EXHIBIT 10.5
ETOOLZ ACQUISITION AGREEMENT
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (which together with the attached exhibits,
are referred to herein as "Agreement") is entered into at closing during the
year 2000, by and between Eagle Wireless International, Inc., a Texas
corporation (the "Buyer") and the shareholders of eToolz, Inc., a Texas
corporation ("ETI") who agree to become parties to this Agreement (the "Selling
Shareholder(s)") evidenced by their signatures hereto.
WHEREAS, the Selling Shareholder(s) wish to sell and the Buyer desires to
purchase the ETI Shares, as defined below, in exchange for the Purchase Price,
as defined below, upon the terms and conditions set forth in this Agreement; and
WHEREAS, it is contemplated that the exchange of shares will qualify under
the Internal Revenue Code as a tax free exchange and it is of material
significance and importance to Buyer and ETI that the transaction will qualify
in its entirety, for reorganization, consolidation or similar accounting
treatment.
NOW, THEREFORE, in consideration of and in reliance on the mutual promises
and representations and warranties contained in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Selling Shareholder(s) and the Buyer agree as follows:
1. Definitions
1.1 "Associate" means with respect to any person, (i) any member of the
immediate family of such person, (ii) any entity of which such person, or any
member of the immediate family of such person, directly or indirectly, owns any
equity interest, (iii) any entity of which such person, or any member of the
immediate family of such person, serves as a director or executive officer, and
(iv) any entity that directly or indirectly controls, or that is directly or
indirectly controlled by or under common control with, such person or any member
of the immediate family of such person.
1.2 "Buyer Disclosure Documents" means the Buyer Financials (as defined
herein), material agreements and corporate documents, and other information
related to the Buyer material to its operations for the two (2) fiscal years
ending August 31, 1999 and 1998, and any and all interim data or filings through
the date hereof to be provided by the Buyer pursuant to this Agreement,
including but not limited to the Buyer Financials (as defined herein) and other
information required pursuant to the provisions of the Securities Exchange Act
of 1934 (the "'34 Act") or the Securities Act of 1933, as amended (the "'33
Act") as listed in Exhibit "A" to this Agreement.
1.3 "Liabilities" means liabilities, obligations, or commitments of any
nature, absolute, accrued, contingent, or otherwise, known or unknown, whether
matured or unmatured.
1.4 "ETI Shares" means all the issued and outstanding shares of eToolz,
Inc., a Texas corporation, comprising 5,341,284 shares of common stock, or such
number of shares as is delivered.
1.5 "Buyer Shares" means shares of common stock in the Buyer issued in
exchange for the Purchase Price, as defined below.
1
<PAGE>
1.6 "ETI Disclosure Documents" means the ETI Financials (as defined in
Section 5.4 herein) and the documents listed in Exhibit "B" to this Agreement.
1.7 "ETI Assets" means assets (excluding the books and records of the
Selling Shareholder(s)), properties, leases, contracts, agreements, and rights
of ETI of every type and description, real, personal, and mixed, tangible and
intangible, including without limitation, all cash on hand and in banks, trade
accounts receivable, other accounts receivable, deposits, prepaid items,
furniture and fixtures, office equipment and supplies, real property and
improvements, leases and leasehold improvements, trademarks, other tangible
properties, and its business as a going concern, goodwill and proprietary
computer software operating system, as contained in the ETI Financials and more
fully described in Exhibit "C" hereto.
1.8 "Person" means any individual, corporation, professional corporation,
limited partnership, association, or any other legal entity through which an
individual or business might organize himself or itself.
1.9 "Subsidiary" means any corporation, joint venture, or other entity in
which either the Buyer, the Selling Shareholder(s), or any other person directly
or indirectly own any voting or equity interest.
1.10 "Tax" or "Taxes" mean any federal, state, local, or foreign income,
gross receipts, profits, franchise, doing business, transfer, sales, use,
payroll, occupation, real or personal property, excise and similar taxes
(including interest, penalties, or additions to such taxes).
1.11 "Tax Returns" or "Tax Reports" mean all returns, reports, estimates,
information returns, and statements of any nature with respect to Taxes.
2. Purchase and Sale of ETI Shares
2.1 Purchase and Sale. Upon the terms and subject to the conditions of
this Agreement, on the Closing Date, as defined in Paragraph 3.1 , the Selling
Shareholder(s) agree to sell and transfer the ETI Shares to the Buyer and the
Buyer agrees to purchase the ETI Shares for the consideration set forth in this
Agreement.
2.2 Purchase Price. In exchange for the ETI Shares, the Buyer shall issue
and deliver to the Selling Shareholders:
2.2.1 Eight Hundred Thirty Thousand (830,000) shares of the Buyer's common
stock as follows:
(A) Fifty Thousand (50,000) shares at Closing.
(B) Up to Seven hundred eighty thousand shares (the "Earn Out
Shares"), collectively to the shareholders, based upon the
"Earn Out" Goals set forth in Exhibit D.
2
<PAGE>
3. Closing
3.1 Date and Place. The closing of the delivery and transfer of the ETI
Shares (the "Closing") shall occur on a date ("Closing Date") to be mutually
agreed upon by the Selling Shareholder(s) and the Buyer after exchange of all
books, records, financial information, documents, and other materials reasonably
deemed necessary to completion of the transaction contemplated under this
Agreement. Exchange of documents under this Agreement shall begin as soon as
possible after execution. In any case, the Closing Date shall be no later than
March 15, 2000, unless agreed upon by the parties, and the effective date of
this transaction shall be at the closing date(the "Effective Date").
3.2 Transactions and Document Exchange at Closing. At the Closing, the
following transactions shall occur and documents shall be exchanged, all of
which shall be deemed to occur simultaneously:
(A) By the Selling Shareholder(s). The Selling Shareholder(s) will deliver, or
cause to be delivered, to the Buyer:
(1) The documents necessary to transfer the ETI Shares to the Buyer
pursuant to this Agreement, in proper form and substance reasonably
acceptable to the Buyer;
(2) The Certificate of Representations and Warranties executed by the
President and Secretary of ETI, as defined in Paragraph. 7.1;
(3) The Opinions, Affidavits and Declarations by the Selling
Shareholder(s) as set forth in Paragraph 7.6;
(4) Such other documents, instruments, and/or certificates, if any, as
are required to be delivered pursuant to the provisions of this
Agreement, or which are reasonably determined by the parties to be
required to effectuate the transactions contemplated in this
Agreement, or as otherwise may be reasonably requested by the Buyer
to further the intent of this Agreement;
(5) Audited financial statements, if any, of ETI dated as of its most
recent year-end prior to the Closing Date covering all operations
since the inception of ETI. Such financial statements shall be
audited by a certified public accounting firm. The Selling
Shareholder(s) shall also deliver or cause to be delivered all books
and records of ETI to the extent available and necessary to perform
an audit of its book as of its most recent month end prior to the
Closing Date in accordance with Regulation S-X, which books and
records shall present fairly the financial condition and results of
operations of ETI since the date of its audited financial
statements, in accordance with generally accepted accounting
principles applied on a basis consistent with prior accounting
periods.
(6) A certificate dated within 30 days of the Closing Date from the
Secretary of State of Texas to the effect that ETI is in good
standing in the State of Texas;
(7) All federal and state income, payroll, franchise, and sales tax
returns filed by ETI and
3
<PAGE>
all correspondence related thereto, including evidence of timely
payment;
(8) The names for issuance of the shares.
(B) By the Buyer. The Buyer will deliver, or cause the following to be
delivered, to the Selling Shareholder(s):
(1) Stock certificate(s) in the name of the Selling Shareholder(s)
aggregating 50,000 Buyer Shares.
(2) The Buyer Certificate of Representations and Warranties, as defined
in Paragraph 6.1;
(3) A certificate dated at or within 30 days of the date of the Closing
from the Secretary of State of Texas to the effect that the Buyer is
a corporation duly organized, validly existing, and in good standing
under the laws of the State of Texas;
(4) The opinion of counsel as set forth in Paragraph 6.7;
(5) Such other documents, instruments, and/ or certificates, if any, as
are required to be delivered pursuant to the provisions of this
Agreement, or which are reasonably determined by the parties to be
required to effectuate the transactions contemplated in this
Agreement, or as otherwise may be reasonably requested by the
Selling Shareholder(s) in furtherance of the intent of this
Agreement.
3.3 Post-Closing Documents. From time to time after the Closing, upon the
reasonable request of any party, the party to whom the request is made shall
deliver such other and further documents, instruments, and/or certificates as
may be necessary to more fully vest in the requesting party the consideration
provided for in this Agreement or to enable the requesting party to obtain the
rights and benefits contemplated by this Agreement, including but not limited to
delivery of records of all books and records of ETI since inception.
4. Representations and Warranties of the Buyer
The Buyer represents and warrants to the Selling Shareholder(s) that:
4.1 Organization and Authority. The Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Texas, with the corporate power and authority to carry on its business as now
being conducted. The execution and delivery of this Agreement and the
consummation of the transactions contemplated in this Agreement have been, or
will be prior to closing, duly authorized by all requisite corporate actions on
the part of the Buyer. This Agreement has been duly executed and delivered by
the Buyer and constitutes the valid, binding, and enforceable obligation of the
Buyer.
4.2 Ability to Carry Out Agreement. To the best of the Buyer's knowledge
and belief, the execution and performance of this Agreement will not violate, or
result in a breach of, or constitute a default in, any provisions of applicable
law, any agreement, instrument, judgment, order or decree to which the Buyer is
a party or to which the Buyer is subject. No consents of any persons under any
4
<PAGE>
contract or agreement required to be disclosed pursuant to this Agreement are
required for the execution, delivery, and performance by the Buyer of this
Agreement.
4.3 The Shares. The Shares to be issued in accordance with this Agreement
in provision 3.2(B)(1) will be issued at Closing, free and clear of liens,
claims, and encumbrances, and the Buyer has all necessary right and power to
issue the Shares to the Selling Shareholder(s) as provided in this Agreement
without the consent or approval of any person, firm, corporation, or
governmental authority. All such Shares and "earn-out" shares will be issued
with restrictive legend.
4.4 Capitalization of the Buyer. The capitalization of the Buyer, as of
the date hereof, consists of 100,000,000 shares of $.001 par value Common Stock,
14,188,253 of which are issued and outstanding and 5,000,000 shares of Preferred
Stock, none of which are issued and outstanding. All issued and outstanding
shares are legally issued, fully paid, and non-assessable, and are not issued in
violation of the preemptive or other right of any person.
4.5 Financial Information. The Buyer has provided to the Selling
Shareholder(s), or will provide prior to Closing, copies of its Annual Report on
Form 1O-K and/or 10-KSB for the two (2) years ending at or prior to August 31,
1999 and the interim quarterly financial statements on Form 10-QSB. The
quarterly financial statements and such Annual Reports, and all other
information included in such reports, shall be referred to as the "Buyer
Financials". The Buyer has no obligations or liabilities (whether accrued,
absolute, contingent, liquidated or otherwise, including without limitation any
tax liabilities due or to become due) which are not fully disclosed and
adequately provided for in the Buyer Financials, excepting current liabilities
incurred and obligations under agreements entered into in the usual and ordinary
course of business since the date of the Buyer Financials, none of which
(individually or in the aggregate) are material except as expressly indicated in
the Buyer Financials. The Buyer is not a guarantor or otherwise contingently
liable for any material amount of such indebtedness. Except as indicated in the
Buyer Financials or the Buyer Disclosure Documents, there exists no default
under the provisions of any instrument evidencing such indebtedness or of any
agreement relating thereto.
4.6 Litigation. To the best knowledge and belief of the Buyer, except as
disclosed pursuant to this Agreement, there is neither pending nor threatened,
any action, suit or arbitration to which its property, assets or business is or
is likely to be subject and in which an unfavorable outcome, ruling or funding
will or is likely to have a material adverse effect on the condition, financial
or otherwise, or properties, assets, business or operations, which would create
a material liability on the part of the Buyer, or which would conflict with this
Agreement or any action taken or to be taken in connection with it.
4.7 Tax Matters. The Buyer has filed or will file all federal, state, and
local income, excise, property, and other tax returns, forms, or reports, which
are due or required to be filed by it and has paid, or made adequate provision
for payment of all taxes, interest, penalty fees, assessments, or deficiencies
shown to be due or claimed to be due or which have or may become due on or in
respect to such returns or reports.
4.8 Contracts. Except as disclosed pursuant to this Agreement, there are
no contracts, actual or contingent obligations, agreements, franchises, license
agreements, or other commitments between the Buyer and the Buyer or other third
parties which are material to the business, financial
5
<PAGE>
condition, or results of operation of the Buyer, taken as a whole. For purposes
of the preceding sentence, the term "material" refers to any obligation or
liability which by its terms calls for aggregate payments of more than $25,000.
4.9 Material Contract Breaches; Defaults. To the best of the Buyer's
knowledge and belief, except as disclosed in the Buyer Financials, it has not
materially breached, nor has it any knowledge of any pending or threatened
claims or any legal basis for a claim that it has materially breached, any of
the terms or conditions of any agreements, contracts, or commitments to which it
is a party or is bound and which might give rise to a claim by anyone against
the Buyer Shares. To the best of its knowledge and belief, the Buyer is not in
default in any material respect under the terms of any outstanding contract,
agreement, lease, or other commitment which might give rise to a claim against
the Buyer Shares, and there is no event of default or other event which, with
notice or lapse of time or both, would constitute a default in any material
respect under any such contract, agreement, lease, or other commitment which
might give rise to a claim against the Buyer Shares in respect of which the
Buyer has not taken adequate steps to prevent such a default from occurring.
4.10 Securities Laws. The Buyer is a public company and represents that,
except as disclosed in the Buyer Disclosure Documents and in Buyer Financials,
it has no existing or threatened liabilities, claims, lawsuits, or basis for the
same with respect to its original stock issuance to its founders, its initial
public offering, any other issuance of stock, or any dealings with its
stockholders, the public, the brokerage community, the SEC, any state
regulatory agencies, or other persons. The Buyer is required to file periodic
reports under Section 12(g) of the '34 Act. The Buyer represents that all
reports required to be filed pursuant to the '34 Act and any applicable U.S.
state "Blue Sky" laws have been filed.
4.11 Brokers. The Buyer has not agreed to pay any brokerage fees, finder's
fees, or other fees or commissions with respect to the transactions contemplated
in this Agreement which could give rise to a claim against the Shares, the ETI
Shares, or any portion thereof. To the best of the Buyer's knowledge, no person
or entity is entitled, or intends to claim that it is entitled, to receive any
such fees or commissions in connection with such transactions. The Buyer further
agrees to indemnify and hold harmless the other parties to this Agreement
against liability to any other broker claiming to act on behalf of the Buyer.
4.12 Corporate Records. Copies of all corporate books and records,
including, but not limited to, any other documents and records of the Buyer
relating to the proceeding of its shareholders and directors will be provided to
ETI prior to Closing at the request of ETI. All such records and documents are
and will be complete, true, and correct.
4.13 Approvals. Except as otherwise provided in this Agreement, no
authorization, consent, or approval of, or registration or filing with, any
governmental authority or any other person is required to be obtained or made by
the Buyer in connection with the execution, deliver, or performance of this
Agreement.
4.14 Full Disclosure. The information concerning the Buyer, set forth in
this Agreement, and in the Buyer Disclosure Documents, is, to the best of the
Buyer's knowledge and belief, complete and accurate in all material respects and
does not contain any untrue statement of a material fact or omit to state a
material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading.
6
<PAGE>
4.15 Date of Representations and Warranties. Each of the representations
and warranties of the Buyer set forth in this Agreement is true and correct at
and as of the Closing Date, with the same force and effect as though made at and
as of the Closing Date, except for changes permitted or contemplated by this
Agreement.
4.16 Indemnity. Buyer agrees to indemnify and hold Selling Shareholder(s)
harmless from any and all claims, causes of action, suits, debts, dues, sums of
money, accounts, controversies, agreements, promises, damages, judgments,
executions, claims, and demands whatsoever, in law or in equity which are made
or claimed against Selling Shareholder(s) as a result of written personal
guaranties given by Selling Shareholder(s) to ETI's vendors identified on
Exhibit "G".
5. Representations and Warranties of the Selling Shareholder(s)
The Selling Shareholder(s) represent and warrant to the Buyer that:
5.1 Organization and Authority. ETI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas, with
the power and authority to carry on its business as now being conducted. In
addition, ETI is duly qualified to do business in each jurisdiction in which the
nature of its business requires it to be so qualified, except to the extent that
the failure to so qualify does not have a material adverse effect on the
business of ETI, taken as a whole. The execution and delivery of this Agreement
and the consummation of the transactions contemplated in this Agreement have
been, or will be prior to closing, duly authorized by all requisite action on
the part of ETI as required, or otherwise, to the extent, if any, that such
authorizations are necessary. This Agreement has been duly executed and
delivered by ETI and constitutes the valid, binding, and enforceable obligation
of ETI, subject to equitable principles and laws of bankruptcy and similar laws.
5.2 Ability to Carry out Agreement. To the best of the Selling
Shareholder(s)' knowledge and belief, the execution and performance of this
Agreement will not violate, or result in a breach of, or constitute a default
in, any provisions of applicable law, any agreement, instrument, judgment, order
or decree to which ETI is a party or to which ETI is subject, other than such
violations, breaches, or defaults which, singly or in the aggregate, do not have
a material adverse effect on its business as a whole or on the enforceability or
validity of this Agreement. No consents of any persons under any contract or
agreement required to be disclosed or disclosed pursuant to this Agreement are
required for the execution, delivery, and performance by the Selling
Shareholder(s) of this Agreement.
5.3 Capitalization of ETI. As of the date of execution of this Agreement,
the capitalization of ETI is comprised of one class of capital stock consisting
of 100,000,000, shares of Common Stock, $0.001 par value, of which 5,341,284
shares were issued and are presently outstanding and held, of record, by the
Selling Shareholder(s) in the amounts opposite their names on the signature page
hereto. All of the issued and outstanding shares are duly authorized, validly
issued, fully paid, and have been offered, issued, sold, and delivered by ETI in
material compliance with all applicable federal and state securities laws.
7
<PAGE>
5.4 Financial Information. The Selling Shareholder(s) have provided to the
Buyer, or will provide prior to Closing, financial statements of ETI for all
fiscal years ended since the inception of ETI and reports for such interim
periods ending since the latest fiscal year ended, and such other documents and
information relating to ETI's current financial condition including but not
limited to its purchase, operation and disposition, if any, of any ETI assets
and liabilities. Such financial statements and other financial information shall
be referred to as the "ETI Financials". If not audited, the Selling
Shareholder(s) represent that all financial statements and reports included in
the ETI Financials have been prepared from the books and records of ETI (subject
to normal year-end adjustments) and present fairly the financial condition of
ETI and the results of their operations for the periods therein specified, all
in accordance with generally accepted accounting principles applied on a basis
consistent with prior accounting periods. Except as set forth in the ETI
Financials, ETI has no obligations or liabilities (whether accrued, absolute,
contingent, liquidated or otherwise, including without limitation any tax
liabilities due or to become due) which are not fully disclosed and adequately
provided for, excepting current liabilities incurred and obligations under
agreements entered into in the usual and ordinary course of business since
February 19,2000, none of which (individually or in the aggregate) are material.
ETI is not a guarantor or otherwise contingently liable for any material amount
not disclosed in the ETI Financials, nor does there exist any default under the
provisions of any instrument evidencing any indebtedness of ETI or of any
agreement relating thereto.
5.5 Conduct of Business. Since February 19, 2000, except as disclosed in
the ETI Disclosure Documents, ETI has not (i) discharged or satisfied any liens
other than those securing, or paid any obligation or liability other than,
current liabilities shown on the ETI Financials and current liabilities incurred
since the date of the ETI Financials, ill each case in the usual or ordinary
course of business, (ii) mortgaged, pledged or subjected to lien any of their
tangible or intangible assets ( other than purchase money liens incurred in the
ordinary course of business for such assets not yet paid for), (iii) sold,
transferred or leased any of their assets except in the usual and ordinary
course of business, (iv) canceled or compromised any material debt or claim, or
waived or released any right of material value, (v) suffered any physical
damage, destruction or loss (whether or not covered by insurance) materially
adversely affecting its properties, business or prospects, (vi) entered into any
transaction other than in the usual and ordinary course of business, except as
contemplated by this Agreement, (vii) encountered any labor difficulties or
labor union organizing activities, (viii) made or agreed to any wage or salary
increase or entered into any employment agreement, (ix) issued or sold any
securities or granted any options with respect thereto, except as disclosed
pursuant to this Agreement, (x) amended its Articles of Incorporation, (xi)
agreed to declare or pay any distributions with respect to their outstanding
capital stock, or (xii) suffered or experienced any change in, or condition
affecting, the condition (financial or otherwise) of their properties, assets,
liabilities, business, operations or prospects, other than changes, events or
conditions in the ordinary course of their business none of which has
(individually or in the aggregate) been materially adverse, except as disclosed
in the ETI Financials or Disclosure Documents.
5.6 Litigation. To the best knowledge and belief of ETI, except as
disclosed in the ETI Disclosure Documents, there is neither pending nor
threatened, any action, suit or arbitration to which ETI's property, assets or
business is or is likely to be subject and in which an unfavorable outcome,
ruling or finding will or is likely to have a material adverse effect on the
condition, financial or otherwise, or properties, assets, business or operations
of ETI, or create any material liability on the part of ETI or conflict with
this Agreement or any action taken or to be taken in
8
<PAGE>
connection herewith.
5.7 Tax Matters. ETI has filed all federal, state and local income,
payroll, franchise, and sales tax returns and reports which are due or required
to be filed by it, and, except as disclosed in the ETI Disclosure Documents, has
paid all taxes, interest, penalties, assessments or deficiencies shown to be due
or claimed to be due or which have or may become due on or in respect to such
tax returns and reports. Such federal and state income, payroll, franchise, and
sales tax returns, to the best of the Selling Shareholder(s)' knowledge and
belief, have not been audited and are not being audited by any governmental
authority.
5.8 Contracts and Options. Except as disclosed in the ETI Disclosure
Documents, there are no contracts, actual or contingent obligations, agreements,
franchises, license agreements, or other commitments to which ETI is a party or
by which it or any of its properties or assets are bound which are material to
the business, financial condition, or its results of operation. For purposes of
the preceding sentence, the term "material " refers to any obligation or
liability which by their terms calls for aggregate payments of more than
$25,000.
5.9 Material Contract Breaches; Defaults. Except as disclosed by the ETI
Financials or as reserved for therein, to the best of their knowledge and belief
of the Selling Shareholder(s), ETI has not materially breached, nor have they
any knowledge of any pending or threatened claims or any legal basis for a claim
that ETI has materially breached, any of the terms or conditions of any
agreements, contracts, or commitments to which they are a party or is bound and
which are material to the business, financial condition, or results of operation
of ETI, taken as a whole. Except as disclosed by the ETI Financials or as
reserved for therein, to the best of their knowledge and belief, neither the
Selling Shareholder(s) nor ETI are not in default in any material respect
under the terms of any outstanding contract, agreement, lease, or other
commitment which is material to the business, operations, properties, assets, or
condition of ETI, and there is no event of default or other event which, with
notice or lapse of time or both, would constitute a default in any material
respect under any such contract, agreement, lease, or other commitment in
respect of which ETI has not taken adequate steps to prevent such a default from
occurring.
5.10 Selling Shareholder(s). Exhibit "D" hereto accurately sets forth the
identity of and their relationship with ETI, and the names, and titles of the
persons serving as directors and officers of a Selling Shareholder, if any such
Selling Shareholder is a corporation.
5.11 Employee and Labor Matters. The ETI Disclosure Documents accurately
set forth the names, positions, and annual salary of each person employed by
ETI, including officers, whose annual salary including bonuses exceeds Ten
Thousand Dollars ($10,000). Except as disclosed in the ETI Disclosure Documents,
ETI has no employment agreement that cannot be canceled on thirty (30) days
notice, or collective bargaining agreement covering any of its employees and has
encountered no material labor difficulties. The ETI Disclosure Documents also
set forth a complete and accurate list of all employee benefit plans, including
all profit sharing, bonus, stock, pension, or similar plans to which ETI is a
party or by which ETI is bound. The Selling Shareholder(s) will deliver or
cause to be delivered to the Buyer prior to Closing complete and correct copies
of all the agreements, plans, or other written materials with its employees
identified in the ETI Disclosure Documents. There is no existing default by
under any of the employee agreements, plans, or arrangements identified in the
ETI Disclosure Documents, and there exists no condition or circumstance which,
with notice or lapse
9
<PAGE>
of time or both, would constitute such a default. Except as disclosed in the ETI
Disclosure Documents, there is no pending or threatened labor dispute, strike,
slowdown, or work stoppage, no unfair labor practice pending against ETI before
the National Labor Relations Board, ETI is not engaged in any unfair labor
practice, and there is no grievance or arbitration proceeding pending against,
or threatened to be asserted or commenced against ETI under any collective
bargaining agreement or other labor contract. All Taxes relating to ETI which
ETI is required by law to withhold or collect have been duly withheld or
collected and have been timely paid over to the proper authorities to the extent
due and payable.
5.12 Real Properties. Except as disclosed pursuant to this Agreement, ETI
has good and marketable fee simple title to all of the real properties owned by
it, including without limitation those reflected in the ETI Financials, free and
clear of any liens or encumbrances except for current local property taxes not
yet payable and any utility or other easements that do not and will not affect
operations upon or about such real properties or the economic value or
marketability thereof.
5.13 Other Properties and Equipment. Except as disclosed pursuant to this
Agreement or in the ETI Disclosure Documents, ETI has good title, subject to no
security interests, liens, encumbrances, or claims of others, to all structures,
facilities, machinery and equipment, supplies, raw materials, vehicles, tools,
parts, office equipment, furniture, furnishings, and all items of personal
property and equipment in, at, on or about such real properties owned or leased
by it, or used or necessary in its operations or business, including without
limitation those reflected in the ETI Financials. All such structures,
facilities, equipment, machinery, vehicles and tools are in reasonably good
operating condition and repair and are sufficient to enable ETI to carry on its
operations, as previously conducted.
5.14 Trademarks. ETI does not own or use any trademark, service mark,
trade name, copyright or patent, or any registration or application for
registration of any of the foregoing, and (ii) to the best of ETI's knowledge
and belief, it has not infringed or is infringing upon any trademark, service
mark, trade name, copyright, or patent that is owned or used by any other
person. ETI has however applied for a patent application (Java Accelerator Card,
or JAC). Such application shall become an exhibit with these documents.
5.15 Leaseholds and Executory Contracts. Except as disclosed pursuant to
this Agreement, each and every lease or executory contract to which ETI is a
party is valid and enforceable. ETI has not received any notice of default by it
under the terms of any such lease or executory contract which default remains
uncured, and it is not in material breach or default by them under the terms of
any such lease or executory contract, except as disclosed on the ETI Disclosure
Documents.
5.16 Investments. ETI has provided, or will provide to the Buyer, prior to
Closing, a complete and accurate description of the ETI Assets, including but
not limited to a list of all investments of ETI, which accurately sets forth the
nature of ETI's interest or ownership in each investment and, if applicable, the
jurisdictions in which the respective investments have been incorporated,
organized, and currently doing business. Except for the entities identified on
the list to be provided to the Buyer, there is no corporation, limited
partnership, joint venture, association, trust, or other entity or organization
which ETI directly or indirectly controls or in which ETI directly or indirectly
owns any equity interest or any other interest.
10
<PAGE>
5.17 Permits. Except as disclosed pursuant to this Agreement, ETI has
obtained and maintained in full force and effect all franchises, permits,
certificates, authorizations, licenses and other similar authority required by
law or governmental regulations from all applicable federal, state or local
authorities and any other regulatory authorities, which are necessary for the
conduct of its business as now being conducted by it and as planned to be
conducted, and it is not in default or noncompliance in any material respect
under any of such franchises, permits, certificates, authorizations, licenses or
other similar authority.
5.18 Compliance with Laws, Rules, Etc. The capitalization, business and
operations of ETI is and has been conducted in compliance with all applicable
federal, state, and local laws, rules and regulations, and it is not in
violation of any terms of any mortgage, indenture, contract, agreement,
instrument, judgment, decree, order, statute, rule or regulation to which it is
subject, except to the extent any violation or noncompliance would not
materially and adversely affect its business, operations, properties, assets, or
financial condition, except to the extent that any violation or noncompliance
would not result in the incurring of any material liability. Further, ETI not
been notified by any regulatory or governmental authority that it is now in
violation of any law, rule, regulation, ordinance, or order.
5.19 Conflict of Interest Transactions. Except as disclosed in the ETI
Disclosure Documents, no past or present shareholder or employee of ETI, or any
affiliate, and no Associate of any past or present shareholder or employee of
ETI or any affiliate, (i) is indebted to, or has any financial, business, or
contractual relationship or arrangement with ETI or any affiliate, (ii) has any
direct or indirect interest in any property, asset, or right which is owned or
used by ETI or any affiliate, or (iii) has been directly or indirectly involved
in any transaction with ETI or any affiliate.
5.20 Corporate Records. Copies of all corporate books and records,
including but not limited to stock transfer ledgers, and any other documents and
records of ETI will be provided to the Buyer at Closing. All such records and
documents are complete, true, and correct.
5.21 Banking Records. A true, correct, and complete list of the names of
each bank in which ETI has an account and the names of all persons authorized to
draw thereon will be delivered to the Buyer as part of the ETI Disclosure
Documents; ETI has no safe deposit box.
5.22 Brokers. ETI has not agreed to pay any brokerage fees, finder's fees,
or other fees or commissions with respect to the transactions contemplated in
this Agreement which could give rise to a claim against the Shares, the ETI
Shares, or any portion thereof. To the best of the ETI'S knowledge, no person
or entity is entitled, or intends to claim that it is entitled, to receive any
such fees or commissions in connection with such transactions. ETI further
agrees to indemnify and hold harmless the other parties to this Agreement
against liability to any other broker claiming to act on behalf of ETI.
5.23 Approvals. Except as otherwise provided in this Agreement, to the
best knowledge and belief of the Selling Shareholder(s), no authorization,
consent, or approval of, or registration or filing with, any governmental
authority or any other person is required to be obtained or made by the Selling
Shareholder(s) or ETI in connection with the execution, delivery, or performance
of this Agreement.
11
<PAGE>
5.24 Full Disclosure. The information concerning ETI set forth in this
Agreement, in the ETI Disclosure Documents, and in the ETI Financials is, to the
best of the Selling Shareholder(s)' knowledge and belief, complete and accurate
in all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact required to make the statements made, in
light of the circumstances under which they were made, not misleading.
5.25 Date of Representations and Warranties. Each of the representations
and warranties of the Selling Shareholder(s) set forth in this Agreement are
joint and several, and are true and correct at and as of the Closing Date, with
the same force and effect as though made at and as of the Closing Date, except
for changes permitted or contemplated by this Agreement.
6. Conditions Precedent to Obligations of the Selling Shareholder(s)
All obligations of the Selling Shareholder(s) under this Agreement are
subject to the fulfillment, prior to or as of the Closing Date, of each of the
following conditions:
6.1 Representations and Warranties. The representations and warranties by
the Buyer set forth in this Agreement shall be true and correct at and as of the
Closing Date, with the same force and effect as though made at and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
The Buyer shall deliver on the Closing Date a certificate to this effect,
referred to as the Buyer Certificate of Representations and Warranties.
6.2 No Breach or Default. The Buyer shall have performed and complied with
all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing.
6.3 Action to Pay Purchase Price. The Buyer shall have taken all corporate
and other action necessary to issue and deliver the shares representing the
Purchase Price to the Selling Shareholder(s) pursuant to this Agreement.
6.4 Buyer Disclosure Documents. Before Closing, the Buyer will have
delivered to the Selling Shareholder(s), or caused the delivery of, the Buyer
Disclosure Documents.
6.5 Approval of Other Instruments and Documents by the Selling
Shareholder(s). All instruments and documents delivered to the Selling
Shareholder(s) pursuant to the provisions of this Agreement, shall be reasonably
satisfactory to their legal counsel.
6.6 [Deleted]
6.7 Opinion of Counsel. The Buyer shall have delivered to the Selling
Shareholder(s) an opinion of counsel dated the Closing Date to the effect that:
(A) The Buyer is duly organized, validly existing, and in good standing
under the laws of the United States, State of Texas.
(B) The Buyer has the corporate power to conduct business and,
specifically, to carry on its business as now being conducted and is
duly qualified to do business in the United
12
<PAGE>
States, State of Texas.
(C) All corporate actions and director approvals have been properly
obtained and completed by the Buyer, to the extent, if any, that
they are necessary, for all actions required under this Agreement
prior to Closing.
(D) This Agreement has been duly authorized, executed, and delivered by
the Buyer and is a valid and binding obligation of the Buyer and, in
this regard, the Buyer shall provide the Selling Shareholder(s) at
Closing with a certified copy of the resolution or resolutions of
the Board of Directors of the Buyer, approving and authorizing the
issuance by the Buyer of the shares upon the terms and conditions
herein set forth.
6.8 Employment Agreements. Buyer shall have entered into Employment
Agreements for ETI with employees to be retained by ETI, if necessary.
7. Conditions Precedent to Obligations of the Buyer
All obligations of the Buyer under this Agreement are subject to the
fulfillment, prior to or as of the Closing Date, of each of the following
conditions:
7.1 Representations and Warranties. The representations and warranties
executed by the President of ETI on behalf of the Selling Shareholder(s) set
forth in this Agreement shall be true and correct at and as of the Closing Date,
with the same force and effect as though made at and as of the Closing Date,
except for changes permitted or contemplated by this Agreement. The Selling
Shareholder(s) shall cause to be delivered on the Closing Date the certificate
to this effect, referred to in this Agreement as the Certificate of
Representations and Warranties executed by the President and Chief Executive
Officer of ETI.
7.2 No Breach or Default. The Selling Shareholder(s) shall have performed
and complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by them prior to or at the Closing.
7.3 Action to Transfer ETI Shares. The Selling Shareholder(s) shall have
taken all action necessary to transfer the ETI Shares to the Buyer pursuant to
this Agreement. In this regard, the conveyance(s) of the ETI Shares shall
contain such good and sufficient stock powers, and other good and sufficient
instruments of sale, conveyance, transfer, and assignment, in form and substance
reasonably satisfactory to the Buyer's counsel and with all requisite
documentary stamps, if any, affixed, as shall be required or as may be
appropriate in order effectively to vest in the Buyer's good, indefeasible, and
marketable title to the ETI Shares free and clear of all liens, mortgages,
conditional sales, and other title retention agreements, pledges, assessments,
covenants, restrictions, reservations, easements, and all other encumbrances of
every nature.
In addition to the conveyance and delivery of the ETI Shares, the Selling
Shareholder(s) shall have taken all action necessary to deliver all of ETI's
corporate books and records, including but not limited to its files, documents,
papers, agreements, formulas, books of account, and records pertaining to its
business, and evidence of compliance with the Texas Corporations Code with
respect to its securities, if required and requested by the Buyer's counsel.
13
<PAGE>
7.4 ETI Financials. Before Closing, the Selling Shareholder(s) will have
delivered the ETI Financials and all ETI Disclosure Documents to the Buyer. The
ETI Disclosure Documents shall specifically include income statements related to
the operations of ETI's business interests up to and including December 31, 1998
and as updated through the quarters ending March 31, 1999, June 30, 1999,
September 30, 1999 and December 31, 1999.
7.5 Approval of Other Instruments and Documents by the Buyer. All
instruments and documents delivered to the Buyer pursuant to the provisions of
this Agreement shall be reasonably satisfactory to the Buyer and its legal
counsel.
7.6 Opinions, Affidavits and Declarations by the Selling Shareholder(s).
The Selling Shareholder(s) shall have delivered to the Buyer evidence
reasonably satisfactory to the Buyer, and their counsel and auditors, dated as
at the Closing Date, that:
(A) ETI is duly organized, validly existing, and in good standing under
the laws of Texas and that the ETI Shares are free and clear of any
and all liens, encumbrances or contingent liabilities except as
disclosed pursuant to this Agreement.
(B) ETI has the corporate power to carry on its business as now being
conducted and is duly qualified to do business in Texas and in any
other jurisdiction where required or where the non-qualification to
do business would have a material adverse affect on the value of its
business.
(C) All action and approvals required in connection to the transfer of
the ETI Shares to the Buyer have been properly taken, completed or
obtained by the Selling Shareholder(s), to the extent, if any, that
they are necessary.
(D) This Agreement has been duly authorized, executed, and delivered by
the Selling Shareholder(s) and is a valid and binding obligation of
the Selling Shareholder(s).
7.7 Employment Agreements. ETI shall have entered into employment
agreements and non-competition agreements with key employees, as identified by
Buyer.
7.8 Release of Claims. The Selling Stockholders shall have executed and
delivered the Release of Claims Against ETI attached hereto as Exhibit "E".
8. Covenants and Agreements of the Selling Shareholder(s)
Up to and including the Closing Date, the Selling Shareholder(s) covenant
that:
8.1 Access and Information. After the execution of this Agreement, the
Selling Shareholder(s) will cause ETI to permit the Buyer to have reasonable
access to all information necessary to verify the representations and warranties
made herein. After the Closing, the Selling Shareholder(s) will cause ETI to
continue to permit the Buyer access to such additional documentation and
information as is reasonably necessary to completion of the transactions
contemplated under this Agreement.
14
<PAGE>
8.2 Conduct of Business as Usual. Up until the Closing Date, the Selling
Shareholder(s) shall insure that ETI's operations shall be conducted only in the
usual and ordinary course, and that no change will be made to such operations
which might adversely affect the value of the ETI Shares to be transferred to
the Buyer.
8.3 Best Efforts. The Selling Shareholder(s) shall use their best efforts
to fulfill all conditions of the Closing including the timely solicitation of
affirmative consent of all third parties necessary to effect a Closing under
this Agreement.
8.4 Assent to Sale of ETI Shares. In the event the sale of ETI Shares is
consummated, then each of the Selling Shareholder(s) agrees to such sale and
waives, surrenders, and agrees not to exercise any rights which such Selling
Shareholder(s) might have to purchase any En Shares or have ETI redeem any ETI
Shares.
9. Covenants and Agreements of the Buyer
Up to and including the Closing Date, the Buyer covenants that:
9.1 Maintenance of Capital Structure. Up until the Closing Date, or
termination hereof, whichever is the earlier, except as disclosed herein or
required under the terms of this Agreement, no change shall be made in the
Articles of Incorporation or Bylaws of the Buyer, or the authorized capital
stock of the Buyer.
9.2 Avoidance of Distributions. Up until the Closing Date, the Buyer shall
not declare any dividends, make any payments or distributions to its
stockholders or purchase for cash or redeem any of its shares of capital stock.
9.3 Conduct of Business as Usual. Up until the Closing Date, the Buyer
shall conduct its operations only in the usual and ordinary course, and that no
change will be made to such operations which might adversely affect the value of
the Buyer.
9.4 Access and Information. After the execution of this Agreement, the
Buyer will permit the Selling Shareholder(s) to have reasonable access to all
information necessary to verify the representations and warranties of the Buyer.
After the Closing, the Buyer will continue to permit the Selling Shareholder(s)
access to such additional documentation and information regarding the Buyer as
is reasonably necessary to completion of the transactions contemplated under
this Agreement.
9.5 Best Efforts. The Buyer shall use its best efforts to fulfill or
obtain the fulfillment of all conditions of the Closing, including the timely
solicitation of affirmative consent of all third parties necessary to effect a
Closing under this Agreement.
9.6 Post Closing Undertaking. The Buyer shall allow the two (2) current
directors of ETI to continue as directors of ETI. However, Buyer will appoint
two (2) additional persons to ETI's board. If ETI's board of directors is
expanded to five (5) persons, then Buyer shall be entitled to appoint 3 out of
the 5 directors.
10. [omitted]
15
<PAGE>
11. Securities Registration; Disclosure
11.1 Private Transaction. The Selling Shareholder(s) understand that the
Company Shares issued pursuant to this Agreement, have not been nor will they be
registered under the Securities Act of 1933 as amended ("'33 Act"), but are
issued pursuant to exemptions from registration including but not limited to
Regulation D and Section 4(2) of the '33 Act, and the Buyer's reliance on such
exemptions in issuing the Company Shares is predicated in part on the
representations of the Selling Shareholder(s) set forth herein and in the
Investment Letter attached hereto as Exhibit "F" (the "Investment Letter"), to
be executed by each of the Selling Shareholder(s) and delivered to the Buyer at
Closing. Exception to preceding pertains to shares as noted in 2.2. 1 (A).
11.2 Access to Information. Each of the Selling Shareholder(s) represents
that, by virtue of their respective economic bargaining power or otherwise,
he/she has had access to or have been furnished with, prior to or concurrently
with Closing, the same kind of information that would be available in a
registration statement under the '33 Act should registration of the Company
Shares issued pursuant to this Agreement have been necessary, and that they
have had the opportunity to ask questions of and receive answers from the
Buyer's officers and directors, or any party acting on their behalf, concerning
the business of the Buyer and that they have had the opportunity to obtain any
additional information, to the extent that the Buyer possesses such information
or can acquire it without unreasonable expense or effort, necessary to verify
the accuracy of information obtained or furnished by the Buyer.
12. Indemnification
Unless a longer period of limitations is provided by law, the Selling
Shareholder(s) and the Buyer shall each indemnify and hold harmless the other
for two (2) years following the date of Closing under this Agreement against and
in respect of any liability, damage, or deficiency, all actions, suits,
proceedings, demands, assessments, judgments, costs and expenses resulting from
any misrepresentations, breach of covenant or warranty, or from any
misrepresentation contained in any certificate furnished hereunder.
13. Covenant Not to Compete
Each Selling Shareholder(s) agrees that for a period of three (3) years
from and after the date of the Closing, he will not, unless acting with the
Buyer's prior written consent, directly or indirectly, own, manage, operate,
join, control, or participate in the ownership, management, operation, or
control of, or be connected as an officer, employee, partner, or otherwise, with
any business substantially similar to Buyer's data cabling activities within the
United States, except any Selling Shareholder may own not more than five percent
(5%) of the common stock of any company whose stock is traded in any stock
exchange or over-the-counter. The Selling Shareholder(s) agree that the remedy
at law for any breach of the foregoing will be inadequate and that the Buyer and
ETI shall be entitled, inter alia, to temporary and permanent injunctive relief
without the necessity of proving actual damage to the Buyer or ETI.
14. [omitted]
16
<PAGE>
15. [omitted]
16. Confidential Information
Notwithstanding any termination of this Agreement, the Buyer, ETI and the
Selling Shareholder(s), and their representatives, agree to hold in confidence
any information not generally available to the public received by them from the
Buyer, ETI or the Selling Shareholder(s) pursuant to the terms of this
Agreement. If this Agreement is terminated for any reason, the Buyer and their
representatives will continue to hold such information in confidence and will,
to the extent requested by ETI or the Selling Shareholder(s), promptly return to
ETI or the Selling Shareholder(s) as the case may be, all written material and
all copies or abstracts thereof furnished to the Buyer pursuant hereto.
Notwithstanding any termination of this Agreement, the Selling Shareholder(s)
and their representatives agree to hold in confidence any information not
generally available to the public received by them from the Buyer pursuant to
the terms of this Agreement. If this Agreement is terminated for any reason, the
Selling Shareholder(s) and their representatives will continue to hold such
information in confidence and will, to the extent requested by the Buyer,
promptly return to the Buyer all written material and all copies or abstracts
thereof given to them or their representatives pursuant thereto.
17. [Omitted]
18. Miscellaneous Provisions
18.1 Survival of Representations and Warranties. All representations,
warranties, and covenants made by any party in this Agreement shall survive the
Closing hereunder and the consummation of the transactions contemplated hereby
for three (3) years from the Closing Date. The Selling Shareholder(s) and the
Buyer are executing and carrying out the provisions of this Agreement in
reliance on the representations, warranties, and covenants and agreements
contained in this Agreement or at the Closing of the transactions herein
provided for including any investigation upon which they might have made or any
representations, warranty, agreement, promise, or information, written or oral,
made by the other party or any other person other than as specifically set forth
herein.
18.2 Approval of the Selling Shareholder(s). The Buyer and the Selling
Shareholder(s) understand that this Agreement requires approval and
participation by a majority of the Selling Shareholder(s) holding at least 100%
of the ETI Shares, and thus that all rights and obligations hereunder are
subject to securing such approval. Each Selling Shareholder, by its execution
hereof, hereby gives its consent to the transaction contemplated by this
Agreement. In the event that the requisite number of Selling Shareholder(s)
shall fail to approve this Agreement, then notwithstanding anything contained
herein to the contrary, this Agreement shall be terminated without liability to
either the Selling Shareholder(s) or the Buyer.
18.3 Costs and Expenses. Subject to paragraph 10 herein, all costs and
expenses in the proposed sale and transfer described in this Agreement shall be
borne by the Buyer.
17
<PAGE>
18.4 Further Assurances. At any time and from time to time, after the
effective date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
18.5 Waiver. Any failure of any party to this Agreement to comply with any
of its obligations, agreements, or conditions hereunder may be waived in writing
by the party to whom such compliance is owed. The failure of any party to this
Agreement to enforce at any time any of the provisions of this Agreement shall
in no way be construed to be a waiver of any such provision or a waiver of the
right of such party thereafter to enforce each and every such provision. No
waiver of any breach of or non-compliance with this Agreement shall be held to
be a waiver of any other or subsequent breach or non-compliance.
18.6 Notices. All notices and other communications hereunder shall either
be in writing and shall be deemed to have been given if delivered in person,
sent by overnight delivery service or sent by facsimile transmission, to the
parties hereto, or their designees, as follows:
To ETI
Bryan Scott
President
eToolz, lnc.
7210 Blanco Road, Suite 206
San Antonio, TX 78216
Telephone: 210-341-1090
Facsimile: 210-341-0988
To the Buyer:
H. Dean Cubley
President
Eagle Wireless International, Inc.
101 Courageous Drive
League City, TX 77573
Telephone (281) 538-6000
Facsimile (281) 334-5302
With a copy to:
Richard O. Weed
Weed & Co. L.P.
4695 MacArthur Court, Suite 530
Newport Beach, CA 92660
Telephone (949)475-9086
Facsimile (949)475-9087
18
<PAGE>
18.7 Headings. The paragraph and subparagraph headings in this Agreement
are inserted for convenience only and shall not affect in anyway the meaning or
interpretation of this Agreement.
18.8 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
18.9 Governing Law. This Agreement shall be governed by the laws of the
United States, State of Texas.
18.10 Binding Effect. This Agreement shall be binding upon the parties
hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors, and assigns.
18.11 Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes any and all prior agreements,
arrangements, or understandings between the parties relating to the subject
matter of this Agreement. No oral understandings, statements, promises, or
inducements contrary to the terms of this Agreement exist. No representations,
warranties, covenants, or conditions, express or implied, other than as set
forth herein, have been made by any party.
18.12 Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in fu11 force and
effect.
18.13 Amendment. This Agreement may be amended only by a written
instrument executed by the parties or their respective Successors or assigns.
18.14 Facsimile Counterparts. A facsimile, telecopy or other reproduction
of this Agreement may be executed by one or more parties hereto and such
executed copy may be delivered by facsimile of similar instantaneous electronic
transmission device pursuant to which the signature of or on behalf of such
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 hereto, all
parties agree to execute an original of this Agreement as well as any facsimile,
telecopy or other reproduction hereof.
18.15 Time is of the Essence. Time is of the essence of this Agreement and
of each and every provision hereof.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
"Buyer"
Eagle Wireless International, Inc.
By:________________________________
Name: _____________________________
Title: ____________________________
eToolz, Inc.
By: /s/ BRYAN SCOTT
Name: Bryan Scott
Title: President and Chairman
By: /s/ TODD A. DOERR
Name: Todd A. Doerr
Title: Secretary
20
