities Act or any state securities laws, or to take any action and make any
exemption from such registration provisions available; and (e) Purchaser is
relying on the representation by each Shareholder (which is herein being made)
that such Shareholder has such knowledge and experience in financial or business
matters that such Shareholder is capable of evaluating the merits and risks
involved in the investment in the Sunbase Preferred Shares and is able to bear
the economic risk and complete loss of such Shareholder's investment.
4.10 Status of Shareholders; Receipt of Documentation. The
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Shareholders acknowledge that they have received a copy of the following
documents of Purchaser: Form 10-K for the transition period from July 1, 1994 to
December 31, 1994; Form 10-Q for the quarter ended March 31, 1995; Form 10-Q for
the quarter ended June 30, 1995; From 10-Q for the quarter ended September 30,
1995; Form 8-K as of December 22, 1994; and Form 8-K/A as of December 22, 1994
and any other reports and registration statements filed by Purchaser with the
SEC after December 31, 1994. Each Shareholder has been furnished with such
information and documents pertaining to Purchaser as such Shareholder has
requested, and has been given the opportunity to meet with officials of
Purchaser and to have such persons answer questions regarding Purchaser's
affairs and condition. Each Shareholder has substantial experience in business
and financial matters and in making investments of the type contemplated by this
Agreement; is capable of evaluating the merits and risks of the acquisition of
the Sunbase Preferred Shares; and is able to bear the economic risks of such
Shareholder's investment.
4.11 Waiver of Appraisal Rights. Each of the Shareholders hereby
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waives any right to require appraisal or to otherwise exercise any other rights
pursuant to Chapter 13 of the California Corporations Code.
4.12 Issuance of Sunbase Preferred Shares to Third Parties. Each
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of the Shareholders understands and agrees that in connection with the loan
described in Section 9.8 below, 500 Sunbase Preferred Shares will be issued to
certain third parties as incentive for such third parties to make a loan to the
Company. Because Sunbase will issue a total of 6,800 Sunbase Preferred Shares in
connection with the Merger, and based on the issuance of 500 Sunbase Preferred
Shares to such certain parties, the Shareholders will receive a total of 6,300
Sunbase Preferred Shares, as set forth in Section 2.1 above.
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ARTICLE V
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REPRESENTATIONS, WARRANTIES AND COVENANTS
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RELATING TO THE COMPANY
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The Company and, to their Knowledge, each of the Shareholders, hereby
severally represent, warrant and covenant to Purchaser as follows:
5.1 Organization, Standing, Etc. of the Company. The Company is
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a corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all requisite corporate power and
authority to carry on its business as currently conducted and to own or lease
and to operate the properties that it now owns or leases. The Company is duly
qualified and in good standing to do business as a foreign corporation in the
jurisdictions described in Schedule 5.1. Except as set forth in Schedule 5.1,
there are no other states or jurisdictions in which the character or location of
the properties owned or leased by it, or the conduct of its business, make such
qualification necessary or where the failure to so qualify and be in good
standing would have a material adverse effect on the Company's financial
condition or results of operation. Copies of the Company's Articles of
Incorporation and all amendments thereto, and of the Company's Bylaws as amended
to date, have been furnished to Purchaser and are complete and correct.
5.2 No Violation. Neither the execution and delivery of this
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Agreement or the Subsidiary Merger Agreement and all other Company Documents nor
the consummation of the transactions contemplated herein and therein will (a)
violate any provision of the Articles of Incorporation or Bylaws of the Company;
(b) violate, conflict with, or constitute a default under any material Contract
or Other Agreement or other instrument to which the Company is a party or by
which it or its property is bound; (c) except as set forth in Schedule 5.2,
require the consent of any party to any material Contract or Other Agreement to
which the Company is a party by which it or its property is bound; or (d)
violate any Laws or Orders to the which the Company or its property is subject.
5.3 Capitalization. Immediately prior to the Closing, the
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authorized capital stock of the Company will consist of ten million (10,000,000)
shares of no par value Common Stock of which 9,450,000 shares are issued and
outstanding. Schedule 5.3 sets forth a true, correct and complete list of the
shareholders of the Company, and (i) prior to conversion, the number of shares
of Common Stock and Southwest Preferred Shares issued and outstanding, together
with the principal amount and holders of the
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Subordinated Debt and (ii) after conversion, the number of the Southwest Shares.
Except as set forth on such Schedule, there are no options, warrants, calls or
rights of any kind to purchase or otherwise acquire, and no securities are
convertible into, the capital stock of Company, and there are no other
agreements of any kind or character obligating the Company to issue, transfer or
sell any of its capital stock authorized or outstanding or to register any such
stock with any securities agency. There is no personal liability, and there are
no preemptive or similar rights, attached to the Company's Common Stock or
Preferred Stock. The Southwest Shares have been duly authorized and are fully
paid and non-assessable.
5.4 Authority for Agreement. The Company has all requisite
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power and authority to enter into this Agreement and the Subsidiary Merger
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement constitutes or will
constitute, as the case may be, the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. The
execution and delivery of this Agreement and the Subsidiary Merger Agreement and
the consummation of the transactions contemplated hereby will not conflict with,
or result in any violation of or default under, any provision of any mortgage,
indenture, lease, agreement or other instrument, or any permit, concession,
grant, franchise, license, Order or Law, applicable to the Company or any of its
properties.
5.5 Consents. No consent, license, approval, order or
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authorization of, or registration, filing or declaration with, any Authority is
required to be obtained or made, and no consent of any third party is required
to be obtained, by the Company in connection with the execution, delivery or
performance of this Agreement or the Subsidiary Merger Agreement, or the
consummation of any other transactions contemplated hereby or thereby.
5.6 Financial Statements. The Southwest Financial Statements
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which are attached hereto as Schedule 5.6, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be otherwise indicated in the notes
thereto), and fairly present the financial position of the Company as of the
dates thereof and the results of its operations and changes in financial
position for the periods then ended.
5.7 Subsidiaries. Except as set forth on Schedule 5.7, the
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Company has no Subsidiaries and does not own, directly or indirectly, any
capital stock of, or have
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any direct or indirect equity or ownership interest in the business of, any
corporation or entity.
5.8 Litigation. Except as set forth on Schedule 5.8 hereto,
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there is no action, proceeding, investigation or inquiry whatsoever pending, or,
to the Company's or Shareholders' Knowledge, threatened, affecting the Company
or its assets or which questions the validity of this Agreement.
5.9 Trademarks, Trade Names, Patents, Etc. Schedule 5.9 hereto
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contains a complete and correct list and description of trademarks, trade names,
copyrights, patents and all applications therefor, and other similar
intellectual property rights used or held for use by the Company (the "Property
Rights"). To the best of the Company's Knowledge, the Company owns or has the
right to use all of the Property Rights which are material to the Business of
the Company and to continue to do so after the Closing on substantially the same
basis. None of the Property Rights violates any laws, statutes, ordinances or
regulations, or infringes upon or violates any rights of others, or is being
infringed by others. The Company has not received any notice or claim that any
Property Right is not valid or enforceable by its owner or that there has been
any infringement of any copyright, patent or other property right of any third
party by the Company.
5.10 Employees. Schedule 5.10 hereto contains a complete and
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correct list of the names of all current employees, consultants and commission
agents of the Company together with compensation earned during the twelve months
ended June 30, 1995 (including any bonuses and commissions and fringe benefits
not generally available to the Company's employees). For employees, consultants
and commission agents hired or retained since June 30, 1995, Schedule 5.10 sets
forth the rate of compensation. To the Company's Knowledge, 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. There are no pending or, to the Company's Knowledge,
threatened, labor negotiations, work stoppages or work slow downs involving or
affecting the Company or its Business, and no union representation questions
exist, and there are no organizing activities, in respect of any of the
employees of the Company.
5.11 Contracts. Schedule 5.11 attached hereto contains a
---------
complete and correct list as of the date hereof of all Contracts and other
Agreements to which the Company is a party or by which it or any of its property
is bound which are material to the Company, its assets or its financial
condition. Except as disclosed on Schedule 5.11A, (a)
14
all Contracts and other Agreements are in full force and effect and unimpaired
by any defaults, acts or omissions of the Company and, based on the Company's
Knowledge, unimpaired by any defaults, acts or omissions of any party thereto;
and (b) no approval or consent of any party to such Contracts and Agreements is
required in connection with the consummation of the transactions contemplated
hereby.
5.12 Transactions with Interested Persons. Except as set forth
------------------------------------
on Schedule 5.12, no officer, director or employee (or spouse or any child
thereof) of the Company owns, directly or indirectly, on an individual or joint
basis, any material interest in, or serves as an officer, director or employee
of, any customer, competitor or supplier of the Company or any person or entity
which has a contract or arrangement with the Company (including without
limitation leases, as lessor, of real property or personal property).
5.13 Bank Accounts. Attached hereto as Schedule 5.13 is a
-------------
complete and correct list of each bank or other financial institution in which
the Company has an account or safe deposit or lock box, the account or box
number, as the case may be, and the name of every person authorized to draw
thereon or having access thereto.
5.14 Compliance with Other Instruments or Laws. To the best of
-----------------------------------------
the Company's Knowledge, the operations of the Company are in material
compliance with all Laws applicable to the operation of the Company's business.
Schedule 5.14 hereto lists all material permits, concessions, grants,
franchises, licenses and other governmental authorizations or approvals
applicable to the operation of the Business.
5.15 Environmental Matters. Except as disclosed in the Phase I
---------------------
Environmental Site Assessment and Limited Phase II Subsurface Investigation
Report dated April 7, 1995, prepared by Converse Environmental West, and
notwithstanding the introduction paragraph to this Article V, based on the
actual knowledge of both the Shareholders and the Company: (i) the operations
of the Company comply in all respects with all applicable federal, state and
local environmental, health and safety statutes and regulations; (ii) none of
the operations of the Company involves the unlawful generation, transportation,
treatment or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-
270 or any state equivalent, the Company has not disposed of any hazardous waste
or substance by placing it in or on the ground of any premises owned, leased or
used by the Company, and no underground storage tanks or surface impoundments
are on any of the premises of the Company; (iii) no lien in favor of any
Governmental Authority for (a) any liability
15
under federal or state environmental laws or regulations, or (b) damages arising
from or costs incurred by such Governmental Authority in response to a release
of a hazardous or toxic waste, substance or constituent, or other substance,
into the environment, has been filed or attached to any premises of the Company,
and the Company has no contingent liability in connection with any release of
any hazardous or toxic waste, substance or constituent, or other substance, into
the environment, (iv) none of the operations of the Company is subject to any
judicial or administrative proceeding alleging the violation of any federal,
state or local environmental, health or safety statute or regulation, and none
of the operations of the Company is the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any hazardous or toxic waste, substance or constituent, or any other
substance, into the environment.
5.16 Broker's Commissions. No broker is entitled to any
--------------------
brokerage or finder's fee or other commission or fee from the Company as a
direct or indirect consequence of any commitment or other arrangement made on
behalf of the Company in connection with the transactions contemplated by this
Agreement.
5.17 Tax Returns and Payments. Except as set forth on Schedule
------------------------
5.17, all Tax Returns or appropriate extensions therefor of the Company have
been duly, properly and timely filed, and, to the best of the Company's
Knowledge, all Taxes which have become due and payable have been paid in full.
Complete and accurate copies of all Tax Returns for the taxable years ended
February 28, 1993 and February 28, 1994 have been delivered to Purchaser.
Except as set forth on Schedule 5.17, neither the Internal Revenue Service nor
any other Tax Authority is now asserting or, to the best Knowledge of the
Company, threatening to assert against the Company a deficiency or claim for
additional Taxes or interest thereon or penalties in connection therewith.
5.18 Disclosure. The representations and warranties contained in
----------
this Agreement and the information contained in the Schedules and the
certificates required to be delivered pursuant hereto in connection with the
transactions contemplated hereby are true and correct in all material respects
and do not omit to state any material fact necessary to make the statements
contained therein not misleading.
5.19 Liabilities. Except as set forth on Schedule 5.19, the
-----------
Company does not have any material liability or obligation, whether accrued,
absolute, contingent or otherwise, which (a) has not been reflected in the
Southwest
16
Financial Statements, or (b) has not been incurred since June 30, 1995 in the
ordinary course of business or in connection with the transactions contemplated
by this Agreement.
5.20 Insurance. Schedule 5.20 contains a complete and accurate
---------
list of all policies of fire, liability, workmen's compensation, health, key man
and other forms of insurance currently in effect with respect to the Company and
the Business, true copies of which have heretofore been delivered to Purchaser.
5.21 ERISA.
-----
(i) Plans. Schedule 5.21 lists each "employee pension
-----
benefit plan" of the Company (collectively called "Pension Plans" and severally
called a "Pension Plan"), as such term is defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and each
"employee welfare benefit plan" (collectively called "Welfare Plans" and
severally called a "Welfare Plan") of the Company as such term is defined in
Section 3(1) of ERISA, which is maintained by the Company or to which it
contributes or is obligated or required to contribute or has been terminated by
the Company. The Pensions Plans and Welfare Plans are hereinafter sometimes
collectively referred to as the "Plans" and severally referred to as a "Plan".
At present and during the past five years, the Company has neither sponsored,
participated in, nor contributed to: (i) any defined benefit plans to which
Section 4021 of ERISA applies that would create a liability under Title IV of
ERISA and/or (ii) any "multi-employer plan" as defined in Section 3(37) of
ERISA.
(ii) Qualification. Each Pension Plan and the trust (if any)
-------------
forming a part thereof has been determined by the Internal Revenue Service
("IRS") to be qualified under Section 401(a) of the Code, except with respect to
changes in federal law resulting from the Tax Reform Act of 1986 and subsequent
revenue acts, and is exempt from taxation under Section 501(a) of the Code, and
to the Knowledge of the Company, nothing has occurred since the date of such
determination which would severally affect such qualification.
(iii) Compliance with Law and Plan. All Plans are now and
----------------------------
have at all times been established, maintained and operated in all material
respects in accordance with all applicable Law (including, but not limited to
ERISA and the Code and for health plans all COBRA requirements) and the Plan
documents. All plan fiduciaries and plan officials are bonded as required.
17
(iv) Contributions; Benefit. The Company has paid in full
----------------------
all amounts which are required to have been paid by it on or prior to the date
hereof as contributions to any of the Pension Plans. All contributions,
premiums, charges or obligations to each Welfare Plan have been complete and
timely made or will be made prior to the Closing Date. The amount of each
payment to each Plan is sufficient to provide for all benefits earned or
promised and other liabilities accrued under each Plan through the Closing Date.
For each non-funded Plan, the Company has established reserves on its books to
provide for the benefits earned and other liabilities accrued under each Plan
through the Closing Date in amounts sufficient to provide for such benefits. No
funds held or under the control of the Company would be deemed plan assets.
5.22 Compliance With Securities Laws. The Company is, and at all
-------------------------------
times since its inception has been, in compliance in all material respects with
all federal and state securities statutes, orders, rules and regulations
(including without limitation statutes, orders, rules and regulations pertaining
to any purchase or sale of the capital stock of the Company and any private
offering of securities of the Company under Regulation D of the Securities Act)
applicable to it or to the operation of the Business. The Company has no basis
to expect, nor has it received, during the five-year period prior to the date
hereof, any order, notice or other communication from any federal or state
agency administering or enforcing the federal and state securities laws of any
alleged, actual or potential violation and/or failure to comply with any such
statute, order, rule or regulation.
5.23 Inventories. All inventories shown on the Southwest
-----------
Financial Statements and all inventories existing as of the date hereof
consisted of, and consist of, items of a quality and quantity usable and
saleable in the ordinary course of the Business without markdown or discount;
were, and are, merchantable and fit for the particular purpose, except for
obsolete and slow-moving items and items below standard quality (which in any
event did not, and do not, exceed normal commercial standards and amount), all
of which had been, and have been, written down on the books of the Company to
the lower of cost or net realizable market value or had been, and have been,
provided for by adequate reserves. The amounts of the inventories shown on the
Southwest Financial Statements were based on quantities determined by physical
count or measurement, taken on the date of the applicable balance sheet, and
valued at the lower of cost (determined on a first-in, first-out basis) or
market value and on a basis consistent with that of prior years.
18
ARTICLE VI
----------
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER
------------------------------------------------------
Purchaser represents, warrants and covenants to the Company and the
Shareholders as follows:
6.1 Organization, Standing, Etc. of the Company. Purchaser is a
-------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and has all requisite corporate power and authority to
carry on its business as currently conducted and to own or lease and to operate
the properties that it now owns or leases. Purchaser is duly qualified and in
good standing to do business as a foreign corporation in those states and
jurisdictions where the failure to so qualify would have a material adverse
effect on Purchaser's financial condition or the results of its operations.
Copies of Purchaser's Articles of Incorporation and all amendments thereto, and
of Purchaser's Bylaws as amended to date, have been furnished to the Company and
the Shareholders and are complete and correct.
6.2 Authority for Agreement. Purchaser has all requisite power
-----------------------
and authority to enter into this Agreement and the Subsidiary Merger Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement constitutes the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms. The execution and delivery of this Agreement and the Subsidiary Merger
Agreement and the consummation of the transactions contemplated hereby will not
conflict with, or result in any violation of or default under, any provision of
any mortgage, indenture, lease, agreement or other instrument, or any permit,
concession, grant, franchise, license, Order or Law, applicable to Purchaser or
any of its properties.
6.3 No Violation. Neither the execution and delivery of this
------------
Agreement and the Purchaser Documents nor the consummation of the transactions
contemplated herein and therein will (a) violate any provision of the Articles
of Incorporation or bylaws of Purchaser; (b) violate, conflict with, or
constitute a default under any material Contract or Other Agreement or other
instrument to which Purchaser is a party or by which it or its property is
bound; (c) require the consent of any party to any material Contract or Other
Agreement to which Purchaser is a party or by which it or its property is bound;
or (d) violate any Laws or Orders to which Purchaser or its property is subject.
6.4 Litigation. There is no action, proceeding, investigation
----------
or inquiry pending or, based on the actual
19
knowledge of the Purchaser, threatened, that materially affects Purchaser, its
Affiliates or its assets, or that questions the validity of this Agreement.
6.5 Contracts. All Contracts and other Agreements to which
---------
Purchaser is a party are in full force and effect and unimpaired by any
defaults, acts or omissions of Purchaser and no approval or consent of any party
to such Contracts and Agreements is required in connection with the consummation
of the transactions contemplated hereby. Without limiting the generality of
the foregoing, there are no provisions in Purchaser's Articles of Incorporation
or Bylaws, or in any Contracts or other Agreements to which Purchaser is a
party, which would prevent Purchaser from redeeming the Sunbase Preferred
Shares, nor will Purchaser amend such Articles (including a reincorporation) or
Bylaws, or enter into any Contract or other Agreement, the effect of which would
prevent the redemption of the Sunbase Preferred Shares by Purchaser. In
addition, based on Purchaser's actual knowledge, Purchaser's joint venture
contract with Shanghai Hong Xing Bearing Factory, dated March 18, 1994 is
unimpaired by any defaults, acts or omissions of Shanghai Hong Xing Bearing
Factory.
6.6 Approvals. All consents, approvals, authorizations and
---------
other requirements prescribed by any Law or Order, including, but not limited
to, those relating to federal and state securities laws with respect to the
issuance of the Sunbase Preferred Shares, which must be obtained or satisfied by
Purchaser and which are necessary for the execution and delivery by Purchaser of
this Agreement and all other Purchaser Documents, and the consummation of the
transactions contemplated in this Agreement will be obtained and satisfied prior
to Closing.
6.7 SEC Filings. Since January 1, 1995, Purchaser has timely
-----------
filed and, as required by Section 13 of the Exchange Act, will continue to
timely file, all the required forms, reports and other documents with the
Securities and Exchange Commission. As of the date hereof, and at the Effective
Time, all reports, forms and other documents so filed do not, and will not,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
6.8 No Adverse Change. Except as may be disclosed in the SEC
-----------------
filings described in Section 6.7 above, there has not been any material adverse
change in the assets, or existing or prospective financial condition of
Purchaser since December 31, 1994.
20
6.9 Sunbase Financial Statements. The Sunbase Financial
----------------------------
Statements were prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may otherwise be indicated in the notes thereto) and fairly present the
financial position of Purchaser as of the dates thereof and the results of
operations and changes in financial position for the periods then ended.
6.10 Investment Representation. Purchaser is acquiring the
-------------------------
Southwest Shares for investment purposes only and not with a view to any
distribution or resale thereof.
6.11 Sunbase Preferred Shares. At the Closing, the Sunbase
------------------------
Preferred Shares and, at the time of their issuance pursuant to Article II
hereof, the Sunbase Shares, shall be duly authorized, validly issued, fully paid
and non-assessable.
6.12 No Broker. Except for Millennium Capital Partners, Ltd., no
---------
broker, finder, agent or similar intermediary has acted for or on behalf of
Purchaser in connection with this Agreement or the transactions contemplated
hereby, and no broker, finder, agent or similar intermediary is entitled to any
broker's, finder's, or similar fee or other commission in connection therewith
based on any agreement, arrangement or understanding with Purchaser or any
action taken by Purchaser.
6.13 Formation of Newco. As soon as practicable after execution
------------------
of this Agreement, Purchaser shall cause Newco to be formed, all of the stock of
which will be held by Purchaser.
6.14 Capitalization. The authorized capital stock of Purchaser
--------------
consists of 50,000,000 shares of Common Stock with a par value of $.001 of which
11,700,063 shares are issued and outstanding and 25,000,000 of Preferred Stock
with a par value of $.001 of which 36 shares of Series A Preferred Stock are
issued and outstanding. Except as set forth on Schedule 6.14, there are no
options, warrants, calls or rights of any kind to purchase or otherwise acquire,
and no securities are convertible into, the capital stock of Purchaser, there
are no other agreements of any kind or character obligating Purchaser to issue,
transfer or sell any of its capital stock authorized or outstanding and there is
no personal liability, and there are no preemptive or similar rights, attached
to Purchaser's Common Stock or Preferred Stock.
21
ARTICLE VII
-----------
COVENANTS AND AGREEMENTS OF THE PARTIES
---------------------------------------
EFFECTIVE PRIOR TO CLOSING
--------------------------
7.1 Corporate Examinations and Investigations. Prior to the
-----------------------------------------
Closing Date, Purchaser shall be entitled, through its employees and
representatives, to make such investigations of the property and plant and such
examination of the books, records and financial condition of the Company as
Purchaser may request. In order that Purchaser may have the full opportunity to
do so, the Company and the Shareholders shall furnish Purchaser and its
representatives during such period with all such information concerning the
affairs of the Company as Purchaser or such representatives may request and
cause the Company's officers, employees, consultants, agents, accountants and
attorneys to cooperate fully with Purchaser or such representatives in
connection with such review and examination and to make full disclosure of all
information and documents reasonably requested by Purchaser and/or such
representatives. Any such investigations and examinations shall be conducted at
reasonable times and under reasonable circumstances.
7.2 Cooperation; Consents. Prior to the Closing Date, each
---------------------
party shall cooperate with the other to the end that the parties shall (i) in a
timely manner make all necessary filings with, and conduct negotiations with,
all Authorities and other Persons the consent or approval of which, or a license
or permit from which, is required for the consummation of the transactions
contemplated by this Agreement and the Subsidiary Merger Agreement and (ii)
provide to each other party such information as the other party may reasonably
request in order to enable it to prepare such filings and to conduct such
negotiations. Without limiting the foregoing, Purchaser shall cause Newco to
take all actions necessary to execute and file the Subsidiary Merger Agreement
and to effect all transactions contemplated of Newco by this Agreement. The
parties shall also use their respective best efforts to expedite the review
process and to obtain all such necessary consents, approvals, licenses and
permits as promptly as practicable. To the extent permitted by Law, the parties
shall request that each Authority or other Person whose review, consent or
approval is requested treat as confidential all information which is submitted
to it.
7.3 Conduct of Business. From the date hereof through the
-------------------
Closing Date, the Company and Purchaser shall conduct their respective
businesses and operations in such a manner so that the representations and
warranties contained in Article V hereof shall continue to be true and correct
as
22
of the Closing Date as if made at and as of the Closing Date.
7.4 Preservation of Business. From the date hereof through the
------------------------
Closing Date, the Company and Purchaser shall conduct their respective
Businesses only in the ordinary course and consistent with prior practices and
shall use their best efforts to (a) maintain their respective existences and
business organizations; (b) maintain their respective relationships with
customers and suppliers; (c) preserve their respective goodwill; and (d) satisfy
their respective obligations to their creditors and suppliers. Without limiting
the generality of the foregoing, the Company shall not, unless Purchaser shall
otherwise agree in writing or as otherwise expressly provided herein, directly
or indirectly, do any of the following:
(i) amend its Articles of Incorporation or Bylaws;
(ii) authorize for issuance, issue, sell, deliver or agree
to commit to issue, sell or deliver any shares of any class of its capital stock
or any securities convertible into shares of any class of its capital stock;
(iii) split, combine or reclassify any shares of its capital
stock; declare, set aside or pay any dividend or other distribution in respect
of its capital stock; or purchase, redeem or otherwise acquire any shares of its
capital stock;
(iv) except for the loan described in Section 9.8 below,
create, incur or assume any debt or assume, guarantee, endorse or otherwise
become liable for the obligations of any person or make any loans, advances or
capital contributions to, or investments in, any other person; and
(v) except in the ordinary course of business consistent
with past practices, sell, transfer, mortgage or otherwise dispose of or
encumber any properties.
7.5 Resignations. On or prior to the Closing Date, all of the
------------
directors of the Company except William McKay shall resign, in writing, as
directors of the Company, and the designees of Purchaser shall be elected to the
Board of Directors of the Company, all effective as of the Closing Date.
7.6 Non-Competition. On or prior to the Closing Date, William
---------------
McKay shall execute and deliver to the Company a Non-Competition Agreement in
form and substance reasonably satisfactory to Purchaser.
23
7.7 No Solicitation or Negotiation. Unless and until this
------------------------------
Agreement is terminated, neither the Company nor any of the Shareholders shall,
nor shall they cause, suffer or permit the directors, officers, employees,
representatives, agents, investment bankers, advisors, accountants or attorneys
of the Company or the Shareholders to, directly or indirectly, solicit or
negotiate any offer for the sale of the Company's assets or stock.
7.8 Update of Representations and Warranties. Each party hereto
----------------------------------------
shall promptly notify the other party in writing of any changes to such party's
representations and warranties contained herein which occurred during the period
between the date hereof and the Closing Date. The obligation contained in this
Section 7.9 is not intended to nor shall it diminish such party's obligation
with respect to the completeness and correctness of such party's representations
and warranties made as of the date hereof.
ARTICLE VIII
------------
CONDITIONS PRECEDENT TO THE OBLIGATION
--------------------------------------
OF EACH PARTY TO CLOSE
----------------------
The obligation of the Shareholders, the Company and Purchaser to
consummate the transactions contemplated herein shall be subject to the
fulfillment, at or prior to the Closing, of all of the conditions set forth
below in this Article VIII.
8.1 No Action or Proceeding. No action, suit or proceeding
-----------------------
shall have been instituted or be pending before any court or governmental body
seeking to challenge or restrain the transactions contemplated herein which
presents a substantial risk that such transactions will be restrained or that
either party hereto may suffer material damages or other relief as a result of
consummating such transactions.
8.2 Governmental Approvals. Any and all permits and approvals
----------------------
from any Authority required for the lawful consummation of the transactions
contemplated herein shall have been obtained.
8.3 Employment Agreements. The Company and Purchaser, on the
---------------------
one hand, and William McKay, on the other hand, shall have entered into an
employment agreement covering certain tasks to be performed by William McKay on
behalf of the Company and the Purchaser.
24
ARTICLE IX
----------
CONDITIONS PRECEDENT TO THE OBLIGATION
--------------------------------------
OF PURCHASER TO CLOSE
---------------------
The obligation of Purchaser to consummate the transactions
contemplated herein shall be subject to the fulfillment, at or before the
Closing Date, of all of the conditions set forth below in this Article IX.
9.1 Representations and Warranties. The representations and
------------------------------
warranties of the Shareholders and the Company contained in this Agreement, in
any Company Document and in any Shareholder Document shall be true on and as of
the Closing Date with the same force and effect as though made on and as of the
Closing Date, and at the Closing each Shareholder and the Company shall each
have delivered to Purchaser a certificate to such effect signed by such
Shareholder and the President of the Company (as to his best Knowledge and
solely in his capacity as President), as appropriate, and addressed to
Purchaser.
9.2 Performance of Covenants. Each of the obligations of each
------------------------
Shareholder to be performed by such Shareholder and each obligation of the
Company to be performed by it on or before the Closing Date pursuant to the
terms of this Agreement shall have been duly performed on or before the Closing
Date, and at the Closing each Shareholder and the Company shall have delivered
to Purchaser a certificate attesting to such performance signed by such
Shareholder and the President of the Company (as to his Knowledge and solely in
his capacity as President), as appropriate, and addressed to Purchaser.
9.3 Third-Party Consents. Except as set forth in Schedule
--------------------
5.11A, all consents, permits and approvals from Authorities and from parties to
any Contract or Other Agreement listed in Schedule 5.11 which may be required in
connection with the consummation of the transactions contemplated hereby or the
continuance of such Contract or Other Agreement after the Closing Date shall
have been obtained by the Company upon terms and conditions satisfactory to
Purchaser.
9.4 No Adverse Change. Except for liabilities incurred in the
-----------------
ordinary course of business and consistent with past practice, there shall not
have occurred between the date hereof and the Closing Date any Material Adverse
Change in the condition (financial or otherwise), assets, liabilities (whether
absolute, accrued, contingent or otherwise) of the Company, the Business or in
the ability of the Shareholders or the Company to consummate the transactions
contemplated herein.
25
9.5 Opinion of Counsel to the Company. Purchaser shall have
---------------------------------
received the favorable opinion of Bruck & Perry, counsel to the Company, dated
as of the Closing Date, addressed to Purchaser, in form and substance
satisfactory to Purchaser's counsel, to the substantial effect that:
9.5.1 The Company is duly organized, validly existing
and in good standing under the Laws of California and has all requisite power to
own, lease and operate its assets, properties and Business as now conducted.
9.5.2 The Company has the full right, power and
authority required to enter into, execute and deliver this Agreement and the
other Company Documents in connection herewith and to perform fully its
obligations hereunder and thereunder.
9.5.3 This Agreement and the other Company Documents
have been duly and validly authorized, executed and delivered by the Company,
and constitute the legal, valid and binding obligations of the Company executing
the same, enforceable in accordance with their respective terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or similar Laws now or hereafter in effect relating to or limiting
creditors' rights generally, and (ii) general principles of equity (whether
considered in an action in equity or at law) which provide, among other things,
that the remedies of specific performance and injunctive and other forms of
equitable relief are subject to equitable defenses and to the discretion of the
court before which any proceedings therefor may be brought.
9.5.4 Neither the execution and delivery of this
Agreement and the Company Documents, nor the consummation of the transactions
contemplated hereby and thereby will (i) violate any provision of the Articles
of Incorporation, bylaws, or other charter documents of the Company; or (ii) to
the best knowledge of such counsel after diligent inquiry, violate, or
constitute a default under, or permit the termination or acceleration of the
maturity of, any material indebtedness of the Company except as described in
Schedule 5.2.
9.5.5 The Southwest Shares have been duly authorized,
validly issued and are fully paid and non-assessable.
As to any matter contained in such opinion which involves the Laws of a
jurisdiction in which such counsel is not admitted to practice, such counsel may
rely upon the opinion of local counsel of established reputation satisfactory to
Purchaser. Any such opinion may expressly rely as to
26
matters of fact upon certificates furnished by appropriate officers of the
Company or appropriate governmental officials.
9.6 Southwest Shares. Immediately prior to the Closing, the
----------------
Southwest Shares shall represent all of the outstanding shares of the capital
stock of the Company on a fully diluted basis.
9.7 Derivative Securities. All existing Subordinated Debt,
---------------------
Preferred Shares and outstanding options and warrants shall have been converted,
exercised or cancelled by the holder thereof on or prior to the Closing Date so
no other shares of capital stock other than the Southwest Shares shall be
outstanding or issuable pursuant to exercise or conversion and the Subordinated
Debt shall have been extinguished.
9.8 Shareholder Loan. One or more of the Shareholders and
----------------
certain third parties shall have made a loan to the Company in the aggregate
amount of Five Hundred Thousand Dollars ($500,000) on the terms and conditions
set forth in Schedule 9.8. The loan shall be repaid on the earlier of (i) one
(1) year from the Closing Date or (ii) that date on which Purchaser receives
proceeds of at least Two Million Dollars ($2,000,000) from a placement or
offering of securities of Purchaser after the Closing Date. The Company's
obligation to repay the loan to such Shareholders shall be guaranteed by
Purchaser.
9.9 Foothill Consent. Foothill Capital Corporation ("Foothill")
----------------
shall have consented to the transactions contemplated herein, waived any right
to accelerate any obligation owed by the Company to Foothill as a result of the
Merger, and provided to Purchaser written confirmation as to the status of the
loan made by Foothill to Southwest in such form and substance as Purchaser, at
its sole discretion, deems acceptable.
9.10 Delivery of Southwest Shares. Each of the Shareholders
----------------------------
shall have surrendered all of the Southwest Shares owned by such Shareholder for
conversion into Sunbase Preferred Shares.
ARTICLE X
---------
CONDITIONS PRECEDENT TO THE OBLIGATION
--------------------------------------
OF THE SHAREHOLDERS AND THE COMPANY TO CLOSE
--------------------------------------------
The obligation of the Shareholders and the Company to consummate the
transactions contemplated herein shall be subject to the fulfillment, at or
before the Closing Date, of all the conditions set forth below in this Article
X.
27
10.1 Representations and Warranties. The representations and
------------------------------
warranties of Purchaser contained in this Agreement and in any Purchaser
Document shall be true on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date, and at the Closing
Purchaser shall have delivered to the Shareholders a certificate to such effect
signed by the Chief Financial Officer of Purchaser.
10.2 Performance of Covenants. Each of the obligations of
------------------------
Purchaser to be performed by it on or before the Closing Date pursuant to the
terms of this Agreement shall have been duly performed on or before the Closing
Date, and at the Closing, Purchaser shall have delivered to Shareholders a
certificate to such effect signed by the Chief Financial Officer of Purchaser.
10.3 Authority. All actions required to be taken by, or on the
---------
part of, Purchaser to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby shall
have been duly and validly taken by Purchaser's Board of Directors.
10.4 No Adverse Change. Except as may be disclosed in the SEC
-----------------
filings described in Section 6.7 above, there has not been any material adverse
change in the assets, or existing or prospective financial condition of
Purchaser, since December 31, 1994. Furthermore, except for liabilities
incurred in the ordinary course of business and consistent with past practice,
there shall not have occurred between the date hereof and the Closing Date any
material adverse change in the condition (financial or otherwise), assets,
liabilities (whether absolute, accrued, contingent or otherwise) of Purchaser,
its business, or in the ability of Purchaser to consummate the transactions
contemplated herein.
10.5 Third-Party Consents. Except as set forth in Schedule 10.5,
--------------------
all consents, permits and approvals from Authorities and from parties to any
Contract or Other Agreement which may be required in connection with the
consummation of the transactions contemplated hereby or the continuance of such
Contract or Other Agreement after the Closing Date shall have been obtained by
Purchaser upon terms and conditions satisfactory to the Company.
10.6 Opinion of Counsel to Purchaser. The Shareholders and the
-------------------------------
Company shall have received the favorable opinion of Loeb and Loeb, counsel to
Purchaser, dated as of the Closing Date, addressed to the Company, in form and
substance satisfactory to the Company's counsel, to the substantial effect that:
28
10.6.1 Purchaser is a corporation duly incorporated,
validly existing and in good standing under the Laws of the State of Nevada.
10.6.2 Purchaser has all requisite power, authority and
approval required to enter into, execute and deliver this Agreement and the
Purchaser Agreements and to perform fully Purchaser's obligations hereunder and
thereunder.
10.6.3 This Agreement and all Purchaser Documents have
been duly and validly authorized, executed and delivered by Purchaser and
constitute the legal, valid and binding obligations of Purchaser, enforceable in
accordance with their respective terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar
Laws now or hereafter in effect relating to or limiting creditors' rights
generally, and (ii) general principles of equity (whether considered in an
action in equity or at law) which provide, among other things, that the remedies
of specific performance and injunctive and other forms of equitable relief are
subject to equitable defenses and to the discretion of the court before which
any proceedings therefor may be brought.
10.6.4 At the time of Closing, the Sunbase Preferred
Shares will be duly authorized, validly issued, fully paid and non-assessable.
As to any matter contained in such opinion which involves the Laws of a
jurisdiction in which such counsel is not admitted to practice, such counsel may
rely on the opinion of local counsel of established reputation satisfactory to
the Shareholders. Any such opinion may rely as to matters of fact upon
certificates furnished by appropriate officers of Purchaser or appropriate
governmental officials.
10.7 Capital Contribution. As soon as reasonably practicable
--------------------
after the Closing, Purchaser shall make a capital contribution or loan of an
aggregate of $2,500,000 to the Company, which contribution or loan shall be
applied in part as follows: Foothill Capital Corporation long term debt payoff:
$1,095,000; Foothill Capital Corporation note payoff: $336,307; Southwest
Working Capital: $1,000,000
ARTICLE XI
----------
TERMINATION; REMEDIES
---------------------
11.1 Termination Without Default. In the event that as of the
---------------------------
Outside Date, any event or state of facts not constituting a default by the
Company or the Shareholders, on the one hand, or Purchaser, on the other hand,
shall
29
exist, which event or state of facts constitutes a failure of the conditions
precedent for such party's benefit, the party for whose benefit such condition
precedent is imposed hereby shall have the right, at its sole option, to
terminate this Agreement without liability to the other party. Such right may
be exercised by Purchaser, on the one hand, or the Company and the Shareholders,
on the other hand, as the case may be, by giving written notice to the other,
specifying the event or state of facts giving rise to such right of termination.
11.2 Termination Upon Default. Either Purchaser, on the one
------------------------
hand, or the Company or the Shareholders, on the other hand, may terminate this
Agreement by giving notice to the other prior to the Closing Date, without
prejudice to any rights or obligations it may have, if the other party has
materially failed in the due and timely performance of any of its covenants or
agreements herein contained or there shall have been a material breach of the
other's warranties and representations herein contained. In any such event the
party who is not guilty of the breach may, in addition to all of its other
rights and remedies, recover from the party responsible for the breach all
losses incurred.
11.3 Specific Performance. The parties acknowledge that the
--------------------
Southwest Shares are unique and cannot be obtained by Purchaser except from the
Shareholders, and for that reason, among others, Purchaser will be irreparably
damaged in the absence of the consummation of this Agreement. Therefore, in the
event of any breach by the Shareholders or the Company of this Agreement,
Purchaser shall have the right, at its election, to obtain an Order for specific
performance of this Agreement, without the need to post a bond or other
security, to prove any actual damage or to prove that money damages would not
provide an adequate remedy.
11.4 Attorneys' Fees. If any Shareholder, the Company or
---------------
Purchaser shall bring an action against the other by reason of any alleged
breach of any covenant, provision or condition hereof, or otherwise arising out
of this Agreement, the unsuccessful party shall pay to the prevailing party all
attorneys' fees and costs actually incurred by the prevailing party, in addition
to any other relief to which it may be entitled. If more than one Person is a
party adverse to Purchaser in any such action, however, such Persons shall
designate one counsel to represent all of them in the action and, if Purchaser
is not the prevailing party, Purchaser shall be required to pay the attorneys'
fees of such one counsel only. As used in this Section 11.4 and elsewhere in
this Agreement, "actual attorneys' fees" or "attorneys' fees actually incurred"
means the full and actual cost of any legal services actually performed in
30
connection with the matter for which such fees are sought calculated on the
basis of the usual fees charged by the attorneys performing such services, and
shall not be limited to "reasonable attorneys' fees" as that term may be defined
in statutory or decisional Authority.
ARTICLE XII
INDEMNIFICATION
---------------
12.1 Indemnification by the Shareholders and the Company. Each
---------------------------------------------------
of the Shareholders and the Company hereby agrees to severally indemnify and
hold Purchaser harmless from and against any and all losses, obligations,
deficiencies, liabilities, claims, costs and expenses (collectively, "Losses"),
(including, without limitation, the amount of any settlement entered into
pursuant hereto and all reasonable legal and other expenses incurred in
connection with the investigation, prosecution or defense of the matter) caused
by, arising out of, relating to, resulting or occurring from or in connection
with the breach of any representation, warranty or covenant made by the Company
or each such Shareholder in this Agreement or in any of the Company Documents or
Shareholder Documents. Notwithstanding the foregoing, the liability of any
Shareholder hereunder shall not exceed an amount in excess of an amount
determined by multiplying the amount of the Loss by such Shareholder's pro rata
share of the Southwest Shares as of the Closing, and no Shareholder shall be
liable hereunder for any breach of any representation, warranty or covenant made
by the Company or any other Shareholder. Further, the Company shall not be
liable hereunder for any breach of any representation, warranty or covenant of
any Shareholder relating to the Southwest Shares. Notwithstanding anything
herein to the contrary, no Shareholder shall be liable hereunder for an amount
in excess of the number of Sunbase Shares received by such Shareholder
multiplied by $500. Notwithstanding the foregoing, the Shareholders and the
Company shall only be required to indemnify Purchaser if, on a cumulative and
aggregate basis, the amount of Losses described in this Section 12.1 exceeds
$50,000. However, if the cumulative and aggregate amount of such Losses exceeds
$50,000, all of the Losses shall be subject to indemnification hereunder by the
Shareholders and the Purchaser. The Shareholders may satisfy any obligation to
indemnify Purchaser hereunder by (i) paying Purchaser the amount due Purchaser
hereunder in cash, (ii) assigning to Purchaser that number of Sunbase Preferred
shares owned by the Shareholders which, when multiplied by $500 equals the
amount due Purchaser hereunder or (iii) assigning to Purchaser that number of
shares of the common stock of Purchaser owned by the Shareholders which, when
multiplied by $5, equals the amount due Purchaser hereunder.
31
12.2 Indemnification by Purchaser. Purchaser hereby agrees to
----------------------------
indemnify and hold each of the Shareholders harmless from and against any and
all Losses (including, without limitation, the amount of any settlement entered
into pursuant hereto and all reasonable, legal and other expenses incurred in
connection with the investigation, prosecution or defense of the matter) caused
by, arising out of, relating to, or resulting or occurring from or in connection
with the breach of any representation, warranty or covenant made by Purchaser in
this Agreement or in any of the Purchaser Documents. Notwithstanding the
foregoing, Purchaser shall only be required to indemnify the Shareholders if, on
a cumulative and aggregate basis, the amount of Losses described in this Section
12.2 exceeds $50,000. However, if the cumulative and aggregate amount of the
Losses exceeds $50,000, all of the Losses shall be subject to indemnification
hereunder by Purchaser.
12.3 Notice to Indemnifying Party. If any party hereto (the
----------------------------
"Indemnified Party") receives notice of any claim or other commencement of any
action or proceeding with respect to which any other party (the "Indemnifying
Party") is obligated to provide indemnification pursuant to Sections 12.1 or
12.2 above, the Indemnified Party shall promptly give the Indemnifying Party
written notice thereof which notice shall specify, if known, the amount or an
estimate of the amount of the liability arising therefrom. Such notice shall be
a condition precedent to any liability of the Indemnifying Party for
indemnification hereunder. The Indemnified Party shall not settle or compromise
any claim by a third party for which it is entitled to indemnification
hereunder, without the prior written consent of the Indemnifying Party, unless
suit shall have been instituted against it and the Indemnifying Party shall not
have taken control of such suit after notification thereof as provided in
Section 12.4 below.
12.4 Defense by Indemnifying Party. In connection with any claim
-----------------------------
giving rise to indemnity hereunder resulting from or arising out of any claim or
legal proceeding by a person who is not a party to this Agreement, the
Indemnifying Party at its sole cost and expense may, upon written notice to the
Indemnified Party, assume the defense of any such claim or legal proceeding
using counsel of its choice (subject to the approval of the Indemnified Party,
which approval may not be unreasonably withheld or delayed) if it acknowledges
to the Indemnified Party in writing its obligations to indemnify the Indemnified
Party with respect to all elements of such claim. The Indemnified Party shall
be entitled to participate in (but not control) the defense of any such action,
with its counsel and at its own expense; provided, however, that if the
Indemnified Party, in its sole discretion, determines that there exists a
conflict of
32
interest between the Indemnifying Party and the Indemnified Party, the
Indemnified Party shall have the right to engage separate counsel, the
reasonable costs and expenses of which shall be paid by the Indemnifying Party,
but in no event shall the Indemnified Party be liable to pay for the costs and
expenses of more than one such separate counsel. If the Indemnifying Party does
not assume the defense of any such claim or litigation resulting therefrom, the
Indemnified Party may defend against such claim or litigation, after giving
notice of the same to the Indemnifying Party, on such terms as the Indemnified
Party may deem appropriate, and the Indemnifying Party shall be entitled to
participate in (but not control) the defense of such action, with its counsel
and at its own expense. Notwithstanding the foregoing, however, Purchaser shall
in all cases be entitled to control the defense of any such action if it (i) may
result in injunctions or other equitable remedies in respect of Purchaser; (ii)
may result in liabilities which would not be fully indemnified hereunder; or
(iii) may have an adverse impact on the financial condition of Purchaser even if
the Company and/or the Shareholders pay all indemnification amounts in full.
12.5 Reliance Upon Representations and Warranties. The
--------------------------------------------
representations and warranties contained in this Agreement shall be considered
to have been relied upon by the Company, the Shareholders or Purchaser, as the
case may be, and shall survive until and through that date which is one (1) year
after the Closing Date.
ARTICLE XIII
------------
EXPENSES; CONFIDENTIALITY
-------------------------
13.1 Expenses of Sale. Each party hereto shall bear such party's
----------------
direct and indirect expenses incurred in connection with the negotiation and
preparation of this Agreement and the consummation and performance of the
transactions contemplated herein.
13.2 Confidentiality. Subject to any obligation to comply with
---------------
(i) any Law (ii) any rule or regulation of any Authority or securities exchange
or (iii) any subpoena or other legal process to make information available to
the Persons entitled thereto, whether or not the transactions contemplated
herein shall be concluded, all information obtained by any party about any
other, and all of the terms and conditions of this Agreement, shall be kept in
confidence by each party, and each party shall cause its shareholders,
directors, officers, employees, agents and attorneys to hold such information
confidential. Such confidentiality shall be maintained to the same degree as
such party maintains its own confidential information and shall be
33
maintained until such time, if any, as any such data or information either is,
or becomes, published or a matter of public knowledge; provided, however, that
the foregoing shall not apply to any information obtained by Purchaser through
its own independent investigations of the Company or received by Purchaser from
a third party not under any obligation to keep such information confidential nor
to any information obtained by Purchaser which is generally known to others
engaged in the trade or business of the Company; and provided, further, that
from and after the Closing, Purchaser shall be under no obligation to maintain
confidential any such information concerning the Company. If this Agreement
shall be terminated for any reason, each party shall return or cause to be
returned to the other all written data, information, files, records and copies
of documents, worksheets and other materials obtained by such party in
connection with the transactions contemplated herein.
13.3 Publicity. No publicity release or announcement concerning
---------
this Agreement or the transactions contemplated herein shall be issued without
advance written approval of the form and substance thereof by Purchaser and the
Company; provided, however, that such restrictions shall not apply to any
disclosure required by regulatory Authorities, applicable Law or the rules of
any securities exchange which may be applicable.
ARTICLE XIV
-----------
NOTICES
-------
14.1 Notices. All notices, requests and other communications
-------
hereunder shall be in writing and shall be delivered by courier or other means
of personal service (including by means of a nationally recognized courier
service or professional messenger service), or sent by telex or telecopy or
mailed first class, postage prepaid, by certified mail, return receipt
requested, in all cases, addressed to:
Purchaser:
Sunbase Asia, Inc.
19/F., First Pacific Bank Centre
51-57 Gloucester Road
Wanchai, Hong Kong
Attention: Roger Li
Telecopy No. 011-852-2865-4293
34
With a copy to:
David L. Ficksman, Esq.
Loeb and Loeb
1000 Wilshire Boulevard, Suite 1800
Los Angeles, California 90017
Telecopy No. (213) 688-3460
Each Shareholder:
To the address set forth below each Shareholder's signature
block.
Company:
Southwest Products Company
2240 Buena Vista Street
Irwindale, California 91706
Attention: William McKay, President
Telecopy No. (818) 303-6141
With a copy to:
Daniel K. Donahue, Esq.
Bruck & Perry
A Professional Corporation
One Newport Place
Newport Beach, California 92660
Telecopy No. (714) 955-0835
All notices, requests and other communications shall be deemed given on the date
of actual receipt or delivery as evidenced by written receipt, acknowledgement
or other evidence of actual receipt or delivery to the address specified above.
In case of service by telecopy, a copy of such notice shall be personally
delivered or sent by registered or certified mail, in the manner set forth
above, within three (3) business days thereafter. Any party hereto may from
time to time by notice in writing served as set forth above designate a
different address or a different or additional Person to which all such notices
or communications thereafter are to be given.
ARTICLE XV
----------
MISCELLANEOUS
-------------
15.1 Further Assurances. Each of the parties shall use its
------------------
reasonable and diligent best efforts to proceed promptly with the transactions
contemplated herein, to
35
fulfill the conditions precedent for such party's benefit or to cause the same
to be fulfilled and to execute such further documents and other papers and
perform such further acts as may be reasonably required or desirable to carry
out the provisions hereof and the transactions contemplated herein. Without
limiting the generality of the foregoing, the Shareholders shall use their best
efforts to cause the Company to fulfill its covenants hereunder prior to the
Closing.
15.2 Modifications and Amendments; Waivers and Consents. At any
--------------------------------------------------
time prior to the Closing Date or termination of this Agreement, Purchaser, on
the one hand, and the Company and the Shareholders, on the other hand, may, by
written agreement:
(a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto;
(b) waive any inaccuracies in the representations and
warranties made by the other parties contained in this Agreement or any other
agreement or document delivered pursuant to this Agreement; and
(c) waive compliance with any of the covenants or agreements
of the other parties contained in this Agreement. However, no such waiver shall
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits a waiver or consent by or
on behalf of any party hereto, such waiver or consent shall be given in writing.
15.3 Entire Agreement. This Agreement (including any exhibits
----------------
and schedules hereto, which are hereby incorporated herein by this reference)
and the agreements, documents and instruments to be executed and delivered
pursuant hereto or thereto shall embody the final, complete and exclusive
agreement among the parties with respect to the exchange of the Southwest Shares
for Sunbase Preferred Shares and related transactions; shall supersede all prior
agreements, understandings and representations written or oral, with respect
thereto; and may not be contradicted by evidence of any such prior or
contemporaneous agreement, understanding or representation, whether written or
oral.
15.4 Governing Law and Venue. This Agreement is to be governed
-----------------------
by and construed in accordance with the Laws of the State of California
applicable to contracts made and to be performed wholly within such State, and
without regard to the conflicts of laws principles thereof.
36
15.5 Binding Effect. This Agreement and the rights, covenants,
--------------
conditions and obligations of the respective parties hereto and any instrument
or agreement executed pursuant hereto shall be binding upon the parties and
their respective successors, assigns and legal representatives. Neither this
Agreement, nor any rights or obligations of any party hereunder, may be assigned
by Purchaser, the Company or the Shareholders without the prior written consent
of the other parties hereto; provided, however, that prior to or following the
Closing, this Agreement and any rights and obligations of Purchaser hereunder,
and under any Purchaser Document may, without the prior written consent of the
Company and Shareholders, be assigned and delegated by Purchaser to any
Affiliate of Purchaser and following the Closing, this Agreement and any rights
and obligations of Purchaser hereunder and under any Purchaser Document may also
be assigned and delegated by Purchaser, without the prior written consent of the
Company and the Shareholders, to any successor-in-interest of Purchaser to the
Sunbase Shares; provided, however, that no delegation by Purchaser of any such
obligation shall relieve Purchaser of liability therefor.
15.6 Counterparts. This Agreement may be executed simultaneously
------------
in any number of counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument. In making proof
of this Agreement it shall not be necessary to produce or account for more than
one counterpart.
15.7 Section Headings. The section headings of this Agreement
----------------
are for convenience of reference only and shall not be deemed to alter or affect
any provision hereof.
15.8 Gender, Tense, Etc. Where the context or construction
-------------------
requires, all words applied in the plural shall be deemed to have been used in
the singular, and vice versa; the masculine shall include the feminine and
neuter, and vice versa; and the present tense shall include the past and future
tense, and vice versa.
15.9 Severability. In the event that any provision or any part
------------
of any provision of this Agreement shall be void or unenforceable for any reason
whatsoever, then such provision shall be stricken and of no force and effect.
However, unless such stricken provision goes to the essence
37
of the consideration bargained for by a party, the remaining provisions of this
Agreement shall continue in full force and effect, and to the extent required,
shall be modified to preserve their validity.
15.10 Third-Party Rights. Nothing in this Agreement, whether
------------------
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any Persons other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third Persons to any
party to this Agreement, nor shall any provision give any third Persons any
right of subrogation over or action against any party to this Agreement.
15.11 Construction. The language in all parts of this Agreement
------------
shall in all cases be construed simply, according to its fair meaning, and not
strictly for or against any of the parties hereto. Without limitation, there
shall be no presumption against any party on the ground that such party was
responsible for drafting this Agreement or any part thereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
PURCHASER
Sunbase Asia, Inc.
By:
--------------------------------
Its:
----------------------------
THE COMPANY
Smith Acquisition Company, Inc. d/b/a Southwest
Products Company
By:
--------------------------------
Its:
----------------------------
38
SHAREHOLDERS:
-----------------------------------
Badr Al-Aiban
c/o Delta International
P.O. Box 6782
Jeddah, 2145 Saudi Arabia
-----------------------------------
Gary Awad
1800 Austin Parkway,
Apt. #1104
Sugar Land, Texas 77479
-----------------------------------
J. Thomas Chess
500 Columbia Street
Pasadena, California 91030
-----------------------------------
John Coman
216 Fairhills Drive
San Rafael, California 94901
-----------------------------------
William R. McKay
777 South Woodward Boulevard
Pasadena, California 91107
-----------------------------------
James McN. Stancill
3642 Mountain View Avenue
Pasadena, California 91107
-----------------------------------
Tom Naygrow
c/o Steven J. Orlando
1805 Parliament Circle
Carmichael, California 95608
39
-----------------------------------
Dick Orfalea
1235 North Louise Street
Glendale, California 91207
-----------------------------------
Steven J. Orlando
1805 Parliament Circle
Carmichael, California 95608
-----------------------------------
Carol Orlando
c/o Steven J. Orlando
1805 Parliament Circle
Carmichael, California 95608
RJN Enterprises
By:
-------------------------------
Its:
----------------------------
c/o Steven J. Orlando
1805 Parliament Circle
Carmichael, California 95608
----------------------------------
Frank Brothers
128 DeForest Road
Wilton, Connecticut 06397
----------------------------------
David C. Lutz
8807 Fox Briar Lane
Boerne, Texas 78006-5585
40
----------------------------------
Cameron McKay
505 East Plaza Serena
Ontario, California 91764
----------------------------------
Ernst Renezeder
1603 Hanging Rock Avenue
Montebello, California 90640
----------------------------------
Todd Stockbauer
16701 Algonquin Street, #308
Huntington Beach, California 92649
41