Share Exchange and Reorganization Agreement - Clean Water Technologies Inc. and SheerVision Inc.
EXECUTION COPY
SHARE EXCHANGE AND REORGANIZATION AGREEMENT, dated as of March 27, 2006
(the "AGREEMENT"), between CLEAN WATER TECHNOLOGIES, INC., a Delaware
corporation ("CWTI"); and SHEERVISION, INC., a California corporation
("SHEERVISION"), and THE BENEFICIAL STOCKHOLDERS OF SHEERVISION IDENTIFIED IN
SCHEDULE A HERETO (the "SHEERVISION SHAREHOLDERS").
INTRODUCTION
CWTI desires to acquire all of the issued and outstanding shares of
SheerVision capital stock (the "SHEERVISION CAPITAL STOCK") solely in exchange
for an aggregate of 9,525,137 shares of authorized, but theretofore unissued,
shares of common stock, par value $0.001 per share, of CWTI (the "CWTI COMMON
STOCK"), representing 95% of the fully diluted outstanding CWTI Common Stock
giving effect to such issuance and the cancellation of any shares of CWTI Common
Stock held beneficially or of record by SheerVision. The SheerVision
Shareholders desire to exchange all of their beneficially owned shares of
SheerVision Capital Stock solely for shares of CWTI Common Stock in the amount
set forth herein.
Prior to the date hereof, the respective boards of directors or
analogous governing body of each of CWTI and SheerVision have, and the
SheerVision Shareholders have, approved and adopted this Agreement and it is the
intent of the parties hereto that the transactions contemplated hereby be
structured so as to qualify as a tax-free exchange under Subchapter C of the
Internal Revenue Code of 1986, as amended (the "CODE"), and the provisions of
this Agreement will be interpreted in a manner consistent with this intent.
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties and covenants herein contained, the parties hereby
agree as follows:
ARTICLE I
ACQUISITION AND EXCHANGE OF SHARES
SECTION 1.01 THE AGREEMENT. The parties hereto hereby agree that CWTI
shall acquire all of the issued and outstanding shares of SheerVision Capital
Stock solely in exchange for an aggregate of 9,525,137 shares of authorized, but
theretofore unissued, shares of CWTI Common Stock. The parties hereto agree that
at the closing of the transactions contemplated by this Agreement (the
"CLOSING"): (i) SheerVision will become a wholly-owned subsidiary of CWTI
subject to the conditions and provisions of Section 1.03 hereof; and (ii) CWTI
will amend its certificate and articles of incorporation and other related
charter and authorization documents with the relevant state authorities so as to
cause the corporate name thereof to be reasonably satisfactory to SheerVision.
<PAGE>
SECTION 1.02 EXCHANGE OF SHARES.
(a) At the Closing, CWTI will cause to be issued and held for delivery
to the SheerVision Shareholders or their designees, stock certificates
representing an aggregate of 9,525,137 shares of CWTI Common Stock, representing
95% of the fully diluted outstanding CWTI Common Stock giving effect to such
issuance and the cancellation of any shares of CWTI Common Stock held
beneficially or of record by SheerVision, in exchange for all of the issued and
outstanding shares of SheerVision Capital Stock, which shares will be delivered
to CWTI at the Closing.
(b) The shares of CWTI Common Stock to be issued pursuant to paragraph
(a) of this Section 1.02 will be authorized, but theretofore unissued shares of
CWTI Common Stock, and will be issued to the SheerVision Shareholders or as
directed thereby as set forth in Schedule 1.02(b) hereof.
(c) All shares of CWTI Common Stock to be issued hereunder shall be
deemed "RESTRICTED SECURITIES" as defined in paragraph (a) of Rule 144 under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and the SheerVision
Shareholders will represent in writing that they are acquiring said shares for
investment purposes only and without the intent to make a further distribution
of such shares. All shares of CWTI Common Stock to be issued under the terms of
this Agreement shall be issued pursuant to an exemption from the registration
requirements of the Securities Act, under Section 4(2) of the Securities Act and
the rules and regulations promulgated thereunder. Certificates representing the
shares of CWTI Common Stock to be issued hereunder shall bear a restrictive
legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE DISPOSED OF,
EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH
ACT OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION
PROVISIONS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
THE SATISFACTION OF THE COMPANY.
SECTION 1.03 CLOSING. The Closing will take place at a date and time
(the "CLOSING DATE") and place to be mutually agreed upon by the parties hereto,
and will be subject to the provisions of Article IV of this Agreement. At the
Closing:
(a) The SheerVision Shareholders will deliver to CWTI stock
certificates or other evidences representing all of the issued and outstanding
shares of SheerVision Capital Stock, duly endorsed, so as to make CWTI the
holder thereof, free and clear of all liens, claims and other encumbrances;
(b) CWTI will deliver to, or at the direction of, the SheerVision
Shareholders, in accordance with Schedule 1.02(b) hereof, stock certificates
representing an aggregate of 9,525,137 shares of CWTI Common Stock, which
certificates will bear a standard restrictive legend in the form customarily
used with restricted securities and as set forth in Section 1.02(c) above and
which shares shall represent 95% of the outstanding CWTI Common Stock giving
effect to the issuance
-2-
<PAGE>
thereof and the cancellation of any shares of CWTI Common Stock held
beneficially or of record by SheerVision;
(c) CWTI will deliver an Independent Directors' Certificate as
described in Sections 4.02(a) and 4.02(b) hereof, dated the Closing Date,
certifying that all representations, warranties, covenants, and conditions set
forth herein by CWTI are true and correct as of, or have been fully performed
and complied with by, the Closing Date; and
(d) SheerVision will deliver an Officer's Certificate as described in
Sections 4.01(a) and 4.01(b) hereof, dated the Closing Date, certifying that all
representations, warranties, covenants and conditions set forth herein by
SheerVision are true and correct as of, or have been fully performed and
complied with by, the Closing Date;
SECTION 1.04 APPROVAL BY BOARD OF DIRECTORS. In anticipation of this
Agreement, CWTI has taken all necessary and requisite corporate and other
actions, including without limitation, actions of the Board of Directors in
order to approve this Agreement and all transactions contemplated hereby and in
connection herewith.
SECTION 1.05 CONSUMMATION OF TRANSACTION. If at the Closing, no
condition exists which would permit any of the parties to terminate this
Agreement, or a condition then exists and the party entitled to terminate
because of that condition elects not to do so, then the transactions herein
contemplated shall be consummated upon such date, and then and thereupon, CWTI
will file any additional necessary documents that may be required by the State
of Delaware, the United States of America, or otherwise.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01 REPRESENTATIONS AND WARRANTIES OF CWTI. CWTI hereby
represents and warrants to, and agrees with, SheerVision and the SheerVision
Shareholders that the statements set forth in this Section 2.01 are true,
correct, and complete as of the date of this Agreement, except as otherwise set
forth in all forms, reports, schedules, statements and other documents required
to be filed by it under the Securities Act, at least since July 1, 2001, as such
documents have been amended since the time of filing thereof (collectively,
including all forms, reports, schedules, statements, exhibits, and other
documents filed by CWTI therewith, the "CWTI SEC Documents"):
(a) ORGANIZATION AND QUALIFICATION. CWTI has no subsidiaries or
affiliated corporation or owns any interest in any other enterprise (whether or
not such enterprise is a corporation). CWTI is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware,
with all requisite power and authority, and all necessary consents,
authorizations, approvals, orders, licenses, certificates, and permits of and
from, and declarations and filings with, all federal, state, local, and other
governmental authorities and all courts and other tribunals, to own, lease,
license, and use its properties and assets and to carry on the businesses in
which it is now engaged and the businesses in which it contemplates engaging.
-3-
<PAGE>
Other than as set forth in the CWTI SEC Documents, CWTI is duly qualified to
transact the businesses in which it is engaged and is in good standing as a
foreign corporation in every jurisdiction in which its ownership, leasing,
licensing, or use of property or assets or the conduct of its businesses makes
such qualification necessary.
(b) CAPITALIZATION. The authorized capital stock of CWTI consists of
50,000,000 shares of CWTI Common Stock, of which 1,111,837 shares are
outstanding. Prior to Closing, CWTI shareholders shall approve and cause to
become effective the charter amendments contemplated by this Agreement. Each of
such outstanding shares of CWTI Common Stock is validly authorized, validly
issued, fully paid, and nonassessable, has not been issued and is not owned or
held in violation of any preemptive or similar right of stockholders. Except as
disclosed in the CWTI SEC Documents, there is no commitment, plan, or
arrangement to issue, and no outstanding option, warrant, or other right calling
for the issuance of, any share of capital stock of CWTI or any security or other
instrument convertible into, exercisable for, or exchangeable for capital stock
of CWTI. CWTI SEC Documents, there is outstanding no security or other
instrument convertible into, or exchangeable or exercisable for, capital stock
of CWTI.
(c) FINANCIAL CONDITION. Baumann Raymondo & Company PA ("BRC"), which
has examined the financial statements of the Company, together with the related
schedules and notes, for the period from September 25, 2002 through June 24,
2005, and Acquavella, Chiarelli & Shuster & Co., LLP ("ACS", and, together with
BRC, the "AUDITORS"), which has examined the financial statements of the
Company, together with the related schedules and notes, for the period from June
25, 2000 through September 25, 2002, in each case filed with the SEC as a part
of the SEC Documents, are independent accountants within the meaning of the
Securities Act, the Exchange Act, and the rules and regulations promulgated
thereunder. CWTI has filed with the United States Securities and Exchange (the
"SEC") true and correct copies of the following: audited balance sheets of CWTI
as of June 25, 2003, 2004, and 2005; unaudited balance sheets of CWTI as of
December 30, 2004 and 2005; audited statements of income, statements of
stockholders' equity, and statements of cash flows of CWTI for the 52 weeks
ended June 25, 2004, and June 24, 2005; and the unaudited statements of income,
statements of stockholders' equity, and statements of cash flows of CWTI for the
27 weeks ended December 30, 2004 and 2005. Each such balance sheet presents
fairly the financial condition, assets, liabilities, and stockholders' equity of
CWTI as of its respective date; each such statement of income and statement of
stockholders' equity presents fairly the results of operations of CWTI for the
period indicated; and each such statement of cash flows presents fairly the
information purported to be shown therein. The financial statements referred to
in this Section 2.01(c) have been prepared in accordance with generally accepted
accounting principles in the United States consistently applied throughout the
periods involved, are in accordance with the books and records of CWTI, and
complied and will comply as to form in all material respects with all applicable
accounting requirements, and the rules and regulations of the SEC with respect
thereto where filed. The financial statements referred to in this Section
2.01(c) contain all certifications and statements required by the SEC's Order,
dated June 27, 2002, pursuant to Section 21(a)(1) of the Exchange Act (File No.
4-460), Rule 13a-14 or 15d-14 under the Exchange Act, or 18 U.S.C. Section 1350
(Sections 302 and 906 of the Sarbanes-Oxley Act of 2002) with respect to the
report relating thereto. Since June 24, 2005:
-4-
<PAGE>
(i) There has at no time been a material adverse change in the
financial condition, results of operations, businesses, properties,
assets, liabilities, or future prospects of CWTI.
(ii) CWTI has not authorized, declared, paid, or effected any
dividend or liquidating or other distribution in respect of its capital
stock or any direct or indirect redemption, purchase, or other
acquisition of any stock of CWTI.
(iii) Except as set forth in the CWTI SEC Documents, the
operations and businesses of CWTI have been conducted in all respects
only in the ordinary course.
There is no fact known to CWTI which materially adversely affects or in the
future (as far as CWTI can reasonably foresee) may materially adversely affect
the financial condition, results of operations, businesses, properties, assets,
liabilities, or future prospects of CWTI; provided, however, that CWTI expresses
no opinion as to political or economic matters of general applicability. CWTI
has made known, or caused to be made known, to the accountants or auditors who
have prepared, reviewed, or audited the aforementioned consolidated financial
statements all material facts and circumstances which could affect the
preparation, presentation, accuracy, or completeness thereof.
(d) TAX AND OTHER LIABILITIES. CWTI does not have any material
liability of any nature, accrued or contingent, including, without limitation,
liabilities for federal, state, local, or foreign taxes and penalties, interest,
and additions to tax ("TAXES"), and liabilities to customers or suppliers, other
than the following:
(i) Liabilities for which full provision has been made on the
balance sheet and the notes thereto (the "LAST CWTI BALANCE SHEET") as
of December 30, 2005 (the "LAST CWTI BALANCE SHEET DATE") referred to
in Section 2.01(c); and
(ii) Other liabilities arising since the Last CWTI Balance
Sheet Date and prior to Closing in the ordinary course of business
(which shall not include liabilities to customers on account of
defective products or services) which are not inconsistent with the
representations and warranties of CWTI or any other provision of this
Agreement.
Without limiting the generality of the foregoing, the amounts set up as
provisions for Taxes on the Last CWTI Balance Sheet are sufficient for all
accrued and unpaid Taxes of CWTI, whether or not due and payable and whether or
not disputed, under tax laws, as in effect on the Last CWTI Balance Sheet Date
or now in effect, for the period ended on such date and for all fiscal periods
prior thereto. The execution, delivery, and performance of this Agreement by
CWTI will not cause any Taxes to be payable (other than those that may possibly
be payable by the SheerVision Shareholders as a result of the contribution of
their shares of SheerVision Capital Stock to CWTI) or cause any lien, charge, or
encumbrance to secure any Taxes to be created either immediately or upon the
nonpayment of any Taxes other than on the properties or assets of the
SheerVision Shareholders. The Internal Revenue Service has audited and settled
or the statute of limitations has run upon all federal income tax returns of
CWTI for all taxable years up to and including the taxable year ended December
31, 1998. CWTI has filed all federal, state, local, and foreign tax
-5-
<PAGE>
returns required to be filed by it; has delivered to the SheerVision
Shareholders a true and correct copy of each such return which was filed in the
past six years; has paid (or has established on the Last CWTI Balance Sheet a
reserve for) all Taxes, assessments, and other governmental charges payable or
remittable by it or levied upon it or its properties, assets, income, or
franchises which are due and payable; and has delivered to the SheerVision
Shareholders a true and correct copy of any report as to adjustments received by
it from any taxing authority during the past six years and a statement as to any
litigation, governmental or other proceeding (formal or informal), or
investigation pending, threatened, or in prospect with respect to any such
report or the subject matter of such report.
(e) LITIGATION AND CLAIMS. Except as described in the CWTI SEC
Documents, there is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending or, to the best of
CWTI's knowledge, threatened, or in prospect (or any basis therefor known to
CWTI) with respect to CWTI or any of its businesses, properties, or assets. CWTI
is not affected by any present or threatened strike or other labor disturbance
nor to the knowledge of CWTI, is any union attempting to represent any employee
of CWTI as collective bargaining agent. CWTI is not in violation of, or in
default with respect to, any law, rule, regulation, order, judgment, or decree
which violation or default would have a material adverse effect on CWTI; nor is
CWTI required to take any action in order to avoid such violation or default.
(f) PROPERTIES.
(i) CWTI owns no real property. CWTI has good and marketable
title to all personal properties and assets material to CWTI and used in its
businesses or owned by it (except real and other properties and assets material
to CWTI as are held pursuant to leases or licenses described in the CWTI SEC
Documents), free and clear of all liens, mortgages, security interests, pledges,
charges, and encumbrances (except such as are listed in the CWTI SEC Documents).
(ii) Set forth in the CWTI SEC Documents are descriptions of
all tangible properties and assets owned by CWTI or leased or licensed by CWTI
from or to a third party (including inventory but not including Intangibles (as
hereinafter defined)), and with respect to such properties and assets leased or
licensed by CWTI from or to a third party, a description of such lease or
license. All such properties and assets (including Intangibles) owned by CWTI
are reflected on the Last CWTI Balance Sheet (except for acquisitions subsequent
to the Last CWTI Balance Sheet Date and prior to the Closing Date, which are
either noted in the CWTI SEC Documents or are approved in writing by
SheerVision). All tangible properties and assets owned by CWTI or leased or
licensed by CWTI from or to a third party are in good and usable condition
(reasonable wear and tear which is not such as to affect adversely the operation
of the businesses of CWTI excepted).
(iii) To the best of CWTI's knowledge, no real property leased
or licensed by CWTI from or to a third party lies in an area which is, or will
be, subject to zoning, use, or building code restrictions which would prohibit,
and, to the best of CWTI's knowledge, no state of facts relating to the actions
or inaction of another person or entity or his or its ownership, leasing, or
licensing of any real or personal property exists or will exist which would
prevent, the continued
-6-
<PAGE>
effective ownership, leasing, or licensing of such real property in the
businesses in which CWTI is now engaged or the businesses in which it
contemplates engaging.
(iv) The properties and assets (including Intangibles (as
hereinafter defined)) owned by CWTI (other than those leased or licensed by CWTI
to a third party) or leased or licensed by CWTI from a third party constitute
all such properties and assets which are necessary to the businesses of CWTI as
presently conducted.
(v) CWTI has not caused or permitted its businesses
properties, or assets to be used to generate, manufacture, refine, transport,
treat, store, handle, dispose of, transfer, produce, or process any Hazardous
Substance (as such term is defined in this Section 2.01(f)(v)) except in
compliance with all applicable laws, rules, regulations, orders, judgments, and
decrees, and has not caused or permitted the Release (as such term is defined in
this Section 2.01(f)(v)) of any Hazardous Substance on or off the site of any
property of CWTI. The term "HAZARDOUS SUBSTANCE" shall mean any hazardous waste,
as defined by 42 U.S.C. ss.6903(5), any hazardous substance, as defined by 42
U.S.C. ss.9601(14), any pollutant or contaminant, as defined by 42 U.S.C.
ss.9601(33), and all toxic substances, hazardous materials, or other chemical
substances regulated by any other law, rule, or regulation. The term "RELEASE"
shall have the meaning set forth in 42 U.S.C. ss.9601(22).
(vi) Except as set forth in the CWTI SEC Documents, (A) CWTI
is in compliance in all material respects with all rules, laws and regulations
relating to the use, treatment, storage and disposal of toxic substances and
protection of health or the environment ("Environmental Laws") that are
applicable to its business, (B) CWTI has not received notice from any
governmental authority or third party of an asserted claim under Environmental
Laws, which claim is required to be disclosed in the CWTI SEC Documents, (C) to
the best knowledge of CWTI, CWTI is not likely to be required to make future
material capital expenditures to comply with Environmental Laws, (D) no property
which is owned, leased or occupied by CWTI has been designated as a Superfund
site pursuant to the Comprehensive Response, Compensation, and Liability Act of
1980, as amended (42 U.S.C. ss. 9601, et seq.), or otherwise designated as a
contaminated site under applicable state or local law, and (E) CWTI is not in
violation of any federal or state law or regulation relating to occupational
safety or health.
(g) CONTRACTS AND OTHER INSTRUMENTS. The CWTI SEC Documents contains a
true and correct statement of the information required to be contained therein
regarding material contracts, agreements, instruments, leases, licenses,
arrangements, or understandings with respect to CWTI. CWTI has made available to
the SheerVision Shareholders (i) the certificate of incorporation (or other
charter document) and by-laws of CWTI and all amendments thereto, as presently
in effect, and (ii) the following: (A) true and correct copies of all material
contracts, agreements, and instruments referred to in the CWTI SEC Documents;
(B) true and correct copies of all material leases and licenses referred to in
the CWTI SEC Documents hereto; and (C) true and correct written descriptions of
all material supply, distribution, agency, financing, or other arrangements or
understandings referred to in the CWTI SEC Documents. To the best of CWTI's
knowledge, neither CWTI nor (to the knowledge of CWTI) any other party to any
such material contract, agreement, instrument, lease, or license is now or
expects in the future to be in violation or breach of, or in default with
respect to complying with, any term thereof, and each such material contract,
-7-
<PAGE>
agreement, instrument, lease, or license is in full force and is (to the best of
CWTI's knowledge in the case of third parties) the legal, valid, and binding
obligation of the parties thereto and (subject to applicable bankruptcy,
insolvency, and other laws affecting the enforceability of creditors' rights
generally) is enforceable as to them in accordance with its respective terms.
Each such material supply, distribution, agency, financing, or other arrangement
or understanding is a valid and continuing arrangement or understanding; neither
CWTI nor any other party to any such arrangement or understanding has given
notice of termination or taken any action inconsistent with the continuance of
such arrangement or understanding; and the execution, delivery, and performance
of this Agreement will not prejudice any such arrangement or understanding in
any way. CWTI enjoys peaceful and undisturbed possession under all material
leases and licenses under which it is operating. CWTI is not party to, or bound
by, any contract, agreement, instrument, lease, license, arrangement, or
understanding, or subject to any charter or other restriction, which has had or
(to the knowledge of CWTI) may in the future have a material adverse effect on
the financial condition, results of operations, businesses, properties, assets,
liabilities, or future prospects of CWTI. CWTI has not engaged within the last
five years in, is not engaging in, and does not intend to engage in any
transaction with, and has not had within the last five years, does not now have,
and does not intend to have any material contract, agreement, instrument, lease,
license, arrangement, or understanding with, any stockholder of CWTI, any
director, officer, or employee of CWTI (except for employment agreements listed
in the CWTI SEC Documents and employment and compensation arrangements described
in the CWTI SEC Documents), any relative or affiliate of any stockholder of CWTI
or of any such director, officer, or employee, or any other corporation or
enterprise in which any stockholder of CWTI, any such director, officer, or
employee, or any such relative or affiliate then had or now has a 5% or greater
equity or voting or other substantial interest, other than those listed and so
specified in the CWTI SEC Documents. The stock ledgers and stock transfer books
relating to all issuances and transfers of stock by CWTI and the minute book
records of CWTI and all proceedings of the stockholders and the Board of
Directors and committees thereof of CWTI since their respective incorporations
made available to counsel to SheerVision and the SheerVision Shareholders are
the original stock ledgers and stock transfer books and minute book records of
CWTI or exact copies thereof. CWTI is not in violation or breach of, or in
default with respect to, any term of its certificate of incorporation (or other
charter document) or by-laws.
(h) EMPLOYEES.
(i) CWTI does not have, or contribute to, any pension,
profit-sharing, option, other incentive plan, or any other type of Employee
Benefit Plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), or have any obligation to or
customary arrangement with employees for bonuses, incentive compensation,
vacations, severance pay, sick pay, sick leave, insurance, service award,
relocation, disability, tuition refund, or other benefits, whether oral or
written, except as set forth in the CWTI SEC Documents. CWTI has made available
to SheerVision and the SheerVision Shareholders: (A) true and correct copies of
all documents evidencing plans, obligations, or arrangements referred to in the
CWTI SEC Documents (or true and correct written summaries, so initialed, of such
plans, obligations, or arrangements to the extent not evidenced by documents)
and true and correct copies, so initialed, of all documents evidencing trusts,
summary plan descriptions, and any other summaries or descriptions relating to
any such plans; (B) the two most recent annual reports (Form
-8-
<PAGE>
5500's), if any, including all schedules thereto and the most recent annual and
periodic accounting of related plan assets with respect to each Employee Benefit
Plan; (C) the two most recent actuarial valuations with respect to each Pension
Plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA; and (D)
the most recent determination letter issued by the Internal Revenue Service with
respect to each Pension Plan.
(ii) If any Employee Benefit Plan of CWTI were to be
terminated on the day prior to Closing Date, (A) no liability under Title IV of
ERISA would be incurred by CWTI or SheerVision and (B) all Accrued Benefits (as
defined in this Section 2.01(h)(ii)) to such day prior to the Closing Date
(whether or not vested) would be fully funded in accordance with the assumptions
contained in the regulations of the Pension Benefit Guaranty Corporation
governing the funding of terminated defined benefit plans. For purposes hereof,
"ACCRUED BENEFITS" shall include the value of disability, pre-retirement, death
benefits, and all supplements, subsidized, ancillary, and optional forms of
benefits. All Accrued Liabilities (for contributions or otherwise) (as defined
in this Section 2.01(h)(ii)) of CWTI as of the Closing Date to each Employee
Benefit Plan and with respect to each obligation to, or customary arrangement
with, employees for bonuses, incentive compensation, vacations, severance pay,
sick pay, sick leave, insurance, service award, relocation, disability, tuition
refund, or other benefits, whether oral or written, have been paid or accrued
for all periods ending prior to the Closing Date and no payment to any Employee
Benefit Plan or with respect to any such obligation or arrangement since the
Last CWTI Balance Sheet Date has been disproportionately large compared to prior
payments. For purposes hereof, "ACCRUED LIABILITIES" shall include a pro rata
contribution to each Employee Benefit Plan or with respect to each such
obligation or arrangement for that portion of a plan year or other applicable
period which commences prior to, and ends after, the Closing Date, and Accrued
Liabilities for any portion of a plan year or other applicable period shall be
determined by multiplying the liability for the entire such year or period by a
fraction, the numerator of which is the number of days preceding the Closing
Date in such year or period and the denominator of which is the number of days
in such year or period, as the case may be.
(iii) There has been no violation of the reporting and
disclosure requirements imposed either under ERISA or the Code for which a
penalty has been or may be imposed with respect to any Employee Benefit Plan of
CWTI. There has been no breach of fiduciary duty or responsibility with respect
to any Employee Benefit Plan of CWTI. No Employee Benefit Plan of CWTI or
related trust has any liability of any nature, accrued or contingent, including
without limitation liabilities for Taxes, other than for routine payments to be
made in due course to participants and beneficiaries, except as set forth in the
CWTI SEC Documents. CWTI does not have any formal plan or commitment, whether or
not legally binding, to create any additional or modify any existing Employee
Benefit Plan or benefit obligation or arrangement described in Section
2.01(h)(i)). Each Employee Benefit Plan of CWTI which is a group health plan
within the meaning of Section 5000(b)(1) of the Code is and has been maintained
in full compliance with the applicable requirements of Section 4980B of the
Code. Other than the health care continuation requirements of Section 4980B of
the Code, CWTI does not have any obligation to provide post-retirement medical
benefits or life insurance coverage or any deferred compensation benefits to any
present or former employees. There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or investigation pending,
threatened, or (to the best of CWTI's knowledge) in prospect (or any basis
therefor known to CWTI) with respect to any
-9-
<PAGE>
Employee Benefit Plan of CWTI or related trust or with respect to any fiduciary,
administrator, or sponsor (in its capacity as such) of any Employee Benefit
Plan. No Employee Benefit Plan of CWTI or related trust and no such obligation
or arrangement is in violation of, or in default with respect to, any law, rule,
regulation, order, judgment, which violation or default would have a material
adverse effect thereon or decree nor is CWTI, any Employee Benefit Plan of CWTI,
or any related trust required to take any action in order to avoid any such
violation or default. No event has occurred, or is (to the best of CWTI's
knowledge) threatened or about to occur, which would constitute a prohibited
transaction under Section 406 of ERISA.
(iv) Each Pension Plan maintained for the employees of CWTI
has been qualified, from its inception, under Section 401(a) of the Code and any
related trust has been an exempt trust for such period under Section 501 of the
Code. Each Pension Plan has been operated in accordance with its terms. No
Pension Plan which is subject to Title IV of ERISA has an accumulated or waived
funding deficiency within the meaning of Section 412 of the Code. No
investigation or review by the Internal Revenue Service is currently pending or
(to the knowledge of CWTI) is contemplated in which the Internal Revenue Service
has asserted or may assert that any Pension Plan is not qualified under Section
401(a) of the Code or that any related trust is not exempt under Section 501 of
the Code. Neither CWTI, nor any organization to which CWTI is a successor or
parent corporation, within the meaning of Section 4069(b) of ERISA, has divested
itself of any entity maintaining or with an obligation to contribute to any
Pension Plan which had an "AMOUNT OF UNFUNDED BENEFIT LIABILITIES," as defined
in Section 4001(a)(18) of ERISA, at the time of such divestiture. No assessment
of any federal taxes with respect to any Employee Benefit Plan of CWTI has been
made or (to the knowledge of CWTI) is contemplated against CWTI, or any related
trust of any Pension Plan of CWTI, and nothing has occurred which would result
in the assessment of unrelated business taxable income under the Code with
respect to any Employee Benefit Plan of CWTI. Form 5500's have been timely filed
with respect to all Pension Plans of CWTI. No event has occurred or (to the
knowledge of CWTI) is threatened or about to occur which would constitute a
reportable event within the meaning of Section 4043(b) of ERISA. No notice of
termination has been filed by the plan administrator pursuant to Section 4041 of
ERISA or issued by the Pension Benefit Guaranty Corporation pursuant to Section
4042 of ERISA with respect to any Pension Plan of CWTI.
(v) CWTI does not currently contribute to, and since September
16, 1980 has not effectuated either a complete or partial withdrawal from, any
multiemployer Pension Plan within the meaning of Section 3(37) of ERISA.
(vi) The CWTI SEC Documents contains a true and correct
statement of the names, relationship with CWTI, present rates of compensation
(whether in the form of salary, bonuses, commissions, or other supplemental
compensation now or hereafter payable), and aggregate compensation for the
fiscal year ended June 30, 2004 of (A) each director, officer, or other employee
of CWTI whose aggregate compensation for the fiscal year ended June 24, 2005
exceeded US$25,000 or whose aggregate compensation presently exceeds the rate of
US$25,000 per annum and (B) all sales agents, dealers, or distributors of CWTI.
Since June 24, 2005, CWTI has not changed the rate of compensation of any of its
directors, officers, employees, agents, dealers, or distributors, nor has any
Employee Benefit Plan or program of CWTI been instituted or amended to increase
benefits thereunder. There is no contract, agreement, plan, arrangement, or
-10-
<PAGE>
understanding covering any person that, individually or collectively, could give
rise to the payment of any amount that would not be deductible by CWTI by reason
of Section 280G of the Code.
(vii) CWTI has not, since at least December 30, 2004, extended
or maintained credit, arranged for the extension of credit, or renewed an
extension of credit, in the form of a personal loan to or for any director or
executive officer (or equivalent thereof) thereof.
(i) PATENTS, TRADEMARKS, ET CETERA. CWTI does not own or have pending,
and is not licensed or otherwise permitted to use, any material patent, patent
application, trademark, trademark application, service mark, copyright,
copyright application, franchise, trade secret, computer program (in object or
source code or otherwise), or other intangible property or asset (collectively,
"INTANGIBLES"), other than as described in the CWTI SEC Documents. Each
Intangible is validly issued and is currently in force and uncontested in all
jurisdictions in which it is used or in which such use is contemplated. The CWTI
SEC Documents contains a true and correct listing of: (i) all Intangibles which
are owned (either in whole or in part), used by, or licensed to CWTI or which
otherwise relate to the businesses of CWTI, and a description of each such
Intangible which identifies its owner, registrant, or applicant; (ii) all
contracts, agreements, instruments, leases, and licenses and identification of
all parties thereto under which CWTI owns or uses any Intangible (whether or not
under license from third parties), together with the identification of the
owner, registrant, or applicant of each such Intangible; (iii) all contracts,
agreements, instruments, leases, and licenses and identification of all parties
thereto under which CWTI grants the right to use any Intangible; (iv) all
validity, infringement, right-to-use, or other opinions of counsel (whether
in-house or outside) which concern the validity, infringement, or enforceability
of any Intangible owned or controlled by a party other than CWTI which relates
to the businesses, properties, or assets of CWTI. Except as specified in the
CWTI SEC Documents, to the knowledge of CWTI: (v) CWTI is the sole and exclusive
owner or licensee of, and (other than those exclusively licensed by CWTI to a
third party) has the right to use, all Intangibles; (vi) no Intangible is
subject to any order, judgment, decree, contract, agreement, instrument, lease,
or license restricting the scope of the use thereof; (vii) during the last five
years, CWTI has not been charged with, and has not charged others with, unfair
competition, infringement of any Intangible, or wrongful use of confidential
information, trade secrets, or secret processes; and (viii) CWTI is not using
any patentable invention, confidential information, trade secret, or secret
process of others. There is no right under any Intangible necessary to the
businesses of CWTI as presently conducted or as it contemplates conducting,
except such as are so designated in the CWTI SEC Documents. Except as described
in the CWTI SEC Documents, CWTI has not infringed, is not infringing, and has
not received notice of infringement in respect of the Intangibles or asserted
Intangibles of others, nor has CWTI been advised by counsel or others that it is
infringing or may infringe the Intangibles or asserted Intangibles of others if
any currently contemplated business activity is effectuated. To the knowledge of
CWTI, there is no infringement by others of Intangibles of CWTI. As far as CWTI
can reasonably foresee, there is no Intangible or asserted Intangible of others
that may materially adversely affect the financial condition, results of
operations, businesses, properties, assets, liabilities, or future prospects of
CWTI. All material contracts, agreements, instruments, leases, and licenses
pertaining to Intangibles to which CWTI is a party, or to which any of its
businesses, properties, or assets are subject, are in compliance in all material
respects with all laws, rules, regulations, orders, judgments, and decrees
binding on CWTI or to which any of its businesses, properties, or assets are
subject. CWTI did not register any
-11-
<PAGE>
trademark, tradename or service mark, design, or name used by CWTI to identify
its products, businesses, or services. Neither any stockholder of CWTI, any
director, officer, or employee of CWTI, any relative or affiliate of any
stockholder of CWTI, any such director, officer, or employee, nor any other
corporation or enterprise in which any stockholder of CWTI, any such director,
officer, or employee, or any such relative or affiliate had or now has a 5% or
greater equity or voting or other substantial interest, possesses any Intangible
which relates to the businesses of CWTI.
(j) QUESTIONABLE PAYMENTS. Neither CWTI, nor any director, officer,
agent, employee, or other person associated with, or acting on behalf of, CWTI,
nor any stockholder of CWTI has, directly or indirectly: used any corporate
funds for unlawful contributions, gifts, entertainment, or other unlawful
expenses relating to political activity; made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns from corporate funds; violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff,
influence payment, kickback, or other unlawful payment.
(k) AUTHORITY. CWTI has all requisite power and authority to execute,
deliver, and perform this Agreement. All necessary corporate proceedings of CWTI
have been duly taken to authorize the execution, delivery, and performance of
this Agreement thereby. This Agreement has been duly authorized, executed, and
delivered by CWTI, constitutes the legal, valid, and binding obligation of CWTI,
and is enforceable as to CWTI in accordance with its terms. Except as otherwise
set forth in this Agreement, no consent, authorization, approval, order,
license, certificate, or permit of or from, or declaration or filing with, any
federal, state, local, or other governmental authority or any court or other
tribunal is required by CWTI for the execution, delivery, or performance of this
Agreement by CWTI. No consent of any party to any material contract, agreement,
instrument, lease, license, arrangement, or understanding to which CWTI is a
party, or to which it or any of its businesses, properties, or assets are
subject, is required for the execution, delivery, or performance of this
Agreement; and the execution, delivery, and performance of this Agreement will
not violate, result in a breach of, conflict with, or (with or without the
giving of notice or the passage of time or both) entitle any party to terminate
or call a default under, entitle any party to receive rights or privileges that
such party was not entitled to receive before this Agreement was executed under,
or create any obligation on the part of CWTI to which it was not subject
immediately before this Agreement was executed under, any term of any such
material contract, agreement, instrument, lease, license, arrangement, or
understanding, or violate or result in a breach of any term of the certificate
of incorporation (or other charter document) or by-laws of CWTI, or (if the
provisions of this Agreement are satisfied) violate, result in a breach of, or
conflict with any law, rule, regulation, order, judgment, or decree binding on
CWTI or to which any of its businesses, properties, or assets are subject, which
violation or breach would have a material adverse effect on CWTI. Neither CWTI,
nor any of its officers, directors, employees, or agents has employed any broker
or finder or incurred any liability for any fee, commission, or other
compensation payable by any person on account of alleged employment as a broker
or finder, or alleged performance of services as a broker or finder, in
connection with or as a result of this Agreement or the transactions
contemplated hereby and in connection herewith.
-12-
<PAGE>
(l) STATUS OF SHARES OF CWTI COMMON STOCK TO BE ISSUED. Assuming
without investigation that the shares of SheerVision Capital Stock outstanding
on the Closing Date are validly authorized, validly issued, fully paid, and
nonassessable, the shares of CWTI Common Stock to be issued pursuant to Section
1.02(a) hereof are validly authorized and, when the such shares of CWTI Common
Stock have been duly delivered pursuant to the terms of this Agreement, such
shares of CWTI Common Stock will be validly issued, fully paid, and
nonassessable and will not have been issued, owned or held in violation of any
preemptive or similar right of stockholder.
(m) INSURANCE. CWTI currently maintains no insurance; however, the
Company has at no time been refused any insurance coverage sought or applied
for.
(o) TRADING MATTERS. At the date hereof and at the Closing Date:
(i) the CWTI Common Stock is traded and quoted in the
over-the-counter Bulletin Board market maintained by The Nasdaq Stock
Market, Inc. (the "OTCBB");
(ii) CWTI has and shall have performed or satisfied all of its
undertakings to, and of its obligations and requirements with, the SEC;
(iii) CWTI has not, and shall not have taken any action that
would preclude, or otherwise jeopardize, the inclusion of the CWTI
Common Stock for quotation on the OTCBB.
(p) REORGANIZATION.
(i) CWTI has not taken and has not agreed to take any action
(other than actions contemplated by this Agreement) that could reasonably be
expected to prevent the transactions contemplated by this Agreement from
constituting a "reorganization" under section 368(b) of the Code or as an
acquisition of in excess of 80% of the stock of a corporation in exchange for
property under Section 351 of the Code. CWTI is not aware of any agreement, plan
or other circumstance that could reasonably be expected to prevent the
transactions contemplated by this Agreement from so qualifying.
(ii) CWTI has no plan or intention to reacquire, and, to
CWTI's knowledge, no person related to CWTI within the meaning of Treasury
Regulations Section 1.368-1 has a plan or intention to acquire, any of the CWTI
Common Stock pursuant to Section 1.02(a) hereof.
(q) COMPLETENESS OF DISCLOSURE. No representation or warranty by CWTI
in this Agreement contains or, and at the Closing Date will contain, an untrue
statement of material fact or omits or, at the Closing Date, will omit to state
a material fact required to be stated therein or necessary to make the
statements made not misleading.
(r) PERIODIC REPORTING.
(i) The CWTI Common Stock has been registered under Section
12(g) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")
and CWTI is subject to the periodic reporting requirements of Section 13 of the
Exchange Act. CWTI has heretofore made
-13-
<PAGE>
available to SheerVision and the SheerVision Shareholders true, complete, and
correct copies of the CWTI SEC Documents. The CWTI SEC Documents, including,
without limitation, any financial statements and schedules included therein, at
the time filed or, if subsequently amended, as so amended, (i) did not contain
any untrue statement of a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and (ii)
complied in all respects with the applicable requirements of the Exchange Act
and the applicable rules and regulations thereunder. The financial statements
included in the CWTI SEC Documents complied when filed as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles in the United States,
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited financial
statements, as permitted by the rules and regulations of the Commission) and
fairly present, subject in the case of the unaudited financial statements, to
customary year end audit adjustments, the financial position of CWTI as at the
dates thereof and the results of its operations and cash flows.
(ii) The Company maintains disclosure controls and procedures
required by Rule 13a-15 or 15d-15 under the Exchange Act; such controls and
procedures are effective to ensure that all material information concerning the
Company and its subsidiaries is made known on a timely basis to the individuals
responsible for the preparation of the Company's filings with the SEC and other
public disclosure documents. CWTI has made available to SheerVision copies of,
all written descriptions of, and all policies, manuals and other documents
promulgating, such disclosure controls and procedures. To CWTI's knowledge, each
director and executive officer thereof has filed with the SEC on a timely basis
all statements required by Section 16(a) of the Exchange Act and the rules and
regulations thereunder since July 1, 2001. As used in this Section 2.01(r), the
term "file" shall be broadly construed to include any manner in which a document
or information is furnished, supplied or otherwise made available to the SEC.
(iii) The Chief Executive Officer and the Chief Financial
Officer of CWTI have signed, and the Company has furnished to the SEC, all
certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of
2002; such certifications contain no qualifications or exceptions to the matters
certified therein and have not been modified or withdrawn; and neither CWTI nor
any of its officers has received notice from any governmental entity questioning
or challenging the accuracy, completeness, form or manner of filing or
submission of such certifications.
(iv) CWTI has heretofore has made available to SheerVision
complete and correct copies of all certifications filed with the SEC pursuant to
Sections 302 and 906 of Sarbanes-Oxley Act of 2002 and hereby reaffirms,
represents and warrants to SheerVision the matters and statements made in such
certificates.
(S) COMPLIANCE WITH LAW AND GOVERNMENT REGULATIONS.
(i) CWTI is in compliance with, and is not in violation of,
applicable federal, state, local or foreign statutes, laws and regulations
(including without limitation, any applicable building, zoning or other law,
ordinance or regulation) affecting its properties or the operation of
-14-
<PAGE>
its business. CWTI is not subject to any order, decree, judgment or other
sanction of any court, administrative agency or other tribunal.
(ii) Each of CWTI, its directors and its senior financial
officers has consulted with CWTI's independent auditors and with CWTI's outside
counsel with respect to, and (to the extent applicable to CWTI) is familiar in
all material respects with all of the requirements of, Sarbanes-Oxley Act of
2002. CWTI is in compliance with the provisions of such act applicable to it as
of the date hereof and has implemented such programs and has taken reasonable
steps, upon the advice of CWTI's independent auditors and outside counsel,
respectively, to ensure CWTI's future compliance (not later than the relevant
statutory and regulatory deadlines therefore) with all provisions of such act
which shall become applicable thereto after the date hereof.
(t) LEGAL PROCEEDINGS AND HISTORY. CWTI hereby represents that, to the
knowledge of CWTI, no officer, director or affiliate of CWTI, has been, within
the five years ending on the Closing Date, a party to any bankruptcy petition
against such person or against any business of which such person was affiliated;
convicted in a criminal proceeding or subject to a pending criminal proceeding
(excluding traffic violations and other minor offenses); subject to any order,
judgment or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting their involvement in any type of business,
securities or banking activities; or found by a court of competent jurisdiction
in a civil action, by the SEC or the Commodity Futures Trading Commission to
have violated a federal or state securities or commodities law, and the judgment
has not been reversed, suspended or vacated.
(u) MATERIAL CHANGES. Subsequent to the respective dates as of which
information is given in the CWTI SEC Documents, there has not been (i) any
material adverse change in the business, prospects, financial condition or
results of operations of CWTI, (ii) any transaction committed to or consummated
that is material to CWTI, (iii) any obligation, direct or contingent, that is
material to CWTI incurred by CWTI, except such obligations as have been incurred
in the ordinary course of business, (iv) any change in the capital stock or
outstanding indebtedness of CWTI that is material to CWTI, (v) any dividend or
distribution of any kind declared, paid, or made on the capital stock of CWTI,
or (vi) any loss or damage (whether or not insured) to the property of CWTI
which has a material adverse effect on the business, prospects, condition
(financial or otherwise), or results of operations thereof.
(v) STABILIZATION. CWTI has not, and no person acting on behalf
thereof, has taken or will take, directly or indirectly, any action designed to,
or that might reasonably be expected to cause or result in, stabilization in
violation of law, or manipulation, of the price of the Common Stock.
(w) CERTAIN LOANS. There are no outstanding loans, advances (except
normal advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by CWTI to, or for the benefit of, any of the
officers, directors, or director-nominees of CWTI or any of the members of the
families of any of them.
-15-
<PAGE>
(x) FOUNDERS. CWTI has not incurred any liability, direct or indirect,
for finders' or similar fees on behalf of or payable by CWTI or SheerVision in
connection with this Agreement or any other transaction contemplated hereby.
(y) REGISTRATION RIGHTS. No stockholder of CWTI has any right to
request or require CWTI to register the sale of any shares owned by such
stockholder under the Securities Act on any registration statement.
SECTION 2.02 REPRESENTATIONS AND WARRANTIES OF SHEERVISION. SheerVision
hereby represents and warrants to, and agrees with, CWTI that the statements set
forth in this Section 2.02 are true, correct, and complete as of the date of
this Agreement except as otherwise set forth in the corresponding numbered
section of the letter, dated even date herewith, from SheerVision to CWTI (the
"SHEERVISION DISCLOSURE LETTER"):
(a) ORGANIZATION AND QUALIFICATION. Other than as set forth in
SheerVision Disclosure Letter, SheerVision has no subsidiaries (each a
"SHEERVISION SUBSIDIARY", as applicable, and collectively, the "SHEERVISION
SUBSIDIARIES") or affiliated corporation or owns any interest in any other
enterprise (whether or not such enterprise is a corporation). SheerVision is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of California, with all requisite power and authority, and all
necessary consents, authorizations, approvals, orders, licenses, certificates,
and permits of and from, and declarations and filings with, all federal, state,
local, and other governmental authorities and all courts and other tribunals, to
own, lease, license, and use its properties and assets and to carry on the
businesses in which it is now engaged and the businesses in which it
contemplates engaging. Other than as set forth in the SheerVision Disclosure
Letter, SheerVision is duly qualified to transact the businesses in which it is
engaged and is in good standing as a foreign corporation in every jurisdiction
in which its ownership, leasing, licensing, or use of property or assets or the
conduct of its businesses makes such qualification necessary.
(b) CAPITALIZATION. The authorized capital stock of SheerVision
consists of 2,000,000 shares of common stock, par value $0.001 per share (the
"SHEERVISION COMMON STOCK"), of which 1,000,000 shares are issued and
outstanding. Each share of capital stock of each SheerVision Subsidiary
("SHEERVISION SUBSIDIARY CAPITAL STOCK") is owned beneficially and of record by
SheerVision. Each of the outstanding shares of SheerVision Common Stock and
SheerVision Subsidiary Capital Stock is validly authorized, validly issued,
fully paid, and nonassessable, has not been issued and is not owned or held in
violation of any preemptive right of stockholders and by the owners set forth in
the SheerVision Disclosure Letter, in each case free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders' agreements,
and voting trusts. Except as set forth in the Sheervision Disclosure Letter,
there is no commitment, plan, or arrangement to issue, and no outstanding
option, warrant, or other right calling for the issuance of, any share of
SheerVision Capital Stock or SheerVision Subsidiary Capital Stock or any
security or other instrument convertible into, exercisable for, or exchangeable
for SheerVision Capital Stock or SheerVision Subsidiary Capital Stock.
(c) FINANCIAL CONDITION. Miller Ellin & Company ("ME"), which has
examined the financial statements of the Company, together with the related
schedules and notes, for the period
-16-
<PAGE>
from September 1, 2003 through August 31, 2005, are independent accountants
within the meaning of the Securities Act, the Exchange Act, and the rules and
regulations promulgated thereunder. SheerVision has provided to CWTI true and
correct copies of the following: audited balance sheets of SheerVision as of
August 31, 2004, and 2005; unaudited balance sheets of SheerVision as of
December 30, 2004 and 2005; audited statements of income, statements of
stockholders' equity, and statements of cash flows of SheerVision for the years
ended August 31, 2004, and 2005; and the unaudited statements of income,
statements of stockholders' equity, and statements of cash flows of SheerVision
for the four months ended December 31, 2004 and 2005. Each such balance sheet
presents fairly the financial condition, assets, liabilities, and stockholders'
equity of SheerVision as of its respective date; each such statement of income
and statement of stockholders' equity presents fairly the results of operations
of SheerVision for the period indicated; and each such statement of cash flows
presents fairly the information purported to be shown therein. The financial
statements referred to in this Section 2.01(c) will have been prepared in
accordance with generally accepted accounting principles in the United States
consistently applied throughout the periods involved, are in accordance with the
books and records of SheerVision, and complied and will comply in all material
respects with all applicable accounting requirements. Since December 31, 2005:
(i) There has at no time been a material adverse change in the
financial condition, results of operations, businesses, properties, assets,
liabilities, or future prospects of SheerVision.
(ii) SheerVision has not authorized, declared, paid, or
effected any dividend or liquidating or other distribution in respect of its
capital stock or any direct or indirect redemption, purchase, or other
acquisition of any stock of SheerVision.
(iii) The operations and businesses of SheerVision have been
conducted in all respects only in the ordinary course, except as described in
the SheerVision Disclosure Letter.
There is no fact known to SheerVision which materially adversely affects or in
the future (as far as SheerVision can reasonably foresee) may materially
adversely affect the financial condition, results of operations, businesses,
properties, assets, liabilities, or future prospects of SheerVision; provided,
however, that SheerVision expresses no opinion as to political or economic
matters of general applicability. SheerVision has made known, or caused to be
made known, to the accountants or auditors who have prepared, reviewed, or
audited the aforementioned consolidated financial statements all material facts
and circumstances which could affect the preparation, presentation, accuracy, or
completeness thereof.
(d) TAX AND OTHER LIABILITIES. Neither SheerVision nor any SheerVision
Subsidiary has any material liability of any nature, accrued or contingent,
including, without limitation, liabilities for Taxes, and liabilities to
customers or suppliers, other than the following:
(i) Liabilities for which full provision has been made on the
balance sheet and the notes thereto (the "LAST SHEERVISION BALANCE SHEET") as of
December 31, 2005 (the "LAST SHEERVISION BALANCE SHEET DATE") referred to in
Section 2.02(c); and
-17-
<PAGE>
(ii) Other liabilities arising since the Last SheerVision
Balance Sheet Date and prior to the Closing Date in the ordinary course of
business (which shall not include liabilities to customers on account of
defective products or services) or in connection with the transactions
contemplated hereby or in connection herewith which are not inconsistent with
the representations and warranties of SheerVision or any other provision of this
Agreement.
Without limiting the generality of the foregoing, the amounts set up as
provisions for Taxes on the Last SheerVision Balance Sheet are sufficient for
all accrued and unpaid Taxes of SheerVision and the SheerVision Subsidiaries,
whether or not due and payable and whether or not disputed, under tax laws, as
in effect on the Last SheerVision Balance Sheet Date or now in effect, for the
period ended on such date and for all fiscal periods prior thereto. The
execution, delivery, and performance of this Agreement by SheerVision will not
cause any Taxes to be payable other than by the stockholders of SheerVision or
cause any lien, charge, or encumbrance to secure any Taxes to be created either
immediately or upon the nonpayment of any Taxes other than on the properties or
assets of the stockholders of SheerVision. Neither SheerVision nor any
SheerVision Subsidiary has been required to file any tax returns by any overseas
tax authorities or required to pay any taxes, assessments, and other
governmental charges payable or remittable by it or levied upon it or its
properties, assets, income, or franchises which are due and payable. Neither
SheerVision nor any SheerVision Subsidiary is subject to any litigation,
governmental or other proceeding (formal or informal), or investigation pending,
threatened, or in prospect with respect to any such report or the subject matter
of such report.
(e) LITIGATION AND CLAIMS. There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or investigation pending,
threatened, or, to the best of SheerVision's knowledge, in prospect (or any
basis therefor known to SheerVision), with respect to SheerVision, any
SheerVision Subsidiary, or any of their respective businesses, properties, or
assets, except as described in the SheerVision Disclosure Letter. Neither
SheerVision nor any SheerVision Subsidiary is affected by any present or
threatened strike or other labor disturbance nor to the knowledge of SheerVision
is any union attempting to represent any employee of SheerVision or any
SheerVision Subsidiary as collective bargaining agent. Neither SheerVision nor
any SheerVision Subsidiary is in violation of, or in default with respect to,
any law, rule, regulation, order, judgment, or decree which violation or default
would have a material adverse effect upon SheerVision or such SheerVision
Subsidiary; nor is SheerVision or any SheerVision Sunsidiary required to take
any action in order to avoid such violation or default.
(f) PROPERTIES.
(i) Neither SheerVision nor any SheerVision Subsidiary owns
any legal or equitable interest in any real property. SheerVision and each
SheerVision Subsidiary has good and marketable title to all other properties and
assets material thereto, used in its respective business or owned by it (except
real and other properties and assets as are held pursuant to leases or licenses
described in the SheerVision Disclosure Letter), free and clear of all liens,
mortgages, security interests, pledges, charges, and encumbrances (except such
as are listed in the SheerVision Disclosure Letter).
-18-
<PAGE>
(ii) All accounts and notes receivable reflected on the Last
SheerVision Balance Sheet, or arising since the Last SheerVision Balance Sheet
Date, have been collected, or are and will be good and collectible, in each case
at the aggregate recorded amounts thereof without right of recourse, defense,
deduction, return of goods, counterclaim, offset, or set off on the part of the
obligor, and, if not collected, can reasonably be anticipated to be paid within
180 days of the date incurred.
(iii) Set forth in the SheerVision Disclosure Letter is a true
and complete list of all tangible properties and assets owned by SheerVision or
leased or licensed by SheerVision from or to a third party (including inventory
but not including Intangibles (as hereinafter defined)), and with respect to
such properties and assets leased or licensed by SheerVision from or to a third
party, a description of such lease or license. All such properties and assets
(including Intangibles) owned by SheerVision are reflected on the Last
SheerVision Balance Sheet (except for acquisitions subsequent to the Last
SheerVision Balance Sheet Date and prior to the Closing Date, which are either
noted in the SheerVision Disclosure Letter or are approved in writing by
SheerVision). All tangible properties and assets owned by SheerVision or leased
or licensed by SheerVision from or to a third party are in good and usable
condition (reasonable wear and tear which is not such as to affect adversely the
operation of the businesses of SheerVision excepted).
(iv) To the best of SheerVision's knowledge, no real property
owned by SheerVision or any SheerVision Subsidiary or leased or licensed by
SheerVision or any SheerVision Subsidiary from or to a third party lies in an
area which is, or will be, subject to zoning, use, or building code restrictions
which would prohibit, and, to the best of SheerVision's knowledge, no state of
facts relating to the actions or inaction of another person or entity or his or
its ownership, leasing, or licensing of any real or personal property exists or
will exist which would prevent, the continued effective ownership, leasing, or
licensing of such real property in the businesses in which SheerVision or such
SheerVision Subsidiary is now engaged or the businesses in which it contemplates
engaging.
(iv) The properties and assets (including Intangibles) owned
by SheerVision or the SheerVision Subsidiaries (other than those leased or
licensed by SheerVision or any SheerVision Subsidiary to a third party) or
leased or licensed by SheerVision or any SheerVision Subsidiary from a third
party constitute all such properties and assets which are necessary to the
business of SheerVision and the SheerVision Subsidiaries taken as a whole as
presently conducted or as they contemplate conducting.
(v) SheerVision has not caused or permitted its businesses
properties, or assets to be used to generate, manufacture, refine, transport,
treat, store, handle, dispose of, transfer, produce, or process any Hazardous
Substance except in compliance with all applicable laws, rules, regulations,
orders, judgments, and decrees, and has not caused or permitted the Release of
any Hazardous Substance on or off the site of any property of SheerVision.
(vi) Except as set forth in the SheerVision Disclosure Letter,
(A) SheerVision is in compliance in all material respects with all Environmental
Laws that are applicable to its business, (B) SheerVision has not received
notice from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the
-19-
<PAGE>
SheerVision Disclosure Letter, (C) to the best knowledge of SheerVision,
SheerVision is not likely to be required to make future material capital
expenditures to comply with Environmental Laws, (D) no property which is owned,
leased or occupied by SheerVision has been designated as a Superfund site
pursuant to the Comprehensive Response, Compensation, and Liability Act of 1980,
as amended (42 U.S.C. ss. 9601, et seq.), or otherwise designated as a
contaminated site under applicable state or local law, and (E) SheerVision is
not in violation of any federal or state law or regulation relating to
occupational safety or health.
(g) CONTRACTS AND OTHER INSTRUMENTS. The SheerVision Disclosure Letter
contains a true and correct statement of the information required to be
contained therein regarding material contracts, agreements, instruments, leases,
licenses, arrangements, or understandings with respect to SheerVision and the
SheerVision Subsidiaries taken as a whole. SheerVision has furnished to CWTI:
(i) the certificate of incorporation and by-laws of SheerVision and each
SheerVision Subsidiary (or, in each case, the comparable charter documents, if
any, under applicable law) and all amendments thereto, as presently in effect,
certified by the Secretary thereof or an authorized signatory thereof and (ii)
the following: (A) true and correct copies of all material contracts,
agreements, and instruments referred to in the SheerVision Disclosure Letter;
(B) true and correct copies of all material leases and licenses referred to in
the SheerVision Disclosure Letter; and (C) true and correct written descriptions
of all material supply, distribution, agency, financing, or other arrangements
or understandings referred to in the SheerVision Disclosure Letter. Except as
set forth in Section the SheerVision Disclosure Letter, neither SheerVision nor
any SheerVision Subsidiary is party to any employment agreement with any
employee thereof. To the best of SheerVision's knowledge, none of SheerVision,
any SheerVision Subsidiary, or any other party to any such contract, agreement,
instrument, lease, or license is now or expects in the future to be in violation
or breach of, or in default with respect to complying with, any term thereof,
and each such material contract, agreement, instrument, lease, or license is in
full force and is (to the best of SheerVision's knowledge in the case of third
parties) the legal, valid, and binding obligation of the parties thereto and
(subject to applicable bankruptcy, insolvency, and other laws affecting the
enforceability of creditors' rights generally) is enforceable as to them in
accordance with its terms. Each such material supply, distribution, agency,
financing, or other arrangement or understanding is a valid and continuing
arrangement or understanding; none of SheerVision, any SheerVision Subsidiary,
or any other party to any such arrangement or understanding has given notice of
termination or taken any action inconsistent with the continuance of such
arrangement or understanding; and the execution, delivery, and performance of
this Agreement will not prejudice any such arrangement or understanding in any
way. SheerVision and each SheerVision Subsidiary enjoys peaceful and undisturbed
possession under all leases and licenses under which it is operating. Neither
SheerVision nor any SheerVision Subsidiary is party to, or bound by, any
contract, agreement, instrument, lease, license, arrangement, or understanding,
or subject to any charter or other restriction, which has had or, to the best of
SheerVision's knowledge, may in the future have a material adverse effect on the
financial condition, results of operations, businesses, properties, assets,
liabilities, or future prospects of SheerVision and the SheerVision Subsidiaries
taken as whole, and, following the consummation of the transactions contemplated
hereby, CWTI. Neither SheerVision nor any SheerVision Subsidiary has engaged
within the last five years in, is engaging in, or intends to engage in any
transaction with, or has had within the last five years, now has, or intends to
have any contract, agreement, instrument, lease, license, arrangement, or
-20-
<PAGE>
understanding with, any stockholder of SheerVision, any director, officer, or
employee of SheerVision or any SheerVision Subsidiary (except for employment
agreements listed in the SheerVision Disclosure Letter and employment and
compensation arrangements described in the SheerVision Disclosure Letter), any
relative or affiliate of any stockholder of SheerVision, any such director,
officer, or employee, or any other corporation or enterprise in which any
stockholder of SheerVision, any such director, officer, or employee, or any such
relative or affiliate then had or now has a 5% or greater equity or voting or
other substantial interest, other than those listed and so specified in the
SheerVision Disclosure Letter. The stock ledgers and stock transfer books and
the minute book records of SheerVision and each SheerVision Subsidiary relating
to all issuances and transfers of stock by SheerVision and the SheerVision
Subsidiaries and all proceedings of the stockholders and the Board of Directors
and committees thereof of SheerVision and each SheerVision Subsidiary since its
respective incorporation made available to CWTI are the original stock ledgers
and stock transfer books and minute book records thereof or exact copies
thereof. Neither SheerVision nor any SheerVision Subsidiary is in violation or
breach of, or in default with respect to, any term of its respective certificate
of incorporation or by-laws (or the comparable charter document, if any, under
applicable law).
(h) EMPLOYEES.
(i) Except as set forth in the SheerVision Disclosure Letter,
neither SheerVision nor any SheerVision Subsidiary has, or contributes to, any
pension, profit-sharing, option, other incentive plan, or any other type of
Employee Benefit Plan or has any obligation to or customary arrangement with
employees for bonuses, incentive compensation, vacations, severance pay, sick
pay, sick leave, insurance, service award, relocation, disability, tuition
refund, or other benefits, whether oral or written, except as set forth in the
SheerVision Disclosure Letter. SheerVision has furnished to CWTI true and
correct copies, of all documents evidencing plans, obligations, or arrangements
referred to in the SheerVision Disclosure Letter (or true and correct written
summaries of such plans, obligations, or arrangements to the extent not
evidenced by documents) and true and correct copies, so initialed, of all
documents evidencing trusts, summary plan descriptions, and any other summaries
or descriptions relating to any such plans.
(ii) The SheerVision Disclosure Letter contains a true and
correct statement of the names, relationship with SheerVision or the relevant
SheerVision Subsidiary, present rates of compensation (whether in the form of
salary, bonuses, commissions, or other supplemental compensation now or
hereafter payable), and aggregate compensation for the fiscal year ended August
31, 2005 of (A) each director, officer, or other employee thereof whose
aggregate compensation for the fiscal year ended August 31, 2005 exceeded
US$25,000 or whose aggregate compensation presently exceeds the rate of
US$25,000 per annum and (B) all sales agents, dealers, or distributors of
SheerVision or any SheerVision Subsidiary. Since August 31, 2005, SheerVision
has not changed the rate of compensation of any of its directors, officers,
employees, agents, dealers, or distributors, nor has any Employee Benefit Plan
or program of SheerVision or any SheerVision Subsidiary been instituted or
amended to increase benefits thereunder.
(iii) There are no material controversies, including strikes,
disputes, slowdowns or work stoppages, pending, or to the best of SheerVision's
knowledge, threatened which involve any employees employed in connection with
the business of SheerVision or the SheerVision
-21-
<PAGE>
Subsidiaries. Each of SheerVision and the SheerVision Subsidiaries has complied
and is complying in all material respects with all Laws relating to the
employment of labor, including, without limitation, any provision thereof
relating to wages, hours, collective bargaining, employee health, safety and
welfare, and the payment of social security and similar taxes. Neither of
SheerVision nor any SheerVision Subsidiary is a party to any collective
bargaining or union contract, and to the best of SheerVision's knowledge, there
exists no current union organizational effort with respect to any employee of
SheerVision or any SheerVision Subsidiary. Neither SheerVision nor any
SheerVision Subsidiary has experienced any material labor difficulties,
including, without limitation, strikes, slowdowns, or work stoppages, within the
five-year period preceding the date hereof.
(i) PATENTS, TRADEMARKS, ET CETERA. Neither SheerVision nor any
SheerVision Subsidiary owns or has pending, or is licensed or otherwise
permitted to use, any material Intangible, other than as described in the
SheerVision Disclosure Letter. Each Intangible is validly issued and is
currently in force and uncontested in all jurisdictions in which it is used or
in which such use is contemplated. The SheerVision Disclosure Letter contains a
true and correct listing of: (i) all Intangibles which are owned (either in
whole or in part), used by, or licensed to SheerVision or any SheerVision
Subsidiary or which otherwise relate to the businesses of SheerVision or any
SheerVision Subsidiary, and a description of each such Intangible which
identifies its owner, registrant, or applicant; (ii) all contracts, agreements,
instruments, leases, and licenses and identification of all parties thereto
under which SheerVision or any SheerVision Subsidiary owns or uses any
Intangible (whether or not under license from third parties), together with the
identification of the owner, registrant, or applicant of each such Intangible;
(iii) all contracts, agreements, instruments, leases, and licenses and
identification of all parties thereto under which SheerVision or any SheerVision
Subsidiary grants the right to use any Intangible; and (iv) all validity,
infringement, right-to-use, or other opinions of counsel (whether in-house or
outside) which concern the validity, infringement, or enforceability of any
Intangible owned or controlled by a party other than SheerVision or any
SheerVision Subsidiary which relates to the businesses, properties, or assets of
SheerVision or any SheerVision Subsidiary. Except as specified in the
SheerVision Disclosure Letter: (v) SheerVision or a SheerVision Subsidiary is
the sole and exclusive owner or licensee of, and (other than those licensed by
SheerVision to any SheerVision Subsidiary to a third party) has the right to
use, all Intangibles; (vi) no Intangible is subject to any order, judgment,
decree, contract, agreement, instrument, lease, or license restricting the scope
of the use thereof; (vii) during the last five years, neither SheerVision nor
any SheerVision Subsidiary has been charged with, or has charged others with,
unfair competition, infringement of any Intangible, or wrongful use of
confidential information, trade secrets, or secret processes; and (viii) neither
SheerVision nor any SheerVision Subsidiary is using any patentable invention,
confidential information, trade secret, or secret process of others. There is no
right under any Intangible necessary to the businesses of SheerVision or any
SheerVision Subsidiary as presently conducted or as it contemplates conducting,
except such as are so designated in the SheerVision Disclosure Letter. Neither
SheerVision nor any SheerVision Subsidiary has infringed, is not infringing, and
has not received notice of infringement in respect of the Intangibles or
asserted Intangibles of others, nor has SheerVision or any SheerVision
Subsidiary been advised by counsel or others that it is infringing or may
infringe the Intangibles or asserted Intangibles of others if any currently
contemplated business activity is effectuated. To the knowledge of SheerVision,
there is no
-22-
<PAGE>
infringement by others of Intangibles of SheerVision or any SheerVision
Subsidiary. As far as SheerVision can foresee, there is no Intangible or
asserted Intangible of others that may materially adversely affect the financial
condition, results of operations, businesses, properties, assets, liabilities,
or future prospects of SheerVision and the SheerVision Subsidiaries taken as a
whole. All contracts, agreements, instruments, leases, and licenses pertaining
to Intangibles to which SheerVision or any SheerVision Subsidiary is a party, or
to which any of its respective businesses, properties, or assets are subject,
are in compliance with all laws, rules, regulations, orders, judgments, and
decrees binding on SheerVision or any SheerVision Subsidiary or to which any of
its respective businesses, properties, or assets are subject. The trademarks,
tradenames, and service marks used by SheerVision and the SheerVision
Subsidiaires to identify, respectively, their products, businesses, and services
are set forth in the SheerVision Disclosure Letter. Neither the SheerVision
Shareholders, any director, officer, or employee of SheerVision or any
SheerVision Subsidiary, any relative or affiliate of the SheerVision
Shareholders or any such director, officer, or employee, nor any other
corporation or enterprise in which the SheerVision Shareholders, any such
director, officer, or employee, or any such relative or affiliate had or now has
a 5% or greater equity or voting or other substantial interest, possesses any
Intangible which relates to the businesses of SheerVision or any SheerVision
Subsidiary.
(j) QUESTIONABLE PAYMENTS. Neither SheerVision or any SheerVision
Subsidiary, nor any director, officer, agent, employee, or other person
associated with, or acting on behalf of, SheerVision or any SheerVision
Subsidiary, nor the SheerVision Shareholders, has, directly or indirectly: used
any corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended; or made any bribe,
rebate, payoff, influence payment, kickback, or other unlawful payment.
(k) AUTHORITY. SheerVision has all requisite power and authority to
execute, deliver, and perform this Agreement. All necessary corporate
proceedings of SheerVision have been duly taken to authorize the execution,
delivery, and performance of this Agreement by SheerVision. This Agreement has
been duly authorized, executed, and delivered by SheerVision, constitutes the
legal, valid, and binding obligation of SheerVision, and is enforceable as to
SheerVision in accordance with its terms. Except as otherwise set forth in this
Agreement, no consent, authorization, approval, order, license, certificate, or
permit of or from, or declaration or filing with, any federal, state, local, or
other governmental authority or any court or other tribunal is required by
SheerVision for the execution, delivery, or performance of this Agreement by
SheerVision. No consent of any party to any material contract, agreement,
instrument, lease, license, arrangement, or understanding to which SheerVision
or any SheerVision Subsidiary is a party, or to which its or any of its
respective businesses, properties, or assets are subject, is required for the
execution, delivery, or performance of this Agreement (except such consents
referred to in the SheerVision Disclosure Letter); and the execution, delivery,
and performance of this Agreement will not violate, result in a breach of,
conflict with, or (with or without the giving of notice or the passage of time
or both) entitle any party to terminate or call a default under, entitle any
party to receive rights or privileges that such party was not entitled to
receive immediately before this Agreement was executed under, or create any
obligation on the part of SheerVision, any SheerVision Subsidiary, or CWTI to
which it was not subject immediately before this Agreement
-23-
<PAGE>
was executed under, any term of any such material contract, agreement,
instrument, lease, license, arrangement, or understanding, or violate or result
in a breach of any term of the certificate of incorporation or by-laws of
SheerVision or any SheerVision Subsidiary (or the comparable charter documents,
if any, under applicable law), or (if the provisions of this Agreement are
satisfied) violate, result in a breach of, or conflict with any law, rule,
regulation, order, judgment, or decree binding on SheerVision or any SheerVision
Subsidiary or to which any of its respective businesses, properties, or assets
are subject. Except as set forth in the SheerVision Disclosure Letter, neither
SheerVision or any SheerVision Subsidiary nor any of its officers, directors,
employees, or agents has employed any broker or finder or incurred any liability
for any fee, commission, or other compensation payable by any person on account
of alleged employment as a broker or finder, or alleged performance of services
as a broker or finder, in connection with or as a result of this Agreement or
the other transactions contemplated hereby and in connection herewith.
(l) INSURANCE. All policies of fire and other insurance against
casualty and other losses and public liability insurance carried by SheerVision
and the SheerVision Subsidiaries are described in the SheerVision Disclosure
Letter and are in full force and effect. A full and complete copy of each such
insurance policy has been provided to CWTI. All premiums in respect of such
policies for which premium notices have been received have been paid in full as
the same become due and payable. Neither SheerVision nor any SheerVision
Subsidiary has failed to give any notice or present any claim under any
insurance policy in due and timely fashion. There are no actual claims or claims
threatened in writing against SheerVision or any SheerVision Subsidiary which
could come within the scope of such coverage nor are any such policies currently
threatened with cancellation. There are no outstanding requirements or
recommendations by any insurance company that issued a policy with respect to
any of the respective assets, the businesses, or operations of SheerVision or
any SheerVision Subsidiary or by any Board of Fire Underwriters or other body
exercising similar functions or by any governmental authority requiring or
recommending any repairs or other work to be done on, or with respect to, any of
the respective assets of SheerVision or any SheerVision Subsidiary or requiring
or recommending any equipment or facilities to be installed on any premises from
which the respective businesses of SheerVision or any SheerVision Subsidiary is
conducted or in connection with any of the respective assets thereof. Neither
SheerVision nor any SheerVision Subsidiary has any knowledge of any material
proposed increase in applicable insurance rates or of any conditions or
circumstances applicable to the respective businesses thereof that might result
in such increases. No such policy is terminable by virtue of the transactions
contemplated by this Agreement.
(m) BUSINESS CONDUCTED IN NO OTHER NAME. All business of SheerVision
and the SheerVision Subsidiaries has been conducted in its respective name and
for its respective benefit and there are no parties related or affiliated with
SheerVision or any SheerVision Subsiairy, either directly or indirectly, which
are competing for the business thereof, unless otherwise set forth in the
SheerVision Disclosure Letter.
(n) CUSTOMERS AND SUPPLIERS. There has been no termination or
cancellation of any relationship between SheerVision or by SheerVision
Subsidiary and any material supplier, or any customer or group of customers
which, individually or in the aggregate, represented more than five (5%) percent
of the gross revenues of SheerVision taken as a whole during the year ended
August 31, 2005, nor is there any reason to believe that any such terminations
or cancellations of such
-24-
<PAGE>
magnitudes are pending or threatened.
(o) Completeness of Disclosure. No representation or warranty by
SheerVision in this Agreement contains, or at the Closing Date will contain, an
untrue statement of material fact or omits or at the Closing Date will omit to
state a material fact required to be stated therein or necessary to make the
statements made not misleading.
(p) Compliance with Law and Government Regulations. SheerVision and
each SheerVision Subsidiary is in compliance in all material respects with, and
is not in violation of, applicable local or foreign 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. Neither SheerVision nor any SheerVision Subsidiary is subject to
any order, decree, judgment or other sanction of any court, administrative
agency or other tribunal.
(q) SheerVision has not, and no person acting on behalf thereof, has
taken or will take, directly or indirectly, any action designed to, or that
might reasonably be expected to cause or result in, stabilization in violation
of law, or manipulation, of the price of the CWTI Common Stock.
(r) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by SheerVision to, or for the benefit of, any of the officers,
directors, or director-nominees of SheerVision or any of the members of the
families of any of them, except as disclosed in the SheerVision Disclosure
Letter.
(s) SheerVision has not incurred any liability, direct or indirect, for
finders' or similar fees on behalf of or payable by SheerVision or SheerVision
in connection with the Transaction Agreements or any other transaction involving
SheerVision and SheerVision.
(t) No stockholder of SheerVision has any right to request or require
SheerVision to register the sale of any shares owned by such stockholder under
the Securities Act on any registration statement.
SECTION 2.03 REPRESENTATIONS AND WARRANTIES OF THE SHEERVISION
SHAREHOLDERS. The SheerVision Shareholders hereby represents and warrants to,
and agrees with, CWTI as follows:
(a) REPRESENTATIONS AND WARRANTIES OF SHEERVISION. To the knowledge of
the SheerVision Shareholders, the representations and warranties of SheerVision
set forth in Section 2.02 hereof are true and correct in all material respects.
Nothing has come to the attention of the SheerVision Shareholders that would
lead the SheerVision Shareholders to believe that any representation or warranty
of SheerVision set forth on Section 2.02 hereof is untrue or incorrect in any
material respect.
(b) AUTHORITY. SheerVision and the SheerVision Shareholders have each
approved this Agreement and duly authorized the execution and delivery hereof.
The SheerVision Shareholders are individuals residing in Hong Kong with full
power and authority under the laws thereof to execute, deliver, and perform this
Agreement and the transactions contemplated hereby and in connection herewith.
The SheerVision Shareholders have reached the age of majority under applicable
law.
-25-
<PAGE>
(c) OWNERSHIP OF SHARES. The SheerVision Shareholders own beneficially
all of the shares of SheerVision Capital Stock. The SheerVision Shareholders
have full power and authority to transfer such shares of SheerVision Capital
Stock to CWTI under, pursuant to, and in accordance with, this Agreement, and
such shares are free and clear of any liens, charges, mortgages, pledges or
encumbrances and such shares are not subject to any claims as to the ownership
thereof, or any rights, powers or interest therein, by any third party and are
not subject to any preemptive or similar rights of stockholders.
(d) INVESTMENT REPRESENTATIONS AND COVENANTS.
(i) The SheerVision Shareholders represent that they are
acquiring the shares of CWTI Common Stock to be issued pursuant to Section
1.02(a) hereof for their own accounts and for investment only and not with a
view to distribution or resale thereof within the meaning of such phrase as
defined under the Securities Act. The SheerVision Shareholders shall not dispose
of any part or all of such shares of CWTI Common Stock in violation of the
provisions of the Securities Act and the rules and regulations promulgated under
the Securities Act by the SEC and all applicable provisions of state securities
laws and regulations.
(ii) The certificate or certificates representing the shares
of CWTI Common Stock shall bear a legend in substantially the form set forth
in Section 1.02(c) hereof.
(iii) The SheerVision Shareholders acknowledge being informed
that the shares of CWTI Common Stock to be issued pursuant to Section 1.02(a)
hereof shall be unregistered, shall be "RESTRICTED SECURITIES" as defined in
paragraph (a) of Rule 144 under the Securities Act, and must be held
indefinitely unless (a) they are subsequently registered under the Securities
Act, or (b) an exemption from such registration is available. The SheerVision
Shareholders further acknowledge that CWTI does not have an obligation to
currently register such securities for the account of SheerVision
Shareholders.
(iv) The SheerVision Shareholders acknowledge that they have
been afforded access to all material information which they have requested
relevant to their decision to acquire the shares of CWTI Common Stock and to
ask questions of CWTI's management and that, except as set forth herein,
neither CWTI nor anyone acting on behalf of CWTI has made any representations
or warranties to the SheerVision Shareholders which have induced, persuaded,
or stimulated the SheerVision Shareholders to acquire such shares of CWTI
Common Stock.
(v) Either alone, or together with their investment
advisor(s), the SheerVision Shareholders have the knowledge and experience in
financial and business matters to be capable of evaluating the merits and
risks of the prospective investment in the shares of CWTI Common Stock, and
the SheerVision Shareholders are and will be able to bear the economic risk of
the investment in such shares of CWTI Common Stock.
-26-
<PAGE>
ARTICLE III
COVENANTS
SECTION 3.01 COVENANTS OF CWTI. CWTI covenants and agrees that, after
the date hereof and through the earlier of the Closing or the date of the
termination of this Agreement pursuant to Article IV hereof (the earlier of such
times, the "RELEASE TIME"), unless SheerVision will otherwise approve in
writing, which approval will not be unreasonably withheld:
(a) (i) Until the Release Time, no dividend or liquidating or
other distribution or stock split shall be authorized, declared, paid, or
effected by CWTI in respect of the outstanding shares of CWTI Common Stock.
(ii) Until the Release Time, no share of capital stock of CWTI
or warrant for any such share, right to subscribe to or purchase any such share,
or security convertible into, or exchangeable or exercisable for, any such
share, shall be issued or sold by CWTI.
(b) Until the Release Time, CWTI will afford the officers, directors,
employees, counsel, agents, investment bankers, accountants, and other
representatives of SheerVision and the SheerVision Shareholders free and full
access to the plants, properties, books, and records of CWTI. CWTI will permit
them to make extracts from and copies of such books and records, and will from
time to time furnish SheerVision and the SheerVision Shareholders with such
additional financial and operating data and other information as to the
financial condition, results of operations, businesses, properties, assets,
liabilities, or future prospects of CWTI as SheerVision or the SheerVision
Shareholders from time to time may request. Until the Release Time, CWTI will
cause the independent certified public accountants of CWTI to make available to
SheerVision, its independent certified public accountants, and the SheerVision
Shareholders, the work papers relating to the audits of CWTI referred to in
Section 2.01(c) of this Agreement.
(c) Until the Release Time, CWTI will conduct its affairs, so that on
the Closing Date, no representation or warranty of CWTI will be inaccurate, no
covenant or agreement of CWTI will be breached, and no condition in this
Agreement will remain unfulfilled by reason of the actions or omissions of CWTI.
Except as otherwise consented to by SheerVision in writing, until the Release
Time, CWTI will conduct its affairs in all respects only in the ordinary course.
(d) Until the Release Time, CWTI will immediately advise SheerVision in
a detailed written notice of any material fact or occurrence or any pending or
threatened material occurrence of which it obtains knowledge and which (if
existing and known at the date of the execution of this Agreement) would have
been required to be set forth or disclosed in or pursuant to this Agreement or
in the CWTI SEC Documents, which (if existing and known at any time prior to or
at the Closing) would make the performance by any party of a covenant contained
in this Agreement impossible or make such performance materially more difficult
than in the absence of such fact or occurrence, or which (if existing and known
at the time of the Closing) would cause a condition to any party's obligations
under this Agreement not to be fully satisfied.
-27-
<PAGE>
(e) CWTI shall use its commercially reasonable efforts to insure that
all confidential information which CWTI or any of its officers, directors,
employees, counsel, agents, investment bankers, or accountants may now possess
or may hereafter create or obtain relating to the financial condition, results
of operations, businesses, properties, assets, liabilities, or future prospects
of SheerVision, any affiliate of SheerVision, or any customer or supplier of
SheerVision or any such affiliate shall not be published, disclosed, or made
accessible by any of them to any other person or entity without the prior
written consent of SheerVision, which written consent shall not be unreasonably
withheld; provided, however, that the restrictions of this sentence shall not
apply (i) as may otherwise be required by law, (ii) as may be necessary or
appropriate in connection with the enforcement of this Agreement, or (iii) to
the extent the information shall have otherwise become publicly available. CWTI
shall, and shall cause all other such persons and entities to, deliver to
SheerVision all tangible evidence of the confidential information relating to
SheerVision, any affiliate of SheerVision, or (insofar as such confidential
information was provided by, or on behalf of, SheerVision, or any such affiliate
of SheerVision) any customer or supplier of any of them or any such affiliate to
which the restrictions of the foregoing sentence apply immediately after the
termination of this Agreement pursuant to Article IV or V hereof.
(f) Before CWTI releases any information concerning this Agreement or
any of the other transactions contemplated hereby or in connection herewith
which is intended for or may result in public dissemination thereof, CWTI shall
cooperate with SheerVision, shall furnish drafts of all documents or proposed
oral statements to SheerVision for comment, and shall not release any such
information without the written consent of SheerVision. Nothing contained herein
shall prevent CWTI from releasing any information if required to do so by law.
(g) CWTI shall not make any agreement or reach any understanding not
approved in writing by SheerVision as a condition for obtaining any consent,
authorization, approval, order, license, certificate, or permit required for the
consummation of the transactions contemplated by this Agreement.
(h) CWTI shall promptly prepare all required or, in the reasonable
opinion of the parties hereto, appropriate Periodic Reports (as hereinafter
defined) and other regulatory filings relating to this Agreement and the
transactions contemplated hereby and in connection herewith. CWTI shall furnish
or cause to be furnished, for inclusion in the Periodic Reports, such
information about CWTI, and CWTI's security holders as may be required or as may
be reasonably requested by SheerVision, and shall continue to furnish or cause
to be furnished such information as is necessary to keep such information
correct and complete in all material respect until the Release Time. CWTI
represents and warrants that the information that it has furnished to date,
taken as a whole, does not now, and will not at any time prior to the Release
Time, (i) contain an untrue statement of a material fact or (ii) omit to state a
material fact required to be stated therein or necessary to make the statements
therein not false or misleading. CWTI shall take any action required to be taken
by it under state "blue-sky," securities, or take-over laws in connection with
the issuance of CWTI Common Stock pursuant to the transactions contemplated
hereby and in connection herewith. The filings made by CWTI within the past six
years with the SEC were, if filed under the Exchange Act, prepared in accordance
with the then existing requirements of the Exchange Act and the rules and
regulations thereunder and, if filed under the Securities Act, prepared in
accordance with the then existing requirements of the Securities Act and the
rules and
-28-
<PAGE>
regulations thereunder. Such filings when filed, and the press releases and
other public statements CWTI has made subsequent to the last such filing when
considered together with such filings, did not at the time of filing or issuance
of the press releases or other public statements, as the case may be, and (with
respect to the press releases and other public statements, when considered
together with such filings) do not now (i) contain an untrue statement of a
material fact or (ii) omit to state a material fact required to be stated
therein or necessary to make the statements therein not false or misleading.
(i) If, prior to the Release Time, CWTI Common Stock shall be
recapitalized or reclassified or CWTI shall effect any stock dividend, stock
split, or reverse stock split of CWTI Common Stock, then the shares of CWTI
Common Stock to be delivered under this Agreement or upon exercise, conversion,
or exchange of any security to be delivered under this Agreement or assumed by
CWTI as contemplated by this Agreement shall be appropriately and equitably
adjusted to the kind and amount of shares of stock and other securities and
property to which the holders of such shares of CWTI Common Stock or such other
security would have been entitled to receive had such stock or such other
security been issued and outstanding as of the record date for determining
stockholders entitled to participate in such corporate event.
(j) CWTI shall timely prepare and file any declaration or filing
necessary to comply with any transfer tax statutes that require any such filing
before the Closing.
(k) Until the Release Time, CWTI shall not, and shall not authorize or
permit any officer, director, employee, counsel, agent, investment banker,
accountant, or other representative of CWTI, directly or indirectly, to
contemplate or enter into any transaction the effect of which may be to
prohibit, restrict, or delay the consummation of the transactions contemplated
by this Agreement or impair the contemplated benefits to CWTI's stockholders of
the transactions contemplated by this Agreement.
(l) (i) Following the consummation of the transactions contem-
plated hereby and in connection herewith, CWTI will cause SheerVision to
continue its historic business or to use a significant portion of SheerVision's
historic business assets in a business, in each case within the meaning of
section 1.368-1(d) of the Treasury Regulations, assuming that the assets of, and
the business conducted by, SheerVision at the Closing Date constitute
SheerVision's historic business assets and historic business, respectively.
(ii) Following the consummation of the transactions
contemplated hereby and in connection herewith, CWTI will not permit SheerVision
to issue additional shares that would result in CWTI losing control of
SheerVision within the meaning of section 368(c) of the Code.
(m) CWTI shall use best efforts to file, within 30 days following the
Closing, with the National Association of Securities Dealers, Inc., or its
affiliates, all information required by Rule 15c2-11 under the Exchange Act, if
required.
(n) As soon as practicable following the Closing, CWTI shall cause its
certificate and articles of incorporation to be amended as follows: to cause the
corporate name thereof to be changed to reflect the nature and character of
SheerVision.
-29-
<PAGE>
SECTION 3.02 COVENANTS OF SHEERVISION. SheerVision covenants and agrees
that, after the date hereof and through the Release Time, unless CWTI will
otherwise approve in writing, which approval will not be unreasonably withheld:
(a) Until the Release Time, no amendment will be made in the
certificate of incorporation or by-laws (or, in each case, the comparable
charter documents, if any, under applicable law) of SheerVision.
(b) Until the Release Time, no dividend or liquidating or other
distribution or stock split shall be authorized, declared, paid, or effected by
SheerVision in respect of the outstanding shares of SheerVision Capital Stock.
Until the Release Time, no direct or indirect redemption, purchase, or other
acquisition shall be made by SheerVision of shares of SheerVision Capital Stock.
(c) Until the Release Time, SheerVision will afford the officers,
directors, employees, counsel, agents, investment bankers, accountants, and
other representatives of CWTI and lenders, investors, and prospective lenders
and investors free and full access to the plants, properties, books, and records
of SheerVision, will permit them to make extracts from and copies of such books
and records, and will from time to time furnish CWTI with such additional
financial and operating data and other information as to the financial
condition, results of operations, businesses, properties, assets, liabilities,
or future prospects of SheerVision as CWTI from time to time may request. Until
the Release Time, SheerVision will cause the independent certified public
accountants of SheerVision to make available to CWTI and its independent
certified public accountants the work papers relating to the audits of
SheerVision referred to in Section 2.02(c) of this Agreement.
(d) Until the Release Time, SheerVision will conduct its affairs so
that at the Closing, no representation or warranty of SheerVision will be
inaccurate in any material respect, no covenant or agreement of SheerVision will
be breached, and no condition in this Agreement will remain unfulfilled by
reason of the actions or omissions of SheerVision. Except as otherwise consented
to by CWTI in writing, until the Release Time, SheerVision will use its best
efforts to preserve the business operations of SheerVision intact, to keep
available the services of its present personnel, to preserve in full force and
effect the contracts, agreements, instruments, leases, licenses, arrangements,
and understandings of SheerVision, and to preserve the good will of its
suppliers, customers, and others having business relations with any of them.
Until the Release Time, SheerVision will conduct its affairs in all respects
only in the ordinary course, other than in connection with the matters
referenced herein.
(e) Until the Release Time, SheerVision will immediately advise CWTI in
a detailed written notice of any material fact or occurrence or any pending or
threatened material occurrence of which it obtains knowledge and which (if
existing and known at the date of the execution of this Agreement) would have
been required to be set forth or disclosed in or pursuant to this Agreement or
the SheerVision Disclosure Letter, which (if existing and known at any time
prior to or at the Closing) would make the performance by any party of a
covenant contained in this Agreement impossible or make such performance
materially more difficult than in the absence of such fact or
-30-
<PAGE>
occurrence, or which (if existing and known at the time of the Closing) would
cause a condition to any party's obligations under this Agreement not to be
fully satisfied.
(f) SheerVision shall use its commercially reasonable efforts to insure
that all confidential information which SheerVision or any of its respective
officers, directors, employees, counsel, agents, investment bankers, or
accountants may now possess or may hereafter create or obtain relating to the
financial condition, results of operations, businesses, properties, assets,
liabilities, or future prospects of CWTI, any affiliate thereof, or any customer
or supplier thereof or of any such affiliate shall not be published, disclosed,
or made accessible by any of them to any other person or entity at any time or
used by any of them except in the ordinary course of business and for the
benefit of SheerVision; provided, however, that the restrictions of this
sentence shall not apply (A) after this Agreement is terminated pursuant to
Article IV or V hereof or otherwise, (B) as may otherwise be required by law,
(C) as may be necessary or appropriate in connection with the enforcement of
this Agreement, or (D) to the extent the information shall have otherwise become
publicly available.
(g) Before SheerVision releases any information concerning this
Agreement or any of the transactions contemplated by this Agreement which is
intended for, or may result in, public dissemination thereof, SheerVision shall
cooperate with CWTI, shall furnish drafts of all documents or proposed oral
statements to CWTI for comment, and shall not release any such information
without the written consent of CWTI, which consent shall not be unreasonably
withheld. Nothing contained herein shall prevent SheerVision from releasing any
information if required to do so by law.
(h) SheerVision shall not make any agreement or reach any understanding
not approved in writing by CWTI as a condition for obtaining any consent,
authorization, approval, order, license, certificate, or permit required for the
consummation of the transactions contemplated by this Agreement.
(i) SheerVision shall furnish, or cause to be furnished, for inclusion
in the periodic and other reports of CWTI on Forms 8-K, 10-QSB, 10-KSB, 14C,
14F-1, or otherwise (such periodic and other reports, together with all
financial statements, exhibits, amendments, and supplements thereto, in the form
filed by CWTI with the SEC being hereinafter referred to as the "PERIODIC
REPORTS"), to be filed pursuant to the Exchange Act in connection with the
transactions contemplated by this Agreement, or for inclusion in CWTI's filings
under state "blue-sky," securities, or take-over laws, such information about
SheerVision or the SheerVision Shareholders as may be required or as may be
reasonably requested by CWTI, and shall continue to furnish or cause to be
furnished such information as is necessary to keep such information correct and
complete in all material respect until the Release Time. SheerVision represents
and warrants that the information that it has furnished to date, taken as a
whole, does not now, and will not at any time prior to the Release Time, (i)
contain an untrue statement of a material fact or (ii) omit to state a material
fact required to be stated therein or necessary to make the statements therein
not false or misleading.
(j) SheerVision shall timely prepare and file any declaration or filing
necessary to comply with any transfer tax statutes that require any such filing
before the Closing.
-31-
<PAGE>
(k) On or prior to the Closing Date, SheerVision and the SheerVision
Shareholders shall deliver to CWTI the completed SheerVision Disclosure Letter,
which letter shall be correct and complete in all material respects.
SECTION 3.03 COVENANTS OF THE SHEERVISION SHAREHOLDERS. The SheerVision
Shareholders covenant and agree that, after the date hereof and through the
Release Time, unless CWTI will otherwise approve in writing, which approval will
not be unreasonably withheld, as follows:
(a) The SheerVision Shareholders will use best efforts to cause
SheerVision to perform each covenant thereof set forth herein on a timely basis.
(b) Until the earlier of the Release Time, the SheerVision Shareholders
shall take no action the result of which shall be to cause SheerVision to make
any amendment in the certificate of incorporation or by-laws (or, in each case,
the comparable charter documents, if any, under applicable law) thereof.
(c) Before the SheerVision Shareholders release any information
concerning this Agreement or any of the transactions contemplated by this
Agreement which is intended for, or may result in, public dissemination thereof,
the SheerVision Shareholders shall cooperate with CWTI, shall furnish drafts of
all documents or proposed oral statements to CWTI for comment, and shall not
release any such information without the written consent of CWTI, which consent
shall not be unreasonably withheld. Nothing contained herein shall prevent the
SheerVision Shareholders from releasing any information if required to do so by
law.
(d) The SheerVision Shareholders shall furnish, or cause to be
furnished, for inclusion in the Periodic Reports to be filed pursuant to the
Exchange Act in connection with the transactions contemplated by this Agreement,
or for inclusion in CWTI's filings under state "blue-sky," securities, or
take-over laws, such information about SheerVision or the SheerVision
Shareholders as may be required or as may be reasonably requested by CWTI, and
shall continue to furnish or cause to be furnished such information as is
necessary to keep such information correct and complete in all material respect
until the Release Time. The SheerVision Shareholders represent and warrant that
the information in writing that they have furnished to date regarding
themselves, taken as a whole, do not now, and will not at any time prior to the
Release Time, (i) contain an untrue statement of a material fact or (ii) omit to
state a material fact required to be stated therein or necessary to make the
statements therein not false or misleading.
ARTICLE IV
CONDITIONS; ABANDONMENT AND TERMINATION
SECTION 4.01 RIGHT OF CWTI TO ABANDON. CWTI's Board of Directors shall
have the right to abandon or terminate this Agreement if any of the following
conditions shall not be true or shall not have occurred, as the case may be, as
of the specified date or dates:
(a) All representations and warranties of SheerVision and the
SheerVision Shareholders contained in this Agreement shall be accurate when made
and, in addition, shall be
-32-
<PAGE>
accurate as of the Closing Date as though such representations and warranties
were then made in exactly the same language by SheerVision or the SheerVision
Shareholders, as applicable, and regardless of knowledge or lack thereof on the
part of SheerVision or the SheerVision Shareholders (as applicable) or changes
beyond its control; as of the Closing Date, SheerVision and the SheerVision
Shareholders shall have performed and complied with all covenants and agreements
and satisfied all conditions required to be performed and complied with by it at
or before the Closing Date, respectively, by this Agreement; and CWTI shall have
received a certificate executed by the chief executive officer and the chief
financial officer of SheerVision and the SheerVision Shareholders, dated the
Closing Date, to that effect.
(b) CWTI shall have received at the Closing Date certificates executed
by the chief executive officer and the chief financial officer of SheerVision
and by the SheerVision Shareholders as of such dates, to the effect that they
have carefully examined the Periodic Reports, and any amendment or supplement
thereto, and, to the best of their knowledge, (i) neither the Periodic Reports,
nor any amendment or supplement thereto (A) contains an untrue statement of a
material fact or (B) omits to state a material fact required to be stated
therein or necessary to make the statements therein not false or misleading,
provided in each case that such untrue statement or omission relates to
information furnished by or on behalf of, or pertaining to, SheerVision or the
SheerVision security holder, (ii) since the date hereof, no event with respect
to SheerVision or the SheerVision security holder has occurred which should have
been set forth in an amendment to any Periodic Report, or a supplement to any
Periodic Report which has not been set forth in such an amendment or supplement,
and (iii) any contract, agreement, instrument, lease, or license regarding
SheerVision required to be filed as an exhibit to any Periodic Report has been
filed with the SEC as an exhibit to or has been incorporated as an exhibit by
reference into such Periodic Report.
(c) SheerVision and the SheerVision Shareholders shall have delivered
to CWTI at or prior to the Closing Date such other documents (including
certificates of officers of SheerVision) as CWTI may reasonably request in order
to enable CWTI to determine whether the conditions to their obligations under
this Agreement have been met and otherwise to carry out the provisions of this
Agreement.
(d) All actions, proceedings, instruments, and documents required by
SheerVision and the SheerVision Shareholders to carry out this Agreement or
incidental thereto and all other related legal matters shall be subject to the
reasonable approval of counsel to CWTI, and SheerVision and the SheerVision
Shareholders shall have furnished such counsel such documents as such counsel
may have reasonably requested for the purpose of enabling them to pass upon such
matters.
(e) At the Closing, there shall not be pending any legal proceeding
relating to, or seeking to prohibit or otherwise challenge the consummation of,
the transactions contemplated by this Agreement, or to obtain substantial
damages with respect thereto.
(f) There shall not have been any action taken, or any law, rule,
regulation, order, judgment, or decree proposed, promulgated, enacted, entered,
enforced, or deemed applicable to the transactions contemplated by this
Agreement by any federal, state, local, or other governmental authority or by
any court or other tribunal, including the entry of a preliminary or permanent
-33-
<PAGE>
injunction, which, in the reasonable judgment of CWTI, (i) makes this Agreement
or any of the transactions contemplated by this Agreement illegal, (ii) results
in a delay in the ability of SheerVision or CWTI to consummate the transactions
contemplated by this Agreement beyond May 31, 2006, (iii) requires the
divestiture by CWTI of a material portion of the business of either CWTI or of
SheerVision, (iv) imposes material limitations on the ability of CWTI
effectively to exercise full rights of ownership of shares of SheerVision
including the right to vote such shares on all matters properly presented to the
SheerVision Shareholders, or (v) otherwise prohibits, restricts, or delays
consummation of the transactions contemplated by this Agreement or impairs the
contemplated benefits to CWTI of this Agreement or any of the other transactions
contemplated by this Agreement.
(g) The parties to this Agreement shall have obtained at or prior to
the Closing Date all unconditional written approval to this Agreement and to the
execution, delivery, and performance of this Agreement by each of them of
relevant governmental authorities having jurisdiction over CWTI or SheerVision
or the subject matter of this Agreement.
(h) The parties to this Agreement shall have obtained at or prior to
the Closing Date all consents required for the consummation of the transactions
contemplated by this Agreement from any unrelated third party to any contract,
agreement, instrument, lease, license, arrangement, or understanding to which
any of them is a party, or to which any of them or any of their respective
businesses, properties, or assets are subject.
(i) There shall not have been any material adverse change in the
condition (financial or otherwise), operations, business, assets, liabilities,
earnings or prospects of SheerVision since the date hereof.
(j) CWTI shall conduct a due diligence review of SheerVision and the
SheerVision Shareholders, including, without limitation, a review of the
SheerVision Disclosure Letter and the documents referenced therein delivered
prior to the Closing Date, and shall be reasonably satisfied with the result of
such review.
SECTION 4.02 RIGHT OF SHEERVISION AND THE SHEERVISION SHAREHOLDERS TO
ABANDON. By the election of the SheerVision Shareholders, the SheerVision
Shareholders or, otherwise, SheerVision's Board of Directors shall have the
right to abandon or terminate this Agreement if any of the following conditions
shall not be true or shall not have occurred, as the case may be, as of the
specified date or dates:
(a) All representations and warranties of CWTI contained in this
Agreement shall be accurate when made and, in addition, shall be accurate as of
the Closing Date as though such representations and warranties were then made in
exactly the same language by CWTI and regardless of knowledge or lack thereof on
the part of CWTI or changes beyond its control; as of the Closing Date, CWTI
shall have performed and complied with all covenants and agreements and
satisfied all conditions required to be performed and complied with by them at
or before the Closing Date by this Agreement; and SheerVision shall have
received certificates executed by the independent directors of CWTI, dated the
Closing Date, to that effect.
-34-
<PAGE>
(b) SheerVision shall have received at the Closing, certificates
executed by the chief executive officer and the chief financial officer of CWTI,
dated as of such dates, to the effect that they have carefully examined the
Periodic Reports, and any amendment or supplement thereto, and, to the best of
their knowledge, (i) neither any Periodic Report, nor any amendment or
supplement thereto (A) contains an untrue statement of a material fact or (B)
omits to state a material fact required to be stated therein or necessary to
make the statements therein not false or misleading, provided in each case that
such untrue statement or omission relates to information furnished by or on
behalf of, or pertaining to, CWTI or any CWTI security holder, (ii) since the
date of the filing of any Periodic Report, no event with respect to CWTI or any
CWTI security holder has occurred which should have been set forth in an
amendment or a supplement to such Periodic Report which has not been set forth
in such an amendment or supplement, (iii) any contract, agreement, instrument,
lease, or license regarding CWTI required to be filed as an exhibit to any
Periodic Report has been filed as an exhibit to or has been incorporated as an
exhibit by reference into such Periodic Report, and (iv) to the effect of clause
(k) of this Section 4.02.
(c) CWTI shall have delivered to SheerVision and the SheerVision
Shareholders at or prior to the Closing such other documents (including
certificates of officers of CWTI) as SheerVision and the SheerVision
Shareholders may reasonably request in order to enable SheerVision and the
SheerVision Shareholders to determine whether the conditions to CWTI's
obligations under this Agreement have been met and otherwise to carry out the
provisions of this Agreement.
(d) All actions, proceedings, instruments, and documents required by
CWTI to carry out this Agreement or incidental thereto and all other related
legal matters shall be subject to the reasonable approval of counsel to
SheerVision and the SheerVision Shareholders, and CWTI shall have furnished such
counsel such documents as such counsel may have reasonably requested for the
purpose of enabling them to pass upon such matters.
(e) At the Closing Date, there shall not be pending any legal
proceeding relating to, or seeking to prohibit or otherwise challenge the
consummation of, the transactions contemplated by this Agreement, or to obtain
substantial damages with respect thereto.
(f) There shall not have been any action taken, or any law, rule,
regulation, order, judgment, or decree proposed, promulgated, enacted, entered,
enforced, or deemed applicable to the transactions contemplated by this
Agreement by any federal, state, local, or other governmental authority or by
any court or other tribunal, including the entry of a preliminary or permanent
injunction, which, in the reasonable judgment of SheerVision or the SheerVision
Shareholders, (i) makes this Agreement or any of the transactions contemplated
by this Agreement illegal, (ii) results in a delay in the ability of CWTI or
SheerVision to consummate any of the transactions contemplated by this Agreement
beyond May 31, 2006, or (iii) otherwise prohibits, restricts, or delays
consummation of the other transactions contemplated by this Agreement or impairs
the contemplated benefits to the SheerVision Shareholders of this Agreement or
any of the transactions contemplated by this Agreement.
(g) The parties to this Agreement shall have obtained at or prior to
the Closing Date all unconditional written approval to this Agreement and to the
execution, delivery, and performance
-35-
<PAGE>
of this Agreement by each of them of relevant governmental authorities having
jurisdiction over CWTI or SheerVision or the subject matter of this Agreement.
(h) At or prior to the Closing Date, CWTI shall have made all filings,
and taken all actions, necessary to comply with all reporting requirements under
federal and state securities laws (including without limitation, applicable
"blue-sky" laws with regard to the issuance of CWTI Common Stock as contemplated
by this Agreement) other than the filing of Form D up to 15 days following the
Closing. Without limiting the generality of the foregoing, any prescribed
periods within which a "blue sky" or securities law administrator may disallow
CWTI's notice of reliance on an exemption from such state's requirements, shall
have elapsed at or prior to the Closing Date.
(i) The parties to this Agreement shall have obtained at or prior to
the Closing Date all consents required for the consummation of the transactions
contemplated by this Agreement from any unrelated third party to any contract,
agreement, instrument, lease, license, arrangement, or understanding to which
any of them is a party, or to which any of them or any of their respective
businesses, properties, or assets are subject.
(j) SheerVision and the SheerVision Shareholders shall conduct a due
diligence review of CWTI, including, without limitation, a review of the CWTI
SEC Documents and the documents referenced therein delivered prior to the
Closing Date, and same shall be satisfactory in the reasonable opinion of
SheerVision and the SheerVision Shareholders.
(k) At the Closing Date, CWTI shall have no assets and no liabilities,
determined in accordance with generally accepted accounting principles in effect
in the United States applied on a basis consistent with that of the financial
statements of CWTI hereinabove referenced.
(l) At or prior to the Closing Date, the officers, directors, and
holders of 5% or more of the outstanding CWTI Common Stock immediately prior to
such date shall have executed and delivered to SheerVision an agreement mutually
acceptable in form and substance to each of such person or entity, on the one
hand, and SheerVision, on the other hand, providing for restrictions on resale
and a "leak-out" of securities following the Closing Date.
SECTION 4.03 OPTIONAL ABANDONMENT. In addition to the provisions of
Section 4.01 and Section 4.02 above, the transactions contemplated by this
Agreement may be abandoned or terminated at or before the Closing
notwithstanding adoption and approval of this Agreement and the transactions
contemplated hereby by the stockholders of the parties hereto:
(a) by mutual agreement of the Boards of Directors of CWTI and
SheerVision;
(b) at the option of CWTI's Board of Directors or
SheerVision's Board of Directors, if the Closing Date shall not have
occurred on or before May 31, 2006;
(c) at the option of CWTI's Board of Directors, if facts exist
which render impossible compliance with one or more of the conditions
set forth in Section 4.01 and such are not waived by CWTI; and
-36-
<PAGE>
(d) at the option of SheerVision's Board of Directors or by the
election of the SheerVision Shareholders if facts exist which render impossible
compliance with one or more of the conditions set forth in Section 4.02 and such
are not waived by SheerVision.
SECTION 4.04 EFFECT OF ABANDONMENT. If the transactions contemplated by
this Agreement are abandoned or terminated as provided for in this Article IV,
except for Sections 3.01(e), 3.02(h), 4.01, 4.02 and 4.03, this Agreement shall
forthwith become wholly void and of no further force or effect without liability
on the part of either party to this Agreement or on the part of any officer,
director, controlling person (if any), employee, counsel, agent, or stockholder
thereof; provided, however, that nothing in this Section 4.04 shall release CWTI
or SheerVision or any officer, director, controlling person (if any), employee,
counsel, agent, or stockholder thereof from liability for a willful failure to
carry out its respective obligations under this Agreement.
ARTICLE V
MISCELLANEOUS
SECTION 5.01 EXPENSES. Whether or not the transactions contemplated in
this Agreement are consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby, will be paid by
the party incurring such expense or as otherwise agreed to herein.
SECTION 5.02 BROKERS AND FINDERS. Each of the parties hereto
represents, as to itself, that no agent, broker, investment banker or firm or
person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except as may be otherwise set forth herein or
by separate document.
SECTION 5.03 NECESSARY ACTIONS. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In the event at any time after the Closing, any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper executive
officers and/or directors of CWTI or SheerVision, as the case may be, or the
relevant SheerVision Shareholders or SheerVision Shareholders will take all such
necessary action.
SECTION 5.04 EXTENSION OF TIME; WAIVERS. At any time prior to the
Closing Date:
(a) CWTI may (i) extend the time for the performance of any of the
obligations or other acts of SheerVision or any SheerVision Shareholders or
SheerVision Shareholders, (ii) waive any inaccuracies in the representations and
warranties of SheerVision or any SheerVision Shareholders or SheerVision
Shareholders, or contained herein or in any document delivered pursuant hereto
by SheerVision or any SheerVision Shareholders or SheerVision Shareholders, and
(iii) waive compliance with any of the agreements or conditions contained herein
to be performed by SheerVision or any SheerVision Shareholders or SheerVision
Shareholders. Any agreement on
-37-
<PAGE>
the part of CWTI to any such extension or waiver will be valid only if set forth
in an instrument, in writing, signed on behalf of CWTI.
(b) SheerVision and the SheerVision Shareholders (by action of the
SheerVision Shareholders), may (i) extend the time for the performance of any of
the obligations or other acts of CWTI, (ii) waive any inaccuracies in the
representations and warranties of CWTI contained herein or in any document
delivered pursuant hereto by CWTI and (iii) waive compliance with any of the
agreements or conditions contained herein to be performed by CWTI. Any agreement
on the part of SheerVision and to any such extension or waiver will be valid
only if set forth in an instrument, in writing, signed on behalf of SheerVision.
SECTION 5.05 NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested or by the most nearly comparable method
if mailed from or to a location outside of the United States or by Federal
Express, Express Mail, or similar overnight delivery or courier service or
delivered (in person or by telecopy, telex, or similar telecommunications
equipment) against receipt to the party to which it is to be given at the
address of such party set forth in the introductory paragraph to this Agreement
(or to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 5.05. Any notice to CWTI or to
SheerVision shall be addressed to the attention of the Corporate Secretary. A
copy of any and all notices to SheerVision or any SheerVision Shareholder shall
be delivered in accordance with this section to Reitler Brown & Rosenblatt LLC,
800 Third Avenue, 21st Floor, New York 10022, Attention: Robert Steven Brown,
Esq. Any notice or other communication given by certified mail (or by such
comparable method) shall be deemed given at the time of certification thereof
(or comparable act), except for a notice changing a party's address which will
be deemed given at the time of receipt thereof. Any notice given by other means
permitted by this Section 5.05 shall be deemed given at the time of receipt
thereof.
SECTION 5.06 PARTIES IN INTEREST. This Agreement will inure to the
benefit of and be binding upon the parties hereto and the respective successors
and assigns. Nothing in this Agreement is intended to confer, expressly or by
implication, upon any other person any rights or remedies under or by reason of
this Agreement.
SECTION 5.07 COUNTERPART. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all together will
constitute one document. The delivery by facsimile of an executed counterpart of
this Agreement will be deemed to be an original and will have the full force and
effect of an original executed copy.
SECTION 5.08 SEVERABILITY. The provisions of this Agreement will be
deemed severable and the invalidity or unenforceability of any provision hereof
will not affect the validity or enforceability of any of the other provisions
hereof. If any provisions of this Agreement, or the application thereof to any
person or any circumstance, is illegal, invalid or unenforceable, (a) a suitable
and equitable provision will be substituted therefor in order to carry out, so
far as may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision, and (b) the remainder of this Agreement and the
application of such provision to other persons or circumstances will not be
affected by such invalidity or unenforceability, nor will such invalidity
-38-
<PAGE>
or unenforceability affect the validity or enforceability of such provision, or
the application thereof, in any other jurisdiction.
SECTION 5.09 HEADINGS. The Article and Section headings are provided
herein for convenience of reference only and do not constitute a part of this
Agreement and will not be deemed to limit or otherwise affect any of the
provisions hereof.
SECTION 5.10 GOVERNING LAW.
(a) This Agreement will be deemed to be made in and in all respects
will be interpreted, construed and governed by and in accordance with the law of
the State of New York, without regard to the conflict of law principles thereof.
(b) EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS
TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE
FEDERAL COURTS SITTING IN THE STATE OF NEW YORK IN ALL ACTIONS OR PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT. EACH OF THE PARTIES AGREES THAT
ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT MUST BE
LITIGATED EXCLUSIVELY IN ANY SUCH STATE OR, TO THE EXTENT PERMITTED BY LAW,
FEDERAL COURT THAT SITS IN THE COUNTY OF NEW YORK, AND ACCORDINGLY, EACH PARTY
IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. EACH
PARTY FURTHER IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED
FOR NOTICES IN SECTION 5.05. NOTHING IN THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW.
(c) EACH PARTY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH OF THE PARTIES (1) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (2) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 5.10(c).
SECTION 5.11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All terms,
conditions, representations and warranties set forth in this Agreement or in any
instrument, certificate, opinion, or other writing providing for in it, will
survive the Closing and the delivery of the shares of CWTI Common Stock to be
issued hereunder at the Closing for a period of one year after Closing,
regardless of any investigation made by or on behalf of any of the parties
hereto.
-39-
<PAGE>
SECTION 5.12 ASSIGNABILITY. This Agreement will not be assignable by
operation of law or otherwise and any attempted assignment of this Agreement in
violation of this subsection will be void ab initio.
SECTION 5.13 AMENDMENT. This Agreement may be amended with the approval
of the SheerVision Shareholders and the boards of directors of each of CWTI and
SheerVision at any time. This Agreement may not be amended except by an
instrument, in writing, signed on behalf of each of the parties hereto.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
-40-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement in a manner legally binding upon them as of the date first above
written.
CLEAN WATER TECHNOLOGIES, INC.
BY: /s/ Suzanne Lewsadder
--------------------------
NAME: SUZANNE LEWSADDER
TITLE: CEO
ATTEST:
/s/ Jeffrey Lewsadder
------------------------------
NAME: JEFFREY LEWSADDER
TITLE: SECRETARY
SHEERVISION, INC.
BY /s/ Jeffrey Lewsadder
----------------------------
NAME: JEFFREY LEWSADDER
TITLE: PRESIDENT
ATTEST:
/s/ Suzanne Lewsadder
------------------------------
NAME: SUZANNE LEWSADDER
TITLE: CEO
SHEERVISION SHAREHOLDERS:
/s/ Suzanne Lewsadder
------------------------------
NAME: SUZANNE LEWSADDER
/s/ Jeffrey Lewsadder
------------------------------
NAME: JEFFREY LEWSADDER
-41-
<PAGE>
LIST OF SCHEDULES
Schedule 1.02(b) CWTI Common Stock Issuance Instructions
SUSANNE LEWSADDER 4,762,569
JEFFREY LEWSADDER 4,762,568
-42-
<PAGE>
FORMS OF CERTIFICATES
Certificate of the Chief Executive Officer and Chief Financial Officer of
SheerVision, Inc. pursuant to Sections 4.01(a) and (b)
Certificate of the Independent Directors of Clean Water Technologies, Inc.
pursuant to Section 4.02(a) and (b)
-43-
<PAGE>
FORM OF CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER OF SHEERVISION, INC. PURSUANT TO
SECTIONS 4.01(a) AND (b)
CERTIFICATE
OF THE
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
OF
SHEERVISION, INC.
The undersigned hereby certify, individually and on behalf of
SheerVision, Inc., a California corporation ("SHEERVISION"), and pursuant to
Sections 4.02(a) and (b) of the Share Exchange and Reorganization Agreement,
dated as of March 27, 2006 (the "AGREEMENT"), among the Clean Water
Technologies, Inc., a Delaware corporation, SheerVision, and the holders of all
of the outstanding capital stock of the Company, as follows:
(i) the undersigned are the duly elected and duly qualified Chief
Executive Officer and Chief Financial Officer, respectively,
of SheerVision;
(ii) that all representations and warranties of SheerVision
contained in the Agreement were accurate when made and, in
addition, are accurate as of the date hereof as though such
representations and warranties were made as of the Closing in
exactly the same language by SheerVision and regardless of
knowledge or lack thereof on the part of SheerVision or
changes beyond its control;
(iii) as of the date hereof SheerVision has performed and complied
with all covenants and agreements and satisfied all conditions
required to be performed and complied with by it at or before
such time by the Agreement;
(iv) attached hereto as Annex A is a true and complete copy of the
Articles of Incorporation, as amended, of SheerVision as in
full force and effect at all times since July 17, 1999. No
amendment or other document relating to or affecting the
Articles of Incorporation, as amended, of SheerVision has been
filed in the office of the Secretary of State of the State of
California since August 18, 2005, and no action has been taken
by SheerVision or its stockholders, directors, or officers in
contemplation of the filing of any such amendment or other
document or in contemplation of the merger, consolidation,
sale of assets, liquidation, or dissolution of SheerVision;
(v) attached hereto as Annex B is a true and complete copy of the
By-Laws of SheerVision, as in full force and effect at all
times since at least June 18, 1999, to and including the date
hereof;
(vi) attached hereto as Annex C are true and complete copies of
resolutions duly adopted by the Board of Directors of
SheerVision regarding the execution of this Agreement, and
such resolutions have not been amended, modified, or
-44-
<PAGE>
rescinded and remain in full force and effect on the date
hereof and are the only resolutions adopted relating to, among
other things, the execution and filing of the Agreement;
(vii) the Agreement, as executed, is substantially in the form
approved by the Board of Directors of SheerVision by
resolution, dated November 21, 2006; and
(viii) the undersigned has carefully examined the Periodic Reports
(as defined the Agreement) and any amendment or supplement
thereto with respect to the information set forth therein
relating to SheerVision, and, to the best of their knowledge,
solely with respect to such information relating to
SheerVision, (i) neither the Periodic Reports, nor any
amendment or supplement thereto (A) contains an untrue
statement of a material fact or (B) omits to state a material
fact required to be stated therein or necessary to make the
statements therein not false or misleading, provided in each
case that such untrue statement or omission relates to
information furnished by or on behalf of, or pertaining to,
SheerVision or the SheerVision security holder, (ii) since the
date of the Agreement, no event with respect to SheerVision or
any SheerVision security holder has occurred which should have
been set forth in an amendment to any Periodic Report, or a
supplement to any Periodic Report which has not been set forth
in such an amendment or supplement, and (iii) any contract,
agreement, instrument, lease, or license regarding SheerVision
required to be filed as an exhibit to any Periodic Report has
been filed with the SEC as an exhibit to or has been
incorporated as an exhibit by reference into such Periodic
Report.
[REMAINDER OF PAGE INTENTIONALLY LEF BLANK]
-45-
<PAGE>
IN WITNESS WHEREOF, we have hereunto set my hands, individually and on
behalf of SheerVision, this 27 day of March.
SHEERVISION, INC.
BY:
---------------------------
SUZANNE LEWSADDER
CHIEF EXECUTIVE OFFICER
SHEERVISION, INC.
BY:
---------------------------
JEFFREY LEWSADDER
PRESIDENT
-46-
<PAGE>
FORM OF CERTIFICATE PURSUANT TO SECTIONS 4.02(a) AND (b)
CERTIFICATE
OF THE
INDEPENDENT DIRECTORS
OF
CLEAN WATER TECHNOLOGIES, INC.
The undersigned hereby certify, individually and on behalf of Clean
Water Technologies, Inc., a Delaware corporation (the "COMPANY"), and pursuant
to Section 4.02(a) of the Share Exchange and Reorganization Agreement, dated as
of March 27, 2006 (the "AGREEMENT"), among the Company, SheerVision, Inc., a
California corporation ("SHEERVISION"), and the holders of all of the
outstanding capital stock of SheerVision, as follows:
(i) the undersigned are duly elected and duly qualified directors,
respectively, of the Company and have no pecuniary or other
interest in the transactions contemplated by the Agreement;
(ii) all representations and warranties of the Company contained in
the Agreement were accurate when made and, in addition, are
accurate as of the date hereof as though such representations
and warranties were made as of the Closing in exactly the same
language by the Company and regardless of knowledge or lack
thereof on the part of the Company or changes beyond its
control;
(iii) as of the date hereof the Company has performed and complied
with all covenants and agreements and satisfied all conditions
required to be performed and complied with by it at or before
such time by the Agreement;
(iv) attached hereto as Annex A is a true and complete copy of the
Articles of Incorporation, as amended, of the Company as in
full force and effect at all times since April 17, 1986. No
amendment or other document relating to or affecting the
Articles of Incorporation, as amended, of the Company has been
filed in the office of the Secretary of State of the State of
Delaware since March 17, 2006, and no action has been taken by
the Company or its stockholders, directors, or officers in
contemplation of the filing of any such amendment or other
document or in contemplation of the merger, consolidation,
sale of assets, liquidation, or dissolution of the Company;
(v) attached hereto as Annex B is a true and complete copy of the
By-Laws of the Company, as in full force and effect at all
times since at least April 20, 1986, to and including the date
hereof;
(vi) attached hereto as Annex C are true and complete copies of
resolutions duly adopted by the Board of Directors of the
Company regarding the execution of this Agreement, and such
resolutions have not been amended, modified, or
-47-
<PAGE>
rescinded and remain in full force and effect on the date
hereof and are the only resolutions adopted relating to, among
other things, the execution and filing of the Agreement;
(vii) the Agreement, as executed, is substantially in the form
approved by the Board of Directors by resolution, dated March
27, 2006;
(viii) the undersigned has carefully examined the Periodic Reports
(as defined in the Agreement), and any amendment or supplement
thereto, and, to the best of their knowledge, (i) neither any
Periodic Report, nor any amendment or supplement thereto (A)
contains an untrue statement of a material fact or (B) omits
to state a material fact required to be stated therein or
necessary to make the statements therein not false or
misleading, provided in each case that such untrue statement
or omission relates to information furnished by or on behalf
of, or pertaining to, CWTI or any CWTI security holder, (ii)
since the date of the filing of any Periodic Report, no event
with respect to CWTI or any CWTI security holder has occurred
which should have been set forth in an amendment or a
supplement to such Periodic Report which has not been set
forth in such an amendment or supplement, (iii) any contract,
agreement, instrument, lease, or license regarding CWTI
required to be filed as an exhibit to any Periodic Report has
been filed as an exhibit to or has been incorporated as an
exhibit by reference into such Periodic Report, and (iv) at
the date hereof, the Company has no assets or liabilities,
determined in accordance with generally accepted accounting
principles in effect in the United States applied on a basis
consistent with that of the financial statements of the
Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-48-
<PAGE>
IN WITNESS WHEREOF, we have hereunto set my hands, individually and on
behalf of the Company, this 27th day of March, 2006.
-------------------------------
SHARON BIDDLE
-------------------------------
SHEMI HART
-------------------------------
DAVID FRANKEL