AGREEMENT AND PLAN OF ACQUISITION
BETWEEN
CLEARWORKS.NET, INC.
AND
CLEARWORKS INTEGRATION SERVICES, INC.
AND
UNITED COMPUTING GROUP, INC.
AND
UNITED CONSULTING GROUP, INC.
AND
THE SHAREHOLDERS OF UNITED COMPUTING
GROUP, INC. AND UNITED CONSULTING GROUP, INC.
Dated December 30, 1999
AGREEMENT AND PLAN OF ACQUISITION
THIS AGREEMENT AND PLAN OF ACQUISITION (hereinafter referred to as
this "Agreement"), is entered into as of this 30th day of December 1999, by
and among ClearWorks.net, Inc., a Delaware corporation ("ClearWorks"),
ClearWorks Integration Services, Inc., a Texas corporation ("ClearWorks
Integration"), United Computing Group, Inc., a Texas corporation, United
Consulting Group, Inc., a Texas Corporation (hereinafter collectively
referred to as the "Companies"), and those persons identified in Schedule A-1
attached hereto who are the beneficial owners of 100% of the outstanding
capital stock of the Companies (hereinafter collectively referred to as the
"Shareholders").
PREMISES
This Agreement provides for the acquisition by ClearWorks of all of
the issued and outstanding shares of the Companies in exchange for voting
shares of the Companies, on the terms and conditions hereinafter provided,
all for the purpose of effecting a so-called "tax-free" reorganization
pursuant to Sections 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended.
AGREEMENT
NOW THEREFORE, on the stated premises and for and in consideration
of the mutual covenants and agreements hereinafter set forth and the mutual
benefits to the parties to be derived herefrom, it is hereby agreed as
follows:
ARTICLE I
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF CLEARWORKS AND CLEARWORKS INTEGRATION
As an inducement to, and to obtain the reliance of the Shareholders,
ClearWorks and ClearWorks Integration represents and warrants as follows:
Section 1.01 ORGANIZATION. ClearWorks and ClearWorks Integration are
corporations duly organized, validly existing, and in good standing under the
laws of the state of Delaware and Texas, respectively. ClearWorks and
ClearWorks Integration have the corporate power and are duly authorized,
qualified, franchised, and licensed under all applicable laws, regulations,
ordinances, and orders of public authorities to own all of their properties
and assets and to carry on their business in all material respects as it is
now being conducted, including qualification to do business as a foreign
corporation in the states in which the character and location of the assets
owned by them or the nature of the business transacted by them requires
qualification. Included in SCHEDULE 1.01 are complete and correct copies of
the certificate of incorporation, as amended, and bylaws of ClearWorks and
ClearWorks Integration as in effect on the date hereof. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement in accordance with the terms hereof will not,
violate any provision of the certificates of incorporation or bylaws.
ClearWorks and ClearWorks Integration have taken all action required by laws,
its articles of incorporation, its bylaws, or otherwise to authorize the
execution and delivery of this Agreement. ClearWorks and ClearWorks
Integration have full power, authority, and legal right and has taken all
action required by law, their certificates of incorporation, bylaws, and
otherwise to consummate the transactions herein contemplated.
Section 1.02 CAPITALIZATION. The authorized capitalization of
ClearWorks consists of 50,000,000 shares of common stock, $.001 par value per
share, of which 18,818,159 shares are currently issued and outstanding, and
5,000,000 shares of preferred stock, $.001 par value, of which no shares are
currently issued and outstanding. All issued and outstanding shares are
legally issued, fully paid, and non-assessable and not issued in violation of
the pre-emptive or other rights of any person. The authorized capitalization
of ClearWorks Integration consists of 10,000 shares of common stock, $.01 par
value per share, of which 10,000 shares are currently issued and outstanding.
All issued and outstanding shares are legally issued, fully paid, and
non-assessable and not issued in violation of the pre-emptive or other rights
of any person.
Section 1.03 FINANCIAL STATEMENTS.
(a) ClearWorks incorporates by reference into this Agreement
all financial statements included in its filings with the Securities and
Exchange Commission made pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended.
(b) ClearWorks has filed all state, federal, or local income
tax returns required to be filed by it from inception to the date
hereof. ClearWorks does not owe any federal, state, county, local, or
other taxes (including any deficiencies, interest, or penalties)
through the date hereof, for which ClearWorks may be liable in its own
right or as a transferee of the assets of, or as a successor to, any
other corporation or entity. Furthermore, except as accruing in the
normal course of business, ClearWorks does not owe any accrued and
unpaid taxes to date of this Agreement.
(c) The books and records, financial and otherwise, of
ClearWorks are in all material respects complete and correct and have
been maintained in accordance with good business and accounting
practices.
(d) ClearWorks has good and marketable title to its assets
and, except as set forth in the financial statements of ClearWorks or
the notes thereto, have no material contingent liabilities, direct or
indirect, matured or unmatured.
Section 1.04 SEC FILINGS. As of the date of this Closing, ClearWorks
represents that all its filings with the Securities and Exchange Commission
made pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended were prepared in accordance with Regulation S-B. ClearWorks
represents that it has filed all reports required to be filed pursuant
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
including any reports required to be filed on Form 8-K and that to its
knowledge, no events have occurred that would require a filing on Form 8-K in
the future, excluding any filing required due to the completion of the
transaction contemplated by this Agreement.
Section 1.05 INFORMATION. The information concerning ClearWorks and
ClearWorks Integration set forth in this Agreement, in the SEC filings
discussed in Section 1.04 above, and in the Schedules attached hereto is
complete and accurate in all material respects and does not contain any
untrue statement of a material fact or omit to state a material fact required
to make the statements made, in light of the circumstances under which they
were made, not misleading.
Section 1.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth in this Agreement, since September 30, 1999:
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(a) there has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of ClearWorks
or ClearWorks Integration; or (ii) any damage, destruction, or loss to
ClearWorks or ClearWorks Integration (whether or not covered by
insurance) materially and adversely affecting the business,
operations, properties, assets, or condition of ClearWorks or
ClearWorks Integration s;
(b) Except as provided in SCHEDULE 1.06(b), ClearWorks or
ClearWorks Integration have not (i) amended their certificate of
incorporation or bylaws; (ii) declared or made, or agreed to declare
or make, any payment of dividends or distributions of any assets of
any kind whatsoever to stockholders or purchased or redeemed, or
agreed to purchase or redeem, any of their capital stock; (iii)
waived any rights of value which in the aggregate are extraordinary
or material considering the business of ClearWorks or ClearWorks
Integration; (iv) made any material change in their method of
management, operation, or accounting; (v) entered into any other
material transaction; (vi) made any accrual or arrangement for
payment of bonuses or special compensation of any kind or any
severance or termination pay to any present or former officer or
employee; or (vii) made any increase in any profit sharing, bonus,
deferred compensation, insurance, pension, retirement, or other
employee benefit plan, payment, or arrangement made to, for, or with
their officers, directors, or employees;
(c) ClearWorks or ClearWorks Integration have not (i)
borrowed or agreed to borrow any funds or incurred, or become
subject to, any material obligation or liability (absolute or
contingent); (ii) paid any material obligation or liability
(absolute or contingent) other than current liabilities reflected in
or shown on the most recent ClearWorks balance sheet; or (iii) made
or permitted any amendment or termination of any contract,
agreement, or license to which it is a party if such amendment or
termination is material, considering the business of ClearWorks or
ClearWorks Integration;
(d) to the best knowledge of the ClearWorks or ClearWorks
Integration, ClearWorks or ClearWorks Integration have not become
subject to any law or regulation which materially and adversely
affects, or in the future may adversely affect, the business,
operations, properties, assets, or condition of ClearWorks or
ClearWorks Integration.
(e) ClearWorks represents that on December 13, 1999 it
completed a private placement, in compliance with Section 4(2) of the
Securities Act of 1933, as amended, in which it received a commitment
for $5 million, of which it has received, as of the date hereof, $3
million in cash.
Section 1.07 LITIGATION AND PROCEEDINGS. There are no actions,
suits, proceedings, or investigations pending or, to the knowledge of
ClearWorks or ClearWorks Integration after reasonable investigation,
threatened by or against ClearWorks or ClearWorks Integration or affecting
ClearWorks or ClearWorks Integration or their properties, at law or in
equity, before any court or other governmental agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind. ClearWorks or
ClearWorks Integration does not have any knowledge of any default on their
part with respect to any judgment, order, writ, injunction, decree, award,
rule, or regulation of any court, arbitrator, or governmental agency or
instrumentality or of any circumstances which, after reasonable investigation,
would result in the discovery of such a default, except those disclosed in
ClearWorks Form 10-QSB for the quarter ended September 30, 1999. ClearWorks
further represents that the resolution of any of the litigation disclosed in
its Form 10-QSB
3
for the quarter ended September 30, 1999 will not have a material adverse
affect on its business or financial condition.
Section 1.08 MATERIAL CONTRACT DEFAULTS. ClearWorks or ClearWorks
Integration is not in default in any material respect under the terms of any
outstanding contract, agreement, lease, or other commitment which is material
to the business, operations, properties, assets, or condition of ClearWorks
or ClearWorks Integration and there is no event of default in any material
respect under any such contract, agreement, lease, or other commitment in
respect of which ClearWorks or ClearWorks Integration has not taken adequate
steps to prevent such a default from occurring.
Section 1.09 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of
this Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed
of trust, or other material contract, agreement, or instrument to which
ClearWorks or ClearWorks Integration is a party or to which any of its
properties or operations are subject.
Section 1.10 GOVERNMENTAL AUTHORIZATIONS. ClearWorks and ClearWorks
Integration have all licenses, franchises, permits, and other governmental
authorizations that are legally required to enable them to conduct their
business in all material respects as conducted on the date hereof. Except for
compliance with federal and state securities and corporation laws, as
hereinafter provided, no authorization, approval, consent, or order of, or
registration, declaration, or filing with, any court or other governmental
body is required in connection with the execution and delivery by ClearWorks
or ClearWorks Integration of this Agreement and the consummation by
ClearWorks or ClearWorks Integration of the transactions contemplated hereby.
Section 1.11 COMPLIANCE WITH LAWS AND REGULATIONS. ClearWorks and
ClearWorks Integration have complied with all applicable statutes and
regulations of any federal, state, or other governmental entity or agency
thereof, except to the extent that noncompliance would not materially and
adversely affect the business, operations, properties, assets, or condition
of ClearWorks or ClearWorks Integration or except to the extent that
noncompliance would not result in the incurrence of any material liability
for ClearWorks or ClearWorks Integration.
Section 1.12 APPROVAL OF AGREEMENT. The board of directors of
ClearWorks and ClearWorks Integration have authorized the execution and
delivery of this Agreement and have approved the transactions contemplated
hereby, and approved the submission of this Agreement and the transactions
contemplated hereby to the shareholders of ClearWorks or ClearWorks
Integration for their approval with the recommendation that the
reorganization be accepted if it has been deemed necessary.
Section 1.13 LABOR RELATIONS. ClearWorks or ClearWorks Integration
have not had a work stoppage resulting from labor problems. To the knowledge
of ClearWorks or ClearWorks Integration, no union or other collective
bargaining organization is organizing or attempting to organize any employee
of ClearWorks or ClearWorks Integration.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES
4
OF THE SHAREHOLDERS
As an inducement to, and to obtain reliance of ClearWorks and
ClearWorks Integration, the Shareholders represent and warrant as follows:
Section 2.01 OWNERSHIP OF THE COMPANIES' SHARES. Each of the
Shareholders hereby represents and warrants with respect to itself that it is
the legal and beneficial owner of the number of shares set forth opposite its
name at the foot of this agreement, free and clear of any claims, charges,
equities, liens, security interests, and encumbrances whatsoever, and each
such shareholder has full right, power, and authority to transfer, assign,
convey, and deliver its shares; and delivery of such shares at the closing
will convey to ClearWorks good and marketable title to such shares free and
clear of any claims, charges, equities, liens, security interests, and
encumbrances whatsoever.
Section 2.02 INVESTMENT REPRESENTATIONS. Each Shareholder is an
"accredited investor" as defined by Rule 501(a) of Regulation D promulgated
under the Securities Act of 1933, as amended, and has substantial experience
in evaluating and investing in private placement transactions of securities
in companies similar to ClearWorks so that he is capable of evaluating the
merits and risks of his investment in ClearWorks and has the capacity to
protect his or her own interests.
ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF THE COMPANIES
As an inducement to, and to obtain the reliance of ClearWorks, the
Companies represents and warrants as follows:
Section 3.01 ORGANIZATION. Except as set forth in SCHEDULE 6.01, the
Companies are corporations duly organized, validly existing, and in good
standing under the laws of the state of Texas. The Companies have the
corporate power and is duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances, and orders of public
authorities to own all of their properties and assets and to carry on their
business in all material respects as it is now being conducted, including
qualification to do business as a foreign corporation in the states in which
the character and location of the assets owned by it or the nature of the
business transacted by it requires qualification. Included in SCHEDULE 3.01
are complete and correct copies of the articles of incorporation, as amended,
and bylaws of the Companies as in effect on the date hereof. The execution
and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement in accordance with the terms
hereof will not, violate any provision of these articles of incorporation or
bylaws. The Companies have taken all action required by laws, their articles
of incorporation, their bylaws, or otherwise to authorize the execution and
delivery of this Agreement. The Companies have full power, authority, and
legal right and has taken all action required by law, their certificate of
incorporation, bylaws, and otherwise to consummate the transactions herein
contemplated.
Section 3.02 CAPITALIZATION. The authorized capitalization of United
Computing Group, Inc. consists of 1,000,000 shares of common stock, $.01 par
value per share, of which 1,800 shares are currently issued and outstanding.
The authorized capitalization of United Consulting Group, Inc. consists of
100,000 shares of common stock, $1.00 par value per share, of which 1,286
shares are currently issued and
5
outstanding. All issued and outstanding shares are legally issued, fully
paid, and non-assessable and not issued in violation of the pre-emptive or
other rights of any person. There are no treasury shares of either of the
Companies currently issued or outstanding. There are no other options,
warrants, rights or convertible securities, outstanding to purchase any
capital stock of the Companies.
Section 3.03 SUBSIDIARIES AND PREDECESSOR CORPORATIONS. The
Companies do not have any subsidiaries and does not own, beneficially or of
record, any shares of any other corporation.
Section 3.04 FINANCIAL STATEMENTS.
(a) Included in SCHEDULE 3.04(a) are unaudited financial
statements for each of the Companies for the period ended November 30,
1999.
(b) All such financial statements have been prepared in
accordance with generally accepted accounting principles. The
unaudited balance sheets presents fairly as of their date the
financial condition of the Companies. The Companies did not have, as
of the date of such balance sheet, except as and to the extent
reflected or reserved against therein, any liabilities or obligations
(absolute or contingent) which should be reflected in a balance
sheet or the notes thereto, prepared in accordance with generally
accepted accounting principles, and all assets reflected therein are
properly reported and present fairly the value of the assets of the
Company in accordance with generally accepted accounting principles.
(c) The Companies have filed all state, federal, and local
income tax returns required to be filed by it from inception to the
date hereof. None of such federal income tax returns have been
examined by the Internal Revenue Service. Each of such income tax
returns reflects the taxes due for the period covered thereby,
except for amounts which, in the aggregate, are immaterial.
(d) The Companies do not owe any unpaid federal, state,
county, local, or other taxes (including any deficiencies, interest,
or penalties) through the date hereof, for which the Companies may be
liable in their own right or as a transferee of the assets of, or as a
successor to, any other corporation or entity. Furthermore, except as
accruing in the normal course of business, the Companies do not owe
any accrued and unpaid taxes to date of this Agreement.
(e) The books and records, financial and otherwise, of the
Companies are in all material respects complete and correct and have
been maintained in accordance with good business and accounting
practices.
(f) The Companies have good and marketable title to their
assets and, except as set forth in SCHEDULE 3.04(f) or as pledged in
the ordinary course of business or as set forth in the financial
statements of the Companies or the notes thereto, has no material
contingent liabilities, direct or indirect, matured or unmatured.
Section 3.05 INFORMATION. The information concerning the Companies set
forth in this Agreement and in Schedules attached hereto is complete and
accurate in all material respects and does not contain any
6
untrue statement of a material fact or omit to state a material fact required
to make the statements made, in light of the circumstances under which they
were made, not misleading.
Section 3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since November 30,
1999:
(a) there has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of the Companies
or (ii) any damage, destruction, or loss to the Companies (whether or
not covered by insurance) materially and adversely affecting the
business, operations, properties, assets, or condition of the
Companies;
(b) The Companies have not (i) amended their articles of
incorporation or bylaws; (ii) declared or made, or agreed to declare or
make, any payment of dividends or distributions of any assets of any
kind whatsoever to stockholders or purchased or redeemed, or agreed to
purchase or redeem, any of their capital stock; (iii) waived any rights
of value which in the aggregate are extraordinary or material
considering the business of The Companies; (iv) made any material
change in their method of management, operation, or accounting; (v)
entered into any other material transaction; (vi) made any accrual or
arrangement for payment of bonuses or special compensation of any kind
or any severance or termination pay to any present or former officer or
employee; or (vii) made any material increase in any profit sharing,
bonus, deferred compensation, insurance, pension, retirement, or other
employee benefit plan, payment, or arrangement made to, for, or with
their officers, directors, or employees;
(c) The Companies have not (i) borrowed or agreed to borrow
any funds or incurred, or become subject to, any material obligation or
liability (absolute or contingent) except liabilities incurred in the
ordinary course of business; (ii) paid any material obligation or
liability (absolute or contingent) other than current liabilities
reflected in or shown on the most recent balance sheets of the
Companies, and current liabilities incurred since that date in the
ordinary course of business; (iii) sold or transferred, or agreed to
sell or transfer, any of their material assets, properties, or rights,
or canceled, or agreed to cancel, any material debts or claims; (iv)
made or permitted any amendment or termination of any contract,
agreement, or license to which it is a party if such amendment or
termination is material, considering the business of the Companies; or
(v) issued, delivered, or agreed to issue or deliver any stock, bonds
or other corporate securities including debentures (whether authorized
and unissued or held as treasury stock); and
(d) to the best knowledge of the Companies, the Companies have
not become subject to any law or regulation which materially and
adversely affects, or in the future may adversely affect, the business,
operations, properties, assets, or condition of the Companies.
Section 3.07 TITLE AND RELATED MATTERS. Except as set forth in SCHEDULE
3.04(f), the Companies have good and marketable title to all of their
properties, inventory, interests in properties, and assets, real and personal,
which are reflected in the most recent balance sheet or acquired after that date
(except properties, interests in properties, and assets sold or otherwise
disposed of since such date in the ordinary course of business), free and clear
of all liens, pledges, charges, or encumbrances except (a) statutory liens or
claims not yet delinquent; (b) such imperfections of title and easements as do
not and will not materially detract from or interfere with the present or
proposed use of the properties subject thereto or affected thereby or otherwise
materially impair present business operations on such properties; and (c) except
as pledged in the ordinary course of business. Except as pledged in the ordinary
course of business, the Companies own, free and clear
7
of any liens, claims, encumbrances, royalty interests, or other restrictions
or limitations of any nature whatsoever, any and all products it is currently
manufacturing, including the underlying technology and data, and all procedures,
techniques, marketing plans, business plans, methods of management, or other
information utilized in connection with the Companies' business. No third
party has any right to, and the Companies have not received any notice of
infringement of or conflict with asserted rights of others with respect to
any product, technology, data, trade secrets, know-how, proprietary techniques,
trademarks, service marks, trade names, or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling, or finding, would
have a materially adverse effect on the business, operations, financial
condition, income, or business prospects of the Companies or any material
portion of their properties, assets, or rights.
Section 3.08 LITIGATION AND PROCEEDINGS. Except as set forth in
SCHEDULE 3.08, there are no actions, suits, proceedings, or investigations
pending or, to the knowledge of the Companies after reasonable investigation,
threatened by or against the Companies or affecting the Companies or their
properties, at law or in equity, before any court or other governmental agency
or instrumentality, domestic or foreign, or before any arbitrator of any kind.
The Companies do not have any knowledge of any default on their part with
respect to any judgment, order, writ, injunction, decree, award, rule, or
regulation of any court, arbitrator, or governmental agency or instrumentality
or of any circumstances which, after reasonable investigation, would result in
the discovery of such a default.
Section 3.09 CONTRACTS.
(a) There are no material contracts, agreements, franchises,
license agreements, or other commitments to which the Companies are a
party or by which it or any of their assets, products, technology, or
properties are bound outside of the ordinary course of business;
(b) All contracts, agreements, franchises, license agreements,
and other commitments to which the Companies are a party or by which
their properties are bound and which are material to the operations of
the Companies taken as a whole are valid and enforceable by the
Companies in all respects, except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of creditors
generally;
(c) The Companies are not a party to or bound by, and the
properties of the Companies are not subject to, any contract,
agreement, other commitment or instrument; any charter or other
corporate restriction; or any judgment, order, writ, injunction,
decree, or award which materially and adversely affects, or in the
future may (as far as the Companies can now foresee) materially and
adversely affect, the business, operations, properties, assets, or
condition of the Companies; and
(d) Except as incurred in the ordinary course of business or
reflected in the most recent unaudited balance sheets of the Companies,
the Companies are not a party to any oral or written (i) contract for
the employment of any officer or employee which is not terminable on 30
days or less notice; (ii) profit sharing, bonus, deferred compensation,
stock option, severance pay, pension benefit or retirement plan,
agreement, or arrangement covered by Title IV of the Employee
Retirement Income Security Act, as amended; (iii) collective bargaining
agreement; or (iv) contract agreement with any present or former
officer or director of the Companies or (viii) contract, agreement, or
other commitment involving payments by it of more than $25,000 in the
aggregate.
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Section 3.10 MATERIAL CONTRACT DEFAULTS. The Companies are not in
default in any material respect under the terms of any outstanding contract,
agreement, lease, or other commitment which is material to the business,
operations, properties, assets, or condition of the Companies and there is no
event of default in any material respect under any such contract, agreement,
lease, or other commitment in respect of which the Companies have not taken
adequate steps to prevent such a default from occurring.
Section 3.11 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust, or other material contract, agreement, or instrument to which the
Companies are a party or to which any of their properties or operations are
subject.
Section 3.12 GOVERNMENTAL AUTHORIZATIONS. The Companies have all
licenses, franchises, permits, and other governmental authorizations that are
legally required to enable it to conduct their business in all material respects
as conducted on the date hereof. Except for compliance with federal and state
securities and corporation laws, as hereinafter provided, no authorization,
approval, consent, or order of, or registration, declaration, or filing with,
any court or other governmental body is required in connection with the
execution and delivery by the Companies of this Agreement and the consummation
by the Companies of the transactions contemplated hereby.
Section 3.13 COMPLIANCE WITH LAWS AND REGULATIONS. The Companies have
complied with all applicable statutes and regulations of any federal, state, or
other governmental entity or agency thereof, except to the extent that
noncompliance would not materially and adversely affect the business,
operations, properties, assets, or condition of the Companies or except to the
extent that noncompliance would not result in the incurrence of any material
liability for the Companies.
Section 3.14 APPROVAL OF AGREEMENT. The board of directors of the
Companies have authorized the execution and delivery of this Agreement and has
approved the transactions contemplated hereby.
Section 3.15 LABOR RELATIONS. The Companies have not had a work
stoppage resulting from labor problems. To the knowledge of the Companies, no
union or other collective bargaining organization is organizing or attempting to
organize any employee of the Companies.
ARTICLE IV
PLAN OF EXCHANGE
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Section 4.01 THE EXCHANGE. On the terms and subject to the conditions
set forth in this Agreement, on the Closing Date (as defined in Section 4.04),
each of the Shareholders hereby agrees to assign, transfer, and deliver to
ClearWorks Integration, free and clear of all liens, pledges, encumbrances,
charges, restrictions, or known claims of any kind, nature, or description, the
number of shares of common stock set after his signature at the foot of this
Agreement, in the aggregate constituting all of the issued and outstanding
shares of common stock of the Companies, or 1,286 shares of United Consulting
Group, Inc. and 1,800 shares of United Computing Group, Inc., and ClearWorks
agrees to acquire such shares on such date by issuing and delivering in exchange
therefor solely shares of ClearWorks restricted common stock, par value $0.001,
in the amount of 2,000,000 shares of ClearWorks common stock to the individuals
set forth in SCHEDULE 4.01. At the Closing, each of the Shareholders shall, on
surrender of his certificate or certificates representing such Companies' shares
to ClearWorks, be entitled to receive a certificate or certificates evidencing
shares of the Exchanged ClearWorks Stock as provided herein. No fractional
shares of ClearWorks shall be issued to the Shareholders, and each Shareholder
entitled to receive such fractional shares shall receive the number of shares of
ClearWorks Common Stock rounded to the nearest whole number. Upon the
consummation of the transaction contemplated herein, all shares of capital stock
of the Companies shall be held by ClearWorks Integration, and the Companies
shall be wholly owned subsidiaries of ClearWorks Integration.
Section 4.02 FURTHER CONSIDERATION.
(a) OPTION SHARES. ClearWorks agrees to enter into the option
agreements set forth in Schedule 4.02(a) with Kevan Casey and Tommy
Allen. ClearWorks agrees that within thirty days of the execution of
this Agreement, it will register the shares of ClearWorks common stock
underlying the option agreements set forth in Schedule 4.02(a) on a
Form S-8 registration statement.
(b) OTHER.
(1) On the Closing Date, ClearWorks agrees to pay
$500,000 to the Companies. The payment will be made by wire
transfer, to the following account #1085794, Union Planters
Bank, "United Computing Group, Inc."
(2) ClearWorks acknowledges that on or prior to the
Closing Date, the Companies will re-pay loans to Charles Casey
in the amount of $85,000 and to Kevan Casey in the amount of
$69,110.55, and that the Companies will make payments to the
specific Shareholders, as set forth in SCHEDULE 4.02(b)(2),
which shall represent the total shareholders' equity of the
Companies on November 30, 1999, as set forth in the Companies
unaudited financial statements for the period ended November
30, 1999 (the "November Equity"). Further, upon the completion
of the audit of the Companies for the year ended December 31,
1999, the specific Shareholders will receive an additional
payment, in the percentages as set forth in SCHEDULE
4.02(b)(2), equal to the total shareholders' equity of the
Companies as determined by such audit at December 31, 1999,
such payment to be made to the Shareholders no later than
April 30, 2000 by Kevan Casey as an officer of the Companies.
ClearWorks acknowledges that its approval or the approval of
Michael T. McClere, as a director of the Companies, is not
required prior to payment. ClearWorks acknowledges that the
Companies may not have sufficient cash to make the foregoing
payments, and understands that the Companies may utilize the
$500,000 payment in Section 4.02(b)(1) to make such payments.
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Section 4.03 BUYBACK OPTION.
(a) Shareholders, at the sole discretion of Kevan Casey as
representative of Shareholders, shall have the right to purchase 100%
of the stock of the Companies by rescinding 75% of the ClearWorks
common stock issued in this Agreement, up to twelve months from the
Closing Date (the "Rescission Period") for the following reasons:
(1) If the closing bid price of ClearWorks' common
stock, as last reported on the principal national securities
exchange or NASDAQ stock market, including the OTC Electronic
Bulletin Board, on which the common stock is listed or
admitted to trade, is less than or equal to $1.50 per share
for (i) any 45 consecutive days commencing the date herewith,
(ii) any ten consecutive days commencing November 1, 2000, or
(iii) any five consecutive days commencing December 1, 2000;
or
(2) If ClearWorks does not provide Companies,
collectively, sufficient working capital to maintain a
positive working capital ratio of not less than 1.2 to 1.0
(the "Working Capital Ratio"), commencing as of March 1, 2000
until December 31, 2000.
(b) During the Rescission Period, United Computing Group and
United Consulting Group will remain as separate legal entities as
wholly owned subsidiaries of ClearWorks Integration.
(c) Working Capital Ratio will be determined monthly by the
Companies as follows. On or prior to the tenth day following the end of
each month during the Rescission Period, the President of the Companies
shall deliver to ClearWorks a letter setting forth the Working Capital
Ratio for such month based on the account of the Companies. Upon notice
that the Working Capital Ratio is less than 1.2 to 1.0, ClearWorks may
dispute the calculation of the Working Capital Ratio as follows. If
ClearWorks disputes the calculation of the Working Capital Ratio,
within five days from the original notice that the Working Capital
Ratio is deficient, ClearWorks shall instruct its independent outside
auditing firm to determine the Working Capital Ratio, such
determination to be made within five days of ClearWorks notice of
dispute. Upon determination of the Working Capital Ratio from
ClearWorks' independent auditing firm, Kevan Casey may, within five
days, dispute such determination. If such determination is disputed,
ClearWorks shall instruct the accounting firm of Arthur Anderson to
determine the Working Capital Ratio, such determination to be made
within ten days of appointment of such independent accounting firm and
such determination to be final, conclusive, and binding on all parties
to this Agreement.
(d) If the Shareholders exercise their right to re-purchase
100% of their common stock pursuant to this section, ClearWorks shall
return 100% of Companies common stock to the Shareholders and the
Shareholders shall return an aggregate of 75% of ClearWorks' common
stock issued pursuant to this Agreement, on a pro rata basis based on
the number of ClearWorks' common stock received, such mutual actions to
be within five days of notice of such re-purchase. If 100% of the
Companies common stock is not returned within the five day period set
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forth in this section, ClearWorks, by execution of this Agreement,
hereby authorizes the Companies to cancel all shares of the Companies
common stock issued pursuant to this Agreement to ClearWorks. If 75% of
ClearWorks common stock is not returned within the five day period set
forth in this section, Shareholders, by execution of this Agreement,
hereby authorize ClearWorks to cancel shares of ClearWorks common stock
issued pursuant to this Agreement to Shareholders, such that, after all
shares of ClearWorks common stock has been returned pursuant to this
section and after ClearWorks has canceled shares of ClearWorks common
stock pursuant to this section, an aggregate of no more than 75% of
ClearWorks common stock is returned or canceled.
(e) If the Companies exercise their right to re-purchase 100%
of their common stock pursuant to this section, effective the date of
the Companies notice to exercise such right, Michael T. McClere shall
resign as Director of the Companies.
Section 4.04 CLOSING. The closing ("Closing") of the transactions
contemplated by this Agreement shall be on a date and at such time as the
parties may agree ("Closing Date"), no later than Thursday, December 30, 1999
provided that the covenants and conditions set forth in Articles V, VI and VII
have been satisfied. Such Closing shall take place at (a) the offices of
ClearWorks.net, Inc., 2450 Fondren, Suite 200, Houston, Texas 77063, at 10:00
a.m., or (b) at such other mutually agreeable time and place.
Section 4.05 CLOSING EVENTS. At the Closing:
(a) each Shareholder of the Companies common stock shall
surrender and deliver, within four business days of execution of this
Agreement, to ClearWorks Integration the certificate or certificates
representing all of such shares of the Companies common stock;
(b) ClearWorks shall deliver or shall cause to be delivered,
within four business days of execution of this Agreement, to each of
the Shareholders a certificate or certificates representing the number
of shares of ClearWorks' common stock as such Shareholder is entitled
to receive in connection with this Agreement;
(c) ClearWorks shall make the payment set forth in Section
4.02(b)(1) of this Agreement;
(d) Companies shall have repaid loans made to it by Kevan
Casey and Charles Casey and distribute any remaining shareholders
equity to the Shareholders, as set forth in Section 4.02(b)(2);
(e) Kevan Casey and Tommy Allen shall execute the Employment
Agreements as set forth in SCHEDULE 4.05(f); and
(f) ClearWorks, ClearWorks Integration, the Companies, and
Kevan Casey shall execute the Voting Agreement as set forth in
SCHEDULE 4.05(g).
ARTICLE V
SPECIAL COVENANTS
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Section 5.01 BOARD OF DIRECTORS ACTION BY CLEARWORKS, CLEARWORKS
INTEGRATION, AND THE COMPANIES. Prior to the Closing, the Board of Directors of
ClearWorks, ClearWorks Integration, and the Companies, shall:
(a) effect the authorization and approval of this Agreement
and the transactions contemplated thereby; and
(b) take such other actions as the directors may determine are
appropriate.
Section 5.02 ACCESS TO PROPERTIES AND RECORDS. ClearWorks, ClearWorks
Integration, and the Companies will each afford to the officers and authorized
representatives of the other full access to the properties, books, and records
of each other as the case may be, in order that each may have full opportunity
to make such reasonable investigation as it shall desire to make of the affairs
of the other, and each will furnish the other with such additional financial and
operating data and other information as to the business and properties of each
other, as the case may be, as the other shall from time to time reasonably
request.
Section 5.03 SPECIAL COVENANTS AND REPRESENTATIONS REGARDING THE
EXCHANGED STOCK. The consummation of this Agreement and the transactions herein
contemplated, including the issuance of the ClearWorks common stock to the
Shareholders as contemplated hereby, constitutes the offer and sale of
securities under the Securities Act of 1933, as amended, and applicable state
statutes. Such transaction shall be consummated in reliance on exemptions from
the registration and prospectus delivery requirements of such statutes which
depend, inter alia, upon the circumstances under which the Shareholders acquire
such securities. Shareholder acknowledge that ClearWorks may rely upon the
representation made in Section 2.02 of this Agreement in making such issuances.
Section 5.04 THIRD PARTY CONSENTS AND CERTIFICATES. ClearWorks,
ClearWorks Integration, and Companies' agree to cooperate with each other in
order to obtain any required third party consents to this Agreement and the
transactions herein and therein contemplated.
Section 5.05 INDEMNIFICATION.
(a) The Shareholders (except for non-controlling Shareholders)
hereby agree to indemnify ClearWorks and ClearWorks Integration and
each of the officers, agents and directors of ClearWorks and ClearWorks
Integration as of the date of execution of this Agreement against any
loss, liability, claim, damage, or expense (including, but not limited
to, any and all expense whatsoever reasonably incurred in
investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever), to which they may
become subject arising out of or based on any inaccuracy appearing in
or misrepresentation made under Article II or Article III of this
Agreement. The indemnification, as well as the rights and remedies
thereto, provided for in this paragraph shall survive the Closing and
consummation of the transactions contemplated hereby and termination of
this Agreement.
(b) ClearWorks and ClearWorks Integration hereby agree to
indemnify the Companies and the Shareholders, and each of the officers,
agents and directors of the Companies as of the date of execution of
this Agreement against any loss, liability, claim, damage, or expense
(including, but not limited to, any and all expense whatsoever
reasonably incurred in investigating, preparing, or defending against
any litigation, commenced or threatened, or any claim whatsoever), to
which it or they may become subject arising out of or based on any
13
inaccuracy appearing in or misrepresentation made under Article I of
this Agreement. The indemnification, as well as the rights and remedies
thereto, provided for in this paragraph shall survive the Closing and
consummation of the transactions contemplated hereby and termination of
this Agreement.
(c) Neither party shall be liable for any indemnification
except to the extent that the amount of the indemnification obligation
exceeds one percent (1%) of consideration to be paid by ClearWorks for
the Companies. The indemnification obligation will be limited to the
consideration received by the Shareholders in connection to this
Acquisition. Such indemnities by Shareholders may be satisfied by
tender of ClearWorks' common stock at its current market price, in lieu
of a cash payment.
Section 5.06 PERSONAL GUARANTIES. ClearWorks and ClearWorks Integration
acknowledge that Kevan Casey and Tommy Allen and Nancy Allen will cancel all
personal guarantees made by them with suppliers or other creditors of the
Companies.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF
CLEARWORKS AND CLEARWORKS INTEGRATION
The obligations of ClearWorks and ClearWorks Integration under this
Agreement are subject to the satisfaction, at or before the Closing Date, of the
following conditions:
Section 6.01 GOOD STANDING. Except as set forth in SCHEDULE 6.01,
ClearWorks shall have received a certificate of good standing from the Secretary
of State of the State of Texas or other appropriate office, dated as of a date
within ten days prior to the Closing Date certifying that the Companies are in
good standing as a corporation in the State of Texas and has filed all tax
returns required to have been filed by it to date and has paid all taxes
reported as due thereon.
Section 6.02 OTHER ITEMS.
(a) ClearWorks shall have received such further documents,
certificates, or instruments relating to the transactions contemplated
hereby as ClearWorks may reasonably request in order to satisfy due
diligence concerns.
(b) All director, shareholder, lender, lessor and other
parties' consents and approvals, as well as all filings with, and all
necessary consents or approvals of, all federal, state and local
governmental authorities and agencies, as are required under this
Agreement, applicable law or any applicable contract or agreement
(other than as contemplated by this Agreement) to complete the
acquisition shall have been secured.
(c) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or
governmental authority that prohibits or restricts the consummation of
the acquisition or the related transactions.
ARTICLE VII
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CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANIES
AND THE SHAREHOLDERS
The obligations of the Companies and the Shareholders under this
Agreement are subject to the satisfaction, at or before the Closing Date, of the
following conditions:
Section 7.01 GOOD STANDING. The Companies shall have received a
certificate of good standing from the Secretary of State of the State of
Delaware or other appropriate office, dated as of a date within ten days prior
to the Closing Date certifying that the ClearWorks is in good standing as a
corporation in the State of Delaware and has filed all tax returns required to
have been filed by it to date and has paid all taxes reported as due thereon.
Section 7.02 OTHER ITEMS.
(a) The Companies shall have received such further documents,
certificates, or instruments relating to the transactions contemplated
hereby as the Companies may reasonably request in order to satisfy due
diligence concerns.
(b) Companies shall enter into an Employment Agreement with
Kevan Casey and Tommy Allen, in accordance with the terms contained
within Schedule 4.05(f) and the Voting Agreement in accordance with the
terms contained within Schedule 4.05(g).
(c) All director, shareholder, lender, lessor and other
parties' consents and approvals, as well as all filings with, and all
necessary consents or approvals of, all federal, state and local
governmental authorities and agencies, as are required under this
Agreement, applicable law or any applicable contract or agreement
(other than as contemplated by this Agreement) to complete the
acquisition shall have been secured.
(d) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or
governmental authority that prohibits or restricts the consummation of
the acquisition or the related transactions.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 BROKERS. ClearWorks, ClearWorks Integration, and the
Companies agree that there were no finders or brokers involved in bringing the
parties together or who were instrumental in the negotiation, execution, or
consummation of this Agreement. The Companies and ClearWorks and ClearWorks
Integration each agree to indemnify the other against any claim by any third
person other than those described above for any commission, brokerage, or
finders' fee arising from the transactions contemplated hereby based on any
alleged agreement or understanding between the indemnifying party and such third
person, whether express or implied from the actions of the indemnifying party.
15
Section 8.02 GOVERNING LAW. This Agreement shall be governed by,
enforced, and construed under and in accordance with the laws of the United
States of America and, with respect to matters of state law, with the laws of
Texas.
Section 8.03 ARBITRATION. If a dispute should arise, all claims,
disputes, controversies, differences or other matters in question arising out of
the Agreement to each other in the matters stated in this Agreement (the claims)
shall be settled finally, completely and conclusively by arbitration in Houston,
Harris County, Texas, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "Rules"), by one or more arbitrators
chosen in accordance with the Rules. Arbitration shall be initiated by written
demand and the party seeking arbitration. This Agreement to arbitrate shall be
specifically enforceable only in the District Court of Harris County, Texas. A
decision of the arbitrator or arbitrators shall be final, conclusive and binding
on ClearWorks, ClearWorks Integration, the Companies and the Shareholders, and
judgment may be entered thereon in the District Court of Harris County, Texas,
to enforce such decision and the benefits thereof. Upon appointment, the
arbitrators shall then proceed to decide the arbitration subjects in accordance
with the Rules. Any arbitration held in accordance with this paragraph shall be
private and confidential and no person shall be entitled to attend the hearings
except the arbitrator(s), the stenographer, if one is requested, ClearWorks,
ClearWorks Integration, the Companies, the Shareholders, and any designated
representatives of the parties. The matters submitted for arbitration, the
hearings and proceedings thereunder and the arbitration award shall be kept and
maintained in strictest confidence by the parties and shall not be discussed,
disclosed or communicated to any persons. On request of either party, the record
of the proceeding shall be sealed and may not be disclosed except insofar, and
only insofar, as may be necessary to enforce the award of the arbitrators and
any judgment enforcing such award. If counsel is required to seek the
enforcement of this agreement or this particular section, counsel shall be
entitled to recover its (his) reasonable and necessary attorneys' fees and costs
from the opposing party.
Section 8.04 NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered to it or
sent by registered mail or certified mail, postage prepaid, or by prepaid
telegram addressed as follows:
If to ClearWorks or: Michael T. McClere
ClearWorks Integration to ClearWorks.net, Inc.
2450 Fondren, Suite 200
Houston, Texas 77063
If to the Companies to: Kevan Casey
United Computing Group, Inc.
7110 Brittmore, Suite 300
Houston, Texas 77041
Kevan Casey
United Consulting Group, Inc.
7110 Brittmore, Suite 300
Houston, Texas 77041
With copies to: Thomas C. Pritchard, Esq.
Brewer & Pritchard
1111 Bagby, Suite 2450
16
Houston, Texas 77002
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered, mailed, or
telegraphed.
Section 8.05 ATTORNEY'S FEES. In the event that any party institutes
any action or suit to enforce this Agreement or to secure relief from any
default hereunder or breach hereof, the breaching party or parties shall
reimburse the non-breaching party or parties for all costs, including reasonable
attorneys' fees, incurred in connection therewith and in enforcing or collecting
any judgment rendered therein.
Section 8.06 EXPENSES. Except as otherwise expressly provided herein,
all costs and expenses incurred in connection with the Agreement shall be paid
by the party incurring such expenses whether or not the acquisition is
consummated.
Section 8.07 CONFIDENTIALITY.
(a) Each party hereto agrees with the other parties that,
unless and until the transactions contemplated by this Agreement have
been consummated, it and its representatives will hold in strict
confidence all data and information obtained with respect to another
party or any subsidiary thereof from any representative, officer,
director, or employee, or from any books or records or from personal
inspection, or such other party, and shall not use such data or
information or disclose the same to others, except (i) to the extent
such data or information is published, is a matter of public knowledge,
or is required by law to be published; and (ii) to the extent that such
data or information must be used or disclosed in order to consummate
the transactions contemplated by this Agreement.
(b) NONDISCLOSURE. Neither ClearWorks, ClearWorks Integration,
nor the Companies shall disclose to the public or to any third party
the existence of this Agreement or the transactions contemplated hereby
or any other material non-public information concerning or relating to
the other party hereto, other than with the express prior written
consent of the other party hereto, except as may be required by law or
court order or to enforce the rights of such disclosing party under
this Agreement, in which event the contents of any proposed disclosure
shall be discussed with the other party before release; provided,
however, that notwithstanding anything to the contrary contained in
this Agreement, any party hereto may disclose this Agreement to any of
its directors, officers, employees, shareholders, affiliates, agents
and representative who need to know such information for the sole
purpose of evaluating the acquisition, and to any party whose consent
is required in connection with the acquisition or this Agreement. The
parties anticipate issuing a mutually acceptable, joint press release
announcing the execution of this Agreement and the consummation of the
acquisition.
Section 8.08 PUBLIC ANNOUNCEMENTS. ClearWorks, ClearWorks Integration,
and the Companies shall consult with each other before issuing any press release
or otherwise making any public statements with respect to the acquisition, this
Agreement or the other transactions contemplated by this Agreement and shall not
issue any other press release or make any other public statement without prior
consultation with the other parties, except as may be required by law or, with
respect to ClearWorks, by obligations pursuant to any listing agreement with an
national securities exchange
17
Section 8.09 SCHEDULES; KNOWLEDGE. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules delivered
pursuant to this Agreement.
Section 8.10 THIRD PARTY BENEFICIARIES. This contract is solely between
ClearWorks, ClearWorks Integration, and the Companies and the Shareholders, and,
except as specifically provided, no director, officer, stockholder, employee,
agent, independent contractor, or any other person or entity shall be deemed to
be a third party beneficiary of this Agreement.
Section 8.11 ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties relating to the subject matter hereof, including
this Agreement alone fully and completely expresses the agreement of the parties
relating to the subject matter hereof. There are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein.
Section 8.12 SURVIVAL; TERMINATION. The representations, warranties,
and covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated for a period of one year.
Section 8.13 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
Section 8.14 AMENDMENT OR WAIVER. Every right and remedy provided
herein shall be cumulative with every other right and remedy, whether conferred
herein, at law, or in equity, and may be enforced concurrently herewith, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may be amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance hereof may be extended by a
writing signed by the party or parties for whose benefit the provision is
intended.
Section 8.15 ASSIGNMENT. This agreement shall not be assigned by
operation of law or other
