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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) July 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, as amended by an amendment executed
by the parties effective as of July 23, 1999, provides for the merger of CWI
into Intellicell Merger Sub, a newly formed, wholly-owned subsidiary of
Registrant. Following the merger, Registrant will continue to be traded on
Nasdaq under Registrant's current stock symbol.
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, 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
10.1 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.
10.2 Amendment No. 1, dated as of July 23, 1999, to the
Merger Agreement.
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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 5, 1999 By: /s/ David Kane
----------------------
David Kane, Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.1 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.
10.2 Amendment No. 1, dated as of July 23, 1999, to the Merger Agreement.
<PAGE>
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
<TABLE>
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Page
<S> <C>
I. CWI MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effects of the Merger. . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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 . . . . . . . . . . . . . . . . . . . . . . 4
1.10 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . 4
1.11 Intellicell to Reserve Shares. . . . . . . . . . . . . . . . . . . . 4
1.12 Further Documents. . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.13 Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
II. INTELLICELL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Directors of Intellicell . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Officers of Intellicell. . . . . . . . . . . . . . . . . . . . . . . 5
III. BOARD AND SHAREHOLDER APPROVALS . . . . . . . . . . . . . . . . . . . . . . 5
3.1 CWI Board and Stockholder Approval . . . . . . . . . . . . . . . . . 5
3.2 Merger Sub Board and Shareholder Approval. . . . . . . . . . . . . . 5
3.3 Intellicell Board and Stockholder Approval . . . . . . . . . . . . . 5
3.4 Intellicell Proxy Statement. . . . . . . . . . . . . . . . . . . . . 6
IV. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Representations and Warranties of CWI. . . . . . . . . . . . . . . . 6
(a) Due Incorporation, Good Standing and Qualification. . . . . . 6
(b) Corporate Authority . . . . . . . . . . . . . . . . . . . . . 7
(c) Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) Options, Warrants and Rights. . . . . . . . . . . . . . . . . 7
(e) Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) Financial Statements. . . . . . . . . . . . . . . . . . . . . 7
(g) Actions in the Ordinary Course of Business. . . . . . . . . . 8
(h) No Material Adverse Change. . . . . . . . . . . . . . . . . . 8
(i) Real Estate Rights. . . . . . . . . . . . . . . . . . . . . . 8
(j) Title to Properties . . . . . . . . . . . . . . . . . . . . . 9
(k) Condition of Assets and Properties. . . . . . . . . . . . . . 9
(l) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 9
(m) Intellectual Property . . . . . . . . . . . . . . . . . . . . 9
(n) Consents and Approvals; No Violation. . . . . . . . . . . . 10
(o) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(p) Accounts Receivable . . . . . . . . . . . . . . . . . . . . 10
(q) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 10
(r) Compliance with Law and Other Regulations . . . . . . . . . 11
(s) Employee Benefit and Employment Matters . . . . . . . . . . 12
(t) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 13
(u) Conflicting Interest. . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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(v) No Payments to Directors, Officers, Stockholders
or Others . . . . . . . . . . . . . . . . . . . . . . . . . 13
(w) No Prohibited Payments. . . . . . . . . . . . . . . . . . . 14
(x) Minute Books. . . . . . . . . . . . . . . . . . . . . . . . 14
(y) Accuracy of Statements. . . . . . . . . . . . . . . . . . . 14
(z) Information Supplied for Proxy Statement. . . . . . . . . . 14
(aa) Brokers and Finders . . . . . . . . . . . . . . . . . . . . 14
(ab) Related Party Transactions. . . . . . . . . . . . . . . . . 15
(ac) Year 2000 Compliance. . . . . . . . . . . . . . . . . . . . 15
(ad) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 Representations and Warranties of CWI and the
Principal CWI Stockholders . . . . . . . . . . . . . . . . . . . . 15
(a) Ownership of Shares . . . . . . . . . . . . . . . . . . . . 15
(b) Investment Representations. . . . . . . . . . . . . . . . . 16
(c) Appraisal Rights. . . . . . . . . . . . . . . . . . . . . . 16
4.3 Representations and Warranties of Intellicell and
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(a) Due Incorporation, Good Standing and Qualification. . . . . 16
(b) Corporate Authority . . . . . . . . . . . . . . . . . . . . 16
(c) Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 17
(d) Options, Warrants and Rights. . . . . . . . . . . . . . . . 17
(e) Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 17
(f) Intellicell SEC Reports . . . . . . . . . . . . . . . . . . 17
(g) Financial Statements. . . . . . . . . . . . . . . . . . . . 18
(h) Actions in the Ordinary Course of Business. . . . . . . . . 18
(i) No Material Adverse Change. . . . . . . . . . . . . . . . . 19
(j) Real Estate Rights. . . . . . . . . . . . . . . . . . . . . 19
(k) Title to Properties . . . . . . . . . . . . . . . . . . . . 19
(l) Condition of Assets and Properties. . . . . . . . . . . . . 20
(m) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 20
(n) Intellectual Property . . . . . . . . . . . . . . . . . . . 20
(o) Consents and Approvals; No Violation. . . . . . . . . . . . 20
(p) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(q) Accounts Receivable . . . . . . . . . . . . . . . . . . . . 21
(r) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 21
(s) Compliance with Law and Other Regulations . . . . . . . . . 22
(t) Employee Benefit and Employment Matters . . . . . . . . . . 22
(u) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 24
(v) Conflicting Interest. . . . . . . . . . . . . . . . . . . . 24
(w) No Payments to Directors, Officers, Stockholders
or Others . . . . . . . . . . . . . . . . . . . . . . . . . 24
(x) No Prohibited Payments. . . . . . . . . . . . . . . . . . . 24
(y) Minute Books. . . . . . . . . . . . . . . . . . . . . . . . 24
(z) Accuracy of Statements. . . . . . . . . . . . . . . . . . . 25
(aa) The Proxy Statement . . . . . . . . . . . . . . . . . . . . 25
(ab) Brokers and Finders . . . . . . . . . . . . . . . . . . . . 25
(ac) Status of Intellicell Common Stock to be Issued . . . . . . 25
(ad) No Activities . . . . . . . . . . . . . . . . . . . . . . . 25
(ae) Year 2000 Compliance. . . . . . . . . . . . . . . . . . . . 25
(af) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 25
V. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1 Covenants of CWI . . . . . . . . . . . . . . . . . . . . . . . . . 26
(a) Truth of Representations and Warranties . . . . . . . . . . 26
(b) Preservation of Business. . . . . . . . . . . . . . . . . . 26
(c) Ordinary Course . . . . . . . . . . . . . . . . . . . . . . 26
(d) Books and Records . . . . . . . . . . . . . . . . . . . . . 27
(e) No Organic Change . . . . . . . . . . . . . . . . . . . . . 27
(f) No Issuance by CWI of Shares, Options, or
Other Securities. . . . . . . . . . . . . . . . . . . . . . 27
(g) Compensation. . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
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(h) Dividends . . . . . . . . . . . . . . . . . . . . . . . . . 27
(i) Right of Inspection . . . . . . . . . . . . . . . . . . . . 27
(j) Confidentiality . . . . . . . . . . . . . . . . . . . . . . 28
(k) Satisfaction of Obligations and Liabilities . . . . . . . . 28
(l) Reasonable Efforts. . . . . . . . . . . . . . . . . . . . . 28
5.2 Covenants of Intellicell . . . . . . . . . . . . . . . . . . . . . 29
(a) Truth of Representations and Warranties . . . . . . . . . . 29
(b) Preservation of Business. . . . . . . . . . . . . . . . . . 29
(c) Ordinary Course . . . . . . . . . . . . . . . . . . . . . . 29
(d) Books and Records . . . . . . . . . . . . . . . . . . . . . 29
(e) No Organic Change . . . . . . . . . . . . . . . . . . . . . 30
(f) No Issuance by Intellicell of Shares, Options
or Other Securities . . . . . . . . . . . . . . . . . . . . 30
(g) Compensation. . . . . . . . . . . . . . . . . . . . . . . . 30
(h) Dividends . . . . . . . . . . . . . . . . . . . . . . . . . 30
(i) Right of Inspection . . . . . . . . . . . . . . . . . . . . 30
(j) Confidentiality . . . . . . . . . . . . . . . . . . . . . . 31
(k) Satisfaction of Obligations and Liabilities . . . . . . . . 31
(l) Recommendation of Board of Directors. . . . . . . . . . . . 31
(m) Reasonable Efforts. . . . . . . . . . . . . . . . . . . . . 31
(n) Employee Benefits . . . . . . . . . . . . . . . . . . . . . 32
(o) Third Party Beneficiaries . . . . . . . . . . . . . . . . . 32
(p) Voting Trust Agreement. . . . . . . . . . . . . . . . . . . 32
(q) Operation of Merger Sub . . . . . . . . . . . . . . . . . . 32
VI. CONDITIONS PRECEDENT TO OBLIGATIONS . . . . . . . . . . . . . . . . . . . 32
6.1 Conditions Precedent to the Obligations of Intellicell
and Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(a) Accuracy of Representations and Warranties. . . . . . . . . 33
(b) Performance of Agreements . . . . . . . . . . . . . . . . . 33
(c) Opinion of Financial Advisor. . . . . . . . . . . . . . . . 33
(d) Stockholder Approvals . . . . . . . . . . . . . . . . . . . 33
(e) Opinion of Counsel for CWI. . . . . . . . . . . . . . . . . 33
(f) No Material Adverse Change. . . . . . . . . . . . . . . . . 34
(g) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 34
(h) Certificate of CWI. . . . . . . . . . . . . . . . . . . . . 34
(i) Proceedings Satisfactory to Counsel . . . . . . . . . . . . 34
(j) Consents and Approvals. . . . . . . . . . . . . . . . . . . 34
(k) Delivery of Documents . . . . . . . . . . . . . . . . . . . 35
(l) Employment Agreement. . . . . . . . . . . . . . . . . . . . 35
(m) Intellicell Common Stock Trading Price. . . . . . . . . . . 35
(n) Additional Financing. . . . . . . . . . . . . . . . . . . . 35
(o) Related Party Agreements. . . . . . . . . . . . . . . . . . 35
(p) Insurance Letter. . . . . . . . . . . . . . . . . . . . . . 35
6.2 Conditions Precedent to the Obligations of CWI . . . . . . . . . . 36
(a) Accuracy of Representations and Warranties. . . . . . . . . 36
(b) Performance of Agreements . . . . . . . . . . . . . . . . . 36
(c) Stockholder Approval. . . . . . . . . . . . . . . . . . . . 36
(d) Opinion of Counsel for Intellicell. . . . . . . . . . . . . 36
(e) No Material Adverse Change. . . . . . . . . . . . . . . . . 38
(f) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 38
(g) Certificates of Intellicell and Merger Sub. . . . . . . . . 38
(h) Proceedings Satisfactory to Counsel . . . . . . . . . . . . 38
(i) Delivery of Documents . . . . . . . . . . . . . . . . . . . 38
(j) Consents and Approvals. . . . . . . . . . . . . . . . . . . 38
(k) Amendment to Certificate of Incorporation . . . . . . . . . 39
(l) Amendment to Bylaws; Election of Directors. . . . . . . . . 39
(m) Intellicell Common Stock Trading Price. . . . . . . . . . . 39
(n) Employment Agreements . . . . . . . . . . . . . . . . . . . 39
(o) Voting Trust Agreement. . . . . . . . . . . . . . . . . . . 39
</TABLE>
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<S> <C> <C>
(p) Additional Financing. . . . . . . . . . . . . . . . . . . . . 39
(q) Insurance Letter. . . . . . . . . . . . . . . . . . . . . . 39
VII. AMENDMENT, WAIVER, TERMINATION. . . . . . . . . . . . . . . . . . . . . . 40
7.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.2 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.3 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.4 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . 41
VIII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1 Survival of Representations and Warranties . . . . . . . . . . . . 41
8.2 Indemnification by CWI and Principal CWI Stockholders. . . . . . . 41
8.3 Indemnification by Intellicell . . . . . . . . . . . . . . . . . . 42
8.4 Procedures for Indemnification . . . . . . . . . . . . . . . . . . 42
8.5 Defense of Third Party Claims. . . . . . . . . . . . . . . . . . . 43
8.6 Settlement of Third Party Claims . . . . . . . . . . . . . . . . . 43
IX. OPERATION OF INTELLICELL FOLLOWING MERGER . . . . . . . . . . . . . . . . 44
9.1 Election of Directors. . . . . . . . . . . . . . . . . . . . . . . 44
9.2 Operational Facilities . . . . . . . . . . . . . . . . . . . . . . 44
X. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.1 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 44
10.2 Indemnity Against Finders. . . . . . . . . . . . . . . . . . . . . 44
10.3 Controlling Law. . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.5 Binding Nature of Agreement; No Assignment . . . . . . . . . . . . 47
10.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.7 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.8 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . 47
10.9 Construction of Agreement. . . . . . . . . . . . . . . . . . . . . 47
10.10 Documents and Exhibits . . . . . . . . . . . . . . . . . . . . . . 47
10.11 Indulgences, Not Waivers . . . . . . . . . . . . . . . . . . . . . 47
10.12 Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . 48
10.13 Provisions Separable . . . . . . . . . . . . . . . . . . . . . . . 48
10.14 Number of Days . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.15 Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . 48
10.16 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . 48
10.17 Nonsolicitation. . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS 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");
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").
<PAGE>
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
$11,000,000 (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 $6,000,000 of shares of
Intellicell common stock, $.01 par value per share (the "INTELLICELL COMMON
STOCK"), valued as hereinafter described (the $6,000,000 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 $2.666666 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.
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 ($6,000,000 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 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
<PAGE>
of the Base Shares as of the Closing Date within 15 days following the
determination of the Closing Date Equity. 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. 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 10
days prior to the Closing.
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
and 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
<PAGE>
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.
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. 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.
<PAGE>
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
thereunder. 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.
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.
<PAGE>
(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 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
<PAGE>
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 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
<PAGE>
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, 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 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 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,
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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.
(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.
<PAGE>
(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.
<PAGE>
(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
<PAGE>
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 "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
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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.
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.
<PAGE>
(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.
(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
<PAGE>
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 practicable, 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
<PAGE>
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 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.
In this regard, Intellicell agrees that it 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.
<PAGE>
(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.
<PAGE>
(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 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
<PAGE>
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.
(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
<PAGE>
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
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 made any other severance or employment
arrangements with 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.
(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. Intellicell shall also have obtained
additional debt or equity financing on terms acceptable to Intellicell in its
reasonable
<PAGE>
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 and Intellicell shall
have entered into agreements with Leavitt Communications, Inc. ("LCI"),
Continental Mobile Telephone Company, Inc. and any other parties related to
CWI covering LCI's right of first refusal to purchase any CWI computer
hardware or software that may be sold by CWI, LCI's tenancy, management and
LCI's access to CWI's resources and any other existing relationships between
CWI and any of its related parties, all on terms acceptable to Intellicell in
its sole discretion.
(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.
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;
<PAGE>
(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;
(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
<PAGE>
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.
(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
and Cary Maimon and made such other severance or employment arrangements with
other CWI employees on terms that are acceptable to CWI in its sole discretion
and to such employees.
(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
<PAGE>
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.
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
<PAGE>
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.
(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.
<PAGE>
(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
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
<PAGE>
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 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.
<PAGE>
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
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:
<PAGE>
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 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
<PAGE>
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
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
INTELLICELL CORP.
By: /s/ Michael Hedge
---------------------
Name: Michael Hedge
Title: Chief Executive Officer
<PAGE>
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
<PAGE>
/s/ Ronald Goldberg*
--------------------
Ronald Goldberg
/s/ Philip Leavitt*
-------------------
Philip Leavitt
/s/ Sherwin Geitner*
--------------------
Sherwin Geitner
/s/ Cary Maimon
---------------
Cary Maimon
* By Melvyn Cohen pursuant to a power of
attorney
<PAGE>
EXHIBIT A
INTELLICELL, INC.
Post-Merger
Directors
---------
John Swinehart - Chairman
Michael Hedge
Sherman Henderson
Vinay Sharma
Mark Laisure
Ronald Goldberg - CWI appointee
Cary Maimon - CWI appointee
David Segneri - CWI appointee
<PAGE>
EXHIBIT B
INTELLICELL CORP.
Post-Merger
Officers
--------
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
Mel Cohen - Vice President Finance and Administration
Cary Maimon - Vice President - General Manager
Michael King - Vice President - Sales and Marketing
<PAGE>
AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
This Amendment to Agreement and Plan of Merger (this "Amendment") 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 Amendment 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, the parties to this Amendment entered into an Agreement and
Plan of Merger, dated as of July 23, 1999 (the "Agreement"); and
Whereas, the parties to this Amendment desire to amend Section 1.7 of
the Agreement to increase the Share Value (as defined in Section 1.7 of the
Agreement) and to correspondingly increase the Base Consideration (as defined
in Section 1.7 of the Agreement);
Now, therefore, in consideration of the premises and the mutual
agreements contained herein, the parties agree as follows:
1. AMENDMENT TO SECTION 1.7 Section 1.7 of the Agreement is hereby
amended to read in full as follows:
"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. 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
<PAGE>
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 the Base Shares on a pro rata basis (unless
directed otherwise as described below) and 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 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 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."
2. AGREEMENT IN FULL FORCE AND EFFECT. The Agreement, as modified
pursuant to Section 1 above, shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
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/ Ronald Goldberg
-------------------------------
Name: Ronald Goldberg
<PAGE>
Title: President
/s/ Ronald Goldberg
-------------------------------
Ronald Goldberg
/s/ Philip Leavitt
-------------------------------
Philip Leavitt
/s/ Sherwin Geitner
-------------------------------
Sherwin Geitner
/s/ Cary Maimon
-------------------------------
Cary Maimon
