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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is entered into this
12th day of October, 2000, by and among Goldonline International, Inc., a
Delaware corporation (hereinafter referred to as "Buyer"); HMS Jewelry Co.,
Ltd., a Texas limited partnership (hereinafter referred to as the "Company");
HMS Operating Company, a Texas corporation (hereinafter referred to as "HMS");
GDOL Acquisition, Inc., a Texas corporation wholly owned by Buyer ("Merger
Sub"); and Harry M. Schmidt, Terri Schmidt and The Schmidt Gifting Trust, being
all owners of the Company and HMS ("Sellers");
WHEREAS, Sellers own all of the outstanding ownership partnership units
of the Company (the "Units") and all of the outstanding common stock of HMS (the
"Shares"); and
WHEREAS, Buyer desires to acquire all of the business and assets of the
Company and HMS utilized by them in the wholesale jewelry business (the
"Business"), excepting only the Excluded Assets described below.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, and subject to the
accuracy of the representations and warranties of the parties, the parties
hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject and upon the terms and conditions of this Agreement and the applicable
provisions of the Texas Business Corporation Act (the "Texas Act"), HMS and the
Company shall be merged with and into the Merger Sub, the separate corporate
existence of HMS and the Company shall cease, and Merger Sub shall continue as
the surviving corporation and as a wholly-owned subsidiary of Parent. The Merger
Sub as the surviving corporation after the Merger is hereinafter sometimes
referred to as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated, the
closing of the Merger (the "Closing") will take place as promptly as
practicable, but no later than five (5) business days following satisfaction or
waiver of the conditions set forth in Article IV and V, at the offices of
Buyer's counsel, unless another place or time is agreed to by Buyer and Seller.
The date upon which the Closing actually occurs is herein referred to as the
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"Closing Date." On the Closing Date, the parties hereto shall cause the Merger
to be consummated by filing Articles of Merger in the form of Exhibit A with the
Secretary of State of the State of Texas (the "Merger Certificate"), in
accordance with the applicable provisions of Texas Law (the time of acceptance
by the Secretary of State of Texas of such filing or such later time as may be
provided in the Merger Certificates being referred to herein as the "Effective
Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the Texas Act.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges , powers and franchises of
the Company, HMS and Merger Sub (except the Excluded Assets) shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company, HMS
and the Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) Unless otherwise determined by Parent prior to the Effective Time,
at the Effective Time, the Articles of Incorporation of the Merger Sub, as in
effect immediately prior to the Effective Time, shall be the provisions of the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Articles of Incorporation.
(b) Unless otherwise determined by Parent, the Bylaws of the Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
provisions of the Bylaws of the Surviving Corporation until thereafter amended
in accordance with the Texas Act and as provided in the Articles of
Incorporation of the Surviving Corporation and such Bylaws
1.5 Directors and Officers. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, to hold office in accordance with the Articles of Incorporation and
Bylaws of the Surviving Corporation. Officers of Merger Sub immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation,
each to hold office in accordance with the Bylaws of the Surviving Corporation;
provided, that effective upon Closing, Harry M. Schmidt shall be the President
of the Surviving Corporation.
1.6. Merger Consideration. Subject to the terms and conditions of this
Agreement, as of the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, the Company or the holder of any shares of the
Company Capital Stock, the following shall occur:
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(a) Conversion of Ownership Shares. All Shares of HMS and all Units of
the Company (the "Ownership Shares") issued and outstanding immediately prior to
the Effective Time will be cancelled and extinguished and converted
automatically into the right to receive the following merger consideration as
set forth below, which shall be divided by the Sellers as set forth on Exhibit B
(the "Merger Consideration"). The Merger Consideration shall be Seven Million
Dollars ($7,000,000) comprised of the following:
(i) Four Million Five Hundred Thousand Dollars ($4,500,000), less
the amount of the Employee Bonuses, payable by wire transfer
pursuant to instructions from Seller;
(ii) Two Convertible Secured Promissory Notes (collectively
referred to as "Promissory Notes") in the aggregate principal
amount of Two Million Five Hundred Thousand Dollars
($2,500,000) attached hereto as Exhibits C and D. Such
Promissory Notes shall be secured pursuant to the Pledge
Agreement attached as Exhibit E; and
(iii) Payment to Donna Jones and Sharon Pisciotta of the sum of
$142,000 each in satisfaction of the Profit Distribution set
forth in employment agreements with them (the "Employee
Bonuses"). Such payments shall be booked as obligations of the
Company upon execution of this Agreement and payable at the
Closing by means of a check from the Buyer.
The Merger Consideration is to be delivered at Closing.
(b) Capital Stock of Merger Sub. At the Effective Time, by virtue of
the Merger and without any action on the part of Buyer, Merger Sub, HMS, or the
Company, each share of Common Stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding and
shall continue to be owned by Buyer. Each stock certificate of Merger Sub
evidencing ownership of any such shares of Common Stock of the Merger Sub shall,
as of the Effective Time, evidence ownership of such shares of Common Stock of
the Surviving Corporation.
1.7 Dissenting Shares. No Seller shall give notice of any right to
dissent from the Merger and receive an appraised price for its ownership shares.
All such rights are hereby waived.
1.8 Excluded Assets. Prior to the Effective Time of the Merger, HMS and
the Company shall have conveyed to Harry M. Schmidt all of their right, title
and interest as a member of HMS Leasing Company, LLC. (the "Excluded Assets").
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1.9 Other Agreements. At the Closing, the indicated parties shall
execute and deliver the following additional agreements in substantially the
form attached hereto:
(a) Employment Agreement between the Surviving Corporation and Harry
Schmidt attached hereto as Exhibit E.
(b) The Lease between the Surviving Corporation and HMS Leasing
Company, LLC attached hereto as Exhibit F.
(c) Corporate and partnership records of HMS and the Company, including
all cancelled Shares and Units.
(d) All necessary consents of third parties, including without
limitation, Fleet Precious Metals, Inc.
(e) Amended loan documents as required by Fleet Precious Metals, Inc.
(f) All other instruments required by this Agreement.
1.9 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company, the officers and directors of the Company
are fully authorized in the name of their respective corporations or otherwise
to take, and will take, all such lawful and necessary action.
1.10 Basic Transactions. This Agreement and other agreements listed
herein are sometimes referred to as the "Basic Agreement." The transactions
contemplated by the Basic Agreement are sometimes referred to as the
"Transactions."
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Sellers. Sellers represent and
warrant to Buyer as follows:
(a) Title to the Shares. At Closing, Sellers shall own of record and
beneficially the number of the Shares and Units listed in Exhibit B, free and
clear of all liens, encumbrances, pledges, claims, options, charges and
assessments of any nature whatsoever,
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with full right and lawful authority to transfer the Shares and Units to Buyer.
No person has any preemptive rights or rights of first refusal with respect to
any of the Shares and Units. There exists no voting agreement, voting trust, or
outstanding proxy with respect to any of the Shares and Units. There are no
outstanding rights, options, warrants, calls, commitments or any other
agreements of any character, whether oral or written, with respect to the Shares
and Units.
(b) Authority. HMS, the Company and Sellers have full power and lawful
authority to execute and deliver the Basic Agreements and to consummate and
perform the Transactions contemplated thereby. The Basic Agreements constitute
(or shall, upon execution, constitute) valid and legally binding obligations
upon HMS, the Company and Sellers, enforceable in accordance with their terms.
Neither the execution and delivery of the Basic Agreements by HMS, the Company
and Sellers, nor the consummation and performance of the Transactions
contemplated thereby, conflicts with, requires the consent, waiver or approval
of, results in a breach of or default under, or gives to others any interest or
right of termination, cancellation or acceleration in or with respect to, any
agreement by which HMS, the Company or Sellers are a party or by which HMS, the
Company and Sellers or any of their respective properties or assets are bound or
affected.
(c) Organization. HMS is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of Texas. The Company
is a limited partnership duly formed under the laws of the State of Texas. The
Company and HMS have all requisite corporate power and authority to own, lease
and operate their properties and to carry on the Business. The Company is duly
qualified and in good standing as a foreign limited partnership in each
jurisdiction where its ownership of property or operation of its business
requires qualification.
(d) Authorized Capitalization. The authorized capitalization of HMS
consists of Ten Thousand (10,000) shares of Common Stock, no par value, of which
One Thousand (1,000) shares have been issued and are outstanding. The Company
has issued and outstanding 100 Units. The Shares and Units have been duly
authorized, validly issued, are fully paid and nonassessable with no personal
liability attaching to the ownership thereof and were offered, issued, sold and
delivered by the Company in compliance with all applicable state and federal
laws. Neither the Company nor HMS has any outstanding rights, options, warrants,
calls, commitments, conversion or any other agreements of any character, whether
oral or written, obligating it to issue any shares of ownership, whether
authorized or not. Other than the Employee Bonuses, neither the Company nor HMS
is a party to or is bound by any agreement, contract, arrangement or
understanding, whether oral or written, giving any person or entity any interest
in, or any right to share, participate in or receive any portion of, their
income, profits or assets, or obligating the Company or HMS to distribute any
portion of their income, profits or assets.
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(e) Company Financial Statements. The Company Financial Statements are
complete in all material respects, were prepared in accordance with generally
accepted accounting principles applied on a basis consistent with prior periods
and fairly present the financial position of the Company as of July 31, 2000.
(f) No Undisclosed Liabilities. Except as set forth in the Company
Financial Statements previously delivered to Buyer and as set forth on Exhibit
"G", and except for obligations incurred thereafter in the ordinary course of
the Company's business, Seller is not aware of any liabilities for which the
Company or HMS is liable or will become liable in the future.
(g) Taxes. The Company and HMS have filed all federal, state, local tax
and other returns and reports which were required to be filed with respect to
all taxes, levies, imposts, duties, licenses and registration fees, charges or
withholdings of every nature whatsoever ("Taxes"), and there exists a
substantial basis in law and fact for all positions taken in such reports. No
waivers of periods of limitation are in effect with respect to any taxes arising
from and attributable to the ownership of properties or operations of the
business of the Company or HMS.
(h) Properties. The Company and HMS have good and marketable title to
all their personal property, equipment, processes, patents, copyrights,
trademarks, franchises, licenses and other properties and assets (except for
items leased or licensed to the Company), including all property reflected in
the Company Financial Statements (except for assets reflected therein which have
been sold in the normal course of its business where the proceeds from such sale
or other disposition have been properly accounted for in the financial
statements of the Company), in each case free and clear of all liens, claims and
encumbrances of every kind and character, except as set forth in Exhibit "G".
Neither the Company nor HMS have any ownership interest in any real property.
The assets and properties owned, operated or leased by the Company and HMS and
used in the Business are in good operating condition in all material respects,
reasonable wear and tear excepted, and suitable for the uses for which intended.
(i) Books and Records. The books and records of the Company and HMS are
complete and correct in all material respects, have been maintained in
accordance with good business practices and accurately reflect in all material
respects the business, financial condition and results of operations of the
Company and HMS as set forth in the Company Financial Statements.
(j) Insurance. Exhibit "H" contains an accurate and complete list and
brief description of all performance bonds and policies of insurance, including
fire and extended coverage, general liability, workers compensation, products
liability, property, and other forms of insurance or indemnity bonds held by the
Company and HMS. Neither the Company nor HMS is in default with respect to any
provisions of any such policy or indemnity bond and have not failed to give any
notice or present any claim thereunder in due
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and timely fashion. All policies of insurance and bonds are: (1) in full force
and effect; (2) are sufficient for compliance by the Company with all
requirements of law and of all agreements and instruments to which the Company
is a party; (3) are valid, outstanding and enforceable; (4) provide adequate
insurance coverage for the assets, business and operations of the Company in
amounts at least equal to customary coverage in the Company's industry; (5) will
remain in full force and effect through the Closing; and (6) will not be
affected by, and will not terminate or lapse by reason of, the transactions
contemplated by this Agreement.
(k) Material Contracts. Except as set forth in Exhibit "I", the Company
and HMS have no purchase, sale, commitment, or other contract, the breach or
termination of which would have a materially adverse effect on the business,
financial condition, results of operations, assets, liabilities, or prospects of
the Company or HMS.
(l) Authorizations. The Company and HMS have no licenses, permits,
approvals and other authorizations from any governmental agencies and any other
entities that are necessary for the conduct of the Business, except as set forth
in Exhibit "J" which contains a list of all licenses, permits, approvals, and
other authorizations, as well as a list of all copyrights, patents, trademarks,
tradenames, servicemarks, franchises, licenses and other permits, each of which
is valid and in full force and effect.
(m) No Powers of Attorney. HMS, the Sellers and the Company have no
powers of attorney or similar authorizations outstanding.
(n) Compliance with Laws. The Company and HMS are not in violation of
any federal, state, local or other law, ordinance, rule or regulation applicable
to the Business, and have not received any actual or threatened complaint,
citation or notice of violation or investigation from any governmental
authority.
(o) Compliance with Environmental Laws. The Company and HMS are in
compliance with all applicable pollution control and environmental laws, rules
and regulations. The Company and HMS have no environmental licenses, permits and
other authorizations held by them relative to compliance with environmental
laws, rules and regulations.
(p) No Litigation. There are no material actions, suits, claims,
complaints or proceedings pending or threatened against the Company or HMS, at
law or in equity, or before or by any governmental department, commission,
court, board, bureau, agency or instrumentality. There are no orders, judgments
or decrees of any governmental authority outstanding which specifically apply to
the Company or HMS or any of their assets.
(q) Validity. All contracts, agreements, leases and licenses to which
the Company or HMS is a party or by which they or any of their properties or
assets are bound
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or affected, are valid and in full force and effect; and no breach or default
exists, or upon the giving of notice or lapse of time, or both, would exist, on
the part of the Company or HMS or by any other party thereto.
(r) No Adverse Changes. Since July 31, 2000, there have been no actual
or threatened developments of a nature that is materially adverse to or involves
any materially adverse effect upon the business, financial condition, results of
operations, assets, liabilities, or prospects of HMS or the Company.
(s) Full Disclosure. All statements of the Company and HMS contained in
the Basic Agreements and in any other written documents delivered by or on
behalf of the Company and HMS to Buyer are true and correct in all material
respects and do not omit any material fact necessary to make the statements
contained therein not misleading in light of the circumstances under which they
were made. There are no facts known to Company and HMS which could have a
materially adversely affect upon the business, financial condition, results of
operations, assets, liabilities, or prospects of the Company or HMS, which have
not been disclosed to Buyer in the Basic Agreements.
2.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Sellers and Company as follows:
(a) Organization. The Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of Delaware. Merger
Sub is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Texas. The Buyer and Merger Sub have all
requisite corporate power and authority to own, lease and operate their
properties and to carry on their business. The Buyer is duly qualified and in
good standing as a foreign corporation in each jurisdiction where its ownership
of property or operation of its business requires qualification.
(b) Authorized Capitalization. The authorized capitalization of the
Buyer at Closing will consist of Two Hundred Million (200,000,000) shares of
Common Stock, $.0001 par value, of which Ninety-Four Million Nine Hundred Four
Thousand Four Hundred Eight (94,904,408) shares will be issued and outstanding.
All shares of Buyer have been duly authorized, validly issued, are fully paid
and nonassessable with no personal liability attaching to the ownership thereof
and were offered, issued, sold and delivered by the Buyer in compliance with all
applicable state and federal laws. The authorized capitalization of Merger Sub
consists of 10,000 shares of Common Stock, par value $0.01, of which 10,000
shares are issued and outstanding, all of which are owned by Buyer. All shares
of Merger Sub have been duly authorized, validly issued, are fully paid and
nonassessable with no personal liability attaching to the ownership thereof and
were offered, issued, sold and delivered by the Merger Sub in compliance with
all applicable state and federal laws.
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(c) Authority. Buyer and Merger Sub have full power and lawful
authority to execute and deliver the Basic Agreements and to consummate and
perform the Transactions contemplated thereby. The Basic Agreements constitute
(or shall, upon execution, constitute) valid and legally binding obligations
upon Buyer and Merger Sub, enforceable in accordance with their terms. Neither
the execution and delivery of the Basic Agreements by Buyer and Merger Sub, nor
the consummation and performance of the Transactions contemplated thereby,
conflicts with, requires the consent, waiver or approval of, results in a breach
of or default under, or gives to others any interest or right of termination,
cancellation or acceleration in or with respect to, any agreement by which Buyer
is a party or by which Buyer or Merger Sub or any of their respective properties
or assets are bound or affected.
(d) Buyer's Financial Statements. The Buyer's Financial Statements are
complete, were prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods and fairly present
the financial position of the Buyer as of April 30. 2000.
(e) Taxes. Except as set forth in Exhibit "K", the Buyer has filed all
federal, state, local tax and other returns and reports which were required to
be filed with respect to all taxes, levies, imposts, duties, licenses and
registration fees, charges or withholdings of every nature whatsoever ("Taxes"),
and their exists a substantial basis in law and fact for all positions taken in
such reports. No waivers of periods of limitation are in effect with respect to
any taxes arising from and attributable to the ownership of properties or
operations of the business of the Company.
(f) Books and Records. The books and records of the Buyer are complete
and correct in all material respects, have been maintained in accordance with
good business practices and accurately reflect in all material respects the
business, financial condition and results of operations of the Buyer as set
forth in the Buyer's Financial Statements.
(g) Compliance with Laws. The Buyer is not, and as a result of the
transactions contemplated hereby, will not be, in violation of any federal,
state, local or other law, ordinance, rule or regulation applicable to its
business, and has not received any actual or threatened complaint, citation or
notice of violation or investigation from any governmental authority, including
the Securities and Exchange Commission.
(h) Compliance with Environmental Laws. The Buyer is in compliance with
all applicable pollution control and environmental laws, rules and regulations.
The Buyer has no environmental licenses, permits and other authorizations held
by the Buyer relative to compliance with environmental laws, rules and
regulations.
(i) Litigation. Except as disclosed in Exhibit "L", there are no
material actions, suits, claims, complaints or proceedings pending or threatened
against the Buyer or Merger Sub, at law or in equity, or before or by any
governmental department, commission, court,
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board, bureau, agency or instrumentality; and there are no facts which would
provide a valid basis for any such action, suit or proceeding. There are no
orders, judgments or decrees of any governmental authority outstanding which
specifically apply to the Company, Merger Sub or any of their assets.
(j) Validity. All contracts, agreements, leases and licenses to which
the Buyer or Merger Sub is a party or by which they or any of their properties
or assets are bound or affected, are valid and in full force and effect; and no
breach or default exists, or upon the giving of notice or lapse of time, or
both, would exist, on the part of the Buyer or by any other party thereto.
(k) Full Disclosure. All statements of Buyer and Merger Sub contained
in the Basic Agreements and in any other written documents delivered by or on
behalf of the Buyer and Merger Sub to Sellers are true and correct in all
material respects and do not omit any material fact necessary to make the
statements contained therein not misleading in light of the circumstances under
which they were made. There are no facts known to Buyer and Merger Sub which
could have a materially adversely affect upon the business, financial condition,
results of operations, assets, liabilities, or prospects of the Buyer and Merger
Sub, which have not been disclosed to Sellers in the Basic Agreements.
ARTICLE III
COVENANTS
3.1 Covenants of Company. Company and HMS covenant and agree that from
the date hereof to the Closing without the prior written consent of Buyer:
(a) Ordinary Course of Business. They will operate the business of the
Company and HMS only in the ordinary course and will use their best efforts to
preserve the Company's business, organization, goodwill and relationships with
persons having business dealings with them.
(b) Maintain Properties. Company and HMS will maintain their properties
in good working order, repair and condition (reasonable wear and use excepted)
and cause the Company and HMS to take all steps reasonably necessary to maintain
in full force and effect their patents, trademarks, servicemarks, trade names,
brand names, copyrights and other intangible assets.
(c) Compensation. Company and HMS will not (1) enter into or alter any
employment agreements; (2) grant any increase in compensation other than normal
merit increases consistent with the Company's general prevailing practices to
any officer or
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employee; or (3) enter into or alter any labor or collective bargaining
agreement or any bonus or other employee fringe benefit.
(d) No Indebtedness. Company and HMS will not create, incur, assume,
guarantee or otherwise become liable with respect to any obligation for borrowed
money, indebtedness, capitalized lease or similar obligation, except in the
ordinary course of business consistent with past practices where the entire net
proceeds thereof are deposited with and used by and in connection with the
Business.
(e) Maintain Books. Company and HMS will maintain their books, accounts
and records in the usual, regular ordinary and sound business manner and in
accordance with generally accepted accounting principles applied on a basis
consistent with past practices.
(f) No Amendments. Company and HMS will not amend their corporate
charters or bylaws (or similar documents) without prior consent of Buyer and
Company and HMS will maintain their corporate existence, licenses, permits,
powers and rights in full force and effect.
(g) Taxes and Accounting Matters. Company and HMS will file when due
all federal, state and local tax returns and reports which shall be accurate and
complete, including but not limited to income, franchise, excise, ad valorem,
and other taxes with respect to their business and properties, and to pay as
they become due all taxes or assessments, except for taxes for which adequate
reserves are established and which are being contested in good faith by
appropriate proceedings. Company and HMS will not change their accounting
methods or practices or any depreciation, amortization or inventory valuation
policies or practices.
(h) No Disposition or Encumbrance. Except in the ordinary course of
business consistent with past practice, Company and HMS will not (1) dispose of
or encumber any of their properties and assets other than the Excluded Assets,
(2) discharge or satisfy any lien or encumbrance or pay any obligation or
liability (fixed or contingent) except for previously scheduled repayment of
debt, (3) cancel or compromise any debt or claim, (4) transfer or grant any
rights under any concessions, leases, licenses, agreements, patents, inventions,
proprietary technology or process, trademarks, servicemarks or copyrights, or
with respect to any know-how, or (5) enter into or modify in any material
respect or terminate any existing license, lease, or contract.
(i) Insurance. Company and HMS will maintain in effect all their
current insurance policies.
(j) No Securities Issuances. Company and HMS will not issue any shares
of any class of capital stock, or enter into any contract, option, warrant or
right calling for the issuance of any such shares of capital stock, or create or
issue any securities convertible into any securities of the Company or HMS
except for the transactions contemplated herein.
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(k) No Dividends. Company and HMS will not declare, set aside or pay
any dividends or other distributions of any nature whatsoever.
(l) Contracts. Company and HMS will not enter into or assume any
contract, agreement, obligation, lease, license, or commitment except in the
ordinary course of business consistent with past practice or as contemplated by
this Agreement.
(m) No Breach. Company and HMS will not do any act or omit to do any
act which would cause a breach of any contract, commitment or obligation of the
Company or HMS.
(n) Due Compliance. Company and HMS will comply with all laws,
regulations, rules and ordinances applicable to it and to the conduct of the
Business.
(o) No Waivers of Rights. Company and HMS will not amend, terminate or
waive any material right whether or not in the ordinary course of business.
(p) Capital Commitments. Company and HMS will not make or commit to
make any capital expenditure, capital addition or capital improvement.
(q) No Related Party Transactions. Except as set forth in Exhibit "M",
the Company and HMS will not make any loans to, or enter into any transaction,
agreement, arrangement or understanding or any other nature with, any officer,
director or employee of the Company or HMS.
(r) Notice of Change. Company and HMS will promptly advise Buyer in
writing of any material adverse change, or the occurrence of any event which
involves any substantial possibility of a material adverse change, in the
business, financial condition, results of operations, assets, liabilities or
prospects of the Company or HMS.
(s) Consents. Company and HMS will use their, best good faith efforts
to obtain the consent or approval of each person or entity whose consent or
approval is required for the consummation of the Transactions contemplated
hereby and to do all things necessary to consummate the Transactions
contemplated by the Basic Agreements.
ARTICLE IV
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CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF BUYER AND MERGER SUB TO CLOSE
The obligation of Buyer and Merger Sub to close the Transactions
contemplated hereby is subject to the fulfillment by Sellers prior to Closing of
each of the following conditions, which may be waived in whole or in part by
Buyer:
4.1 Compliance with Representations, Warranties and Covenants. The
representations and warranties of Sellers and the covenants of the Company and
HMS contained in this Agreement shall have been true and correct when made and
shall be true and correct as of the Closing with the same force and effect as if
made at the Closing. Sellers shall have performed all agreements, covenants and
conditions required to be performed by Sellers prior to the Closing.
4.2 No Adverse Change. There shall have been no event which has had or
may have a material adverse effect upon the business, financial condition,
results of operation, assets, liabilities or prospects of the Company and HMS.
4.3 No Legal Proceedings. No suit, action or other legal or
administrative proceeding before any court or other governmental agency shall be
pending or threatened seeking to enjoin the consummation of the Transactions
contemplated hereby.
4.4 Documents to be Delivered by Sellers. Sellers shall have delivered
the following documents:
(a) The documents listed in Section 1.9.
(b) A copy of (i) the Articles of Incorporation of HMS, certified as
correct by HMS; and (ii) the Bylaws of HMS certified as correct by HMS; (iii) a
certificate of the Texas Tax Commission, Franchise Tax Division, to the effect
that HMS is in good standing and has paid all franchise taxes in such state;
(iv) a copy of the Certificate of Limited Partnership of the Company, certified
as correct of the Company; and (v) a copy of the Agreement of Limited
Partnership of the Company, certified as correct by the Company.
(c) Resolutions of the Board of Directors and Shareholders of HMS and
of the General Partner of the Company approving the Merger.
(d) Such other documents or certificates as shall be reasonably
required by Buyer or its counsel in order to close and consummate this
Agreement.
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<PAGE> 14
ARTICLE V
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF SELLERS AND THE COMPANY TO CLOSE
The obligation of Sellers and the Company to close the Transactions is
subject to the fulfillment prior to Closing of each of the following conditions,
any of which may be waived in whole or in part by Sellers:
5.1 Compliance with Representations, Warranties and Covenants. The
representations and warranties made by Buyer and Merger Sub in this Agreement
shall have been true and correct when made and shall be true and correct in all
material respects at the Closing with the same force and effect as if made at
the Closing, and Buyer and Merger Sub shall have performed all agreements,
covenants and conditions required to be performed by Buyer and Merger Sub prior
to the Closing.
5.2 No Legal Proceedings. No suit, action or other legal or
administrative proceedings before any court or other governmental agency shall
be pending or threatened seeking to enjoin the consummation of the Transactions
contemplated hereby.
5.3. Payments. Sellers shall have received from Buyer the Cash Payment
and Promissory Notes delivered at the Closing by Buyer.
5.4 No Adverse Change. There shall have been no event which has had or
may have a material adverse effect upon the business, financial condition,
results of operation, assets, liabilities or prospects of the Buyer.
5.5 Documents to be Delivered by Buyer and Merger Sub. Buyer and Merger
Sub shall have delivered the following documents:
(a) The documents listed in Section 1.9.
(b) A copy of the Articles of Incorporation and Bylaws of each of the
Company and Merger Sub, certified as correct by the Buyer.
(c) A Certificate of the franchise tax authorities of Delaware and
Texas to effect the good standing of Buyer and Merger Sub.
(d) Resolutions of the Board of Directors and Shareholders of Merger
Sub approving the Merger, certified by the Secretary of the Merger Sub.
(e) Such other documents or certificates as shall be reasonably
required by Sellers or their counsel in order to close and consummate the
Transactions.
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<PAGE> 15
5.6 Arrangement with Lender. Buyer and the Company shall have made
arrangements with Fleet Precious Metals, Inc. ("Fleet") satisfactory to Terri
Schmidt and Harry M. Schmidt for the assumption by Buyer of a guarantee to
Fleet, an indemnity of Terri Schmidt and Harry M. Schmidt by Buyer and Merger
Sub, and the eventual release of Terri Schmidt and Harry M. Schmidt from any
guarantee to Fleet.
ARTICLE VII
MODIFICATION, WAIVERS, TERMINATION
AND EXPENSES
6.1 Modification. Buyer and Sellers may amend, modify or supplement
this Agreement in any manner as they may mutually agree in writing.
6.2 Waivers. Buyer and Sellers may in writing extend the time for or
waive compliance by the other with any of the covenants or conditions of the
other contained herein.
6.3 Termination and Abandonment. This Agreement may be terminated and
the purchase of the Shares may be abandoned before the Closing:
(a) By the mutual consent of Sellers and Buyer;
(b) By Buyer, if the representations and warranties of Sellers set
forth herein shall not be accurate, or the conditions precedent set forth in
Article IV shall have not have been satisfied, in all material respects; or
(c) By Sellers, if the representations and warranties of Buyer set
forth herein shall not be accurate, or the conditions precedent set forth in
Article V shall not have been satisfied in all material respects.
Termination shall be effective on the date of receipt of written notice
specifying the reasons therefor.
ARTICLE VII
MISCELLANEOUS
7.1 Representations and Warranties to Survive. Unless otherwise
provided, all of the representations and warranties contained in this Agreement
and in any certificate, exhibit
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<PAGE> 16
or other document delivered pursuant to this Agreement shall survive the Closing
for a period of two (2) years ("Survival Period"). No investigation made by any
party hereto or their representatives shall constitute a waiver of any
representation or warranty, and no such representation or warranty shall be
merged into the Closing.
In the event the Sellers breach any of their representations,
warranties, and covenants contained herein during the Survival Period, provided
that the Buyer makes a written claim for indemnification against the Sellers
within the Survival Period, then the Sellers agree to indemnify the Buyer from
and against any losses the Buyer shall suffer through and after the date of the
claim for indemnification (but excluding any losses the Buyer shall suffer after
the end of the Survival Period) caused by the breach; provided, however, that
the Sellers shall not have any obligation to indemnify the Buyer from and
against any losses caused by the breach of any representation or warranty or
covenant of the Sellers until the Buyer has suffered losses by reason of all
such breaches in excess of $50,000 in the aggregate after which point the
Sellers will be obligated to indemnify the Buyer from and against further losses
or thereafter to the extent the losses the Buyer has suffered by reason of all
such breaches exceeds a $3,750,000 aggregate ceiling (after which point the
Sellers will have no obligation to indemnify the Buyer from and against further
losses.
7.2 Binding Effect of the Basic Agreements. The Basic Agreements and
the certificates and other instruments delivered by or on behalf of the parties
pursuant thereto, constitute the entire agreement between the parties. The terms
and conditions of the Basic Agreements shall inure to the benefit of and be
binding upon the respective heirs, legal representatives, successor and assigns
of the parties hereto. Nothing in the Basic Agreements, expressed or implied,
confers any rights or remedies upon any party other than the parties hereto and
their respective heirs, legal representatives and assigns.
7.3 Applicable Law. The Basic Agreements are made pursuant to, and will
be construed under, the laws of the State of Texas.
7.4 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and will be deemed to have been duly given when
delivered or mailed, first class postage prepaid:
(a) If to Seller, to:
Mr. Harry Schmidt
HMS JEWELRY COMPANY, LTD.
4385 Sunbelt Drive
Addison, TX 75001
Telephone: (800) HMS-GOLD
Fax: (800) FAX-GOLD
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<PAGE> 17
With a copy to:
Ronald L. Brown
Glast, Phillips & Murray, P.C.
13355 Noel Road
Suite 2200
Dallas, Texas 75240
Telephone: (972) 419-8302
Fax: (972) 419-8329
(b) If to Buyer, to:
Mr. James G. Gordon
GOLDONLINE INTERNATIONAL, INC.
111 Rhodes Road,
Conroe, TX 73301
Telephone: (936) 756-6888
Fax: (936) 756-6822
With a copy to:
Mr. G. David Gordon
G. David Gordon & Associates, P.C.
One Memorial Place
7633 East 63rd Place, Suite 210
Tulsa, OK 74133
Telephone: (918) 254-4997
Fax: (918) 254-2988
These addresses may be changed from time to time by written notice to
the other parties.
7.5 Headings. The headings contained in this Agreement are for
reference only and will not affect in any way the meaning or interpretation of
this Agreement.
7.6 Counterparts. This Agreement may be executed in counterparts, each
of which will be deemed an original and all of which together will constitute
one instrument.
7.7 Severability. If any one or more of the provisions of this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
under applicable law this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein. The
remaining provisions of this Agreement shall be given effect to the maximum
extent then permitted by law.
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<PAGE> 18
7.8 Forbearance; Waiver. Failure to pursue any legal or equitable
remedy or right available to a party shall not constitute a waiver of such
right, nor shall any such forbearance, failure or actual waiver imply or
constitute waiver of subsequent default or breach.
7.9 Attorneys' Fees and Expenses. The prevailing party in any legal
proceeding based upon this Agreement shall be entitled to reasonable attorneys'
fees and expenses and court costs.
7.10 Expenses. Each party shall pay all fees and expenses incurred by
it incident to this Agreement and in connection with the consummation of all
transactions contemplated by this Agreement.
7.11 Integration. This Agreement and all documents and instruments
executed pursuant hereto merge and integrate all prior agreements and
representations respecting the Transactions, whether written or oral, and
constitute the sole agreement of the parties in connection therewith. This
Agreement has been negotiated by and submitted to the scrutiny of both Seller
and Buyer and their counsel and shall be given a fair and reasonable
interpretation in accordance with the words hereof, without consideration or
weight being given to its having been drafted by either party hereto or its
counsel.
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<PAGE> 19
IN WITNESS WHEREOF, the undersigned parties hereto have duly executed
this Agreement on the date first written above.
"BUYER"
GOLDONLINE INTERNATIONAL, INC.
By:
James G. Gordon, President
"MERGER SUB"
GDOL ACQUISITION, INC.
By:
James G. Gordon, President
"COMPANY"
HMS JEWELRY COMPANY, LTD.
By: HMS OPERATING COMPANY,
General Partner
By:
Harry M. Schmidt, President
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<PAGE> 20
"HMS"
HMS OPERATING COMPANY
By:
Harry M. Schmidt, President
"SELLERS"
Harry M. Schmidt
Terri Schmidt
THE SCHMIDT GIFTING TRUST
By:
Sharon A. Pisciotta, Trustee
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