SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 18, 1997
ELECTRO-OPTICAL SYSTEMS CORP.
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(Exact name of Registrant as specified in its charter)
Delaware
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(State or other jurisdiction of Incorporation or organization
33-26344 75-2254748
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(Commission File Number) (I.R.S. Employer Identification No.)
422 Gleason Road, Stow, Massachusetts 01775
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(Address of principal executive offices) (Zip Code)
(508) 562-3806
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(Registrant's telephone number, including area code)
Curbstone Acquisition Corp.
4180 La Jolla Village Drive, Suite 500, La Jolla, California 92037
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
On December 5, 1997, the Registrant executed a definitive Agreement for
Exchange of Stock (the "Acquisition Agreement") with WTS Transnational Inc., a
Massachusetts Corporation ("WTS"). Pursuant to the Acquisition Agreement the
Registrant will acquire all of the issued and outstanding stock of WTS and WTS
will become a wholly owned subsidiary of the Registrant, with all of the
outstanding shares of WTS delivered to the Registrant and exchanged for
15,488,120 shares of the Registrant's common stock.
The acquisition was approved by the boards of directors of the Registrant
and WTS and was completed on December 18, 1997 whereupon the Registrant changed
its name to "Electro-Optical Systems Corp. ("Electro"). Concurrently with the
closing of the acquisition the OTC Bulletin Board symbol was changed to "EOSC".
Additionally, in accordance with the Acquisition Agreement the management of
Curbstone resigned in favor of the management of WTS.
Business
The Company has developed and is in the process of producing
state-of-the-art fingerprint biometric systems for the information security and
access control market segments. These systems meet the highest level security
requirements at an affordable cost. The Company believes that it has two main
features that differentiate it from the competition; (1) Price. Using the
Company's proprietary plastic optical device allows significant savings; (2)
Using the Company's proprietary electronic chips continues the substantial cost
savings. The combination of the Company's technology and its implementation
represent a significant break in the current biometric industry learning curve.
The Company's product approach and resulting price will enable the Registrant to
sell its systems as a commodity, which would be an industry first. The Company's
goal is to provide a range of products that will set the standard in automated
biometric identification.
The Company's products have a cost/performance ratio which is an order of
magnitude lower than current systems on the market. They utilize proprietary
optical systems, electronics, algorithms and software. The software is based on
a highly reliable class fingerprint extraction and matching algorithm.
The Company's primary mission is to revolutionize the way people interact
with information technology systems on an economical basis. The Company's goal
is to eliminate obnoxious and manifold passwords or personal identification
numbers and replace them with biometric verification of the individual. A
process the Company calls the "Notarization System." Log-on is speeded up with a
fraction for the effort required for keying a password, while providing
authentication of the individual user for security and privacy of transactions
and records. Once the individual is known, the system can be programmed to
configure itself to the individual or client company's needs or desires.
Security is improved by the creation of a changing random length encryption
based on the minutia data of the individual's fingerprints.
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Management
The following table sets forth the names and ages of the Company's Officers
and Directors which were appointed upon the resignation of the management of
Curbstone, together with all positions and offices held with the Company by such
Officers. Officers are generally elected to serve until the meeting of the Board
of Directors following the next Annual Meeting of Shareholders or until their
successors have been elected and have qualified.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Charles B. Weaver 56 President, CEO & Chairman of the Board
Marc Gordon 39 Vice President Systems Development
James Callahan 47 Vice President Manufacturing
Steven T. Price 41 Chief Financial Officer
Avi Fogel 40 Director
George Parrent 66 Director
Martin Goldman 71 Director & Corporate Counsel
</TABLE>
CHARLES B. WEAVER, President, CEO and Chairman of the Board. Charles B.
Weaver is the president of the Company was the founder of WTS in 1990. His
responsibilities encompass Electro-Optical Systems Corp.'s overall business
functions, including strategic planning, operations, and administration.
Initially he was responsible for providing the technical marketing requirements
to the engineering and manufacturing team. Additionally he has been pivotal in
providing the firm with entre' with key VAR and OEM channels.
During the initial development phase, Mr. Weaver concentrated on the
product marketing functions to insure a competitive product. He was instrumental
in the development of the system concept for a low cost high performance
Notarization System. As the product solidified, he focused on developing the
company's organization and plans. Prior to his current position, He established
the requisite business relationships and identified the key personnel required
to grow the company. Because of his background in working with high technology
companies, Mr. Weaver has been able to establish the foundation accounts for a
good VAR and OEM roll out.
Mr. Weaver had the responsibilities of Business Area manager and Program
Manager for Honeywell Electro-Optics Division in areas such as Infrared Search
and Track (IRST), Navy Electro-Optics systems, and Thermal Imaging development
programs. The contract value of these programs were up to $45 million. He was
responsible for leading the growth of the threat warning business area from a
few technology development contracts to major production contracts. He was
responsible for the initial proposals and customer briefings which led to the
win by Honeywell of the development and production of the main gun
electro-optical fire control system for the Israeli Merkava main battle tank.
The revenue generated by this program of over $100 million per year at its peak
made what was then known as the Honeywell Radiation Center into a Division. As a
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Business Area Manager he was responsible for the successful negotiations with
SPAR Aerospace, the Canadian Department of Supplies and Services and Honeywell
for a two way technology transfer agreement for Canadian Infrared Search and
Track Technology and Honeywell's Thermal Imaging Technology. Prior to the
Honeywell position which he held for fifteen years, Mr. Weaver was a Senior
Systems Engineer at Texas Instruments. He developed a number of systems concepts
which became products. He was part of the team that developed the concept and
technology for the US Army's thermal imaging Common Module Program. He was
responsible for the concept development and system engineering on Electro-Optics
products which were used on a wide range of platforms including the SR-71, the
Mariner Jupiter Saturn space probes, and the M-60A3 main battle tank, as
examples. He was responsible for the design of the first system HgCdTe detector
and its flight test in a reconnaissance system used by Texas Instruments. He was
responsible for developing and managing an Electro-Optics Laboratory for the
development and testing of optical assemblies and complete infrared imaging fire
control and reconnaissance systems through testing of image characteristics and
performance.
Mr. Weaver's strengths are in technical marketing, electro-optical system
engineering, and growth management. Mr. Weaver was elected to the grade of
fellow in the Society for Photonic and Instrumentation Engineers (SPIE) for his
contribution to the development of infrared imaging technology. He founded and
managed the 1st through the 3rd International Symposiums on Sensor Fusion. He
holds a Bachelor of Arts degree in Physics from Oklahoma City University and
participated in Graduate Studies in Physics at Texas A&M.
MARC GORDON, Vice President Systems Development. Mr. Gordon is responsible
for software systems and algorithm development at Electro-Optical Systems Corp.
He has worked with all aspects of the fingerprint biometric identification
algorithms in this role. He has also evaluated algorithms and segments of
algorithms from a number of different sources including his own. He wrote the
initial application software modules.
At American Surgical Technologies Corp. (AST), he was responsible for the
imaging processing software and the BIOS development for the 3-D Endoscope. As
AST's Software Manager, he initiated SQA policy per ANSI/IEEE and FDA
guidelines, provided the software portion of the 510(k) and wrote design,
verification, and validation documents as required. He established configuration
control using PVCS and managed subcontractors and performed formal software
reviews.
At C.R. Bard, Inc. Mr. Gordon was responsible for the software development
on the ABG300 Arterial Blood Gas Monitor.
He established the Software Department for Zoll Medical (ZMI Corporation)
and led the team that developed the code for the Zoll PD-1200 (in-hospital) and
PD-1400 (pre-hospital and transport) combination non-invasive Pacemaker,
Defibrillator, ECG monitors. He was responsible for software architecture,
design specification, load analysis, coding standards and controls, processor
selection, planning and staffing, equipment planning and purchasing, FDA (US),
IEC (European) and VDE/TUV (German) compliance.
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He led a group of engineers at Raytheon Missile Systems Division designing
and implementing the embedded software for the AMRAAM (Advanced Medium Range
Air-to-Air Missile) GTV Missile.
As an independent author, he developed and licensed a project management
system (Peachtree Project Management System) for sale through Peachtree
Software, Inc., Atlanta, GA. Mr. Gordon holds a BS in Mathematics from the
University of Massachusetts, Amherst, MA and a MS in Computer Engineering from
Boston University, Boston, MA.
JAMES CALLAHAN, Vice President Manufacturing. Mr. James Callahan has
twenty-five years of production and materials management experience. He is
responsible for Electro-Optical Systems Corp. manufacturing and procurement. He
has been responsible for the fabrication and assembly of all of Electro-Optical
Systems Corp.'s products including engineering prototypes. He is experienced in
all aspects of manufacturing management of electo-optical systems and software.
During his 18 year tenure with Honeywell's Electro-Optics Division he held
nearly every manufacturing management position from Production Control
Planner/Coordinator to Manufacturing Project Manager overseeing major military
contracts. The Division produced Infrared Detectors, Infrared Reconnaissance
Systems, tank fire control systems, Thermal Imaging Systems and Threat Warning
Systems. As a Manufacturing Project Manager he was selected to head up a
recovery team on a critically delinquent defense contract and was able to
recover a 6 month delinquency and finish the program on schedule. He was
instrumental in developing and executing manufacturing plans and risk analysis,
reversing the Division's worst program (7 years of cost overruns) into a 20%
profit maker. This contract was also completed 3 months early. As Production
Control Manager, Mr. Callahan launched an aggressive program to accelerate
manufacturing that resulted in a $35 million revenue increase over the prior
year.
Mr. Callahan was the Materials Manager for Autographix, Inc. where he was
responsible for Production/Material Planning and Control, Shipping/Receiving,
and Stockroom. Additional responsibilities included all material related to
Field Service activities and Software Production. Autographix produces computer
based studio graphic art systems which are used to produce graphics by
commercial art studios. He successfully transitioned a $12 million/18 truck load
inventory from a major acquisition which were moved over one weekend resulting
in zero down time. He implemented a full MRP system in Manufacturing, producing
eight inventory turns annually on production hardware, and also instituted
restructuring of manufacturing processes and Bills of Materials to minimize lead
times. Mr. Callahan has completed course work in Business Administration at
Northeastern University, Boston, MA.
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STEVEN T. PRICE, Chief Financial Officer. Steven T. Price recently was
appointed CFO of the Company. Mr. Price is a seasoned financial executive with
eighteen years experience specializing in information businesses, both in the
public and private arenas. As of May 1997, Mr. Price was the CFO of Ezaccess,
Inc., Brisbane, California and is responsible for financial and management
reporting, treasury functions, investor relations, risk management, facilities
management and human resources. He developed the internal financial system,
including budgeting and reporting. Mr. Price established a UK Sales
Representative Agreement to minimize overall taxes and also managed and issued
the Company?s Employee Handbook.
Mr. Price was CFO and Treasurer for Orbit Network, Inc., Novato, California
from June 1996 to May 1997, and was responsible for financial and management
reporting, treasury functions, investor relations, risk management and human
resources. He also managed the due diligence process and closing for two
acquisitions.
From March 1992 to may 1996, Mr. Price was the CFO/Treasurer/Secretary of
The National Registry, Inc., a public company, St. Petersburg, Florida where he
was responsible for financial and management reporting, treasury functions,
investor relations, risk management and human resources. While with The National
Registry Inc., Mr. Price also prepared all 10-K and 10-Q reports, including all
MD&A and Liquidity section disclosures. He developed accounting procedures and
passed Ernst & Young audits with no exceptions.
He established and maintained a multi-state payroll accounting system,
represented finance in Private Placements which netted $28 million, representing
finance in S-3 registrations. From 1991 to 1992, Mr. Price was Chief Financial
Officer for Medic Alert Foundation, International, Turlock, California and was
responsible for financial and management reporting, treasury functions, risk
management, employee benefits and bank relations.
Mr. Price was Chief Financial Officer for Goals of California from 1990 to
1992.
Mr. Price was Corporate Controller (Quotron subsidiary), Los Angeles,
California from 1988 to 1990 and was responsible for all financial functions
with a staff of fifty. From 1986 to 1988, Mr. Price was Controller for Citicorp
Management Logistics subsidiary, responsible for the Financial
Analysis/Reporting functions of Citicorp?s first information business operating
company. Mr. Price was Audit Supervisor for Coopers and Lybrand, San Francisco,
California from 1984 to 1986 where he planned and managed audits of
manufacturing, utility, hospital and venture capital companies. Mr. Price was an
Administrative Officer for Napa Valley Vineyard company, Rutherford, California
from 1981 to 1983. He managed preparation of financial and management reports
and administered UFW contracts for this Vineyard Management Company. From 1979
to 1981 was on the audit staff for Coopers and Lybrand, Sacramento, California.
AVI FOGEL served as a director of WTS since December 1995. He has been a
major contributor in locating potential sources of funding for Electro-Optical
Systems Corp. as well as helping with marketing. He currently is President and
founder of COMMHOME Systems, Inc. He was Vice President of Marketing for Digital
Equipment's Network Division. Mr. Fogel founded LANNET Data Communications'
North American subsidiary LANNET Inc. in 1989 and served as President and Chief
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Executive Officer. Starting with two employees and sales of $1 Million, he grew
the company over three years to a $20 Million run-rate and 55 local employees in
nine Nation wide branches. He guided the global company's strategic direction as
a high-end intelligent LAN hub manufacturer. He established major national VAR
relationships with Jostens Learning and Data General. He personally participated
in closing major deals such as: Swiss Bank Corp.; US Sprint; General Motors;
Time Magazine; CalTrans (California Dept. of Transportation). He established
LANNET as the leading supplier of video capable intelligent LAN/WAN hubs. Mr.
Fogel started with LANNET Data Communications Ltd. in 1987 as Director of
Marketing & Sales at the start of its sales effort he helped the company grow to
$12 Million by 1989. He guided the companies strategic and marketing directions
and penetrated into North America with the win of the Houston Chronicle over
major local players. Personally participated in developing large customers such
as: BMW, French Ministry of Finance, Ciba Geigy. Mr. Fogel served with Fibronics
Israel as an Account Manager from 1985 to 1986. He served in the Israeli Defense
Forces (IDF) Ordnance Corps Electro-Optics Command retiring with the rank of
Major. He was the final authority in the IDF's Army branch on laser based
imaging and range-finding systems. Achievements include the conclusion of
multi-million dollar technical/business contracts with Optic-Electronics Corp.
(Dallas, TX) and El-Op Industries (Israel). He was project officer on assignment
to Honeywell Electro-Optics Division (Lexington, MA) on behalf of the IDF. He
was responsible for IDF requirements and specifications for the most advanced
field tester for a complex IR video night vision system for use in tank fire
control systems. Mr. Fogel holds a B.Sc. E.E. from the Technion, Israeli
Institute of Technology, Haifa, Israel. Studies towards an Executive MBA degree,
UC Irvine.
GEORGE PARRENT has served as a Director of WTS since the founding of WTS.
Mr. Parrent has over 30 years of diverse technical and managerial experience. He
is one of the founders of the science of physical optics. He is currently
President of Innovative Imaging Systems, Inc. and is active in the areas of
analog and digital image processing. Previously, Mr. Parrent was employed at
Honeywell Inc., Electro-Optics Division as Manager of Advanced Systems
(1986-1988), Industrial Vision Systems, Inc. as Chief Scientist (1982-1986),
Raytheon Data Systems as the Director of Product Integrity (1978-1980),
Technical Operations, Inc. as Vice President, European Operations (1970-1977),
Instruments and Research as Vice President (1969-1970), Tech/Ops, Physical
Sciences Division as Vice President and General Manager (1965-1968) and Tech/Ops
and Cambridge Research Laboratories as Physicist (1955-1960). Mr. Parrent holds
a B.S. in Mathematics from Bradley University (1953), a M.S. in Physics from
Boston University (1955) and a Ph.D in Physics from the University of
Manchester, England (1960).
MARTIN GOLDMAN has served as a Director and Corporate Counsel of WTS since
the founding of WTS. Mr. Goldman is a partner in the law offices of Goldman &
Goldman, with law practices in Lynn and Swampscott, Massachusetts. Mr. Goldman
specialize in private placement and corporate law and serves on a number of
local corporate boards. Mr. Goldman received a Doctor Degree from Boston
University Law School (1951) and a Masters of Law in Taxation from Northeastern
University (1954).
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Item 7. Financial Statements, Pro Forma Financial Statements And Exhibits
(b) Pro Forma Financial Information
The Registrant will provide Pro Forma Consolidated Financial
Statements within 60 days.
(c) Exhibits.
1 Agreement Regarding the Exchange of Stock Between Curbstone
Acquisition Corp., and the Shareholders of WTS Transnational, Inc.,
dated December 5, 1997.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the Undersigned, thereunto duly authorized.
ELECTRO-OPTICAL SYSTEMS CORP.
formerly Curbstone Acquisition Corp.
(Registrant)
Date: December 22, 1997 /S/ Charles B. Weaver
-----------------------------------
By: Charles B. Weaver
Its: President
Date: December 22, 1997 /S/ Steven T. Price
-----------------------------------
By: Steven T. Price
Its: Chief Financial Officer
Date: December 22, 1997 /S/ Steven T. Price
-----------------------------------
By: Steven T. Price
Its: Chief Financial Officer
Date: December 22, 1997 /S/ Martin Goldman
-----------------------------------
By: Martin Goldman
Its: Secretary
Page 8
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AGREEMENT
CONCERNING THE EXCHANGE OF STOCK
BETWEEN
CURBSTONE ACQUISITION CORP.
AND
SHAREHOLDERS OF
WTS TRANSNATIONAL INC.
DATED DECEMBER 5, 1997
<PAGE>
1 EXCHANGE OF SECURITIES............................................... 1
1.1 Exchange of Shares.............................................. 1
1.2 Exemption from Registration..................................... 1
1.3 Non-taxable Transaction......................................... 1
2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS .................. 2
2.1 Organization.................................................... 2
2.2 Capital Stock................................................... 2
2.3 Subsidiaries.................................................... 2
2.4 Directors and Officers.......................................... 2
2.5 Financial Statements............................................ 2
2.6 Absence of Changes.............................................. 2
2.7 Absence of Undisclosed Liabilities.............................. 2
2.8 Tax Returns..................................................... 2
2.9 Patents, Trade Names and Rights................................. 3
2.10 Compliance with Laws............................................ 3
2.11 Litigation...................................................... 3
2.12 Authority....................................................... 3
2.13 Ability to Carry Out Obligations................................ 3
2.14 Full Disclosure................................................. 3
2.15 Assets.......................................................... 4
2.16 Material Contracts.............................................. 4
3 REPRESENTATIONS AND WARRANTIES OF CURBSTONE.......................... 4
3.1 Organization.................................................... 4
3.2 Capital Stock................................................... 4
3.3 Subsidiaries.................................................... 4
3.4 Directors and Officers.......................................... 4
3.5 Patents, Trade Names and Rights................................. 4
3.6 Compliance with Laws............................................ 4
3.7 Litigation...................................................... 5
3.8 Authority....................................................... 5
3.9 Ability to Carry Out Obligations................................ 5
3.10 Full Disclosure................................................. 5
3.11 Assets.......................................................... 5
3.12 Filings with the SEC............................................ 5
4 COVENANTS............................................................ 6
4.1 Investigative Rights............................................ 6
4.2 Conduct of Business............................................. 6
5 CLOSING.............................................................. 6
5.1 Closing......................................................... 6
5.2 Deliveries at Closing........................................... 6
5.2.1 Shareholders' Deliveries at Closing.................... 6
5.2.2 CURBSTONE Deliveries at Closing........................ 6
(i)
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6 CONDITIONS TO OBLIGATIONS TO CLOSE................................... 7
6.1 Conditions to Obligations of Shareholders to Close.............. 7
6.2 Conditions to Obligations of CURBSTONE.......................... 7
6.3 No Reverse Split for 6 Months Following Closing................. 7
6.4 No Change of Transfer Agent for 30 Days......................... 7
7 INDEMNIFICATION...................................................... 7
7.1 Indemnification by Shareholders................................. 7
7.2 Indemnification by Curbstone.................................... 8
7.3 Notice and Opportunity to Defend................................ 8
8 MISCELLANEOUS........................................................ 9
8.1 Costs........................................................... 9
8.2 Additional Documentation........................................ 9
8.3 Captions and Headings........................................... 9
8.4 No Oral Change.................................................. 9
8.5 Non-Waiver...................................................... 9
8.6 Time of Essence................................................. 9
8.7 Choice of Law................................................... 9
8.8 Counterparts and/or Facsimile Signature......................... 9
8.9 Notices......................................................... 10
8.10 Binding Effect ................................................. 10
8.11 Mutual Cooperation.............................................. 10
8.12 Brokers......................................................... 10
8.13 Survival of Representations and Warranties...................... 10
8.14 Facsimile Signatures............................................ 11
SCHEDULE A LIST OF WTS SHAREHOLDERS
EXHIBIT 1.2 INVESTMENT LETTER
EXHIBIT 2.3 SUBSIDIARIES OF WTS
EXHIBIT 2.4 WTS OFFICERS AND DIRECTORS
EXHIBIT 2.5 WTS FINANCIAL STATEMENTS
EXHIBIT 2.7 LIABILITIES OF WTS
EXHIBIT 2.11 WTS LITIGATION AND LEGAL PROCEEDINGS
EXHIBIT 2.15 EXCEPTIONS TO GOOD TITLE TO ASSETS
EXHIBIT 2.16 MATERIAL CONTRACTS OF WTS
EXHIBIT 5.2.2.2 POST CLOSING OFFICERS AND DIRECTORS
EXHIBIT 8.12 BROKERS
(ii)
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AGREEMENT
This Stock Exchange Agreement (the "Agreement") made this 5th day of
December, 1997, is by and among CURBSTONE ACQUISITION CORP., a Delaware
Corporation ("CURBSTONE"); and THE UNDERSIGNED SHAREHOLDERS ("Shareholders")
which are the owners of 100% of the capital stock of WTS TRANSNATIONAL INC., a
Massachusetts Corporation ("WTS").
A. Whereas, Shareholders hold all of the issued and outstanding common
stock of WTS; and
B. Whereas, CURBSTONE, a public company, desires to exchange shares of its
common stock for all of the issued and outstanding common stock of WTS held by
the Shareholders, thereby making WTS a wholly owned subsidiary of CURBSTONE; and
C. Whereas, Shareholders desire to exchange all of the issued and
outstanding common stock of WTS for 15,488,120 shares of the common stock of
CURBSTONE, all as more fully set forth herein below; and
D. Whereas, the Board of Directors of CURBSTONE has authorized its proper
corporate officers to effect the transactions contemplated herein.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree to the following terms
and conditions:
1 EXCHANGE OF SECURITIES EXCHANGE OF SECURITIES
1.1 Exchange of Shares..1.....Exchange of Shares. Subject to all the terms
and conditions of this Agreement, CURBSTONE will deliver to Shareholders of WTS
15,488,120 shares of previously authorized but unissued unregistered shares of
the Common Stock, $.0001 Par Value of CURBSTONE (the "CURBSTONE Shares"), in
exchange for all of the issued and outstanding shares of WTS owned by the WTS
Shareholders.
1.2 Exemption from Registration..2.....Exemption from Registration. The
parties hereto intend that the CURBSTONE Shares to be exchanged shall be exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Act"), pursuant to Section 4(2) of the Act and the rules and regulations
promulgated thereunder and exempt from the registration requirements of the
applicable states. In furtherance thereof, Shareholders will execute and deliver
to CURBSTONE on the closing date, investment letters suitable to CURBSTONE
counsel, in form substantially as per Exhibit 1.2 attached hereto.
1.3 Non-taxable Transaction..3Non-taxable Transaction. The parties intend
to effect this transaction as a non-taxable reorganization pursuant to Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
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2 REPRESENTATIONS AND WARRANTIES OF CERTAIN SHAREHOLDERS REPRESENTATIONS AND
WARRANTIES OF THE SHAREHOLDERS
Certain Shareholders (the "Warranting Shareholders") hereby represent and
warrant to CURBSTONE that:
2.1 Organization. WTS is a corporation duly organized, validly existing and
in good standing under the laws of the Common Wealth of Massachusetts, has all
necessary corporate powers to own its properties and to carry on its business as
now owned and operated by it, and is duly qualified to do business and is in
good standing in each of the states where its business requires qualification.
2.2 Capital Stock. The authorized capital stock of WTS consists solely of
200,000 shares of Common Stock, no par value per share. Immediately prior to
closing there shall be 45,959 shares of Common Stock issued and outstanding all
of which are owned by the Shareholders. All of the issued and outstanding shares
of WTS are duly and validly issued, fully paid and nonassessable. There are no
outstanding subscriptions, options, rights, warrants, debentures, instruments,
convertible securities or other agreements or commitments obligating WTS to
issue or to transfer from treasury any additional shares of its capital stock of
any class.
2.3 Subsidiaries.WTS has no subsidiaries and owns no interest in other
enterprises except as set forth on Exhibit 2.3 attached hereto.
2.4 Directors and Officers. Exhibit 2.4 hereto contains the names and
titles of all present officers and directors WTS as of the date of this
Agreement.
2.5 Financial Statements. Exhibit 2.5 hereto consists of the financial
statements of WTS as of November 30, 1997 which have not been certified by
Independent Public Accountants. WTS represents that the audited financial
statements for the years ended December 31, 1995 and 1996 shall be completed and
delivered to the principals of Curbstone post closing no later than December 19,
1997. The financial statements have been prepared in accordance with generally
accepted accounting principles on an accrual basis and practices consistently
followed by WTS throughout the periods indicated, and fairly present the
financial position of WTS as of the dates of the balance sheets included in the
financial statements and the results of operations for the periods indicated.
2.6 Absence of Changes. Since the date of WTS's financial statements
included in Exhibit 2.5, there has not been any change in the financial
condition or operations of WTS, except for changes in the ordinary course of
business, which changes have not, in the aggregate, been materially adverse.
2.7 Absence of Undisclosed Liabilities. Except as set forth on Exhibit 2.7
attached hereto, WTS does not have any material debt, liability or obligation of
any nature, whether accrued, absolute, contingent or otherwise, and whether due
or to become due, that is not reflected in the balance sheet of WTS included in
Exhibit 2.5.
2.8 Tax Returns. Within the times and in the manner prescribed by law, WTS
has filed all federal, state and local tax returns required by law and has paid
all taxes, assessments and penalties due and payable. The provisions for taxes,
if any reflected in the Exhibits are adequate for the periods indicated. There
are no present disputes as to taxes of any nature payable by WTS.
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2.9 Patents, Trade Names and Rights. To the best of its knowledge WTS and
its subsidiaries own and hold all necessary patents, franchise rights,
trademarks, service marks, trade names, inventions, processes, know-how, trade
secrets, copyrights, licenses and other rights necessary to its business, and
the business of its subsidiaries as now conducted or proposed to be conducted.
WTS and its subsidiaries are not infringing upon or otherwise acting adversely
to the right or claimed right of any person with respect to any of the
foregoing.
2.10 Compliance with Laws. WTS and each of its subsidiaries have complied
with, and is not in violation of, applicable federal, state or local statutes,
laws and regulations (including, without limitation, any applicable building,
zoning or other law, ordinance or regulation) affecting its properties or the
operation of its business.
2.11 Litigation. Except as set forth in Exhibit 2.11 attached hereto,
neither WTS or any of its subsidiaries is a defendant to any suit, action,
arbitration or legal, administrative or other proceeding, or governmental
investigation which is pending or, to the best knowledge of the Shareholders,
threatened against or affecting WTS or its subsidiaries or their business,
assets or financial condition. WTS and its subsidiaries are not in default with
respect to any order, writ, injunction or decree of any federal, state, local or
foreign court, department, agency or instrumentality applicable to it. WTS and
its subsidiaries are not engaged in any material lawsuits to recover monies due
it.
2.12 Authority. The Board of Directors of WTS has authorized the execution
of this Agreement and the consummation of the transactions contemplated herein,
and WTS has full power and authority to execute, deliver and perform this
Agreement, and this Agreement is a legal, valid and binding obligation of the
Shareholders and is enforceable in accordance with its terms and conditions.
2.13 Ability to Carry Out Obligations. The execution and delivery of this
Agreement by the Shareholders and the performance by the Shareholders of their
obligations hereunder in the time and manner contemplated will not cause,
constitute or conflict with or result in (a) any breach or violation of any of
the provisions of or constitute a default under any license, indenture,
mortgage, instrument, article of incorporation, bylaw, or other agreement or
instrument to which WTS is a party, or by which it may be bound, nor will any
consents or authorizations of any party to the Shareholders' performance of
their obligations hereunder be required; (b) an event that would permit any
party to any agreement or instrument to terminate it or to accelerate the
maturity of any indebtedness or other obligation of WTS; or (c) an event that
would result in the creation or imposition of any lien, charge or encumbrance on
any asset of WTS.
2.14 Full Disclosure. None of the representations and warranties made by
WTS Shareholder herein or in any exhibit, certificate or memorandum furnished or
to be furnished by Shareholders, or on their behalf, contain or will contain any
untrue statement of material fact or omit any material fact the omission of
which would be misleading.
Page 3
2.15 Assets.
2.15.1 Except as otherwise indicated in Exhibit 2.15 attached hereto, WTS
and each of its subsidiaries has good and marketable title to all of its
property, free and clear of all liens, claims and encumbrances.
2.16 Material Contracts. Material contracts of WTS are set forth in Exhibit
2.16.
3 REPRESENTATIONS AND WARRANTIES OF CURBSTONE.
CURBSTONE represents and warrants to Shareholders that:
3.1 Organization. CURBSTONE is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, has all
necessary corporate powers to own its properties and to carry on its business as
now owned and operated by it, and is duly qualified to do business and is in
good standing in each of the states where its business requires qualification.
3.2 Capital Stock. The authorized capital stock of CURBSTONE consists of
250,000,000 shares of common stock, $.0001 par value of which 3,521,876 shares
of common stock will be issued and outstanding prior to Closing. All of the
issued and outstanding shares are duly and validly issued, fully paid and
nonassessable. There are no outstanding subscriptions, options, rights,
debentures, instruments, convertible securities or other agreements or
commitments obligation CURBSTONE to issue or to transfer from treasury any
additional shares of its capital stock of any class, other than those listed in
CURBSTONE's 1934 Act filings with the Securities and Exchange Commission. The
Common Stock of CURBSTONE is currently listed on the OTC Bulletin Board under
the symbol "CBSO".
3.3 Subsidiaries. CURBSTONE does not have any subsidiaries or own any
interest in any enterprise.
3.4 Directors and Officers. The names and titles of all directors and
officers of CURBSTONE are as set forth on Exhibit 3.4 attached hereto.
3.5 Patents, Trade Names and Rights. To the best of its knowledge CURBSTONE
owns and holds all necessary patents, franchise rights, trademarks, service
marks, trade names, inventions, processes, know-how, trade secrets, copyrights,
licenses and other rights necessary to its business as now conducted or proposed
to be conducted. CURBSTONE is not infringing upon or otherwise acting adversely
to the right or claimed right of any person with respect to any of the
foregoing.
3.6 Compliance with Laws. CURBSTONE has complied with, and is not in
violation of, applicable federal, state or local statutes, laws and regulations
(including, without limitation, any applicable building, zoning or other law,
ordinance or regulation and all federal and state securities laws (including,
without limitation, the Securities Act of 1933 and the Securities Exchange Act
of 1934) and all material respects NASDAQ rules) affecting its properties or the
operation of its business. To the best of its knowledge all stock of Curbstone
issued to date has been issued in compliance with all Federal and State
securities laws.
Page 4
<PAGE>
3.7 Litigation. CURBSTONE is not a party to any suit, action, arbitration
or legal, administrative or other proceeding, or governmental investigation
which is pending or, to the best knowledge of CURBSTONE threatened against or
affecting CURBSTONE or its business, assets or financial condition except for
suits as described in its 1934 Act filings. CURBSTONE is not in default with
respect to any order, writ, injunction or decree of any federal, state, local or
foreign court, department, agency or instrumentality applicable to it.
3.8 Authority. The Board of Directors of CURBSTONE has authorized the
execution of this Agreement and the consummation of the transactions
contemplated herein, and CURBSTONE has full power and authority to execute,
deliver and perform this Agreement, and this Agreement is a legal, valid and
binding obligation of CURBSTONE enforceable in accordance with its terms.
3.9 Ability to Carry Out Obligations. The execution and delivery of this
Agreement by CURBSTONE and the performance by the CURBSTONE of the obligations
hereunder in the time and manner contemplated will not cause, constitute or
conflict with or result in (a) any breach or violation of any of the provisions
of or constitute a default under any license, indenture, mortgage, instrument,
article of incorporation, bylaw, or other agreement or instrument to which
CURBSTONE is a party, or by which it may be bound, nor will any consents or
authorizations of any party to CURBSTONE's performance of its obligation
hereunder; (b) an event that would permit any party to any agreement or
instrument to terminate it or to accelerate the maturity of any indebtedness or
other obligation of CURBSTONE; or (c) an event that would result in the creation
or imposition of any lien, charge or encumbrance on any asset of CURBSTONE.
3.10 Full Disclosure. None of the representations and warranties made by
CURBSTONE herein or in any exhibit, certificate or memorandum furnished or to be
furnished by CURBSTONE or on its behalf, contains or will contain any untrue
statement of material fact or omit any material fact the omission of which would
be misleading.
3.11 Assets. CURBSTONE has good and marketable title to all of its
property, free and clear of all liens, claims and encumbrances, except as
otherwise indicated in its 1934 Act filings.
3.12 Filings with the SEC. CURBSTONE has made all filings with the SEC that
it has been required to make under the Securities Act and the Securities
Exchange Act of 1934 (the "Exchange Act")(collectively, the "Public Reports").
Each of the Public Reports has complied with the Securities Act and the Exchange
Act in all material respects. None of the Public Reports, as of their respective
dates, contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, false or misleading. CURBSTONE
has delivered to Shareholders a correct and complete copy of each Public Report
(together with all claims and schedules thereto and as amended to date).
Page 5
<PAGE>
4 COVENANTS RELATING TO THE PERIOD PRIOR TO CLOSING
4.1 Investigative Rights. From the date of this Agreement until the Closing
Date, each party shall provide to the other party, and such other party's
counsel, accountants, auditors and other authorized representatives, full access
during normal business hours and upon reasonable advance written notice to all
of each party's properties, books, contracts, commitments and records for the
purpose of examining the same. Each party shall furnish the other party with all
information concerning each party's affairs as the other party may reasonably
request.
4.2 Conduct of Business. Prior to Closing, Shareholders represent that WTS
shall conduct its business in the normal course. WTS shall not amend its
Articles of Incorporation or Articles of Organization, as the case may be, or
Bylaws (except as may be described in this Agreement), declare dividends, redeem
securities, incur additional or newly-funded liabilities outside the ordinary
course of business, acquire or dispose of fixed assets, change employment terms,
enter into any material or long-term contract, guarantee obligations of any
third party, settle or discharge any balance sheet receivable for less than its
stated amount, pay more on any liability than its stated amount, or enter into
any other transaction without the prior approval of CURBSTONE, not to be
unreasonably withheld.
5 CLOSING
5.1 Closing. The closing of this transaction shall be held at the offices
of CURBSTONE on or prior to Friday, January 16, 1998, or at such other place and
time as is mutually agreeable to the parties, or by FAX and Federal Express.
5.2 Deliveries at Closing.
5.2.1. Shareholders' Deliveries at Closing. At the Closing, the
Shareholders shall deliver the following items:
5.2.1.1 certificates representing all of the shares of WTS stock held by
the Shareholders, along with a stock power or stock powers duly executed by the
Shareholders in blank;
5.2.1.2 an investment letter in the form of Exhibit 1.2 hereof, duly
executed by the Shareholders;
5.2.2. CURBSTONE Deliveries at Closing. At the Closing, CURBSTONE shall
deliver the following items:
5.2.2.1 either (A) certificates representing the CURBSTONE Shares, duly
issued to the Shareholders as listed on Schedule A attached hereto, or (B) a
copy of a letter from CURBSTONE to its transfer agent, American Registrar &
Transfer Co., instructing such transfer agent to issue the certificates
representing the CURBSTONE Shares to the Shareholders as listed on Schedule A.
Page 6
<PAGE>
5.2.2.2 resignations of the Officers and Directors of CURBSTONE and a
resolution concurrently therewith appointing WTS's designated Officers and
Directors as set forth on Exhibit 5.2.2.2 attached hereto.
6 CONDITIONS TO OBLIGATIONS TO CLOSE AND MATERIAL TERMS OF AGREEMENT
6.1 Conditions to Obligations of Shareholders to Close. The obligations of
the Shareholders to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction of the conditions that the representations
and warranties of CURBSTONE shall be true in all material respects on and as of
the Closing Date with the same force and effect as though made on and as of the
Closing date, that CURBSTONE shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the Closing Date.
6.2 Conditions to Obligations of CURBSTONE. The obligations of CURBSTONE to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction of the conditions that the representations and warranties of
the Shareholders shall be true in all material respects on and as of the Closing
Date with the same force and effect as though made on and as of the Closing
Date, that the Shareholders shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement and
between CURBSTONE, its shareholders and WTS and related parties, be performed or
complied with by it on or prior to the Closing Date. In addition, prior to
Closing, WTS shall have caused the bridge loan in the amount of $500,000 to be
converted to common stock of WTS or an additional 500,000 to be invested as
equity, and further shall cause immediately following Closing to have an
additional $500,000 to be invested and infused into Curbstone.
6.3 No Reverse Split for 6 Months Following Closing. As a material term
hereto and a condition to CURBSTONE entering into this Agreement, WTS and the
Shareholders of WTS agree that for a period of six (6) months from the date of
Closing, there will be no reorganizations, recapitalizations or reverse stock
splits which would have a dilutive effect on the pre-acquisition shareholders of
CURBSTONE, without the prior written consent of the existing directors of
CURBSTONE as of the date of this Agreement, George G. Chachas or Thomas R.
Brooksbank.
6.4 No Change of Transfer Agent for 30 Days.. As a material term hereto and
a condition to CURBSTONE entering into this Agreement, WTS and the Shareholders
of WTS agree that there will be no change of the transfer agent and registrar of
CURBSTONE for a period of 30 days from the date of Closing from the date of
Closing without the prior written consent of the existing directors of CURBSTONE
as of the date of this Agreement, George G. Chachas or Thomas R. Brooksbank. Any
such change shall be null and void.
7 INDEMNIFICATION.
7.1 Indemnification by Shareholders. The Warranting Shareholders agree to
indemnify, defend and hold the CURBSTONE shareholders, CURBSTONE, its officers
and directors, harmless against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
Page 7
<PAGE>
deficiencies, including interest, penalties and reasonable attorney fees that it
shall incur or suffer, which arise out of, result or relate to any breach of, or
failure by WTS perform any of its material representations, warranties,
covenants or agreements in this Agreement or in any schedule, certificate,
exhibit or other instrument furnished or to be furnished by Shareholders under
this Agreement; provided however, that notice of any such breach shall have been
communicated with specificity within 2 years of the date hereof, and provided
further that in no event shall the amount of all claims paid or payable
hereunder exceed $200,000, except for fraud or intentional misrepresentation.
7.2 Indemnification by Curbstone. CURBSTONE agrees to indemnify, defend and
hold the Shareholders harmless against and in respect of any and all claims,
demands, losses, costs, expenses, obligations, liabilities, damages, recoveries
and deficiencies, including interest, penalties and reasonable attorney fees,
that it shall incur or suffer, which arise out of, result or relate to any
breach of, or failure by CURBSTONE to perform any of its material
representations, warranties, covenants or agreements in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or to be furnished
by CURBSTONE under this Agreement.
7.3 Notice and Opportunity to Defend. If there occurs an event which any
Party asserts is an indemnifiable event, the Party seeking indemnification shall
notify the Party obligated to provide indemnification (the "Indemnifying Party")
promptly. If such event involves (i) any claim or (ii) the commencement of any
action or proceeding by a third person, the Party seeking indemnification will
give such Indemnifying Party written notice of such claim or the commencement of
such action or proceeding. Such notice shall be a condition precedent to any
liability of the Indemnifying Party hereunder. Such Indemnifying Party shall
have a period of thirty (30) days within which to respond thereto. If such
Indemnifying Party does not respond within such thirty (30) days period, such
Indemnifying Party shall be obligated to compromise or defend, at its own
expense and by counsel chosen by the Indemnifying Party shall provide reasonably
satisfactory to the Party seeking indemnity, such matter and the Indemnifying
Party shall provide the Party seeking indemnification with such assurances as
may be reasonably required by the latter to assure that the Indemnifying Party
will assume, and be responsible for, the entire liability issue. If such
Indemnifying Party does not respond within such thirty (30) day period and
rejects responsibility for such matter in whole or in part, the Party seeking
indemnification shall be free to pursue, without prejudice to any of its rights
hereunder, such remedies as may be available to such Party under applicable law.
The Party seeking indemnification agrees to cooperate fully with the
Indemnifying Party and its counsel in the defense against any such asserted
liability. In any event, the Party seeking indemnification shall have the right
to participate at its own expense in the defense of such asserted liability. Any
compromise of such asserted liability by the Indemnifying Party shall require
the prior written consent of the Party seeking indemnification. If, however, the
Party seeking indemnification refuses its consent to a bona fide offer of
Page 8
<PAGE>
settlement which the Indemnifying Party wishes to accept, the Party seeking
indemnification may continue to pursue such matter, free of any participation by
the Indemnifying Party, at the sole expense of the Party seeking
indemnification. In such event, the obligation of the Indemnifying Party to the
Party seeking indemnification shall be equal to the lesser of (i) the amount of
the offer of settlement which the Party seeking indemnification refused to
accept plus the costs and expenses of such Party prior to the date the
Indemnifying Party notifies the Party seeking indemnification of the offer of
settlement and (ii) the actual out-of-pocket amount the Party seeking
indemnification is obligated to pay as a result of such Party's continuing to
pursue such an offer. An Indemnifying Party shall be entitled to recover from
the Party seeking indemnification any additional expenses incurred by such
Indemnifying Party as a result of the decision of the Party seeking
indemnification to pursue such matter.
8 MISCELLANEOUS.
8.1 Costs. Each party shall bear its own costs associated with this
Agreement, the closing of this Agreement, and all ancillary or related measures,
including without limitation, costs of attorneys fees, accountants fees, filing
fees, or other costs or expenses, without right or recourse from the other.
8.2 Additional Documentation. The parties acknowledge that further
agreements and documents, in addition to the Exhibits appended hereto, may be
required in order to effect the transactions contemplated hereunder. Each party
agrees to provide and execute such other and further agreements or documentation
as, in the opinions of respective counsel, are reasonably necessary to effect
the transactions contemplated hereunder and to maintain regulatory and legal
compliance.
8.3 Captions and Headingss. The article and paragraph headings throughout
this Agreement are for convenience and reference only and shall not define,
limit or add to the meaning of any provision of this Agreement.
8.4 No Oral Change. This Agreement and any provision hereof may not be
waived, changed, modified or discharged orally, but only by an agreement in
writing signed by the party against whom enforcement of any such waiver, change,
modification or discharge is sought.
8.5 Non-Waiver. The failure of any party to insist in any one or more cases
upon the performance of any of the provisions, covenants or conditions of this
Agreement or to exercise any option herein contained shall not be construed as a
waiver or relinquishment for the future of any such provisions, covenants or
conditions. No waiver by any party of one breach by another party shall be
construed as a waiver with respect to any subsequent breach.
8.6 Time of Essence. Time is of the essence of this Agreement and of each
and every provision.
8.7 Choice of Law. This Agreement and its application shall be governed by
the laws of the State of Delaware.
8.8 Counterparts and/or Facsimile Signature. This Agreement may be executed
in any number of counterparts, including counterparts transmitted by telecopier
or FAX, any one of which shall constitute an original of this Agreement. When
counterparts of facsimile copies have been executed by all parties, they shall
have the same effect as if the signatures to each counterpart or copy were upon
the same document and copies of such documents shall be deemed valid as
originals. The parties agree that all such signatures may be transferred to a
single document upon the request of any party.
Page 9
<PAGE>
8.9 Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is to be
given, or on the third day after mailing if mailed to the party to whom notice
is to be given, by first class mail, registered or certified, postage prepaid,
and properly addressed as follows:
If to CURBSTONE, addressed to it at:
Curbstone Acquisition Corp.
c/o George G. Chachas, Esq.
4180 La Jolla Village Drive, Suite 500
La Jolla, California 92037
If to WTS and the Shareholders, to them at:
WTS Transnational Inc.
c/o Charles B. Weaver, President
P.O. Box 590
Stow, Massachusetts 01775
With a copy to:
William N. Levy, Esq.
Levy & Levy, P.A.
Plaza 1000, Suite 309, Main Street
Voorhees, NJ 08043
8.10 Binding Effect. This Agreement shall inure to and be binding upon the
heirs, executors, personal representatives, successors and assigns of each of
the parties to this Agreement.
8.11 Mutual Cooperation. The parties hereto shall cooperate with each other
to achieve the purpose of this Agreement and shall execute such other and
further documents and take such other and further actions as may be necessary or
convenient to effect the transaction described herein.
8.12 Brokers. The parties hereto represent that no other broker has brought
about this Agreement, and no other finder's fee has been paid or is payable by
either party, except for the broker whose name is set forth on Exhibit 8.12, and
whose fee shall be paid by the Shareholders. Each party hereto shall indemnify
and hold the other harmless against any and all claims, losses, liabilities or
expenses which may be asserted against it as a result of its dealings,
arrangements or agreements with any other broker.
8.13 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties set forth in this Agreement
or in any instrument, certificate, opinion or other writing provided for herein
shall survive the Closing.
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<PAGE>
8.14 Facsimile Signatures. It is expressly agreed that the parties may
execute this agreement via facsimile signatures and such facsimile signature
pages shall be treated as originals for all purposes.
AGREED AND ACCEPTED as of the date first above written.
CURBSTONE ACQUISITION CORP.
A Delaware Corporation
Dated: December 8, 1997, /S/ Thomas R. Brooksbank
-------------------------------
By: Thomas R. Brooksbank
Its: President
Dated: December 8, 1997 /S/ George G. Chachas
------------------------------
By: George G. Chachas
Its: Secretary
WTS TRANSNATIONAL INC.
A Massachusetts Corporation
Dated: December 12, 1997 /S/ Charles B. Weaver
------------------------------
By: Charles B. Weaver
Its: President
Dated: December 12, 1997 /S/ Martin Goldman
-------------------------------
By: Martin Goldman
Its: Secretary
SHAREHOLDERS OF WTS TRANSNATIONAL INC. WHO WILL WARRANT THE REPRESENTATIONS
HEREIN:
/S/ Charles B. Weaver
- ------------------------------------------
Charles B. Weaver
/S/ James F. Callahan
- --------------------------------------------
James F. Callahan
Page 11
<PAGE>
NON-WARRANTING WTS SHAREHOLDER SIGNATURE PAGE for Agreement Concerning the
Exchange of Stock between Curbstone Acquisition Corp. and the Shareholders of
WTS Transnational Inc.
The undersigned shareholders of WTS Transnational Inc., execute this Agreement
solely for the purpose of affirming the following and for no other purpose.
Delivery of WTS Stock.
Each WTS Shareholder signing hereto hereby agrees to sell, assign, transfer
and deliver and does hereby sell, assign, transfer and deliver to CURBSTONE, and
CURBSTONE agrees to acquire and accept from each WTS Shareholder, upon the terms
and conditions set forth in this Agreement, complete, absolute and unencumbered
right, title and interest in and to the WTS Shares held by each WTS Shareholder.
Consideration.
The entire consideration to be paid to WTS Shareholders in exchange for the
transfer, assignment and deliver of the WTS Shares is common shares of the
authorized but unissued capital stock of CURBSTONE as allocated on Schedule A to
each shareholder.
Exchange of Shares.
At the Closing Date as defined in this Agreement, CURBSTONE shall deliver
to the WTS Shareholders, in accordance with Schedule A, 15,488,120 shares of the
authorized but unissued capital stock of CURBSTONE (the "CURBSTONE Shares"). The
exchange of shares contemplated by this Agreement is intended to result in a
tax-free reorganization within the meaning of Section 368(a)(1)(B) of the Code.
The WTS Shareholders agree to assist CURBSTONE in adopting and filing any
documentation necessary to comply with the Code in order to preserve the
tax-free treatment of the within exchange of shares.
Investment Representation.
The Shares being acquired by the WTS Shareholders hereunder are being
acquired for investment purposes only and not with a view towards resale or
redistribution and no person or entity has any beneficial interest in such
shares except the WTS Shareholders. The Shares being acquired have not been
registered under the Securities Act of 1933 as amended (the "Securities Act")
and WTS Shareholders acknowledge and agree that they may not sell, offer,
transfer, hypothecate or convey such shares except pursuant to a registration
statement pursuant to the Securities Act or an exemption therefrom. Such shares
shall be issued with the following legend and shall be subject to a stock
transfer order delivered by the Company to the transfer agent, such legend to be
as follows:
Page 12
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
FOR THESE SHARES UNDER SUCH ACT OR AN OPINION OF THE COMPANY'S COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
Dated: ________________________ __________________________________
Signature of Non-Warranting
WTS Shareholder
Page 13
<PAGE>
SCHEDULE A
LIST OF WTS SHAREHOLDERS
Shareholder Number of Number of
Name and Address WTS Shares CURBSTONE Shares
** To be supplied prior to Closing.
<PAGE>
EXHIBIT 1.2
INVESTMENT LETTER
CURBSTONE ACQUISITION CORP.
c/o George G. Chachas, Esq.
George G. Chachas, P.C.
4180 La Jolla Village Drive, Suite 500
La Jolla, California 92037
Re: INVESTMENT LETTER
Gentlemen:
The undersigned having acquired by a stock-for-stock exchange a certain
amount of the total 15,488,120 restricted shares of common stock of CURBSTONE
ACQUISITION CORP., a Delaware corporation (the "Company"), par value $.0001 per
share (the "Securities"), hereby represents to the Company that:
1. The Securities which are being acquired by the undersigned are being
acquired for the undersigned's own account and for investment and not with a
view to the public resale or distribution thereof.
2. The undersigned will not sell, transfer or otherwise dispose of the
Securities unless, in the opinion of the Company's counsel, such disposition
conforms with applicable securities laws requirements.
3. The undersigned is aware that the Securities are "restricted securities"
as that term is defined in Rule 144 (the "Rule") promulgated under the
Securities Act of 1933, as amended (the "Act").
The undersigned acknowledges that the undersigned has had an opportunity to
ask questions of and receive answers from duly designated representatives of the
Company concerning the finances of the Company and the proposed business plan of
the Company.
The undersigned acknowledges and understands that the Securities are
unregistered and must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available.
The undersigned further acknowledges that the undersigned is fully aware of
the applicable limitations on the resale of the Securities. These restrictions
for the most part are set forth in Rule 144 (the "Rule"). The Rule permits sales
of "restricted securities" upon compliance with the requirements of such Rule.
If and when the Rule is available to the undersigned, the undersigned may make
only sales of the Securities in accordance with the terms and conditions of the
rule (which may limit the amount of Securities that may be sold).
<PAGE>
CURBSTONE ACQUISITION CORP.
Page 2
Investment Letter
- ------------------------------------------------------------------------------
By reason of the undersigned's knowledge and experience in financial and
business matters in general, and investments in particular, the undersigned is
capable of evaluating the merits and risks of an investment by the undersigned
in the Securities.
The undersigned is capable of bearing the economic risks of an investment
in the Securities. The undersigned fully understands the speculative nature of
the Securities and the possibility of loss.
The undersigned's present financial condition is such that the undersigned
is under no present or contemplated future need to dispose of any portion of the
Securities to satisfy any existing or contemplated undertaking, need, or
indebtedness.
Any and all certificates representing the Securities, and any and all
securities issued in replacement thereof or in exchange therefor, shall bear a
restrictive legend.
The undersigned further agrees that the Company shall have the right to
issue stop-transfer instructions to its transfer agent until such time as sale
is permitted under Security Laws and acknowledges that the Company has informed
the undersigned of its intention to issue such instructions.
Very truly yours,
---------------------------------
Undersigned
Date: ____________________________
----------------------------------
Address
----------------------------------
Social Security Number
<PAGE>
EXHIBIT 2.3
SUBSIDIARIES OF WTS TRANSNATIONAL CORPORATION
NONE
<PAGE>
EXHIBIT 2.4
WTS OFFICERS AND DIRECTORS
OFFICERS
CEO and President .................................. Charles B. Weaver
Vice President Systems Development ................. Marc Gordon
Vice President Manufacturing ....................... James Callahan
Chief Financial Officer ............................ Steven T. Price
Secretary .......................................... Martin Goldman
DIRECTORS
1. Charles B. Weaver - Chairman of the Board
2. Avi Fogel
3. George Parrent
4. Martin Goldman
<PAGE>
EXHIBIT 2.5
WTS FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997
<PAGE>
WTS TRANSNATIONAL, INC.
- -------------------------------------------------------------------------------
INDEX
September 30, 1997
Page
Accountants' Compilation Report 1
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Deficit 4
Statement of Cash Flows 5
Supplementary Schedules:
Schedule of General and Administrative Expenses 6
<PAGE>
To the Board of Directors
WTS TRANSNATIONAL, INC.
Stow, Massachusetts
We have compiled the accompanying balance sheet of WTS TRANSNATIONAL, INC.
(an S corporation) as of September 30, 1997, and the related statements of
operations, stockholders' deficit, cash flows, and supplementary information
contained on page 6, for the nine months then ended, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of the management of WTS TRANSNATIONAL,
INC. We have not audited or reviewed the accompanying financial statements and,
accordingly, do not express an opinion or any other form of assurance on them.
The Company's ability to function as a going concern is dependent upon its
ability to secure sufficient financing to take advantage of the development of
advanced fingerprint imaging technologies. The accompanying financial statements
do not include any adjustments that might be necessary should the Company be
unable to secure such financing.
Management has elected to omit substantially all of the disclosures
required by generally accepted accounting principles. If the omitted disclosures
were included in the financial statements, they might influence the user's
conclusions about the Company's financial position, results of operations, and
cash flows. Accordingly, these financial statements are not designed for those
who are not informed about such matters.
We are not independent with respect to WTS TRANSNATIONAL, INC.
Gerald F. Paolilli
Certified Public Accountant, P.C.
<PAGE>
WTS TRANSNATIONAL, INC.
- -------------------------------------------------------------------------------
BALANCE SHEET
<TABLE>
<CAPTION>
September 30,
1997
---------------
<S> <C>
Assets
Current assets:
Cash ................................... $ 0
Accounts receivable, net.................... 10,000
---------------
Total current assets........................ 10,000
Equipment, Net ................................... 0
Other Assets ................................... 0
---------------
Total Assets................................ $ 10,000
---------------
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable............................ $ 359,000
Deferred compensation....................... 172,000
Notes payable............................... 51,000
Accrued payroll and benefits................ 48,000
Accrued expenses............................ 25,000
---------------
Total current liabilities............... 655,000
---------------
Stockholders' Deficit:
Common stock, 200,000 shares authorized..... 1,423,000
Retained deficit............................ (2,068,000)
---------------
(645,000)
---------------
Total Liabilities and Stockholders'
Deficit ................................... $ 10,000
---------------
</TABLE>
See accountants' compilation report
<PAGE>
WTS TRANSNATIONAL, INC.
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997
---------------
<S> <C>
Revenues: ................................... $ 0
Cost of Services Provided............................ 0
---------------
Gross Profit ................................... 0
General and Administrative Expenses.................. 107,000
Research and Development............................. 1,000
---------------
Net Loss ................................... (108,000)
---------------
</TABLE>
See accountants' compilation report
<PAGE>
WTS TRANSNATIONAL, INC.
- -------------------------------------------------------------------------------
STATEMENT OF STOCKHOLDERS DEFICIT
<TABLE>
<CAPTION>
Common Stock
(No Par Value) Total
Number of Retained Stockholders'
Shares Amount Deficit Deficit
<S> <C> <C> <C> <C>
Balances -
December 31, 1996 32,500 $1,423,000 $(1,960,000) $ (537,000)
Net Loss 0 0 (108,000) (108,000)
--------- ------------ ----------- ----------
Balances -
September 30, 1997 32,500 1,423,000 (2,068,000) (645,000)
--------- ----------- ----------- ----------
</TABLE>
See accountants' compilation report
<PAGE>
WTS TRANSNATIONAL, INC.
- -------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997
---------------
<S> <C>
Cash Flows from Operations.................. $ 0
Cash received from customers..................... (44,000)
Cash paid to suppliers and employees............. (44,000)
---------------
Cash Flows from Financing Activities:
Proceeds from notes payable...................... 44,000
---------------
Change in Cash.............................. 0
Cash - Beginning, ................................... 0
Cash - Ending, ................................... $ 0
---------------
Reconciliation of Net Loss to Net Cash Used
by Operating Activities
Net Loss................................... $ (108,000)
Adjustment to Reconcile Net Loss to Net Cash
Used by Operating Activities:
Changes in assets and liabilities:
Increase in accounts payable..................... 54,000
Increase in accrued expenses..................... 10,000
---------------
Net Cash Used by Operations................. $ (44,000)
---------------
</TABLE>
See accountants' compilation report
<PAGE>
WTS TRANSNATIONAL, INC.
- -----------------------------------------------------------------------------
SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997
---------------
<S> <C>
Payroll and related expenses......................... $ 31,000
Rent and leases ................................... 5,000
Office expense ................................... 2,000
Other costs ................................... 10,000
Telephone ................................... 1,000
Outside services ................................... 58,000
---------------
$ 107,000
---------------
</TABLE>
See accountants' compilation report
<PAGE>
EXHIBIT 2.7
MATERIAL LIABILITIES OF WTS
There are no material liabilities of WTS except as set forth in the
September 30, 1997 financial statements, and subsequent to that, the accountants
payable of WTS and a bridge loan in the amount of $500,000 from Optimum Fund.
<PAGE>
EXHIBIT 2.11
MATERIAL LITIGATION AND LEGAL PROCEEDINGS OF WTS
There is no material litigation and/or legal proceedings.
<PAGE>
EXHIBIT 2.15
EXCEPTIONS TO GOOD TITLE TO ASSETS
There are no known exceptions to good title to the assets of WTS.
<PAGE>
EXHIBIT 2.16
MATERIAL CONTRACTS OF WTS
** Previously supplied.
<PAGE>
EXHIBIT 5.2.2.2.
POST CLOSING OFFICERS AND DIRECTORS
OFFICERS
CEO and President .................................. Charles B. Weaver
Vice President Systems Development ................. Marc Gordon
Vice President Manufacturing ....................... James Callahan
Chief Financial Officer ............................ Steven T. Price
Secretary .......................................... Martin Goldman
DIRECTORS
1. Charles B. Weaver - Chairman of the Board
2. Avi Fogel
3. George Parrent
4. Martin Goldman
<PAGE>
EXHIBIT 8.12
BROKERS
None
