Looking for an agreement? Search from over 1 million agreements now.

Agreement And Plan Of Reorganization And Merger

This is an actual contract by Centire International.
Browse the agreement preview below and buy the entire agreement for $35
Search This Document
EXHIBIT 10.20


AGREEMENT AND PLAN OF REORGANIZATION AND MERGER


Among


SUNBASE ASIA, INC.
as Purchaser


SMITH ACQUISITION COMPANY, INC.
d/b/a
SOUTHWEST PRODUCTS COMPANY
as the Company


and


THOSE PERSONS SET FORTH ON THE SIGNATURE PAGES OF THIS AGREEMENT


as the Shareholders


Dated:


As of December 29, 1995


AGREEMENT AND PLAN OF REORGANIZATION AND MERGER


THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER, dated and deemed effective by the parties hereto as of December 29, 1995, is made and entered into by and among Sunbase Asia, Inc., a Nevada corporation ("Purchaser"); those persons set forth on the signature pages of this Agreement (collectively, the "Shareholders" and individually, a "Shareholder"); and Smith Acquisition Company, Inc., a California corporation, d/b/a Southwest Products Company (the "Company") with reference to the following:


A. Prior to the conversion described below, the Shareholders own the number of issued and outstanding shares of the (a) no par value common stock and (b) the no par value preferred stock (the "Southwest Preferred Shares") of the Company together with the principal amount of Subordinated Debt (the "Subordinated Debt") set forth opposite the applicable Shareholder's name on Schedule 5.3.


B. The Shareholders intend to recapitalize the Company so that immediately prior to the consummation of this transaction all of the Southwest Preferred Shares and the Subordinated Debt will be converted to Southwest Common Stock.


C. The respective directors of Purchaser and the Company and the Shareholders have determined that it is in the best interests of the Company, Purchaser and the Shareholders for the Company to be merged with a California corporation to be created by Purchaser ("Newco") upon the terms and conditions set forth in this Agreement.


D. Pursuant to this Agreement, the Shareholders are hereby approving the merger of the Company and Newco.


NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereby agree as follows:


ARTICLE I
---------


DEFINITIONS
-----------


When used in this Agreement, the following terms shall have the respective meanings set forth below:


"Affiliate" shall mean, with respect to any Person, (i) a Person directly or indirectly controlling, controlled by or under common control with such Person; (ii) a Person owning or controlling 10% or more of the outstanding voting securities of such Person; or (iii) an officer, director or partner of such Person. When the


Affiliate is an officer, director or partner of such Person, any other Person for which the Affiliate acts in that capacity shall also be considered an Affiliate. For these purposes, control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether by the ownership of voting securities, by contract or otherwise.


"Agreement" shall mean this Agreement and Plan of Reorganization and Merger, including all exhibits and schedules thereto, as the same may hereafter be amended, modified or supplemented from time to time.


"Authority" shall mean any governmental, regulatory or administrative body, agency or authority, any court of judicial authority, any arbitrator or any public, private or industry regulatory authority, whether international, national, Federal, state or local.


"Business" shall mean the manufacture, assembly and sale of bearing products.


"Closing" shall have the meaning specified in Section 3.1 hereof.


"Closing Date" shall mean the date upon which the Closing occurs.


"Code" shall mean the Internal Revenue Code of 1986, as the same may hereafter be amended from time to time. Any reference to a specific section of the Code shall refer to the cited provision as the same may be subsequently amended from time to time, as well as to any successor provision(s).


"Company" shall mean Smith Acquisition Company, Inc. d/b/a Southwest Products Company, a California corporation.


"Company Documents" shall mean this Agreement and all other agreements, instruments and certificates to be executed by the Company in connection with this Agreement.


"Contracts and Other Agreements" shall mean all contracts, agreements, warranties, guaranties, indentures, bonds, options, leases, subleases, easements, mortgages, plans, collective bargaining agreements, licenses, commitments or binding arrangements of any nature whatsoever, express or implied, written or unwritten, and all amendments thereto, entered into or binding upon the applicable party or to which the property of the applicable party may be subject.


2


"Effective Time" shall have the meaning specified in Section 2.1 hereof.


"Knowledge" shall mean, (i) with respect to any Shareholder who is not a director, the actual knowledge of such person, and the Knowledge that such person would have acquired by attending all of the meetings of the Board of Directors of the Company and by reviewing all of the corporate minutes therefor, (ii) with respect to any Shareholder who is also a director of Southwest, the actual knowledge of each such person, the knowledge that such person would have acquired upon reasonable inquiry, and the Knowledge that such person would have acquired by attending all of the meetings of the Board of Directors of the Company and by reviewing all of the corporate minutes therefor, and (iii) with respect to the Company, the actual knowledge of each of its directors, executive officers and key employees, the knowledge that each such person would have acquired upon diligent inquiry and the knowledge that is imputed to each such person and/or the Company by operation of Law.


"Labor Agreements" shall mean, collectively, (i) all employment agreements, collective bargaining agreements or other labor agreements to which the Company is a party or by which its properties is bound; (ii) all pension, profit sharing, deferred compensation, bonus, stock option, stock purchase, savings, retainer, consulting, non-competition, retirement, welfare or incentive plans or contracts (including ERISA Plans) to which the Company is a party or by which its properties is bound; and (iii) all plans or agreements under which "fringe benefits" (including, but not limited to, hospitalization plans or programs, medical insurance, vacation plans or programs, sick plans or programs and related benefits) are afforded to any employees of the Company.


"Law" shall mean any law, statute, regulation, ordinance, requirement, or other binding action or requirement of an Authority.


"Licenses and Permits" shall mean all licenses and permits issued to the Company or in which the Company has any interest (including the right to use).


"Lien or Other Encumbrance" shall mean any lien, pledge, mortgage, security interest, lease, charge, conditional sales contract, option, restriction, reversionary interest, right of first refusal, voting trust arrangement, preemptive right, claim under bailment or storage contract, easement or any other adverse claim or right whatsoever.


"Losses" shall have the meaning specified in Section 12.1 hereof.


3


"Material Adverse Change" or "Material Adverse Effect" or other similar phrase including the word "material" with respect to the condition (financial or otherwise), assets, liabilities, Business, operations or prospects of the Company shall mean any adverse change or effect or potential adverse change or effect, or any series thereof, involving more than Fifty Thousand Dollars ($50,000) in the aggregate.


"Merger" shall have the meaning specified in Section 2.1 hereof.


"Newco" shall have the meaning specified in Recital C above.


"Non-Competition Agreement" shall mean the agreement of William McKay referred to in Section 7.6 hereof.


"Order" shall mean any decree, order, judgment, writ, award, injunction, rule or consent of or by an Authority.


"Outside Date" shall have the meaning specified in Section 3.1 hereof.


"Person" shall mean any entity, corporation, company, association, joint venture, joint stock company, partnership, trust, organization, individual (including personal representatives, executors and heirs of a deceased individual), nation, state, government (including agencies, departments, bureaus, boards, divisions and instrumentalities thereof), trustee, receiver or liquidator.


"Purchaser Financial Statements" shall mean the audited (a) consolidated balance sheets of Purchaser as of December 31, 1993 and December 31, 1994; (b) the consolidated statement of income for the years ended December 31, 1993 and December 31, 1994; (c) consolidated statement of cash flows for the years ended December 31, 1993 and December 31, 1994; and (d) consolidated statements of changes in shareholder's equity for the years ended December 31, 1993 and December 31, 1994, including all notes thereto.


"Property Rights" shall have the meaning specified in Section 5.9 hereof.


"Purchaser Documents" shall mean this Agreement and all other agreements, instruments and certificates to be executed and delivered by Purchaser in connection with this Agreement.


4


"Securities Act" shall have the meaning specified in Section 4.9 hereof.


"Shareholder Documents" shall mean this Agreement and all other agreements, instruments and certificates to be executed and delivered by the Shareholders in connection with this Agreement.


"Southwest Financial Statements" shall mean the unaudited balance sheets as of June 30, 1995 and June 30, 1994 and the unaudited statements of income and statements of cash flow of the Company, for the twelve month periods then ended, including all notes thereto, and the unaudited balance sheets as of September 30, 1995 and the unaudited statements of income and statements of cash flow of the Company, for the three month period then ended, including all notes thereto.


"Southwest Common Stock" shall mean any issued and outstanding shares of the common stock of the Company.


"Southwest Preferred Shares" shall have the meaning specified in Recital A above.


"Southwest Shares" shall mean all of the issued and outstanding shares of the common stock of the Company after conversion of the Southwest Preferred Shares and the Subordinated Debt, and the exercise or cancellation of all outstanding options.


"Subordinated Debt" shall have the meaning specified in Recital A above.


"Subsidiary" shall mean each corporation, partnership, joint venture, trust or other entity in which the Company has, directly or indirectly, an equity interest representing 10% or more of the capital stock thereof or other equity interest therein.


"Subsidiary Merger Agreement" shall have the meaning specified in Section 2.1 hereof.


"Sunbase Preferred Shares" shall have the meaning specified in Section 2.1 hereof.


"Sunbase Shares" shall have the meaning specified in Section 4.9 hereof.


"Taxes" shall mean, collectively, all taxes, including without limitation, income, gross receipts, net proceeds, alternative, add-on, minimum, ad valorem, value added, turnover, sales, use, property, personal property (tangible and intangible), stamp, leasing, excise, duty,


5


franchise, transfer, license, withholding, payroll, employment, fuel, excess profits, environmental, occupational, interest equalization, windfall profits and severance taxes, and all other like charges imposed by an Authority.


"Tax Returns" shall mean, collectively all Federal, state, foreign and local tax reports, returns, information returns and other related documents required to be filed with any relevant taxing Authority.


ARTICLE II
----------


SUBSCRIPTION OF NEW ISSUE SHARES AND SALE
-----------------------------------------
AND PURCHASE OF SHARES
----------------------


2.1 The Merger. Subject to the terms and conditions of this Agreement
---------- Newco shall be merged into the Company (with the Company being the surviving corporation of the merger) in accordance with the applicable provisions of the California Corporations Code (the "Merger") pursuant to the Agreement of Merger attached to this Agreement as Schedule 2.1 (the "Subsidiary Merger Agreement"). The Merger shall be effective when the Subsidiary Merger Agreement shall have been filed with the Secretary of State of the State of California. When used in this Agreement, the term "Effective Time" shall mean the time of filing of the Subsidiary Merger Agreement with the Secretary of State. The authorized and issued capital stock of Newco, all of which shall be owned by Purchaser immediately prior to the Effective Time, at the Effective Time, pursuant to the Subsidiary Merger Agreement and without any further action on the part of Purchaser, shall be converted into one share of the common stock of the Company (the "Surviving Stock"). Each outstanding stock certificate which prior to the Effective Time represented shares of capital stock of Newco automatically and for all purposes shall be deemed to represent the number of shares of the Company into which the shares of capital stock of Newco represented by such certificate have been converted as provided herein. At the Effective Time, all of the Southwest Shares shall be converted into and become the right to receive an aggregate of six thousand three hundred (6,300) shares of Series B Convertible Preferred Stock (the "Sunbase Preferred Shares") of Purchaser to be distributed to the Shareholders in accordance with Schedule 5.3. The terms of the Sunbase Preferred Shares shall be set forth on Schedule 2.1 and will include the following:


(a) Each of the Sunbase Preferred shares, on an "as-converted" and pro-rata basis, shall participate with the shares of the common stock of Purchaser in any dividends paid by Purchaser thereon.


6


(b) Each holder of the Sunbase Preferred Shares shall be entitled to the number of votes equal to the number of shares of common stock of Purchaser into which such Shares could be converted under 2.1(c) below and shall have voting rights and powers equal to the voting rights and powers of the common stock (voting together with the common stock as a single class), except that any action to be taken by Purchaser which would adversely affect the rights of the holders of the Sunbase Preferred Shares shall require the approval of a majority in interest of such holders;


(c) At the option of each holder, the shares owned by such holder may be redeemed from the proceeds of the next public offering of Purchaser, the net proceeds of which are designated to be used to redeem the Sunbase Preferred Shares. Purchaser shall provide to each holder (i) notice of its intention to file a registration statement with the Securities and Exchange Commission with respect to a public offering of its shares and (ii) a copy of Purchaser's most recent reports and registration statements filed with the SEC. In the event that such holder elects to redeem such holder's Sunbase Preferred Shares, such holder shall provide notice to Purchaser within 15 days from the date of the notice from Purchaser. The per share redemption price shall be $500 less the pro rata portion of the underwriter's commission with respect to the public offering. By way of example, if the redemption price otherwise payable to such holder is $400,000 and the underwriter's commission is 10%, Purchaser shall pay the redeeming holder $360,000. The redemption price payable to the redeeming holders shall be paid by Purchaser to such holders within twenty (20) business days after the closing of any public offering (as described herein) made by Purchaser. In the event that a holder elects not to have such holder's Sunbase Preferred Shares so redeemed, each Share not redeemed shall, on the same date that the redemption price is paid to the redeeming holders, be automatically converted into 100 shares of the common stock of Purchaser. The per share redemption price and the number of shares of common stock to be issuable upon conversion shall be subject to adjustment in the event of stock dividends, combinations or splits with respect to the common stock.


(d) If, by that date which is two (2) years after the date on which the Sunbase Preferred Shares are distributed to the holders (the "Two Year Date"), such holders have not been able to redeem their Sunbase Preferred Shares because Purchaser has not made a public offering, the net proceeds of which are designated to be used to redeem the Sunbase Preferred Shares, the holder's Sunbase Preferred Shares shall automatically convert into shares of the common stock of Purchaser as follows: On the first business day following the Two Year Date, each Sunbase Preferred Share


7


shall automatically be converted into that number of shares of common stock of Purchaser that equals $500 divided by the lesser of (a) $5.00 or (b) the average closing price of the common stock of the Purchaser (subject to adjustment for stock dividends, combinations or splits). As used herein, the average closing price shall be computed by taking the then most recent 60 consecutive trading days where Purchaser's common stock has traded at a minimum volume of 2,000 shares per day for 45 of those 60 trading days.


2.2 Transfer Taxes. The Shareholders shall be solely responsible for
-------------- the payment of any and all Taxes, impositions, liens, levies, assessments and similar charges incident to or incurred as a result of the transfer of the Southwest Shares pursuant to the Merger contemplated herein.


ARTICLE III
-----------


CLOSING
-------


3.1 Time and Place. Subject to the provisions of Sections 11.1 and
-------------- 11.2 hereof, the Closing (the "Closing") shall take place at the offices of Loeb and Loeb, 1000 Wilshire Boulevard, Suite 1800, Los Angeles, California 90017, no later than January 19, 1996 (the "Outside Date").


3.2 Transactions at the Closing. At the Closing, the following shall
--------------------------- occur:


3.2.1 Pursuant to the Merger, the Shareholders shall receive certificates representing the Sunbase Preferred Shares;


3.2.2 Pursuant to the Merger, the Southwest Shares will be automatically converted into Sunbase Preferred Shares, and the Shareholders shall surrender all of the certificates evidencing the Southwest Shares for conversion into Sunbase Preferred Shares;


3.2.3 The Company shall deliver to Purchaser the opinion of counsel referred to in Section 9.5 hereof;


3.2.4 Purchaser shall deliver to the Company and the Shareholders the opinion of counsel referred to in Section 10.6 hereof;


3.2.5 All of the directors of the Company other than William McKay shall deliver the resignations referred to in Section 7.5 hereof;


3.2.6 William McKay shall deliver the Non-Competition Agreement referred to in Section 7.6 hereof;


8


3.2.7 The Company and Purchaser on the one hand and, on the other hand, William McKay, shall execute and deliver counterpart copies of the employment agreement referred to in Section 8.3 hereof;


3.2.8 The Company shall provide to Purchaser a certificate of good standing with respect to its jurisdiction of formation and each other jurisdiction in which the Company has qualified to do business; and


3.2.9 The Company shall deliver to Purchaser any and all other assignments, documents, instruments and conveyances requested by Purchaser or necessary to effect the consummation of the transactions contemplated by this Agreement.


The foregoing transactions shall be deemed to occur simultaneously at the Closing.


ARTICLE IV
----------


REPRESENTATIONS AND WARRANTIES OF THE
-------------------------------------
SHAREHOLDERS REGARDING THE SOUTHWEST SHARES AND THEIR STATUS
------------------------------------------------------------


Each Shareholder, individually, represents and warrants to Purchaser that:


4.1 Title to Southwest Shares. Such Shareholder has good and
------------------------- marketable title to the Southwest Shares, which are free and clear of all Liens or Other Encumbrances excepting only such restrictions upon transfer, if any, as may be imposed by federal or state securities Laws.


4.2 Authority to Execute and Perform Agreements. Such
------------------------------------------- Shareholder has the full right, power and authority to enter into, execute and deliver this Agreement and all other Shareholder Documents.


4.3 Due Authorization; Enforceability. Such Shareholder has
--------------------------------- taken all actions necessary to authorize such Shareholder to enter into and perform said Shareholder's obligations under this Agreement and all other Shareholder Documents. This Agreement is, and as of the Closing Date the other Shareholder Documents will be, the legal, valid and binding obligations of such Shareholder, enforceable in accordance with their respective terms.


4.4 No Violation of Order or Law. Such Shareholder is not a
---------------------------- party to, subject to or bound by any Law or Order which would prevent the execution or delivery of this Agreement by such Shareholder or the performance by such Shareholder of such Shareholder's obligations hereunder.


9


4.5 Adverse Agreements; Consents. Neither the execution or
---------------------------- delivery by such Shareholder of this Agreement or any other Shareholder Document nor the consummation by such Shareholder of the transactions contemplated herein or therein require the consent of any Person except, as applicable, the consent of each Shareholder's spouse, which consent shall be given by such spouse substantially in the form which is attached hereto as Schedule 4.5.


4.6 Securities Laws. Such Shareholder has obtained all necessary
--------------- permits and other authorizations or Orders of exemption as may be necessary or appropriate under any and all applicable state securities Laws with respect to the transactions contemplated herein, except that no such representation or warranty is made with respect to the issuance by Purchaser of the Sunbase Preferred Shares or the Sunbase Shares.


4.7 No Adverse Litigation. To such Shareholder's Knowledge, such
--------------------- Shareholder is not a party to any pending or threatened litigation which seeks to enjoin or restrict such Shareholder's own ability to sell or transfer his Southwest Shares hereunder, nor is any such litigation threatened against such Shareholder. Furthermore, to such Shareholder's Knowledge, there is no litigation pending or threatened against such Shareholder which, if decided adversely to such Shareholder, could adversely affect such Shareholder's ability to consummate the transactions contemplated herein.


4.8 No Broker. No broker or finder has acted for such
--------- Shareholder in connection with this Agreement or the transactions contemplated herein, and no broker or finder is entitled to any brokerage or finder's fees or other commissions in respect of such transactions based in any way upon agreements, arrangements or understandings made by or on behalf of such Shareholder.


4.9 Investment Capacity. Each of the Shareholders understands
------------------- and agrees that (a) the Sunbase Preferred Shares to be issued to the Shareholders and the shares of Purchaser's Common Stock issuable upon conversion of the Sunbase Preferred Shares (together with the Sunbase Preferred Shares, the "Sunbase Shares") will not have been registered under the Securities Act of 1933, as amended (the "Securities Act") or the securities laws of any state, based upon an exemption from such registration requirements under the Securities Act; (b) the Sunbase Shares are and will be "restricted securities", as said term is defined in Rule 144 of the Rules and Regulations promulgated under the Securities Act; (c) the Sunbase Shares may not be sold or otherwise transferred unless they have been first registered under the Securities Act and applicable state securities


10


laws, or unless exemptions from such registration provisions are available with respect to said resale or transfer; (d) except as expressly set forth herein, Purchaser is under no obligation to register the Sunbase Shares under the Securities Act or any state securities laws, or to take any action and make any exemption from such registration provisions available; and (e) Purchaser is relying on the representation by each Shareholder (which is herein being made) that such Shareholder has such knowledge and experience in financial or business matters that such Shareholder is capable of evaluating the merits and risks involved in the investment in the Sunbase Preferred Shares and is able to bear the economic risk and complete loss of such Shareholder's investment.


4.10 Status of Shareholders; Receipt of Documentation. The
------------------------------------------------ Shareholders acknowledge that they have received a copy of the following documents of Purchaser: Form 10-K for the transition period from July 1, 1994 to December 31, 1994; Form 10-Q for the quarter ended March 31, 1995; Form 10-Q for the quarter ended June 30, 1995; From 10-Q for the quarter ended September 30, 1995; Form 8-K as of December 22, 1994; and Form 8-K/A as of December 22, 1994 and any other reports and registration statements filed by Purchaser with the SEC after December 31, 1994. Each Shareholder has been furnished with such information and documents pertaining to Purchaser as such Shareholder has requested, and has been given the opportunity to meet with officials of Purchaser and to have such persons answer questions regarding Purchaser's affairs and condition. Each Shareholder has substantial experience in business and financial matters and in making investments of the
-- End of Preview --
Home| About Us| FAQ| Subscription | Contact Us |