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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 23, 1999
INTELLICELL CORP.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
001-12571 95-4467726
(Commission File Number) (I.R.S. Employer Identification No.)
9314 Eton Avenue
Chatsworth, California 91311
(Address of principal executive offices) (Zip Code)
(818) 709-2300
Registrant's telephone number, including area code
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Item 5. OTHER EVENTS
On July 23, 1999, Intellicell Corp. ("Registrant"), Intellicell Merger Sub,
Inc. ("Intellicell Merger Sub"), Cellular Wholesalers, Inc. ("CWI") and the
principal stockholders of CWI signed an Agreement and Plan of Merger ("the
Merger Agreement"). The Merger Agreement provides for the merger of CWI into
Intellicell Merger Sub, a newly formed, wholly-owned subsidiary of Registrant.
On August 23, 1999, the parties made certain clarifying amendments to and
restated in full the Merger Agreement, which was effective as of July 23, 1999.
CWI is a privately held wholesale distributor of wireless phone products.
Under the terms of the merger, CWI's stockholders will receive up to $5,000,000
in cash and 2,250,000 shares of Registrant's common stock (with the amount of
cash subject to reduction and the number of shares subject to increase to a
maximum of 4,500,000 shares, based on CWI's total stockholders' equity on the
closing date of the merger). The merger, which is subject to Registrant's
shareholder approval, certain customary closing conditions and receipt by
Registrant of certain financing commitments, is expected to be completed in the
fourth quarter of 1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
10 Amended and Restated Agreement and Plan of Merger, dated as of July
23, 1999, among Intellicell Corp., Intellicell Merger Sub, Inc.,
Cellular Wholesalers, Inc. and Principal CWI Stockholders.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTELLICELL CORP.
Date: August 26, 1999 By: /s/ David Kane
----------------------------------------
David Kane, Chief Financial Officer
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INDEX TO EXHIBITS
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EXHIBIT
NUMBER DESCRIPTION
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10 Amended and Restated Agreement and Plan of Merger, dated as of
July 23, 1999, among Intellicell Corp., Intellicell Merger
Sub, Inc., Cellular Wholesalers, Inc. and Principal CWI
Stockholders.
</TABLE>
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EXHIBIT 10
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
among
INTELLICELL CORP.
INTELLICELL MERGER SUB,
CELLULAR WHOLESALERS, INC.
AND
PRINCIPAL CWI STOCKHOLDERS
Dated as of July 23, 1999
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TABLE OF CONTENTS
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<C> <S> <C> <C> <C>
I. CWI MERGER............................................................................................... 1
1.1 The Merger.................................................................................... 1
1.2 Effects of the Merger......................................................................... 1
1.3 Closing....................................................................................... 1
1.4 Certificate of Incorporation and Bylaws of the Surviving Corporation.......................... 2
1.5 Directors of the Surviving Corporation; Voting Trust Agreement................................ 2
1.6 Officers of the Surviving Corporation......................................................... 2
1.7 Conversion of CWI Shares...................................................................... 2
1.8 Escrow........................................................................................ 3
1.9 Merger Sub Common Stock Represents Surviving Corporation Common Stock......................... 3
1.10 Exchange of Certificates...................................................................... 3
1.11 Intellicell to Reserve Shares................................................................. 3
1.12 Further Documents............................................................................. 3
1.13 Reorganization................................................................................ 3
II. INTELLICELL.............................................................................................. 4
2.1 Directors of Intellicell...................................................................... 4
2.2 Officers of Intellicell....................................................................... 4
III. BOARD AND SHAREHOLDER APPROVALS.......................................................................... 4
3.1 CWI Board and Stockholder Approval............................................................ 4
3.2 Merger Sub Board and Shareholder Approval..................................................... 4
3.3 Intellicell Board and Stockholder Approval.................................................... 4
3.4 Intellicell Proxy Statement................................................................... 4
IV. REPRESENTATIONS AND WARRANTIES........................................................................... 5
4.1 Representations and Warranties of CWI......................................................... 5
(a) Due Incorporation, Good Standing and Qualification................................. 5
(b) Corporate Authority................................................................ 5
(c) Capital Stock...................................................................... 5
(d) Options, Warrants and Rights....................................................... 5
(e) Subsidiaries....................................................................... 5
(f) Financial Statements............................................................... 5
(g) Actions in the Ordinary Course of Business......................................... 6
(h) No Material Adverse Change......................................................... 6
(i) Real Estate Rights................................................................. 6
(j) Title to Properties................................................................ 6
(k) Condition of Assets and Properties................................................. 7
(l) Litigation......................................................................... 7
(m) Intellectual Property.............................................................. 7
(n) Consents and Approvals; No Violation............................................... 7
(o) Taxes.............................................................................. 7
(p) Accounts Receivable................................................................ 8
(q) Contracts.......................................................................... 8
(r) Compliance with Law and Other Regulations.......................................... 8
(s) Employee Benefit and Employment Matters............................................ 8
(t) Insurance.......................................................................... 10
(u) Conflicting Interest............................................................... 10
(v) No Payments to Directors, Officers, Stockholders or Others......................... 10
(w) No Prohibited Payments............................................................. 10
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(x) Minute Books....................................................................... 10
(y) Accuracy of Statements............................................................. 10
(z) Information Supplied for Proxy Statement........................................... 10
(aa) Brokers and Finders................................................................ 10
(ab) Related Party Transactions......................................................... 11
(ac) Year 2000 Compliance............................................................... 11
(ad) Inventory.......................................................................... 11
4.2 Representations and Warranties of CWI and the Principal CWI Stockholders...................... 11
(a) Ownership of Shares................................................................ 11
(b) Investment Representations......................................................... 11
(c) Appraisal Rights................................................................... 12
4.3 Representations and Warranties of Intellicell and Merger Sub.................................. 12
(a) Due Incorporation, Good Standing and Qualification................................. 12
(b) Corporate Authority................................................................ 12
(c) Capital Stock...................................................................... 12
(d) Options, Warrants and Rights....................................................... 12
(e) Subsidiaries....................................................................... 12
(f) Intellicell SEC Reports............................................................ 13
(g) Financial Statements............................................................... 13
(h) Actions in the Ordinary Course of Business......................................... 13
(i) No Material Adverse Change......................................................... 13
(j) Real Estate Rights................................................................. 14
(k) Title to Properties................................................................ 14
(l) Condition of Assets and Properties................................................. 14
(m) Litigation......................................................................... 14
(n) Intellectual Property.............................................................. 14
(o) Consents and Approvals; No Violation............................................... 15
(p) Taxes.............................................................................. 15
(q) Accounts Receivable................................................................ 15
(r) Contracts.......................................................................... 15
(s) Compliance with Law and Other Regulations.......................................... 16
(t) Employee Benefit and Employment Matters............................................ 16
(u) Insurance.......................................................................... 17
(v) Conflicting Interest............................................................... 17
(w) No Payments to Directors, Officers, Stockholders or Others......................... 17
(x) No Prohibited Payments............................................................. 17
(y) Minute Books....................................................................... 18
(z) Accuracy of Statements............................................................. 18
(aa) The Proxy Statement................................................................ 18
(ab) Brokers and Finders................................................................ 18
(ac) Status of Intellicell Common Stock to be Issued.................................... 18
(ad) No Activities...................................................................... 18
(ae) Year 2000 Compliance............................................................... 18
(af) Inventory.......................................................................... 18
V. COVENANTS................................................................................................ 19
5.1 Covenants of CWI.............................................................................. 19
(a) Truth of Representations and Warranties............................................ 19
(b) Preservation of Business........................................................... 19
(c) Ordinary Course.................................................................... 19
(d) Books and Records.................................................................. 19
(e) No Organic Change.................................................................. 19
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(f) No Issuance by CWI of Shares, Options, or Other Securities......................... 19
(g) Compensation....................................................................... 19
(h) Dividends.......................................................................... 20
(i) Right of Inspection................................................................ 20
(j) Confidentiality.................................................................... 20
(k) Satisfaction of Obligations and Liabilities........................................ 20
(l) Reasonable Efforts................................................................. 20
5.2 Covenants of Intellicell...................................................................... 21
(a) Truth of Representations and Warranties............................................ 21
(b) Preservation of Business........................................................... 21
(c) Ordinary Course.................................................................... 21
(d) Books and Records.................................................................. 21
(e) No Organic Change.................................................................. 21
(f) No Issuance by Intellicell of Shares, Options or Other Securities.................. 21
(g) Compensation....................................................................... 22
(h) Dividends.......................................................................... 22
(i) Right of Inspection................................................................ 22
(j) Confidentiality.................................................................... 22
(k) Satisfaction of Obligations and Liabilities........................................ 22
(l) Recommendation of Board of Directors............................................... 22
(m) Reasonable Efforts................................................................. 22
(n) Employee Benefits.................................................................. 23
(o) Third Party Beneficiaries.......................................................... 23
(p) Voting Trust Agreement............................................................. 23
(q) Operation of Merger Sub............................................................ 23
VI. CONDITIONS PRECEDENT TO OBLIGATIONS...................................................................... 23
6.1 Conditions Precedent to the Obligations of Intellicell and Merger Sub......................... 23
(a) Accuracy of Representations and Warranties......................................... 23
(b) Performance of Agreements.......................................................... 24
(c) Opinion of Financial Advisor....................................................... 24
(d) Stockholder Approvals.............................................................. 24
(e) Opinion of Counsel for CWI......................................................... 24
(f) No Material Adverse Change......................................................... 24
(g) Litigation......................................................................... 24
(h) Certificate of CWI................................................................. 24
(i) Proceedings Satisfactory to Counsel................................................ 25
(j) Consents and Approvals............................................................. 25
(k) Delivery of Documents.............................................................. 25
(l) Employment Agreement............................................................... 25
(m) Intellicell Common Stock Trading Price............................................. 25
(n) Additional Financing............................................................... 25
(o) Related Party Agreements........................................................... 25
(p) Insurance Letter................................................................... 25
6.2 Conditions Precedent to the Obligations of CWI................................................ 26
(a) Accuracy of Representations and Warranties......................................... 26
(b) Performance of Agreements.......................................................... 26
(c) Stockholder Approval............................................................... 26
(d) Opinion of Counsel for Intellicell................................................. 26
(e) No Material Adverse Change......................................................... 27
(f) Litigation......................................................................... 27
(g) Certificates of Intellicell and Merger Sub......................................... 27
</TABLE>
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<C> <S> <C> <C> <C>
(h) Proceedings Satisfactory to Counsel................................................ 27
(i) Delivery of Documents.............................................................. 27
(j) Consents and Approvals............................................................. 27
(k) Amendment to Certificate of Incorporation.......................................... 28
(l) Amendment to Bylaws; Election of Directors......................................... 28
(m) Intellicell Common Stock Trading Price............................................. 28
(n) Employment Agreements.............................................................. 28
(o) Voting Trust Agreement............................................................. 28
(p) Additional Financing............................................................... 28
(q) Insurance Letter................................................................... 28
VII. AMENDMENT, WAIVER, TERMINATION........................................................................... 28
7.1 Amendment..................................................................................... 28
7.2 Waiver........................................................................................ 28
7.3 Termination................................................................................... 29
7.4 Effect of Termination......................................................................... 29
VIII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.............................................. 29
8.1 Survival of Representations and Warranties.................................................... 29
8.2 Indemnification by CWI and Principal CWI Stockholders......................................... 29
8.3 Indemnification by Intellicell................................................................ 30
8.4 Procedures for Indemnification................................................................ 30
8.5 Defense of Third Party Claims................................................................. 30
8.6 Settlement of Third Party Claims.............................................................. 31
IX. OPERATION OF INTELLICELL FOLLOWING MERGER................................................................ 31
9.1 Election of Directors......................................................................... 31
9.2 Operational Facilities........................................................................ 31
X. GENERAL.................................................................................................. 31
10.1 Fees and Expenses............................................................................. 31
10.2 Indemnity Against Finders..................................................................... 32
10.3 Controlling Law............................................................................... 32
10.4 Notices....................................................................................... 32
10.5 Binding Nature of Agreement; No Assignment.................................................... 33
10.6 Entire Agreement.............................................................................. 33
10.7 Section Headings.............................................................................. 33
10.8 Public Announcements.......................................................................... 33
10.9 Construction of Agreement..................................................................... 34
10.10 Documents and Exhibits........................................................................ 34
10.11 Indulgences, Not Waivers...................................................................... 34
10.12 Execution in Counterparts..................................................................... 34
10.13 Provisions Separable.......................................................................... 34
10.14 Number of Days................................................................................ 34
10.15 Liquidated Damages............................................................................ 34
10.16 Dispute Resolution............................................................................ 34
10.17 Nonsolicitation............................................................................... 34
</TABLE>
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is
made and entered into as of July 23, 1999, by and among Intellicell Corp., a
Delaware corporation ("INTELLICELL"), Intellicell Merger Sub, Inc., a Delaware
corporation ("MERGER SUB"), Cellular Wholesalers, Inc., an Illinois corporation
("CWI"), and Ronald Goldberg, Philip Leavitt, Sherwin Geitner, and Cary Maimon
(the "PRINCIPAL CWI STOCKHOLDERS") with reference to the following facts and
subject to the condition that Cary Maimon will only continue for purposes of
this Agreement to be one of the Principal CWI Stockholders if he is a
shareholder of CWI at the time of the merger of CWI into the Merger Sub:
WHEREAS, Intellicell has formed Merger Sub as a wholly-owned subsidiary for
the purpose of effectuating the merger of CWI with and into Merger Sub as
provided herein; and
WHEREAS, the respective Boards of Directors of Intellicell, Merger Sub, and
CWI (collectively, the "COMPANIES") deem it to be in the best interests of the
Companies and their respective stockholders that CWI merge with and into Merger
Sub on the terms and subject to the conditions set forth in this Agreement (the
"Merger"); and
WHEREAS, the Principal CWI Stockholders approve of the Merger and desire to
facilitate the Merger by their agreements contained herein; and
WHEREAS, the parties intend that the transactions contemplated hereby
qualify for nonrecognition treatment under the provisions of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "CODE"); and
WHEREAS, the parties entered into an Agreement and Plan of Merger, dated as
of July 23, 1999 and an Amendment to Agreement and Plan of Merger, dated as of
July 23, 1999 (collectively, the "Original Agreement"); and
WHEREAS, the parties desire to make certain amendments to the Original
Agreement and to restate in full the Original Agreement as so amended;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and agreements herein contained, the parties agree
as follows:
I. CWI MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as hereinafter defined), CWI shall be merged
with and into Merger Sub, with Merger Sub as the corporation (the "SURVIVING
CORPORATION") surviving the Merger, and the separate existence of CWI shall
cease.
1.2 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of Chapter 805 of the Illinois
Compiled Statutes (the "ILLINOIS ACT") and Subchapter IX of the Delaware General
Corporation Law (the "DELAWARE ACT").
1.3 CLOSING. Subject to Article VI, the consummation of the transactions
contemplated hereby (the "CLOSING") shall take place at the offices of Kamensky
& Rubinstein, 7250 North Cicero Avenue, Suite 200, Lincolnwood, Illinois
60646-1693, or such other place as the parties hereto shall agree, at 10:00 A.M.
on September 30, 1999 or such other time and date as shall be determined by the
parties (the "CLOSING DATE"). Contemporaneously with the Closing, the Companies
shall cause an agreement of merger between Merger Sub and CWI, in a form that is
acceptable to each of the Companies and otherwise conforms to the requirements
of the Illinois Act (the "AGREEMENT OF MERGER"), to be filed with the Secretary
of State of the State of Illinois as provided in Sections 5/11.25 and 5/11.35 of
Chapter 805 of the Illinois Act and with the Secretary of State of the State of
Delaware as provided in Section 252 of Subchapter IX of the Delaware Act. The
Agreement of Merger shall specify that the Merger shall become effective on the
Closing Date or such other time as the parties shall agree (the "EFFECTIVE
TIME").
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1.4 CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION. The Certificate of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation. The Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation. The Certificate of Incorporation and Bylaws of Merger Sub
shall be provided to CWI's counsel prior to the Closing Date and shall be
reasonably acceptable to such counsel.
1.5 DIRECTORS OF THE SURVIVING CORPORATION; VOTING TRUST AGREEMENT. As of
the Effective Time, the individuals identified on Exhibit A to the Agreement
shall be elected by Intellicell as the directors of the Surviving Corporation
(the "INITIAL SURVIVING CORPORATION DIRECTORS"), in each case to serve until
their respective successors are elected or appointed in accordance with the
Bylaws of the Surviving Corporation. The Initial Surviving Corporation Directors
shall be the individuals who are all of Intellicell's directors immediately
following the appointment of additional Intellicell directors pursuant to
Section 2.1. Subject to Article VI, at the Closing the Principal CWI
Stockholders shall enter into the Voting Trust Agreement referred to in Section
5.2(p).
1.6 OFFICERS OF THE SURVIVING CORPORATION. As of the Effective Time, the
individuals identified on Exhibit B to this Agreement shall be appointed as the
officers of the Surviving Corporation, to serve in each case until their
respective successors are appointed in accordance with the Bylaws of the
Surviving Corporation.
1.7 CONVERSION OF CWI SHARES. The total consideration to be received by
the shareholders of CWI in connection with the conversion of all of the then
outstanding capital stock of CWI in connection with the Merger shall be
$14,000,000 (the "BASE CONSIDERATION"), plus an additional amount (the
"ADDITIONAL CONSIDERATION") in the event the total stockholders' equity of CWI
as of the Closing Date (the "Closing Date Equity") exceeds $177,667. The Base
Consideration shall consist of $5,000,000 in cash and $9,000,000 of shares of
Intellicell common stock, $.01 par value per share (the "INTELLICELL COMMON
STOCK"), valued as hereinafter described (the $9,000,000 of shares of
Intellicell Common Stock being hereinafter referred to as the "BASE SHARES").
For purposes of this Agreement, the shares of Intellicell Common Stock shall
have a value (the "SHARE VALUE") equal to $4 per share. The Additional
Consideration, if any, shall consist of an additional number of shares of
Intellicell Common Stock (the "ADDITIONAL SHARES") as equals (i) the amount by
which the Closing Date Equity exceeds $177,667, divided by (ii) $4; provided,
however, that in no event will the number of Additional Shares to be issued
exceed 2,250,000 shares. Notwithstanding the foregoing, the cash portion of the
Base Consideration will be reduced by the amount, if any, by which the Closing
Date Equity is less than $1,177,667, although Additional Shares will then be
issued in an amount equal to (i) the amount, if any, by which the Closing Date
Equity exceeds $177,667, divided by (ii) $4. The Closing Date Equity shall be
determined within 30 days following the Closing Date by Intellicell's and CWI's
independent certified public accountants in accordance with generally accepted
accounting principles, using assumptions that are mutually acceptable to such
accountants and including a reserve against accounts receivable that is
acceptable to Intellicell and CWI, and such determination shall be binding on
all of the parties to this Agreement. At the Effective Time, all of the issued
and outstanding shares of capital stock of CWI ("CWI STOCK") shall, by virtue of
the Merger and without any action on the part of the holders thereof, be
converted pro rata into and thereafter represent the number of Base Shares
described above ($9,000,000 divided by the Share Value) and the holders of such
shares shall concurrently receive on a pro rata basis (unless directed otherwise
as described below) $4,500,000 of the cash portion of the Base Consideration.
The rights of the CWI stockholders to receive the Additional Shares will be
nontransferrable as of the Closing Date. The Additional Shares and, subject to
Section 1.8, the remaining cash portion of the Base Consideration, if any, will
be distributed pro rata (unless directed otherwise as described below) to the
holders of the Base Shares as of the Closing Date within 15 days following the
determination of the Closing Date Equity. Notwithstanding the foregoing, the
Base Shares, Additional Shares and cash portion of the Base Consideration will
be allocated among the CWI stockholders in accordance with a written allocation
agreement signed by all of the CWI stockholders, provided that a copy of this
allocation agreement is delivered to Intellicell at least three
2
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business days prior to the Closing. Fractional shares shall not be issued, and
in lieu thereof Intellicell shall pay cash in an amount equal to the Share Value
times the applicable fraction of a share.
1.8 ESCROW. $500,000 of the cash portion of the Base Consideration shall
not be distributed at the Closing but shall be held in escrow with an escrow
agent and on such terms as shall be agreed to by the parties to this Agreement
(the "Escrow Agreement"), pending determination of the Closing Date Equity. In
the event the Closing Date Equity is determined to exceed $677,667, a portion of
the escrowed funds (up to the entire $500,000) equal to the amount by which such
equity exceeds $677,667 shall be delivered to the CWI stockholders out of the
escrowed funds within 15 days following the determination of the Closing Date
Equity. The remainder of such escrowed funds will be returned to Intellicell. In
the event the Closing Date Equity is determined to not exceed $677,667, all of
the escrowed funds shall be returned to Intellicell and the CWI stockholders
shall be required to pay Intellicell in cash an amount equal to (i) $677,667
less (ii) the amount of the Closing Date Equity, with such payment to be made
within 15 days following the determination of such equity.
1.9 MERGER SUB COMMON STOCK REPRESENTS SURVIVING CORPORATION COMMON
STOCK. At the Effective Time, each share of common stock, $.01 par value, of
Merger Sub issued and outstanding immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of Intellicell as the
holder thereof, represent one share of common stock, $.01 par value, of the
Surviving Corporation.
1.10 EXCHANGE OF CERTIFICATES. After the Effective Time, any holder of an
outstanding certificate or certificates (the "CWI STOCK CERTIFICATES")
theretofore representing any of the shares of CWI Stock, upon surrender thereof
to Intellicell or the transfer agent for Intellicell Common Stock, shall be
entitled to receive in exchange therefor a certificate or certificates
representing the number of shares of Intellicell Common Stock as provided in
Section 1.7. Until so surrendered, the outstanding CWI Stock Certificates shall
be deemed for all purposes, other than the payment of dividends or other
distributions, if any, in respect of Intellicell Common Stock, to represent that
certain number of shares of Intellicell Common Stock as set forth in Section
1.7. No dividend or distribution, if any, payable to holders of shares of
Intellicell Common Stock shall be paid to the holders of CWI Stock Certificates;
provided, however, that upon surrender and exchange of such CWI Stock
Certificates, there shall be paid to the record holders of the stock certificate
or certificates issued in exchange therefor, the amount, without interest
thereon, of dividends or other distributions, if any, which theretofore but
subsequent to the Effective Time have been declared and become payable with
respect to the number of whole shares of Intellicell Common Stock into which the
shares of CWI Stock theretofore represented thereby shall have been converted.
1.11 INTELLICELL TO RESERVE SHARES. At or prior to the Closing Date,
Intellicell shall reserve for the benefit of the holders of the CWI Stock
Certificates such number of shares of Intellicell Common Stock as shall be
required for conversion of CWI Stock in accordance with this Agreement.
1.12 FURTHER DOCUMENTS. From time to time, on and after the Closing Date
(i), as and when requested by Intellicell, the appropriate officers and
directors of CWI as of the Closing Date shall, for and on behalf and in the name
of CWI, execute and deliver all such instruments, and shall take or cause to be
taken such further or other actions as Intellicell may reasonably request in
order to confirm of record or otherwise to Intellicell title to all of the
outstanding shares of CWI and otherwise to carry out fully the provisions and
purposes of this Agreement, and (ii) as and when requested by CWI's counsel,
Intellicell shall execute and deliver all such instruments and shall take or
cause to be taken such further or other actions as CWI's counsel may reasonably
request in order to carry out fully the provisions and purposes of this
Agreement.
1.13 REORGANIZATION. This Agreement constitutes a plan of reorganization
within the meaning of the Treasury Regulations under the Code and has been duly
adopted by each party hereto as such. The parties hereto intend that the
transactions contemplated by this Agreement shall qualify for nonrecognition
treatment under Section 368(a) of the Code, and each party hereto will take all
commercially reasonable actions in order to accomplish such intent.
3
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II. INTELLICELL
2.1 DIRECTORS OF INTELLICELL. At or prior to the Closing, Intellicell
shall cause the authorized number of directors of Intellicell to be increased
from six to eight and shall elect or appoint, or cause to be elected or
appointed, of the eight directors three individuals (at least one of whom is not
an officer, director, employee or significant shareholder of CWI) designated by
CWI in writing at least ten days prior to the Closing, provided that each such
designated director shall be reasonably acceptable to Intellicell. For purposes
of this Section 2.1, a significant shareholder of CWI means any shareholder who
owned at least 10% of the outstanding shares of CWI Stock as of the Closing
Date. It is currently contemplated that the three CWI designees will be Cary
Maimon, Ronald Goldberg and David Segneri. The authorized number of directors of
Intellicell will be fixed at eight by Intellicell's Board of Directors and the
five incumbent directors of Intellicell will then fill the vacancies with the
CWI designees at a meeting of Intellicell's Board of Directors that will be held
on or before the Closing Date.
2.2 OFFICERS OF INTELLICELL. At or prior to the Closing, Intellicell shall
cause the persons indicated on Schedule 2.2 hereto to be appointed to the
offices of Intellicell set forth on Schedule 2.2.
III. BOARD AND SHAREHOLDER APPROVALS
3.1 CWI BOARD AND STOCKHOLDER APPROVAL. CWI hereby represents that its
Board of Directors has duly authorized the execution and delivery of this
Agreement and approved this Agreement, the Merger and related matters, and all
of the stockholders of CWI have executed and delivered to CWI their written
consents under Sections 5/11.20 and 5/7.10 of Chapter 805 of the Illinois Act
approving the execution, delivery and performance by CWI of this Agreement, the
Merger and related matters.
3.2 MERGER SUB BOARD AND SHAREHOLDER APPROVAL. Merger Sub hereby
represents that its Board of Directors has duly authorized the execution and
delivery of this Agreement and approved this Agreement, the Merger and related
matters, and Intellicell, in its capacity as the sole shareholder of Merger Sub,
has executed and delivered to the Merger Sub a written consent under Section 252
of Subchapter IX of the Delaware Act approving the execution, delivery and
performance by Merger Sub of the Agreement of Merger and the approval of this
Agreement.
3.3 INTELLICELL BOARD AND STOCKHOLDER APPROVAL. Intellicell hereby
represents that its Board of Directors has duly authorized the execution and
delivery of this Agreement and approved this Agreement, the Merger and related
matters. As soon as is practicable following the execution of this Agreement,
Intellicell shall duly call, give notice of, convene and hold a meeting (the
"INTELLICELL STOCKHOLDERS MEETING") of the stockholders of Intellicell (the
"INTELLICELL STOCKHOLDERS") for the purpose of voting upon this Agreement, the
Merger and related matters. Intellicell shall, through its Board of Directors,
recommend that the Intellicell Stockholders approve of such matters and shall
use its commercially reasonable best efforts to hold such meeting as soon as
practicable after the date hereof and secure the approval of the Intellicell
Stockholders of the transactions contemplated herein.
3.4 INTELLICELL PROXY STATEMENT. As promptly as practicable after the
execution of this Agreement, Intellicell shall prepare and file with the
Securities and Exchange Commission (the "SEC") a proxy statement (the "PROXY
STATEMENT") and related proxy materials to be used in connection with the
Intellicell Stockholders Meeting. CWI shall furnish Intellicell for inclusion in
the Proxy Statement such information regarding CWI as may be reasonably
necessary to comply with the provisions of the Securities Exchange Act of 1934,
as amended (the "1934 ACT"), and the rules and regulations of the SEC
there-under. If, at any time prior to the Closing Date, it shall be necessary to
amend or supplement the Proxy Statement to correct any statement or omission
with respect to CWI in order to comply with any applicable legal requirements,
CWI shall, at the request of Intellicell or its counsel, promptly supply the
necessary information to Intellicell or its counsel. Intellicell's Board of
Directors shall recommend in the Proxy Statement that the Merger be approved by
the Intellicell stockholders.
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IV. REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF CWI. CWI hereby represents and
warrants to Intellicell, subject to such exceptions as are specifically
disclosed by CWI to Intellicell in the disclosure letter of even date herewith
relating to this Agreement and delivered by CWI to Intellicell herewith (the
"CWI DISCLOSURE LETTER"), the matters set forth below. Any representation made
to the "knowledge" of CWI shall be limited to the actual knowledge of Melvyn
Cohen, Ronald Goldberg and Cary Maimon.
(a) DUE INCORPORATION, GOOD STANDING AND QUALIFICATION. CWI is a
corporation or other legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
with all requisite power and authority to own, operate and lease its properties
and to carry on its business as now being conducted. CWI is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so qualified or licensed and in good
standing would not, in the aggregate, have a Material Adverse Effect. As used in
this Agreement, "MATERIAL ADVERSE EFFECT" means, with respect to CWI or
Intellicell, a material adverse effect on the business, operations, prospects,
or condition, financial or otherwise, of CWI or Intellicell, as the case may be,
and their respective subsidiaries, if any, taken as a whole. Section 4.1(a) of
the CWI Disclosure Letter sets forth, as of the date of this Agreement, each
jurisdiction in which CWI is qualified to do business. CWI has heretofore
delivered to Intellicell accurate and complete copies of the charter and
by-laws, as currently in effect, of CWI.
(b) CORPORATE AUTHORITY. CWI has the corporate power and authority to
enter into this Agreement and to carry out the transactions contemplated hereby.
This Agreement and the Merger have been approved by all of the stockholders of
CWI. This Agreement has been duly authorized, executed and validly delivered by
CWI, and constitutes a valid and binding agreement of CWI, enforceable against
CWI in accordance with its terms.
(c) CAPITAL STOCK. CWI has an authorized capital stock consisting of
10,000 shares of CWI Stock, of which 800 shares are issued and outstanding as of
the date of this Agreement. All of the issued and outstanding shares of CWI
Stock are owned by the persons identified on Schedule 4.1(c) to this Agreement
in the amounts shown thereon, and there are no commitments or other agreements
to which CWI is a party or by which it is bound relating to the issuance or sale
by CWI of any of its securities. All of the issued and outstanding shares of
capital stock of CWI have been validly authorized and issued and are fully paid
and nonassessable and free of preemptive or similar rights.
(d) OPTIONS, WARRANTS AND RIGHTS. There are no outstanding convertible
securities, options, warrants or other rights to purchase or to convert any
obligation into any shares of the capital stock of CWI or any subsidiary of CWI
or commitments or agreements to issue any such securities, options, warrants or
other rights.
(e) SUBSIDIARIES. CWI does not have any subsidiaries, which for
purposes of this Agreement shall include every other corporation, partnership,
joint venture or other business association in which CWI directly, or indirectly
through another entity or entities more than 50% owned by CWI, owns or controls
at least 50% of the securities or other equity interests.
(f) FINANCIAL STATEMENTS. The balance sheets of CWI as of September
30, 1998 and 1997, the statements of operations, stockholders' equity and cash
flows of CWI for each of the three years ended September 30, 1998, and all
related schedules and notes to the foregoing, copies of which are attached to
the CWI Disclosure Letter, were prepared in accordance with generally accepted
accounting principles and fairly and accurately present the financial position,
results of operations and changes in financial position of CWI as of their
respective dates and for the periods indicated. The foregoing for the three-year
period ended September 30, 1998 has been audited by independent public
accountants; and each of the foregoing financial statements for the three-month
period ended December 31, 1998 and the seven-month
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period ended April 30, 1999 have been certified by the principal financial
officer of CWI. To CWI's knowledge, CWI does not have any material liabilities
or obligations of a type which would be included in a balance sheet prepared in
accordance with generally accepted accounting principles, whether related to tax
or non-tax matters, accrued or contingent, due or not yet due, liquidated or
unliquidated, or otherwise, except as and to the extent disclosed or reflected
in the balance sheet of CWI as of April 30, 1999 or incurred since April 30,
1999 in the ordinary course of business.
(g) ACTIONS IN THE ORDINARY COURSE OF BUSINESS. Except as set forth in
Section 4.1(g) of the CWI Disclosure Letter, since April 30, 1999 CWI has not:
(i) to CWI's knowledge taken any action outside the ordinary and usual course of
business; (ii) borrowed any money or, to CWI's knowledge, become contingently
liable for any obligations or liability of another; (iii) to CWI's knowledge,
failed to pay all of its debts and obligations as they become due or prior to
the imposition of any penalties or interest; (iv) incurred any debt or, to CWI's
knowledge, any other liability or obligation of any nature to any party except
for obligations arising from the purchase of goods or the rendition of services
in the ordinary course of business, none of which aggregate more than $100,000
with respect to the same supplier or customer; (v) failed to use commercially
reasonable efforts to preserve its business organization intact, to keep
available the services of its employees and independent contractors, or to
preserve its relationships with its customers, suppliers and others with which
it deals; (vi) increased or committed to increase the salary or compensation of
any officer; or (vii) made any material change in its practices, operations or
policies with respect to the method for selling goods or services, or other
method for accounting for sales, the conduct of accounts receivable collection
or accounts payable payment activities or the maintenance of inventory levels.
(h) NO MATERIAL ADVERSE CHANGE. Since April 30, 1999, there has not
been and, to the knowledge of CWI, there is not threatened (i) any material
adverse change in the financial condition, business, properties, assets or
results of operations of CWI; (ii) any loss or damage (whether or not covered by
insurance) to any of the assets or properties of CWI which materially affects or
impairs its ability to conduct its business; (iii) any event or condition of any
character which has materially and adversely affected the business or prospects
(financial or otherwise) of CWI; or (iv) any mortgage or pledge of any material
amount of the assets or properties of CWI, or any indebtedness incurred by CWI
other than indebtedness, not material in the aggregate, incurred in the ordinary
course of business. Notwithstanding the foregoing, Intellicell acknowledges that
CWI's revenues between October 1, 1998 and June 30, 1999 were approximately
$58,000,000 and that this does not constitute a material adverse change in the
business condition of CWI.
(i) REAL ESTATE RIGHTS. Section 4.1(i) of the CWI Disclosure Letter
contains a list of each piece of real property owned, leased or occupied by CWI,
including in each case the location thereof and a description of the use to
which it is put by CWI. CWI has delivered to Intellicell a true and accurate
copy of each deed, mortgage, lease, and other documents (collectively, the "CWI
REAL ESTATE DOCUMENTS") pursuant to which CWI owns, leases, or otherwise
occupies each of its real estate properties (collectively, the "CWI
PROPERTIES"). CWI does not have any interest as owner, lessor, lessee, or
otherwise in any real estate, other than as set forth in the CWI Disclosure
Letter. CWI has not received notice from any mortgagee or landlord of any of the
CWI Properties that CWI is in default of any terms, conditions, or provisions of
any mortgage ("CWI MORTGAGE") or lease ("CWI LEASE") relating to any of the CWI
Properties. The CWI Mortgages and CWI Leases are in good standing and, to the
knowledge of CWI, no condition exists which, with the passage of time, giving of
notice, or both, would lead to a default under any CWI Mortgage or CWI Lease.
(j) TITLE TO PROPERTIES. To CWI's knowledge, it has good and
marketable title to all of its real and personal properties, including the CWI
Properties and all other properties reflected in CWI's balance sheet as of April
30, 1999, or acquired subsequent to April 30, 1999 (except properties disposed
of subsequent to that date in the ordinary course of business). Except as
disclosed in CWI's balance sheet as of April 30, 1999, such assets and
properties are not, to CWI's knowledge, subject to any mortgage, pledge, lien,
claim, encumbrance, charge, security interest or title retention or other
security arrangement, except
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for liens for the payment of federal, state and other taxes, the payment of
which is neither delinquent nor subject to penalties, and except for other liens
and encumbrances incidental to the conduct of the business of CWI or the
ownership of its assets or properties which were not incurred in connection with
the borrowing of money or the obtaining of advances, and which do not in the
aggregate materially detract from the value of the assets or properties of CWI
or materially impair the use thereof in the operation of its business.
(k) CONDITION OF ASSETS AND PROPERTIES. To CWI's knowledge, the
buildings, equipment, fixtures, furniture, furnishings, office equipment and all
other tangible personal assets and properties of CWI presently used in CWI's
business do not require any material repairs other than normal maintenance and
are in good operating condition, reasonable wear and tear excepted.
(l) LITIGATION. There are no actions, suits, proceedings or other
litigation pending or, to the knowledge of CWI, threatened against CWI or any of
its officers, directors or material vendors or customers, at law or in equity,
or before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality which, if determined
adversely to CWI, would individually or in the aggregate be reasonably likely to
have a Material Adverse Effect.
(m) INTELLECTUAL PROPERTY. No claim is pending or, to the knowledge of
CWI, threatened to the effect that the present or past operations of CWI
infringes upon or conflicts with the rights of others with respect to any
intellectual property (including, without limitation, licenses, patents, patent
rights, patent applications, trademarks, trademark applications, trade names,
copyrights, drawings, trade secrets, know-how and computer software) necessary
to permit CWI to conduct its business as now operated (the "CWI INTELLECTUAL
PROPERTY") and no claim is pending or, to the knowledge of CWI, threatened to
the effect that any of the CWI Intellectual Property is invalid or
unenforceable. The CWI Disclosure Letter contains a list of all licenses,
patents, patent rights, patent applications, trademarks, trademark applications,
trade names, copyrights, and service marks of CWI. No contract, agreement or
understanding between CWI and any other party exists which would impede or
prevent the continued use by CWI of the entire right, title and interest of CWI
in and to the CWI Intellectual Property.
(n) CONSENTS AND APPROVALS; NO VIOLATION. Except for recordation of
the Agreement of Merger as required by the Illinois Act and Delaware Act, no
filing with, and no permit, authorization, consent or approval of, any
governmental entity is necessary for the consummation by CWI of the transactions
contemplated by this Agreement. The execution and delivery of this Agreement by
CWI and the consummation of the transactions contemplated hereby will not
violate or result in a breach by CWI of, or constitute a default under, or
conflict with, or cause any acceleration of any material obligation with respect
to (i) any material provision or restriction of any charter, bylaw, loan,
indenture or mortgage of CWI; or (ii) any provision or restriction of any lien,
lease agreement, con-tract, instrument, order, judgment, award, decree,
ordinance or regulation or any other restriction of any kind or character to
which any assets or properties of CWI is subject or by which CWI is bound.
Neither CWI, nor its ultimate parent entity and all entities which it controls
directly or indirectly (within the meaning of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "H-S-R ACT"), has total assets or
annual net sales of $100,000,000 or more.
(o) TAXES. CWI has filed all Federal, state, foreign, local and any
other applicable tax returns and reports required to be filed, and have paid in
full all taxes and assessments shown due thereon (together with all interest,
penalties, assessments and deficiencies assessed in connection therewith due
through the date hereof). To the knowledge of CWI, such tax returns and reports
are correct in all material respects. Federal tax returns of CWI have not been
audited by the Internal Revenue Service within the previous three years. There
are no outstanding agreements or waivers extending the statutory period of
limitation applicable to any Federal or state income tax returns of CWI. No
claim or assertion has been made against CWI by any tax authority in any
jurisdiction in which CWI has not filed any tax return that
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CWI is or may be subject to taxation of any sort in that jurisdiction or is
required to file a tax return in such jurisdiction.
(p) ACCOUNTS RECEIVABLE. To CWI's knowledge, the accounts receivable
of CWI have been acquired in the ordinary course of business, and are subject to
no known defenses, set-offs or counterclaims, except to the extent of the
reserve reflected in the financial statements of CWI. Subject to the foregoing
and to Section 1.8, CWI is not guaranteeing the collectibility of its
receivables nor is CWI representing or warranting that any of the receivables
will actually be collected.
(q) CONTRACTS. CWI is not a party to (i) any lease, installment
purchase agreement or other contract with respect to any real property, used or
proposed to be used in its operations, except, in each case, items reflected in
CWI's April 30, 1999 financial statements; (ii) any contract or agreement for
the purchase of any personal property, commodity, material, fixed asset or
equipment in excess of $100,000; (iii) any mortgage, lease, contract or
agreement creating an obligation of $100,000 or more; (iv) any contract or
agreement involving payments in excess of $100,000 which by its terms does not
terminate or is not terminable without penalty to it within one year after the
date hereof; (v) any loan agreement, indenture, promissory note, conditional
sales agreement or other similar type of arrangement; (vi) any material license
agreement; or (vii) any contract which could be reasonably be expected to result
in a material loss or obligation to CWI. To the knowledge of CWI, each of the
foregoing mortgages, leases, contracts, agreements and other arrangements to
which CWI is a party are valid and enforceable in accordance with their terms,
except as such enforceability may be limited by (i) bankruptcy laws and other
similar laws affecting creditors' rights generally and (ii) general principles
of equity, whether asserted in a proceeding in equity or at law. CWI, and, to
CWI's knowledge, all other parties to each of the foregoing mortgages, leasing
contracts, agreements and other arrangements have performed all material
obligations required to be performed to date thereunder; neither CWI, nor, to
CWI's knowledge, any such other party is in default or in arrears under the
terms of any of the foregoing, except as set forth in Section 4.1(q) of the CWI
Disclosure Letter with respect to CWI's line of credit with American National
Bank where CWI is out of compliance with the terms of such line of credit as of
the date of this Agreement but will be in compliance as of the Closing Date;
and, to CWI's knowledge, no condition exists or event has occurred which, with
the giving of notice or lapse of time or both, would constitute a default under
any of them.
(r) COMPLIANCE WITH LAW AND OTHER REGULATIONS. To CWI's knowledge, CWI
is in compliance with all requirements (including those relating to
environmental matters) of Federal, state or local law, and all requirements of
all governmental bodies and agencies having jurisdiction over it, the conduct of
its business, the use of its assets and properties and all premises occupied by
it, except where the failure to comply would not be reasonably likely to have a
Material Adverse Effect. To CWI's knowledge, there is no environmental
contamination, toxic waste or other discharge, spill, construction component,
structural element or condition, other than cleaning solvents and other
substances normally used in day-to-day operations which is reasonably likely to
have a Material Adverse Effect, nor has CWI received any official notice or
citation that the CWI Properties in any way contravene any Federal, state or
local law or regulation relating to environmental, health or safety matters,
including without limitation any requirements of the Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA") or any OSHA requirements.
Without limiting the foregoing, to CWI's knowledge, CWI has properly filed all
reports, paid all monies and obtained all licenses, permits, certificates and
authorizations needed or required and material to the conduct of its business
and the use of its assets and properties and the premises occupied by it in
connection therewith and is in compliance in all material respects with all
conditions, restrictions and provisions of all of the foregoing. CWI has not
received any notice from any Federal, state or local authority or any insurance
or inspection body that any of its assets, properties, facilities, equipment or
business procedures or practices fails to comply with any applicable law,
ordinance, regulation, building or zoning law, or requirement of any public
authority or body.
(s) EMPLOYEE BENEFIT AND EMPLOYMENT MATTERS. CWI and its "ERISA
Affiliates" (as determined under Section 414(b), (c), (m) or (o) of the Code)
(i) maintain, administer or contribute to, or at any time
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during the past six years have maintained, administered or contributed to, only
those employee pension benefit plans (as defined in Section 3(2) of the
Employment Retirement Income Security Act of 1974, as amended ("ERISA"), whether
or not excluded from coverage under specific Titles or Subtitles of ERISA)
described in Section 4.1(s) of the CWI Disclosure Letter (the "CWI Pension
Plans"); and (ii) maintain, administer or contribute to only those employee
welfare benefit plans (as defined in Section 3(l) of ERISA, whether or not
excluded from coverage under specific Titles or Subtitles of ERISA) described in
Section 4.1(s) of the Disclosure Letter (the "CWI Welfare Plans"). CWI and all
ERISA Affiliates maintain, administer or contribute to only those bonus,
deferred compensation, stock purchase, stock option, severance plan, insurance
or similar arrangements described in Section 4.1(s) of the CWI Disclosure Letter
(the "CWI EMPLOYEE BENEFIT PLANS"). The Internal Revenue Service has determined
that each CWI Pension Plan intended to be "qualified" under Section 401(a) of
the Code is so qualified and that the trust forming a part thereof is tax exempt
under Section 501(a) of the Code from the date of its establishment until the
date hereof, and CWI does not know of any matter which would adversely affect
such qualified or tax-exempt status of such plan or trust. Full payment has been
made, or will be made in accordance with Sections 404(a)(6) and 412 of the Code,
of all amounts which either CWI or any ERISA Affiliate is required to pay under
the terms of each of the CWI Pension Plans and CWI Welfare Plans and all such
amounts are properly accrued on CWI's April 30, 1999 consolidated balance sheet;
and none of the CWI Pension Plans or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in Sections 302 of the
ERISA and 412 of the Code), whether or not waived, as of the last day of the
most recent fiscal year of each of such Plans ended prior to the date of this
Agreement. Neither any CWI Pension Plan or CWI Welfare Plan nor any CWI Pension
Plan or CWI Welfare Plan fiduciary has engaged in any transaction in violation
of Section 406 of ERISA or any "prohibited transaction" (as defined in Section
4975(c)(1) of the Code) other than any such transaction which is exempt under
Section 408 of ERISA or Section 4975(d) of the Code. CWI has furnished to
Intellicell true and complete copies of each CWI Pension Plan, CWI Welfare Plan,
and CWI Employee Benefit Plan and related trust agreements or annuity contracts,
Internal Revenue Service determination letters and summary plan descriptions;
all of the foregoing plans, agreements and commitments are valid, binding, in
full force and effect, and there are no defaults thereunder; and none of the
rights of CWI or any of its ERISA Affiliates thereunder will be impaired by this
Agreement or the consummation of the transactions contemplated by this
Agreement. CWI is not a party to any collective bargaining agreement and there
is no request for union representation pending or, to the knowledge of CWI,
threatened against CWI. Neither CWI nor any of its ERISA Affiliates has incurred
any liability to the Pension Benefit Guaranty Corporation (the "PBGC") as a
result of the voluntary or involuntary termination of any CWI Pension Plan
subject to Title IV of ERISA; there is currently no active filing by CWI or any
of its ERISA Affiliates with the PBGC (and no proceeding has been commenced by
the PBGC to terminate any CWI Pension Plan subject to Title IV of ERISA
maintained or funded, in whole or in part, by CWI or any of its ERISA
Affiliates); and neither CWI nor any of its ERISA Affiliates has made a complete
or partial withdrawal from a multi-employer plan, as such term is defined in
Section 3(37) of ERISA, resulting in "withdrawal liability," as such term is
defined in Section 4201 of ERISA (without regard to subsequent reduction or
waiver of such liability under either Section 4207 or 4208 of ERISA). The
employment of each employee of CWI and its Subsidiaries is terminable at will,
subject to applicable law; and no officer, director or employee of CWI is
entitled to any severance payment upon termination of his or her employment with
CWI, and any severance arrangement described in Section 4.1(s) of the CWI
Disclosure Letter shall apply only in the event such termination is effected by
CWI without cause. CWI has complied in all material respects with all other
applicable Federal, state and local laws relating to the employment of labor
including, but not limited to, the provisions thereof relative to wages, hours,
collective bargaining, working conditions and payment of taxes of any kind, and
CWI is not liable for any arrears of wages or any taxes or penalties for failure
to comply with any of the foregoing or has any obligations for any vacation,
sick leave or other compensatory time. All officers and independent contractors
of CWI are paid salaries or other compensation in accordance with the amounts
set forth in Section 4.1(s) of the CWI Disclosure Letter, and Section 4.1(s) of
the CWI Disclosure Letter correctly and accurately sets forth all salaries,
expenses and personal benefits
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paid to or accrued for all directors, officers and principal stockholders of CWI
as of the date of this Agreement, all of which are reflected as appropriate in
CWI's financial statements as of April 30, 1999.
(t) INSURANCE. CWI maintains in full force and effect insurance
coverage on its assets, properties, premises, operations and personnel in such
amounts and against such risks and losses as are set forth in Section 4.1(t) of
the CWI Disclosure Letter.
(u) CONFLICTING INTEREST. Except as set forth in Section 4.1(u) of the
CWI Disclosure Letter, no director or officer of CWI (i) has any pecuniary
interest in any supplier or customer of CWI or in any other business with which
CWI conducts business or with which CWI is in competition other than holdings of
the publicly-traded securities of such entities; or (ii) is indebted to CWI for
borrowed money.
(v) NO PAYMENTS TO DIRECTORS, OFFICERS, STOCKHOLDERS OR OTHERS. Except
as contemplated by Sections 5.1(c) and 5.1(h), there has not been, since April
30, 1999, any purchase or redemption of any shares of capital stock of CWI or
any transfer, distribution or payment by CWI directly or indirectly, of any
assets or properties to any director or officer or other person other than the
payment of compensation for services actually rendered at rates not in excess of
the rates prevailing on April 30, 1999 and amounts paid in the normal course in
reimbursement of reasonable expenses incurred on behalf of CWI.
(w) NO PROHIBITED PAYMENTS. To the knowledge of CWI, no officer,
director, employee, independent contractor or agent acting on behalf of CWI, has
at any time (i) made any contributions to any candidate for political office in
violation of law, or failed to disclose fully any contributions to any candidate
for political office in accordance with any applicable statute, rule, regulation
or ordinance requiring such disclosure; (ii) made any payment to any local,
state, Federal or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments required
or allowed by applicable law; (iii) made any payment outside the ordinary course
of business to any purchasing or selling agent or person charged with similar
duties of any entity to which CWI sells products or renders services or from
which CWI buys products or services for the purpose of influencing such agent or
person to buy products or services from or sell products or services to CWI; or
(iv) engaged in any transaction, maintained any bank account or used any
corporate funds except for transactions, bank accounts and funds which have been
and are reflected in the normally maintained books and records of CWI.
(x) MINUTE BOOKS. CWI has furnished to Intellicell all minute books of
CWI reflecting actions taken by its stockholders and directors and, to CWI's
knowledge, such minute books are complete and correct in all material respects.
(y) ACCURACY OF STATEMENTS. Except to the extent specifically
qualified herein as being only to CWI's knowledge, neither this Agreement nor
any statement, list, certificate, document or other information furnished or to
be furnished by CWI to Intellicell in connection with this Agreement or any of
the transactions contemplated hereby contains or will contain an untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein, in the light of
circumstances under which they are made, not misleading.
(z) INFORMATION SUPPLIED FOR PROXY STATEMENT. The information supplied
or to be supplied by CWI as required by the 1934 Act and applicable SEC
regulations for inclusion in the Proxy Statement, including any amendments and
supplements thereto, will not, either at the date mailed to the Intellicell
Stockholders or at the time of the Intellicell Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(aa) BROKERS AND FINDERS. Neither CWI nor any of its directors,
officers or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
similar payments in connection with the transactions contemplated by this
Agreement.
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(ab) RELATED PARTY TRANSACTIONS. Since September 30, 1998, there have
been no transactions that CWI would have been required to disclose under Item
404 of Regulation S-K under the Securities Act of 1933, as amended (the "1933
ACT"), had CWI been subject to such regulations.
(ac) YEAR 2000 COMPLIANCE. All of the computer hardware, software and
information systems, including without limitation the financial, operational and
manufacturing systems, used by CWI are, or prior to December 31, 1999 will be,
Year 2000 Compliant, provided that Intellicell makes the remediation
expenditures in accordance with the budget set forth in Section 4.1(ac) of the
CWI Disclosure Letter. For purposes of this Agreement, "Year 2000 Compliant"
shall mean that such systems: (1) are prior to, during, and after calendar year
2000 A.D. capable of operating without errors relating to date data, including
errors relating to date data which represents or references different calendar
centuries or more than one century, and of providing all date related
functionalities, interfaces and data fields, including the indication of
century; (ii) are able to accurately manage and process date and date-related
data (including, but not limited to, calculating, comparing, sequencing and
sorting) from, into and between the twentieth and twenty-first centuries,
including single and multiple centuries and leap years; and (iii) shall not
abnormally terminate or provide invalid or incorrect results due to date or
date-related data, specifically including date data which represents or
references different centuries or more than one century. CWI has not been
informed by any of its vendors that any of the products sold by CWI are not Year
2000 Compliant.
(ad) INVENTORY. With respect to inventories listed on CWI's balance
sheet as of April 30, 1999, as of the date of such balance sheet: (i)
inventories are stated at lower of cost or market, cost being determined on the
basis of FIFO and consistent with the prior year, and due provision was made to
reduce all slow-moving, obsolete or unusable inventories to their estimated
useful or scrap values; (ii) inventory quantities were determined from CWI's
perpetual inventory records, which have been adjusted on the basis of physical
counts taken by competent employees; (iii) liabilities, if unpaid, for all items
included in inventories are recorded, and all quantities billed to customers are
excluded from the inventory balances; (iv) commitments for future purchases are
for quantities not in excess of anticipated requirements and at prices which
will not result in loss; and (v) adequate provision has been made for any
material loss to be sustained in the fulfillment of, or from the inability to
fulfill, any commitment.
4.2 REPRESENTATIONS AND WARRANTIES OF CWI AND THE PRINCIPAL CWI
STOCKHOLDERS. Each of the Principal CWI Stockholders as to himself and CWI as
to all of the Principal CWI Stockholders hereby represents and warrants to
Intellicell as follows:
(a) OWNERSHIP OF SHARES. Each of the shares of CWI Common Stock is
owned by each of the CWI stockholders free and clear of any lien, pledge,
charge, adverse claim, security interest, encumbrance (including any imposed by
law in any jurisdiction), title retention agreement, option or right to purchase
of any kind.
(b) INVESTMENT REPRESENTATIONS. Each of the CWI stockholders is either
an "accredited investor" as defined under Rule 501 of Regulation D under the
1933 Act, or, alone or with his representative(s) has such knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of an investment in Intellicell, and in any case is
acquiring the Intellicell Common Stock solely for the purpose of investment and
not with a view to, or for sale in connection with, any distribution thereof.
Each of the Principal CWI Stockholders acknowledges that the Intellicell Common
Stock will not be registered under the Securities Act or any state securities
laws, and that such Intellicell Common Stock may not be transferred or sold
except pursuant to the registration provisions of the 1933 Act, or pursuant to
an applicable exemption therefrom and pursuant to state securities laws and
regulations, as applicable. Each of the Principal CWI Stockholders acknowledges
that the certificate or certificates evidencing the Intellicell Common Stock
will bear a legend or legends referring to the restrictions on the
transferability thereof and any other legends required by applicable law.
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(c) APPRAISAL RIGHTS. Each of the Principal CWI Stockholders hereby
acknowledges and agrees that by signing this Agreement he is approving the
Merger and is waiving his appraisal rights with respect to the Merger under the
Illinois Act.
4.3 REPRESENTATIONS AND WARRANTIES OF INTELLICELL AND MERGER SUB. Except
as disclosed in the Intellicell SEC Reports (as hereinafter defined) and subject
to such exceptions as are specifically disclosed in the disclosure letter of
even date herewith relating to this Agreement and delivered by Intellicell to
CWI herewith (the "INTELLICELL DISCLOSURE LETTER"), Intellicell and Merger Sub
jointly and severally represent and warrant to CWI the matters set forth below.
Any representation made to the "knowledge" of Intellicell or Merger Sub shall be
limited to the actual knowledge of Michael Hedge, John Swinehart and David Kane.
(a) DUE INCORPORATION, GOOD STANDING AND QUALIFICATION. Intellicell
and each of its subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization with all requisite power and
authority to own, operate and lease its properties and to carry on its business
as now being conducted. Each of Intellicell and its subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
in such jurisdictions where the failure to be so qualified or licensed and in
good standing would not, in the aggregate, have a Material Adverse Effect.
Intellicell has heretofore delivered to CWI accurate and complete copies of the
charter and bylaws, as currently in effect, of Intellicell and each of its
subsidiaries.
(b) CORPORATE AUTHORITY. Each of Intellicell and Merger Sub has the
corporate power and authority (subject to the requisite approval of the
Intellicell Stockholders) to carry out the transactions contemplated hereby. The
Boards of Directors of each of Intellicell and Merger Sub, and Intellicell, as
the sole stockholder of Merger Sub, have duly authorized the execution, delivery
and performance of this Agreement. This Agreement has been duly and validly
executed and delivered by each of Intellicell and Merger Sub and constitutes a
valid and binding agreement of each of Intellicell and Merger Sub, enforceable
against Intellicell and Merger Sub in accordance with its terms.
(c) CAPITAL STOCK. As of the date of this Agreement, Intellicell has
an authorized capital stock consisting of 15,000,000 shares of Intellicell
Common Stock, $.01 par value per share, of which 7,014,893 shares are issued and
outstanding, and 1,000,000 shares of preferred stock, $.01 par value per share,
none of which shares have been issued or are outstanding. As of the date of this
Agreement, an aggregate of 4,417,985 shares of Intellicell Common Stock were
reserved for issuance upon (i) the exercise of outstanding Intellicell stock
options or stock options that may be issued in the future under Intellicell's
stock option plans, and (ii) the exercise of outstanding warrants to purchase
shares of Intellicell Common Stock. Section 4.3(c) of the Intellicell Disclosure
Letter sets forth a complete schedule of all the outstanding options and
warrants or other rights to purchase Intellicell Common Stock. All of the issued
and outstanding shares of capital stock of Intellicell and each of its
Subsidiaries have been validly authorized and issued and are fully paid and
nonassessable and free of preemptive or similar rights.
(d) OPTIONS, WARRANTS AND RIGHTS. As of the date of this Agreement,
neither Intellicell nor any of its Subsidiaries (as defined in Section 4.3(e))
has outstanding any options, warrants, or other rights to purchase or convert
any obligation into any shares of the capital stock of Intellicell or any
Subsidiary of Intellicell, other than those referred to in Section 4.3(c).
(e) SUBSIDIARIES. Section 4.3(e) of the Intellicell Disclosure Letter
sets forth, as of the date of this Agreement, (i) the name, jurisdiction of
incorporation and list of stockholders of each Subsidiary of Intellicell; and
(ii) the name and a description of every other person, corporation, partnership,
joint venture or other business association in which Intellicell directly, or
indirectly through another entity or entities more than 50% owned by
Intellicell, owns or controls at least 50% of the securities or other equity
interests. (The subsidiaries, corporations, partnerships, joint ventures or
other business associations listed, or required to be listed in Section 4.3(e)
of the Intellicell Disclosure Letter are herein referred to as the
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"Subsidiaries" of Intellicell.) The outstanding shares of capital stock and
other equity securities of the Subsidiaries of Intellicell owned by Intellicell
or any of its Subsidiaries are owned free and clear of all claims, liens,
charges and encumbrances.
(f) INTELLICELL SEC REPORTS. Intellicell has furnished to CWI all
forms, reports, and documents filed by Intellicell with the SEC since June 30,
1998 (collectively, the "INTELLICELL SEC REPORTS"). Each Intellicell SEC Report
at the time filed (or, if amended or superseded by a subsequent filing, then on
the date of such filing), (i) complied in all material respects with the
applicable requirements of the 1933 Act or the 1934 Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder; and (iii) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated herein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of Intellicell's Subsidiaries is required to file any forms,
reports or other documents with the SEC.
(g) FINANCIAL STATEMENTS. The consolidated balance sheets of
Intellicell and its consolidated Subsidiaries as of December 31, 1998 and 1997,
the consolidated statements of operations, stockholders' equity and cash flows
of Intellicell and its consolidated Subsidiaries for each of the three years
ended December 31, 1998 and for the three months ended March 31, 1999 and all
related schedules and notes to the foregoing, as contained in the Intellicell
SEC Reports, complied as to form in all material respects with the regulations
of the SEC, were prepared in accordance with generally accepted accounting
principles which were applied on a consistent basis, and fairly and accurately
present the financial position, results of operations and changes in financial
position of Intellicell and its consolidated Subsidiaries as of their respective
dates and for the periods indicated. The foregoing financial statements as for
the three years ended December 31, 1998 have been audited by Hollander, Lumer &
Co. LLP, independent public accountants, and the foregoing financial statements
as of March 31, 1999 and for the three months ended March 31, 1999, have been
certified by the principal financial officer of Intellicell. To Intellicell's
knowledge, neither Intellicell nor any of its Subsidiaries has any material
liabilities or obligations of a type which would be included in a balance sheet
prepared in accordance with generally accepted accounting principles, whether
related to tax or non-tax matters, accrued or contingent, due or not yet due,
liquidated or unliquidated, or otherwise, except as and to the extent disclosed
or reflected in the consolidated balance sheet of Intellicell and its
consolidated Subsidiaries as of March 31, 1999, or incurred since March 31, 1999
in the ordinary course of business.
(h) ACTIONS IN THE ORDINARY COURSE OF BUSINESS. Except for the debt
and equity financings contemplated by Section 6.1(n), since March 31, 1999,
neither Intellicell nor any of its Subsidiaries has: (i) to Intellicell's
knowledge, taken any action outside the ordinary and usual course of business;
(ii) borrowed any money or, to Intellicell's knowledge, become contingently
liable for any obligations or liability of another; (iii) to Intellicell's
knowledge, failed to pay all of its debts and obligations as they become due or
prior to the imposition of any penalties or interest; (iv) incurred any debt or,
to Intellicell's knowledge, any other liability or obligation of any nature to
any party except for obligations arising from the purchase of goods or the
rendition of services in the ordinary course of business, none of which
aggregate more than $100,000 with respect to the same supplier or customer; (v)
failed to use commercially reasonable efforts to preserve its business
organization intact, to keep available the services of its employees and
independent contractors, or to preserve its relationships with its customers,
suppliers and others with which it deals; (vi) increased or committed to
increase the salary or compensation of any officer; or (vii) made any material
change in its practices, operations or policies with respect to the method for
selling goods or services, or other method for accounting for sales, the conduct
of accounts receivable collection or accounts payable payment activities or the
maintenance of inventory levels.
(i) NO MATERIAL ADVERSE CHANGE. Since March 31, 1999, there has not
been and, to the knowledge of Intellicell, there is not threatened (i) any
material adverse change in the financial condition, business, properties, assets
or results of operations of Intellicell and its Subsidiaries, taken as a whole;
(ii) any loss or damage (whether or not covered by insurance) to any of the
assets or properties of
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Intellicell or its Subsidiaries which materially affects or impairs their
ability to conduct their respective businesses; (iii) any event or condition of
any character which has materially and adversely affected the business or
prospects (financial or otherwise) of Intellicell or any of its Subsidiaries; or
(iv) any mortgage or pledge of any material amount of the assets or properties
of Intellicell or any of its Subsidiaries, or any indebtedness incurred by
Intellicell or any of its Subsidiaries, other than indebtedness, not material in
the aggregate, incurred in the ordinary course of business.
(j) REAL ESTATE RIGHTS. Section 4.3(j) of the Intellicell Disclosure
Letter contains a list of each piece of real property owned, leased or occupied
by Intellicell and its Subsidiaries. Intellicell has delivered to CWI a true and
accurate copy of each deed, mortgage, lease, and other documents (collectively,
the "INTELLICELL REAL ESTATE DOCUMENTS") pursuant to which Intellicell owns,
leases, or otherwise occupies each of its properties (the "INTELLICELL
PROPERTIES"). Neither Intellicell nor any of its Subsidiaries has any interest
as owner, lessor, lessee, or otherwise in any real estate other than as set
forth in Section 4.3(j) of the Intellicell Disclosure Letter. Intellicell has
not received notice from any mortgagee or landlord of any of the Intellicell
Properties that Intellicell or any of its Subsidiaries is in default of any
terms, conditions, or provisions of any mortgage ("INTELLICELL MORTGAGE") or
lease ("INTELLICELL LEASE") relating to any of the Intellicell Properties. The
Intellicell Mortgages and Intellicell Leases are in good standing and, to the
knowledge of Intellicell, no condition exists which, with the passage of time,
giving of notice, or both, would lead to a default under any Intellicell
Mortgage or Intellicell Lease.
(k) TITLE TO PROPERTIES. To Intellicell's knowledge, Intellicell and
its Subsidiaries have good and marketable title to all of their respective real
and personal properties, including the Intellicell Properties and all other
properties reflected in Intellicell's consolidated balance sheet as of March 31,
1999, or acquired subsequent to March 31, 1999 (except property disposed of
subsequent to that date in the ordinary course of business). Except as disclosed
in Intellicell's consolidated balance sheet as of March 31, 1999, such assets
and properties are not, to Intellicell's knowledge, subject to any mortgage,
pledge, lien, claim, encumbrance, charge, security interest or title retention
or other security arrangement except for liens for the payment of federal, state
and other taxes, the payment of which is neither delinquent nor subject to
penalties, and except for other liens and encumbrances incidental to the conduct
of the business of Intellicell and its Subsidiaries or the ownership of their
assets or properties which were not incurred in connection with the borrowing of
money or the obtaining of advances, and which do not in the aggregate materially
detract from the value of the assets or properties of Intellicell and its
Subsidiaries taken as a whole or materially impair the use thereof in the
operation of their respective businesses.
(l) CONDITION OF ASSETS AND PROPERTIES. To Intellicell's knowledge,
the buildings, equipment, fixtures, furniture, furnishings, office equipment and
all other tangible personal assets and properties of Intellicell and its
Subsidiaries presently used in Intellicell's business, do not require any
material repairs other than normal maintenance and are in good operating
condition, reasonable wear and tear excepted.
(m) LITIGATION. There are no actions, suits, proceedings or other
litigation pending or, to the knowledge of Intellicell, threatened against
Intellicell or any of its Subsidiaries, or any of their officers, directors or
material vendors or customers, at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality which, if determined adversely to Intellicell or its
Subsidiaries, would individually or in the aggregate be reasonably likely to
have a Material Adverse Effect.
(n) INTELLECTUAL PROPERTY. No claim is pending or, to the knowledge of
Intellicell, threatened to the effect that the present or past operations of
Intellicell or any Subsidiary of Intellicell infringes upon or conflicts with
the rights of others with respect to any intellectual property (including,
without limitation, licenses, patents, patent rights, patent applications,
trademarks, trademark applications, trade names, copyrights, drawings, trade
secrets, know-how and computer software) necessary to permit Intellicell and its
Subsidiaries to conduct their businesses as now operated (the "INTELLICELL
INTELLECTUAL PROPERTY") and no claim is pending or, to the knowledge of
Intellicell, threatened to the effect that any of the Intellicell
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Intellectual Property is invalid or unenforceable. Section 4.3(n) of the
Intellicell Disclosures Letter contains a list of all licenses, patents, patent
rights, patent applications, trademarks, trademark applications, trade names,
copyrights, and service marks of Intellicell and each of its Subsidiaries. No
contract, agreement or understanding between Intellicell or any of its
Subsidiaries and any other party exists which would impede or prevent the
continued use by Intellicell and its Subsidiaries of the entire right, title and
interest of Intellicell and its Subsidiaries in and to the Intellicell
Intellectual Property.
(o) CONSENTS AND APPROVALS; NO VIOLATION. Except for applicable
requirements of the 1934 Act, state blue sky laws, and the filing and
recordation of the Agreement of Merger, as required by the Illinois Act and
Delaware Act, no filing with, and no permit, authorization, consent or approval
of, any governmental entity is necessary for the consummation by Intellicell and
Merger Sub of the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Intellicell and the consummation of the
transactions contemplated hereby will not violate or result in a breach by
Intellicell or any of its Subsidiaries of, or constitute a default under, or
conflict with or cause any acceleration of any obligation with respect to (i)
any material provision or restriction of any charter, bylaw, loan, indenture or
mortgage of Intellicell or any of its Subsidiaries; or (ii) any material
provision or restriction of any lien, lease agreement, contract, instrument,
order, judgment, award, decree, ordinance or regulation or any other restriction
of any kind or character to which any assets or properties of Intellicell or any
of its Subsidiaries is subject or by which Intellicell or any of its
Subsidiaries is bound. To Intellicell's knowledge based, in part, upon CWI's
representation set forth in the last sentence of Section 4.1(n), no filing under
the H-S-R Act is required in connection with this Agreement or the Merger.
(p) TAXES. Intellicell and its Subsidiaries have filed all federal,
state, foreign, local and any other applicable tax returns and reports required
to be filed, and have paid in full or adequately reserved for all taxes shown
due thereon (together with all interest, penalties, assessments and deficiencies
assessed in connection therewith due through the date hereof). To the knowledge
of Intellicell, such tax returns and reports are correct in all material
respects. Federal tax returns of Intellicell and its Subsidiaries have not been
audited by the Internal Revenue Service. There are no outstanding agreements or
waivers extending the statutory period of limitation applicable to any federal
or state income tax returns of Intellicell or any of its Subsidiaries within the
three previous years.
(q) ACCOUNTS RECEIVABLE. To Intellicell's knowledge, the accounts
receivable of Intellicell and its Subsidiaries have been acquired in the
ordinary course of business, and are subject to no known defenses, setoffs or
counterclaims, except to the extent of the reserve reflected in the consolidated
financial statements of Intellicell and its Subsidiaries. Subject to the
foregoing, Intellicell is not guaranteeing the collectibility of its receivables
or the receivables of its Subsidiaries nor is Intellicell representing that any
of those receivables will actually be collected.
(r) CONTRACTS. Except for the transactions contemplated by Section
6.1(n), neither Intellicell nor any of its Subsidiaries is a party to (i) any
lease, installment purchase agreement or other contract with respect to any real
property used or proposed to be used in its operations, except, in each case,
items reflected in Intellicell's March 31, 1999 financial statements; (ii) any
contract or agreement for the purchase of any personal property, commodity,
material, fixed asset or equipment in excess of $100,000 (iii) any mortgage,
lease, contract or agreement creating an obligation of $100,000 or more; (iv)
any contract or agreement involving payments in excess of $100,000 which by its
terms does not terminate or is not terminable without penalty to it within one
year after the date hereof; (v) any loan agreement, indenture, promissory note,
conditional sales agreement or other similar type of arrangement; (vi) any
material license agreement; or (vii) any contract which could be reasonably be
expected to result in a material loss or obligation to Intellicell and its
Subsidiaries. To the knowledge of Intellicell, each of the foregoing mortgages,
leases, contracts, agreements and other arrangements to which Intellicell or any
of its Subsidiaries is a party are valid and enforceable in accordance with
their terms, except as such enforceability may be limited by (i) bankruptcy laws
and other similar laws affecting creditors' rights generally and (ii) general
principles of equity, whether asserted in a proceeding in equity or at law.
Intellicell, its
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Subsidiaries and, to Intellicell's knowledge, all other parties to each of the
foregoing mortgages, leases, contracts, agreements and other arrangements have
performed all material obligations required to be performed to date thereunder;
neither Intellicell, nor any of its Subsidiaries nor, to Intellicell's
knowledge, any such other party is in default or in arrears under the terms of
any of the foregoing; and, to Intellicell's knowledge, no condition exists or
event has occurred which, with the giving of notice or lapse of time or both,
would constitute a default under any of them.
(s) COMPLIANCE WITH LAW AND OTHER REGULATIONS. Intellicell and each of
its Subsidiaries is in compliance with all requirements (including those
relating to environmental matters) of Federal, state or local law, and all
requirements of all governmental bodies and agencies having jurisdiction over
it, the conduct of its business, the use of its assets and properties and all
premises occupied by it except where the failure to comply would not be
reasonably likely to have a Material Adverse Effect. There is no environmental
contamination, toxic waste or other discharge, spill, construction component,
structural element or condition, other than cleaning solvents and other
substances normally used in day-to-day operations which is reasonably likely to
have a Material Adverse Effect, nor has Intellicell received any official notice
or citation that the Intellicell Properties in any way contravene any Federal,
state or local law or regulation relating to environmental, health or safety
matters, including without limitation any requirements of CERCLA or any OSHA
requirements. Without limiting the foregoing, each of Intellicell and its
Subsidiaries have properly filed all reports, paid all monies and obtained all
licenses, permits, certificates and authorizations needed or required and
material to the conduct of its business and the use of its assets and properties
and the premises occupied by it in connection therewith and is in compliance in
all material respects with all conditions, restrictions and provisions of all of
the foregoing. Neither Intellicell nor any of its Subsidiaries has received any
notice from any Federal, state or local authority or any insurance or inspection
body that any of its assets, properties, facilities, equipment or business
procedures or practices fails to comply with any applicable law, ordinance,
regulation, building or zoning law, or requirement of any public authority or
body.
(t) EMPLOYEE BENEFIT AND EMPLOYMENT MATTERS. Intellicell and its
"ERISA Affiliates" (as determined under Section 414(b), (c), (m) or (o) of the
Code) (i) maintain, administer or contribute to, or at any time during the past
six years have maintained, administered or contributed to, only those employee
pension benefit plans (as defined in Section 3(2) of ERISA, whether or not
excluded from coverage under specific Titles or Subtitles of ERISA) described in
Section 4.3(t) of the Intellicell Disclosure Letter (the "INTELLICELL PENSION
PLANS"); and (ii) maintain, administer or contribute to only those employee
welfare benefit plans (as defined in Section 3(1) of ERISA, whether or not
excluded from coverage under specific Titles or Subtitles of ERISA) described in
Section 4.3(t) of Intellicell Disclosure Letter (the "INTELLICELL WELFARE
PLANS"). Intellicell and all ERISA Affiliates maintain, administer or contribute
to only those bonus, deferred compensation, stock purchase, stock option,
severance plan, insurance or similar arrangements described in Section 4.3(t) of
the Intellicell Disclosure Letter (the "INTELLICELL EMPLOYEE BENEFIT PLANS").
The Internal Revenue Service has determined that each Intellicell Pension Plan
intended to be "qualified" under Section 401(a) of the Code is so qualified and
that the trust forming a part thereof is tax exempt under Section 501(a) of the
Code from the date of its establishment until the date hereof, and Intellicell
does not know of any matter which would adversely affect such qualified or
tax-exempt status of such plan or trust. Full payment has been made, or will be
made in accordance with Sections 404(a)(6) and 412 of the Code, of all amounts
which either Intellicell or any ERISA Affiliate is required to pay under the
terms of each of the Intellicell Pension Plans and Intellicell Welfare Plans and
all such amounts are properly accrued on Intellicell's March 31, 1999
consolidated balance sheet; and none of the Intellicell Pension Plans or any
trust established thereunder has incurred any "accumulated funding deficiency"
(as defined in Sections 302 of ERISA and 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each of such Plans
ended prior to the date of this Agreement. Neither any Intellicell Pension Plan
or Intellicell Welfare Plan nor any Intellicell Pension Plan or Intellicell
Welfare Plan fiduciary has engaged in any transaction in violation of Section
406 of ERISA or any "prohibited transaction" (as defined in Section 4975(c)(1)
of the Code) other than any such transaction which is exempt under
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Section 408 of ERISA or Section 4975(d) of the Code. Intellicell has furnished
to CWI true and complete copies of each Intellicell Pension Plan, Intellicell
Welfare Plan, and Intellicell Employee Benefit Plan and related trust agreements
or annuity contracts, Internal Revenue Service determination letters and summary
plan descriptions; all of the foregoing plans, agreements and commitments are
valid, binding, in full force and effect, and there are no defaults thereunder;
and none of the rights of Intellicell or any of its ERISA Affiliates thereunder
will be impaired by this Agreement or the consummation of the transactions
contemplated by this Agreement. Neither Intellicell nor any of its Subsidiaries
is a party to any collective bargaining agreement and there is no material
request for union representation pending or, to the knowledge of Intellicell,
threatened against Intellicell or any of its Subsidiaries. Neither Intellicell
nor any of its ERISA Affiliates has incurred any liability to the PBGC as a
result of the voluntary or involuntary termination of any Intellicell Pension
Plan subject to Title IV of ERISA; there is currently no active filing by
Intellicell or any of its ERISA Affiliates with the PBGC (and no proceeding has
been commenced by the PBGC to terminate any Intellicell Pension Plan subject to
Title IV of ERISA maintained or funded, in whole or in part, by Intellicell or
any of its ERISA Affiliates); and neither Intellicell nor any of its ERISA
Affiliates has made a complete or partial withdrawal from a multi-employer plan,
as such term is defined in Section 3(37) of ERISA, resulting in "withdrawal
liability," as such term is defined in Section 4201 of ERISA (without regard to
subsequent reduction or waiver of such liability under either Section 4207 or
4208 of ERISA). The employment of each employee of Intellicell and its
Subsidiaries is terminable at will, subject to applicable law. Each of
Intellicell and its Subsidiaries has complied in all material respects with all
other applicable Federal, state and local laws relating to the employment of
labor including, but not limited to, the provisions thereof relative to wages,
hours, collective bargaining, working conditions and payment of taxes of any
kind, and neither Intellicell nor any of its Subsidiaries is liable for any
arrears of wages or any taxes or penalties for failure to comply with any of the
foregoing or has any obligations for any vacation, sick leave or other
compensatory time.
(u) INSURANCE. Intellicell and each of its Subsidiaries maintains in
full force and effect insurance coverage on their respective assets, properties,
premises, operations and personnel in such amounts and against such risks and
losses as are set forth on Section 4.3(u) of the Intellicell Disclosure Letter.
(v) CONFLICTING INTEREST. No director, officer or principal
stockholder of Intellicell or any of its Subsidiaries (i) has any pecuniary
interest in any supplier or customer of Intellicell or any of its Subsidiaries
or in any other business with which Intellicell and its Subsidiaries conducts
business or with which Intellicell and its Subsidiaries is in competition other
than holdings of the publicly traded securities of such entities; or (ii) is
indebted to Intellicell and its Subsidiaries for borrowed money.
(w) NO PAYMENTS TO DIRECTORS, OFFICERS, STOCKHOLDERS OR OTHERS. Since
March 31, 1999, there has not been any purchase or redemption of any shares of
capital stock of Intellicell or any of its Subsidiaries or any transfer,
distribution or payment by Intellicell and its Subsidiaries, directly or
indirectly, of any assets or properties to any director, officer, principal
stockholder or other person other than the payment of compensation for services
actually rendered at rates not in excess of the rates prevailing on March 31,
1999 and amounts paid in the normal course in reimbursement of reasonable
expenses incurred on behalf of Intellicell.
(x) NO PROHIBITED PAYMENTS. Neither Intellicell or its Subsidiaries
nor, to the knowledge of Intellicell, any officer, director, employee,
independent contractor or agent acting on behalf of Intellicell or its
Subsidiaries has at any time (i) made any contributions to any candidate for
political office in violation of law, or failed to disclose fully any
contributions to any candidate for political office in accordance with any
applicable statute, rule, regulation or ordinance requiring such disclosure;
(ii) made any payment to any local, state, Federal or foreign governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or allowed by applicable law; (iii) made
any payment outside the ordinary course of business to any purchasing or selling
agent or person charged with similar duties of any entity to which Intellicell
and its Subsidiaries sells products or renders services or from which
Intellicell and its Subsidiaries buys products or services for the purpose of
influencing such agent or
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person to buy products or services from or sell products or services to
Intellicell and its Subsidiaries; or (iv) engaged in any transaction, maintained
any bank account or used any corporate funds except for transactions, bank
accounts and funds which have been and are reflected in the normally maintained
books and records of Intellicell and its Subsidiaries.
(y) MINUTE BOOKS. Intellicell has furnished CWI all minute books of
Intellicell and each of its Subsidiaries reflecting actions taken by their
respective stockholders and directors.
(z) ACCURACY OF STATEMENTS. Except to the extent specifically
qualified herein as being only to Intellicell's knowledge, neither this
Agreement nor any statement, list, certificate, document or other information
furnished or to be furnished by Intellicell to CWI in connection with this
Agreement or any of the transactions contemplated hereby contains or will
contain an untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in
the light of the circumstances under which they are made, not misleading.
(aa) THE PROXY STATEMENT. The Proxy Statement, including any
amendments and supplements thereto, will not, either at the date mailed to the
Intellicell Stockholders or at the time of the meeting of the Intellicell
Stockholders to be held in connection with the transactions contemplated by this
Agreement, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Proxy Statement will comply as to form in all material
respects with all applicable laws, including the provisions of the 1934 Act and
the rules and regulations promulgated thereunder, except that no representation
is made by Intellicell with respect to information supplied by CWI for inclusion
therein.
(ab) BROKERS AND FINDERS. Neither Intellicell or any of its
Subsidiaries nor any of their respective directors, officers or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or similar payments in connection
with the transactions contemplated by this Agreement, except for Intellicell's
agreement, dated June 2, 1999, with Sands Brothers & Co., Ltd. ("SANDS").
(ac) STATUS OF INTELLICELL COMMON STOCK TO BE ISSUED. The shares of
Intellicell Common Stock into which the shares of CWI Common Stock will be
converted pursuant to this Agreement will be, when issued, validly authorized
and issued, fully paid, nonassessable and not subject to any preemptive rights.
(ad) NO ACTIVITIES. Merger Sub has not conducted any operations or
incurred any liabilities or obligations other than in connection with its
formation and the transactions contemplated hereby.
(ae) YEAR 2000 COMPLIANCE. To Intellicell's knowledge, all of the
computer hardware, software and information systems, including without
limitation the financial, operational and manufacturing systems, used by
Intellicell and each of its Subsidiaries are, or on or before December 31, 1999
will be, Year 2000 Compliant. To Intellicell's knowledge, products sold by
Intellicell to customers are Year 2000 Compliant.
(af) INVENTORY. With respect to inventories listed on Intellicell's
balance sheet as of March 31, 1999, as of the date of such balance sheet: (i)
inventories are stated at lower of cost or market, cost being determined on the
basis of FIFO and consistent with the prior year, and due provision was made to
reduce all slow-moving, obsolete or unusable inventories to their estimated
useful or scrap values; (ii) inventory quantities were determined from
Intellicell's perpetual inventory records, which have been adjusted on the basis
of physical counts taken by competent employees; (iii) liabilities, if unpaid,
for all items included in inventories are recorded, and all quantities billed to
customers are excluded from the inventory balances; (iv) commitments for future
purchases are for quantities not in excess of anticipated requirements and at
prices which will not result in loss; and (v) adequate provision has been made
for any material loss to be sustained in the fulfillment of, or from the
inability to fulfill, any commitment.
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V. COVENANTS
5.1 COVENANTS OF CWI. CWI agrees that, unless Intellicell otherwise
consents in writing, prior to the Closing:
(a) TRUTH OF REPRESENTATIONS AND WARRANTIES. CWI and CWI's
Subsidiaries shall not take or suffer or permit any action which would render
untrue any of the representations or warranties of CWI herein contained, and CWI
shall not omit to take any action, the omission of which would render untrue any
such representation or warranty.
(b) PRESERVATION OF BUSINESS. CWI shall use commercially reasonable
efforts to (i) preserve intact the present business organization of CWI; (ii)
preserve the present goodwill and advantageous relationships of CWI with
vendors, customers and all other persons having business dealings with CWI; and
(iii) preserve and maintain in force all CWI Intellectual Property. CWI shall
not enter into any employment agreements with any of its officers or management
personnel which may not be cancelled without penalty upon notice not exceeding
90 days, except for those severance agreements with specified individuals
described in Section 5.1(b) of the CWI Disclosure Letter. CWI shall maintain in
force all property, casualty, directors and officers and other forms of
insurance which it is presently carrying and shall refrain from making any
change in any insurance coverage.
(c) ORDINARY COURSE. CWI shall operate its business only in the usual,
regular and ordinary course and manner consistent with past practice. Without
limiting the foregoing, CWI shall not (i) encumber or mortgage any property or
assets; (ii) except for those severance agreements described in Section 5.1(b)
of the CWI Disclosure Letter, incur any obligation (contingent or otherwise), or
purchase or acquire, or transfer or convey, any material assets or properties or
enter into any transaction or make or enter into any contract or commitment
except in the ordinary course of business or, whether or not in the ordinary
course of business, which involve obligations in excess of $100,000 or which
extend beyond six months from the date of this Agreement; (iii) amend, modify or
terminate any presently existing lease, contract, agreement or other obligation;
or (iv) acquire any stock or other equity interest in any corporation, trust or
other entity. CWI will retain its $1,500,000 term loan with American National
Bank and will continue to make payments on this loan through the Closing Date in
the ordinary course of business. Notwithstanding the foregoing, CWI may make
distributions, issue shares of CWI Stock as contemplated by this Agreement or
pay compensation to its officers, directors and shareholders that are not in the
ordinary course of business, provided that such distributions or payments do not
result in CWI having total stockholders' equity as of the Closing Date of less
than $1,177,667.
(d) BOOKS AND RECORDS. CWI shall maintain its books, accounts and
records in the usual, regular and ordinary manner, and on a basis consistent
with prior years.
(e) NO ORGANIC CHANGE. Except as contemplated by this Agreement, CWI
shall not (i) amend its charter or bylaws; (ii) make any change in its capital
stock by reclassification, subdivision, reorganization or otherwise; or (iii)
merge or consolidate with any other corporation, trust or entity or change the
character of its business.
(f) NO ISSUANCE BY CWI OF SHARES, OPTIONS, OR OTHER SECURITIES. CWI
shall not (i) issue any shares of capital stock (except for issuances to its
existing officers, directors and shareholders); or (ii) grant any option,
warrant or other right to purchase or to convert any obligation into shares of
capital stock.
(g) COMPENSATION. CWI shall not (i) increase the compensation payable
to any elected officer or to other management personnel from the amount payable
as of the date of this Agreement; or (ii) introduce or change any pension or
profit sharing plan, or any other employee benefit arrangement, except as a
result of collective bargaining negotiations, except for insubstantial changes
necessary to comply with the minimum requirements of the Code or ERISA.
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(h) DIVIDENDS. CWI shall not (i) declare, make or pay any dividend or
other distribution with respect to shares of CWI Common Stock or otherwise; (ii)
purchase, redeem or otherwise acquire any shares of CWI Common Stock; or (iii)
transfer, distribute or pay, directly or indirectly, any assets or properties to
any stockholders of CWI or its Subsidiaries or to any other person, except as
permitted by this Agreement. Notwithstanding the foregoing, CWI may pay or
prepay CWI stockholder loans and other related-party indebtedness, pay
dividends, redeem or repurchase shares of CWI Common Stock, or make other
distributions to or cancel obligations owing from its shareholders, provided
that such payments, prepayments, dividends, redemptions, repurchases,
distributions or cancellations do not violate any covenants or restrictions
under any agreement with American National Bank or other contract or agreement
of CWI and do not result in CWI having total stockholders' equity as of the
Closing Date of less than $1,177,667.
(i) RIGHT OF INSPECTION. Subject to the confidentiality agreement,
dated February 9, 1999, entered into by and between Intellicell and CWI (the
"CONFIDENTIALITY AGREEMENT"), CWI shall make available to Intellicell and its
representatives for inspection at all reasonable times all of the assets,
properties, facilities, records, agreements (including all documents of any
description evidencing any right or obligation of CWI) and the financial
statements of CWI and allow Intellicell and its representatives the right to
make whatever copies of such materials they require, and CWI shall permit
Intellicell and its independent accountants to audit or make such audit tests
respecting the accounts of CWI as Intellicell or its accountants consider
appropriate.
(j) CONFIDENTIALITY. CWI shall not reveal, orally or in writing, to
any person, other than Intellicell and its representatives and CWI's own
officers, directors, agents, representatives and employees, any of the business
procedures or practices followed by it in the conduct of its business or any
other information of a confidential nature. All information obtained by CWI from
Intellicell, shall be kept confidential in accordance with the Confidentiality
Agreement.
(k) SATISFACTION OF OBLIGATIONS AND LIABILITIES. CWI shall (i) pay or
cause to be paid all of the obligations and liabilities arising out of its
business as they mature, except for those obligations and liabilities as to
which nonpayment will not result in any interest or penalties and those which
are disputed in good faith with the written approval of Intellicell, which
approval shall not be unreasonably withheld and shall be presumed to be given by
Intellicell unless objection is delivered by Intellicell within three business
days after CWI's written request for approval delivered in accordance with the
notice requirement of Section 10.4; (ii) maintain in all material respects and
perform its obligations under all agreements and contracts to which it is bound
in accordance with their terms; and (iii) comply in all material respects with
all requirements of applicable federal, state and local laws, regulations and
rules.
(l) REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement, CWI shall use its commercially reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement including, without
limitation, (i) assisting Intellicell with the prompt preparation and filing
with the SEC of the Proxy Statement; (ii) assisting Intellicell with such
actions as may be required to have the Proxy Statement cleared by the SEC as
promptly as prac-ticable, including by consulting with Intellicell as to any SEC
comments with respect thereto; (iii) assisting Intellicell with such actions as
may be required to be taken under applicable state securities or Blue Sky laws
in connection with the issuance of the shares of Intellicell Common Stock
contemplated hereby; and (iv) the preparation and filing of all other forms,
registrations and notices required to be filed to consummate the transactions
contemplated hereby and the taking of such actions as are necessary to obtain
any requisite approvals, consents, orders, exemptions, and waivers by any public
or private third parties. Intellicell shall reimburse CWI for reasonable
out-of-pocket expenses incurred by CWI in assisting Intellicell with any filings
required to be made by Intellicell, provided that Intellicell's obligations to
reimburse CWI under this Section 5.1(l) and under Section 10.1 shall not exceed
in the aggregate $25,000, or 50% of the cost to CWI to obtain the audited
financial statements to be prepared by
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its independent public accountants for the Proxy Statement and to satisfy SEC
regulations, whichever is less, and except that no such reimbursement shall be
required if Intellicell terminates this Agreement due to CWI's breach of any of
its covenants under this Agreement or CWI's failure to satisfy any condition
precedent for the benefit of Intellicell by no later than October 30, 1999.
Intellicell's reimbursement of CWI's costs will, subject to CWI's delivery of
verification of such costs, be made to CWI within 15 days after the last to
occur of (i) the date of termination of the transaction or the Closing Date (as
the case may be) and (ii) the receipt of Altschuler, Melvoin & Glasser's
statement for services with respect to the certified audit for the three year
period ended September 30, 1998. In this regard, Intellicell agrees that it also
shall be responsible for all SEC filing fees in connection with the Proxy
Statement.
5.2 COVENANTS OF INTELLICELL. Intellicell agrees that, unless CWI
otherwise consents in writing, prior to the Closing:
(a) TRUTH OF REPRESENTATIONS AND WARRANTIES. Intellicell and its
Subsidiaries shall not take or suffer or permit any action which would render
untrue any of the representations or warranties of Intellicell herein contained,
and Intellicell shall not omit to take any action, the omission of which would
render untrue any such representation or warranty.
(b) PRESERVATION OF BUSINESS. Intellicell shall use commercially
reasonable efforts to (i) preserve intact the present business organization of
Intellicell and its Subsidiaries; (ii) preserve the present goodwill and
advantageous relationships of Intellicell and its Subsidiaries with investors
and all other persons having business dealings with Intellicell and its
Subsidiaries; and (iii) preserve and maintain in force all Intellicell
Intellectual Property. Intellicell and its Subsidiaries shall maintain in force
all property, casualty, directors and officers and other forms of insurance
which they are presently carrying and shall refrain from making any change in
any insurance coverage.
(c) ORDINARY COURSE. Intellicell and its Subsidiaries shall operate
their businesses only in the usual, regular and ordinary course and manner
consistent with past practice. Without limiting the foregoing, Intellicell shall
not, except in connection with the transactions contemplated by Section 6.1(n)
(i) encumber or mortgage any material property or assets; (ii) incur any
obligation (contingent or otherwise), or purchase or acquire, or transfer or
convey, any material assets or properties or enter into any transaction or make
or enter into any contract or commitment except in the ordinary course of
business or, whether or not in the ordinary course of business, which involve
obligations in excess of $100,000 or which extend beyond six months from the
date of this Agreement; (iii) amend, modify or terminate any presently existing
material lease, contract, agreement or other obligation; or (iv) acquire any
stock or other equity interest in any corporation, trust or other entity.
(d) BOOKS AND RECORDS. Intellicell and its Subsidiaries shall maintain
their books, accounts and records in the usual, regular and ordinary manner, and
on a basis consistent with prior years.
(e) NO ORGANIC CHANGE. Except as contemplated by this Agreement,
neither Intellicell nor its Subsidiaries shall (i) amend their charter or
bylaws; (ii) make any change in their capital stock by reclassification,
subdivision, reorganization or otherwise; or (iii) merge or consolidate with any
other corporation, trust or entity or change the character of their business.
(f) NO ISSUANCE BY INTELLICELL OF SHARES, OPTIONS OR OTHER
SECURITIES. Except for (i) shares of Intellicell Common Stock issued upon the
exercise of any options or warrants that are outstanding on the date of this
Agreement, (ii) grants of options under stock option plans or similar
arrangements in effect on the date hereof, (iii) the distribution of warrants to
the Intellicell Stockholders approved by the Intellicell Stockholders in
December 1998, or (iv) the issuance of any shares, options or other securities
in connection with the transactions contemplated by Section 6.1(n), neither
Intellicell nor its Subsidiaries shall issue any shares of capital stock or
grant any option, warrant or other right to purchase or to convert any
obligation into shares of capital stock.
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(g) COMPENSATION. Except as set forth in Section 4.3(g) of the
Intellicell Disclosure Letter, Neither Intellicell nor its Subsidiaries shall
(i) increase the compensation payable to any elected officer or to other
management personnel from the amount payable as of the date of this Agreement,
except in accordance with normal and customary practice; or (ii) introduce or
change any pension or profit sharing plan, or any other employee benefit
arrangement (other than as a result of collective bargaining negotiations),
except for insubstantial changes necessary to comply with the minimum
requirements of the Code or ERISA and a contemplated increase of 500,000 in the
number of shares covered by options that may be granted under Intellicell's
qualified option plans pursuant to either an amendment to the existing plans or
the adoption of a new plan. Any options granted with respect to such increase in
the number of shares available under Intellicell's option plans shall be
described in Schedule 4.3(d) of the Intellicell Disclosure Letter.
(h) DIVIDENDS. Intellicell shall not (i) declare, make or pay any
dividend or other distribution with respect to shares of Intellicell Common
Stock; (ii) purchase, redeem or otherwise acquire any shares of Intellicell
Common Stock; or (iii) transfer, distribute or pay, directly or indirectly, any
assets or properties to any stockholders of Intellicell or its Subsidiaries or
to any other person, except for the distribution of warrants to the Intellicell
Stockholders approved by the Intellicell Stockholders in December 1998 and
described in Section 5.2(h) of the Intellicell Disclosure Letter and as
otherwise permitted by this Agreement.
(i) RIGHT OF INSPECTION. Intellicell shall make available to CWI and
its representatives for inspection at all reasonable times all of the assets,
properties, facilities, records, agreements (including all documents of any
description evidencing any right or obligation of Intellicell or any of its
Subsidiaries) and the financial statements of Intellicell and allow CWI and its
representatives the right to make whatever copies of such materials they
require, and Intellicell shall permit CWI and its independent accountants to
audit or make such audit tests respecting the accounts of Intellicell and its
Subsidiaries as CWI or its accountants consider appropriate.
(j) CONFIDENTIALITY. Neither Intellicell nor any of its Subsidiaries
shall reveal, orally or in writing, to any person, other than CWI and its
representatives, any of the business procedures or practices followed by it in
the conduct of its business or any other information of a confidential nature.
All information obtained by Intellicell and its Subsidiaries from CWI, other
than information obtained for inclusion in the Proxy Statement, shall be kept
confidential in accordance with the Confidentiality Agreement.
(k) SATISFACTION OF OBLIGATIONS AND LIABILITIES. Intellicell and each
of its Subsidiaries shall (i) pay or cause to be paid all of the obligations and
liabilities arising out of its business as they mature, except for those which
are in good faith disputed with the written approval of CWI; (ii) maintain in
all material respects and perform its obligations under all agreements and
contracts to which it is bound in accordance with their terms; and (iii) comply
in all material respects with all requirements of applicable Federal, state and
local laws, regulations and rules.
(l) RECOMMENDATION OF BOARD OF DIRECTORS. Except to the extent
required by fiduciary duty under applicable law, the Board of Directors of
Intellicell shall not modify its action taken on or prior to the date of this
Agreement approving the Merger and recommending approval of the Merger by the
Intellicell Stockholders, except that no such recommendation shall be required
if Intellicell terminates this Agreement due to CWI's breach of any of its
covenants under this Agreement or CWI's failure to satisfy any condition
precedent for the benefit of Intellicell by no later than October 30, 1999.
(m) REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement, Intellicell shall use its commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
including, without limitation, (i) with the assistance of CWI, the prompt
preparation and filing with the SEC of the Proxy Statement; (ii) with the
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assistance of CWI, such actions as may be required to have the Proxy Statement
cleared by the SEC as promptly as practicable, including by consulting with CWI
as to, and responding promptly to, any SEC comments with respect thereto; (iii)
with the assistance of CWI, such actions as may be required to be taken under
applicable state securities or Blue Sky laws in connection with the issuance of
the shares of Intellicell Common Stock contemplated hereby; and (iv) the
preparation and filing of all other forms, registrations and notices required to
be filed to consummate the transactions contemplated hereby and the taking of
such actions as are necessary to obtain any requisite approvals, consents,
orders, exemptions, and waivers by any public or private third parties.
Notwithstanding the foregoing, Intellicell shall not be required to agree, as a
condition to any governmental approval of or consents to the transactions
contemplated hereby, to divest itself of any Subsidiary, division or business
units which is material to Intellicell and its Subsidiaries taken as a whole, or
the divestiture of which would be reasonable likely to have a Material Adverse
Effect.
(n) EMPLOYEE BENEFITS. Intellicell shall cause the Surviving
Corporation and its subsidiaries to provide employees of the Surviving
Corporation and its subsidiaries with benefits, including 401(k), deferred
compensation, health and welfare and paid time-off benefits, which are no less
favorable in the aggregate than those generally provided by CWI to its
employees. To the extent that any employees of CWI become eligible to
participate in any employee benefit plan of Intellicell after the Closing,
Intellicell, the Surviving Corporation and their subsidiaries, to the extent
such employee benefit plan permits, shall credit such employee's service with
CWI for purposes of determining such employee's eligibility to participate in
and vesting under, and for purposes of calculating the benefits under, such
employee benefit plan.
(o) THIRD PARTY BENEFICIARIES. The provisions of Section 5.2(n) will
survive the consummation of the Merger, are intended to benefit and may be
enforced by each of the persons who participate in any of the employee benefits
plans referred to therein, and will be binding on all successors and assigns of
Intellicell and Surviving Corporation.
(p) VOTING TRUST AGREEMENT. Intellicell shall use its commercially
reasonable efforts to cause officers, directors, and shareholders of Intellicell
(the "MINIMUM HOLDERS") who own, in the aggregate, a specified minimum number of
shares of Intellicell Common Stock that will be agreed to by Intellicell and CWI
to enter into a Voting Trust Agreement, with the Principal CWI Stockholders (the
"VOTING TRUST AGREEMENT"), with the terms of such agreement to be agreed to by
Intellicell and CWI prior to the Closing.
(q) OPERATION OF MERGER SUB. With the exception of CWI's computer
hardware and software systems, Merger Sub intends to use a significant portion
of CWI's assets in its business and, with the exception of such hardware and
software, Merger Sub currently does not intend or plan to dispose of more than
an insignificant portion of CWI's assets or to liquidate or merge Merger Sub
into Intellicell.
VI. CONDITIONS PRECEDENT TO OBLIGATIONS
6.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF INTELLICELL AND MERGER
SUB. The obligations of Intellicell and Merger Sub under this Agreement are
subject to the satisfaction of the following conditions on or before the
Closing, which may be waived in whole or in part by Intellicell and Merger Sub
at their sole discretion:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of CWI and the Principal CWI Stockholders herein contained shall
have been true and correct in all material respects when made, and, in addition,
shall be true and correct in all material respects on and as of the Closing with
the same force and effect as though made on and as of the Closing, except as
specifically affected by transactions contemplated hereby.
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(b) PERFORMANCE OF AGREEMENTS. CWI shall have in all material respects
performed all obligations and agreements and complied in all material respects
with all covenants and conditions contained in this Agreement to be performed
and complied with by it on or prior to the Closing.
(c) OPINION OF FINANCIAL ADVISOR. Sands, the financial advisor to
Intellicell, shall have delivered to Intellicell its written opinion to the
effect that the Merger is fair to the stockholders of Intellicell from a
financial point of view.
(d) STOCKHOLDER APPROVALS. All necessary action on the part of the
CWI's stockholders adopting this Agreement and approving the transactions
contemplated hereby shall have been taken, and no stockholder of CWI shall have
exercised any appraisal right that he may have with respect to the Merger.
(e) OPINION OF COUNSEL FOR CWI. At the Closing, Intellicell shall have
received an opinion of Kamensky & Rubinstein, counsel for CWI, dated the Closing
Date, in form and substance reasonably satisfactory to Intellicell and its
counsel, to the effect that:
(i) CWI is a corporation duly incorporated, validly existing and in
good standing under the laws of the state of its incorporation, and has
all requisite corporate power under the laws of such state to own, lease
and operate its properties, to carry on its business as currently
conducted and to consummate the Merger;
(ii) All necessary corporate proceedings of the Board of Directors
of CWI to approve and adopt this Agreement and to authorize the execution
and delivery of this Agreement and the consummation of the Merger have
been duly and validly taken;
(iii) CWI has the corporate power to execute and deliver this
Agreement, and this Agreement has been duly authorized, executed and
delivered by CWI and constitutes its legal, valid and binding obligation
except that the enforceability thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally; and (ii)
general principles of equity (regardless of whether such enforcement is
sought in a proceeding in equity or at law); and
(iv) Except as disclosed in the CWI Disclosure Letter, such counsel
knows of no actions, suits or proceedings pending or threatened against
or affecting CWI, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board,
bureau, agency, or instrumentality that relate to the transactions
contemplated by this Agreement, or would, if determined adversely to CWI,
individually or in the aggregate have a Material Adverse Effect.
In rendering the above opinions, such counsel may rely on opinions of other
counsel and certificates of officers and employees of CWI delivered in
connection with this Agreement, with copies of such opinions and certificates to
be furnished to Intellicell.
(f) NO MATERIAL ADVERSE CHANGE. There shall be no material adverse
change in the business, properties, prospects or financial condition of CWI.
(g) LITIGATION. No action or proceeding before any court or
governmental agency shall have been instituted or threatened which would enjoin,
restrain or prohibit, or might result in substantial damages in respect of this
Agreement or the consummation of the transactions contemplated by this
Agreement, and would in the reasonable judgment of Intellicell make it
inadvisable to consummate such transactions, and no court order shall have been
entered in any action or proceeding instituted by any other party which enjoins,
restrains or prohibits this Agreement or the consummation of the transactions
contemplated by this Agreement.
(h) CERTIFICATE OF CWI. At the Closing, Intellicell shall have
received from CWI a certificate of the chairman or president and the secretary
of CWI, dated the date of the Closing, certifying that all
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representations and warranties set forth in this Agreement are true, complete
and correct in all material respects at and as of the Closing as if made at that
time, and that CWI has performed and complied with all agreements, covenants and
conditions required by this Agreement to be performed or complied with by CWI on
or prior to the Closing.
(i) PROCEEDINGS SATISFACTORY TO COUNSEL. All proceedings taken by CWI
and all instruments executed and delivered by CWI on or prior to the Closing in
connection with the transactions herein contemplated shall be reasonably
satisfactory in form and substance to counsel for Intellicell.
(j) CONSENTS AND APPROVALS. CWI shall have obtained all consents and
approvals of other persons, mortgagees, lessors, and governmental authorities
necessary to the performance by CWI of the transactions hereunder. CWI shall
have made all filings, applications, statements and reports to all Federal,
state, and local governmental agencies or entities required to be made prior to
the Closing by or on behalf of CWI pursuant to any statute, rule or regulation
in connection with the transactions contemplated hereunder.
(k) DELIVERY OF DOCUMENTS. All other documents required to be
delivered by CWI on or prior to the Closing shall be delivered or shall be
tendered by the Closing.
(l) EMPLOYMENT AGREEMENT. Intellicell or the Surviving Corporation
shall have entered into employment agreements with Ronald Goldberg, and Cary
Maimon and any other CWI employees that Intellicell deems necessary on terms
that are acceptable to Intellicell in its sole discretion and to such employees.
Philip Leavitt and Sherwin Geitner shall have terminated their employment with
CWI as of the Closing Date. CWI will have entered into any necessary severance
arrangements with CWI employees on terms that are acceptable to CWI (in its sole
discretion) and approved by Intellicell, with such approval not to be
unreasonably withheld.
(m) INTELLICELL COMMON STOCK TRADING PRICE. The average closing price
on Nasdaq of the Intellicell Common Stock for any five consecutive trading day
period ending at least three trading days prior to the Closing Date shall not be
below $2.50 per share; provided that Intellicell may only terminate this
Agreement pursuant to this Section 6.1(m) by giving written notice of such
termination to CWI within three business days following the end of such five-day
trading period.
(n) ADDITIONAL FINANCING. Intellicell shall have received the approval
from its current lender, Nationscredit Commercial Corporation ("NATIONSCREDIT"),
to this Agreement and shall have obtained an additional line of credit on terms
acceptable to Intellicell in its sole discretion for at least $15,000,000 from
either Nationscredit, CWI's current lender or another commercially recognized
lender. The additional line of credit will be used to pay off CWI's existing
line of credit which is partially secured by the personal guaranties of the
Principal CWI Stockholders, and those guaranties will be released. Intellicell
shall also have obtained additional debt or equity financing on terms acceptable
to Intellicell in its reasonable discretion for at least $5,500,000 (exclusive
of the exercise price of any currently outstanding warrants or options to
purchase Intellicell Common Stock).
(o) RELATED PARTY AGREEMENTS. CWI shall have entered into agreements
with Leavitt Communications, Inc. ("LCI"), covering LCI's right of first refusal
to purchase any CWI computer hardware or software that may be sold by Merger
Sub. CWI shall have entered into agreements with LCI and Continental Mobile
Telephone Company, Inc. ("CMT") regarding LCI's and CMT's tenancy, management,
and LCI's and CMT's access to Merger Sub's resources, all on terms mutually
acceptable to Intellicell and either LCI or CMT, as the case may be.
(p) INSURANCE LETTER. Intellicell shall have received a letter from
CWI's insurance carrier confirming that the insurance coverage described in
Section 4.1(t) of the CWI Disclosure Letter is customary for the business
engaged in by CWI.
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6.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CWI. The obligations of CWI
under this Agreement are subject to the satisfaction of the following conditions
on or before the Closing, which may be waived in whole or in part by CWI at its
sole discretion:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Intellicell and Merger Sub herein contained shall have been
true and correct in all material respects when made, and, in addition, shall be
true and correct in all material respects on and as of the Closing with the same
force and effect as though made on and as of the Closing, except as specifically
affected by transactions contemplated hereby.
(b) PERFORMANCE OF AGREEMENTS. Intellicell and Merger Sub shall have
in all material respects performed all obligations and agreements and complied
in all material respects with all covenants and conditions contained in this
Agreement to be performed and complied with by them on or prior to the Closing.
(c) STOCKHOLDER APPROVAL. All necessary action on the part of the
Intellicell Stockholders adopting this Agreement and approving the transactions
contemplated hereby shall have been taken.
(d) OPINION OF COUNSEL FOR INTELLICELL. At the Closing, CWI shall have
received an opinion of Troy & Gould Professional Corporation, counsel for
Intellicell, dated the Closing Date, in form and substance reasonably
satisfactory to CWI and its counsel, to the effect that:
(i) Intellicell is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, and has all
requisite corporate power under the laws of such state to own, lease and
operate its properties, to carry on its business as described in the
Proxy Statement, and to consummate the Merger;
(ii) Each of the Subsidiaries of Intellicell is a corporation,
partnership or joint venture incorporated, validly existing and in good
standing under the laws of the state of its incorporation or
organization, and has all requisite corporate power under the laws of
such state to own, lease and operate its properties and to carry on its
business as described in the Proxy Statement and, with respect to Merger
Sub, to consummate the Merger.
(iii) All necessary corporate proceedings of the Boards of Directors
and the stockholders of Intellicell and Merger Sub to approve and adopt
this Agreement and to authorize the execution and delivery of this
Agreement and the consummation of the Merger have been duly and validly
taken;
(iv) Each of Intellicell and Merger Sub has the corporate power to
execute and deliver this Agreement, and this Agreement has been duly
authorized, executed and delivered by each of Intellicell and Merger Sub
and constitutes its legal, valid and binding obligation except that the
enforceability thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally; and (ii) general
principles of equity (regardless of whether such enforcement is sought in
a proceeding in equity or at law);
(v) Except as disclosed in the Intellicell Disclosure Letter, such
counsel knows of no actions, suits or proceedings pending or threatened
against or affecting Intellicell or any of its Subsidiaries, at law or in
equity, or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality that would, if determined adversely to Intellicell,
individually or in the aggregate, have a Material Adverse Effect, or
which would require disclosure in the Proxy Statement pursuant to the
1934 Act or the rules and regulations promulgated thereunder;
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(vi) The shares of Intellicell Common Stock to be issued in
accordance with this Agreement are duly authorized, and will be, upon the
effectiveness of the Merger, validly issued, fully paid and
nonassessable.
(vii) The method of computing the Share Value set forth in Section
1.7 will not violate the 1933 Act, the 1934 Act or any rules or
regulations promulgated thereunder or any rules or regulations of the
National Association of Securities Dealers, Inc.
(viii) Based solely upon the representations of Intellicell and CWI,
no filing is required by the parties to this Agreement under the H-S-R
Act.
(ix) The Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code.
(x) The Intellicell Stockholders will not have any appraisal rights
in connection with the Merger.
(xi) The transactions contemplated by this Agreement will not
violate the registration requirements of the 1933 Act.
In rendering the above opinions, such counsel may rely on opinions of other
counsel and certificates of officers and employees of Intellicell delivered in
connection with this Agreement, with copies of such opinions and certificates to
be delivered to CWI.
(e) NO MATERIAL ADVERSE CHANGE. There shall be no material adverse
change in the business, properties, prospects or financial condition of
Intellicell and its Subsidiaries, taken as a whole.
(f) LITIGATION. No action or proceeding before any court or
governmental agency shall have been instituted or threatened which would enjoin,
restrain or prohibit, or might result in substantial damages in respect of this
Agreement or the consummation of the transactions contemplated by this
Agreement, and would in the reasonable judgment of CWI make it inadvisable to
consummate such transactions, and no court order shall have been entered in any
action or proceeding instituted by any other party which enjoins, restrains or
prohibits this Agreement or the consummation of the transactions contemplated by
this Agreement.
(g) CERTIFICATES OF INTELLICELL AND MERGER SUB. At the Closing, CWI
shall have received from Intellicell and Merger Sub certificates of the
president and secretary of Intellicell and Merger Sub, dated the Closing Date,
certifying that all representations and warranties set forth in this Agreement
are true, complete and correct in all material respects at and as of the Closing
Date as if made at that time, and that Intellicell and Merger Sub each has
performed and complied with all agreements, covenants and conditions required by
this Agreement to be performed or complied with by Intellicell and Merger Sub,
respectively, on or prior to the Closing.
(h) PROCEEDINGS SATISFACTORY TO COUNSEL. All proceedings taken by
Intellicell and Merger Sub and all instruments executed and delivered by
Intellicell and Merger Sub on or prior to the Closing in connection with the
transactions herein contemplated shall be reasonably satisfactory in form and
substance to counsel for CWI.
(i) DELIVERY OF DOCUMENTS. All other documents required to be
delivered by Intellicell or Merger Sub on or prior to the Closing shall be
delivered or shall be tendered by the Closing.
(j) CONSENTS AND APPROVALS. Intellicell and Merger Sub shall have
obtained all consents and approvals of other persons, mortgagees, lessors, and
governmental authorities necessary to the performance by Intellicell and Merger
Sub of the transactions hereunder. Intellicell and Merger Sub shall have made
all filings, applications, statements and reports to all Federal, state, and
local governmental agencies or entities required to be made prior to the Closing
by or on behalf of Intellicell or its Subsidiaries pursuant to any statute, rule
or regulation in connection with the transactions contemplated hereunder.
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(k) AMENDMENT TO CERTIFICATE OF INCORPORATION. On or before the
Closing, Intellicell shall have amended its Certificate of Incorporation to
increase the number of shares of Common Stock it is authorized to issue to
25,000,000 and to change Intellicell's name to Focus Affiliates, Inc. or such
other similar name as may be determined by Intellicell's Board of Directors.
(l) AMENDMENT TO BYLAWS; ELECTION OF DIRECTORS. Intellicell shall have
amended its Bylaws to increase the authorized number of seats on its Board of
Directors to eight, and three designees of CWI (who shall be reasonably
acceptable to Intellicell and at least one of whom is not an officer, director,
employee or significant shareholder of CWI) shall have been duly elected to the
Intellicell Board of Directors.
(m) INTELLICELL COMMON STOCK TRADING PRICE. The average closing price
on Nasdaq of the Intellicell Common Stock for any five consecutive trading day
period ending at least three trading days prior to the Closing Date shall not be
below $2.50 per share; provided that CWI may only terminate this Agreement
pursuant to this Section 6.2(m) by giving written notice of such termination to
Intellicell within three business days of such five-day trading period.
(n) EMPLOYMENT AGREEMENTS. Intellicell or the Surviving Corporation
shall have entered into employment agreements with Ronald Goldberg, Cary Maimon
and any other CWI employees that Intellicell deems necessary on terms that are
acceptable to CWI in its sole discretion and to such employees. CWI will have
entered into any necessary severance arrangements with CWI employees on terms
that are acceptable to CWI (in its sole discretion) and approved by Intellicell,
with such approval not to be unreasonably withheld.
(o) VOTING TRUST AGREEMENT. The Voting Trust Agreement shall have been
executed and delivered to the Principal CWI Shareholders by not less than the
Minimum Holders.
(p) ADDITIONAL FINANCING. Intellicell shall have received the approval
of Nationscredit to this Agreement and shall have obtained an additional line of
credit on terms acceptable to CWI in its sole discretion for at least
$15,000,000 from either Nationscredit, CWI's current lender or another
commercially recognized lender. Intellicell shall also have obtained additional
debt or equity financing on terms acceptable to CWI in its reasonable discretion
for at least $5,500,000 (exclusive of the exercise price of any currently
outstanding warrants or options to purchase Intellicell Common Stock).
(q) INSURANCE LETTER. CWI shall have received a letter from
Intellicell's insurance carrier confirming that the insurance coverage described
in Section 4.2(u) of the Intellicell Disclosure Letter is customary for the
business engaged in by Intellicell.
VII. AMENDMENT, WAIVER, TERMINATION
7.1 AMENDMENT. This Agreement may be amended by the parties hereto at any
time before or after approval hereof by the Intellicell Stockholders, provided
that after any such approval, no amendment shall be made which (i) increases the
number of shares of Intellicell Common Stock or improves the formula that
determines the number of shares to be received by the stockholders of CWI
pursuant to this Agreement; (ii) in any way materially adversely affects the
rights of the Intellicell Stockholders; or (iii) changes any of the principal
terms of this Agreement, in each case without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
7.2 WAIVER. At any time prior to the Closing, the parties hereto may (i)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto; (ii) waive any inaccuracies in the representations and
warranties of the other parties contained herein or in any document delivered
pursuant hereto; and (iii) waive compliance with any of the agreements or
conditions of the other parties contained herein. Any agreement on the part of a
party hereto to any extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
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7.3 TERMINATION. This Agreement may be terminated at any time prior to the
Closing, whether before or after approval of the matters presented in connection
with the Merger by the Intellicell Stockholders:
(i) by mutual consent of CWI and Intellicell;
(ii) by either CWI or Intellicell, if the Merger shall not have been
consummated before October 30, 1999 (unless the failure to consummate the
Merger by such date shall be due to the action or failure to act of the
party seeking to terminate this Agreement);
(iii) by either CWI or Intellicell, if (a) the conditions to such
party's obligations shall have become commercially impracticable to
satisfy and such conditions have not been waived; or (b) any permanent
injunction or other order of a court or other competent authority
preventing the consummation of the Merger shall have become final and
non-appealable;
(iv) by either CWI or Intellicell, if the issuance of the shares of
Intellicell Common Stock issuable in connection with the Merger is not
duly approved by the Intellicell Stockholders; or
(v) by either CWI or Intellicell if (a) an SEC or Nasdaq proceeding
is pending or threatened against Intellicell or (b) the financing
commitments described in Sections 6.1(n) and 6.2(p) have not been
obtained.
7.4 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.3 hereof, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party hereto
or its affiliates, directors, officers or stockholders. Nothing contained in
this Section 7.4 shall relieve any party from liability for any willful breach
of this Agreement.
VIII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. If the Merger occurs, all
of the representations and warranties contained in Article IV shall survive the
Closing for a period of 18 months from the Closing Date.
8.2 INDEMNIFICATION BY CWI AND PRINCIPAL CWI STOCKHOLDERS.
(a) Subject to the terms and conditions herein, CWI, jointly and
severally with the Principal CWI Stockholders, and the Principal CWI
Stockholders, pro rata (based on their proportionate ownership of CWI Stock
prior to the Closing), agree to indemnify, defend and hold harmless Intellicell,
its stockholders, officers, directors and employees, the Merger Sub, and its
officers, directors and employees (all such persons and entities being
collectively referred to as the "INTELLICELL GROUP") from, against, for and in
respect of any and all losses, damages, costs and expenses (including reasonable
legal fees and expenses) which any member of the Intellicell Group may sustain
or incur which are caused by or arise out of any inaccuracy in or breach of any
of the representations, warranties or covenants made by CWI or the Principal CWI
Stockholders in this Agreement (collectively, the "INTELLICELL LOSSES");
provided, however, that (a) the foregoing indemnification shall not include lost
profits or other consequential damages and (b) following completion of the
Merger, the foregoing indemnification (including without limitation with respect
to CWI's representations and warranties) shall be provided solely by the
Principal CWI Stockholders pro rata (based on their proportionate ownership of
CWI Stock prior to the Closing), and the foregoing indemnified parties shall
neither be permitted nor required to seek indemnification from CWI.
(b) The obligations of CWI and the Principal CWI Stockholders to
indemnify members of the Intellicell Group with respect to any Intellicell Loss
is subject to the condition that CWI and the Principal CWI Stockholders shall
have received a claim for such Intellicell Loss prior to the expiration of 18
months following the Closing Date.
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(c) Notwithstanding any term or condition of this Section 8.2, the
liability of CWI and the Principal CWI Stockholders shall be limited as follows:
(i) the maximum aggregate liability of CWI and the Principal CWI Stockholders
for all claims pursuant to this Section 8.2 shall not exceed $2,500,000; and
(ii) CWI and the Principal CWI Stockholders shall only be obligated with respect
to any claim of indemnification pursuant to this Section 8.2 to the extent the
aggregate Intellicell Losses exceed $100,000, in which case CWI and the
Principal CWI Stockholders shall be obligated for all Intellicell Losses up to
the $2,500,000 maximum.
8.3 INDEMNIFICATION BY INTELLICELL.
(a) Subject to the terms and conditions contained herein, Intellicell
agrees to indemnify, defend and hold harmless CWI, its stockholders, officers,
directors, and employees (all such persons being collectively referred to as the
"CWI GROUP") from, against, for and in respect of any and all losses, damages,
costs and expenses (including reasonable legal fees and expenses) which any
member of the CWI Group may sustain or incur which are caused by or arise out of
any inaccuracy in or breach of any of the representations, warranties or
covenants made by Intellicell in this Agreement (collectively, the "CWI
LOSSES"); provided however, that the foregoing indemnification shall not include
lost profits or other consequential damages. Intellicell, however, shall have no
liability or obligation to CWI or any of CWI's stock holders should the
transactions contemplated by this Agreement not qualify for nonrecognition
treatment under the Code for any reason.
(b) The obligation of Intellicell to indemnify members of the CWI Group
with respect to any CWI Loss is subject to the condition that Intellicell shall
have received a claim for such CWI Loss prior to the expiration of 18 months
following the Closing Date.
(c) Notwithstanding any term or conditions of this Section 8.3, the
liability of Intellicell shall be limited as follows: (i) the maximum liability
of Intellicell for all claims pursuant to this Section 8.3 shall not exceed
$2,500,000; and (ii) Intellicell shall only be obligated with respect to any
claim of indemnification pursuant to this Section 8.3 to the extent the
aggregate CWI Losses exceed $100,000, in which case Intellicell shall be
obligated for all CWI Losses up to the $2,500,000 maximum.
8.4 PROCEDURES FOR INDEMNIFICATION.
(a) As used in this Article VIII, the term "INDEMNITOR" means the party
or parties against whom indemnification hereunder is sought, and the term
"INDEMNITEE" means the party or parties seeking indemnification hereunder.
(b) A claim for indemnification hereunder (an "INDEMNIFICATION CLAIM")
shall be made by Indemnitee by delivery of a written notice to Indemnitor
requesting indemnification and specifying the basis on which indemnification is
sought in reasonable detail (and shall include relevant documentation related to
the Indemnification Claim), the amount of the asserted Intellicell Losses or CWI
Losses, as the case may be, and, in the case of a Third Party Claim (as defined
in Section 8.5), containing (by attachment or otherwise) such other information
as Indemnitee shall have concerning such Third Party Claim.
(c) If the Indemnification Claim involves a Third Party Claim, the
procedures set forth in Section 8.5 hereof shall be observed by Indemnitee and
Indemnitor.
8.5 DEFENSE OF THIRD PARTY CLAIMS. Should any claim be made or any suit or
proceeding instituted by a third party against Indemnitee which, if prosecuted
successfully, would be a matter for which Indemnitee would be entitled to
indemnification under this Article VIII (a "THIRD PARTY CLAIM"), the obligations
and liabilities of the parties hereunder with respect to such Third Party Claim
shall be subject to the following terms and conditions:
(a) Indemnitee shall give Indemnitor written notice of any such Third
Party Claim promptly after receipt by Indemnitee of notice thereof, and
Indemnitor will undertake control of the defense thereof by counsel of its own
choosing reasonably acceptable to Indemnitee. Indemnitee may participate in the
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defense through its own counsel at its own expense. If Indemnitor fails or
refuses to undertake the defense of such Third Party Claim within 15 days after
written notice of such claim has been delivered to Indemnitor by Indemnitee,
Indemnitee shall have the right to undertake the defense, compromise and,
subject to Section 8.6, settlement of such Third Party Claim with counsel of its
own choosing. In the circumstances described in the preceding sentence,
Indemnitee shall, promptly upon its assumption of the defense of such Third
Party Claim, make an Indemnification Claim as specified in Section 8.4(b), which
shall be deemed an Indemnification Claim that is not a Third Party Claim for the
purposes of the procedures set forth herein. Failure of Indemnitee to furnish
written notice to Indemnitor of a Third Party Claim shall not release Indemnitor
from Indemnitor's obligations hereunder, except to the extent Indemnitor is
prejudiced by such failure.
(b) Indemnitee and Indemnitor shall cooperate with each other in all
reasonable respects in connection with the defense of any Third Party Claim,
including making available records relating to such claim and furnishing
employees of Indemnitee as may be reasonably necessary for the preparation of
the defense of any such Third Party Claim or for testimony as witness in any
proceeding relating to such claim.
8.6 SETTLEMENT OF THIRD PARTY CLAIMS. Unless Indemnitor has failed to
fulfill its obligations under this Article VIII, no settlement by Indemnitee of
a Third Party Claim shall be made without the prior written consent by or on
behalf of Indemnitor, which consent shall not be unreasonably withheld or
delayed. If Indemnitor has assumed the defense of a Third Party Claim as
contemplated by Section 8.5(a), no settlement of such Third Party Claim may be
made by Indemnitor without the prior written consent by or on behalf of
Indemnitee, unless such settlement includes a complete release of all claims
against Indemnitee.
IX. OPERATION OF INTELLICELL FOLLOWING MERGER
9.1 ELECTION OF DIRECTORS. During the two-year period following the
Closing Date, Intellicell and Merger Sub each shall have an eight-member Board
of Directors and will use their commercially reasonable best efforts to cause
the election of three persons to the Intellicell Board of Directors and Merger
Sub Board of Directors who have been designated by the CWI stockholders (at
least one whom was not an officer, director, employee or significant stockholder
of CWI and all of whom shall be reasonably acceptable to Intellicell).
Thereafter, Intellicell and Merger Sub each shall have a seven-member Board of
Directors and will use their commercially reasonable best efforts to cause the
election of two persons to the Intellicell Board of Directors and Merger Sub
Board of Directors who have been designated by the CWI stockholders (and who are
reasonably acceptable to Intellicell), provided that the CWI stockholders
continue to own in the aggregate at least 50% of the shares of Intellicell
Common Stock issued to them by Intellicell in connection with the Merger,
including Base Shares and Additional Shares.
9.2 OPERATIONAL FACILITIES. It is currently contemplated that
Intellicell's Chatsworth, California, facility will serve as its West Coast
warehousing facility and the headquarters for Intellicell's corporate functions;
Intellicell's Chief Executive Officer, Chief Financial Officer and Marketing and
Business Development functions will be based in Dallas, Texas; and CWI's current
Chicago area and Miami facilities will continue to be maintained, all subject to
the discretion of Intellicell's Board of Directors.
X. GENERAL
10.1 FEES AND EXPENSES. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including the costs and expenses incurred in
connection with preparing, printing and mailing of the Proxy Statement, shall be
borne separately by Intellicell for its costs and expenses and by the Principal
CWI Stockholders for the expenses of CWI and the Principal CWI Stockholders;
provided, however, that (i) the Principal CWI Stockholders will not be required
to reimburse CWI for expenses relating to the Merger that are incurred by CWI
and paid before the Closing and (ii) subject to the limitations set forth in
Section 5.1(l), Intellicell
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shall reimburse CWI for up to 50% of any payments made by CWI to its independent
certified public accountants for preparing the audited financial statements for
the Proxy Statement and to satisfy SEC regulations.
10.2 INDEMNITY AGAINST FINDERS. Each party hereto shall indemnify and hold
the other party harmless against any claim for finders' fees based on alleged
retention of a finder by it.
10.3 CONTROLLING LAW. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by and
construed in accordance with the laws of the State of Delaware, notwithstanding
any Delaware or other conflict-of-law provisions to the contrary.
10.4 NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received when delivered against
receipt, upon receipt of a facsimile transmission or three days following
deposit in the United States mails, first class postage prepaid, addressed as
set forth below:
If to Intellicell or Merger Sub:
Intellicell Corp.
9314 Eton Street
Chatsworth, California 91311
Facsimile: (818) 882-2707
Attention: Chief Executive Officer
with a copy given in the manner prescribed above, to:
Troy & Gould Professional Corporation
1801 Century Park East
Suite 1600
Los Angeles, California 90067
Facsimile: (310) 201-4746
Attention: Sanford J. Hillsberg, Esq.
If to CWI:
Cellular Wholesalers, Inc.
600 Knightsbridge Parkway
P.O. Box 1492
Lincolnshire, Illinois 60069-1492
Facsimile: (847) 955-2447
Attention: Melvyn Cohen
If to CWI Principal Stockholders:
Melvyn Cohen
600 Knightsbridge Parkway
P.O. Box 1492
Lincolnshire, Illinois 60069-1492
Facsimile: (847) 955-2447
Ronald Goldberg
11 Lakewood
Bannockburn, IL 60015
Facsimile: (847) 676-8889
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Philip Leavitt
65 South Deere Park
Highland Park, IL 60035
Facsimile: (847) 676-8744
Sherwin Geitner
3239 Maple Leaf Drive
Glenview, IL 60025
Facsimile: (847) 676-8866
Cary Maimon
1819 Brandywyn
Buffalo Grove, IL 60089
Facsimile: (847) 955-2428
in every case, with a copy given in the manner prescribed above, to:
Kamensky & Rubinstein
7250 North Cicero Avenue
Suite 200
Lincolnwood, Illinois 60646-1693
Facsimile: (847) 982-1676
Attention: Sherwin Rubinstein, Esq.
and in the case of a CWI Principal Stockholder, with a copy given in the
manner prescribed above, to:
Melvyn Cohen
600 Knightsbridge Parkway
P.O. Box 1492
Lincolnshire, Illinois 60069-1492
Facsimile: (847) 955-2447
Any party may alter the address to which communications or copies are to be
sent by giving notice to the other parties of such change of address in
conformity with the provisions of this paragraph for the giving of notice.
10.5 BINDING NATURE OF AGREEMENT; NO ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that no party may assign or transfer its rights
or obligations under this Agreement without the prior written consent of the
other parties hereto.
10.6 ENTIRE AGREEMENT. Except as set forth in the Confidentiality
Agreement, this Agreement contains the entire understanding between the parties
hereto with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written, except as herein contained. The express
terms hereof control and supersede any course of performance and/or usage of the
trade inconsistent with any of the terms hereof.
10.7 SECTION HEADINGS. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
10.8 PUBLIC ANNOUNCEMENTS. Except as contemplated by this Agreement or as
may be required, in the opinion of Intellicell's counsel, by applicable law or
the rules and regulations or the SEC or the National Association of Securities
Dealers, Inc., none of the parties hereto shall make any press release or
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other public announcement or filings with respect to this Agreement or the
transactions contemplated hereby without the prior approval of both Intellicell
and CWI, which approvals shall not be unreasonably withheld or delayed.
10.9 CONSTRUCTION OF AGREEMENT. Each party and counsel for each party
(including the Principal CWI Stockholders) has reviewed and cooperated in the
drafting and preparation of this Agreement. As a jointly produced document, this
Agreement and its language shall in all cases be simply construed according to
its fair meaning and not strictly for or against any party or the drafter
hereof.
10.10 DOCUMENTS AND EXHIBITS. All documents, schedules, writings and
exhibits referred to herein or delivered pursuant hereto are hereby incorporated
by reference into, and made a part of, this Agreement.
10.11 INDULGENCES, NOT WAIVERS. Neither the failure nor any delay on the
part of a party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or any other right, remedy, power or privilege, nor shall
any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
10.12 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories. Any photographic or xerographic copy of this Agreement, with all
signatures reproduced on one or more sets of signature pages, shall be
considered for all purposes as if it were an executed counterpart of this
Agreement.
10.13 PROVISIONS SEPARABLE. The provisions of this Agreement are
independent and separable from each other, and no provision shall be affected or
rendered invalid or unenforceable by virtue of the fact that for any reason any
other or others of them may be invalid or unenforceable in whole or in part,
provided, however, that the provisions of this Agreement are not separable to
the extent that doing so would materially deprive any party of the benefit of
its bargain as provided for by this Agreement.
10.14 NUMBER OF DAYS. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and holidays;
provided, however, that if the final day of any time period falls on a Saturday,
Sunday or holiday, then the final day shall be deemed to be the next day which
is not a Saturday, Sunday or holiday.
10.15 LIQUIDATED DAMAGES. In the event CWI or Intellicell and Merger Sub
fail to complete the Merger for any reason (except if such party is in
compliance with the terms and conditions of this Agreement), (i) the sole remedy
for Intellicell and Merger Sub in the case of such a failure by CWI will be a
cash payment by CWI to Intellicell of $175,000 and (ii) the sole remedy of CWI
in the case of such a failure by Intellicell or Merger Sub will be a cash
payment by Intellicell to CWI of $175,000. The foregoing payment is intended to
serve as a liquidated damages penalty by the defaulting party.
10.16 DISPUTE RESOLUTION. In the event of any dispute under the terms of
this Agreement, such dispute shall be resolved by binding arbitration under the
rules of the American Arbitration Association in Los Angeles, California. The
prevailing party in any arbitration shall be entitled to recover its reasonable
attorneys fees and costs.
10.17 NONSOLICITATION. If this Agreement is terminated for any reason
(including with cause), Intellicell and CWI shall not solicit at any time prior
to June 1, 2001 for employment any current officer or employee who is in a
policy making role or is responsible or shares responsibility for the execution
of any marketing, sales, finance or other signification function of the other
party.
34
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
<TABLE>
<S> <C> <C>
INTELLICELL CORP.
By: /s/ MICHAEL HEDGE
------------------------------------------
Name: Michael Hedge
Title: CHIEF EXECUTIVE OFFICER
INTELLICELL MERGER SUB, INC.
By: /s/ MICHAEL HEDGE
------------------------------------------
Name: Michael Hedge
Title: CHIEF EXECUTIVE OFFICER
CELLULAR WHOLESALERS, INC.
By: /s/ MELVYN COHEN
------------------------------------------
Name: Melvyn Cohen
Title: SECRETARY-TREASURER
/s/ RONALD GOLDBERG
------------------------------------------
Ronald Goldberg
/s/ PHILIP LEAVITT*
------------------------------------------
Philip Leavitt
/s/ SHERWIN GEITNER
------------------------------------------
Sherwin Geitner
/s/ CARY MAIMON
------------------------------------------
Cary Maimon
</TABLE>
* By Melvyn Cohen pursuant to a power of
attorney
i
<PAGE>
EXHIBIT A
INTELLICELL, INC.
POST-MERGER
DIRECTORS
<TABLE>
<S> <C>
John Swinehart -- Chairman
Michael Hedge
Sherman Henderson
Vinay Sharma
Mark Laisure
Ronald Goldberg -- CWI appointee
Cary Maimon -- CWI appointee
David Segneri -- CWI appointee
</TABLE>
ii
<PAGE>
EXHIBIT B
INTELLICELL MERGER SUB, INC.
POST-MERGER
OFFICERS
<TABLE>
<S> <C>
Michael Hedge -- Chief Executive Officer, President
John Swinehart -- Chief Operating Officer
Ronald Goldberg -- Senior Vice President--U.S. Operations
David M. Kane -- Chief Financial Officer
Mark Fruehan -- Executive Vice President--Business
Development and Strategic Planning
Melvyn Cohen -- Vice President Finance and Administration
Cary Maimon -- Vice President--General Manager
Michael King -- Vice President--Sales and Marketing
</TABLE>
iii
<PAGE>
SCHEDULE 2.2
INTELLICELL CORP.
OFFICERS
PRIOR TO OR AT CLOSING
<TABLE>
<S> <C>
Michael Hedge -- Chief Executive Officer, President
John Swinehart -- Chief Operating Officer
Ronald Goldberg -- Senior Vice President--U.S. Operations
David M. Kane -- Chief Financial Officer
Mark Fruehan -- Executive Vice President--Business
Development and Strategic Planning
Melvyn Cohen -- Vice President Finance and Administration
Cary Maimon -- Vice President--General Manager
Michael King -- Vice President--Sales and Marketing
</TABLE>
iv
<PAGE>
SCHEDULE 4.1(C)
CELLULAR WHOLESALERS, INC.
LIST OF SHAREHOLDERS
<TABLE>
<CAPTION>
NAME NO. OF SHARES
- -------------------------------------------------------------------------------- -------------
<S> <C>
Ronald Goldberg................................................................. 266.33
Sherwin Geitner................................................................. 266.33
Philip Leavitt.................................................................. 266.33
Melvyn Cohen.................................................................... 1.00
</TABLE>
As of the Closing Date the following individual also is expected to be a
Shareholder. Currently the individual owns no shares of stock, but has certain
rights under a Stock Rights Appreciation Plan.
<TABLE>
<CAPTION>
<S> <C>
Cary Maimon..................................................................... 88.9
(estimated)
</TABLE>
v
