AGREEMENT AND PLAN OF MERGER
by and among
NEXTPATH TECHNOLOGIES, INC.
(Parent)
WILLOW SYSTEMS, INC.
(Sub)
WILLOW SYSTEMS LIMITED
(Target)
and
DOUGLAS E. ELERATH, BETZI M. HITZ,
SAMUEL C. AND BEVERLY ANNE ROGERS,
AND JOHN W. HODGES, JR.
(Shareholders)
Dated as of November 2, 1999
TABLE OF CONTENTS
Section Description Page
- ------- ----------- ----
1. Definitions ........................................................ 2
2. The Merger.......................................................... 7
(a) The Merger ................................................ 7
(b) Effective Time of the Merger .............................. 8
(c) The Surviving Corporation ................................. 8
3. Conversion of Shares and Consideration Therefor..................... 8
(a) Conversion of Target Shares ............................... 8
(b) Additional Consideration .................................. 8
(c) Delivery of Parent Shares ................................. 9
(d) Delivery of Target Shares .................................10
(e) Taking Necessary Action; Further Action ...................10
(f) Registration Rights .......................................10
(g) Reflex and NextWave Interests .............................10
4. The Closing ........................................................10
(a) The Closing ...............................................10
(b) Deliveries at the Closing .................................11
5. Escrow Account .....................................................11
(a) Deposit Into Escrow Account ...............................11
(b) Investment of Escrow Amount ...............................11
(c) Initial Distribution from Escrow Account ..................11
(d) Final Distribution from Escrow Account ....................11
(e) Dispute Resolution .......................................12
(f) Assignment of Reimbursed UAR ..............................12
(g) Reimbursement of Elerath Shareholders .....................12
6. Representations and Warranties Concerning the Transaction ..........12
(a) Representations and Warranties of the Shareholders ........12
(i) Authorization of Transaction .....................12
(ii) Noncontravention .................................13
(iii) Broker's Fees ....................................13
(iv) The Shares .......................................13
(v) Suitability ......................................13
(vi) Absence of Registration ..........................14
(vii) Restrictions on Transferability ..................14
(viii) Access to Information ............................14
(ix) Investment .......................................14
(x) Liability ........................................15
(xi) Reflex and NextWave Interests ....................15
(b) Representations and Warranties of the Parent ..............15
(i) Organization and Qualification ...................15
(ii) Capitalization ...................................15
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TABLE OF CONTENTS
Section Description Page
- ------- ----------- ----
(iii) Authorization of Transaction .....................16
(iv) Noncontravention .................................16
(v) Default ..........................................16
(vi) Litigation .......................................16
(vii) Suitability.......................................16
(viii) Absence of Registration ..........................17
(ix) Restrictions on Transferability ..................17
(x) Access to Information ............................17
(xi) Brokers' Fees ....................................17
(xii) Investment .......................................17
(xiii) Financing ........................................17
(xiv) Employee Benefit Program .........................18
(xv) SkyCam ...........................................18
(xvi) Creativity Incentive Plan ........................18
(xvii) Directors and Officers Liability Insurance .......18
7. Representations and Warranties Concerning the Target and
Subsidiaries .................................................18
(a) Organization and Qualification ............................18
(b) Capitalization ............................................18
(c) Notice of Transaction .....................................19
(d) Noncontravention ..........................................19
(e) Subsidiaries ..............................................19
(f) Financial Statements ......................................19
(g) Events Subsequent to the Most Recent Financial Statement ..19
(h) Undisclosed Liabilities ...................................21
(i) Tax Matters ...............................................21
(j) Tangible Assets ...........................................22
(k) Real Property .............................................22
(l) Personal Property .........................................22
(m) Intellectual Property .....................................23
(n) Product Liability/Warranties ..............................24
(o) Contracts .................................................24
(p) Insurance .................................................25
(q) Litigation ................................................25
(r) Employees .................................................25
(s) Employee Benefits .........................................25
(t) Health and Safety Matters .................................26
(u) Environmental Matters .....................................27
(v) Legal Compliance ..........................................28
(w) Certain Business Relationships with the Target and
Subsidiaries ..........................................29
(x) Brokers' Fees .............................................29
(y) Year 2000 Compliance ......................................29
(z) Customer List .............................................30
(aa) Acquired Accounts Receivable ..............................30
(bb) Accounts Payable ..........................................30
(cc) Target Liability ..........................................30
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TABLE OF CONTENTS
Section Description Page
- ------- ----------- ----
(dd) Minutes ...................................................30
(ee) Disclosure ................................................30
8. Pre-Closing Covenants ..............................................30
(a) General ...................................................30
(b) Notices and Consents ......................................31
(c) Operation of Business .....................................31
(d) Preservation of Business ..................................31
(e) Access ....................................................31
(f) Notice of Developments ....................................32
(g) Exclusivity ...............................................32
(h) HSR Act Filings ...........................................32
(i) Plant Closing Notification ................................32
(j) Intercompany Items ........................................33
9. Additional Covenants ..............................................33
(a) General ...................................................33
(b) Litigation Support ........................................33
(c) Transition ................................................33
(d) Confidentiality ...........................................33
(e) Additional Tax Matters ....................................34
(f) Covenant Not to Compete ...................................34
(g) Employment Matters ........................................35
10. Conditions to Obligations to Close .................................35
(a) Conditions to Obligation of the Parent and Sub ............35
(b) Conditions to Obligations of the Shareholders .............37
11. Closing Deliveries .................................................39
(a) Deliveries by the Shareholders at Closing .................39
(b) Deliveries by the Parent and Sub at Closing ...............40
12. Audit ..............................................................40
13. Indemnification ....................................................41
(a) Survival ..................................................41
(b) Indemnification by the Shareholders .......................41
(c) Indemnification by the Parent .............................41
(d) Notice and Opportunity to Defend ..........................41
(e) Indemnification Between the Shareholders ..................42
14. Termination ........................................................42
(a) Termination of Agreement ..................................42
(b) Effect of Termination .....................................43
15. Miscellaneous ......................................................43
(a) Disclosure Schedules ......................................43
(b) Press Releases and Announcements ..........................43
(c) No Third-Party Beneficiaries ..............................43
(d) Entire Agreement ..........................................43
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TABLE OF CONTENTS
Section Description Page
- ------- ----------- ----
(e) Succession and Assignment .................................44
(f) Counterparts/Facsimile ....................................44
(g) Headings ..................................................44
(h) Notices ...................................................45
(i) Amendments and Waivers ....................................45
(j) Severability ..............................................45
(k) Expenses ..................................................45
(l) Construction ..............................................45
(m) Incorporation of Exhibits and Schedules ...................46
(n) Specific Performance ......................................46
(o) NextWave Photonics, Inc. ..................................46
EXHIBITS
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A Agreement of Merger
B Certificate of Merger - Delaware
B-1 Articles of Merger - New Mexico
C Escrow Agreement
D Financial Statements
E-1 Employment Agreement - Douglas E. Elerath
E-2 Employment Agreement - Samuel C. Rogers, Jr.
E-3 Employment Agreement - John W. Hodges, Jr.
F Closing Certificate - Shareholders
G Opinion of Counsel - Shareholders
H Release - Shareholders
I Closing Certificate - Parent and Sub
J Opinion of Counsel - Parent
K-1 Elerath - Reflex LLC Purchase Agreement
K-2 Rogers - Reflex LLC Purchase Agreement
K-3 Elerath - NextWave Photonics LLC Purchase Agreement
K-4 Hodges - NextWave Photonics LLC Purchase Agreement
L Option to Purchase
DISCLOSURE SCHEDULES
- --------------------
6(a) Shareholders' Amended Representations and Warranties
6(b) Parent's Amended Representations and Warranties
6(b)(iv) Parent Approvals
6(b)(vi) Litigation
7(d) Approvals - Willow
7(e) Subsidiaries
7(g) Events Subsequent to the Most Recent Financial Statement
7(h) Target Liabilities
7(i) Tax Matters
7(k) Real Property
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TABLE OF CONTENTS
Section Description Page
- ------- ----------- ----
7(l) Personal Property
7(m) Intellectual Property
7(n) Product Liability/Warranties
7(o) Contracts
7(p) Insurance
7(q) Litigation
7(r) Employees
7(s) Employee Benefit (ERISA) Matters
7(t) Health and Safety Matters
7(u) Environmental Matters
7(v) Legal Compliance
7(w) Business Relationships
7(y) Year 2000 Compliance
7(z) Customer List
7(aa) Acquired Accounts Receivable
7(bb) Accounts Payable
7(cc) Target Liability
7(dd) Minutes
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered
into as of the 2nd day of November, 1999 (the "Effective Date") by and among
NextPath Technologies, Inc., a Nevada corporation (the "Parent"), Willow
Systems, Inc., a Delaware corporation (the "Sub"), Willow Systems Limited,
a New Mexico corporation (the "Target"), and Douglas E. Elerath and Betzi M.
Hitz, husband and wife, of Cedar Crest, New Mexico, and Samuel C. and Beverly
Anne Rogers, husband and wife, of Albuquerque, New Mexico, and John W. Hodges,
Jr. of Palm Harbor, Florida (Douglas E. Elerath, Betzi M. Hitz, Samuel C. and
Beverly Anne Rogers, and John W. Hodges, Jr. are collectively referred to as the
"Shareholders"). (Mr. Elerath and Ms. Hitz are sometimes referred to as the
"Elerath Shareholders.") The Parent, Sub, Target and the Shareholders are
referred to in this Agreement individually as a "Party" and collectively as the
"Parties." The Target and the Sub are referred to in this Agreement collectively
as the "Constituent Corporations").
WHEREAS, the Parent is engaged in the development of new and
innovative technologies;
WHEREAS, the Target, whose principal executive offices are
located at 15100 Central SE, Albuquerque, New Mexico 87123, (i) is engaged in
the business of designing and marketing motion control systems and robotics and
the development of other technology which has potential application in a wide
range of businesses and other business activities, (ii) through its wholly owned
Subsidiary, NextWave Photonics LLC, a Florida limited liability company
("NextWave"), is engaged in the business of designing and marketing fiber optic
switching and other fiber optic technology, and (iii) through its wholly owned
Subsidiary, Reflex LLC, a New Mexico limited liability company ("Reflex"), is
engaged in the business of stabilized camera systems (collectively, the
"Business");
WHEREAS, the Shareholders own all of the issued and
outstanding common stock of the Target (the "Shares");
WHEREAS, the Shareholders and the Boards of Directors of the
Parent, Sub and Target have approved the acquisition of the Target by the
Parent, and the merger of the Target into the Sub (the "Merger"), pursuant to
the Agreement of Merger set forth as Exhibit A attached to this Agreement (the
"Merger Agreement") and the transaction contemplated by this Agreement, in
accordance with the applicable provisions of the statutes of the States of
Delaware and New Mexico, which permit the Merger;
WHEREAS, for Federal income tax purposes, it is intended that
the transaction contemplated by this Agreement shall be a forward triangular
merger which qualifies as a reorganization pursuant to Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code; and
WHEREAS, concurrent with the Merger, the Sub and Douglas E.
Elerath, the Sub and Samuel C. Rogers, Jr. and the Sub and John W. Hodges, Jr.
desire to enter into employment agreements.
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NOW, THEREFORE, in consideration of the representations,
warranties, and covenants contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is acknowledged,
the Parties agree as follows:
1. Definitions.
-----------
"Acquired Accounts Receivable" means all accounts receivable
of the Target which are unpaid as of the Closing Date and which are listed on
Disclosure Schedule 7(aa).
"Adverse Consequences" means all actual damages from
complaints, actions, suits, proceedings, hearings, investigations, claims,
demands, judgments, orders, decrees, stipulations, injunctions, damages, dues,
penalties, fines, costs, amounts paid in settlement, liabilities, obligations,
taxes, liens, losses, expenses, and fees, including all reasonable attorneys'
fees and court costs.
"Affiliate" means (a) any person directly or indirectly
owning, controlling, or holding with power to vote ten percent (10%) or more of
the outstanding voting securities of such other person; (b) any person ten
percent (10%) or more of whose outstanding voting securities are directly or
indirectly owned, controlled, or held with power to vote, by such other person;
(c) any person directly or indirectly controlling, controlled by, or under
common control with such other person; (d) any officer, director or partner of
such other person; and (e) if such other person is an officer, director or
partner, any company for which such person acts in any such capacity.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms the basis for any
specified consequence.
"Business" means the business of designing and marketing
motion control systems and robotics and the development of other technology
which has potential application in a wide range of businesses, and all other
business activities engaged in by the Target and its wholly owned Subsidiaries,
NextWave and Reflex.
"Business Day" means any day except a Saturday, Sunday or
other day in which commercial banks in the State of New Mexico are authorized by
law to close.
"Cause" means the conviction of (a) a felony, or (b) a
misdemeanor involving embezzlement, fraud, conversion or misuse of the Company's
funds or resources or that affects the Company's business, operations or
reputation or substantially impairs a person's qualifications, character or
ability to perform his or her duties.
"Claim Settlement Amount" has the meaning set forth in Section
13.
"Closing" has the meaning set forth in Section 4(a).
"Closing Date" has the meaning set forth in Section 4(a).
"Code" means the Internal Revenue Code of 1986, as amended.
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"Confidential Information" means any information, technical
data or know-how related to any aspect of a Party's business (including without
limitation, research findings, products, proposals, formulas, test results,
product developments, discoveries, inventions, processes, designs, drawings,
engineering studies, marketing reports, customer lists and financial
information) which is disclosed by one party (the "Disclosing Party") to the
another party (the "Receiving Party"), either directly or indirectly, in
writing, orally, electronically, graphically, or by drawings, plans or
inspection of products, tests or equipment. The term "Confidential Information"
shall not include any information, technical data or know-how which: (a) is
already (or otherwise becomes) publicly known, not as a result of any action or
inaction of the Receiving Party; (b) is in the Receiving Party's possession
prior to disclosure by the Disclosing Party as can be shown by the Receiving
Party's files and records as they existed immediately prior to the disclosure;
(c) is approved for release by written authorization of the Disclosing Party;
(d) is independently developed and disclosed by a third party to the Receiving
Party; or (e) disclosure is required by law or regulation.
"Controlled Group of Corporations" has the meaning set forth
in Code Sec. 1563.
"Disclosure Schedule" has the meaning set forth in Section 6.
"DOJ" means the Antitrust Division of the United States
Department of Justice or any successor Governmental Body.
"Elerath Shareholders" means Douglas E. Elerath and Betzi M.
Hitz, husband and wife.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Sec. 3(1).
"Environmental Damages" means all claims, judgments, damages,
losses, penalties, fines, liabilities (including strict liability),
encumbrances, liens, costs, and expenses of investigation and defense of any
claim, whether or not such claim is ultimately defeated, and of any good faith
settlement or judgment, of whatever kind or nature, contingent or otherwise,
matured or unmatured, foreseeable or unforeseeable, including without limitation
reasonable attorneys' fees and disbursements and consultants' fees, any of which
are incurred at any time as a result of the existence prior to the Closing Date
of: (i) Hazardous Material upon, about, or beneath the Real Property, or (ii) a
violation of Environmental Requirements pertaining to the Real Property,
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regardless of whether the existence of such Hazardous Material or the violation
of Environmental Requirements arose prior to the Target's and its Subsidiaries'
ownership or operation of the Real Property.
"Environmental Requirements" means all applicable statutes,
regulations, rules, ordinances, codes, licenses, permits, orders, approvals,
plans, authorizations, concessions, franchises, and similar items, of all
governmental agencies, departments, commissions, boards, bureaus, states,
political subdivisions, or instrumentalities of the United States, and all
applicable judicial, administrative, and regulatory decrees, judgments, and
orders relating to the protection of human health or the environment.
"Equitable Exceptions" has the meaning set forth in Section
6(a)(i).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Financial Statements" has the meaning set forth in Section
7(f).
"FTC" means the United States Federal Trade Commission or any
successor Governmental Body
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"Governmental Body" means any federal, state, county, city,
town, village, municipal or other governmental department, commission, board,
bureau, agency, authority or instrumentality.
"Hazardous Materials" means any substance other than
substances and materials necessary to produce the products currently
manufactured by the Target on the Real Property or used in the ordinary course
of the Business: (i) the presence of which requires investigation or remediation
under any applicable federal, state, or local statute, regulation, ordinance,
order, action, policy, or common law; (ii) that is defined as `a "hazardous
waste" or "hazardous substance" under any applicable federal, state, or local
statute, regulation, or ordinance; (iii) that is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise
hazardous and is regulated by any applicable governmental authority within a
United States agency, department, commission, board, agency, or instrumentality;
(iv) the presence of which on the Real Property causes or threatens to cause a
nuisance upon the Real Property or to adjacent properties, or poses or threatens
to pose a hazard to the health or safety of persons on or about the Real
Property; (v) the presence of which on adjacent properties could constitute a
trespass by the Target or the Parent as of the Closing Date; (vi) that contains
gasoline, diesel fuel, or other petroleum hydrocarbons in any unconfined manner;
or (vii) that contains PCBs, asbestos, or urea formaldehyde foam insulation.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
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"Indemnified Party" means the party indemnified under this
Agreement.
"Indemnifying Party" means the party indemnifying the
Indemnified Party under this Agreement.
"Intellectual Property" means all (a) trademarks, service
marks, trade dress, logos, trade names, and corporate names and registrations
and applications for registration thereof, (b) copyrights and registrations and
applications for registration thereof, (c) computer software, data, and
documentation, (d) trade secrets and confidential business information
(including formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing, and business data, pricing and cost
information, business and marketing plans, and customer and supplier lists and
information), and (e) all property, tangible or intangible, acquired or used
directly or indirectly in connection with the development and/or maintenance of
the Target's website, including without limitation, the databases and all
information contained therein, the domain names, the technology underlying the
website, all hardware and software, all contents of the website, all information
received from the persons accessing the website, and any and all trademark,
copyright and other intellectual property rights to any or all of the foregoing.
"Knowledge" means, with respect to the Target or the
Shareholders, actual knowledge by Douglas E. Elerath or Betzi M. Hitz.
"Known Claim" has the meaning set forth in Section 13.
"Known Claim Amount" has the meaning set forth in Section 13.
"Laws" means all laws, statutes, codes, rules, regulations,
ordinances, or orders of any Governmental Body.
"Liability" means any liability, debt, obligation, amount or
sum due (whether absolute or contingent, whether liquidated or unliquidated, and
whether due or to become due) including any liability for Taxes.
"Material" or "Material Adverse Effect" means a material
adverse effect (5% or greater) on the assets, financial condition or results of
operations of the Party immediately upon the effectiveness of the Closing on the
Closing Date.
"Most Recent Balance Sheet" means the balance sheet contained
within the Most Recent Financial Statements.
"Most Recent Financial Statement" has the meaning set forth in
Section 7(f).
"Most Recent Fiscal Year End" has the meaning set forth in
Section 7(f).
"Multi-employer Plan" has the meaning set forth in ERISA Sec.
3(37).
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"NextWave" means NextWave Photonics LLC, a Florida limited
liability company.
"Order" means any order, writ, injunction, decree, judgment,
award, determination or written direction of any court, arbitrator or
Governmental Body.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Parent" means NextPath Technologies, Inc., a Nevada
corporation.
"Party" has the meaning set forth in the preface above.
"Patent" or "Patents" means any U.S. or foreign patents or
applications that are later added to this Agreement, any patents issuing on any
such applications, any reissuance or extensions or reexaminations of any such
patents and any foreign patents or patent applications corresponding to any of
the U.S. patents or patent applications included in the Patent.
"Permitted Lien" means (i) any Security Interest for which the
underlying liability is disclosed on the Most Recent Balance Sheet, (ii) any
Security Interest for Taxes not yet due or being contested in good faith, or
(iii) any Security Interest which does not materially detract from the value or
materially interfere with the use of any asset as currently used in the Business
by the Target.
"Person" means an individual, corporation, partnership,
association, trust or other entity or organization, including a Governmental
Body or an agency or instrumentality thereof.
"Personal Property" means all tangible property other than
Real Property.
"Pre-Closing Tax Period" means any Tax period ending prior to
the Closing Date.
"Products" means that group of products which has been
designed, developed and/or produced, or which is presently sold or offered for
sale by, the Target.
"Prohibited Transaction" has the meaning set forth in ERISA
Sec. 406 and Code Sec. 4975.
"Reflex" means Reflex LLC, a New Mexico limited liability
company.
"Real Property" means all real estate, improvements, buildings
and fixtures owned or leased by the Target or its subsidiaries in connection
with the Business.
"Reportable Event" has the meaning set forth in ERISA Sec.
4043.
"Securities Act" means the Securities Act of 1933, as amended.
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"Security Interest" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien, other than (a) mechanic's,
materialmen's and similar liens, (b) liens for Taxes not yet due and payable (or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings), (c) liens arising under workers' compensation, unemployment
insurance, social security, retirement, and similar legislation, (d) liens
arising in connection with sales of foreign receivables, (e) liens on goods in
transit incurred pursuant to documentary letters of credit, (f) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(g) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"Shareholders" means Douglas E. Elerath and Betzi M. Hitz,
husband and wife, Samuel C. Rogers, Jr. and Beverly Anne Rogers, husband and
wife, and John W. Hodges, Jr.
"Shares" means all of the outstanding shares of the common
stock of the Target as owned by the Shareholders on the Effective Date and on
the Closing Date.
"Subsidiary" means any partnership, corporation or limited
liability company with respect to which another specified partnership,
corporation or limited liability company has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors or
managers. Reflex LLC, a New Mexico limited liability company, and NextWave
Photonics LLC, a Florida limited liability company, shall each be deemed a
Subsidiary of the Target in this Agreement. When the term "Subsidiaries" is used
in conjunction with the Target, it shall specifically include Reflex LLC and
NextWave Photonics LLC.
"Sub" means Willow Systems, Inc., a Delaware corporation.
"Target" means Willow Systems Limited, a New Mexico
corporation.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty or addition
thereto.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"UAR" means uncollected Acquired Accounts Receivable other
than those related to the Parent, Sagebrush Technology, Inc. or Laser Wireless,
Inc.
2. The Merger.
----------
(a) The Merger. At the Effective Time (as defined in Section
2(b) below), the Target shall be merged with and into the Sub in accordance with
the applicable provisions of Delaware and New Mexico law, and the separate
existence of the Target shall thereupon cease, and the Sub, as the Surviving
Corporation in the Merger (the "Surviving Corporation"), shall continue its
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corporate existence under the laws of the State of Delaware under its present
name. Upon the consummation of the Merger, the Surviving Corporation shall
thereupon and thereafter possess all the rights, privileges, powers, and
franchises as well of public as of a private nature, and being subject to all
the restrictions, disabilities and duties of each of the Constituent
Corporations, and all property, real, personal and mixed and all goodwill
associated therewith, and all debts due to either Constituent Corporation on
whatever account, as well as all other things belonging to or due to each of the
Constituent Corporations, shall be vested in the Surviving Corporation without
further act or deed. The Surviving Corporation shall thenceforth be responsible
and liable for all debts, liabilities, duties and obligations of each of the
Constituent Corporations, in accordance with applicable Delaware law.
(b) Effective Time of the Merger. On the Closing Date, the
Merger Agreement or a Certificate of Merger, if permitted, together with
required officers' certificates, shall be duly executed and filed with the New
Mexico Secretary of State in accordance with New Mexico law and the Delaware
Secretary of State in accordance with Delaware law. Subject to the laws of the
States of New Mexico and Delaware, the Merger shall become effective on the date
the Merger Agreement is filed with the Delaware Secretary of State or such later
time or date as may be specified in the Certificate of Merger (the "Effective
Time").
(c) The Surviving Corporation.
-------------------------
(i) Name. The Surviving Corporation shall be the
Sub, "Willow Systems, Inc."
(ii) Certificate of Incorporation. The Certificate
of Incorporation of the Sub in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation.
(iii) Bylaws. The Bylaws of the Sub in effect at
the Effective Time shall be the Bylaws of the Surviving Corporation.
(iv) Directors and Officers. The directors and
officers of the Sub as existing immediately prior to the Effective Time shall be
the directors and officers of the Surviving Corporation.
3. Conversion of Shares and Consideration Therefore.
------------------------------------------------
(a) Conversion of Target Shares. Pursuant to the Merger
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of the Shareholders, the Shares shall be converted into, and become
exchangeable for, Six Hundred Fifty Thousand (650,000) shares of Parent's
restricted common stock, par value $.001 (the "Parent Shares").
(b) Additional Consideration. In addition to the conversion of
the Shares into Parent Shares, the Sub shall pay to the Elerath Shareholders One
Million Seven Hundred Thousand Dollars ($1,700,000) (the "Additional
Consideration"), to be divided equally between the Elerath Shareholders. On the
-8-
Closing Date (as defined in Section 4), the Sub shall pay the Additional
Consideration as follows:
(i) Seven Hundred Fifty Thousand Dollars
($750,000) (the "Escrow Payment") shall be paid to the Escrow Agent to be held
and distributed as set forth in Section 5; and
(ii) Nine Hundred Fifty Thousand Dollars
($950,000) (the "Initial Payment") shall be paid to the Elerath Shareholders by
wire transfer of immediately available funds. The Initial Payment shall be paid
to the respective Elerath Shareholders in the following amounts:
Seller Initial Payment
------ ---------------
Douglas E. Elerath $ 475,000
Betzi M. Hitz 475,000
----------
TOTAL $ 950,000
The Parent Shares, Escrow Payment and Initial Payment shall
collectively be known as the "Merger Consideration".
(c) Delivery of Parent Shares. Parent The Sub shall deliver
the Parent Shares to the Shareholders at Closing in the form of certificates
evidencing ownership as follows:
Shareholders Parent Shares
------------ -------------
Douglas E. Elerath and Betzi M. Hitz, 500,000
Joint Tenants With Right of Survivorship
Samuel C. Rogers and Beverly Anne Rogers, 100,000
Joint Tenants with Right of Survivorship
John W. Hodges, Jr. 50,000
The Parent Shares will be "Restricted Securities," as defined by Rule 144 under
the Securities Act of 1933, will be restricted as to transferability, and will
bear substantially the following legend:
The Securities represented by this Certificate have not been
registered under the United States Securities Act of 1933 (the
"Act") and are "restricted securities" as that term is defined
in Rule 144 under the Act. The Securities may not be offered
for sale, sold or otherwise transferred except pursuant to an
effective registration statement under the Act, or pursuant to
an exemption from registration under the Act, the availability
of which is to be established to the satisfaction of the
Company.
-9-
(d) Delivery of Target Shares. At Closing, the Shareholders
shall deliver to the Parent all certificates of the Shares which shall be
cancelled and exchanged for the Merger Consideration. From and after the
Effective Time, the stock transfer books of the Target shall be closed and no
transfer of Shares shall thereafter be made.
(e) Taking of Necessary Action; Further Action. The Parent,
Sub, Target and Shareholders shall take all such action as may be necessary or
appropriate in order to effectuate the Merger as promptly as possible, subject
to all of the terms and conditions of this Agreement. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers,
franchises, and all goodwill associated therewith, of either of the Constituent
Corporations, the officers and directors of the Constituent Corporations are
fully authorized in the name of the Constituent Corporations or otherwise to
take, and shall take, all such action.
(f) Registration Rights. At the written request of the
Shareholders, the Parent shall register the Parent Shares. In any event, the
Parent agrees to file a registration statement covering the Parent Shares with
the Securities and Exchange Commission within six months of the Closing Date.
(g) Reflex and NextWave Interests. The Shareholders agree to
deliver to the Target, on or before the Closing Date, the following fully
executed documents related to Reflex and NextWave:
Document Subsidiary Agreement Exhibit
-------- ---------- -----------------
Elerath - Reflex LLC Purchase
Agreement Reflex K-1
Rogers - Reflex LLC Purchase Agreement Reflex K-2
Elerath - NextWave Photonics LLC
Purchase Agreement NextWave K-3
Hodges - NextWave Photonics LLC
Purchase Agreement NextWave K-4
4. The Closing.
-----------
(a) The Closing. The closing of the transaction contemplated
by this Agreement (the "Closing") will take place in Oklahoma City, Oklahoma,
commencing at 9:00 a.m. local time on the first Business Day following the
satisfaction or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated in this Agreement, or such other date,
time and place as the Parties may mutually determine (the "Closing Date");
provided however, that the Closing Date will be no later than December 31, 1999,
after which any Party may terminate this Agreement upon written notice to the
other Parties and without obligation to the other Parties.
-10-
(b) Deliveries at the Closing. At the Closing, (i) the
Shareholders shall deliver to the Parent the various certificates, instruments,
and documents referred to in Section 10(a), and (ii) the Parent will deliver to
the Shareholders the various certificates, instruments, and documents referred
to in Section 10(b).
5. Escrow Account.
--------------
(a) Deposit Into Escrow Account. On the Closing Date, the Sub
shall deposit the Escrow Payment (the Escrow Payment together with any proceeds
realized from the investment of the Escrow Payment are collectively referred to
as the "Escrow Amount") into an escrow account (the "Escrow Account") with
BancTrust, the Trust Division of BancFirst, Oklahoma City, Oklahoma (the "Escrow
Agent"), to be held and invested by the Escrow Agent pursuant to the terms and
conditions of the Escrow Agreement attached as Exhibit C to this Agreement and
distributed not later than one (1) year following the Closing Date (the "Escrow
Closing Date").
(b) Investment of Escrow Amount. The Escrow Agent shall invest
the Escrow Amount during the term of the Escrow Agreement in such short term
cash equivalent or money market obligations and/or investments as the Escrow
Agent, in its discretion, may deem appropriate. The Elerath Shareholders may, by
written notice to the Escrow Agent and to the Parent, designate a particular
cash equivalent or money market obligation and/or investment. If the Elerath
Shareholders do so, then the Escrow Agent is relieved of any responsibility for
the appropriateness of the investment of the Escrow Amount designated by the
Elerath Shareholders. All income derived from the investment of the Escrow
Amount shall accrue to the Escrow Account.
(c) Initial Distribution from Escrow Account. Within fifteen
(15) days after the six-month anniversary of the Closing Date, the Parent shall
provide the Elerath Shareholders and the Escrow Agent with (i) a list of all
Acquired Accounts Receivable which have not been collected (the "UAR" and the
"UAR List"), and (ii) a list of all claims asserted against the Parent and Sub
as of that date for which the Parent and Sub seek indemnification by the Elerath
Shareholders (the "Known Claim Amounts" and the "Known Claim Amounts List").
Following receipt of the UAR List and the Known Claims List, the Escrow Agent
shall distribute to the Parent or its designee an amount equal to the face
amount of all UARs as set forth on the UAR List.
(d) Final Distribution from Escrow Account. Not sooner than
fifteen (15) days before the Escrow Closing Date, the Parent shall provide the
Elerath Shareholders and the Escrow Agent with an updated UAR List and an
updated Known Claims List as of that date (the "Final UAR List" and the "Final
Known Claims List") and a list of any Claim Settlement Amounts to which the
Parent is entitled pursuant to Section 13. On the Escrow Closing Date, the
Escrow Agent shall distribute the Escrow Amount in the following amounts and
order of priority and close the Escrow Account:
(i) to the Escrow Agent in an amount equal to
one-half of any unpaid expenses and any unpaid portion of its fees as
set forth in the Escrow Agreement, the payment of which amount would
otherwise be the Elerath Shareholders' obligation;
-11-
(ii) to the Parent or its designee in an amount equal
to the face value of all UARs and all Known Claim Amounts as set forth
on the Final UAR List and the Final Known Claims List and all Claim
Settlement Amounts to which the Parent or Sub is entitled; and
(iii) to the Elerath Shareholders, share and share
alike, to the extent of any remaining balance in the Escrow Account.
(e) Dispute Resolution In the event the Elerath Shareholders
notify the Parent that they dispute a Known Claims Amount or a Claim Settlement
Amount proposed by the Parent, the Elerath Shareholders and the Parent shall use
their reasonable efforts to negotiate a prompt resolution of the dispute. Should
they be unable to resolve the dispute, they shall seek binding arbitration in
New Mexico. The arbitration will be conducted pursuant to the Commercial
Arbitration Rules of the American Arbitration Association, but will not be
administered by the American Arbitration Association. The arbitrator will be
chosen as follows: following receipt of the demand, each party will appoint an
arbitrator within seven days. The appointed arbitrator(s) will, within seven
days of the date of his/her/their appointment, appoint a neutral arbitrator who
will hear the case. The parties may communicate with the neutral arbitrator in
writing with a copy of the communication provided to the other party. The fee
and expenses of each appointed arbitrator shall be paid by the party appointing
the arbitrator and the fee and expenses of the neutral arbitrator shall be paid
one-half by each party.
(f) Assignment of Reimbursed UAR. Within ten (10) days of its
receipt from the Escrow Agent of reimbursement for an UAR, the Parent shall
assign the UAR to the Elerath Shareholders.
(g) Reimbursement of Elerath Shareholders. If the Parent is
reimbursed for a Known Claim Amount or a Settlement Claim Amount out of the
Escrow Account and the Know Claim Amount or the Settlement Claim Amount is
subsequently reduced, the Parent shall, within thirty (30) days of the
reduction, reimburse the Elerath Shareholders in an amount equal to the
reduction of the Known Claim Amount or the Settlement Claim Amount.
6. Representations and Warranties Concerning the
-----------------------------------------------------
Transaction.
- -----------
(a) Representations and Warranties of the Shareholders. Each
Shareholder severally represents and warrants to the Parent and Sub that the
statements contained in this Section 6(a) are true, correct and complete as of
the Effective Date and will be true, correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
Effective Date throughout this Section 6(a)), except to the extent that those
representations and warranties are expressly made as of another specified date,
and as to those representations and warranties, the same will be true, correct
and complete as of such date and except as set forth in Disclosure Schedule 6(a)
attached to this Agreement.
(i) Authorization of Transaction. The Shareholder has
full power and authority to execute and deliver this Agreement and to
perform his or her obligations under this Agreement. This Agreement has
been duly executed and delivered by the Shareholder. This Agreement
constitutes the valid and legally binding obligation of the
Shareholder, enforceable in accordance with its terms and conditions,
-12-
except that (A) such enforceability may be subject to bankruptcy,
insolvency, reorganization, moratorium or other laws, decisions or
equitable principles now or hereafter in effect relating to or
affecting the enforcement of creditors' rights or debtors' obligations
generally, and to general equity principles, and (B) the remedy of
specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefore may be brought (the terms of
clause (A) and (B) are sometimes collectively referred to as the
"Equitable Exceptions"). Except for filings required by the HSR Act, if
so required, the Shareholder need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
Governmental Body in order to consummate the transactions contemplated
by this Agreement.
(ii) Noncontravention. Except for approvals required
under the HSR Act, if any, neither the execution and the delivery of
this Agreement by the Shareholder, nor the consummation of the
transactions contemplated by this Agreement by the Shareholder, will
(A) violate any Law or Order or other restriction of any Governmental
Body to which the Shareholder is subject, or (B) conflict with, result
in a breach of, constitute a default under, result in the acceleration
of, create in any part the right to accelerate, terminate, modify, or
cancel, or require any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which any Shareholder is a party or
by which he or she is bound or to which any of his or her assets is
subject.
(iii) Broker's Fees. The Shareholder has no Liability
or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which the Parent or Sub could become liable or obligated.
(iv) The Shares. The Shareholder holds of record and
owns beneficially all of his or her Shares, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act of 1933 (the "Securities Act") and state securities
laws), claims, Taxes, Security Interests (other than those to be
removed at Closing), options, warrants, rights, contracts, calls,
commitments, equities, and demands. The Shareholder is not a party to
any option, warrant, right, contract, call, put, or other agreement or
commitment providing for the disposition by the Shareholders of any
capital stock of the Target (other than this Agreement, including any
Exhibits to this Agreement). The Shareholder is not a party to any
voting trust, proxy, or other agreement or understanding with respect
to the voting of any capital stock of the Target.
(v) Suitability. The Shareholder is either (a) an
Accredited Investor, as that term is defined in Regulation D as
promulgated by the Securities and Exchange Commission, in that he or
she is a natural person (i) whose individual net worth, or joint net
worth with that person's spouse, at the time of purchase, exceeds
$1,000,000, or (ii) who had an individual income in excess of $200,000
in each of the two most recent years or joint income with that person's
-13-
spouse in excess of $300,000 in each of those years, and who reasonably
expects to reach the same income level in the current year, or (b)
either directly or through his or her professional tax and other
advisors, has such knowledge and experience in financial and business
matters that he or she is capable of evaluating the merits and risks
relating to the acquisition of the Parent Shares and making an informed
purchase and investment decision.
(vi) Absence of Registration. The Shareholder
understands that the Parent Shares have not been registered under the
Securities Act or any state securities laws, and are being offered and
sold under exemptions from the registration provisions of the
Securities Act, and applicable state securities laws, and that such
exemptions may depend upon, among other things, the bona fide nature of
the respective Seller's investment intent as expressed in this
Agreement.
(vii) Restrictions on Transferability. The
Shareholder acknowledges that the Parent Shares may not be offered or
sold and must be held indefinitely unless subsequently registered under
the Securities Act and applicable state securities laws or unless any
proposed transaction involving any of the Parent Shares qualifies for
exemption from registration under the Securities Act and applicable
state securities law, and that no such exemption may be available at
any particular time. Each of the Shareholders further acknowledges that
the Parent Shares are and will be subject to the legend set forth in
Section 3(c) as they are "restricted securities" under Rule 144 as
promulgated by the SEC under the Securities Act.
(viii) Access to Information. The Shareholder has had
an opportunity to discuss, and has discussed to his or her
satisfaction, the Parent's business, management and financial affairs
with the Parent and others involved in the management of the Parent.
The Shareholder has had the opportunity to ask questions and receive
answers, and has asked questions and received answers to his or her
satisfaction, concerning the terms and conditions of this transaction,
and has had the opportunity to obtain, and has obtained, to his or her
satisfaction, any additional information which the Parent possesses or
could acquire without unreasonable effort or expenses. The Shareholder
has had the opportunity to review, and has reviewed to his or her
satisfaction, the Parent's facilities and books and records as
necessary to evaluate the Parent Shares and the business of the Parent.
The Shareholder acknowledges that the Parent has not made any
representations regarding the Parent Shares or the business of the
Parent or the management or financial affairs of the Parent except to
the extent set forth in this Agreement and the Exhibits to this
Agreement, and any other writing delivered pursuant to this Agreement
or at Closing. The Shareholder acknowledges the risks inherent in the
quality, character and underlying business of the Parent. At Closing,
the Shareholder will assume the risk of full or partial loss of his or
her investment.
(ix) Investment. The Shareholder is acquiring the
Parent Shares for investment purpose only and not with a view to or for
sale in connection with any distribution of them within the meaning of
the Securities Act. Furthermore, the Shareholder acknowledges that
neither the Securities and Exchange Commission nor any state securities
commission has passed upon the merits of an investment in the Parent
Shares and that any representation to the contrary is a criminal
offense.
-14-
(x) Liability. The Shareholder represents that as of
the Closing Date the Target and its Subsidiaries have no Liability
whatsoever to the Shareholder and the Shareholder has no claims or
causes of action whatsoever against the Target and its Subsidiaries.
(xi) Reflex and NextWave Interests. The Target holds
of record and owns beneficially all of Reflex and all of NextWave free
and clear of any restrictions on transfer (other than any restrictions
under the Securities Act and state securities laws), claims, Taxes,
Security Interests (other than those to be removed at Closing),
options, warrants, rights, contracts, calls, commitments, equities, and
demands.
(b) Representations and Warranties of the Parent. The Parent
represents and warrants to the Shareholders that the statements contained in
this Section 6(b) are true, correct and complete as of the Effective Date and
will be true, correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the Effective Date
throughout this Section 6(b)), except to the extent that those representations
and warranties are expressly made as of another specified date, and as to those
representations and warranties, the same will be true, correct and complete as
of such date and except as set forth in the Disclosure Schedule 6(b) attached to
this Agreement.
(i) Organization and Qualification. The Parent is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada. It has full power and authority
to carry on its business as it is now being conducted and to own and
operate its assets and business.
The Sub is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware.
It has full power and authority to carry on its business as it is now
being conducted and to own and operate its assets and business. If
required by law, the Sub will be duly licensed or qualified to transact
business as a foreign corporation in New Mexico.
(ii) Capitalization. The Parent has authorized
capital stock consisting of 100,000,000 shares of common stock, $0.001
par value, of which approximately 25,000,000 shares have been issued
and are outstanding as of the Effective Date, and 1,000,000 shares of
preferred stock, $0.001 par value, none of which have been issued and
are outstanding as of the Effective Date. The outstanding shares have
been validly issued and are fully paid and nonassessable. No
subscriptions, options, warrants, calls, commitments or agreements
(including, without limitation, voting trust agreements or any other
agreement relating to the voting of shares or restricting in any manner
the sale or transfer of shares) relating to the authorized or issued
shares of the Parent are outstanding.
The Sub has authorized capital stock consisting of
5,000 shares of common stock, $.01 par value, of which 5,000 shares
have been issued and are outstanding as of the Effective Date, all of
which are owned by the Parent. The outstanding shares have been validly
issued and are fully paid and nonassessable. No subscriptions, options,
warrants, calls, commitments or agreements (including, without
-15-
limitation, voting trust agreements or any other agreement relating to
the voting of shares or restricting in any manner the sale or transfer
of shares) relating to the authorized or issued shares of the Sub are
outstanding.
(iii) Authorization of Transaction. The Parent and
the Sub have full power and authority (including full corporate power
and authority) to execute and deliver this Agreement and to perform
their obligations under this Agreement and this Agreement has been duly
executed and delivered by the Parent and Sub. This Agreement
constitutes the valid and legally binding obligation of the Parent and
the Sub, enforceable in accordance with its terms and conditions except
for the Equitable Exceptions. Except for filings made under the HSR
Act, if so required, the Parent and the Sub need not give any notice
to, make any filing with, or obtain any authorization, consent, or
approval of any Governmental Body in order to consummate the
transactions contemplated by this Agreement.
(iv) Noncontravention. Except for approvals required
under the HSR Act, if so required, and as set forth in Disclosure
Schedule 6(b)(iv) attached to this Agreement, neither the execution and
the delivery of this Agreement by the Parent and the Sub, nor the
consummation of the transactions contemplated by this Agreement by the
Parent and the Sub, will (A) violate any Law or Order or other
restriction of any Governmental Body to which the Parent or the Sub are
subject or any provision of its charter or bylaws, or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness,
Security Interest, or other arrangement to which the Parent or the Sub
is a party or by which it is bound or to which any of its assets is
subject and which has a Material Adverse Effect on the Parent or the
Sub.
(v) Default. Neither the Parent nor the Sub has
defaulted under any agreement to which it is a party or by which it is
bound, which would have a Material Adverse Effect on the Parent or the
Sub.
(vi) Litigation. Neither the Parent nor Sub is a
party to any litigation, pending or threatened. Other than as set forth
in Disclosure Schedule 6(b)(vi) related to Jolt Ltd. and AirOptics,
Inc., no material claim has been made, asserted or threatened against
the Parent or the Sub. There are no proceedings involving the Parent or
the Sub pending before any federal, state or municipal government, or
any department, board, body or agency, nor have any been threatened.
(vii) Suitability. The Parent is an Accredited
Investor as that term is defined in Regulation D. Through its directors
and officers, the Parent has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and
risks relating to the acquisition of the Shares and making an informed
investment decision.
-16-
(viii) Absence of Registration. The Parent
understands that the Shares have not been registered under the
Securities Act, or any state securities laws, and are being offered and
sold under exemptions from the registration provisions of the
Securities Act, and applicable state securities laws, and that such
exemptions may depend upon, among other things, the bona fide nature of
the Parent's investment intent as expressed in this Agreement.
(ix) Restrictions on Transferability. The Parent
acknowledges that the Shares may not be offered or sold and must be
held indefinitely unless subsequently registered under the Securities
Act and applicable state securities laws or unless any proposed
transaction involving any of the Shares qualifies for exemption from
registration under the Securities Act and applicable state securities
law, and that no such exemption may be available at any particular
time. The Parent further acknowledges that the Shares are "restricted
securities" under Rule 144 promulgated by the SEC under the Securities
Act.
(x) Access to Information. The Parent has had an
opportunity to discuss, and has discussed to its satisfaction, the
Target, the Business and the Target's management and financial affairs
with the Shareholders and others involved in the management of the
Target. The Parent has had the opportunity to ask questions and receive
answers, and has asked questions and received answers to its
satisfaction, concerning the terms and conditions of this transaction,
and has had the opportunity to obtain, and has obtained, to its
satisfaction, any additional information which the Target or the
Shareholders possess or could acquire without unreasonable effort or
expenses. The Parent has had the opportunity to review, and has
reviewed to its satisfaction, the Target's facilities and books and
records as necessary to evaluate the Shares and the business of the
Target. The Parent acknowledges that neither the Target nor any of the
Shareholders has made any representations regarding the Shares or the
Business, management or financial affairs of the Target except to the
extent set forth in this Agreement and the Exhibits to this Agreement,
and any other writing delivered pursuant to this Agreement or at
Closing. The Parent acknowledges the risks inherent in the quality,
character and underlying business of the Target. At Closing, the Parent
will assume the risk of full or partial loss of its investment.
(xi) Brokers' Fees. Neither the Parent nor the Sub
has any Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated
by this Agreement for which the Shareholders could become liable or
obligated.
(xii) Investment. The Parent is acquiring the Shares
for its own account for investment only and not with a view toward any
public sale or distribution of the Shares or any portion of the Shares.
(xiii) Financing. The Sub has, or will have prior to
Closing, sufficient funds and/or commitments for all financing
necessary to pay the cash portion of the Merger Consideration to the
Elerath Shareholders and the Escrow Agent which commitments are, or
will be, in full force and effect.
-17-
(xiv) Employee Benefit Program. The Parent represents
and warrants that (A) the Employee Benefit Program that will be
established for the Surviving Corporation will be equal to or greater
than the one in place for the Target as of the Effective Date, (B) the
Target's Safe Harbor 401(k) Pension Plan will be retained, the medical
benefits currently provided by the Target to its employees will not be
reduced, (C) the combination of pay and time off benefits currently
provided by the Target to its employees will not be reduced, and (D)
any changes in any employee benefit plan made during the first year
after the Closing Date will be assessed by and outside third party to
assure parity.
(xv) SkyCam. The Target's ongoing contracted work for
SkyCam Systems, Inc. d/b/a CineFlex, will continue.
(xvi) Creativity Incentive Plan. The Surviving
Corporation will establish an employee Creativity Incentive Plan
("CIP") to encourage invention and creativity by its employees. The CIP
will be innovative and go beyond the customary industry norms in
providing rewards to employees for invention and creativity. The CIP
will be established within six months of the Closing Date. It shall be
established by a committee with representatives from the employees,
management, the directors and one representative of an outside
consulting firm that meets with the approval of the employees,
management and the directors on the CIP committee.
(xvii) Directors and Officers Liability Insurance.
The Surviving Corporation will obtain standard directors and officers
liability insurance.
7. Representations and Warranties Concerning the Target and
----------------------------------------------------------
Subsidiaries. The Elerath Shareholders, jointly and severally, represent and
- ------------
warrant to the Parent and the Sub that the statements contained in this Section
7 are true, correct and complete as of the Effective Date and will be true,
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the Effective Date throughout this Section
7), except to the extent that those representations and warranties are expressly
made as of another specified date, and as to those representations and
warranties, the same shall be true, correct and complete as of such date and
except as set forth in a Disclosure Schedule to this Section 7.
(a) Organization and Qualification. The Target is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of New Mexico. It is duly authorized to conduct business and
is in good standing under the laws of the State of New Mexico and each other
jurisdiction in which the nature of its businesses or the ownership or leasing
of its properties requires such qualification. Reflex is duly organized, validly
existing and in good standing under the laws of New Mexico. NextWave is duly
organized, validly existing, and in good standing under the laws of Florida. The
Target, Reflex and NextWave each has full power and authority to carry on its
business as it is now being conducted and to own and operate its assets and
business.
(b) Capitalization. The entire authorized capital stock of the
Target consists solely of one hundred thousand (100,000) shares of no par value
common stock, of which two hundred (200) shares are issued and outstanding and
-18-
owned by the Elerath Shareholders (100 shares each), 31.169 shares are held by
Samuel C. and Beverly Anne Rogers, and 15.584 shares are held by John W. Hodges,
Jr. The Target has no preferred shares authorized. None of the Shares are held
in treasury. The Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record by the Shareholders. There are
no outstanding or authorized options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights, or other agreements or commitments to
which the Target is a party or which are binding upon the Target providing for
the issuance, disposition, or acquisition of any of its capital stock. There are
no outstanding or authorized stock appreciation or similar rights with respect
to the Shares.
(c) Notice of Transaction. Except for filings made under the
HSR Act, if so required, the Target and its Subsidiaries need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of, any Governmental Body in order to consummate the transactions
contemplated by this Agreement.
(d) Noncontravention. Except for approvals required under the
HSR Act, if required, and as set forth on Disclosure Schedule 7(d), the
consummation of the transactions contemplated by this Agreement will not (i)
violate any Law or Order or other restriction of any Governmental Body to which
the Target and its Subsidiaries are subject or any provision of their charter or
bylaws, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which the Target and its Subsidiaries are a
party or by which they are bound or to which any of their assets is subject (or
result in the imposition of any Security Interest upon any of its assets) and
which has a Material Adverse Effect on the Target and its Subsidiaries.
(e) Subsidiaries. The Target has no Subsidiaries other than
Reflex and NextWave and does not control, directly or indirectly, or have any
direct or indirect equity participation in any other Person.
(f) Financial Statements. Attached hereto as Exhibit D are the
following financial statements (collectively the "Financial Statements"): (i)
unaudited balance sheet and statement of income, changes in stockholders'
equity, and cash flow as of and for the fiscal year ended December 31, 1998 (the
"Most Recent Fiscal Year End") for the Target, and (ii) an unaudited balance
sheet and statement of income, changes in stockholders' equity, and cash flow as
of and for the stub period ending September 30, 1999 for the Target and its
Subsidiaries (the "Most Recent Financial Statement"). The Financial Statements
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby, are true and complete in all material
respects, fairly present the financial condition of the Target and its
Subsidiaries as of such dates, and are consistent with the books and records of
the Target and its Subsidiaries (which books and records are true, correct and
complete in all material respects).
(g) Events Subsequent to the Most Recent Financial Statement.
Except as set forth on Disclosure Schedule 7(g), since September 30, 1999, there
has not been any Material adverse change in the assets, Liabilities, Business,
financial condition, operations, or results of operations of the Target and its
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Subsidiaries. Without limiting the generality of the foregoing since that date:
(i) the Target and its Subsidiaries have not sold,
leased, transferred, or assigned any of their assets, tangible or
intangible, other than for a fair consideration in the Ordinary Course
of Business;
(ii) the Target and its Subsidiaries have not entered
into any contract, lease, sublease, license or sublicense (or series or
related contracts, leases, subleases, licenses and sublicenses) either
involving more than $5,000 or outside the Ordinary Course of Business;
(iii) the Target and its Subsidiaries have not
accelerated, terminated, modified, or canceled any contract, lease,
sublease, license or sublicense (or series of related contracts,
leases, subleases, licenses and sublicenses) involving more than $5,000
to which the Target and/or its Subsidiaries are a party or by which
they are bound;
(iv) no party has notified the Target or its
Subsidiaries of any acceleration, termination, modification or
cancellation of any Material customer contract or any contract,
agreement, lease, sublease, license or sublicense (or series of related
contracts, leases, subleases, licenses and sublicenses), involving more
than $5,000 to which the Target or its Subsidiaries is a party or by
which it is bound;
(v) the Target and its Subsidiaries have not made any
capital expenditure (or series of related capital expenditures) either
involving more than $5,000 individually or $15,000 in the aggregate, or
outside the Ordinary Course of Business;
(vi) the Target and its Subsidiaries have not made
any capital investment in, any loan to, or any acquisition of the
securities or assets of any other person (or series of related capital
investments, loans, and acquisitions) either involving more than $5,000
individually or $15,000 in the aggregate;
(vii) the Target and its Subsidiaries have not
delayed or postponed (beyond their normal practice) the payment of
accounts payable and other Liabilities;
(viii) there has been no change made or authorized to
the Articles of Incorporation or Bylaws of the Target or the
organizational and operating documents of its Subsidiaries.
(ix) the Target and its Subsidiaries have not
experienced any damage, destruction or loss involving more than $5,000
(whether or not covered by insurance) to their property;
(x) the Target and its Subsidiaries have not made any
loan to, or entered into any other transaction with, any of its
directors, officers, and employees outside the Ordinary Course of
Business or involving more than $5,000, giving rise to any claim or
right on its part against the person or on the part of the person
against them;
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(xi) the Target and its Subsidiaries have not entered
into any employment contract or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or
agreement with any of their full-time staff employees;
(xii) the Target and its Subsidiaries have not
granted an increase in the base compensation of any of their directors,
officers, and employees outside the Ordinary Course of Business;
(xiii) the Target and its Subsidiaries have not
adopted any (A) bonus, (B) profit-sharing, (C) incentive compensation,
(D) pension, (E) retirement, (F) medical, hospitalization, life, or
other insurance, (G) severance, or (H) other plan, contract or
commitment for any of their directors, officers, and employees, or
modified or terminated any existing such plan, contract or commitment;
and
(xiv) the Target and its Subsidiaries have not
committed to do any of the foregoing.
(h) Undisclosed Liabilities. Except as set forth in Disclosure
Schedule 7(h), the Target and its Subsidiaries do not have any Liability to the
Knowledge of the Elerath Shareholders which is individually in excess of $5,000,
or in excess of $25,000 in the aggregate, except for (i) Liabilities set forth
on the face of the Most Recent Financial Statement, and (ii) Liabilities which
have arisen after the Most Recent Financial Statement in the Ordinary Course of
Business.
(i) Tax Matters. Except as set forth on Disclosure
Schedule 7(i):
(i) the Target and its Subsidiaries have filed all
Tax Returns that they were required to file. All such Tax Returns are
true and complete in all material respects. All Taxes owed by the
Target and its Subsidiaries (whether or not shown on any Tax Return)
have been paid. The Target and its Subsidiaries are not the beneficiary
of any extension of time within which to file any Tax Return. To the
Knowledge of the Elerath Shareholders, no claim is currently pending by
any authority in any jurisdiction where the Target and its Subsidiaries
do not file Tax Returns that they are or may be subject to taxation by
that jurisdiction. There are no Security Interests on any of the assets
of the Target and its Subsidiaries that arose in connection with any
failure (or alleged failure) to pay any Tax;
(ii) the Target and its Subsidiaries have not
received any notice that any authority intends to assess any additional
Taxes for any period for which Tax Returns have been filed. There is no
dispute or claim concerning any Tax Liability of the Target and its
Subsidiaries either (A) claimed or raised by any authority in writing,
or (B) as to which the Elerath Shareholders have Knowledge based upon
personal contact with any agent of such authority. Disclosure Schedule
7(i) lists all federal, state and local income Tax Returns filed with
respect to the Target and its Subsidiaries for taxable periods ended on
or after December 31, 1994 that currently are the subject of an audit;
and
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(iii) The Target and its Subsidiaries have not filed
a consent under Code Sec. 341(f) concerning collapsible corporations.
The Target and its Subsidiaries have not made any payments, are not
obligated to make any payments, and are not a party to any agreement
that under certain circumstances could obligate any of them to make any
payments that will not be deductible to the Target and its Subsidiaries
under Code Sec. 280G. The Target and its Subsidiaries have not been a
United States real property holding corporation within the meaning of
Code Sec. 897(c)(2) during the applicable period specified in Code Sec.
897(c)(1)(A)(ii). The Target and its Subsidiaries have disclosed on
their federal income Tax Returns all positions taken therein that could
give rise to a substantial understatement of federal income Tax within
the meaning of Code Sec. 6662. The Target and its Subsidiaries are not
a party to any Tax allocation or sharing agreement. The Target and its
Subsidiaries have not consented to the extension of the statute of
limitations relating to any tax year.
(j) Tangible Assets. The Target and its Subsidiaries own or
lease all tangible assets necessary for the conduct of their businesses as
presently conducted. To the Knowledge of the Elerath Shareholders, each such
tangible asset is free from Material defects (patent and latent), has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), and is suitable for the
purposes for which it presently is used.
(k) Real Property. Disclosure Schedule 7(k) sets forth all
real estate, improvements, buildings and fixtures owned or leased by the Target
and/or its Subsidiaries (the "Real Property"). Subject to the Permitted Liens
and any Security Interests disclosed on Disclosure Schedule 7(k), the Target has
good title to, or, in the case of leased Real Property, has a valid leasehold
interest in, the Real Property. All leases of Real Property are valid, binding
and enforceable in accordance with their respective terms. The Target and its
Subsidiaries are not in Material default under any such leases, and to the
Knowledge of the Elerath Shareholders, there does not exist under any such lease
any Material default of any other party or any event which with notice or lapse
of time or both would constitute a Material default. To the Knowledge of the
Elerath Shareholders, the Real Property is in good operating condition and
repair, normal wear and tear excepted, is in compliance with all applicable code
requirements, and is free from any defects that have, or reasonably could have,
a Material Adverse Effect. Except as set forth on Disclosure Schedule 7(k), to
the Knowledge of the Elerath Shareholders there are no existing structural
defects in any of the Real Property.
(l) Personal Property. Disclosure Schedule 7(l) sets forth all
tangible property, other than Real Property, owned or leased by the Target
and/or its Subsidiaries (the "Personal Property") whose fair market value
exceeds $250. Subject to the Permitted Liens and any Security Interests
disclosed on Disclosure Schedule 7(l), the Target and its Subsidiaries have good
title to, or in the case of leased Personal Property has a valid leasehold
interest in, the Personal Property. All leases of Personal Property are valid,
binding and enforceable in accordance with their respective terms. The Target
and its Subsidiaries are not in Material default under any such leases, and to
the Knowledge of the Elerath Shareholders, there does not exist under any such
lease any Material default of any other party or any event which with notice or
-22-
lapse of time or both would constitute a Material default. To the Knowledge of
the Elerath Shareholders, the Personal Property is in good operating condition
and repair, normal wear and tear excepted, and is free from any defects that
have, or reasonably could have, a Material Adverse Effect. Except as set forth
on Disclosure Schedule 7(l), to the Knowledge of the Elerath Shareholders there
are no existing defects in any of the Personal Property.
(m) Intellectual Property.
---------------------
(i) Except as set forth on Disclosure Schedule 7(m),
the Target and its Subsidiaries own or have the right to use pursuant
to license, sublicense, agreement, or permission all Intellectual
Property and all goodwill associated therewith necessary for the
operation of the Business as presently conducted. Each item of
Intellectual Property owned or used by the Target and its Subsidiaries
immediately prior to the Closing will be owned or available for use by
the Target and its Subsidiaries on identical terms and conditions
immediately subsequent to the Closing.
(ii) To the Knowledge of the Elerath Shareholders,
the Target and its Subsidiaries have not interfered with, infringed
upon, misappropriated, or otherwise come into conflict with, any
Intellectual Property rights of third parties; and the Target and its
Subsidiaries have not received within the past three (3) years any
charge, complaint, claim, or notice alleging any such interference,
infringement, misappropriation, or violation.
(iii) Disclosure Schedule 7(m) identifies each patent
or trademark, tradename or copyright registration, and website which
has been issued to the Elerath Shareholders and the Target and/or its
Subsidiaries with respect to any of their Intellectual Property,
identifies each pending patent application or application for
trademark, tradename, copyright registration or website which the
Elerath Shareholders and the Target and/or its Subsidiaries have made
with respect to any of their Intellectual Property, and identifies each
license, agreement, or other permission which the Elerath Shareholders
and the Target and/or its Subsidiaries have granted to any third party
with respect to any of their Intellectual Property (together with any
exceptions). Except as identified in Disclosure Schedule 7(m), with
respect to each item of Intellectual Property that the Elerath
Shareholders and the Target and/or its Subsidiaries own:
(A) the identified owner possesses all
right, title, and interest in and to the item;
(B) the item is not subject to any
outstanding Order; and
(C) no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand is
pending or, to the Knowledge of the Elerath Shareholders, is
threatened, which challenges the legality, validity,
enforceability, use, or ownership of the item.
(iv) Disclosure Schedule 7(m) also identifies each
item of Intellectual Property that any third party owns and that the
Target and/or its Subsidiaries use pursuant to license, sublicense,
agreement, or permission (other than general commercial software).
Except as identified in Disclosure Schedule 7(m), with respect to each
such item of used Intellectual Property:
-23-
(A) to the Knowledge of Elerath
Shareholders, the license, sublicense, or permission covering
the item is legal, valid, binding, and in full force and
effect, subject to the Equitable Exceptions;
(B) to the Knowledge of Elerath
Shareholders, the license, sublicense, agreement, or
permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
following the Closing;
(C) the Target and/or its Subsidiaries are
not, and to the Knowledge of the Elerath Shareholders no other
party to the license, sublicense, agreement, or permission is,
in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default
or permit termination, modification, or acceleration
thereunder; and
(D) to the Knowledge of the Elerath
Shareholders, no charge, complaint, action, suit, proceedings,
hearing, investigation, claim or demand is pending or is
threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual
Property.
(n) Product Liability/Warranties. Except as disclosed on
Disclosure Schedule 7(n), there is no outstanding claim or action against the
Target and/or its Subsidiaries and, to the Knowledge of the Elerath
Shareholders, no threatened claim, action or investigation against the Target
and/or its Subsidiaries, for product liability or for breach of warranty of
fitness to any customer of the Business which individually or in the aggregate
could have a Material Adverse Effect.
(o) Contracts. Disclosure Schedule 7(o) lists the following
contracts, agreements, leases, customer contracts or agreements and other
written arrangements to which the Target and/or its Subsidiaries is a party:
(i) any written arrangement (or group of related
written arrangements) for the lease of Personal Property, Real Property
or Intellectual Property;
(ii) any written arrangement (or group of related
written arrangements) for the purchase or sale of Products, raw
materials, commodities, supplies, or other personal property or for the
furnishing or receipt of services;
(iii) any written arrangement concerning a partnership
or joint venture;
(iv)any written arrangement requiring confidentiality
or non-competition;
(v) any written arrangement involving the
Shareholders and their Affiliates related to the Target and/or its
Subsidiaries; and
(vi) any other written arrangement (or group of
related written arrangements) involving the Target and/or its
Subsidiaries.
-24-
The Elerath Shareholders have delivered to the Parent a
correct and complete copy of each written arrangement (as amended to date)
listed in Disclosure Schedule 7(o). With respect to each written arrangement so
listed: (A) the written arrangement is legal, valid, binding, enforceable, and
in full force and effect, subject to the Equitable Exceptions; (B) to the
Knowledge of the Elerath Shareholders, the written arrangement will continue to
be legal, valid, binding, enforceable and in full force and effect, subject to
Equitable Exceptions, on identical terms following the Closing; (C) the Target
and/or its Subsidiaries are not, nor to the Knowledge of the Elerath
Shareholders, is any other party in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration, under the written
arrangement; and (D) the Target and/or its Subsidiaries have not, nor to the
Knowledge of the Elerath Shareholders, has any other party, repudiated any
provision of any of the written arrangements.
(p) Insurance. Disclosure Schedule 7(p) sets forth an accurate
and complete list of all policies of fire, liability, key man life insurance,
worker's compensation, products liability and other forms of insurance owned or
held by or beneficially for the Target and/or its Subsidiaries. All such
policies are in full force and effect, no premiums with respect to them are past
due and no notice of cancellation or termination has been received by the
Elerath Shareholders or the Target and/or its Subsidiaries with respect to any
of them.
(q) Litigation. Disclosure Schedule 7(q) sets forth each
instance in which the Target and/or its Subsidiaries (i) is subject to any
unsatisfied judgment, order, decree, stipulation, injunction, or charge, or (ii)
is a party or, to the Knowledge of the Elerath Shareholders, is threatened to be
made a party to any charge, complaint, action, suit, proceeding, hearing, or
investigation of or in any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any arbitrator.
(r) Employees. Disclosure Schedule 7(r) lists all of the
Employees of the Target and its Subsidiaries. To the Knowledge of the Elerath
Shareholders, no key employee or full-time group of employees has any plans to
terminate employment with the Target or its Subsidiaries. Except as set forth on
Disclosure Schedule 7(r), the Target and its Subsidiaries are not a party to or
bound by any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. To the Knowledge of the Shareholders, the Target and its
Subsidiaries have not committed any unfair labor practice.
(s) Employee Benefits. Disclosure Schedule 7(s) lists all
Employee Benefit Plans that the Target and its Subsidiaries maintain or to which
the Target contributes for the benefit of any current or former employee of the
Target:
(i) each Employee Benefit Plan (and each related
trust or insurance contract) substantially complies in form and in
operation with the applicable requirements of ERISA and the Code;
(ii) to the Knowledge of the Elerath Shareholders,
all contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to each
Employee Pension Benefit Plan and all contributions for any period
ending on or before the Closing Date which are not yet due have been
-25-
paid to each Employee Pension Benefit Plan or accrued in accordance
with the past custom and practice of the Target and its Subsidiaries.
All premiums or other payments which are due for all periods ending on
or before the Closing Date have been paid with respect to each Employee
Pension Benefit Plan;
(iii) each Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan" under
Code Sec. 401(a);
(iv) no Employee Pension Benefit Plan (other than any
Multi-employer Plan) has been completely or partially terminated or
been the subject of a Reportable Event as to which notices would be
required to be filed with the Pension Benefit Guaranty Corporation
("PBGC"). To the Knowledge of the Elerath Shareholders, no proceeding
by the PBGC to terminate any Employee Pension Benefit Plan (other than
any Multi-employer Plan) has been instituted or threatened;
(v) there have been no Prohibited Transactions with
respect to any Employee Benefit Plan. No Fiduciary has any Liability
for breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any
Employee Benefit Plans. To the Knowledge of the Elerath Shareholders,
no charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand with respect to the administration or the investment
of the assets of any Employee Benefit Plan (other than routine claims
for benefits) is pending or threatened. The Elerath Shareholders have
no Knowledge of any Basis for any such charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand; and
(vi) the Target and its Subsidiaries have not
incurred, and the Elerath Shareholders have no reason to expect that
the Target and its Subsidiaries will incur, any Liability to the PBGC
(other than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with respect to
any Employee Pension Benefit Plan that the Target and its Subsidiaries
and the Controlled Group of Corporations which includes the Target and
its Subsidiaries maintain or ever has maintained or to which any of
them contributes, ever has contributed, or ever has been required to
contribute. The Target and its Subsidiaries do not maintain, nor have
they ever maintained or contributed to, or ever has been required to
contribute to any Employee Welfare Benefit Plan providing health,
accident, or life insurance benefits to former employees, their
spouses, or their dependents (other than in accordance with Code Sec.
162(k)).
(t) Health and Safety Matters. Except as set forth on
Disclosure Schedule 7(t), to the Knowledge of the Elerath Shareholders:
(i) the Target and its Subsidiaries are in
substantial compliance with all Laws concerning public health and
safety, and employee health and safety, and no charge, complaint,
action, suit, proceeding, hearing, investigation, claim, demand, or
notice has been filed or commenced against any of them alleging any
failure to comply with any such Laws; and
-26-
(ii) the Target and its Subsidiaries have no Material
Liability under the Occupational Safety and Health Act, as amended, or
any other Law concerning employee health and safety.
(u) Environmental Matters. Except as set forth on Disclosure
Schedule 7(u), to the Knowledge of the Elerath Shareholders:
(i) Hazardous Materials. The current and former
owners and tenants, occupants, and users of the Real Property and any
other persons or concerns, have not: (i) engaged in or permitted any
operations or activities upon, or any use or occupancy of, the Real
Property, or any portion of the Real Property, for the purpose of, or
in any way involving, the handling, manufacture, treatment, storage,
use, generation, release, discharge, refining, dumping, or disposal of
any Hazardous Materials (whether legal or illegal, accidental or
intentional) on, under, in, or about, the Real Property, or (ii)
unlawfully transported any Hazardous Materials to, from, or across, the
Real Property. No Hazardous Materials are constructed, deposited,
stored, or otherwise located on, under, in, or about, the Real
Property, and, to the Knowledge of the Elerath Shareholders, no
Hazardous Materials have migrated, or are likely to migrate, from other
properties upon, about, or beneath, the Real Property. No Hazardous
Materials generated by the Target and its Subsidiaries, if any, or, to
the Knowledge of the Elerath Shareholders, located under, in, or about,
the Real Property in the past have been unlawfully transported to any
waste disposal facility or other site.
(ii) Environmental Requirements. Prior users of the
Real Property and activities on the Real Property and all activities
and conduct of business related to the Real Property have at all times
complied with all Environmental Requirements (as defined in Section 1),
and no activity on, or condition of, the Real Property has constituted
a nuisance or tortious condition with respect to any third party. The
Real Property and the existing uses and activities on the Real Property
and all activities and conduct of business related to the Real Property
(including the Business), comply with all Environmental Requirements,
and no activity on, or condition of, the Real Property constitutes a
nuisance or constitutes a tortious condition with respect to any third
party.
(iii) Notice of Violations. Neither the Target and
its Subsidiaries nor any other owner, tenant, occupant, or user of the
Real Property has ever received any notice or other communication
concerning any alleged violation of Environmental Requirements, or
notice or other communication concerning alleged liability for
Environmental Damages (as defined in Section 1) in connection with the
Real Property. There is no (i) writ, injunction, decree, order, or
judgment outstanding in relation to the ownership, use, maintenance, or
operation of the Real Property by any person or concern; (ii) lawsuit,
claim, proceeding, citation, directive, summons, or investigation
pending or, to the Knowledge of the Elerath Shareholders, threatened in
relation to the ownership, use, maintenance, or operation of the Real
Property by any person or concern; or (iii) alleged violation of
-27-
Environmental Requirements. Neither the Target and its Subsidiaries
nor, to the Knowledge of the Elerath Shareholders, any other person or
company has been ordered or requested by any regulatory authority to
take any steps to remedy any condition on the Real Property
constituting a violation of Environmental Requirements.
(iv) Underground Inspection and Storage Tanks. There
is not now and, to the Knowledge of the Elerath Shareholders, there has
never been located on the Real Property, any (i) underground
improvement, including without limitation, any treatment or storage
tank or water, gas, or oil well, or (ii) above-ground storage tank.
(v) The Target and its Subsidiaries have no Material
Liability (and there is no Basis related to the past or present
operations, properties, or facilities of the Target and its
Subsidiaries and their respective predecessors and Affiliates for any
present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Target and its Subsidiaries
giving rise to any Liability) under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Federal Water Pollution
Control Act of 1972, the Clean Air Act of 1970, the Safe Drinking Water
Act of 1974, the Toxic Substances Control Act of 1976, the Refuse Act
of 1997, or the Emergency Planning and Community Right-to-Know Act of
1986 (each as amended), or any other Law or Order of any Governmental
Body, concerning release or threatened release of hazardous substances,
public health and safety, or pollution or protection of the
environment;
(vi) The Target and its Subsidiaries have no Material
Liability (and the Target, its Subsidiaries and their predecessors have
not handled or disposed of any substance, arranged for the disposal of
any substance, or owned or operated any property or facility in any
manner that could form the Basis for, any present or future charge,
complaint, action, suit, proceeding, heating, investigation, claim, or
demand (under the common law or pursuant to any statute) against the
Target and its Subsidiaries giving rise to any Material Liability) for
damage to any site (including the Real Property), location, or body of
water (surface or subsurface) or for illness or personal injury;
(vii) The Target and its Subsidiaries have obtained
and been in compliance in all material respects with all of the terms
and conditions of all permits, licenses, and other authorizations which
are required under, and has complied with, all other Laws and Orders of
any Governmental Body relating to public health and safety, worker
health and safety, and pollution or protection of the environment,
including laws relating to emissions, discharge, releases, or
threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes into ambient air,
surface water, ground water, or lands or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
(v) Legal Compliance. Except as set forth in Disclosure
Schedule 7(v):
(i) The Target and its Subsidiaries have complied
with all non-environmental Laws. No charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand, or notice has been
filed or commenced against the Target and its Subsidiaries which is
-28-
currently pending and alleges any failure to comply with any such
non-environmental Law;
(ii) The Target and its Subsidiaries have not
violated in any respect or received a notice or charge asserting any
violation of any state or federal law; and
(iii) The Target and its Subsidiaries have filed in a
timely manner all reports, documents, and other materials it was
required to file (and the information contained therein was correct and
complete in all material respects) under all applicable Laws.
(w) Certain Business Relationships with the Target and
Subsidiaries. Except as set forth on Disclosure Schedule 7(w), neither the
Elerath Shareholders nor their Affiliates have been involved in any business
arrangement or relationship with the Target and its Subsidiaries within the past
twelve (12) months, and neither the Elerath Shareholders nor their Affiliates
owns directly any material property or right, tangible or intangible, which is
used in the Target or its Subsidiaries' Business.
(x) Brokers' Fees. The Target and its Subsidiaries do not have
any Liability or obligation to pay any fees or commissions to any broker,
finder, or similar representative with respect to the transactions contemplated
by this Agreement.
(y) Year 2000 Compliance. Except as set forth on
Disclosure Schedule 7(y):
(i) all devices, systems, machinery, information
technology, computer software and hardware, and other date sensitive
technology (jointly and severally the "Systems") necessary for the
Target and its Subsidiaries to carry on their business as presently
conducted and as contemplated to be conducted in the future are Year
2000 Compliant or will be Year 2000 Compliant within a period of time
calculated to result in no material disruption of any of the Target or
its Subsidiaries' business operations. For purposes of these
provisions, "Year 2000 Compliant" means that the Systems are designed
to be used prior to, during and after the Gregorian calendar year 2000
A.D. and will operate during each such time period without error
relating to date data, specifically including any error relating to, or
the product of date data which represents or references different
centuries or more than one century.
(ii) The Target and its Subsidiaries have: (1)
undertaken a detailed inventory, review, and cost and other assessment
of all areas within its business and operations that could be adversely
affected by the failure of the Target and its Subsidiaries to be Year
2000 Compliant on a timely basis; (2) developed a detailed plan and
timetable for becoming Year 2000 Compliant on a timely basis, and (3)
to date, implemented that plan in accordance with that timetable in all
material respects.
(iii) The Target and its Subsidiaries have made
written inquiry of each of its key suppliers, vendors, and customers,
and has used their best efforts to obtain written confirmations from
all those persons, as to whether they have initiated programs to become
Year 2000 Compliant and on the basis of such confirmations, the Target
and its Subsidiaries reasonably believe that they are or will become,
-29-
in a timely fashion, Year 2000 Compliant. For purposes of this
Agreement, "key suppliers, vendors, and customers" refers to those
suppliers, vendors, and customers of the Target and its Subsidiaries
whose business failure would, with reasonable probability, result in a
material adverse change in the Business, properties, condition
(financial or otherwise), or prospects of the Target and its
Subsidiaries.
(iv) The Target and its Subsidiaries have received
Year 2000 Compliance inquiries from the entities listed on Disclosure
Schedule 6(y) and have responded to each of them that they believe they
are Year 2000 Compliant.
(z) Customer List. Disclosure Schedule 7(z) is a true and
complete list of all customers of the Target and its Subsidiaries as of the
Effective Date, by name, address and telephone number. On the Closing Date, the
Elerath Shareholders will deliver a then current list of all customers of the
Target and its Subsidiaries, by name, address and telephone number together with
any and all files, records and accounts related to the customers.
(aa) Acquired Accounts Receivable. Disclosure Schedule 7(aa)
is a true and complete list of all accounts receivable of the Target and its
Subsidiaries as of the Effective Date, by name, address and telephone number. On
the Closing Date, the Elerath Shareholders will deliver a then current list of
all accounts receivable of the Target and its Subsidiaries, by name, address and
telephone number (the "Acquired Accounts Receivable").
(bb) Accounts Payable. Disclosure Schedule 7(bb) is a true and
complete list of all accounts payable of the Target and its Subsidiaries as of
the Effective Date, by name, address and telephone number. On the Closing Date,
the Elerath Shareholders will deliver a then current list of all accounts
payable of the Target and its Subsidiaries, by name, address and telephone
number.
(cc) Target Liability. Except as set forth in Disclosure
Schedule 7(cc), the Target and its Subsidiaries have no Liability whatsoever
to the Shareholders, Randall Goucher, or any current or former officer,
director, shareholder, employee or other party.
(dd) Minutes. Attached to this Agreement as Disclosure
Schedule 7(dd) is a complete list of all minutes related to the Target and its
Subsidiaries for the past three years.
(ee) Disclosure. To the Knowledge of the Elerath Shareholders,
the representations and warranties contained in this Section 7 as amended,
modified and/or supplemented by the Disclosure Schedules do not contain any
untrue statement of a Material fact or omit to state any Material fact necessary
in order to make the representations, warranties, statements and information
contained in this Section 7 and in any Disclosure Schedule not misleading.
8. Pre-Closing Covenants. With respect to the period between
the Effective Date of this Agreement and the Closing, the Parties agree as
follows:
(a) General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
to consummate and make effective the transactions contemplated by this Agreement
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(including satisfying the closing conditions set forth in Section 10).
(b) Notices and Consents. The Shareholders will cause the
Target and its Subsidiaries to give any notices to third parties, and will cause
the Target and its Subsidiaries to use their reasonable best efforts to obtain
any third-party consent, that the Parent may reasonably request in connection
with the matters pertaining to the Target disclosed or required to be disclosed
in the Disclosure Schedules. The Parties will take any additional action (and
the Shareholders will cause the Target and its Subsidiaries to take any
additional action) that may be necessary, proper, or advisable in connection
with any other notices to, filings with, and authorizations, consents, and
approvals of, Governmental Bodies and third parties that he, she or it may be
required to give, make, or obtain.
(c) Operation of Business. Except as contemplated in this
Agreement, or as may be incidental to or in furtherance of the transactions
contemplated by this Agreement, or as may have been set forth in this Agreement
or in the Disclosure Schedules, the Shareholders will not cause or permit the
Target and its Subsidiaries to engage in any practice, take any action, embark
on any course of inaction, or enter into any transaction outside the Ordinary
Course of Business.
(d) Preservation of Business. Except as contemplated by this
Agreement, or as may be incidental to, or in furtherance of, the transactions
contemplated by this Agreement, or as may have been set forth in this Agreement
or in the Disclosure Schedules, the Shareholders will cause the Target and its
Subsidiaries to use their best efforts to keep its business, properties and
assets substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers and employees.
(e) Access.
------
(i) The Shareholders will permit, and the
Shareholders will cause the Target and its Subsidiaries to permit,
representatives of the Parent to have access at reasonable times, and
in a manner so as not to interfere with the normal business operations
of the Target and its Subsidiaries, to the headquarters of the Target
and its Subsidiaries, and to all books, records, contracts, Tax
records, and documents of or pertaining to the Target and its
Subsidiaries and the Business. Notwithstanding the above, the Parent's
on-site investigation of the Target and its Subsidiaries shall be
limited to five (5) Business Days, unless otherwise agreed to by the
Parent and the Shareholders in writing; provided, however, that such
limitation of time shall not otherwise limit the Parent's investigation
of the Target and its Subsidiaries off-site. During the Parent's
on-site investigation of the Target and its Subsidiaries, except as
otherwise provided in this Agreement, the Parent shall not discuss any
aspects of the operation of the Target and its Subsidiaries with any
employee of the Target and its Subsidiaries, and the Parent shall
direct all requests for information and material only through the
Shareholders, unless otherwise agreed to by the Parent and the
Shareholders in writing.
(ii) The Shareholders shall arrange a mutually
agreeable time and place at which the Parent may conduct interviews
with key employees and/or customers of the Target and its Subsidiaries.
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The interviews shall be in strict conformity with the format mutually
agreed to by the Shareholders and the Parent and shall take place and
be completed wholly within the last twenty (20) days prior to the
Closing unless otherwise agreed to by the Parent and the Shareholders
in writing.
(f) Notice of Developments. The Shareholders will give prompt
written notice to the Parent of any Material developments affecting the assets,
Liabilities, Business, financial condition, operations, results of operations,
or future prospects of the Target and its Subsidiaries. Each Party will give
prompt written notice to the others of any Material development affecting the
ability of the Parties to consummate the transactions contemplated by this
Agreement.
(g) Exclusivity. The Shareholders will not (and the
Shareholders will not cause or permit the Target and its Subsidiaries to) (i)
solicit, initiate, or encourage the submission of any proposal or offer from any
Person relating to any (A) liquidation, dissolution, or recapitalization, (B)
merger or consolidation, (C) acquisition or purchase of securities or assets, or
(D) similar transaction or business combination involving the Target and its
Subsidiaries, or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any person to do or seek any of the
foregoing. The Shareholders will notify the Parent immediately if any person
makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
(h) HSR Act Filings. If it is determined that such a filing is
required by law, the Parent and the Shareholders will use reasonable efforts to
file or cause to be filed with the FTC and the DOJ, as promptly as practicable
but in no event later than twenty (20) Business Days after the Effective Date of
this Agreement, the Notification and Report Form and related material required
to be filed in connection with the transactions contemplated in this Agreement
pursuant to the HSR Act, and to promptly file any additional information
requested by the FTC or the DOJ as soon as practicable after receipt of a
request for additional information. In addition, the Parent shall use its best
efforts to take or cause to be taken all actions necessary, proper or advisable
to obtain any consent, waiver, approval or authorizations relating to the HSR
Act that are required for the consummation of the transactions contemplated by
this Agreement, which efforts shall include, without limitation, the proffer by
the Parent of its willingness to accept an order providing for the divestiture
by the Parent of such of the assets relating to the Business (or, in lieu
thereof, assets and businesses of the Parent having an approximate equivalent
value) as are necessary to fully consummate the transactions contemplated by
this Agreement, and an offer to hold separate such assets and businesses pending
such divestiture. In the event that the FTC or the DOJ requires the divestiture
or the holding separate by the Parent of any of the assets relating to the
Business, no adjustment shall be made to the Purchase Price and the Parent shall
be required to hold such assets separate, or to divest them, as the case may be,
following the Closing. All filing fees required under the HSR Act shall be paid
by the Parent.
(i) Plant Closing Notification. The Parent shall be
responsible for providing any notice of layoff or plant closing required with
respect to any manufacturing facility of the Target pursuant to the Federal
Worker Adjustment and Retraining Notification Act of 1988 (the "WARN Act"), any
successor federal law and any applicable state or local plant closing.
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notification statute, for any such layoffs or plant closings which will commence
effective on or subsequent to the Closing Date.
(j) Intercompany Items. The Shareholders shall, as of the date
immediately preceding the Closing Date, by appropriate documentation and
accounting entries, contribute to the paid in capital of the Target, any
inter-company payables, receivables and/or indebtedness of the Shareholders to
the Target or its Subsidiaries arising prior to the Closing Date.
9. Additional Covenants. The Parties further covenant and
agree as follows:
(a) General. In case at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor under
Section 13). The Shareholders acknowledge and agree that from and after the
Closing Date the Parent will be entitled to possession of all documents, books,
records, agreements, and financial data of any sort relating to the Target, its
Subsidiaries and the Business; provided that the Shareholders may retain any
copies of the foregoing as shall be necessary to comply with applicable tax and
other laws, regulations and ordinances.
(b) Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand in connection with
(i) any transaction contemplated under this Agreement, or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Target and its Subsidiaries, each of the other
Parties will cooperate with him, her or it and his, her or its counsel in the
contest or defense, make available their personnel, and provide such testimony
and access to their books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 13).
(c) Transition. The Shareholders will not take any action that
is primarily designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of the Target and its
Subsidiaries from maintaining the same business relationships with the Target
and its Subsidiaries after the Closing Date for a period of twelve (12) months
thereafter as it maintained with the Target and its Subsidiaries prior to the
Closing Date. The Shareholders will refer all customer inquiries relating to the
Target and its Subsidiaries' Business to the Parent and/or the Target and its
Subsidiaries from and after the Closing Date for a period of twelve (12) months
thereafter.
(d) Confidentiality. The Shareholders will (i) treat and hold
as such all of the Confidential Information, (ii) refrain from using any of the
Confidential Information except in connection with this Agreement for a period
of two (2) years from the Closing Date, and (iii) deliver promptly to the Parent
or destroy, at the request and option of the Parent, all tangible embodiments
(and all copies) of the Confidential Information which are in their possession.
In the event that a Seller is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
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civil investigative demand, or similar process) to disclose any Confidential
Information, the Seller will notify the Parent promptly of the request or
requirement so that the Parent may seek an appropriate protective order or waive
compliance with the provisions of this Section 9(d). If, in the absence of a
protective order or the receipt of a waiver under this Section 9(d), a Seller
is, on the advice of counsel, compelled to disclose any Confidential Information
to any tribunal or else stand liable for contempt, the Seller may disclose the
Confidential Information to the tribunal; provided, however, that the Seller
shall use his or her reasonable best efforts to obtain, at the reasonable
request of the Parent, an order or other assurance that confidential treatment
will be accorded to the portion of the Confidential Information required to be
disclosed as the Parent shall designate. The foregoing provisions shall not
apply to any Confidential Information which is generally available to the public
immediately prior to the time of disclosure.
(e) Additional Tax Matters.
----------------------
(i) The Shareholders will cause the Target and its
Subsidiaries (at the Shareholders' sole cost and expense) to file with
the appropriate Governmental Bodies all Tax Returns required to be
filed by it for any Pre-Closing Tax Period and will remit any Taxes due
in respect of the Tax Returns.
(ii) The Parent and the Shareholders recognize that
each of them will need access, from time to time, after the Closing
Date, to certain accounting and Tax records and information concerning
the Target and its Subsidiaries held by the Parent and/or the Surviving
Corporation and its Subsidiaries to the extent the records and
information pertain to events occurring on or prior to the Closing
Date; therefore, the Parent agrees to cause the Surviving Corporation
and its Subsidiaries to (A) use their best efforts to properly retain
and maintain those records for a period of six (6) years from the date
the Tax Returns for the year in which the Closing occurs are filed or
until the expiration of the statute of limitations that applies to the
Tax Return in question (i.e., including Tax Returns for years preceding
the year in which the Closing occurs), whichever is later, and (B)
allow the Shareholders and their agents and representatives at times
and dates mutually acceptable to the Parties, to inspect, review and
make copies of those records that the other party may deem necessary or
appropriate from time to time, those activities to be conducted during
normal business hours and at the other Party's expense.
(f) Covenant Not to Compete. Without the prior written
permission of the Parent, which permission may be withheld in the sole
discretion of the Parent, or unless they are an employee, officer, director or
consultant with the Surviving Corporation and its Subsidiaries or the Parent,
for a period of two (2) years from and after the Closing Date, each Shareholder
will not directly or indirectly, as principal, agent, trustee or through the
agency of any corporation, partnership, association or agent or agency, (i)
participate or engage in the Business existing as of the Closing Date, (ii)
service or solicit any of the Surviving Corporation's and its Subsidiaries'
business from any customer of the Surviving Corporation and its Subsidiaries,
(iii) request or advise any customer of the Target and its Subsidiaries to
withdraw, curtail or cancel such customer's business with the Surviving
-34-
Corporation and its Subsidiaries, or (iv) solicit for employment any person
employed by the Target and its Subsidiaries on the Closing Date; provided
however, that (i) no owner of less than five percent (5%) of the outstanding
stock of any publicly traded corporation shall, for purposes of this Section
8(f), be deemed to engage solely by reason of that stock position in any of its
businesses and (ii) the future acquisition by any of the Shareholders, or his or
her Affiliates, of any Person or company engaged in the Business shall not be
deemed to violate this Section 9(f) if less than twenty-five percent (25%) of
the total revenues of such acquired business or Person are derived from the
Business.
(g) Employment Matters. Disclosure Schedule 7(r) lists all of
the current employees of the Target and its Subsidiaries (the "Current
Employees"). For a period of one (1) year after the Closing Date, the Surviving
Corporation agrees that it will not substantially reduce the base salary or wage
rate in effect immediately prior to the Closing Date of any Current Employee
other than for Cause. In addition, the Parent agrees that on the Closing Date it
will cause the Surviving Corporation to enter into the Employment Agreements
with Douglas Elerath, Samuel C. Rogers, Jr. and John W. Hodges, Jr. attached to
this Agreement as Exhibits E-1, E-2 and E-3.
10. Conditions to Obligations to Close.
----------------------------------
(a) Conditions to Obligation of the Parent and Sub. The
obligation of the Parent and Sub to consummate the transactions to be performed
by it in connection with the Closing is subject to satisfaction or waiver of the
following conditions:
(i) the representations and warranties of the
Shareholders as set forth in Section 6(a) and of the Elerath
Shareholders as set forth in Section 7 must be true, correct and
complete in all Material respects at and as of the Closing Date as
evidenced by the delivery by the Shareholders to the Parent at Closing
of the Shareholders' Closing Certificate to the effect that the
representations and warranties of the Shareholders as set forth in
Section 6(a) and of the Elerath Shareholders as set forth in Section 7
are true, correct and complete in all Material Respects as of the
Closing Date to be attached to this Agreement as Exhibit F;
(ii) the Shareholders shall have performed and
complied with all of their covenants in this Agreement in all Material
respects through the Closing;
(iii) the Target and its Subsidiaries shall have
procured all necessary third party consents specified in Section 8(b);
(iv) no action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, or (C) affect
adversely the right of the Parent to own, operate, or control the
Shares or the Target and its Subsidiaries (and no such judgment, order,
decree, stipulation, injunction, or charge shall be in effect);
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(v) the Shareholders shall have delivered to the
Parent the Shareholders' Closing Certificate (without qualification as
to knowledge or Materiality or otherwise) to the effect that each of
the conditions specified in Section 10(a)(i)-(iv) is satisfied in all
respects to be attached to this Agreement as Exhibit F;
(vi) the acquisition by the Parent of the Shares must
represent all of the issued and outstanding capital stock of the Target
and its Subsidiaries and all of the Shares must be free and clear of
any Security Interests or other liens, claims or encumbrances of any
nature whatsoever;
(vii) the Parties, the Target and its Subsidiaries
must have received all other authorizations, consents and approvals of
Governmental Bodies including such authorizations, consents or
approvals required under the HSR Act, if any, and set forth in the
Disclosure Schedules;
(viii) the Parent must have received from counsel to
the Elerath Shareholders an opinion with respect to the matters set
forth in Sections 6(a)(i), 6(a)(ii), 6(a)(iv), 7(a)-(e), 7(q) and 7(v)
addressed to the Parent and dated as of the Closing Date in
substantially the form attached to this Agreement as Exhibit G;
(ix) the Parent must have received the resignations,
effective as of the Closing, of each officer and director of the Target
and each Manager of Reflex and NextWave;
(x) no Material adverse change shall have occurred in
the Target or its Subsidiaries' Business or their future prospects;
(xi) all funded indebtedness of the Target other than
that assumed by the Parent must have been paid in full prior to or at
the Closing and all Security Interests except Permitted Liens must have
been fully released of record to the satisfaction of the Parent and all
mortgages and Uniform Commercial Code financing statements covering
such funded indebtedness must have been terminated or the Parent must
be reasonably satisfied that all Security Interests will be fully
released of record within ten (10) days after the Closing Date;
(xii) except as set forth in the Disclosure
Schedules, since the Effective Date the Target and its Subsidiaries
must not have transferred, conveyed, disposed of and/or sold any of
Material assets, except in the Ordinary Course of Business;
(xiii) the Target and its Subsidiaries must have
delivered to the Parent a certificate from the Target's treasurer
stating that from the Effective Date to the Closing Date there has been
no change in the capitalization of the Target and its Subsidiaries or
any Material adverse change in its financial condition or assets;
(xiv) the Shareholders must have delivered to the
Parent certificates representing the Shares, which shall be cancelled
and exchanged for the Merger Consideration, and otherwise must have
satisfied fully all of their obligations required by this Agreement to
be satisfied before or at Closing;
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(xv) the Target and its Subsidiaries must not be in a
bankruptcy, reorganization or insolvency proceeding nor any such
proceeding contemplated;
(xvi) Douglas E. Elerath, Samuel C. Rogers, Jr. and
John W. Hodges, Jr. must have signed and delivered the Employment
Agreements (Exhibits E-1, E-2 and E-3) with attached Confidentiality
Agreements;
(xvii) the Shareholders must have delivered to the
Parent Certificates of Good Standing from the State of New Mexico and
Florida, as the case may be, dated within ten (10) days prior to the
Closing Date, certifying that the Target and each of its Subsidiaries
is in good standing in the State of New Mexico and Florida, as the case
may be;
(xviii) the Shareholders must have delivered to the
Parent the Release attached to this Agreement as Exhibit H and dated as
of the Closing Date, whereby the Shareholders release the Target and
its Subsidiaries from any and all claims and causes of action they may
have against the Target and its Subsidiaries as of the Closing Date;
(xix) the Shareholders must have delivered to the
Parent all minutes related to the Target and its Subsidiaries for the
past three (3) years;
(xx) the Shareholders must have delivered to the
Parent, Officer, Directors and Significant Employee Questionnaires as
prepared by the Parent and completed by Douglas E. Elerath, Betzi M.
Hitz, Samuel C. Rogers, Jr. and John W. Hodges, Jr.;
(xxi) the Shareholders must have delivered to the
Parent (A) evidence that they have repaid the Target and its
Subsidiaries all amounts owed the Target and its Subsidiaries by them,
and (B) a copy of the promissory note evidencing the Target's loan to
Laser Wireless, Inc.; and
(xxii) The Reflex and NextWave documents set forth as
Exhibits K-1 through K-4 must be signed and delivered to the Target.
The Parent may waive any condition specified in this Section
10(a) if it executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligations of the Shareholders. The
obligations of the Shareholders to consummate the transactions to be performed
by them in connection with the Closing are subject to satisfaction or waiver of
the following conditions:
(i) the representations and warranties set forth in
Section 6(b) must be true, correct and complete in all Material
respects at and as of the Closing Date as evidenced by the delivery by
the Parent to the Shareholders at Closing of a Parent's Closing
Certificate to the effect that the representations and warranties of
the Parent as set forth in Section 6(b) are true, correct and complete
in all Material respects as of the Closing Date to be attached to this
Agreement as Exhibit I;
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(ii) the Parent and Sub must have performed and
complied with all of its covenants under this Agreement in all Material
respects through the Closing;
(iii) no action, suit or proceeding must be pending
or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement, or (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation (and no such
judgment, order, decree, stipulation, injunction, or charge must be in
effect);
(iv) the Parent must have delivered to the
Shareholders the Parent's Closing Certificate (without qualification as
to knowledge or Materiality or otherwise) to the effect that each of
the conditions specified in Section 10(b)(i)-(iii) is satisfied in all
respects to be attached to this Agreement as Exhibit I;
(v) the Parties and the Target and its Subsidiaries
must have received all other authorizations, consents, and approvals of
Governmental Bodies including such authorizations, consents and
approvals required under the HSR Act, if any, and set forth in the
Disclosure Schedules;
(vi) the Shareholders must have received from counsel
to the Parent an opinion with respect to the matters set forth in
Sections 6(b)(i)-(iv) and (vi) addressed to the Shareholders and dated
as of the Closing Date in substantially the form attached to this
Agreement as Exhibit J;
(vii) all actions to be taken by the Parent and Sub
in connection with the consummation of the transactions contemplated by
this Agreement must be reasonably satisfactory in form and substance to
the Shareholders;
(viii) the Parent and Sub must have paid and
delivered the Additional Consideration and the Parent Shares to the
Shareholders, and otherwise must have satisfied fully all of its other
obligations required by this Agreement to be satisfied before or at
Closing;
(ix) the Parent and Sub must not be in a bankruptcy,
reorganization or insolvency proceeding, nor must any such proceeding
be contemplated;
(x) the lessor or landlord of any Real Property
rented, leased or used by the Target and its Subsidiaries as of the
Closing Date must have delivered releases which effectively and to the
satisfaction of the Shareholders, waive, release and discharge the
Shareholders, their respective heirs and estates, and each of them,
from all and every claim which the lessor or landlord may have or claim
arising out of, or in connection with, the rent, lease or use by the
Target and its Subsidiaries;
(xi) each of the lessors of equipment (the "Equipment
Lessors") under each of the equipment leases to which the Target and
its Subsidiaries are a party (the "Equipment Leases") as set forth in
Disclosure Schedule 7(l) must have delivered releases which effectively
and to the satisfaction of the Shareholders, waive, release and
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discharge the Shareholders, their respective heirs and estates, and
each of them, from all and every claim which the Equipment Lessors, and
each of them, may have or claim arising out of or in connection with
the Equipment Leases, or any of them;
(xii) the Parent must have caused the Sub to execute
and deliver to Douglas E. Elerath, Samuel C. Rogers, Jr. and John W.
Hodges, Jr. the Employment Agreements attached to this Agreement as
Exhibits E-1, E-2 and E-3; and
(xiii) the Parent must have delivered the following
documents to the Shareholders:
(A) the Parent's and Sub's Articles of
Incorporation;
(B) the Parent's and Sub's Bylaws;
(C) the Parent's and Sub's Minutes;
(D) the Parent's 504 Offering Memoranda
dated February 1, 1998, March 10, 1998, and January 1, 1999;
and
(F) a list of any option, warrant, right,
contract, call, put, or other agreement or commitment to which
the Parent is a party which provides for the disposition by
the Parent of any of its capital stock.
The Shareholders may waive any condition specified in this
Section 10(b) if they execute a writing so stating at or prior to the Closing.
11. Closing Deliveries.
------------------
(a) Deliveries by the Shareholders at Closing. Provided the
conditions precedent described in Section 10(b) have been satisfied, the
Shareholders shall deliver the following to the Parent at Closing:
(i) the Shares which shall be cancelled and
exchanged for the Merger Consideration;
(ii) the Escrow Agreement attached to this
Agreement as Exhibit C;
(iii) the executed resignations of Douglas E.
Elerath, Betzi M. Hitz, Samuel C. Rogers, Jr. and John W. Hodges, Jr.;
(iv) the executed Employment Agreements of
Douglas E. Elerath, Samuel C. Rogers, Jr. and John W. Hodges, Jr. as
attached to this Agreement as Exhibits E-1, E-2 and E-3;
(v) the Reflex and NextWave documents set forth
in Exhibits K-1 through K-4;
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(vi) any and all other instruments required by this
Agreement to be delivered by the Shareholders to the Parent and Sub at
Closing.
(b) Deliveries by the Parent and Sub at Closing. Provided the
conditions precedent described in Section 10(a) have been satisfied, the Parent
and/or Sub shall deliver the following at Closing:
(i) the Initial Payment to the Elerath Shareholders
and the Escrow Amount to the Escrow Agent;
(ii) the Escrow Agreement attached to this Agreement
as Exhibit C;
(iii) the executed Employment Agreements of Douglas
E. Elerath, Samuel C. Rogers, Jr. and John W. Hodges, Jr. as attached
to this Agreement as Exhibits E-1, E-2 and E-3;
(iv) certificates for 500,000 Parent Shares in the
name of Douglas E. Elerath and Betzi M. Hitz, joint tenants with right
of survivorship;
(v) a certificate for 100,000 Parent Shares in the
name of Samuel C. and Beverly Anne Rogers, joint tenants with right of
survivorship;
(vi) a certificate for 50,000 Parent Shares in the
name of John W. Hodges, Jr.; and
(vii) any and all other instruments required by this
Agreement to be delivered by the Parent and/or Sub to the Shareholders
at Closing.
12. Audit. As soon as is reasonably practicable following the
Effective Date, the Parent may, but shall not be required to, cause an audit of
the Target and its Subsidiaries to be conducted at the Parent's expense. The
Shareholders agree to cooperate, and to cause the Target and its Subsidiaries to
cooperate, as reasonably requested by the Parent, with the audit. A copy of the
final audit report shall be provided to the Shareholders. In addition, the
Shareholders agree to cooperate and to cause the Target to cooperate, as
reasonably required in the preparation in a form satisfactory to the Parent and
the Parent's accountants, of any other financial and other information needed by
the Parent to comply with reporting and filing requirements imposed on the
Parent by federal, state and securities exchange regulations. All expenses paid
and incurred in the preparation of the Audit will be borne solely by the Parent.
Without the consent of the Shareholders, the audit report, financial and other
information and analyses prepared or prepared pursuant to this Section 12 will
be held in strict confidence and made available only to the Parent, its
directors, officers, financial and tax consultants, legal counsel, and other
advisors, agents and potential investors whose review is required in connection
with the Parent's satisfaction of its obligations under this Agreement, and the
Securities and Exchange Commission and such other persons, if any, to whom
disclosure is required by applicable law.
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13. Indemnification.
---------------
(a) Survival. All of the representations, warranties and
covenants of the Parties contained in this Agreement shall survive the Closing
and will continue in full force and effect for a period of three (3) years
thereafter, except as otherwise expressly provided elsewhere in this Agreement.
(b) Indemnification by the Shareholders. The Elerath
Shareholders, jointly and severally, agree to defend, indemnify and hold the
Parent and Sub harmless from and against any and all loss, damage, liability,
cost, and expense, including without limitation reasonable attorney fees,
suffered or incurred by the Parent or Sub, as and when incurred, by reason of,
relating to, or arising out of any misrepresentation, breach of warranty, or
breach or non-fulfillment of any agreement of the Elerath Shareholders or Target
contained in this Agreement or in any document executed and delivered in
connection with this Agreement and the Elerath Shareholders' operation of the
Business prior to the Closing Date. In addition, the Shareholders, jointly and
severally, agree to defend, indemnify and hold the Parent and Sub harmless from
and against any and all loss, damage, liability, cost, and expense, including
without limitation reasonable attorney fees, suffered or incurred by the Parent
or Sub, as and when incurred, by reason of, relating to, or arising out of (i)
any and all Taxes of Shareholders with respect to any period, and (ii) any and
all Taxes of Target and its Subsidiaries with respect to any period (or an
portion thereof) up to and including the Closing Date. The Shareholders shall
have the right, but not the obligation, to assume the defense of the Parent and
Sub with respect to any action covered by this Section 13(b). If the
Shareholders elect not to assume the defense of the Parent and Sub as provided
in Section 13(d), then the Parent and Sub shall have the right, upon a final and
binding conclusion of the action, to make a claim against the Shareholders,
jointly and severally, for reimbursement of reasonable expenses and attorney's
fees incurred by the Parent and Sub in the defense of the action.
(c) Indemnification by the Parent. The Parent agrees to
defend, indemnify, and hold the Shareholders, jointly and severally, harmless
from and against any and all loss, damage, liability, cost, and expense,
including without limitation reasonable attorneys' fees, suffered or incurred by
the Shareholders, as and when incurred, by reason of or arising out of (i) any
misrepresentation, breach of warranty, or breach or non-fulfillment of any
agreement of the Parent and Sub contained in this Agreement or in any document
executed and delivered in connection with this Agreement, and (ii) the Sub's
operation of the Business after the Closing Date. The Parent and Sub shall have
the right, but not the obligation, to assume the defense of the Shareholders
with respect to any action covered by this Section 13(c). If the Parent and Sub
elect not to assume the defense of the Shareholders, then the Shareholders shall
have the right, upon a final and binding conclusion of the action, to make a
claim against the Parent for reimbursement of reasonable expenses and attorney's
fees incurred by the Shareholders in the defense of the action.
(d) Notice and Opportunity to Defend. The Indemnified Party
shall notify the Indemnifying Party in writing (the "Indemnity Demand Notice")
within thirty (30) days after a claim is presented to the Indemnified Party, and
the Indemnifying Party may assume the defense of such claim at its sole expense.
The notice shall contain (i) a copy of the claim, and (ii) if not stated in the
claim, a good faith estimate of the amount in controversy under the claim (the
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"Known Claim Amount"). If the Indemnifying Party does not assume the defense of
the Indemnified Party or settle such claim within thirty (30) days of the date
of the receipt of the Indemnity Demand Notice, the Indemnified Party shall pay
the expenses of such defense, and the Indemnified Party may settle or compromise
such claim upon prior written notice to the Indemnifying Party without the
Indemnifying Party's consent and the Indemnified Party shall be entitled to
reimbursement as provided in this Section 13. If the Indemnifying Party is a
Seller and he or she does not assume the defense of the Parent, as the
Indemnified Party, to settle the claim or settle the claim within thirty (30)
days of the date of an Indemnity Demand Notice, then to the extent the amount
paid by the Parent as the Indemnified Party to defend or satisfy such claim (the
"Claim Settlement Amount") is less than the Escrow Amount as of the date such
claim is satisfied or otherwise disposed of, then a portion of the Escrow Amount
equal to the Claim Settlement Amount shall become the property of the Sub free
and clear of all liens or claims by the Shareholders.
(e) Indemnification Between the Shareholders. Each of the
Shareholders, individually, agrees to defend, indemnify and hold each of the
other Shareholders harmless from and against any and all loss, damage,
liability, cost, and expense, including without limitation, reasonable
attorney's fees, suffered, or incurred by the indemnifying Shareholder, as and
when incurred, by reason of, relating to, or arising out of a breach of this
Agreement by the indemnifying Shareholder and/or any and all taxes incurred by
an indemnifying Shareholder with respect to any period, which were the sole
responsibility of the indemnifying Shareholder, the intention of the
Shareholders being that each Shareholder shall be individually responsible for
any and all taxes incurred by him or her as a result of this Agreement.
14. Termination.
-----------
(a) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(i) The Parent, Sub, Target and Shareholders may
terminate this Agreement by mutual written consent at any time prior to
the Closing.
(ii) The Parent may terminate this Agreement by
giving written notice to the Shareholders at any time prior to the
Closing in the event the Shareholders or Target are in breach of any
Material representation, warranty, or covenant contained in this
Agreement in any Material respect and the breach has not been cured
within fifteen (15) days of written notice. The Shareholders may
terminate this Agreement by giving written notice to the Parent at any
time prior to the Closing in the event the Parent or Sub is in breach
of any Material representation, warranty, or covenant contained in this
Agreement in any Material respect and the breach has not been cured
within fifteen (15) days of written notice.
(iii) The Parent may terminate this Agreement by
giving written notice to the Shareholders at any time prior to the
Closing if the Closing shall not have occurred on or before December
31, 1999 by reason of the failure of any condition precedent under
Section 10(a) (unless the failure results primarily from the Parent's
or Sub's breach of any representation, warranty or covenant contained
in this Agreement).
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(iv) The Shareholders may terminate this Agreement by
giving written notice to the Parent at any time prior to the Closing if
the Closing shall not have occurred on or before December 31, 1999 by
reason of the failure of any condition precedent under Section 10(b)
(unless the failure results primarily from a Shareholder's or Target's
breach of any representation, warranty or covenant contained in this
Agreement).
Nothing contained in this Section 14(a) shall alter, affect,
modify or restrict the Parties' rights to rely on and/or seek indemnification
for a breach of any of the representations, warranties or covenants of any of
the Parties contained in this Agreement.
(b) Effect of Termination. If either the Parent or the
Shareholders terminate this Agreement pursuant to Section 14(a), all obligations
of the Parties under this Agreement shall terminate without any Liability of any
Party to any other Party.
15. Miscellaneous.
-------------
(a) Disclosure Schedules. Any Disclosure Schedule may be
updated one or more times prior to the Closing Date. Any updated Disclosure
Schedule must be delivered at least five (5) Business Days prior to the Closing
Date unless the updated Disclosure Schedule is required by this Agreement to be
current as of the Closing Date. An updated Disclosure Schedule shall only be
deemed to modify a representation and/or warranty made as of the Effective Date
in the event, and only in the event, that the representing and/or warranting
Party acted in good faith and used its best efforts when preparing the original
Disclosure Schedule delivered to the Parties on the Effective Date. In the event
any updated Disclosure Schedule indicates a Material Adverse Change from
information previously provided to the receiving Party, the receiving Party
shall be entitled to terminate this Agreement (without any liability whatsoever
to the other Parties) by written notice delivered to the other Parties following
receipt of the updated Disclosure Schedule.
(b) Press Releases and Announcements. Except as may be
required by applicable securities laws or stock exchange requirements, if any,
no Party may issue any press release or announcement relating to the subject
matter of this Agreement prior to, at, or about the Closing without the prior
written consent of the other Parties, which written approval will not be
unreasonably withheld; provided, however, that any Party may make any public
disclosure it believes in good faith is required by law or regulation (in which
case the disclosing Party will advise the other Parties prior to making the
disclosure). Notwithstanding anything to the contrary in this Section 15(b), the
Parties specifically agree and consent that the Parent may make disclosures
concerning this Agreement as in the opinion of its counsel are required to
comply with federal and state securities laws.
(c) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the Exhibits,
Disclosure Schedules and other documents referred to in this Agreement, all of
which are incorporated into this Agreement by reference) constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements,
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or representations by or among the Parties, written or oral, that may have
related in any way to the subject matter of this Agreement.
(e) Succession and Assignment. This Agreement shall be binding
upon, and shall inure to the benefit of, the Parties and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his, her or its rights, interests, or obligations under this Agreement
without the prior written approval of the other Parties; provided, however, that
the Parent or Sub may assign any or all of their rights and interests under this
Agreement to a wholly-owned Subsidiary (in which case the Parent or Sub, as the
case may be, nonetheless shall remain liable and responsible for the performance
of all of its obligations under this Agreement).
(f) Counterparts/Facsimile. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument. A facsimile,
telecopy or other reproduction of this Agreement may be executed by one or more
Parties, and an executed copy of this Agreement may be delivered by one or more
Parties by facsimile or similar instantaneous electronic transmission device
pursuant to which the signature of or on behalf of the Party can be seen, and
such execution and delivery shall be considered valid, binding and effective for
all purposes. At the request of any Party, all Parties agree to execute an
original of this Agreement as well as any facsimile, telecopy or other
reproduction of this Agreement.
(g) Headings. The Section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications under this Agreement must be in writing. Any notice, request,
demand, claim, or other communication under this Agreement shall be deemed duly
given if (and then two Business Days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below:
If to the Parent or Sub:
NextPath Technologies, Inc.
James R. Ladd, President
114 South Churton Street, Suite 101
Hillsborough, NC 27278
If to Elerath Shareholders or Target:
Douglas E. Elerath and Betzi M. Hitz
P.O. Box 454
Sandia Park, NM 87047
If to Samuel C. and Beverly Anne Rogers:
Samuel C. and Beverly Anne Rogers
5901 Canyon Crest Place, NE
Albuquerque, NM 87111
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If to John W. Hodges, Jr.:
John W. Hodges, Jr.
1533 Windmill Pointe Road
Palm Harbor, FL 34685
Any Party may give any notice, request, demand, claim, or other communication
under this Agreement using any other means (including personal delivery,
expedited courier, messenger service, facsimile, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication shall
be deemed to have been duly given unless and until it actually is received by
the individual for whom it is intended. Any Party may change the address to
which notices, requests, demands, claims, and other communications under this
Agreement are to be delivered by giving the other Parties written notice in the
manner set forth in this Section 15(h).
(i) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless it is in writing and signed by the Parties.
No waiver by any Party of any default, misrepresentation, or breach of warranty
or covenant under this Agreement, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant under this Agreement or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions of
this Agreement or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this Agreement is invalid or unenforceable, the Parties agree that
the court making the determination of invalidity or unenforceability shall have
the power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
(k) Expenses. Each of the Parties will bear his, her or its
own costs and expenses (including legal fees and expenses and investment banking
fees, if any) incurred in connection with the negotiation of this Agreement and
the transactions contemplated by this Agreement. The Shareholders acknowledge
and agree that the Target has not borne, nor will it bear, any of the
Shareholders' costs and expenses (including any of their legal fees and expenses
and investment banking fees, if any) in connection with this Agreement or any of
the transactions contemplated by this Agreement.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
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regulations promulgated thereunder, unless the context otherwise requires. This
Agreement shall be interpreted and enforced under the laws of the State of New
Mexico. The prevailing party in any dispute to enforce this Agreement shall be
entitled to recover from the losing party its costs and a reasonable attorneys'
fee to be determined by the court.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
Disclosure Schedules identified in this Agreement are incorporated into this
Agreement by reference and made a part of this Agreement.
(n) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to specifically
enforce this Agreement and the terms and provisions of this Agreement in any
action instituted in any court of the United States or any state having
jurisdiction over the Parties and the matter, in addition to any other remedy to
which they may be entitled, at law or in equity.
(o) NextWave Photonics, Inc. Douglas E. Elerath and John W.
Hodges, Jr., jointly and severally, represent to the Parent and the Sub that (i)
they are the sole shareholders of NextWave Photonics, Inc., a Florida
corporation formed on September 21, 1999 ("NextWave, Inc."), (ii) NextWave, Inc.
has never had, and never will have, any assets, liabilities, employees or
operating history, and (iii) they will dissolve NextWave, Inc. not later than
December 31, 1999.
IN WITNESS WHEREOF, the Parties have executed this Agreement
and Plan of Merger as of the Effective Date.
PARENT: NextPath Technologies, Inc., a Nevada corporation
By:
-----------------------------------------------
James R. Ladd, President
SUB: Willow Systems, Inc., a Delaware corporation
By:
-----------------------------------------------
James R. Ladd, Vice President
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TARGET: Willow Systems Limited, a New Mexico corporation
By:
-----------------------------------------------
Douglas E. Elerath, President
SHAREHOLDERS:
-----------------------------------------------
Douglas E. Elerath
-----------------------------------------------
Betzi M. Hitz
-----------------------------------------------
Samuel C. Rogers, Jr.
-----------------------------------------------
Beverly Ann Rogers
-----------------------------------------------
John W. Hodges, Jr.
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