AGREEMENT AND PLAN OF REORGANIZATION
among
RACOM SYSTEMS, INC.,
NSK HOLDINGS, INC.
NEWSTATE CAPITAL CORP.
and
NEWSTATE CAPITAL CO., LTD
As Of July 14, 1999
TABLE OF CONTENTS
RECITALS ...............................................................................1
ARTICLE I...............................................................................2
SECTION 1.1 The Transactions.............................................2
SECTION 1.2 The Closing: Issuance of Shares..............................2
SECTION 1.3 Consummation of Transaction; distribution of Racom Assets....5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF RACOM........................................6
SECTION 2.1 Organization of Racom........................................6
SECTION 2.2 Capitalization of Racom......................................6
SECTION 2.3 Charter Documents............................................6
SECTION 2.4 Corporate Documents..........................................6
SECTION 2.5 Required Authorizations......................................7
SECTION 2.6 Compliance with Law and Government Regulations...............7
SECTION 2.7 Litigation...................................................7
SECTION 2.8 Authority....................................................7
SECTION 2.9 Full Disclosure..............................................7
ARTICLE III
COVENANTS OF RACOM AND SUBSIDIARY .............................................8
SECTION 3.1 Conduct Prior to the Closing.................................8
SECTION 3.2 Affirmative Covenants........................................8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEWSTATE ....................................9
SECTION 4.1 Organization of NewState.....................................9
SECTION 4.2 Capitalization of NewState...................................9
SECTION 4.3 Charter Documents............................................9
SECTION 4.4 Required Authorizations......................................9
SECTION 4.5 Compliance with Law and Government Regulations...............9
SECTION 4.6 Litigation...................................................9
SECTION 4.7 Governmental Consent.........................................9
SECTION 4.8 Authority...................................................10
SECTION 4.9 Ownership of NewState Capital Shares........................10
SECTION 4.10 Investment Purpose..........................................10
SECTION 4.11 Full Disclosure.............................................10
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NEWSTATE CAPITAL............................11
SECTION 5.1 Organization of NewState Capital............................11
SECTION 5.2 Capitalization of NewState Capital..........................11
SECTION 5.3 Charter Documents...........................................11
SECTION 5.4 Tax Returns and Payments....................................11
SECTION 5.5 Required Authorizations.....................................11
SECTION 5.6 Compliance with Law and Government Regulations..............11
SECTION 5.7 Litigation..................................................12
SECTION 5.8 Patents, Trade Names and Rights.............................12
SECTION 5.9 Governmental Consent........................................12
SECTION 5.10 Ownership of NewState Capital Shares........................12
SECTION 5.11 Full Disclosure.............................................12
ARTICLE VI
COVENANTS OF NEWSTATE AND NEWSTATE CAPITAL....................................13
SECTION 6.1 Conduct Prior to the Closing................................13
SECTION 6.2 Affirmative Covenants............................................13
ARTICLE VII
ADDITIONAL AGREEMENTS.........................................................14
SECTION 7.1 Expenses....................................................14
SECTION 7.2. Brokers and Finders.........................................14
SECTION 7.3 Necessary Actions...........................................14
SECTION 7.4 Confidentiality.............................................14
SECTION 7.5 Liquidation and Dissolution of NewState.....................14
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF THE PARTIES......................................14
SECTION 8.1 Legal Action................................................14
SECTION 8.2 Absence of Termination......................................15
SECTION 8.3 Required Approvals..........................................15
SECTION 8.4 "Blue Sky" Compliance.......................................15
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF RACOM AND SUBSIDIARY...................15
SECTION 9.1 Representations and Warranties True at Closing..............15
SECTION 9.2 Performance.................................................15
SECTION 9.3 Authority...................................................15
SECTION 9.4 Absence of Certain Changes or Events........................15
ARTICLE X
CONDITIONS PRECEDENT OF NEWSTATE .............................................16
SECTION 10.1 Representations and Warranties True at Closing..............16
SECTION 10.2 Performance.................................................16
SECTION 10.3 Authority...................................................16
SECTION 10.4 Absence of Certain Changes or Events........................16
ARTICLE XI
TERMINATION...................................................................17
SECTION 11.1 Termination.................................................17
SECTION 11.2 Effect of Termination.......................................17
ARTICLE XII
MISCELLANEOUS.................................................................18
SECTION 12.1 Cost and Expenses...........................................18
SECTION 12.2 Extension of Time: Waivers..................................18
SECTION 12.3 Notices.....................................................18
SECTION 12.4 Parties in Interest.........................................19
SECTION 12.5 Counterparts................................................19
SECTION 12.6 Severability................................................19
SECTION 12.7 Headings....................................................19
SECTION 12.8 Survival of Representations and Warranties..................19
SECTION 12.9 Assignability...............................................19
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (hereinafter referred to as
the "Agreement") is made and entered into as of the 14th day of July 1999 by and
among RACOM CORPORATION, a Delaware corporation (hereinafter referred to as
"Racom"), NSK HOLDINGS, INC., a Delaware corporation and a wholly-owned
subsidiary of Racom (hereinafter referred to as "Subsidiary"), NEWSTATE CAPITAL
CORP., a New York corporation (hereinafter referred to as "NewState") and
NEWSTATE CAPITAL CO., LTD, a company organized under the laws of Korea
(hereinafter referred to as "NewState Capital").
RECITALS
WHEREAS, Racom desires to issue and NewState desires to acquire eighty
(80%) percent of the issued and outstanding shares of the common stock, par
value $.01, of Racom (the "Racom Shares") pursuant to the terms and conditions
as set forth herein;
WHEREAS, NewState desires to transfer and Racom and Subsidiary desire
that Subsidiary acquire all of NewState's right, title and interest in
NewState's sole asset, an ownership interest in 99.6% of the capital shares (the
"NewState Capital Shares") of NewState Capital pursuant to the terms and
conditions as set forth herein; and
WHEREAS, NewState desires to assign and Racom and Subsidiary desire
that Subsidiary assume NewState's rights and obligations under that certain
promissory note dated December 28, 1998 made by NewState to the order of Korea
Exchange Bank, Broadway Branch, (the "Korea Bank") in the principal amount of
$5,000,000 (the "Korean Bank Note");
WHEREAS, NewState desires as an integral part of the transaction, to
distribute the Racom Shares to its shareholders in exchange for their NewState
shares in complete liquidation of NewState and to dissolve; and
WHEREAS, all of the foregoing shall be in a transaction which shall
qualify as a tax-free acquisition reorganization under Section 368 (a)(1)(C) of
the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties and covenants herein contained, the parties hereby
agree as follows:
ARTICLE I
SECTION 1.1 The Transactions. The parties to this Agreement agree as
follows:
(a) Racom shall issue to NewState stock certificates representing eight
million (8,000,000) Racom Shares, free and clear of all claims and encumbrances,
resulting in NewState owning eighty (80%) percent of the issued and outstanding
shares of Racom.
(b) NewState shall transfer and assign and Subsidiary shall acquire all
of NewState's right, title and interest in 99.6% of the NewState Capital Shares,
which NewState owns with no restrictions on transfer and free and clear of all
claims and encumbrances, resulting in NewState Capital being a subsidiary of the
Subsidiary.
(c) Subsidiary shall assume the Korean Bank Note by executing the
Assumption Agreement annexed hereto as Exhibit 1.1(c). The parties hereto
acknowledge that the Korean Bank Note is currently overdue and has not been
extended.
(d) As a condition to closing, certain investors (the "Investors") will
have together paid an aggregate of $1,000,000 in cash to Racom in exchange for
certificates representing 667,000 Racom Shares pursuant to a Common Stock
Purchase Agreement, dated the date hereof representing, an aggregate of
approximately eighteen percent (18%) of Racom Shares.
(e) As a condition to closing, NewState and NewState Capital shall
deliver to Racom and Subsidiary, an opinion of Korean counsel, which opinion and
counsel shall be acceptable to counsel for Racom and Subsidiary that: (i) the
consummation of the transactions contemplated by this Agreement are authorized
pursuant to the laws of the Country of Korea; and (ii) there are no restrictions
on the subsequent transfer of the NewState Capital Shares.
(f) Immediately after closing the transactions contemplated by the
terms of this Agreement, Racom shall transfer all of its assets existing on the
date hereof to Racom Systems, Inc., a Colorado corporation and wholly owned
subsidiary of Racom ("Racom II") in return for Racom II assuming all of the
liabilities, known or unknown, contingent or otherwise, of Racom incurred or
related to events prior to the date hereof. Racom shall spin off the shares of
Racom II to the Shareholders of Racom, as soon as practicable after the Closing
(as hereinafter defined in Section 1.2(b) of this Agreement).
SECTION 1.2 The Closing: Issuance of Shares.
(a) Closing Date: The Closing Date shall be ten business days after the
date on which the shareholders of Racom approve that certain stock split
referenced in the Racom Proxy Statement dated July 1, 1999 or such earlier time
as shall be agreed by Racom and NewState.
(b) Issuance and Delivery of Racom Shares:
(i) Upon the closing of the transactions contemplated
by this Agreement (the "Closing"), Racom shall
issue and deliver to NewState or the stockholders
of NewState, if NewState has or is about to be
dissolved, stock certificates representing an
aggregate of eight million (8,000,000) Racom
Shares free and clear of all claims and
encumbrances;.
(ii) The Racom Shares to be issued hereunder shall be
authorized but previously unissued shares of
Racom common stock.
(iii) All of the Racom Shares to be issued hereunder
are deemed "restricted securities" as defined by
Rule 144 of the Securities Act of 1933, as
amended (the "Securities Act"), and the recipient
shall represent that they are acquiring the Racom
Shares for investment purposes only and without
the intent to make a further distribution of the
Racom Shares. All Racom Shares 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 restricted Racom Shares to be
issued hereunder shall bear the following, or
similar legend:
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 TRANSFERRED 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.
(iv) Racom agrees that notwithstanding any
restrictions, but for such restrictions as set
forth in Section 1.2(b)(iii), the shares issued
to NewState may be reissued to the shareholders
of NewState in connection with the liquidation of
NewState.
(c) Transfer and Delivery of the NewState Capital Shares.
(i) Upon the Closing, NewState shall transfer and
deliver stock certificates registered in the name
of Subsidiary representing an aggregate of Four
Million Nine Hundred Fifty Eight Thousand
(4,958,000) NewState
Capital Shares, with no restrictions on transfer
and being free and clear
of all claims and encumbrances;
(d) Assumption of Korea Bank Note. Upon the Closing, Subsidiary shall
execute an assumption of the Korea Bank Note.
(e) Registration Rights.
At any time commencing after the Closing, NewState or the
shareholders of NewState if NewState has or is about to be dissolved, shall have
the right, exercisable by written notice to Racom (the "Demand Registration
Request"), to have Racom prepare and file with the Commission, on one occasion,
at the sole expense of Racom, in respect of all the Shares of Common Stock
purchased under this Agreement (the "Registrable Securities"), a Registration
Statement so as to permit a public offering and sale of the Registrable
Securities. Upon such demand, Racom shall prepare and file with the Commission a
"Shelf" Registration Statement covering the resale of all Registrable Securities
for an offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form S-1 or another appropriate form
permitting registration of Registrable Securities for resale by the Holders in
the manner or manners designated by them (including, without limitation, public
or private sales and one or more Underwritten Offerings). The Company shall (i)
not permit any securities other than the Registrable Securities to be included
in the Registration Statement other than the shares of common stock of Racom
purchased by GEM Singapore Pte Limited ("GEM") and Turbo International, Ltd.
("Turbo") pursuant to a Stock Purchase Agreement by and among Racom, GEM and
Turbo dated June 8, 1999 and the Racom Shares purchased by the Investors
pursuant to Section 1.1(d) of this Agreement and (ii) use its best efforts to
cause the Registration Statement to be declared effective under the Securities
Act as promptly as practicable after the filing thereof, but in any event prior
to 120 days after the filing of such Registration Statement, and to keep such
Registration Statement continuously effective under the Securities Act until the
date which is five years after the date of this Agreement or such earlier date
when all Registrable Securities covered by such Registration Statement have been
sold or may be sold pursuant to Rule 144 as determined by the counsel to Racom
pursuant to a written opinion letter, addressed to the Holders, to such effect
(the "Effectiveness Period"); provided, however, that Racom shall not be deemed
to have used its best efforts to keep the Registration Statement effective
during the Effectiveness Period if it voluntarily takes any action that would
result in the Holders not being able to sell the Registrable Securities covered
by such Registration Statement during the Effectiveness Period, unless such
action is required under applicable law or Racom has filed a post-effective
amendment to the Registration Statement and the Commission has not declared it
effective.
The parties agree that NewState or the shareholders of NewState if
NewState has or is about to be dissolved, GEM, Turbo and the Investors shall
have equal demand and piggy-back registration rights respecting the Racom
Shares.
1. If the Holders of a majority of the Registrable Securities
so elect, an offering of Registrable Securities pursuant to a Registration
Statement may be effected in the form of an Underwritten Offering. In such
event, and if the managing underwriters advise the Company and such Holders in
writing that in their opinion the amount of Registrable Securities proposed to
be sold in such offering exceeds the amount of Registrable Securities which can
be sold in such offering, there shall be included in such Underwritten Offering
the amount of such Registrable Securities which in the opinion of such managing
underwriters can be sold, and such amount shall be allocated pro rata among the
Holders proposing to sell Registrable Securities in such Underwritten Offering.
2. If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority of the Registrable Securities included in such offering and the
Company shall be advised in advance of the identity of any underwriter and the
general terms of the proposed offering. No Holder may participate in any
Underwritten Offering hereunder unless such Person (i) agrees to sell its
Registrable Securities on the basis provided in any underwriting agreements
approved by the Persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
arrangements.
(f) Resignation and Appointment of Directors and Officers. Upon the
Closing, all of the present directors of Racom shall resign except for Xxxxxx
Xxxxx and the four (4) replacement directors shall be appointed by Xxxxxx Xxxxx
who shall be Xxxxxx X. Xxx, Sun X. Xxxxx, Xxx X. Xxx and Xxxxxxxx Xxxxx. Upon
the Closing, Xxxxxx Xxxxx and the newly elected directors of Racom shall appoint
Xxxxxx Xxx as chairman, Chief Executive Officer and President, Xxxxxxxxx X.
Xxxxx as Chief Financial Officer and Treasurer, Xxx X. Xxx as vice president,
and Sun X. Xxxxx as secretary of both Racom and Subsidiary. Racom's Board of
Directors shall also have created an Executive Committee consisting of Xxxxxx X.
Xxx and two (2) other directors selected by him who shall also serve as the
directors of Subsidiary.
(g) Officers' Certificates.
(i) Upon the Closing, Racom and Subsidiary shall each
deliver to NewState an Officer's Certificate as
described in Sections 9.1 and 9.2 hereof, dated
the Closing Date, that all representations,
warranties, covenants and conditions set forth
herein by Racom are true and correct as of, or
have been fully performed and complied with by,
the Closing Date; and
(ii) Upon the Closing, NewState and NewState Capital
shall each deliver to Racom an Officer's
Certificate as described in Section 10.1 and 10.2
hereof, dated the Closing Date, that all
representations, warranties, covenants and
conditions set forth herein by NewState and
NewState
Capital are true and correct as of, or have been,
or will be fully performed and complied with by
the Closing Date;
SECTION 1.3. Consummation of Transaction; Distribution of Racom Assets.
If at the time of 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.
Immediately after closing the transactions contemplated by the terms of this
Agreement, Racom shall transfer all of its assets existing on the date hereof to
Racom System, Inc., a Colorado corporation and wholly owned subsidiary of Racom
("Racom II") in return for Racom II assuming all of the liabilities, known or
unknown, contingent or otherwise, of Racom incurred or related to events prior
to the date hereof. Racom shall spin off the shares of Racom II to the
Shareholders of Racom, as soon as practicable after the Closing (as hereinafter
defined in Section 1.2(b) of this Agreement).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF RACOM
Racom hereby represents, warrants and agrees that:
SECTION 2.1 Organization of Racom. Racom is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, is duly qualified and in good standing as a foreign corporation in
every jurisdiction in which such qualification is necessary, and has the
corporate power and authority to own its properties and assets and to transact
the business in which it is engaged. With the exception of Subsidiary and Racom
II, there are no corporations or other entities with respect to which (i) Racom
owns any of the outstanding stock or other interests, or (ii) Racom may be
deemed to be in control because of factors or relationships other than the
quantity of stock or other interests owned. Racom has all requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement is the legal, valid and binding
obligation of Racom, enforceable against Racom in accordance with its respective
terms except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency and other similar laws affecting creditors' rights
generally.
SECTION 2.2 Capitalization of Racom. The authorized capital stock of
Racom consists of 40,000,000 share of common stock, par value $0.01 per share,
of which only 1,332,482 shares are issued and outstanding as of the date hereof
(subject to adjustments due to the 15:1 reverse stock split effective July 12,
1999). All shares of Racom common stock currently issued and outstanding have
been duly authorized and validly issued and are fully paid and non-assessable,
and have been issued in compliance with any and all applicable federal and state
laws or pursuant to appropriate exemptions therefrom. Except as set forth in
Exhibit 2.2, there are no options, warrants, rights, calls, commitments or
agreements of any character obligating Racom to issue any shares of its capital
stock or any security representing the right to purchase or otherwise receive
any such stock. Shares of Racom common stock to be issued pursuant to this
Agreement, when so issued, will be duly
authorized, validly issued, fully paid and non-assessable, and will be issued in
compliance with any and all applicable federal and state laws or pursuant to
appropriate exemptions therefrom.
SECTION 2.3 Charter Documents. Certified copies of the Racom and
Subsidiary Articles of Incorporation and By-Laws, as amended to date, have been
or will be provided to NewState and the Shareholders of NewState prior to the
Closing.
SECTION 2.4 Corporate Documents. The Racom and Subsidiary shareholders'
list and corporate minute books are complete and accurate as of the date hereof
and the corporate minute books contain the recorded minutes of all corporate
meetings of shareholders and directors.
SECTION 2.5 Required Authorizations. There have been or will be timely
filed, given, obtained or taken, all applications, notices, consents, approvals,
orders, registrations, qualifications waivers or other actions of any kind
required by virtue of execution and delivery of this Agreement by Racom or the
consummation by it of the transactions contemplated hereby. Prior to the
Closing, the directors and a majority of the shareholders of Racom and
Subsidiary shall have approved this Agreement and the transactions contemplated
hereunder, exempt the transactions from any Delaware takeover stature, if
applicable, and appropriate corporate filings shall have been made.
SECTION 2.6 Compliance with Law and Government Regulations. Racom 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 its business. Racom is not subject to any order,
decree, judgment or other sanction of any court, administrative agency or other
tribunal.
SECTION 2.7 Litigation. There is no litigation, arbitration, proceeding
or investigation pending or threatened to which Racom or Subsidiary is a party
or which may result in any material change in the business of condition,
financial or otherwise, of Racom or in any of its properties or assets, or which
might result in any liability on the part of Racom or Subsidiary, or which
questions the validity of this Agreement or of any action taken or to be taken
pursuant to or in connection with the provisions of this Agreement, and to the
best knowledge of Racom, there is no basis for any such litigation, arbitration,
proceeding or investigation.
SECTION 2.8 Authority. Racom, Subsidiary and their respective directors
will, prior to the Closing, approve this Agreement and the transactions
contemplated hereby and will duly authorize the execution and delivery hereof.
Racom and Subsidiary have full power, authority and legal right to enter into
this Agreement and to consummate the transactions contemplated hereby, and all
corporate action necessary to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby has been
duly and validly taken. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Racom
with the provisions hereof will not (a) conflict with or result in a breach of
any provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Racom under, any
of the terms, conditions or provisions of the Articles of Incorporation or
By-Laws of Racom, or any note, bond, mortgage, indenture, license, lease,
agreement or any instrument or obligation to which Racom is a party or by which
it is bound; or (b) violate any order, writ injunction, decree, statute, rule or
regulation applicable to Racom or any of its properties or assets.
SECTION 2.9 Full Disclosure. None of the representations and warranties
made by Racom herein, or in any exhibit, certificate or memorandum furnished or
to be furnished by Racom, on its behalf pursuant hereto, contains or will
contain any untrue statement of material fact, or omits any material fact, the
omission of which would be misleading.
ARTICLE III
COVENANTS OF RACOM AND SUBSIDIARY
SECTION 3.1 Conduct Prior to the Closing.
Between the date hereof and the Closing:
(a) Racom and Subsidiary will comply with all requirements which
federal or state law may impose on it with respect to this Agreement and the
transactions contemplated hereby, and will promptly cooperate with and furnish
written information to NewState in connection with any such requirements imposed
upon the parties hereto in connection therewith;
(b) Racom shall grant to NewState and its counsel, accountants and
other representatives, full access during normal business hours during the
period to the Closing to all of its respective properties, books, contracts,
commitments and records and, during such period, furnish promptly to NewState
and such representatives all information relating to Racom and Subsidiary as
NewState may reasonably request, and shall extend to NewState the opportunity to
meet with Racom's accountants and attorneys to discuss the financial condition
of Racom and Subsidiary; and
(c) Except for the transactions contemplated by this Agreement, Racom
and Subsidiary will conduct its business in the normal course, and shall not
sell or issue any Racom Shares to any person (except as contemplated hereby) or
sell, pledge or assign any of its assets without the prior written consent of
NewState.
(d) Racom will not declare any dividends or distributions with respect
to its capital stock or amend its organization documentation, without the prior
written consent of NewState, except as provided herein.
(e) Except within the regular course of business, Racom will not incur
any indebtedness for money borrowed or issue any debt securities, or incur or
suffer to be incurred any liability or obligation of any nature whatsoever, or
cause or permit any lien, encumbrance or security interest
to be created or arise on or in any of its properties or assets, without the
prior written consent of NewState;
SECTION 3.2 Affirmative Covenants. Prior to Closing, Racom
will do the following:
(a) Use its best efforts to accomplish all actions necessary to
consummate this Agreement, including satisfaction of all conditions contained in
this Agreement;
(b) Reserve, and promptly after the Closing, issue and deliver to the
Shareholders the Racom Shares;
(c) Take all other necessary corporate actions to accomplish those
items set forth in Section 1.2 hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEWSTATE
NewState hereby represents, warrants and agrees that:
SECTION 4.1 Organization of NewState. NewState is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, is duly qualified and in good standing in every jurisdiction in which
such qualification is necessary. Other than NewState Capital, there are no
corporations or other entities with respect to which (i) NewState owns any of
the outstanding stock or other interests, or (ii) NewState may be deemed to be
in control because of factors or relationships other than the quantity of stock
or other interests owned in such entity. NewState has all requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
SECTION 4.2 Capitalization of NewState. The authorized capital stock of
NewState consists of two hundred (200) shares of common stock, no par value,
which has been issued to five (5) shareholders (the "NewState Stock"). The
NewState Stock has been duly authorized and validly issued and is fully paid and
non-assessable, and has been issued in compliance with any and all applicable
federal and state laws or pursuant to appropriate exemptions therefrom.
SECTION 4.3 Charter Documents. Complete and correct copies of the
Certificate of Incorporation and By-Laws of NewState and all amendments thereto,
have been or will be delivered to Racom prior to the Closing.
SECTION 4.4 Required Authorizations. There have been or will be timely
filed, given, obtained or taken, all applications, notices, consents, approvals,
orders, registrations, qualifications
waivers or other actions of any kind required by virtue of execution and
delivery of this Agreement by NewState or the consummation by it of the
transactions contemplated hereby.
SECTION 4.5 Compliance with Law and Government Regulations. NewState is
in compliance with all applicable statutes, regulations, decrees, orders,
restrictions, guidelines and standard affecting its properties and operations,
imposed by the United States of America or any state to which NewState is
subject.
SECTION 4.6 Litigation. There is no litigation, arbitration, proceeding
or investigation pending or threatened to which NewState is a party or which may
result in any material change in the business of condition, financial or
otherwise, of NewState or in any of its properties or assets, or which might
result in any liability on the part of NewState, or which questions the validity
of this Agreement or of any action taken or to be taken pursuant to or in
connection with the provisions of this Agreement, and to the best knowledge of
NewState, there is no basis for any such litigation, arbitration, proceeding or
investigation.
SECTION 4.7 Governmental Consent. No consent, approval, authorization
or order of, or registration, qualification, designation, declaration or filing
with, any governmental authority on the part of NewState is required in
connection with the execution and delivery of this Agreement or the carrying out
of any transactions contemplated.
SECTION 4.8 Authority. NewState and its shareholders representing no
less than one hundred percent (100%) of the issued and outstanding shares of
NewState capital stock of record, have approved this Agreement and duly
authorized the execution hereof. NewState has full power, authority and legal
right to enter into this Agreement on behalf of NewState and its shareholders
and to consummate the transactions contemplated hereby, and all corporate action
necessary to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby has been duly and validly
taken. The execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and compliance by NewState with the provisions
hereof will not (a) conflict with or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
NewState under, any of the terms, conditions or provisions of the Articles of
Incorporation or By-Laws of NewState, or any note, bond, mortgage, indenture,
license, agreement or any instrument or obligation to which NewState is a party
or by which it is bound; or (b) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to NewState or any of its properties or
assets; provided however, the parties' acknowledge that the Korean Bank Note is
overdue, has not been extended, and may not by its terms be assigned.
SECTION 4.9 Ownership of NewState Capital Shares. NewState is the owner
of 99.6% of the NewState Capital Shares currently issued and outstanding and
such shares are to be transferred to Subsidiary under this Agreement, has full
power and authority to transfer the NewState Capital Shares to Subsidiary
hereunder, and that such shares are free and clear of any liens, charges,
mortgages, pledges or encumbrances and that such shares are not subject to any
claims as to the ownership thereof, or any rights, powers or interest therein,
by any third party.
SECTION 4.10 Investment Purpose. NewState is acquiring the Racom Shares
for investment purposes only and acknowledges that the Racom Shares issued
hereunder are "restricted securities" and may not be sold, traded or otherwise
transferred without registration under the Securities Act or exemption
therefrom, except to the shareholders of NewState in connection with the
liquidation of NewState.
SECTION 4.11 Full Disclosure. None of the representations and
warranties made by the Shareholders or in any exhibit, certificate or memorandum
furnished or to be furnished by, their behalf pursuant hereto, contains or will
contain any untrue statement of material fact, or omits any material fact, the
omission of which would be misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NEWSTATE CAPITAL
NewState Capital hereby represents, warrants and agrees that:
SECTION 5.1 Organization of NewState Capital. NewState Capital is a
company duly organized, validly existing and in good standing under the laws of
the Country of Korea. There are no corporations or other entities with respect
to which (i) NewState Capital owns any of the outstanding stock or other
interests, or (ii) NewState Capital may be deemed to be in control because of
factors or relationships other than the quantity of stock or other interests
owned in such entity except for the 4,000,000 shares that NewState Capital owns
in Yongman General Finance Co., Ltd. a Korean corporation. NewState has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby.
SECTION 5.2 Capitalization of NewState Capital. The authorized capital
stock of NewState Capital consists of sixteen million (16,000,000) shares of
stock, par value Won 5,000 per share which has been issued, as disclosed in
Section 5.10 herein. The NewState Shares has been duly authorized and validly
issued and are fully paid and non-assessable, and has been issued in compliance
with any and all applicable laws or pursuant to appropriate exemptions
therefrom.
SECTION 5.3 Charter Documents. Translated, complete and correct copies
of the organizational documentation and of NewState Capital and all amendments
thereto, have been delivered to Racom.
SECTION 5.4 Tax Returns and Payments. All of NewState Capital's tax
returns (federal, state, city, county or foreign) which are required by law to
be filed on or before the date of this Agreement, have been duly filed or
extended with the appropriate governmental authority. NewState
Capital has paid all taxes to be due on said returns, any assessments made
against NewState Capital and all other taxes, fees and similar charges imposed
on NewState Capital by any governmental authority (other than those, the amount
or validity of which is being contested in good faith by appropriate
proceedings). No tax liens have been filed and no claims are being assessed with
respect to any such taxes, fees or other similar charges.
SECTION 5.5 Required Authorizations. There have been or will be timely
filed, given, obtained or taken, all applications, notices, consents, approvals,
orders, registrations, qualifications waivers or other actions of any kind
required by virtue of the execution and delivery of this Agreement or the
consummation by it of the transactions contemplated hereby.
SECTION 5.6 Compliance with Law and Government Regulations. NewState
Capital is in compliance with all applicable statutes, regulations, decrees,
orders, restrictions, guidelines and standard affecting its properties and
operations, imposed by the United States of America or any government to which
NewState Capital is subject.
SECTION 5.7 Litigation. There is no litigation, arbitration, proceeding
or investigation pending or threatened to which NewState Capital is a party or
which may result in any material change in the business of condition, financial
or otherwise, of NewState Capital or in any of its properties or assets, or
which might result in any liability on the part of NewState Capital, or which
questions the validity of this Agreement or of any action taken or to be taken
pursuant to or in connection with the provisions of this Agreement, and to the
best knowledge of NewState Capital, there is no basis for any such litigation,
arbitration, proceeding or investigation.
SECTION 5.8 Patents, Trade Names and Rights. Exhibit 5.8 annexed hereto
and by this reference is made a part hereof, contains a complete list of all
patents, trademarks, service marks, trade marks, service xxxx, trademark and
service xxxx registrations, applications and licenses with respect the forgoing
owned or held by NewState Capital. NewState Capital has no knowledge of any
facts and nothing has come to its attention that would lead it to believe that
it has infringed or misappropriated or is infringing upon any trademark,
copyright, patent or other similar right of any person. No claim relating
thereto is pending or to the knowledge of NewState Capital is threatened.
SECTION 5.9 Governmental Consent. No consent, approval, authorization
or order of, or registration, qualification, designation, declaration or filing
with, any governmental authority on the part of NewState Capital is required in
connection with the execution and delivery of this Agreement or the consummation
of any transactions contemplated hereby.
SECTION 5.10 Ownership of NewState Capital Shares. NewState Capital
represents and warrants that it has only 4,978,000 shares of stock issued and
outstanding which are issued to two (2) shareholders as follows:
NewState Capital Corp. 99.6%
The Estate of Xxx Xxx Xxxx 0.4%
NewState Capital further represents and warrants that there are no restrictions
on transfer of the NewState Capital Shares imposed by NewState Capital,
contractual restriction or law.
SECTION 5.11 Full Disclosure. None of the representations and
warranties made by the NewState Capital or in any exhibit, certificate or
memorandum furnished or to be furnished by, or on their behalf pursuant hereto,
contains or will contain any untrue statement of material fact, or omits any
material fact, the omission of which would be misleading.
ARTICLE VI
COVENANTS OF NEWSTATE AND NEWSTATE CAPITAL
SECTION 6.1 Conduct Prior to the Closing.
Between the date hereof and the Closing:
(a) NewState and NewState Capital will conduct their businesses in the
ordinary course.;
(b) NewState Capital will not declare any dividends or distributions
with respect to its capital stock or amend its organization documentation,
without the prior written consent of Racom;
(c) Except within the regular course of business, NewState and NewState
Capital will not incur any indebtedness for money borrowed or issue any debt
securities, or incur or suffer to be incurred any liability or obligation of any
nature whatsoever, or cause or permit any lien, encumbrance or security interest
to be created or arise on or in any of its properties or assets, without the
prior written consent of Racom;
(d) NewState and NewState Capital will comply with all requirements
which foreign, federal or state law may impose on it with respect to this
Agreement and the transactions contemplated hereby, and will promptly cooperate
with and furnish written information to NewState Capital in connection with any
such requirements imposed upon the parties hereto in connection therewith;
(e) NewState and NewState Capital shall grant to Racom and its counsel,
accountants and other representatives, full access during normal business hours
during the period to the Closing to all its respective properties, books,
contracts, commitments and records and, during such period, furnish promptly to
Racom and such representatives all information relating to NewState as Racom may
reasonably request, and shall extend to Racom the opportunity to meet with
NewState's and NewState Capital's accountants and attorneys to discuss the
financial condition of NewState Capital.
SECTION 6.2 Affirmative Covenants. Prior to Closing, NewState and
NewState Capital will do the following:
(a) NewState and NewState Capital shall use its best efforts to
accomplish all actions necessary to consummate this Agreement, including
satisfaction of all conditions contained in this Agreement; and
(b) Promptly notify Racom in writing of any material adverse change in
the financial condition, business, operations or key personnel of NewState
and/or NewState Capital, any threatened material litigation or investigation,
any breach of its representations or warranties contained herein, and any
material contract, agreement, license or other agreement which, if in effect on
the date of this Agreement, should have been included in this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 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 shall be paid by
the party incurring such expense or as otherwise agreed to herein.
SECTION 7.2. 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.
SECTION 7.3 Necessary Actions. Subject to the terms and conditions
herein provided, each of the parties hereto agree 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 purpose of this Agreement, the proper officers and/or
directors of Racom or NewState, as the case may be, shall take all such
necessary action.
SECTION 7.4 Confidentiality. All parties hereto agree to keep
confidential this Agreement and all information and documents relating to this
Agreement until such time as the Agreement and the transactions contemplated
hereunder are made public by means of an appropriate press release or by any
other means reasonably assured to make such information publicly available.
SECTION 7.5 Liquidation and Dissolution of NewState. Immediately after
Closing, NewState shall not engage in any business and shall, as soon as
practicable after Closing, distribute the Racom Shares, pro rata, to its
shareholders and shall dissolve.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF THE PARTIES
The obligations of the parties under this Agreement are subject to the
fulfillment and satisfaction of each of the following conditions:
SECTION 8.1 Legal Action. No preliminary or permanent injunction or
other order by any federal or state court which prevents the consummation of
this Agreement or any of the transactions contemplated by this Agreement shall
have been issued and remain in effect.
SECTION 8.2 Absence of Termination. The obligations to consummate the
transactions contemplated hereby shall not have been canceled pursuant to
Article X hereof.
SECTION 8.3 Required Approvals. Racom, Subsidiary, NewState and
NewState Capital shall have received all such approvals, consents,
authorizations or modifications as may be required to permit the performance by
Racom, Subsidiary, NewState and NewState Capital of the respective obligations
under this Agreement, and the consummation of the transactions herein
contemplated, whether from governmental authorities or other persons, and Racom,
Subsidiary, NewState and NewState Capital shall each have received any and all
permits and approvals from any regulatory authority having jurisdiction required
for the lawful consummation of this Agreement.
SECTION 8.4 "Blue Sky" Compliance. There shall have been obtained any
and all permits, approvals and consents of the appropriate state securities
commissions of any jurisdictions, and of any other governmental body or agency,
which counsel for Racom may reasonably deem necessary or appropriate so that
consummation of the transactions contemplated by this Agreement may be in
compliance with all applicable laws.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF RACOM AND SUBSIDIARY
All obligations of Racom under this Agreement are subject to the
fulfillment and satisfaction by NewState and NewState Capital prior to or at the
time of Closing, of each of the following conditions, any one or more of which
may be waived by Racom.
SECTION 9.1 Representations and Warranties True at Closing. All
representations and warranties of NewState and NewState Capital contained in
this Agreement will be true and correct at and as of the time of the Closing,
and NewState and NewState Capital shall have delivered to Racom certificates,
dated the date of the Closing, to such effect and in the form and substance
satisfactory to Racom, and signed by its respective presidents and secretaries.
SECTION 9.2 Performance. The obligations of NewState and New State
Capital to be performed on or before the Closing pursuant to the terms of this
Agreement shall be duly performed at such time and NewState Capital shall have
delivered to Racom a certificate, dated the date of the Closing, to such effect
and in form and substance satisfactory to Racom.
SECTION 9.3 Authority. All action required to be taken by, or on the
part of NewState and its shareholders and NewState Capital to authorize the
execution, delivery and performance of this Agreement by NewState and NewState
Capital and the consummation of the transactions contemplated hereby, shall have
been duly and validly taken.
SECTION 9.4 Absence of Certain Changes or Events. There shall not have
occurred, since the date hereof, any adverse change in the business, condition
(financial or otherwise), assets or liabilities of NewState or NewState Capital
any event or condition of any character adversely affecting NewState or NewState
Capital, and it shall have delivered to Racom, certificates, dated the date of
the Closing, to such effect and in form and substance satisfactory to Racom.
ARTICLE X
CONDITIONS PRECEDENT OF NEWSTATE
All obligations of NewState under this Agreement are subject to the
fulfillment and satisfaction by Racom prior to or at the time of Closing, of
each of the following conditions, any one or more of which may be waived by
NewState.
SECTION 10.1 Representations and Warranties True at Closing. All
representations and warranties of Racom contained in this Agreement will be true
and correct at and as of the time of the Closing, and Racom shall have delivered
to NewState certificates, dated the date of the Closing, to such effect and in
the form and substance satisfactory to NewState, and signed, in the case of
Racom, by its president and secretary.
SECTION 10.2 Performance. The obligations of Racom to be performed on
or before the Closing pursuant to the terms of this Agreement shall have been
duly performed at such time, and Racom shall have delivered to NewState a
certificate, dated the date of the Closing, to such effect and in form and
substance satisfactory to NewState, and signed in the case of Racom, by its
president and secretary.
SECTION 10.3 Authority. All action required to be taken by, or on the
part of Racom and its shareholders to authorize the execution, delivery and
performance of this Agreement by Racom and the consummation of the transactions
contemplated hereby, shall have been duly and validly taken.
SECTION 10.4 Absence of Certain Changes or Events. There shall not have
occurred, since the date hereof, any adverse change in the business, condition
(financial or otherwise), assets or liabilities of Racom or any event or
condition of any character adversely affecting Racom, and it shall have
delivered to NewState, certificates, dated the date of the Closing, to such
effect and in form and substance satisfactory to NewState and signed, in the
case of Racom, by its president and secretary.
ARTICLE XI
TERMINATION
SECTION 11.1 Termination. Notwithstanding anything herein or elsewhere
to the contrary, this Agreement may be terminated:
(a) By mutual agreement of the parties hereto at any time;
(b) By the Board of Directors of Racom at any time prior to the
Closing, if:
(i) a condition to performance by Racom under
this Agreement or a covenant of NewState or NewState Capital
contained herein shall not be fulfilled on or before the time
of the Closing or at such other time and date specified for
the fulfillment for such covenant or condition; or
(ii) a material default or breach of this
Agreement shall be made by NewState or NewState Capital; or
(c) By the Board of Directors of NewState or NewState Capital at any
time prior to the Closing, if:
(i) a condition to NewState's performance under
this Agreement or a covenant of Racom or Subsidiary contained
herein shall not be fulfilled on or before the time of the
Closing or at such other time and date specified for the
fulfillment for such covenant or condition; or
(ii) a material default or breach of this
Agreement shall be made by Racom or Subsidiary.
SECTION 11.2 Effect of Termination. If this Agreement is terminated,
this Agreement, except as to Section 12.1 and Section 12.2, shall no longer be
of any force or effect and there shall be no liability on the party of any party
or its respective directors, officers or stockholders; provided however, that in
the case of a termination without cause by a party or a termination pursuant to
Section 11.1 (b)(i) or 11.1(c)(i) hereof because of a prior material default
under or a material breach
of this Agreement by another party, the damages which the aggrieved party or
parties may recover from the defaulting party or parties shall in no event
exceed the amount of out-of-pocket costs and expenses incurred by such
aggravated party or parties in connection with this Agreement, and no party to
this Agreement shall be entitled to any injunctive relief.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Cost and Expenses. All costs and expenses incurred in
connection with this Agreement will be paid by the party incurring such
expenses. In the event of any termination of this Agreement pursuant to Section
11.1, subject to the provisions of Section 11.2, Racom, Subsidiary, NewState,
and NewState Capital will each bear their own respective expenses.
SECTION 12.2 Extension of Time: Waivers.
At any time prior to the Closing date:
(a) Racom and Subsidiary may (i) extend the time for the performance of
any of the obligations or other acts of NewState or NewState Capital, (ii) waive
any inaccuracies in the representations and warranties of NewState and NewState
Capital contained herein or in any documents delivered pursuant hereto by
NewState or NewState Capital, (iii) waive compliance with any of the agreements
or conditions contained herein to be performed by NewState or NewState Capital.
Any agreement on the part of Racom and Subsidiary to any such extension or
waiver shall be valid only if set forth in an instrument, in writing, signed on
behalf of Racom and Subsidiary.
(b) NewState and NewState Capital may (i) extend the time for the
performance of any of the obligations or other acts of Racom or Subsidiary, (ii)
waive any inaccuracies in the representations and warranties of Racom or
Subsidiary contained herein or in any documents delivered pursuant hereto by
Racom and (iii) waive compliance with any of the agreements or conditions
contained herein to be performed by Racom or Subsidiary. Any agreement on the
party of NewState and NewState Capital to any such extension or waiver shall be
valid only if set forth in an instrument, in writing, signed on behalf of
NewState and NewState Capital.
SECTION 12.3 Notices. Any notice to any party hereto pursuant to this
Agreement shall be in writing and given by Certified or Registered Mail or by
facsimile, addressed as follows:
NewState
00 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
NewState Capital
00 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
with a copy to:
Pitney, Xxxxxx, Xxxx & Xxxxx
000 Xxxxxx Xxxxx
Xxxxxxx Xxxx, Xxx Xxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxx, Esq.
Racom Corporation & NSK Holdings, Inc.
c/x Xxxxxx & Xxxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000-0000
with a copy to:
Xxxxxx & Gottbetter & Xxxxxxxx, LLP
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000-0000
Additional notices are to be given as to each party, at such other
address as should be designated in writing complying as to delivery with the
terms of this Section 12.3. All such notices shall be effective when sent,
addressed as aforesaid.
SECTION 12.4 Parties in Interest. This Agreement shall 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 12.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and together shall
constitute one documents. The delivery by facsimile of an executed counterpart
of this Agreement shall be deemed to be an original and shall have the full
force and effect of an original executed copy.
SECTION 12.6 Severability. The parties hereto agree and affirm that
none of the provisions herein is dependent upon the validity of any other
provision, and if any part of this Agreement is deemed to be unenforceable, the
remainder of the Agreement shall remain in full force and effect.
SECTION 12.7 Headings. The "Article" and "Section" headings are
provided herein for convenience of reference only and do not constitute a part
of this Agreement.
SECTION 12.8 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, shall
survive the Closing and the delivery of the Racom Shares
issued hereunder at the Closing, for a period of one year from the Closing
regardless of any investigation made by or on behalf of any of the parties
hereto.
SECTION 12.9 Assignability. This Agreement shall not be assigned by any
of the parties hereto without the prior written consent of the other parties.
SECTION 12.10 Applicable Law. This Agreement shall be governed by and
constituted in accordance with the laws of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement in a manner legally binding upon them on July 20, 1999.
RACOM SYSTEMS, INC. Attest:
----------------------------------- ---------------------------------------
By:
Its: Secretary
NSK HOLDINGS, INC. Attest:
----------------------------------- ---------------------------------------
By:
Its: Secretary
NEWSTATE CAPITAL CORP. Attest:
----------------------------------- ---------------------------------------
By:
Its: Secretary
NEWSTATE CAPITAL CO. LTD. Attest:
----------------------------------- ---------------------------------------
By:
Its: Secretary
