EXHIBIT 10.1
SHARE EXCHANGE AND REORGANIZATION AGREEMENT, dated as of December 15, 2004 (the
"AGREEMENT"), between NORTH SHORE CAPITAL IV, INC., a Colorado corporation with
offices located at 0000 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000 (together
with its successor in interest as a result of the Reincorporation, as
hereinafter defined, "NSC"); and GRIDLINE COMMUNICATIONS CORP., a Delaware
corporation with offices located at 00000 Xxxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxx
Xxxx, Xxxxx 00000 ("GRIDLINE"), and THE BENEFICIAL STOCKHOLDERS OF GRIDLINE
IDENTIFIED IN SCHEDULE A HERETO (the "GRIDLINE SHAREHOLDERS").
INTRODUCTION
NSC desires to acquire all of the issued and outstanding shares of
Gridline capital stock (the "GRIDLINE CAPITAL STOCK") solely in exchange for an
aggregate of 47,600,000 shares of authorized, but theretofore unissued, shares
of common stock, par value $0.001 per share (the "NSC COMMON STOCK"), of the
newly formed Delaware corporation that is the successor in interest to North
Shore Capital IV, Inc., a Colorado corporation, giving effect to the
Reincorporation (as defined below), representing approximately 95.5% of the
fully diluted outstanding NSC Common Stock giving effect to such issuance, but
without giving effect to the issuance of NSC Common Stock upon the exercise or
conversion of certain options, warrants and convertible securities described on
SCHEDULE B hereto. The Gridline Shareholders desire to exchange all of their
beneficially owned shares of Gridline Capital Stock solely for shares of NSC
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 NSC and Gridline have, and the Gridline
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 NSC
shall acquire all of the issued and outstanding shares of Gridline Capital Stock
solely in exchange for an aggregate of 47,600,000 shares of authorized, but
theretofore unissued, shares of NSC Common Stock. The parties hereto agree that
at the closing of the transactions contemplated by this Agreement (the
"CLOSING"):
(i) Gridline will become a wholly-owned subsidiary of NSC
subject to the conditions and provisions of Section 1.03 hereof;
(ii) North Shore Capital IV, Inc., a Colorada corporation,
shall reincorporate in the State of Delaware (the "REINCORPORATION"),
and shall change its name in connection therewith to "Gridline
Communications Corp. and cause its certificate and articles of
incorporation to be in the form of EXHIBIT A hereto and cause its
by-laws to be in the form of EXHIBIT B hereto; and
(iii) NSC shall assume each option (each a "GRIDLINE STOCK
OPTION") and each warrant (each a "GRIDLINE WARRANT") outstanding at the
as of the Closing by executing and delivering to such holder an
assumption, which assumption shall read as set forth in EXHIBIT
1.01(iii) hereto, incorporated in, and made a part of this Agreement by
this reference thereto, and NSC shall be substituted for Gridline with
respect to each Gridline Stock Option or Gridline Warrant so assumed,
and thereafter, until any event that affects the exercise price, each
Gridline Stock Option and Gridline Warrant assumed by NSC as aforesaid
shall represent an option to purchase, instead of Gridline Common Stock,
the number of whole shares of NSC Common Stock (after disregarding all
fractions) which equals the number of shares of Gridline Common Stock
subject to such option immediately prior to the Closing divided by
2.03151261 and the price per share of NSC Common Stock at which such
option shall be exercisable shall (until any event that affects the
exercise price) be an amount (to the next higher whole cent) equal to
the option price per share of Gridline Common Stock immediately prior to
the Closing multiplied by 2.03151261. Except as aforesaid, the period
during which, and the terms upon which, each Gridline Stock Option and
Gridline Warrant may be exercised shall remain unchanged.
SECTION 1.02 EXCHANGE OF SHARES.
(a) At the Closing, NSC will cause to be issued and held for
delivery to the Gridline Shareholders or their designees, stock certificates
representing an aggregate of 47,600,000 shares of NSC Common Stock, representing
95.5% of the fully diluted outstanding NSC Common Stock giving effect to such
issuance, in exchange for all of the issued and outstanding shares of Gridline
Capital Stock, which shares will be delivered to NSC at the Closing.
(b) The shares of NSC Common Stock to be issued pursuant to
paragraph (a) of this Section 1.02 will be authorized, but theretofore unissued
shares of NSC Common Stock, and will be issued to the Gridline Shareholders or
as directed thereby as set forth in SCHEDULE 1.02(b) hereof.
(c) All shares of NSC 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 Gridline
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 NSC 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 NSC Common Stock to be issued hereunder shall bear a restrictive
legend in substantially the following form:
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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.
(d) All shares of NSC Common Stock to be issued pursuant to Gridline
Stock Options and Gridline Warrants shall be deemed "RESTRICTED SECURITIES" as
defined in paragraph (a) of Rule 144 under the Securities Act. All shares of NSC
Common Stock to be issued under, and pursuant to, the terms of the Gridline
Stock Options and the Gridline Warrants 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 NSC Common Stock to be issued hereunder
shall bear a restrictive legend in substantially the form set forth in Section
1.02(c).
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) Gridline will deliver to NSC stock certificates or other
evidences representing all of the issued and outstanding shares of Gridline
Capital Stock, duly endorsed, so as to make NSC the holder thereof, free and
clear of all liens, claims and other encumbrances;
(b) (i) NSC will deliver to, or at the direction of, the
Gridline Shareholders, in accordance with SCHEDULE 1.02(b) hereof, stock
certificates representing an aggregate of 47,600,000 shares of NSC
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 approximately
95.5% of the outstanding NSC Common Stock giving effect to the issuance
thereof;
(ii) Upon the exercise of the Gridline Stock Options and
Gridline Warrants in accordance with the terms thereof and against
payment of the exercise price therein specified, Gridline shall deliver
to the holder of such Gridline Stock Options and/or Gridline Warrants,
as applicable, exercising such securities, certificates representing the
number of shares of NSC Common Stock determined pursuant to the
Assumption Agreement, 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.
(c) NSC will deliver an Officer's 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 NSC
are true and correct as of, or have been fully performed and complied with by,
the Closing Date; and
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(d) Gridline 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
Gridline 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, NSC has taken all necessary and requisite corporate and other action,
including without limitation, actions of the Board of Directors in order to
approve this Agreement and all transactions contemplated hereby and in
connection herewith, including, without limitation, the Reincorporation.
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, NSC
will file any additional necessary documents that may be required by the States
of Colorado and Delaware, the United States of America, or otherwise.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01 REPRESENTATIONS AND WARRANTIES OF NSC. NSC hereby
represents and warrants to, and agrees with, Gridline and the Gridline
Shareholders as follows:
(a) ORGANIZATION AND QUALIFICATION. Other than as set forth in
Section A of the disclosure letter, of even date herewith, from NSC to Gridline
and the Gridline Shareholders (the "NSC DISCLOSURE LETTER"), NSC has no
subsidiaries or affiliated corporation or owns any interest in any other
enterprise (whether or not such enterprise is a corporation). NSC is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Colorado, 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. Commencing upon the Reincorporation, NSC shall be 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. Other than as set forth in Section A of the NSC
DISCLOSURE LETTER, NSC 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.
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(b) CAPITALIZATION. The authorized capital stock of NSC consists of
50,000,000 shares of NSC Common Stock, of which 2,247,500 shares are
outstanding, and 10,000,000 shares of non-cumulative convertible preferred
stock, par value $0.002 per share, no shares of which are outstanding.
Commencing upon the Reincorporation and not giving effect to the Closing, the
authorized capital stock of NSC shall consist of 230,000,000 shares of NSC
Common Stock, of which 2,247,500 shares shall be outstanding, and 20,000,000
shares of "blank check" preferred stock, par value $0.001 per share, no shares
of which shall then be outstanding. Prior to Closing, NSC shareholders shall
approve and caused to become effective the Reincorporation. Each of such
outstanding shares of NSC 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. 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 NSC or
any security or other instrument convertible into, exercisable for, or
exchangeable for capital stock of NSC. There is outstanding no security or other
instrument convertible into, or exchangeable or exercisable for, capital stock
of NSC.
(c) FINANCIAL CONDITION. NSC has filed with the United States
Securities and Exchange (the "SEC") true and correct copies of the following:
audited balance sheets of NSC as of December 31, 2001, 2002, and 2003; unaudited
balance sheets of NSC as of September 30, 2003; audited statements of income,
statements of stockholders' equity, and statements of cash flows of NSC for the
years ended December 31, 2001, 2002, and 2003; and the unaudited statements of
income, statements of stockholders' equity, and statements of cash flows of NSC
for the nine months ended September 30, 2003. Each such balance sheet shall
present fairly the financial condition, assets, liabilities, and stockholders'
equity of NSC as of its respective date; each such statement of income and
statement of stockholders' equity shall present fairly the results of operations
of NSC for the period indicated; and each such statement of cash flows shall
present 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 and shall be in accordance
with the books and records of NSC. 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 Xxxxxxxx-Xxxxx Act of 2002) with
respect to the report relating thereto. Since September 30, 2004:
(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 NSC.
(ii) NSC 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 NSC.
(iii) The operations and businesses of NSC have been conducted
in all respects only in the ordinary course, except as described in the
filings made and to be made by NSC with the SEC and except as otherwise
described herein.
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There is no fact known to NSC which materially adversely affects or in the
future (as far as NSC can reasonably foresee) may materially adversely affect
the financial condition, results of operations, businesses, properties, assets,
liabilities, or future prospects of NSC; provided, however, that NSC expresses
no opinion as to political or economic matters of general applicability. NSC 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. NSC 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 NSC BALANCE SHEET")
as of September 30, 2004 (the "LAST NSC BALANCE SHEET DATE") referred to
in Section 2.01(c); and
(ii) Other liabilities arising since the Last NSC 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 NSC 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 NSC Balance Sheet are sufficient for all
accrued and unpaid Taxes of NSC, whether or not due and payable and whether or
not disputed, under tax laws, as in effect on the Last NSC 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 NSC
will not cause any Taxes to be payable (other than those that may possibly be
payable by the Gridline Shareholders as a result of the contribution of their
shares of Gridline Capital Stock to NSC) 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 Gridline
Shareholders. The Internal Revenue Service has audited and settled or the
statute of limitations has run upon all federal income tax returns of NSC for
all taxable years up to and including the taxable year ended December 31, 1997.
NSC has filed all federal, state, local, and foreign tax returns required to be
filed by it; has delivered to the Gridline 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 NSC 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 Gridline 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 Section G of the
NSC DISCLOSURE LETTER, there is no litigation, arbitration, claim, governmental
or other proceeding (formal or
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informal), or investigation pending or, to the best of NSC's knowledge,
threatened, or in prospect (or any basis therefor known to NSC) with respect to
NSC or any of its businesses, properties, or assets. NSC is not affected by any
present or threatened strike or other labor disturbance nor to the knowledge of
NSC, is any union attempting to represent any employee of NSC as collective
bargaining agent. NSC 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 NSC; nor is NSC required to take any
action in order to avoid such violation or default.
(f) PROPERTIES.
(i) NSC owns no real property. NSC has good title to all
personal properties and assets material to NSC and used in its businesses or
owned by it (except real and other properties and assets material to NSC as are
held pursuant to leases or licenses described in Section B or C of the NSC
DISCLOSURE LETTER), free and clear of all liens, mortgages, security interests,
pledges, charges, and encumbrances (except such as are listed in Section D of
the NSC DISCLOSURE LETTER).
(ii) Set forth in Section B of the NSC DISCLOSURE LETTER is a
true and complete list of all tangible properties and assets owned by NSC or
leased or licensed by NSC 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 NSC from or to a third party, a
description of such lease or license. All such properties and assets (including
Intangibles) owned by NSC are reflected on the Last NSC Balance Sheet (except
for acquisitions subsequent to the Last NSC Balance Sheet Date and prior to the
Closing Date, which are either noted in Section B or C of the NSC DISCLOSURE
LETTER or are approved in writing by Gridline). All tangible properties and
assets owned by NSC or leased or licensed by NSC 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 NSC excepted).
(iii) To the best of NSC's knowledge, no real property leased
or licensed by NSC 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 NSC'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 NSC is now engaged or the businesses in
which it contemplates engaging.
(iv) The properties and assets (including Intangibles (as
hereinafter defined)) owned by NSC (other than those leased or licensed by NSC
to a third party) or leased or licensed by NSC from a third party constitute all
such properties and assets which are necessary to the businesses of NSC as
presently conducted.
(v) NSC 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
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Hazardous Substance on or off the site of any property of NSC. 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).
(g) CONTRACTS AND OTHER INSTRUMENTS. Section D of the NSC 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 NSC. NSC has furnished
to the Gridline Shareholders (i) the certificate of incorporation (or other
charter document) and by-laws of NSC and all amendments thereto, as presently in
effect and as shall be in effect upon the Reincorporation, and (ii) the
following: (A) true and correct copies of all material contracts, agreements,
and instruments referred to in Section D of the NSC DISCLOSURE LETTER; (B) true
and correct copies of all material leases and licenses referred to in Section B
or C of the NSC DISCLOSURE LETTER hereto; and (C) true and correct written
descriptions of all material supply, distribution, agency, financing, or other
arrangements or understandings referred to in Section B or C of the NSC
DISCLOSURE LETTER. To the best of NSC's knowledge, neither NSC nor (to the
knowledge of NSC) 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, agreement, instrument, lease, or license is in
full force and is (to the best of NSC'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 NSC 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. NSC enjoys peaceful and undisturbed
possession under all material leases and licenses under which it is operating.
NSC 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 NSC) may in the future have a
material adverse effect on the financial condition, results of operations,
businesses, properties, assets, liabilities, or future prospects of NSC. NSC 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 NSC, any director, officer, or employee of NSC (except for
employment agreements listed in Section D of the NSC DISCLOSURE LETTER and
employment and compensation arrangements described in Section E of the NSC
DISCLOSURE LETTER), any relative or affiliate of any stockholder of NSC or of
any such director, officer, or employee, or any other corporation or enterprise
in which any stockholder of NSC, 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
Section D of the NSC DISCLOSURE LETTER. The stock ledgers and stock transfer
books relating to all issuances and transfers of stock
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by NSC and the minute book records of NSC and all proceedings of the
stockholders and the Board of Directors and committees thereof of NSC since its
incorporation made available to counsel to Gridline and the Gridline
Shareholders are the original stock ledgers and stock transfer books and minute
book records of NSC or exact copies thereof. NSC 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 or its its certificate of incorporation
(or other charter document) or by-laws commencing upon the Reincorporation.
(h) EMPLOYEES.
(i) NSC 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 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 Section E of the NSC DISCLOSURE LETTER. NSC has
furnished to Gridline and the Gridline Shareholders: (A) true and correct copies
of all documents evidencing plans, obligations, or arrangements referred to in
Section E of the NSC DISCLOSURE LETTER (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 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 NSC were to be
terminated on the day prior to Closing Date, (A) no liability under Title IV of
ERISA would be incurred by NSC or Gridline 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 NSC 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 NSC 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
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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
NSC. There has been no breach of fiduciary duty or responsibility with respect
to any Employee Benefit Plan of NSC. No Employee Benefit Plan of NSC 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 Section E
of the NSC DISCLOSURE LETTER. NSC 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 NSC 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, NSC 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 NSC's knowledge) in prospect (or any basis
therefor known to NSC) with respect to any Employee Benefit Plan of NSC 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
NSC 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 NSC, any Employee Benefit Plan of NSC, 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 NSC'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 NSC
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 NSC) 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 NSC, nor any organization to which NSC 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 NSC has been
made or (to the knowledge of NSC) is contemplated against NSC, or any related
trust of any Pension Plan of NSC, and nothing has occurred which would result in
the assessment of
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unrelated business taxable income under the Code with respect to any Employee
Benefit Plan of NSC. Form 5500's have been timely filed with respect to all
Pension Plans of NSC. No event has occurred or (to the knowledge of NSC) 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 NSC.
(v) NSC 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) Section E of the NSC DISCLOSURE LETTER contains a true
and correct statement of the names, relationship with NSC, 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 December 31, 2003 of (A) each director, officer, or
other employee of NSC whose aggregate compensation for the fiscal year ended
December 31, 2003 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 NSC. Since [December 31, 2003, NSC 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 NSC been
instituted or amended to increase benefits thereunder. There is no contract,
agreement, plan, arrangement, or understanding covering any person that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible by NSC by reason of Section 280G of the Code.
(vii) NSC has not, since at least December 31, 2003, 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. NSC does not own or have
pending, and is not licensed or otherwise permitted to use, any material patent,
patent application, trademark, trademark application, service xxxx, 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 Section C of the NSC 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. Section C of the NSC 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 NSC or which otherwise relate to the businesses of NSC,
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 NSC 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 NSC 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 NSC which relates to the
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businesses, properties, or assets of NSC. Except as specified in Section C of
the NSC DISCLOSURE LETTER, to the knowledge of NSC: (v) NSC is the sole and
exclusive owner or licensee of, and (other than those exclusively licensed by
NSC 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, NSC 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) NSC 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 NSC as presently conducted or as it contemplates conducting,
except such as are so designated in Section C of the NSC DISCLOSURE LETTER.
Except as described in Section C of the NSC DISCLOSURE LETTER, NSC 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 NSC 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 NSC, there is no
infringement by others of Intangibles of NSC. As far as NSC 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 NSC. All
material contracts, agreements, instruments, leases, and licenses pertaining to
Intangibles to which NSC 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 NSC
or to which any of its businesses, properties, or assets are subject. NSC did
not register any trademark, tradename or service xxxx, design, or name used by
NSC to identify its products, businesses, or services. Neither any stockholder
of NSC, any director, officer, or employee of NSC, any relative or affiliate of
any stockholder of NSC, any such director, officer, or employee, nor any other
corporation or enterprise in which any stockholder of NSC, 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 NSC.
(j) QUESTIONABLE PAYMENTS. Neither NSC, nor any director, officer,
agent, employee, or other person associated with, or acting on behalf of, NSC,
nor any stockholder of NSC 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. NSC has all requisite power and authority to execute,
deliver, and perform this Agreement and to effect the Reincorporation. All
necessary corporate proceedings of NSC have been duly taken to authorize the
execution, delivery, and performance of this Agreement and the effectuation of
the Reincorporation thereby. This Agreement has been duly authorized, executed,
and delivered by NSC, constitutes the legal, valid, and binding obligation of
NSC, and is enforceable as to NSC 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
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other tribunal is required by NSC for the execution, delivery, or performance of
this Agreement or the effectuation of the Reincorporation by NSC. No consent of
any party to any material contract, agreement, instrument, lease, license,
arrangement, or understanding to which NSC 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 or the Reincorporation
(except such consents referred to in Section D of the NSC DISCLOSURE LETTER);
and the execution, delivery, and performance of this Agreement and the
effectuation of the Reincorporation will not (if the consents referred to in
Section D of the NSC DISCLOSURE LETTER are obtained prior to the Closing)
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 NSC to which it was not subject immediately before
this Agreement was executed or the Reincorporation was effectuated, as
applicable, 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) (as currently in effect or as in effect upon the Reincorporation) or
by-laws (as currently in effect or as in effect upon the Reincorporation)of NSC,
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 NSC or to which any of its businesses, properties, or assets
are subject, which violation or breach would have a material adverse effect on
NSC. Neither NSC, 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, including, without limitation,
the Reincorporation.
(l) STATUS OF SHARES OF NSC COMMON STOCK TO BE ISSUED.
(i) Assuming without investigation that the shares of
Gridline Capital Stock outstanding on the Closing Date are validly
authorized, validly issued, fully paid, and nonassessable, the shares of
NSC Common Stock to be issued pursuant to Section 1.02(a) hereof are
validly authorized and, when the such shares of NSC Common Stock have
been duly delivered pursuant to the terms of this Agreement, such shares
of NSC 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.
(ii) The shares of NSC Common Stock to be issued pursuant to
the to terms of such Gridline Stock Options and Gridline Warrants are
validly authorized and, when such shares of NSC Common Stock have been
duly delivered pursuant to, and in accordance with, the terms of the
Gridline Stock Options and the Gridline Warrants against payment of the
exercise price specified therein, such shares of NSC 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. All policies of fire and other insurance against
casualty and other losses and public liability insurance carried by NSC are
described in Section F of the NSC DISCLOSURE LETTER (including the risks covered
and limits of such policies) and are in full force and effect. All
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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. NSC has not
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 NSC 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
NSC 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 assets of NSC or
requiring or recommending any equipment or facilities to be installed on any
premises from which the businesses of NSC is conducted or in connection with any
of the respective assets thereof. NSC does not have any knowledge of any
material proposed increase in applicable insurance rates or of any conditions or
circumstances applicable to the businesses thereof that might result in such
increases. No such policy is terminable by virtue of the transactions
contemplated by this Agreement.
(o) TRADING MATTERS. At the date hereof and at the Closing Date:
(i) the NSC Common Stock is eligible to be traded and quoted
in the over-the-counter market known as the "pink sheet market" (the "OTC");
(ii) NSC has and shall have performed or satisfied all of its
undertakings to, and of its obligations and requirements with, the SEC;
(iv) NSC has not, and shall not have taken any action that
would preclude, or otherwise jeopardize, the inclusion of the NSC Common Stock
for quotation on the OTC or the OTC Bulletin Board.
(p) REORGANIZATION.
(i) NSC 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(a)(1)(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. NSC 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) NSC has no plan or intention to reacquire, and, to NSC's
knowledge, no person related to NSC within the meaning of Treasury Regulations
Section 1.368-1 has a plan or intention to acquire, any of the NSC Common Stock
pursuant to Section 1.02(a) hereof.
(q) COMPLETENESS OF DISCLOSURE. No representation or warranty by NSC
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.
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(r) PERIODIC REPORTING.
(i) The NSC Common Stock has been registered under Section
12 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and
NSC is subject to the periodic reporting requirements of Section 13 of the
Exchange Act. NSC has heretofore provided to Gridline and the Gridline
Shareholders true, complete, and correct copies of all forms, reports,
schedules, statements, and other documents required to be filed by it under the
Exchange Act since at least April 18, 2000 as such documents have been amended
since the time of the filing thereof (the "NSC SEC DOCUMENTS"). The NSC 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 NSC 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 NSC 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. NSC has delivered to Gridline copies of, all
written descriptions of, and all policies, manuals and other documents
promulgating, such disclosure controls and procedures. To NSC'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 April 18, 2000. As used in the 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 NSC have signed, and the Company has furnished to the SEC, all
certifications required by Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of
2002; such certifications contain no qualifications or exceptions to the matters
certified therein and have not been modified or withdrawn; and neither NSC 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) NSC has heretofore has provided Gridline complete and
correct copies of all certifications filed with the SEC pursuant to Sections 302
and 906 of Xxxxxxxx-Xxxxx Act of 2002 and hereby reaffirms, represents and
warrants to Gridline the matters and statements made in such certificates.
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(s) COMPLIANCE WITH LAW AND GOVERNMENT REGULATIONS.
(i) NSC 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. NSC is not subject to any order, decree, judgment or other sanction of
any court, administrative agency or other tribunal.
(ii) Each of NSC, its directors and its senior financial
officers has consulted with NSC's independent auditors and with NSC's outside
counsel with respect to, and (to the extent applicable to NSC) is familiar in
all material respects with all of the requirements of, Xxxxxxxx-Xxxxx Act of
2002. NSC 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 NSC's independent auditors and outside counsel,
respectively, to ensure NSC'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. NSC hereby represents that,
unless otherwise disclosed herein or in Section G of the NSC DISCLOSURE LETTER,
no officer, director or affiliate of NSC, 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.
SECTION 2.02 REPRESENTATIONS AND WARRANTIES OF GRIDLINE. Gridline
hereby represents and warrants to, and agrees with, NSC:
(a) ORGANIZATION AND QUALIFICATION. Gridline owns no subsidiary or
affiliate corporation or owns any interest in any other enterprise (whether or
not such enterprise is a corporation). Section A of the letter, dated even date
herewith, from Gridline to NSC (the "GRIDLINE DISCLOSURE LETTER"), correctly
sets forth as to Gridline its place of incorporation, principal place of
business, jurisdictions in which it is qualified to do business, and the
businesses which it presently conducts and which it contemplates conducting.
Gridline 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. Gridline is duly qualified to transact the
businesses in which it is engaged. Gridline 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.
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(b) CAPITALIZATION. The authorized capital stock of Gridline consists
of 250,000,000 shares of capital stock, divided into 20,000,000 shares of "blank
check" preferred stock, par value $0.0001 per share, no shares of which are
outstanding, and 230,000,000 shares of Common Stock, par value $0.0001 per share
, of which 96,700,000 shares are issued and outstanding. Each of the outstanding
shares of Gridline 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 is owned by the persons
or entities set forth in Section A of the GRIDLINE DISCLOSURE LETTER, in each
case free and clear of all liens, security interests, pledges, charges,
encumbrances, stockholders' agreements, and voting trusts. Except for those
certain options, warrants and convertible securities described on SCHEDULE B
hereto, there is no outstanding security or other instrument convertible into or
exercisable or exchangeable for Gridline Capital Stock, and 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 Gridline Capital Stock
or any security or other instrument convertible into, exercisable for, or
exchangeable for Gridline Capital Stock.
(c) FINANCIAL CONDITION. Gridline has delivered to NSC true and
correct copies of the following: audited balance sheets of Gridline as of
September 30, 2004; and audited statements of operations, statements of
stockholders' equity, and statements of cash flows of Gridline for the period
from the date of inception through September 30, 2004. Such balance sheet
presents fairly the financial condition, assets, liabilities, and stockholders'
equity of Gridline as of its date; such statement of operations and statement of
stockholders' equity presents fairly the results of operations of Gridline for
the period indicated; and such statement of cash flows presents fairly the
information purported to be shown therein. The financial statements referred to
in this Section 2.02(c) have been prepared in accordance with generally accepted
accounting principles in the United States consistently applied throughout the
periods involved and are in accordance with the books and records of Gridline.
The financial statements referred to in this Section 2.02(c) contain all
certifications and statements required, if any, 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 (Section
906 of the Xxxxxxxx-Xxxxx Act of 2002) with respect to the report relating
thereto. Since September 30, 2004:
(i) There has at no time been a material adverse change in
the financial condition, results of operations, business, properties,
assets, liabilities, or future prospects of Gridline.
(ii) Gridline 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 Gridline.
(iii) The operations and businesses of Gridline have been
conducted in all respects only in the ordinary course, except for the
transactions contemplated hereby and in connection herewith.
(iv) There has been no accepted purchase order or quotation,
arrangement, or understanding for future sale of the products or
services of Gridline that Gridline expects will not be profitable.
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(v) Gridline has not suffered an extraordinary loss (whether
or not covered by insurance) or waived any right of substantial value.
There is no fact known to Gridline which materially adversely affects or in the
future (as far as Gridline can reasonably foresee) may materially adversely
affect the financial condition, results of operations, business, properties,
assets, liabilities, or future prospects of Gridline; provided, however, that
Gridline expresses no opinion as to political or economic matters of general
applicability. Gridline 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. The statement of operations of Gridline for the year
ending December 31, 2004 shall be prepared in accordance with generally accepted
accounting principles in the United States consistently applied throughout the
periods involved, and shall contain all certifications and statements required,
if any, 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 Xxxxxxxx-Xxxxx Act of
2002) with respect to the report relating thereto.
(d) TAX AND OTHER LIABILITIES. Gridline does not have 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 GRIDLINE BALANCE
SHEET") as of September 30, 2004 (the "LAST GRIDLINE BALANCE SHEET
DATE") referred to in Section 2.02(c); and
(ii) Other liabilities arising since the Last Gridline
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 Gridline 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 Gridline Balance Sheet are sufficient for all
accrued and unpaid Taxes of Gridline, whether or not due and payable and whether
or not disputed, under tax laws, as in effect on the Last Gridline 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 Gridline will not cause any Taxes to be payable other than by the
stockholders of Gridline 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 Gridline. Gridline has
not 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. Gridline is not 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.
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(e) LITIGATION AND CLAIMS. Except as described in Section H GRIDLINE
DISCLOSURE LETTER, there is no litigation, arbitration, claim, governmental or
other proceeding (formal or informal), or investigation pending, threatened, or,
to the best of Gridline's knowledge, in prospect (or any basis therefor known to
Gridline), with respect to Gridline or any of its businesses, properties, or
assets. Gridline is not affected by any present or threatened strike or other
labor disturbance nor to the knowledge of Gridline is any union attempting to
represent any employee of Gridline as collective bargaining agent. Gridline 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 upon Gridline; nor is Gridline required to take any action in
order to avoid such violation or default.
(f) PROPERTIES.
(i) Gridline does not own any legal or equitable interest in
any real property. Gridline has good title to all other properties and assets
material to Gridline, used in its business or owned by it (except real and other
properties and assets as are held pursuant to leases or licenses described in
Section B or C of the GRIDLINE DISCLOSURE LETTER), free and clear of all liens,
mortgages, security interests, pledges, charges, and encumbrances (except such
as are listed in Section D of the GRIDLINE DISCLOSURE LETTER).
(ii) All accounts and notes receivable reflected on the Last
Gridline Balance Sheet, or arising since the Last Gridline 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) All production in progress of Gridline is usable, in
current production and marketable, on a normal basis in the existing film
production business of Gridline.
(iv) Attached as Section B of the GRIDLINE DISCLOSURE LETTER
is a true and complete list of the classes of all tangible properties and assets
owned by Gridline or leased or licensed by Gridline from or to a third party
(including inventory but not including Intangibles, as defined in Section
2.02(i)), and with respect to such properties and assets leased or licensed by
Gridline from or to a third party, a description of such lease or license. All
such properties and assets (including Intangibles) owned by Gridline are
reflected on the Last Gridline Balance Sheet (except for acquisitions subsequent
to the Last Gridline Balance Sheet Date and prior to the Closing Date which are
either noted in Section B or C of the GRIDLINE DISCLOSURE LETTER or are approved
in writing by NSC). All real and other tangible properties and assets owned by
Gridline or leased or licensed by Gridline 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 business of Gridline excepted).
(v) To the best of Gridline's knowledge, no real property
owned by Gridline or leased or licensed by Gridline 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 Gridline'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
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prevent, the continued effective ownership, leasing, or licensing of such real
property in the businesses in which Gridline is now engaged or the businesses in
which it contemplates engaging.
(vi) The properties and assets (including Intangibles) owned
by Gridline (other than those leased or licensed by Gridline to a third party)
or leased or licensed by Gridline from a third party constitute all such
properties and assets which are necessary to the business of Gridline as
presently conducted or as it contemplates conducting.
(vii) Gridline 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 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 Section
2.01(f)(v)) of any Hazardous Substance on or off the site of any property of
Gridline.
(g) CONTRACTS AND OTHER INSTRUMENTS. Section D of the GRIDLINE
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
Gridline. Gridline has furnished to NSC: (i) the certificate of incorporation
and by-laws of Gridline (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 or an authorized signatory of Gridline and (ii) the
following: (A) true and correct copies of all material contracts, agreements,
and instruments referred to in Section D of the GRIDLINE DISCLOSURE LETTER; (B)
true and correct copies of all material leases and licenses referred to in
Section B or C of the GRIDLINE DISCLOSURE LETTER; and (C) true and correct
written descriptions of all material supply, distribution, agency, financing, or
other arrangements or understandings referred to in Section D of the GRIDLINE
DISCLOSURE LETTER. Except as set forth in Section D of the GRIDLINE DISCLOSURE
LETTER, Gridline is not party to any employment agreement with any employee
thereof. To the best of Gridline's knowledge, none of Gridline 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
Gridline'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
Gridline 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. Gridline enjoys peaceful and undisturbed possession under all leases
and licenses under which it is operating. Gridline 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 best of Gridline'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 Gridline and, following
the consummation of the transactions contemplated hereby, NSC. Gridline has not
engaged within the
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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 understanding
with, any stockholder of Gridline, any director, officer, or employee of
Gridline (except for employment agreements listed in Section D of the GRIDLINE
DISCLOSURE LETTER and employment and compensation arrangements described in
Section E of the GRIDLINE DISCLOSURE LETTER), any relative or affiliate of any
stockholder of Gridline, any such director, officer, or employee, or any other
corporation or enterprise in which any stockholder of Gridline, 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 Section D of the GRIDLINE DISCLOSURE
LETTER. The stock ledgers and stock transfer books and the minute book records
of Gridline relating to all issuances and transfers of stock by Gridline and all
proceedings of the stockholders and the Board of Directors and committees
thereof of Gridline since its incorporation made available to NSC are the
original stock ledgers and stock transfer books and minute book records of
Gridline or exact copies thereof. Gridline is not in violation or breach of, or
in default with respect to, any term of its certificate of incorporation or
by-laws (or the comparable charter document, if any, under applicable law).
(h) EMPLOYEES.
(i) Gridline does not have, or contribute 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 Section E of the
GRIDLINE DISCLOSURE LETTER. Gridline has furnished to NSC true and correct
copies, of all documents evidencing plans, obligations, or arrangements referred
to in Section E of the GRIDLINE 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) Section E of the GRIDLINE DISCLOSURE LETTER contains a
true and correct statement of the names, relationship with Gridline, present
rates of compensation (whether in the form of salary, bonuses, commissions, or
other supplemental compensation now or hereafter payable), and aggregate rate of
compensation for the fiscal year ended December 31, 2004 of (A) each director,
officer, or other employee of Gridline whose aggregate rate of compensation for
the fiscal year ended December 31, 2004 will exceed US$25,000 or whose aggregate
rate of compensation presently exceeds the rate of US$25,000 per annum and (B)
all sales agents, dealers, or distributors of Gridline. Since September 30,
2004, Gridline 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 Gridline been instituted or amended to increase
benefits thereunder.
(i) PATENTS, TRADEMARKS, ET CETERA. Gridline does not own or have
pending, and is not licensed or otherwise permitted to use, any material
Intangible, other than as described in Section C of the GRIDLINE 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. Section C of the GRIDLINE DISCLOSURE LETTER contains a true and
correct listing of: (i) all Intangibles which
-21-
are owned (either in whole or in part), used by, or licensed to Gridline or
which otherwise relate to the businesses of Gridline, 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 Gridline 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 Gridline 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 Gridline which
relates to the businesses, properties, or assets of Gridline. Except as
specified in Section C of the GRIDLINE DISCLOSURE LETTER: (v) Gridline is the
sole and exclusive owner or licensee of, and (other than those licensed by
Gridline 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, Gridline 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) Gridline 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 Gridline as presently conducted or
as it contemplates conducting, except such as are so designated in Section C of
the GRIDLINE DISCLOSURE LETTER. Gridline 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 Gridline 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 Gridline, there is no infringement by others of
Intangibles of Gridline. As far as Gridline 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 Gridline. All contracts, agreements,
instruments, leases, and licenses pertaining to Intangibles to which Gridline is
a party, or to which any of its businesses, properties, or assets are subject,
are in compliance with all laws, rules, regulations, orders, judgments, and
decrees binding on Gridline or to which any of its businesses, properties, or
assets are subject. There is no trademark, tradename or service xxxx used by
Gridline to identify, respectively, its products, businesses, or services.
Neither the Gridline Shareholders, any director, officer, or employee of
Gridline, any relative or affiliate of the Gridline Shareholders or any such
director, officer, or employee, nor any other corporation or enterprise in which
the Gridline 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 Gridline.
(j) QUESTIONABLE PAYMENTS. Neither Gridline, nor any director,
officer, agent, employee, or other person associated with, or acting on behalf
of, Gridline, nor the Gridline 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.
-22-
(k) AUTHORITY. Gridline has all requisite power and authority to
execute, deliver, and perform this Agreement. All necessary corporate
proceedings of Gridline have been duly taken to authorize the execution,
delivery, and performance of this Agreement by Gridline. This Agreement has been
duly authorized, executed, and delivered by Gridline, constitutes the legal,
valid, and binding obligation of Gridline, and is enforceable as to Gridline 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 Gridline
for the execution, delivery, or performance of this Agreement by Gridline. No
consent of any party to any material contract, agreement, instrument, lease,
license, arrangement, or understanding to which Gridline is a party, or to which
its or any of its businesses, properties, or assets are subject, is required for
the execution, delivery, or performance of this Agreement (except such consents
referred to in Section D of the GRIDLINE DISCLOSURE LETTER); and the execution,
delivery, and performance of this Agreement will not (if the consents referred
to in Section D of the GRIDLINE DISCLOSURE LETTER are obtained prior to the
Closing) 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 Gridline or NSC 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 by-laws of Gridline (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 Gridline or to
which any of its businesses, properties, or assets are subject. Except as set
forth in Section F of the GRIDLINE DISCLOSURE LETTER, neither Gridline 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 Gridline are
described in Section H of the GRIDLINE DISCLOSURE LETTER (including the risks
covered and limits of such policies) and are in full force and effect. A full
and complete copy of each such insurance policy has been provided to NSC, and
such policies are summarized in Section G of the GRIDLINE DISCLOSURE LETTER. 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. Gridline
have not 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 Gridline 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 Gridline 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 Gridline or requiring or recommending any equipment or
facilities to be installed on any
-23-
premises from which the respective businesses of Gridline is conducted or in
connection with any of the respective assets thereof. Gridline does not have 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. Subject to the next
sentence, all business of Gridline has been conducted in its and for their
benefit and there are no parties related or affiliated with Gridline, either
directly or indirectly, which are competing for the business of Gridline.
Gridline conducts business in the following name: "Gridline Communications
Corp." and, previously, under the name "Halocom, Inc."
(n) CUSTOMERS AND SUPPLIERS. There has been no termination or
cancellation of any relationship between Gridline 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 Gridline taken
as a whole during the period from July 1, 2004 (inception) through September 30,
20034, nor is there any reason to believe that any such terminations or
cancellations of such magnitudes are pending or threatened.
(o) COMPLETENESS OF DISCLOSURE. No representation or warranty by
Gridline 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. Gridline 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. Gridline is not subject to any
order, decree, judgment or other sanction of any court, administrative agency or
other tribunal.
SECTION 2.03 REPRESENTATIONS AND WARRANTIES OF THE GRIDLINE
SHAREHOLDERS. The Gridline Shareholders hereby represents and warrants to, and
agrees with, NSC as follows:
(a) REPRESENTATIONS AND WARRANTIES OF GRIDLINE. To the knowledge of
the Gridline Shareholders, the representations and warranties of Gridline set
forth in Section 2.02 hereof are true and correct in all material respects.
Nothing has come to the attention of the Gridline Shareholders that would lead
the Gridline Shareholders to believe that any representation or warranty of
Gridline set forth on Section 2.02 hereof is untrue or incorrect in any material
respect.
(b) AUTHORITY. Gridline and the Gridline Shareholders have each
approved this Agreement and duly authorized the execution and delivery hereof.
The Gridline Shareholders are individuals residing in the jurisdictions
indicated in SCHEDULE A hereto 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 Gridline Shareholders have
reached the age of majority under applicable law.
-24-
(c) OWNERSHIP OF SHARES. The Gridline Shareholders own beneficially
all of the shares of Gridline Capital Stock. The Gridline Shareholders have full
power and authority to transfer such shares of Gridline Capital Stock to NSC
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 Gridline Shareholders represent that they are
acquiring the shares of NSC 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 Gridline Shareholders shall not dispose of
any part or all of such shares of NSC 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 NSC Common Stock shall bear a legend in substantially the form set forth in
Section 1.02(c) hereof.
(iii) The Gridline Shareholders acknowledge being informed
that the shares of NSC 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 Gridline
Shareholders further acknowledge that NSC does not have an obligation to
currently register such securities for the account of Gridline Shareholders.
(iv) The Gridline 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 NSC Common Stock and to ask
questions of NSC's management and that, except as set forth herein, neither NSC
nor anyone acting on behalf of NSC has made any representations or warranties to
the Gridline Shareholders which have induced, persuaded, or stimulated the
Gridline Shareholders to acquire such shares of NSC Common Stock.
(v) Either alone, or together with their investment
advisor(s), the Gridline 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 NSC Common Stock, and the
Gridline Shareholders are and will be able to bear the economic risk of the
investment in such shares of NSC Common Stock.
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ARTICLE III
COVENANTS
SECTION 3.01 COVENANTS OF NSC. NSC 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 Gridline will otherwise approve in writing,
which approval will not be unreasonably withheld:
(a) Until the release time, except as otherwise provided herein, no
amendment shall be made in the certificate of incorporation or by-laws (or, in
each case, the comparable charter documents, if any, under applicable law, of
NSC).
(b) Until the Release Time, no share of capital stock of NSC, option
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 NSC, otherwise than as contemplated by, or in
connection with, this Agreement.
(c) Until the Release Time, no dividend or liquidating or other
distribution or stock split shall be authorized, declared, paid, or effected by
NSC in respect of the outstanding shares of Gridline Capital Stock. Until the
Release Time, no direct or indirect redemption, purchase, or other acquisition
shall be made by NSC of shares of NSC Capital Stock.
(d) Until the Release Time, except in the ordinary course of its
business, NSC shall not borrow money, guarantee the borrowing of money, engage
in any transaction, or enter into any agreement other than in connection with
the transactions contemplated hereby or in connection herewith.
(e) Until the Release Time, NSC will afford the officers, directors,
employees, counsel, agents, investment bankers, accountants, and other
representatives of Gridline and the Gridline Shareholders free and full access
to the plants, properties, books, and records of NSC. NSC will permit them to
make extracts from and copies of such books and records, and will from time to
time furnish Gridline and the Gridline 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 NSC as Gridline or the Gridline Shareholders from time to
time may request. Until the Release Time, NSC will cause the independent
certified public accountants of NSC to make available to Gridline, its
independent certified public accountants, and the Gridline Shareholders, the
work papers relating to the audits of NSC referred to in Section 2.01(c) of this
Agreement.
(f) Until the Release Time, NSC will conduct its affairs, so that on
the Closing Date, no representation or warranty of NSC will be inaccurate, no
covenant or agreement of NSC will be breached, and no condition in this
Agreement will remain unfulfilled by reason of the actions or omissions of NSC.
Except as otherwise consented to by Gridline in writing, until the Release Time,
NSC will conduct its affairs in all respects only in the ordinary course.
(g) Until the Release Time, NSC will immediately advise Gridline in
a detailed written notice of any material fact or occurrence or any pending or
threatened material occurrence of which
-26-
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 NSC 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 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.
(h) NSC shall use its commercially reasonable efforts to insure that
all confidential information which NSC 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 Gridline, any affiliate of Gridline, or any customer or supplier of Gridline
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
Gridline, 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. NSC shall, and shall
cause all other such persons and entities to, deliver to Gridline all tangible
evidence of the confidential information relating to Gridline, any affiliate of
Gridline, or (insofar as such confidential information was provided by, or on
behalf of, Gridline, or any such affiliate of Gridline) 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.
(i) Before NSC 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, NSC shall
cooperate with Gridline, shall furnish drafts of all documents or proposed oral
statements to Gridline for comment, and shall not release any such information
without the written consent of Gridline. Nothing contained herein shall prevent
NSC from releasing any information if required to do so by law.
(j) NSC shall not make any agreement or reach any understanding not
approved in writing by Gridline 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.
(k) NSC 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, as well as all
Periodic Reports which NSC is required to file, but has not heretofore filed
(such deliquent Periodic Reports, "DELIQUENT PERIODIC REPORTS"). NSC shall file
with the SEC all Deliquent Periodic Reports within 15 days following the date
hereof. NSC shall furnish or cause to be furnished, for inclusion in the
Periodic Reports, such information about NSC, and NSC's security holders as may
be required or as may be reasonably requested by Gridline, 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.
NSC represents and warrants that the
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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. NSC
represents and warrants that all information heretofore filed thereby with the
SEC does not now, and will not at any time prior to the Release Time, and the
Deliquent Periodic Reports will not, when filed with the SEC and at any time
prior to the Release Time, (iii) contain an untrue statement of a material fact
or (iv) omit to state a material fact required to be stated therein or necessary
to make the statements therein not false or misleading. NSC 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 NSC Common Stock pursuant to
the transactions contemplated hereby and in connection herewith. The filings
made by NSC 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 regulations thereunder. Such filings when
filed, and the press releases and other public statements NSC 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.
(l) Prior to the Release Time, shall not affect any
recapitalization, stock split, reverse stock split, or stock dividend of the NSC
Common Stock or any other security of NSC, otherwise than as contemplated by, or
in connection with, this Agreement.
(a) NSC 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.
(b) Until the Release Time, NSC shall not, and shall not
authorize or permit any officer, director, employee, counsel, agent, investment
banker, accountant, or other representative of NSC, 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 Gridline's stockholders
of the transactions contemplated by this Agreement.
(c) (i) Following the consummation of the transactions
contemplated hereby and in connection herewith, NSC will cause Gridline to
continue its historic business or to use a significant portion of Gridline'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, Gridline at the Closing Date constitute Gridline's
historic business assets and historic business, respectively.
(ii) Following the consummation of the transactions
contemplated hereby and in connection herewith, NSC will not permit Gridline to
issue additional shares that would result in NSC losing control of Gridline
within the meaning of section 368(c) of the Code.
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(d) If required, NSC shall use COMMERCIALLY REASONABLE efforts to
file with the National Association of Securities Dealers, Inc., or its
affiliates, all information required by Rule 15c2-11 under the Exchange Act.
(n) NSC shall effect the Reincorporation prior to the Closing.
(o) Effective immediately following the Closing, each member of the
Board of Directors and each officer of NSC shall tender his or her respective
resignation therefrom and shall appoint up to five individuals designated by
Gridline as the sole directors of NSC.
(p) On or prior to the Closing Date, NSC shall deliver to Gridline
and the Gridline Shareholders the completed an updated NSC DISCLOSURE LETTER,
dated as of the Closing Date, which letter shall be correct and complete in all
material respects.
SECTION 3.02 COVENANTS OF GRIDLINE. Gridline covenants and agrees
that, after the date hereof and through the Release Time, unless NSC 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 Gridline, except for such
amendment to the certificate of incorporation of Gridline as may be required to
allow NSC to change its to "Gridline Communications Corp." in connection with
the Reorganization.
(b) Until the Release Time, no share of Gridline Capital Stock,
option 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 Gridline, otherwise than as contemplated
by, or in connection with, this Agreement. Notwithstanding the foregoing,
Gridline shall be entitled to grant the incentive stock options and nonqualified
stock options to employees, consultants, and non-employee directors set forth in
SCHEDULE 3.02(b), and Gridline shall be authorized to issue and deliver its 8%
Convertible Notes Due September 10, 2004, as required from time to time, for
working capital and general corporate purposes.
(c) Until the Release Time, no dividend or liquidating or other
distribution or stock split shall be authorized, declared, paid, or effected by
Gridline in respect of the outstanding shares of Gridline Capital Stock. Until
the Release Time, no direct or indirect redemption, purchase, or other
acquisition shall be made by Gridline of shares of Gridline Capital Stock.
(d) Until the Release Time, except in the ordinary course of its
business, Gridline shall not borrow money, guarantee the borrowing of money,
engage in any transaction, or enter into any material agreement other than in
connection with the transactions contemplated hereby or in connection herewith
or otherwise pursuant to any currently outstanding credit line of Gridline);
provided that Gridline shall be authorized to issue and deliver its 8%
Convertible Notes Due September 10, 2004, as required from time to time, for
working capital and general corporate purposes. For purposes of this Agreement,
references to "MATERIAL", as well as correlative terms (E.G., MATERIALLY,
MATERIALITY, etc.), shall be deemed to refer to amounts of US$50,000 or more or
effects or consequences of US$50,000 or more.
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(e) Until the Release Time, Gridline will afford the officers,
directors, employees, counsel, agents, investment bankers, accountants, and
other representatives of NSC and lenders, investors, and prospective lenders and
investors free and full access to the plants, properties, books, and records of
Gridline, will permit them to make extracts from and copies of such books and
records, and will from time to time furnish NSC 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 Gridline as NSC from time to time may request. Until the Release Time,
Gridline will cause the independent certified public accountants of Gridline to
make available to NSC and its independent certified public accountants the work
papers relating to the audits of Gridline referred to in Section 2.02(c) of this
Agreement.
(f) Until the Release Time, Gridline will conduct its affairs so
that at the Closing, no representation or warranty of Gridline will be
inaccurate in any material respect, no covenant or agreement of Gridline will be
breached, and no condition in this Agreement will remain unfulfilled by reason
of the actions or omissions of Gridline. Except as otherwise consented to by NSC
in writing, until the Release Time, Gridline will use its commercially
reasonable efforts to preserve the business operations of Gridline 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 Gridline, and to preserve the good will of
its suppliers, customers, and others having business relations with any of them.
Until the Release Time, Gridline will conduct its affairs in all respects only
in the ordinary course, other than in connection with the matters referenced
herein.
(g) Until the Release Time, Gridline will immediately advise NSC 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 GRIDLINE 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 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.
(h) Gridline shall use its commercially reasonable efforts to insure
that all confidential information which Gridline 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 NSC, 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 Gridline; 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.
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(i) Before Gridline 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, Gridline shall
cooperate with NSC, shall furnish drafts of all documents or proposed oral
statements to NSC for comment, and shall not release any such information
without the written consent of NSC, which consent shall not be unreasonably
withheld. Nothing contained herein shall prevent Gridline from releasing any
information if required to do so by law.
(j) Gridline shall not make any agreement or reach any understanding
not approved in writing by NSC 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.
(k) Gridline shall furnish, or cause to be furnished, for inclusion
in the periodic and other reports of NSC on Forms 8-K, 10-QSB, 10-KSB, 14A, 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 NSC 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 NSC's filings
under state "blue-sky," securities, or take-over laws, such information about
Gridline or the Gridline Shareholders as may be required or as may be reasonably
requested by NSC, 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. Gridline 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.
(l) Gridline 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.
(m) On or prior to the Closing Date, Gridline and the Gridline
Shareholders shall deliver to NSC Shareholders the completed an updated GRIDLINE
DISCLOSURE LETTER, dated as of the Closing Date, which letter shall be correct
and complete in all material respects.
SECTION 3.03 COVENANTS OF THE GRIDLINE SHAREHOLDERS. The Gridline
Shareholders covenant and agree that, after the date hereof and through the
Release Time, unless NSC will otherwise approve in writing, which approval will
not be unreasonably withheld, as follows:
(a) The Gridline Shareholders will use commercially reasonable
efforts to cause Gridline to perform each covenant thereof set forth herein on a
timely basis.
(b) Until the earlier of the Release Time, the Gridline Shareholders
shall take no action the result of which shall be to cause Gridline 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 Gridline 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 Gridline Shareholders shall cooperate with NSC,
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shall furnish drafts of all documents or proposed oral statements to NSC for
comment, and shall not release any such information without the written consent
of NSC, which consent shall not be unreasonably withheld. Nothing contained
herein shall prevent the Gridline Shareholders from releasing any information if
required to do so by law.
(d) The Gridline 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 NSC's filings under state "blue-sky," securities, or
take-over laws, such information about Gridline or the Gridline Shareholders as
may be required or as may be reasonably requested by NSC, 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.
ARTICLE IV
CONDITIONS; ABANDONMENT AND TERMINATION
SECTION 4.01 RIGHT OF NSC TO ABANDON. NSC'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 Gridline and the Gridline
Shareholders 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
Gridline or the Gridline Shareholders, as applicable, and regardless of
knowledge or lack thereof on the part of Gridline or the Gridline Shareholders
(as applicable) or changes beyond its control; as of the Closing Date, Gridline
and the Gridline 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 NSC shall have received a certificate executed by the chief
executive officer and the chief financial officer of Gridline and the Gridline
Shareholders, dated the Closing Date, to that effect.
(b) NSC shall have received at the Closing Date certificates
executed by the chief executive officer and the chief financial officer of
Gridline and by the Gridline Shareholders as of such dates, to the effect that
they have carefully examined the Periodic Reports, including the Delinquent
Periodic Reports, and any amendment or supplement thereto, and, to the best of
their knowledge, (i) neither the Periodic Reports, the Delinquent 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, Gridline or the
Gridline security holder, (ii) since the date hereof, no event with respect to
Gridline or the Gridline security holder has occurred which should have been set
forth in an amendment to any Periodic Report or any Deliquent Periodic Report,
or a supplement to any Periodic Report or Delinquent Periodic Report which has
not been set forth in such an amendment or supplement, and (iii) any contract,
agreement, instrument, lease, or license regarding Gridline required to be filed
as an exhibit to any Periodic Report or any
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Deliqunet 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) Gridline and the Gridline Shareholders shall have delivered to
NSC at or prior to the Closing Date such other documents (including certificates
of officers of Gridline) as NSC may reasonably request in order to enable NSC 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
Gridline and the Gridline 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 NSC, and Gridline and the Gridline 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
injunction, which, in the reasonable judgment of NSC, (i) makes this Agreement
or any of the transactions contemplated by this Agreement illegal, (ii) results
in a delay in the ability of Gridline or NSC to consummate the transactions
contemplated by this Agreement beyond January 31, 2005, (iii) requires the
divestiture by NSC of a material portion of the business of either NSC or of
Gridline, (iv) imposes material limitations on the ability of NSC effectively to
exercise full rights of ownership of shares of Gridline including the right to
vote such shares on all matters properly presented to the Gridline Shareholders,
or (v) otherwise prohibits, restricts, or delays consummation of the
transactions contemplated by this Agreement or impairs the contemplated benefits
to NSC 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 required unconditional written approvals to this Agreement
and to the execution, delivery, and performance of this Agreement by each of
them of relevant governmental authorities having jurisdiction over NSC or
Gridline 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.
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(i) There shall not have been any material adverse change in the
condition (financial or otherwise), operations, business, assets, liabilities,
earnings or prospects of Gridline since the date hereof.
(j) NSC shall conduct a due diligence review of Gridline and the
Gridline Shareholders, including, without limitation, a review of the GRIDLINE
DISCLOSURE LETTER and the documents referenced therein delivered prior to the
Closing Date, and shall be reasonably satisfied with the result of such review.
(k) Gridline shall enter into an agreement, substantially in the
form of EXHIBIT 4.01(k), with Xxxxxx Xxxxxx pursuant to which such individual
shall agree to assist NSC in the preparation of financial statements and tax
returns of NSC during the period commencing on the Closing Date and terminating
on the date six months thereafter.
SECTION 4.02 RIGHT OF GRIDLINE AND THE GRIDLINE SHAREHOLDERS TO
ABANDON. By the election of the Gridline Shareholders, the Gridline Shareholders
or, otherwise, Gridline'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 NSC 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 NSC and regardless of knowledge or lack thereof on
the part of NSC or changes beyond its control; as of the Closing Date, NSC 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 Gridline shall have received certificates
executed by the chief executive officer and the chief financial officer of NSC,
dated the Closing Date, to that effect.
(b) Gridline shall have received at the Closing, certificates
executed by the chief executive officer and the chief financial officer of NSC,
dated as of such dates, to the effect that they have carefully examined the
Periodic Reports and the Delinquent Periodic Reports, and any amendment or
supplement thereto, and, to the best of their knowledge, (i) neither any
Periodic Report or any Delinquent 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, NSC or any NSC security holder, (ii) since the date
of the filing of any Periodic Report or Delinquent Periodic Report, no event
with respect to NSC or any NSC security holder has occurred which should have
been set forth in an amendment or a supplement to such Periodic Report or
Delinquent Periodic Report which has not been set forth in such an amendment or
supplement, and (iii) any contract, agreement, instrument, lease, or license
regarding NSC required to be filed as an exhibit to any Periodic Report or any
Delinquent Periodic Report has been filed as an exhibit to or has been
incorporated as an exhibit by reference into such Periodic Report or Delinquent
Periodic Report.
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(c) NSC shall have delivered to Gridline and the Gridline
Shareholders at or prior to the Closing such other documents (including
certificates of officers of NSC) as Gridline and the Gridline Shareholders may
reasonably request in order to enable Gridline and the Gridline Shareholders to
determine whether the conditions to NSC'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
NSC to carry out this Agreement or incidental thereto and all other related
legal matters shall be subject to the reasonable approval of counsel to Gridline
and the Gridline Shareholders, and NSC shall have furnished thereto 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 Gridline, (i) makes this
Agreement or any of the transactions contemplated by this Agreement illegal,
(ii) results in a delay in the ability of Gridline or NSC to consummate the
transactions contemplated by this Agreement beyond January 31, 2005, (iii)
requires the divestiture by Gridline of a material portion of the business of
either NSC or of Gridline, (iv) imposes material limitations on the ability of
NSC effectively to exercise full rights of ownership of shares of Gridline
including the right to vote such shares on all matters properly presented to the
Gridline Shareholders, or (v) otherwise prohibits, restricts, or delays
consummation of the transactions contemplated by this Agreement or impairs the
contemplated benefits to Gridline and the Gridline Shareholders 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 required written approvals to this Agreement
and to the execution, delivery, and performance of this Agreement by each of
them of relevant governmental authorities having jurisdiction over NSC or
Gridline or the subject matter of this Agreement.
(h) At or prior to the Closing Date, NSC 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 NSC 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 NSC'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,
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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) Gridline and the Gridline Shareholders shall conduct a due
diligence review of NSC, including, without limitation, a review of the NSC
Disclosure Letter and the documents referenced therein delivered prior to the
Closing Date, and same shall be satisfactory in the reasonable opinion of
Gridline and the Gridline Shareholders.
(k) At the Closing Date, NSC 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 NSC hereinabove referenced.
(l) At or prior to the Closing Date, the officers, directors, and
holders of 5% or more of the outstanding NSC Common Stock immediately prior to
such date shall have executed and delivered to Gridline an agreement mutually
acceptable in form and substance to each of such person or entity, on the one
hand, and Gridline, 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 NSC and
Gridline;
(b) at the option of NSC's Board of Directors or Gridline's Board of
Directors, if the Closing Date shall not have occurred on or before January 31,
2005;
(c) at the option of NSC'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 NSC; and
(d) at the option of Gridline's Board of Directors or by the
election of the Gridline 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 Gridline.
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(h), 3.02(h), 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 NSC
or Gridline 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.
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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.
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 NSC or Gridline, as the case may be, or the
relevant Gridline Shareholders or Gridline Shareholders will take all such
necessary action.
SECTION 5.04 EXTENSION OF TIME; WAIVERS. At any time prior to the
Closing Date:
(a) NSC may (i) extend the time for the performance of any of the
obligations or other acts of Gridline or any Gridline Shareholders or Gridline
Shareholders, (ii) waive any inaccuracies in the representations and warranties
of Gridline or any Gridline Shareholders or Gridline Shareholders, or contained
herein or in any document delivered pursuant hereto by Gridline or any Gridline
Shareholders or Gridline Shareholders, and (iii) waive compliance with any of
the agreements or conditions contained herein to be performed by Gridline or any
Gridline Shareholders or Gridline Shareholders. Any agreement on the part of NSC
to any such extension or waiver will be valid only if set forth in an
instrument, in writing, signed on behalf of NSC.
(b) Gridline and the Gridline Shareholders (by action of the
Gridline Shareholders), may (i) extend the time for the performance of any of
the obligations or other acts of NSC, (ii) waive any inaccuracies in the
representations and warranties of NSC contained herein or in any document
delivered pursuant hereto by NSC and (iii) waive compliance with any of the
agreements or conditions contained herein to be performed by NSC. Any agreement
on the part of Gridline and to any such extension or waiver will be valid only
if set forth in an instrument, in writing, signed on behalf of Gridline.
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
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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 NSC or to
Gridline shall be addressed to the attention of the Corporate Secretary. A copy
of any and all notices to Gridline or any Gridline Shareholder shall be
delivered in accordance with this section to Xxxxxxxx & Knight LLP, 000 Xxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000-0000 Attention: Xxxxxx X. Xxxxxx, Xx.,
and Xxxxxxx Xxxxx & Xxxxxxxxxx LLC, 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx
00000, Attention: Xxxxxx Xxxxxx Xxxxx, 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 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 Texas, without regard to the conflict of law principles thereof.
-38-
(b) EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS 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 XXXXXX, STATE OF
TEXAS, 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 NSC 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.
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 Gridline Shareholders and the boards of directors of each of NSC
and Gridline 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]
-39-
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.
NORTH SHORE CAPITAL IV, INC.
BY /s/ Xxxxxx Xxxxxx
-----------------------------------
NAME: XXXXXX XXXXXX
TITLE: PRESIDENT
ATTEST:
/s/ Xxxxxx Xxxxxx
-----------------------------------
NAME: XXXXXX XXXXXX
TITLE: SECRETARY
GRIDLINE COMMUNICATIONS CORP.
BY /s/ Xxxxxx Xxxxxx
-----------------------------------
NAME:
TITLE:
ATTEST:
/s/ Xxxxxx Xxxxxx
-----------------------------------
NAME: XXXXXX XXXXXX
TITLE: SECRETARY
GRIDLINE SHAREHOLDERS:
AVENTURA HOLDING, INC.
BY /s/ Xxxxx Xxxxxxx
-----------------------------------
NAME:
TITLE:
SIGNATURE PAGE TO SHARE EXCHANGE AND REORGANIZATION AGREEMENT
B2NK INVESTMENTS LLC
BY /s/ W. Xxxxxx Xxxxxx
-----------------------------------
NAME: W. XXXXXX XXXXXX
TITLE: MEMBER
/s/ Xxxx Xxxxxx
-------------------------------------
NAME: XXXX XXXXXX
/s/ Xxxxxx Xxxxxxx
-------------------------------------
NAME: XXXXXX XXXXXXX
BOTIMOR CAPITAL LLC
BY /s/ Xxxxxx Xxxxxx
-----------------------------------
NAME: XXXXXX XXXXXX
TITLE: MANAGER
ENERGY GENERATION CORP.
BY /s/ Xxxxxxx X. Xxxxxxxxxx
-----------------------------------
NAME: XXXXXXX X. XXXXXXXXXX
TITLE: PRESIDENT
XXXXXXXXX & XXXXXXX
BY /s/ Xxxxxx Colostein
-----------------------------------
NAME: XXXXXX COLOSTEIN
TITLE: PARTNER
/s/ Xxxxxxx X. Xxxx
-------------------------------------
NAME: XXXXXXX X. XXXX
SIGNATURE PAGE TO SHARE EXCHANGE AND REORGANIZATION AGREEMENT
/s/ Xxxxxxx X. Xxxx
-------------------------------------
NAME: XXXXXXX X. XXXX
/s/ Xxxxx X. Xxxx
-------------------------------------
NAME: XXXXX X. XXXX
iGate INCORPORATED
BY /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
NAME: XXXXXX X. XXXXXXX
TITLE: CHAIRMAN AND CEO
/s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
NAME: XXXXXX X. XXXXXXXXX
/s/ Xxxxxx X. Xxxxxx
-------------------------------------
NAME: XXXXXX X. XXXXXX
SERENGETI GROUP LP
BY BENELUX INVESTMENT HOLDINGS LTD.,
ITS GENERAL PARTNER
BY /s/ Xxxxx Xxxxx
-------------------------------------
NAME: XXXXX XXXXX
TITLE: DIRECTOR, BENELUX INVESTMENT
HOLDINGS LTD.
/s/ Xxx Xxxx
-------------------------------------
NAME: XXX XXXX
/s/ Xxxxxxxx Xxxxxx
-------------------------------------
NAME: XXXXXXXX XXXXXX
SIGNATURE PAGE TO SHARE EXCHANGE AND REORGANIZATION AGREEMENT
NATIONAL FINANCIAL SERVICES GROUP
BY /s/ Xxxxxxx X. Xxxx
-------------------------------------
NAME: XXXXXXX X. XXXX
TITLE: PRESIDENT
/s/ Xxxxxxx Xxxx
-------------------------------------
NAME: XXXXXXX XXXX
/s/ Xxxxxxx Xxxxxx
-------------------------------------
NAME: XXXXXXX XXXXXX
/s/ Xxxxxxx Xxxxxx
-------------------------------------
NAME: XXXXXXX XXXXXX
/s/ Xxxxxx Xxxxx
-------------------------------------
NAME: XXXXXX XXXXX
/s/ B.K. Son
-------------------------------------
NAME: B.K. SON
/s/ Xxxx Sunsvold
-------------------------------------
NAME: XXXX SUNSVOLD
/s/ Xxxxx Xxxxxxx
-------------------------------------
NAME: XXXXX XXXXXXX
/s/ Xxxxxx Xxxxxx
-------------------------------------
NAME: XXXXXX XXXXXX
SIGNATURE PAGE TO SHARE EXCHANGE AND REORGANIZATION AGREEMENT
/s/ Duncan E. Wine
-------------------------------------
NAME: DUNCAN E. WINE
HALOCOM LP
BY LOGO SHIPPING LTD.,
ITS GENERAL PARTNER
BY /s/ Xxxxx Xxxxx
-------------------------------------
NAME: XXXXX XXXXX
TITLE: DIRECTOR, LOGO SHIPPING LTD.
/s/ Xxxx Xxxx
-------------------------------------
NAME: XXXX XXXX
WSS INVESTMENTS LLC
BY /s/ Xxxxxxx Xxxxxx
-------------------------------------
NAME: XXXXXXX XXXXXX
TITLE: MEMBER
/s/ Xxxxxx Xxxxxxx
-------------------------------------
NAME: XXXXXX XXXXXXX
/s/ Pertti Luhanto
-------------------------------------
NAME: PERTTI LUHANTO
AVERCAP, OY
BY /s/ Pertti Luhanto
-------------------------------------
NAME: PERTTI LUHANTO
TITLE: PRESIDENT
SIGNATURE PAGE TO SHARE EXCHANGE AND REORGANIZATION AGREEMENT
SCHEDULE A
DATE LAST NAME FIRST NAME AMOUNT SHARES COMMENTS
Aventura Holding,
7/1/2004 Inc. 100.00 1,000,000
07/01/2004 B2NK Investments LLC 700.00 7,000,000
07/01/2004 Xxxxxx Xxxx 50.00 500,000
07/01/2004 Xxxxxxx Xxxxxx 50.00 500,000
07/01/2004 Botimor Capital LLC 500.00 5,000,000
Energy Generation
10/08/2004 Corp. 100.00 1,000,000
07/01/2004 Xxxxxxx Xxxxxxxxx & W. 50.00 500,000
10/04/2004 Xxxx Xxxxxxx 10.00 100,000
Xxxxxxx R &
10/04/2004 Xxxx Xxxxx M. 10.00 100,000
07/01/2004 iGate Incorporated 2,100.00 21,000,000
11/08/2004 Jefferson Xxxxxx Xxxxxx E. 100.00 1,000,000
07/01/2004 Kaduru NOMINEE 2,100.00 21,000,000
07/01/2004 Xxxx Xxx 10.00 100,000
07/01/2004 Xxxxxx Xxxxxxxx 250.00 2,500,000
10/28/2004 National Finacial Services Group 2.50 25,000
07/01/2004 Xxxx Xxxxxxx 100.00 1,000,000
07/01/2004 Xxxxxx Xxxxxxx 110.00 1,100,000
07/01/2004 Xxxxxx Xxxxxxx 50.00 500,000
07/01/2004 Xxxxx Xxxxxx 50.00 500,000
07/01/2005 Son B. K. 50.00 500,000
07/01/2004 Sunsvold Xxxx 20.00 200,000
Transferred 2,000,000
07/01/2004 Xxxxxxx Xxxxx 400.00 2,000,000 12.03.04
Transferred 2,000,000
07/01/2004 Wahala Xxxxxx Xxxxxx 350.00 1,500,000 12.03.04
07/01/2004 Wine NOMINEE E. 2,100.00 21,000,000
11/02/2004 Xxxx Xxxx 50.00 500,000
07/01/2004 WSS Investments LLC 250.00 2,500,000
10/28/2004 Xxxxxxx Xxxxxx D. 7.50 75,000
----
12/03/2004 Luhanto Pertti 2,000,000
12/03/2004 Avercap, Oy 2,000,000
--------------------------
9,670.00 96,700,000
A-1
[REMAINING SCHEDULES AND EXHIBITS OMITTED]
