AGREEMENT AND PLAN OF MERGER By and Among XFONE, INC. AND XFONE USA, INC. Dated August 18, 2005
Exhibit
10.47
AGREEMENT
AND PLAN OF MERGER
By
and
Among
I-55
INTERNET SERVICES, INC.,
XFONE,
INC. AND XFONE USA, INC.
Dated
August 18, 2005
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|
THE
MERGER
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|
|
The
Merger; Effective Time
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1
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|
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1.02
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Effect
of the Merger
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2
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1.03
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Consideration;
Conversion of Shares
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2
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1.04
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Dissenting
Shares
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3
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1.05
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Surrender
of Certificates
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4
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1.06
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Value
of Parent Common Stock
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5
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1.07
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Treatment
of the Company Options and Warrants
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5
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1.08
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No
Further Ownership Rights in the Company Capital Stock
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5
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1.09
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Lost,
Stolen or Destroyed Certificates
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6
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1.1
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Taking
of Necessary Action; Further Action
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6
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1.11
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Tax
Consequences
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6
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ARTICLE
II
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REPRESENTATIONS
AND WARRANTIES OF THE COMPANY AND THE PRINCIPALS
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2.01
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Corporate
Organization
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6
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2.02
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Subsidiaries
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6
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2.03
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Capital
Structure
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7
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2.04
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Authority
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7
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2.05
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No
Conflict
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8
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2.06
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Consents
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8
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2.07
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The
Company Financial Statements
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8
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2.08
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No
Undisclosed Liabilities
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9
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2.09
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No
Changes
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9
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2.1
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Tax
Matters
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11
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2.11
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Restrictions
on Business Activities
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12
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2.12
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Title
of Properties; Absence of Liens and Encumbrances; Condition of
Equipment
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12
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2.13
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Material
or Significant Agreements, Contracts and Commitments
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13
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2.14
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Interested
Party Transactions
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15
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2.15
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Governmental
Authorization
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15
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2.16
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Litigation
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15
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2.17
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Accounts
Receivable
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16
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2.18
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Assets
Necessary to Business
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16
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2.19
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Minute
Books
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16
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2.2
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Environmental
Matters
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16
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2.21
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Brokers'
and Finders' Fees
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17
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2.22
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Employee
Benefit Plans and Compensation
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17
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2.23
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Compliance
with Laws; Relations with Governmental Entities
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21
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2.24
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Merger
Tax Matters
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21
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2.25
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Intellectual
Property
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22
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2.26
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Customer
Contracts
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22
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2.27
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Relationships
with Suppliers
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22
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2.28
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Investment
Representation; Legends
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22
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2.29
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Stockholder
Matters
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23
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2.3
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Banking
and Insurance
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23
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2.31
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Representations
Complete
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23
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ARTICLE
III
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REPRESENTATIONS
AND WARRANTIES OF PARENT AND SUBSIDIARY
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3.01
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Organization
and Standing
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24
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3.02
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Authorization
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24
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3.03
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Binding
Obligation
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25
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3.04
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Issuance
of Parent Common Stock and Parent Stock Warrants
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25
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3.05
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Litigation
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25
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3.06
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Securities
and Exchange Commission Filings
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25
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ARTICLE
IV
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COVENANTS
OF PARTIES PRIOR TO THE EFFECTIVE TIME
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4.01
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Preparation
of Proxy Statement
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25
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4.02
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Restrictions
on Transfer; Legends
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26
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4.03
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Access
to Information
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26
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4.04
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Public
Disclosure
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27
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4.05
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Conduct
Business in Ordinary Course
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27
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4.06
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Consents
and Approvals
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28
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4.07
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Financial
Statements
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28
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4.08
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Notification
of Certain Matters
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29
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4.09
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Additional
Documents and Further Assurances
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29
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4.1
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Federal
and State Securities Exemptions
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29
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4.11
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Shareholder
List
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29
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4.12
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Non-Competition
and Non-Solicitation
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30
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4.13
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Approval
of Shareholders
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31
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4.14
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No
Shop
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31
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ARTICLE
V
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CONDITIONS
TO THE MERGER
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5.01
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Conditions
to Obligations of Each Party to Effect the Merger
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31
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5.02
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Conditions
to the Obligations of Parent and Subsidiary
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32
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5.03
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Conditions
to Obligations of the Company and the Principals
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35
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ARTICLE
VI
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SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION;
POST-CLOSING
COVENANTS
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6.01
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Survival
of Representations, Warranties and Covenants
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36
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6.02
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Indemnification
by the Principals; Escrow Fund
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37
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6.03
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Indemnification
Procedures
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39
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6.04
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No
Contribution
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40
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6.05
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Benefit
Plans
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40
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ARTICLE
VII
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TERMINATION,
AMENDMENT AND WAIVER
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7.01
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Termination
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41
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7.02
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Effect
of Termination
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41
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7.03
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Expenses;
Termination Fees.
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41
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7.04
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Amendment
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42
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7.05
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Extension;
Waiver
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42
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ARTICLE
VIII
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GENERAL
PROVISIONS
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8.01
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Notices
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42
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8.02
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Interpretation
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43
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8.03
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Counterparts
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44
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8.04
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Entire
Agreement; Assignment
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44
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8.05
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No
Third Party Beneficiaries
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44
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8.06
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Severability
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44
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8.07
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Other
Remedies
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44
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8.08
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Governing
Law; Dispute Resolution
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44
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8.09
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Rules
of Construction
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44
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8.1
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Attorneys'
Fees
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45
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8.11
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Shareholder's
Post Closing Sale Restrictions
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45
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8.12
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Xfone
USA, Inc. Board Appointments
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45
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Exhibits
Exhibit
A
- Articles of Merger
Exhibit
B
- Escrow Agreement
Exhibit
C
- XxXxxxxxxx Employment Agreement
Exhibit
X
- Xxxxxx Employment Agreement
Exhibit
E
- Release
Exhibit
F
- Restricted Area
Schedules
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Schedule
2.03
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Capital
Structure
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Schedule
2.07
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The
Company Financial Statements
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Schedule
2.08
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No
Undisclosed Liabilities
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|||
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Schedule
2.09
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No
Changes
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Schedule
2.10
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Tax
Matters
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Schedule
2.12(b)
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Properties
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Schedule
2.13
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Agreements,
Contracts, Commitments
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Schedule
2.15
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Governmental
Authorization
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|||
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Schedule
2.16
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Litigation
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Schedule
2.22
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Employee
Benefit Plans and Compensation
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Schedule
2.25
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Intellectual
Property
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Schedule
2.26
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Customer
Contracts
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Schedule
2.29
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Stockholder
Matters
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|||
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Schedule
2.30
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Banking
and Insurance
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|||
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Schedule
5.02(b)
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Third
Party Consents Required
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AGREEMENT
AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of August 18, 2005 by
and
among I-55 INTERNET SERVICES, INC., a corporation organized under the laws
of
the State of Louisiana (“I-55” or the “Company”), XFONE, INC., a corporation
organized under the laws of the State of Nevada ("Parent"), XFone USA, Inc.
(“Subsidiary”), a corporation organized under the laws of the State of
Mississippi, a wholly owned subsidiary of Parent , and Xxxxxx XxXxxxxxxx,
Xxxxx
Xxxxxx (the "Principals").
BACKGROUND
A. The
Board
of Directors of each of Parent, Subsidiary, and the Company believe it is
in the
best interests of their respective companies and their respective shareholders
that Parent acquire the Company through the statutory merger of the Company
with
and into the Subsidiary (the "Merger")
and,
in furtherance thereof, have approved the Merger.
B. Pursuant
to the Merger, among other things, all of the issued and outstanding capital
stock of the Company shall be acquired and converted into the right to receive
the consideration upon the terms and conditions set forth herein.
C. The
Company and each of the Principals, on the one hand, and Parent and Subsidiary,
on the other hand, desire to make certain representations, warranties, covenants
and other agreements in connection with the Merger.
D. Concurrently
with the execution and delivery of this Agreement, as material inducements
to
Parent and Subsidiary to enter into this Agreement: (i) Parent, the Subsidiary,
the Escrow Agent (as defined herein) and the Principals are entering into
an
Escrow Agreement, in the form attached as Exhibit
B
(the
"Escrow
Agreement");
(ii)
Subsidiary and Xxxxxx XxXxxxxxxx are entering into an Employment Agreement
in
the form attached as Exhibit
C
(the
"XxXxxxxxxx
Employment Agreement")
and
(iii) Subsidiary and Xxxxx Xxxxxx are entering into an Employment Agreement
in
the form attached as Exhibit
D
("Xxxxxx
Employment Agreement"
and
together with the XxXxxxxxxx Employment Agreement, the "Principals
Employment Agreements").
NOW,
THEREFORE, in consideration of the covenants, promises and representations
set
forth in this Agreement, the parties agree as follows:
ARTICLE
I
THE
MERGER
1.01 The
Merger; Effective Time.
The
Company shall be merged with and into Subsidiary, and Subsidiary shall be
the
surviving corporation (sometimes referred to herein as the "Surviving
Corporation"). The Merger shall be consummated effective at the time Articles
of
Merger attached hereto as Exhibit
A,
are
completed, executed and filed with the later of the Mississippi and Louisiana
Secretaries of State. The date and time of such consummation are referred
to as
the "Closing Date" and the "Effective Time," respectively.
1.02 Effect
of the Merger.
At the
Effective Time, (i) the separate existence of the Company shall cease and
the
Company shall be merged with and into Subsidiary, (ii) Subsidiary shall continue
to possess all of the rights, privileges and franchises possessed by it and
shall, at the Effective Time, become vested with and possess all property,
rights, privileges, powers and franchises possessed by and all the property,
real or personal, causes of action and every other asset of the Company,
(iii)
Subsidiary shall be responsible for all of the liabilities and obligations
of
the Company in the same manner as if Subsidiary had itself incurred such
liabilities or obligations, and the Merger shall not affect or impair the
rights
of the creditors or of any persons dealing with the Company, (iv) the Articles
of Incorporation and the Bylaws of Subsidiary shall become the Articles of
Incorporation and the Bylaws of the Company, (v) the existing officers and
directors of Subsidiary shall remain in such offices, and (vi) the Merger
shall
have all the effects provided by applicable Mississippi law.
1.03 Consideration;
Conversion of Shares.
(a) Definitions.
For all
purposes of this Agreement, the following terms shall have the following
respective meanings:
(i) "Aggregate
Merger Consideration"
shall
mean the: (1) the Parent Stock Consideration, and (2) the Parent Warrant
Consideration.
(1) "Parent
Stock Consideration"
shall
mean a number of shares of the common stock of the Parent Common Stock with
an
agreed market value of $2,569,445 determined using the weighted average price
as
reported on the website of the American Stock Exchange of the Parent Common
Stock for the ten (10) trading days preceding the trading day immediately
prior
to the Closing Date (which weighted average price shall in no event be less
than
$2.70 per share or greater than $3.70 per share).
(2) "Parent
Warrant Consideration"
shall
mean a number of Parent Stock Warrants with a value of $1,284,722 with the
value
calculated as of the Closing Date assuming 90% volatility of the underlying
Parent Common Stock pursuant to the Black Scholes option - pricing
model.
(ii) "Company
Common Stock"
shall
mean shares of the Company's common stock.
(iii) "Company
Stockholders"
or
"Company
Shareholders"
shall
mean the holders of the Total Company Common Stock at the Effective
Time.
(iv) "Escrow
Agent"
shall
mean Trustmark National Bank or such other person or entity mutually agreed
to
by the parties to serve as an escrow agent under the Escrow
Agreement.
(v) "GAAP"
shall
mean U.S. generally accepted accounting principles.
(vi) "Knowledge"
shall
mean (i) with respect to the Company, the actual knowledge of any of the
Company's officers or directors or either of the Principals and the knowledge
that such persons would have obtained of the matter represented after reasonable
inquiry thereof under the circumstances; and (ii) with respect to the Parent
and
Subsidiary, the actual knowledge of the Parent's and Subsidiary’s Chairman,
President or any Executive Vice President and the knowledge that such person
would have obtained of the matter represented after reasonable inquiry thereof
under the circumstances.
(vii) "Material
Adverse Effect"
shall
mean any change, event or effect that is materially adverse to the business,
assets, financial condition, prospects or results of operations of the Company
and its Subsidiaries, taken as a whole.
(viii) "Parent
Common Stock"
shall
mean shares of the common stock of Parent.
(ix) "Parent
Stock Warrants"
shall
mean warrants convertible on a one to one basis into Parent Common Stock
with a
term of five (5) years, a strike price that is 10% above the closing price
of
the Parent Common Stock on the Closing Date with the Parent Common Stock
into
which the warrant is convertible is restricted stock.
(x) "SEC"
shall
mean the U.S. Securities and Exchange Commission.
(xi) "Total
Company Common Stock"
shall
be the aggregate number of all shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time.
(b) The
Aggregate Merger Consideration shall be allocated among the Company Stockholders
as of the Effective Date as follows:
(c)
Each
share of Company Common Stock issued and outstanding immediately prior to
the
Effective Time (other than Dissenting Shares as defined in Section 1.04)
will be
canceled and extinguished and be converted automatically into the right to
receive upon surrender of certificate(s) representing Company Common Stock
(i)
an amount of the Parent Stock Consideration equal to the product of one times
the Parent Stock Consideration divided by the Total Company Common Stock;
and
(ii) an amount of the Parent Warrant Consideration equal to the product of
one
times the Parent Warrant Consideration divided by the Total Company Common
Stock.
1.04 Dissenting
Shares.
(a) Notwithstanding
any other provisions of this Agreement to the contrary, any shares of Company
Common Stock held by a Company Shareholder who has exercised and perfected
appraisal rights for such Company Common Stock, if available because this
Agreement and Plan of Merger was not approved by at least eighty percent
(80%)
of the total voting power of the Shareholders of the Company in accordance
with
the Business Corporation Law of Louisiana, and who has not effectively withdrawn
or lost such appraisal rights ("Dissenting
Shares"),
shall
not be converted into or represent a right to receive the consideration set
forth in Section 1.03, but the holder shall only be entitled to such rights
as
are provided by the Business Corporation Law of Louisiana.
(b) Notwithstanding
the provisions of Section 1.04(a) hereof, if any holder of Dissenting Shares
shall effectively withdraw or lose (through failure to perfect or otherwise)
such holder's appraisal rights under the Business Corporation Law of Louisiana,
then, as of the later of the Effective Time and the occurrence of such event,
such holder's shares shall automatically be converted into and represent
only
the right to receive the consideration set forth in Section 1.03 hereof,
without
interest thereon, upon surrender of the certificate(s) representing such
shares.
(c) The
Company shall give Parent (i) prompt notice of any written demand for appraisal
received by the Company pursuant to the applicable provisions of the Business
Corporation Law of Louisiana; and (ii) the opportunity to participate in
all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent or as required by law,
including the Business Corporation Law of Louisiana, make any payment with
respect to any such demands or offer to settle or settle any such demands.
To
the extent that Parent or the Company makes any payment or payments to any
Dissenting Shares, Parent shall be entitled to recover under the terms of
Article VI hereof the aggregate amount by which such payment or payments
exceed
the aggregate consideration that otherwise would have been payable in respect
of
the stock of any Dissenting Shares.
1.05 Surrender
of Certificates.
(a) Exchange
Agent.
Transfer Online, Inc. shall serve as the exchange agent (the "Exchange
Agent")
for
the Merger.
(b) Parent
to Provide Parent Common Stock and Parent Stock Warrants.
Upon
the terms and subject to the conditions of Section 1.03, promptly after the
Effective Time, in exchange for outstanding Company Common Stock, Parent
shall
make available to the Exchange Agent for exchange in accordance with this
Article I, the Aggregate Consideration issuable pursuant to Section 1.03,
less
the Parent Common Stock and Parent Stock Warrants being escrowed in accordance
with Section 6.02(b) hereof (the "Escrow Shares"), which Parent shall deposit
into the Escrow Fund as defined in Section 6.02(b) hereof.
(c) Exchange
Procedures.
As
promptly as practicable after the Effective Time, Parent shall cause the
Exchange Agent to mail to each holder of record of a certificate(s) which,
immediately prior to the Effective Time, represented outstanding Company
Common
Stock(the "Certificates"),
whose
Company Common Stock was converted into the right to receive shares of Parent
Common Stock and Parent Stock Warrants pursuant to Section 1.03: (i) a letter
of
transmittal (which shall specify that delivery shall be effected, and risk
of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other
provisions as Parent may reasonably specify); and (ii) instructions for use
in
effecting the surrender of the Certificates in exchange for certificate(s)
representing shares of Parent Common Stock and for the Parent Stock Warrants.
Upon surrender of Certificates for cancellation to the Exchange Agent or
to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holders of such Certificates shall be entitled
to
receive in exchange therefor certificate(s) representing the number of whole
shares of Parent Common Stock and Parent Stock Warrants, and the Certificates
so
surrendered shall forthwith be canceled. Until so surrendered, outstanding
Certificates will be deemed from and after the Effective Time, for all corporate
purposes other than the payment of dividends, to evidence the ownership of
the
number of full shares of Parent Common Stock and Parent Stock Warrants into
which such Company Common Stock shall have been so converted.
(d) Distributions
With Respect to Unexchanged Shares.
No
dividends or other distributions declared or made after the Effective Time
with
respect to Parent Common Stock with a record date after the Effective Time
will
be paid to the holder of any unsurrendered Certificate with respect to the
Parent Common Stock represented thereby until the holder of record of such
Certificates shall surrender such Certificates. Subject to applicable law,
as
promptly as practicable following surrender of any such Certificates, the
Exchange Agent shall deliver to the record holder thereof, without interest,
(i)
certificate(s) representing whole shares of Parent Common Stock and Parent
Stock
Warrants issued in exchange therefore, and (ii) the amount of dividends or
other
distributions with a record date after the Effective Time but prior to surrender
payable with respect to such whole shares of Parent Common Stock.
(e) No
Liability.
Notwithstanding anything to the contrary in this Section 1.05, neither the
Exchange Agent, the Surviving Corporation nor any party hereto shall be liable
to a holder of shares of Company Common Stock or Company Preferred Stock
for any
amount properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
1.06 Value
of Parent Common Stock.
For
purposes of the indemnification obligations described in Article VI hereof,
the
parties hereto agree that the Parent Common Stock shall be deemed to have
a
value determined using the weighted average price as reported on the website
of
the American Stock Exchange for the ten (10) trading days preceding the date
on
which a claim for indemnification is made, and Parent Stock Warrants issued
in
the Merger shall be deemed to have a value per share equal to the value per
share determined in accordance with Section 1.03.
1.07 Treatment
of the Company Options and Warrants.
All
outstanding options, warrants and other rights to purchase Company Common
Stock
or any other equity interest in the Company as set forth in Section 2.03
that
remain unexercised as of the Effective Time will be terminated, and the rights
granted thereunder will be forfeited. Prior to the Closing Date, the Company
shall provide all necessary notifications, and obtain all necessary consents,
releases or cancellation agreements from the holders of such options, warrants
and other rights as Parent may reasonably require.
1.08 No
Further Ownership Rights in the Company Capital Stock.
The
shares of Parent Common Stock and Parent Stock Warrants paid in respect of
the
surrender for exchange of Company Common Stock in accordance with the terms
hereof (including any cash paid with respect to fractional shares of Parent
Common Stock or Parent Stock Warrants) shall be deemed to be in full
satisfaction of all rights pertaining to such Company Common Stock, and there
shall be no further registration of transfers on the records of the Surviving
Corporation of capital stock that was outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented
to the
Surviving Corporation for any reason, they shall be canceled and exchanged
as
provided in this Article I.
1.09 Lost,
Stolen or Destroyed Certificates.
In the
event any certificates evidencing shares of Company Common Stock shall have
been
lost, stolen or destroyed, the Exchange Agent shall issue in exchange for
such
lost, stolen or destroyed certificates, upon the making of an affidavit of
that
fact by the holder thereof, such shares of Parent Common Stock, Parent Stock
Warrants or such cash consideration as may be required pursuant to Section
1.03
hereof; provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen
or
destroyed certificates to deliver a bond in such amount as it may reasonably
direct against any claim that may be made against Parent or the Exchange
Agent
with respect to the certificates alleged to have been lost, stolen or
destroyed.
1.10 Taking
of Necessary Action; Further Action.
If at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company, then the officers,
directors and employees of the Company, Parent and Subsidiary are fully
authorized in the name of their respective companies or otherwise to take,
and
will take, all such lawful and necessary action.
1.11 Tax
Consequences.
It is
intended that the Merger shall constitute a reorganization within the meaning
of
Section 368(a)(1)(A), by reason of Section 368(a)(2)(D) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that this Agreement shall constitute
a "plan of reorganization" within the meaning of Section 368 of the Code.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY AND THE PRINCIPALS
The
Company, and each of the Principals, hereby represent and warrant to Parent
and
Subsidiary that on the date hereof and as of the Effective Time as though
made
on the Effective Date as follows:
2.01 Corporate
Organization.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Louisiana. The Company has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which its ownership or leasing of its
properties or the nature of the business conducted by the Company makes such
licensing or qualification necessary. The copies of the Articles of
Incorporation of the Company and the Bylaws of the Company, certified by
its
Secretary as of the date of this Agreement, which are being delivered to
Parent
and Subsidiary herewith, are complete and correct copies of such documents
in
effect as of the date of this Agreement. The minute books of the Company
contain
true and complete records of all meetings and other corporate actions of
its
shareholders and their Boards of Directors (including all committees of their
Boards of Directors).
2.02 Subsidiaries.
There
is no other corporation, limited liability company, partnership, association,
joint venture or other business entity that the Company owns or controls,
directly or indirectly.
2.03 Capital
Structure.
(a) The
authorized capital stock of the Company consists of (i) 100,000,000 shares
of
Company Common Stock, 11,110,000 shares of which are issued and outstanding.
The
capitalization of the Company is as set forth on Schedule
2.03(a)
hereto.
The names, addresses, number of shares held and domiciles of each of the
Company
Shareholders are set forth on Schedule
2.03(a)
hereto.
Except as set forth on Schedule
2.03(a)
hereto,
there are no shares of capital stock of the Company authorized, issued or
outstanding. Except for Company Common Stock set forth on Schedule
2.03(a)
hereto,
there are no classes or series of ownership interests of the Company of any
kind
authorized, outstanding or issuable. All outstanding shares of Company Common
Stock are duly authorized, validly issued, fully paid and non-assessable,
and
are not subject to preemptive rights created by statute, the Articles of
Incorporation or Bylaws of the Company, or any agreement to which the Company
is
a party or by which it is bound. All shares of Company Common Stock have
been
issued in compliance with all applicable federal and state securities laws.
The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of Company Common Stock are as set forth in Schedule
2.03(a)
hereto.
There are no declared or accrued but unpaid dividends with respect to any
shares
of the Company capital stock and none of the Company capital stock is held
in
treasury.
(b) As
of the
date hereof, except for the 5,982,307.69 warrants issued in favor of MCG
Capital
Finance, Inc. (“MCG”), there are no other options, warrants or similar rights
outstanding. Of the 5,982,307.69 warrants issued to MCG, 2,777,500 are currently
vested. Schedule
2.03(b)
sets
forth the full name of MCG and the domicile address of MCG, the number of
shares
of Company Common Stock issuable upon the exercise of such warrants, the
exercise price of such warrants, the vesting schedule for such warrants
(including any vesting acceleration triggered by this Agreement, upon events
following the Closing, or the transactions contemplated hereby), and whether
such right is intended to qualify as an incentive stock option as defined
in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
As of
the Closing Date, all such warrants, written or unwritten, to purchase any
of
the Company's authorized or unissued capital stock shall have been exercised
or
will have terminated. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or other similar rights with respect
to the
Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to Company Common Stock of which the Company
or any
Principal has knowledge. To the Company’s and the Principals’ knowledge, the
shareholders of the Company have good, valid and marketable title to Company
Common Stock free and clear of any claim, lien, pledge, charge, security
interest options, charges, assessments or other encumbrance of any nature
whatsoever.
(c) The
requisite vote required to approve the Merger under Louisiana law, the Company's
Articles of Incorporation, Bylaws and any other agreement to which the Company
or any Shareholder of the Company is two-thirds of the Company Common Stock
voting as a class.
2.04 Authority.
The
Company and each of the Principals have all requisite power and authority
to
enter into this Agreement and any Related Agreement (as defined below) to
which
they are party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement, any Related Agreement
to
which the Company is party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Company, subject to the approval of the Company Shareholders.
No further action is required on the part of any of the Principals to authorize
the Agreement, any Related Agreement to which they are a party and the
transactions contemplated hereby and thereby. This Agreement, any Related
Agreement to which the Company is a party and the Merger have been unanimously
approved by the board of directors of the Company, and the Board of Directors
will recommend to the Company Shareholders to vote in favor of this Agreement,
the Merger and the transactions contemplated thereby. This Agreement and
any
Related Agreement to which the Company and/or any of the Principals is a
party
has been duly executed and delivered by the Company and/or the Principals,
as
the case may be, and constitute the valid and binding obligations of the
Company
and each of the Principals, enforceable against each such party in accordance
with their respective terms, except as such enforceability may be subject
to the
laws of general application relating to bankruptcy, insolvency and the relief
of
debtors and rules of law governing specific performance, injunctive relief
or
other equitable remedies. For the purposes of this Agreement, the term
"Related
Agreements"
shall
mean the Escrow Agreement, the XxXxxxxxxx Employment Agreement, the Xxxxxx
Employment Agreement, the Articles of Merger, and any other agreements to
which
the Company and/or the Principals is a party that is entered into in order
to
consummate the transactions contemplated hereby or thereby.
2.05 No
Conflict.
The
execution and delivery by the Company and each of the Principals of this
Agreement and any Related Agreement to which the Company and/or any Principal
is
a party, and the consummation of the transactions contemplated hereby and
thereby, will not conflict with or result in any violation of or default
under
(with or without notice or lapse of time, or both) or give rise to a right
of
termination, cancellation, modification or acceleration of any obligation
or
loss of any benefit under (any such event, a "Conflict"):
(i)
any provision of the Articles of Incorporation or Bylaws of the Company,
each as
amended to date; (ii) any contract to which the Company is a party, or to
which
any of the Principals, is subject; or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or
any
respective properties or assets, or applicable to any of the
Principals.
2.06 Consents.
No
consent, waiver, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission
or
other federal, state, county, local or other foreign governmental authority,
instrumentality, agency, commission, military division or department,
inspectorate, minister, ministry or public or statutory person (whether
autonomous or not) thereof (or of any political subdivision thereof) (each,
a
"Governmental
Entity"),
is
required by or with respect to the Company, or any of the Principals in
connection with the execution and delivery of this Agreement, any of the
Related
Agreements to which the Company, or any Principal is a party, or the
consummation of the transactions contemplated hereby or thereby, except for:
(i)
the filing of the Articles/Certificate of Merger with the Secretary of State
of
the State of Mississippi and Louisiana; (ii) the approval of this Agreement
and
the transactions contemplated hereby by the Company Shareholders; (iii) the
consents as set forth in Section 5.02(b); and (iv) such other consents, filings,
approvals, registrations or declarations, the failure of which to make or
obtain
is not reasonably likely, individually, or in the aggregate, to have a Material
Adverse Effect.
2.07 The
Company Financial Statements.
Attached as Schedule
2.07
are the
(i) audited balance sheet as of December 31, 2002, 2003 and 2004, and the
Profit
and Loss Statement for the Company for the years ended December 31, 2002,
2003
and 2004 and (ii) the unaudited balance sheet as of June 30, 2005 and the
consolidated Profit and Loss Statement for the Company for the three months
ending June 30, 2005 (collectively, the "Financials").
The
Financials are true, correct and accurate and have been based upon the
information contained in the books and records of the Company and have been
prepared in accordance with GAAP except that the June 30, 2005 Financials
do not
have notes thereto and may be subject to normal and recurring year end
adjustments consistently applied throughout the periods covered thereby.
The
Financials present fairly the financial condition, operating results and
cash
flows of the Company (and their predecessors) as of the dates and during
the
periods indicated therein. The Company's unaudited balance sheet as of June
30,
2005 is referred to hereinafter as the "Current
Balance Sheet."
The
Company maintains and will continue, prior to the Effective Time, to maintain
a
standard system of accounting established and administered in accordance
with
GAAP. The Parent, Subsidiary, and the Company acknowledge that the Financials
do
not reflect receivables owed to the Company by I-55 Telecommunications, L.L.C.
and that the representations of this paragraph are limited by this
acknowledgement.
2.08 No
Undisclosed Liabilities.
Except
as and to the extent reflected or reserved against in the Financials or as
disclosed on Schedule
2.08,
which
shall include all the Company's accounts payable and other accrued expenses
as
of the date of this Agreement, and subject to the thresholds set forth in
Section 2.13 of this Agreement (except that the thresholds of Section 2.13
shall
not apply if the cumulative undisclosed liabilities based on such threshold
exceed $50,000), the Company has no liabilities, claims or obligations (whether
accrued, absolute, contingent, unliquidated or otherwise, whether or not
known
to the Company or Principals or any directors, officers or employees of the
Company, whether due to become payable and regardless of when or by whom
asserted) or any unrealized or anticipated losses from any unrealized or
anticipated losses of a contractual nature.
2.09 No
Changes.
Except
as set forth on Schedule
2.09,
since
the Current Balance Sheet Date, there has not been, occurred or arisen any
of
the following with respect to the Company:
(a) material
transaction by the Company except in the ordinary course of business consistent
with past practices;
(b) amendments
or changes to the organizational documents of the Company;
(c) capital
expenditure or capital expenditure commitment exceeding $5,000 individually
or
$20,000 in the aggregate;
(d) payment,
discharge or satisfaction, in any amount in excess of $5,000 in any one case,
or
$20,000 in the aggregate, of any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than payments,
discharges or satisfactions made or given in the ordinary course of business
consistent with past practices;
(e) destruction
of, damage to or loss of any material assets or material business or loss
of any
material customer (whether or not covered by insurance);
(f) claim
of
wrongful discharge or other unlawful labor practice or action;
(g) material
change in accounting methods or practices (including any change in depreciation
or amortization policies or rates by the Company) other than as required
by
GAAP;
(h) change
in
any election in respect of Taxes (as defined below), adoption or change in
any
accounting method in respect of Taxes, agreement or settlement of any claim
or
assessment in respect of Taxes, or extension or waiver of the limitation
period
applicable to any claim or assessment in respect of Taxes;
(i) revaluation
by the Company of any of their respective assets;
(j) declaration,
setting aside or payment of a dividend or other distribution (whether in
cash,
stock or property) in respect of any share of capital stock, or any split,
combination or reclassification in respect of any share of capital stock,
or any
issuance or authorization of any issuance of any other securities in respect
of,
in lieu of or in substitution for any share of capital stock, or any direct
or
indirect repurchase or redemption of any share of capital stock (or options
or
other rights convertible into, exercisable or exchangeable
therefor);
(k) increase
in the salary or other compensation (cash, equity or otherwise) payable by
the
Company to any officers, directors, employees or advisors, or the declaration,
or commitment or obligation of any kind for the payment by the Company of
a
severance payment, termination payment, bonus or other additional salary
or
compensation (cash, equity or otherwise) to any such person;
(l) sale,
lease or other disposition of any of the material assets or material properties
or any creation of any security interest in such material assets or material
properties;
(m) loan
by
the Company to any person or entity, incurring by the Company of any
indebtedness, guaranteeing of any indebtedness (in each case, except in the
ordinary course of business and consistent with past practice, including,
without limitation, travel and related expenses advanced to employees), issuance
or sale of any debt securities or guaranteeing of any debt securities of
others,
except for advances to employees for travel and business expenses in the
ordinary course of business consistent with past practices;
(n) waiver
or
release of any material or valuable right or claim of the Company , including
any write-off or other compromise of any account receivable of the Company
;
(o) the
commencement, settlement, notice or threat of any lawsuit or proceeding or
other
investigation against the Company or its affairs, or any reasonable basis
for
any of the foregoing;
(p) notice
to
the Company, or their respective directors, officers or managers or advisors
of
any claim of ownership by any person other than the Company of the intellectual
property owned by or developed or created by the Company or of infringement
by
the Company of any other person's intellectual property;
(q) issuance
or sale, or contract to issue or sell, by the Company of any capital stock,
or
any securities, warrants, options or rights to purchase any of the foregoing
(other than a transfer of capital stock occasioned by the exercise of the
MCG
Warrants);
(r) agreement
or modification to any agreement pursuant to which any other party was granted
marketing, distribution, development or similar rights of any type or scope
with
respect to any products or technology of the Company;
(s) hiring
or
termination of any employee of the Company;
(t) event
or
condition of any character that has had or is reasonably likely to have a
Material Adverse Effect; or
(u) agreement
by the Company, or any officer, manager or employee thereof on behalf of
the
Company to do any of the things described in the preceding clauses (a) through
(t) (other than negotiations with Parent and its representatives regarding
the
transactions contemplated by this Agreement).
2.10 Tax
Matters.
(a) Definition
of Taxes.
For the
purposes of this Agreement, the term "Tax"
or,
collectively, "Taxes"
shall
mean: (i) any and all federal, state, local and foreign taxes, assessments
and
other governmental charges, duties, impositions and liabilities, including
taxes
based upon or measured by gross receipts, income, profits, capital gains,
capital stock, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, stamp, excise and
property taxes, together with all interest, penalties and additions imposed
with
respect to such amounts (whether payable directly or by withholding, and
whether
or not requiring the filing of a Return (defined below)); (ii) any liability
for
the payment of any amounts of the type described in clause (i) above as a
result
of being a member of an affiliated, consolidated, combined or unitary group
for
any period; and (iii) any liability for the payment of any amounts of the
type
described in clauses (i) or (ii) above as a result of any express or implied
obligation to indemnify any other person or as a result of any obligations
under
any agreements or arrangements with any other person with respect to such
amounts and including any liability for taxes of a predecessor
entity.
(b) Taxes.
All
Taxes which are due and payable by the Company and any interest or penalties
thereon have been paid in full or accrued on the balance sheets included
in the
Financials. All federal, state and other tax returns of the Company required
by
law to be filed have been timely filed, and Company has paid or accrued on
the
balance sheets included in the Financials (including taxes on properties,
income, franchises, licenses, sales and payrolls) all taxes which have become
due pursuant to such returns or pursuant to any assessment. All such tax
returns
have been prepared in compliance with all applicable laws and regulations
and
are true and accurate in all material respects. The amounts set up as provisions
for Taxes (including provision for deferred income taxes) on the Financials
are
sufficient for the payment of all unpaid federal, state, county and local
taxes
accrued for or applicable to all periods (or portions thereof) ending on
or
before the Effective Date. There are no tax liens on any of the property
of the
Company except those with respect to taxes not yet due and payable. There
are no
pending tax examinations nor has the Company received a revenue agent's report
asserting a tax deficiency. The Company does not expect any taxing authority
to
claim or assess any amount of additional taxes against it. No claim has ever
been made by a taxing authority in a jurisdiction where the Company does
not
file tax returns that the Company is or may be subject to taxes assessed
by such
jurisdiction.
Copies
of
Company’s last three federal, state and local income tax returns are included as
Schedule
2.10(b).
No
waivers of any statute of limitations relating to the payment of taxes have
been
given by the Company and no waivers therefor have been requested by the Internal
Revenue Service from the Company . No extensions have been obtained to file
any
tax return which has not heretofore been filed. The Company has withheld
from
each payment made to employees of the Company the amount of all taxes
(including, but not limited to, federal, state and local income taxes, Federal
Insurance Contribution Act taxes and Unemployment Tax Act taxes) required
to be
withheld therefrom and all amounts customarily withheld therefrom, and have
set
aside all other employee contributions or payments customarily set aside
with
respect to such wages and have paid or will pay the same to, or have deposited
or will deposit such payment with, the proper tax receiving officers or other
appropriate authorities. All Taxes and other amounts required to be collected
and paid to a third party as required by law from customers' payments have
been
timely withheld and paid by the Company.
2.11 Restrictions
on Business Activities.
There
is no agreement (noncompete or otherwise), commitment, judgment, injunction,
order or decree to which the Company is a party or otherwise binding upon
the
Company , which has or may reasonably be expected to have the effect of
prohibiting or impairing in any material respect any business practice, any
acquisition of property, the conduct of business as currently conducted or
otherwise materially limiting the freedom of the Company to engage in any
line
of business or to compete with any person.
2.12 Title
of Properties; Absence of Liens and Encumbrances; Condition of
Equipment.
(a) The
Company has good and valid title to, or, in the case of leased properties
and
assets, valid leasehold interests in, all of its properties and assets, real,
personal and mixed, used or held for use in its business, free and clear
of any
Liens, except: (i) as reflected in the Financials; (ii) Liens for Taxes not
yet
due and payable; and (iii) such imperfections of title and encumbrances,
if any,
which do not detract materially from the value of, or interfere materially
with
the present use of, the property subject thereto or affected
thereby.
(b) Schedule
2.12(b)
contains
an accurate and complete list and description of all real property owned
by the
Company or in which the Company has a leasehold or other interest or which
is
used by the Company in connection with the operation of its business, together
with a description of each lease, sublease, license, or any other instrument
under which the Company claims or holds such leasehold or other interest
or
right to the use thereof or pursuant to which the Company has assigned, sublet
or granted any rights therein, identifying the parties thereto, the rental
or
other payment terms, expiration date and cancellation and renewal terms thereof,
and all machinery, tools, equipment, motor vehicles, rolling stock and other
tangible personal property (other than inventory and supplies), owned, leased
or
used by the Company except for items having a value of less than $2,000 which
do
not, in the aggregate, have a total value of more than $10,000, setting forth
with respect to all such listed property a summary description of all leases,
liens, claims, encumbrances, charges, restrictions, covenants and conditions
relating thereto, identifying the parties thereto, the rental or other payment
terms, expiration date and cancellation and renewal terms thereof.
(c) The
Company has not granted to any third party any right or license to use the
Company's customer lists, customer contact information, customer correspondence
or customer licensing and purchasing histories relating to its current and
former customers.
2.13 Material
or Significant Agreements, Contracts and Commitments.
(a) Except
as
set forth on Schedule
2.13(a),
the
Company is not presently a party to or bound by:
(i) any
employment, consulting or sales agreement with any employee, consultant or
salesperson of the Company that is not otherwise terminable without penalty
upon
no more than 30 days notice or involves payments of more than $10,000 per
annum;
(ii) any
agreement or plan relating to employee benefits or compensation involving
payments of more than $10,000 per annum, including without limitation any
option
plan or purchase plan with respect to Equity Interests of the Company , any
of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(iii) any
material fidelity or surety bond or completion bond;
(iv) any
lease
of personal property having an annual rental rate in excess of $2,000
individually or $20,000 in the aggregate;
(v) any
agreement, contract or commitment relating to capital expenditures and involving
future payments in excess of $5,000 individually or $20,000 in the
aggregate;
(vi) any
agreement, contract or commitment relating to the disposition or acquisition
of
assets or any interest in any business enterprise outside the ordinary course
of
the Company's business that involves future payments of more than
$10,000;
(vii) any
payables, mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit or evidencing any debt or any payable, debt
or
agreement which is secured by any assets of the Company and has a balance
of
more than $5,000.00;
(viii) any
purchase order or contract for the purchase of materials or services involving
in excess of $2,000 individually or $20,000 in the aggregate;
(ix) any
material construction contracts;
(x) any
dealer, distribution, joint marketing or development agreement or agreements
relating to territorial arrangements, sales representation, operating or
consulting agreements that is not otherwise terminable without penalty upon
no
more than 30 days notice or involves payments of more than $10,000 per
annum;
(xi) any
remarketer, reseller or other agreement for use or distribution of the Company's
products, technology or services that may not be cancelled without penalty
upon
no more than 30 days notice;
(xii) any
supplier or third party provider agreements that involves future payments
in
excess of $10,000 per annum and is not cancelable without penalty within
30
calendar days;
(xiii) any
joint
venture, partnership or other management agreements that involves future
payments of more than $10,000;
(xiv) any
advertising, marketing, telemarketing or promotional agreements that involves
future payments of more than $5,000;
(xv) any
material tax sharing agreement with any other party;
(xvi) any
non-compete or other agreements restricting the business in any
way;
(xvii) any
independent agent or independent contractor agreements that is not cancelable
without penalty within 30 calendar days;
(xviii) any
agreements for the discount of the services or products offered by the Company
that involve discounts of more than $5,000 per annum;
(xix) any
material agreements pursuant to which the Company is obligated to indemnify
any
party;
(xx) any
agreements that involves future payments of more than $5,000 or which is
not
otherwise cancelable without penalty within 30 calendar days with any current
or
former officer, director, employee, consultant or equity holder or any
partnership, corporation, joint venture or other entity in which any such
person
has an interest;
(xxi) any
irrevocable right of use or similar agreements that is not cancelable without
penalty within 30 calendar days;
(xxii) any
agreement providing for the purchase of telecommunications minutes, services
or
traffic that involves future payments of more than $5,000 or which is not
otherwise cancelable without penalty within 30 calendar days; or
(xxiii) any
other
agreement, contract or commitment that involves $2,000 individually or $20,000
in the aggregate or more and is not cancelable without penalty within thirty
(30) calendar days.
The
undisclosed liabilities based on the thresholds as provided in this Section
2.13(a) do not exceed in the aggregate $50,000.
(b) The
Company is in compliance with and has not breached, violated or defaulted
under,
or received notice that it has breached, violated or defaulted under, any
of the
terms or conditions of any agreement, contract, lease, license or commitment
to
which it is a party or by which it is bound, including those included on
Schedule
2.13(a)
(collectively, the "Contracts"),
nor
does the Company have knowledge of any event that would constitute such a
material breach, violation or default with the lapse of time, giving of notice
or both. Each Contract is in full force and effect and is not subject to
any
material default thereunder, nor, to the Knowledge of the Company, is any
party
obligated to the Company pursuant thereto subject to any material default
thereunder.
(c) The
Company has obtained, or will obtain prior to the Effective Time, all necessary
consents, waivers and approvals of parties to any Contract as are required
thereunder in connection with the Merger or for such Contracts to remain
in
effect without modification, limitation or alteration after the Effective
Date.
Following the Effective Date, the Company will be permitted to exercise all
of
its rights under the Contracts without the payment of any additional amounts
or
consideration other than amounts or consideration which the Company would
otherwise be required to pay had the transactions contemplated by this Agreement
not occurred.
2.14 Interested
Party Transactions.
No
officer, director, employee, shareholder, manager or member of the Company
(nor
any ancestor, sibling, descendant or spouse of any such person, or trust,
partnership or corporation in which any such person has or has had an interest)
has or has had, directly or indirectly: (i) an interest in any entity which
furnished or sold, or furnishes or sells, services, products or technology
that
the Company furnishes or sells; (ii) any interest in any entity that purchases
from or sells or furnishes to the Company, any goods or services; or (iii)
a
beneficial interest in any Contract to which the Company is a party; provided,
however, that ownership of no more than 1% of the outstanding voting stock
of a
publicly traded corporation shall not be deemed to be an "interest in any
entity" for purposes of this Section 2.14.
2.15 Governmental
Authorization.
(a) Each
consent, license, permit, grant, certificate, approval or other authorization
(i) pursuant to which the Company currently operates or holds any interest
in
any of its properties, or (ii) which is required for the operation of its
business as currently conducted or the holding of any such interest has been
issued or granted and is listed on Schedule
2.15
(collectively, the "the
Company Authorizations").
The
Company is operating in compliance with all Company Authorizations. Each
Company
Authorization has been lawfully and validly issued and no proceeding or
investigation is currently pending or threatened, and the Company has received
no notice of any investigation, revocation, cancellation or modification
with
respect to any Company Authorization and knows of no basis therefor. The
Company
has timely filed all reports, data and other information required to be filed
with any governmental entity or as required to maintain the Company
Authorizations. The Company Authorizations are in full force and effect,
and,
shall remain in full force and effect without modification after the Effective
Time.
2.16 Litigation.
Except
as set forth on Schedule
2.16,
there
is no action, suit, claim or proceeding of any nature pending or threatened
against the Company or any Principal or their respective properties or any
person or entity whose liability the Company or any Principal may have retained
or assumed, either contractually or by operation of law, nor, to the Knowledge
of the Company or Principals, is there any reasonable basis therefor. There
is
no investigation or other proceeding pending or threatened against the Company
or any Principal, any of their respective properties or any person or entity
whose liability the Company or any Principal may have retained or assumed,
either contractually or by operation of law, by or before any Governmental
Entity, nor, to the Knowledge of the Company or Principals, is there any
reasonable basis therefor. Except as set forth on Schedule
2.16,
no
Governmental Entity has at any time challenged or questioned the legal right
of
the Company to conduct their respective operations as presently or previously
conducted.
2.17 Accounts
Receivable.
Except
for any receivables owed to the Company by I-55 Telecommunications, L.L.C.,
all
receivables of the Company (including accounts receivable, loans receivable
and
advances) which are reflected in the Balance Sheet, and all such receivables
which will have arisen since the date thereof, shall have arisen only from
bona
fide transactions in the ordinary course of the business of the Company and
shall be (or have been) fully collected when due, or in the case of each
account
receivable within 90 days after it arose, without resort to litigation and
without offset or counterclaim, in the aggregate face amounts thereof except
to
the extent of the normal allowance for doubtful accounts with respect to
accounts receivable computed as a percentage of sales consistent with the
Company's prior practices as reflected on the Financials.
2.18 Assets
Necessary to Business.
The
Company presently has and at Closing will have title to all property and
assets,
real, personal and mixed, tangible and intangible, and all leases, licenses
and
other agreements, necessary to permit Subsidiary to carry on the business
of the
Company, as currently conducted.
2.19 Minute
Books.
The
minutes of the Company made available to counsel for Parent are the only
minutes
of the Company and contain substantially accurate summaries of all material
meetings of the board of directors (or committees thereof), the board of
managers (or committees thereof), the shareholders (or committees thereof),
the
members (or committees thereof) of the Company , as applicable, and each
action
by written consent since the inception of each such entity.
2.20 Environmental
Matters.
(a) Hazardous
Material.
The
Company has not: (i) operated any underground storage tanks at any property
that
the Company has at any time owned, operated, occupied or leased; or (ii)
illegally released any amount of any substance that has been designated by
any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including without limitation PCBs, asbestos, petroleum, and
urea-formaldehyde and all substances listed as hazardous substances pursuant
to
the Comprehensive Environmental Response, Compensation, and Liability Act
of
1980, as amended, or defined as a hazardous waste pursuant to the United
States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws (a "Hazardous
Material").
To
the Knowledge of the Company, no Hazardous Materials are present in, on or
under
any property, including the land and the improvements, ground water and surface
water thereof, that the Company or any Subsidiary has at any time owned,
operated, occupied or leased.
(b) Hazardous
Materials Activities.
The
Company has not transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to Hazardous Materials in violation of
any
law in effect on or before the Effective Time, nor has the Company or any
Subsidiary disposed of, transported, sold, or manufactured any product
containing a Hazardous Material (any or all of the foregoing being collectively
referred to herein as "Hazardous
Materials Activities")
in
violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) Permits.
The
Company currently holds all environmental approvals, permits, licenses,
clearances and consents (the "Environmental
Permits")
necessary for the conduct of Hazardous Material Activities by them,
respectively, and other businesses of the Company as such activities and
businesses are currently being conducted.
(d) Environmental
Liabilities.
No
action, proceeding, revocation proceeding, amendment procedure, writ, injunction
or claim is pending or, to the Knowledge of the Company, threatened concerning
any Environmental Permit, Hazardous Material or any Hazardous Materials Activity
of the Company or any Subsidiary. The Company has no Knowledge of any fact
or
circumstance that is reasonably likely to involve the Company in any
environmental litigation or impose upon the Company any environmental
liability.
2.21 Brokers'
and Finders' Fees.
The
Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
2.22 Employee
Benefit Plans and Compensation.
(a) Definitions.
For all
purposes of this Agreement, the following terms shall have the following
respective meanings:
(i) "Affiliate"
shall
mean any other person or entity under common control with the Company or
Parent,
as applicable, within the meaning of Section 414(b), (c), (m) or (o) of the
Code, and the regulations issued thereunder.
(ii) "COBRA"
shall
mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.
(iii) "the
Company Employee Plan"
shall
mean any plan, program, policy, practice, contract, agreement or other material
arrangement providing for compensation, severance, termination pay, deferred
compensation, performance awards, stock or stock related awards, fringe benefits
or other employee benefits or remuneration of any kind, whether written,
unwritten or otherwise, funded or unfunded, including without limitation,
each
"employee benefit plan," within the meaning of Section 3(3) of ERISA which
is or
has been maintained, contributed to, or required to be contributed to, by
the
Company or any Affiliate for the benefit of any Employee, or with respect
to
which the Company or any Affiliate has or may have any liability or
obligation.
(iv) "DOL"
shall
mean the United States Department of Labor.
(v) "Employee"
shall
mean any current or former employee, consultant or director of the Company
or
any Affiliate.
(vi) "Employment
Agreement"
shall
mean each management, employment, severance, consulting, relocation,
repatriation, expatriation, visas, work permit or other agreement, or contract
between the Company or any Affiliate and any Employee.
(vii) "ERISA"
shall
mean the Employee Retirement Income Security Act of 1974, as
amended.
(viii) "FMLA"
shall
mean the Family Medical Leave Act of 1993, as amended.
(ix) "IRS"
shall
mean the United States Internal Revenue Service.
(x) "Pension
Plan"
shall
mean each the Company Employee Plan, which is an "employee pension benefit
plan," within the meaning of Section 3(2) of ERISA.
(b) Schedule.
Schedule
2.22(b)
contains
an accurate and complete list of each the Company Employee Plan and each
Employment Agreement. The Company has no plan or commitment to establish
any new
the Company Employee Plan or Employment Agreement, to modify any the Company
Employee Plan or Employment Agreement (except to the extent required by law),
or
to enter into any the Company Employee Plan or Employee Agreement.
(c) Documents.
The
Company has provided to Parent correct and complete copies of: (i) all documents
embodying each the Company Employee Plan and each Employment Agreement including
(without limitation) all amendments thereto and all related trust documents,
administrative service agreements, group annuity contracts, group insurance
contracts, and policies pertaining to fiduciary liability insurance covering
the
fiduciaries for each Plan; (ii) the most recent annual actuarial valuations,
if
any, prepared for each the Company Employee Plan; (iii) the three (3) most
recent annual reports (Form Series 5500 and all schedules and financial
statements attached thereto), if any, required under ERISA or the Code in
connection with each the Company Employee Plan; (iv) if the Company Employee
Plan is funded, the most recent annual and periodic accounting of the Company
Employee Plan assets; (v) the most recent summary plan description together
with
the summary(ies) of material modifications thereto, if any, required under
ERISA
with respect to each the Company Employee Plan; (vi) all IRS determination,
opinion, notification and advisory letters, and all applications and
correspondence to or from the IRS or the DOL with respect to any such
application or letter; (vii) all communications material to any Employee
or
Employees relating to any the Company Employee Plan and any proposed the
Company
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments
or
vesting schedules or other events which would result in any material liability
to the Company; (viii) all correspondence to or from any governmental agency
relating to any the Company Employee Plan; (ix) all COBRA forms and related
notices (or such forms and notices as required under comparable law); (x)
the
three (3) most recent plan years discrimination tests for each the Company
Employee Plan; and (xi) all registration statements, annual reports (Form
11-K
and all attachments thereto) and prospectuses prepared in connection with
each
Company Employee Plan.
(d) Employee
Plan Compliance.
Except
as set forth on Schedule
2.22(d),
(i) the
Company has performed in all material respects all obligations required to
be
performed by it under, is not in material default or violation of, and has
no
knowledge of any material default or violation by any other party to each
the
Company Employee Plan, and each the Company Employee Plan has been established
and maintained in all material respects in accordance with its terms and
in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each the Company Employee
Plan intended to qualify under Section 401(a) of the Code and each trust
intended to qualify under Section 501(a) of the Code has either received
a
favorable determination, opinion, notification or advisory letter from the
IRS
with respect to each such Company Employee Plan as to its qualified status
under
the Code, including all amendments to the Code effected by the Tax Reform
Act of
1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for
such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such Company Employee Plan; (iii) no
"prohibited transaction," within the meaning of Section 4975 of the Code
or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 4975
of
the Code or Section 408 of ERISA (or any administrative class exemption issued
thereunder), has occurred with respect to any the Company Employee Plan;
(iv)
there are no actions, suits or claims pending, or, to the Knowledge of the
Company, threatened or reasonably anticipated (other than routine claims
for
benefits) against any the Company Employee Plan or against the assets of
any the
Company Employee Plan; (v) each Company Employee Plan can be amended, terminated
or otherwise discontinued after the Effective Time, without material liability
to the Parent, the Subsidiary, or the Company (other than ordinary
administration expenses); (vi) there are no audits, inquiries or proceedings
pending or, to the Knowledge of the Company , threatened by the IRS or DOL
with
respect to any Company Employee Plan; and (vii) the Company is not subject
to
any penalty or tax with respect to any the Company Employee Plan under Section
502(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) No
Pension Plans.
The
Company has not ever maintained, established, sponsored, participated in,
or
contributed to, any (i) Pension Plans subject to Title IV of ERISA or Section
412 of the Code; (ii) "multiemployer plan" within the meaning of Section
(3)(37)
of ERISA; or (iii) multiemployer plan, or to any plan described in Section
413
of the Code.
(f) No
Post-Employment Obligations.
No
Company Employee Plan provides, or reflects or represents any liability to
provide, retiree life insurance, retiree health or other retiree employee
welfare benefits to any person for any reason, except as may be required
by
COBRA or other applicable statute, and the Company has never represented,
promised or contracted (whether in oral or written form) to any Employee
(either
individually or to Employees as a group) or any other person that such
Employee(s) or other person would be provided with retiree life insurance,
retiree health or other retiree employee welfare benefit, except to the extent
required by statute.
(g) Health
Care Compliance.
The
Company has not , prior to the Effective Time and in any material respect,
violated any of the health care continuation requirements of COBRA, the
requirements of FMLA, the requirements of the Health Insurance Portability
and
Accountability Act of 1996, the requirements of the Women's Health and Cancer
Rights Act of 1998, the requirements of the Newborns' and Mothers' Health
Protection Act of 1996, or any amendment to each such act, or any similar
provisions of state law applicable to its Employees.
(h) Effect
of Transaction.
(i) Execution
of this Agreement and the consummation of the transactions contemplated hereby
will not constitute an event under any Company Employee Plan, Employment
Agreement, trust or loan that will or may result in any payment (whether
of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any Employee.
(ii) No
payment or benefit which will or may be made by the Company with respect
to any
Employee or any other "disqualified individual" (as defined in Code Section
280G
and the regulations thereunder) will be characterized as a "parachute payment,"
within the meaning of Section 280G(b)(2) of the Code.
(i) Employment
Matters.
The
Company : (i) is in compliance with all applicable foreign, federal, state
and
local laws, rules and regulations respecting employment, employment practices,
terms and conditions of employment and wages and hours, in each case, with
respect to Employees; (ii) has withheld and reported all amounts required
by law
or by agreement to be withheld and reported with respect to wages, salaries
and
other payments to Employees; (iii) is not liable for any arrears of wages
or any
taxes or any penalty for failure to comply with any of the foregoing; and
(iv)
is not liable for any payment to any trust or other fund governed by or
maintained by or on behalf of any governmental authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the
normal
course of business and consistent with past practice). There are no pending
or,
to the knowledge of the Company or Principals, threatened or reasonably
anticipated claims or actions against the Company under any worker's
compensation policy or long-term disability policy.
(j) Labor.
No work
stoppage or labor strike against the Company is pending, or, to the knowledge
of
the Company or Principals, threatened or reasonably anticipated. To the
knowledge of the Company or Principals, there are neither any activities
nor
proceedings of any labor union to organize any Employees, nor have there
ever
been. There are no actions, suits, claims, labor disputes or grievances pending,
or, to the knowledge of the Company or Principals, threatened or reasonably
anticipated relating to any labor, safety or discrimination matters involving
any Employee, including without limitation charges of unfair labor practices
or
discrimination complaints. The Company has not has engaged in any unfair
labor
practices within the meaning of the National Labor Relations Act. The Company
is
not presently, or has been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to Employees and no
collective bargaining agreement is being negotiated by the Company.
(k) Employees.
Schedule
2.22(k)
contains
a true and complete list of the names and current salary rates and bonus
commitments to all present employees of the Company and Schedule
2.22(k)
or other
Schedules attached as part of Section 2.22 contains a list of all contracts,
agreements, Company Employee Plans, arrangements, commitments and understanding
(formal and informal) pertaining to terms of employment, compensation, bonuses,
profit sharing, stock purchases, stock repurchases, stock options, commissions,
incentives, loans or loan guarantees, severance pay or benefits, change in
control payments, use of the Company's property and related matters of the
Company with any current or former officer, director, employee or consultant,
and true and complete copies of all such contracts, agreements, plans,
arrangements and understandings have been delivered to Parent
heretofore.
(l) Except
for the Principals, the Company will not have any responsibility for continuing
any person in the employ (or retaining any person as a consultant) of the
Subsidiary from and after the Effective Time or have any liability for any
severance payments to or similar arrangements with any such person who shall
cease to be an employee or consultant of the Company at or prior to the
Effective Time.
(m) No
facts
or circumstances are known to exist that could provide a reasonable basis
for a
claim of wrongful termination or employment discrimination by any current
or
former employee of the Company against the Company.
2.23 Compliance
with Laws; Relations with Governmental Entities.
The
Company has complied in all respects with, is not in violation of, and has
not
received any notices of violation with respect to, any foreign, federal,
state
or local statute, law or regulation. Neither the Company nor any Principal,
nor,
to the Knowledge of the Company or any Principal, any of the Company's officers,
directors, employees or agents (or shareholders, distributors, representatives
or other persons acting on the express, implied or apparent authority of
the
Company) have paid, given or received or have offered or promised to pay,
give
or receive, any bribe or other unlawful payment of money or other thing of
value, any unlawful discount, or any other unlawful inducement, to or from
any
person or Governmental Entity in the United States or elsewhere in connection
with or in furtherance of the business of the Company (including any offer,
payment or promise to pay money or other thing of value (a) to any foreign
official, political party (or official thereof) or candidate for political
office for the purposes of influencing any act, decision or omission in order
to
assist the Company in obtaining business for or with, or directing business
to,
any person or entity, or (b) to any person or entity, while knowing that
all or
a portion of such money or other thing of value will be offered, given or
promised to any such official or party for such purposes. To the knowledge
of
the Company or any Principal, the business of the Company is not in any manner
dependent upon the making or receipt of such payments, discounts or other
inducements. The Company nor any Principal has otherwise taken any action
that
would cause the Company to be in violation of the Foreign Corrupt Practices
Act
of 1977, as amended, or any applicable Laws of similar effect.
2.24 Merger
Tax Matters.
The
Company and each Principal represents that each of them and the Company
Shareholders understands that he or she must rely solely on his or her advisors
and not on any statements or representations by Parent, or its agents, with
respect to Tax consequences of the Merger and that the Company is relying
on its
own advisors as to such matters. No tax opinions are being required under
Article V of this Agreement.
2.25 Intellectual
Property.
Schedule
2.25 contains
a true, correct and complete listing of all Intellectual Property owned or
licensed by or registered in the name of the Company and used or held for
use in
operations of the Business, all of which are transferable to Buyer by the
sole
act and deed of the Company , and no consent on the part of any other person
is
necessary to effectuate the transfer to Buyer of such Intellectual Property.
The
Company pays no royalty to anyone with respect to the Intellectual Property
and
has the right to bring action for the infringement thereof. The Company owns
or
possesses all rights to use all such Intellectual Property necessary to or
useful for the conduct of the Business. The Company has not received any
notice
to the effect that any service rendered by the Company relating to the Business
may infringe on any Intellectual Property right or other legally protectable
right of another, nor does the Company or any Principal otherwise have any
knowledge of any such infringement.
2.26 Customer
Contracts.
The
contracts, agreements, understandings and commitments set forth and described
in
Schedule
2.26 (the
"Customer
Contracts") are
the
current forms of all of the types of customer contracts, agreements, commitments
or understandings relating to the business and operations thereof to which
the
Company is a party. Separately described in Schedule
2.26 are
all
Customer Contracts of the Company that have generated $2,000 or more in revenue
in any month since June 1, 2004 ("Significant
Customer Contracts") and
a
list of all current customers of the Company.
The
Company has not entered into any binding agreement with respect to any Customer
Contract that could adversely affect the Company’s ability to enforce its rights
under such Customer Contract. The Company has delivered true and complete
copies
of all written Significant Customer Contracts (and all amendments and
modifications thereto) to Parent and Subsidiary prior to the execution of
this
Agreement, and each Significant Customer Contract represents the entire
agreement between the Company and any other party to such Significant Customer
Contract.
Since
120
days prior to the date of this Agreement, (i) no customer (or group of related
customers) purchasing in the aggregate $25,000 in products and services over
the
past twelve (12) months-has terminated its relationship with the Company
, and
(ii) the Company has not received any written or oral communication from
any
customer (or group of related customers) purchasing in the aggregate $25,000
in
products and services over the past twelve (12) months to the effect that
such
customer (or group of related customers) is experiencing financial difficulties
which reasonably could be expected to affect adversely full and timely payment
by such customer for services rendered by the Company.
2.27 Relationships
with Suppliers.
The
Company or any Principal does not know of any written or oral communication,
fact, event or action which exists or has occurred within 120 days prior
to the
date of this Agreement which would indicate that any current supplier to
the
Company or its Subsidiaries of items or services essential to the conduct
of the
business of the Company and its Subsidiaries may terminate or materially
reduce
its business with the Company.
2.28 Investment
Representation; Legends.
(a) The
Company understands that the Parent Common Stock and the Parent Stock Warrants
to be issued pursuant to the terms of this Agreement have not been registered
under the Securities Act of 1933 as amended (the "Securities Act") and the
Parent Common Stock and Parent Stock Warrants are "restricted securities"
as the
term is defined in Rule 144 promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act and the Company shareholders
cannot transfer any of such Parent Common Stock and Parent Stock Warrants
unless
such shares are subsequently registered under the Securities Act or in a
transfer that, in the opinion of legal counsel to Parent, is exempt from
such
registration.
(b) Each
Company shareholder has been advised that the Parent Company Stock and the
Parent Stock Warrants issued hereunder have not been and are not being
registered under the Securities Act or under the Blue Sky laws of any
jurisdiction, and that Parent in issuing such shares is relying upon, among
other things, the representations and warranties of the Company and Principals
contained in this Section including that such issuance is a "private offering"
and does not require compliance with the registration provisions of the
Securities Act.
2.29 Stockholder
Matters.
Set
forth on Schedule
2.29 is
a list
of all holders of the Company's capital stock as of the date hereof and
Schedule
2.29 identifies
each holder of the Company's capital stock that is an accredited investor
as
defined in Rule 501(a) under the Securities Act of 1933, as
amended.
2.30 Banking
and Insurance.
(a) Schedule
2.30(a)
contains
a true and complete list of the names and locations of all financial
institutions at which the Company maintains a checking account, deposit account,
securities account, safety deposit box or other deposit or safekeeping
arrangement, the number or other identification of all such accounts and
arrangements and the names of all persons authorized to draw against any
funds
therein.
(b) Schedule
2.30(b)
contains
a true and complete list of all insurance policies and bonds and self insurance
arrangements currently in force that cover or purport to cover risks or losses
to or associated with the Company's business, operations, premises, properties,
assets, employees, agents and directors and sets forth, with respect to each
such policy, bond and self insurance arrangement, a description of the insured
loss coverage, the expiration date and time of coverage, the dollar limitations
of coverage, a general description of each deductible feature and principal
exclusion and the premiums paid and to be paid prior to expiration. The Company
has no obligation, liability or other commitment relating to any contract
of
insurance containing a provision for retrospective rating or adjustment of
the
Company's premium obligation. To the Company’s knowledge, no facts or
circumstances exist that would cause the Company to be unable to renew its
existing insurance coverage as and when the same shall expire other than
possible increases in premiums that do not result from any act or omission
of
the Company.
2.31 Representations
Complete.
None of
the representations or warranties made by the Company or any Principal in
this
Agreement, or to be furnished in or in connection with documents mailed or
delivered to the Company Shareholders for use in soliciting their consent
to
this Agreement and the Merger, contains or, with respect to documents to
be
mailed to the Company Shareholders, will when mailed contain, any untrue
statement of a material fact or omits or, with respect to documents to be
mailed
to the Company Shareholders, will when mailed omit, to state any material
fact
necessary in order to make the statements contained herein or therein, in
light
of the circumstances under which they were made, not misleading. No
representations and warranties by the Company and Principals in this Agreement
and no statement in this Agreement or any document or certificate furnished
or
to be furnished to Parent or Subsidiary pursuant hereto contains or will
contain
any untrue statement or omits or will omit to state a fact necessary in order
to
make the statements contained therein not misleading. The Company and Principals
have disclosed to Parent and Subsidiary all facts known to any of them material
to the assets, liabilities, business, operation and property of the Company
or
its Subsidiaries. There are no facts known to the Company or Principals not
yet
disclosed which would adversely affect the Company's business, financial
condition or future operations of the Company's business. All facts of material
importance to the assets and to the business have been fully and truthfully
disclosed to Parent and Subsidiary in this Agreement.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF PARENT AND SUBSIDIARY
Parent
and Subsidiary represent and warrant to the Company that on the date hereof
and
as of the Effective Date as though made at the Effective Time as
follows:
3.01 Organization
and Standing.
Parent
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Nevada. Subsidiary is a corporation duly organized,
validly
existing and in good standing under the laws of the State of Mississippi.
Each
of Parent and Subsidiary has the full and unrestricted corporate power and
authority to carry on its business as currently conducted. Each of Parent
and
Subsidiary has the full and unrestricted corporate power and authority to
execute and deliver this Agreement, the Related Agreements and each other
document required hereunder and to carry out the transactions contemplated
hereby and thereby. Parent has the full and unrestricted corporate power
and
authority to issue the Parent Common Stock and Parent Stock Warrants hereunder
and to carry out the transactions to be carried out by it as contemplated
by
this Agreement and all other Related Agreements.
3.02 Authorization.
The
execution, delivery and performance by each of Parent and Subsidiary of this
Agreement and each other Related Agreement, the fulfillment of and compliance
with the respective terms and provisions hereof and thereof, and the
consummation by each of Parent and Subsidiary of the transactions contemplated
hereby and thereby have been duly authorized by their respective Board of
Directors and subject to the approval of the shareholders of the Parent and
shareholders of the Subsidiary (a) will not conflict with, or violate any
term
or provision of (i) any law having applicability to each of Parent and
Subsidiary, the effect of which would have an adverse material effect on
the
business of Parent or Subsidiary, or (ii) any provision of the certificate
of
incorporation or bylaws of Parent or Subsidiary; (b) will not conflict with,
or
result in any material breach of, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, any material
agreement to which Parent or Acquisition Sub is a party or by which it is
bound;
or (c) will not result in or require the creation or imposition of or result
in
the acceleration of any indebtedness, or of any encumbrance of any nature
upon,
or with respect to, Parent or Subsidiary. No other corporate action on the
part
of Parent or Subsidiary is necessary for Parent or Subsidiary to enter into
this
Agreement and all other Related Agreements and to consummate the transactions
contemplated hereby and thereby, other than the approval of the Parent as
the
sole shareholder of the Subsidiary. The issuance by Parent of the Parent
Common
Stock and Parent Stock Warrants hereunder and the performance by Parent or
Subsidiary of the terms and provisions of this Agreement and each other Related
Agreements required to be performed by it have been duly authorized by all
necessary corporate action of Parent (which authorization has not been modified
or rescinded and is in full force and effect) other than the approval of
the
Parent as sole shareholder of the Subsidiary.
3.03 Binding
Obligation.
This
Agreement and each other agreement to be executed by Parent or Subsidiary
hereunder constitutes a valid and binding obligation of the Parent or
Subsidiary, as applicable, enforceable against the Parent or Subsidiary,
as
applicable, in accordance with its terms, except as such enforceability may
be
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies.
3.04 Issuance
of Parent Common Stock and Parent Stock Warrants.
All of
the Parent Common Stock and Parent Stock Warrants to be issued pursuant to
this
Agreement have been duly authorized by Parent and, when issued in accordance
with the terms of this Agreement, shall be validly issued, fully paid and
nonassessable.
3.05 Litigation.
There
are no actions, suits, claims, arbitrations, proceedings or investigations
pending, threatened or reasonably anticipated against, or involving Parent
or
Subsidiary or the transactions contemplated by this Agreement or any other
Related Agreement, at law or in equity, or before or by any arbitrator or
governmental authority, domestic or foreign, which could reasonably be expected
to have a material adverse effect on the Parent or Subsidiary. Neither Parent
nor Subsidiary is operating under, subject to or in default with respect
to any
order, award, writ, injunction, decree or judgment of any arbitrator or
governmental authority relating to Parent or Subsidiary or their respective
employees.
3.06 Securities
and Exchange Commission Filings.
Parent
and Subsidiary have furnished the Company and the Principals with a true
and
complete copy of each final annual, quarterly and current report and each
final
prospectus filed by Parent with the SEC since January 1, 2002. No
such
filing with the SEC by Parent contained to Parent's Knowledge, as of the
time of
such filing, any untrue statement of a material fact or omitted a material
fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
ARTICLE
IV
COVENANTS
OF PARTIES PRIOR TO THE EFFECTIVE TIME
4.01 Preparation
of Proxy Statement.
(a) Immediately
after the execution of this Agreement, the Company shall prepare, with the
cooperation of Parent and Subsidiary, a Proxy Statement for the Company
Shareholders to approve this Agreement, the Merger and the transactions
contemplated hereby and thereby. The Proxy Statement shall include a disclosure
document for the offer and issuance of the shares of Parent Common Stock
and
Parent Stock Warrants to be received by the holders of Company Common Stock
in
the Merger. Parent and the Company shall each use commercially reasonable
efforts to cause the Proxy Statement to comply with applicable federal and
state
securities laws requirements. Each of Parent and the Company agrees to provide
promptly to the other such information concerning its business and financial
statements and affairs as, in the reasonable judgment of the providing party
or
its counsel, may be required or appropriate for inclusion in the Proxy
Statement, or in any amendments or supplements thereto, and to cause its
counsel, accountants and auditors to cooperate with the other's counsel,
accountants and auditors in the preparation of the Proxy Statement. The Company
will promptly advise Parent, and Parent will promptly advise the Company,
in
writing if at any time prior to the Effective Date either the Company or
Parent
shall obtain Knowledge of any facts that might make it necessary or appropriate
to amend or supplement the Proxy Statement in order to make the statements
contained or incorporated by reference therein not misleading or to comply
with
applicable law. The Proxy Statement shall contain the recommendation of the
Board of Directors of the Company that the Company Shareholders approve the
Merger and this Agreement and the conclusion of the Board of Directors that
the
terms and conditions of the Merger are fair and reasonable to the Company
Shareholders, unless the Company's Board of Directors shall have determined
in
good faith that the failure to do so would violate the Board of Directors'
fiduciary duties to the Company Shareholders under applicable law. Anything
to
the contrary contained herein notwithstanding, the Company shall not include
in
the Proxy Statement any information with respect to Parent, the Subsidiary
or
their affiliates or associates, the form and content of which information
shall
not have been approved by Parent prior to such inclusion.
4.02 Restrictions
on Transfer; Legends.
The
Parent Common Stock and all the Parent Stock Warrants to be issued in the
Merger
shall be characterized as "restricted securities" for purposes of Rule 144
under
the Securities Act, and each certificate representing any of such shares
shall
bear a legend identical or similar in effect to the following legend (together
with any other legend or legends required by applicable state securities
laws or
otherwise):
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED THE "ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES
LAWS,
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED
OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT AND SUCH LAWS OR IN
COMPLIANCE WITH AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. IN ADDITION,
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN SALE RESTRICTIONS
AS
PROVIDED IN SECTION 8.11 OF THAT CERTAIN AGREEMENT AND PLAN OF MERGER BY
AND
AMONG I-55 INTERNET SERVICES, INC., XFONE, INC. AND XFONE USA, INC. DATED
AS OF
AUGUST ___, 2005.
4.03 Access
to Information.
(a) The
Company shall afford Parent, Subsidiary and its accountants, counsel and
other
representatives, reasonable access during the period prior to the Effective
Date
and during normal business hours upon reasonable advance notice to (i) all
of
the Company's properties, books, contracts, commitments and records; (ii)
all
other information concerning the business, properties and personnel (subject
to
restrictions imposed by applicable law) of the Company as Parent may reasonably
request; and (iii) all employees of the Company as identified by Parent.
The
Company agrees to provide to Parent and its accountants, counsel and other
representatives copies of internal financial statements (including Tax returns
and supporting documentation) promptly upon request.
(b) No
information or knowledge obtained in any investigation pursuant to this Section
4.03 shall affect or be deemed to modify: any representation or warranty
contained herein, the conditions to the obligations of the parties to consummate
the Merger in accordance with the terms and provisions hereof, or the
indemnification obligations of the Company and the Principals.
(c) All
information furnished by one party to another pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the Merger contemplated hereby and, if such Merger shall not occur, the
party
receiving the information shall retrieve, if necessary, and return to the
party
which furnished such information all documents or other materials containing,
reflecting or referring to such information, shall use its best efforts to
keep
confidential all of such information, and shall not directly or indirectly
use
such information for any competitive or other commercial purpose. If the
Merger
is not consummated, the obligation to keep such information confidential
shall
continue for two (2) years from the date the proposed Merger is abandoned
and
shall not apply to (i) any information which (a) the party receiving the
information can establish by convincing evidence was already in its possession
prior to the disclosure thereof by the party furnishing the information,
(b) was
then generally known to the public or set forth in public records, (c) became
known to the public through no fault of the party receiving the information,
or
(d) was disclosed to the party receiving the information by a third party
not
bound by an obligation of confidentiality, or (ii) disclosures in accordance
with an order of a court of competent jurisdiction.
4.04 Public
Disclosure.
The
parties hereto agree that prior to the Effective Time, none of them will
make or
engage in any press release, publicity or other public disclosure of the
matters
which are the subject of this Agreement without the prior written consent
of
Parent and the Company, unless such party believes in good faith upon
consultation with counsel that such press release, publicity or other public
disclosure is required by law or legal process, in which event such party
will
give Parent and the Company as much advance notice thereof as is practicable
under the circumstances and will give good faith consideration to any comments
made with respect thereto by the other parties hereto prior to the time when
such press release, publicity or other public disclosure is made.
4.05 Conduct
Business in Ordinary Course.
The
Company shall, through the Closing Date, use its best efforts to preserve
its
business and the assets and maintain its existing contracts and licenses
and to
preserve for the Subsidiary the present relationships with customers, employees,
lessors and any other persons having business relations with the Company.
Except
as contemplated by this Agreement or as reasonably required to carry out
its
obligations hereunder, the Company shall, through the Closing Date, maintain
and
service the business and the assets only in the ordinary course of business
and,
in addition, shall not (except to the extent that Parent has consented in
advance in writing thereto: (i) enter into any agreement in connection with
the
business or assets that may not be terminated on less than thirty (30) days'
notice or that may reasonably be expected to have a Material Adverse Effect
on
the business or assets, (ii) make any capital purchases or commitments relating
to the Assets that exceed, individually or in the aggregate, $10,000; (iii)
place, or allow to be placed, an Encumbrance on any of the assets, (iv) sell,
assign, lease or otherwise transfer or dispose of any interest in any asset
(other than in the ordinary course of business), (v) commit any act or omit
to
do any act, or engage in any activity or transaction or incur any obligation
(by
conduct or otherwise), that (individually or in the aggregate) reasonably
could
be expected to have a Material Adverse Effect on the business or assets;
(vi) do
or omit to do any act (or permit such action or omission) which reasonably
could
be expected to cause a breach of any contract or Governmental Authorizations,
or
(vii) take any action or fail to take any action that would reasonably be
expected to cause any of the representations, warranties or covenants contained
herein to be untrue or incorrect or incapable of being performed or satisfied
on
the Closing Date. Through the Closing Date, the Company shall not (except
to the
extent that Parent has consented in advance in writing thereto): (i) provide
service or agree to provide service to any customer at rates that are different
than those that were in effect for such customer (or would have been in effect
for any new customer) as of June 23, 2005, (ii) offer any promotions or special
incentives or arrangements to customers that were not being offered to all
customers at June 23, 2005, including, but not limited to, any promotions
or
special incentives or arrangements with respect to pricing or usage, or (iii)
amend or modify any Customer Contract. Prior to and through the day following
the Closing Date, the Company and its Subsidiaries shall maintain in full
force
and effect all of its existing casualty, liability, and other insurance in
amounts not less than those in effect on the date hereof, except for changes
in
such insurance that are made in the Ordinary Course of Business.
4.06 Consents
and Approvals.
The
Company shall use its best efforts to obtain, prior to the Closing, all waivers,
consents and approvals including those as provided in Schedule
5.02(b),
that
are required in order to effect the Merger so as to preserve all rights of
and
benefits of the Company thereunder for the Subsidiary. Parent and Subsidiary
shall use commercially reasonable efforts to assist the Company in the Company's
efforts to obtain such waivers, consents and approvals. In addition, the
Company
and Parent and Subsidiary shall use their commercially reasonable efforts
to
obtain all other waivers, consents and approvals of all Governmental Authorities
that are required in order for them to consummate the transactions contemplated
by this Agreement or to perform the other obligations of the Company and
Parent
and Subsidiary hereunder. The Company and Parent and Subsidiary shall: (i)
cooperate in the filing of all forms, notifications, reports and information,
if
any, required or reasonably deemed advisable pursuant to applicable statutes,
rules, regulations or orders of any Governmental Authority or supra-governmental
authority in connection with the transactions contemplated by this Agreement;
and (ii) use their respective best efforts to cause any applicable waiting
periods thereunder to expire and any objections to the transactions contemplated
hereby to be withdrawn before the Effective Date. All expenses incurred in
obtaining the waivers, consents and approvals described in this Section 4.06
shall be paid by the Company.
4.07 Financial
Statements.
The
Company shall provide Parent with unaudited statements of assets and liabilities
of the Company , and statements of revenues and expenses reflecting the results
of operations of the Company for each month beginning with August 2005 within
twenty (20) days of the end of each such month. All of the foregoing financial
statements shall comply with the requirements concerning financial statements
set forth in Section 2.07.
4.08 Notification
of Certain Matters.
(a) The
Company and each of the Principals, as the case may be, shall give prompt
written notice to Parent of: (i) the occurrence or non-occurrence of any
event,
the occurrence or non-occurrence of which is likely to cause any representation
or warranty of the Company or any of the Principals, respectively and as
the
case may be, contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Date; and (ii) any failure
of the
Company or any of the Principals, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by
it
hereunder; provided, however, that the delivery of any notice pursuant to
this
Section 4.08(a) shall not constitute an acknowledgment or admission of a
breach
of this Agreement. No disclosure by the Company or any of the Principals
pursuant to this Section 4.08(a) shall be deemed to have cured any breach
of any
representation or warranty made in this Agreement for purposes of determining
whether or not the conditions set forth in Article V have been satisfied,
or be
deemed to have cured any such breach of a representation or warranty in this
Agreement and to have been disclosed as of the date of this Agreement for
purposes of Article VI hereof.
(b) The
Parent and Subsidiary shall give prompt written notice to the Company of:
(i)
the occurrence or non-occurrence of any event, the occurrence or non-occurrence
of which is likely to cause any representation or warranty of the Parent
and
Subsidiary contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time; and (ii) any failure
of the
Parent and Subsidiary to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 4.08(b) shall not
constitute an acknowledgment or admission of a breach of this Agreement.
No
disclosure by the Company or any of the Principals pursuant to this Section
4.08(b) shall be deemed to have cured any breach of any representation or
warranty made in this Agreement for purposes of determining whether or not
the
conditions set forth in Article VI have been satisfied, or be deemed to have
cured any such breach of a representation or warranty in this Agreement and
to
have been disclosed as of the date of this Agreement for purposes of Article
VI
hereof.
4.09 Additional
Documents and Further Assurances.
Each
party hereto, at the request of another party hereto, shall execute and deliver
such other instruments and do and perform such other acts and things as may
be
necessary or desirable for effecting completely the consummation of the Merger
and the transactions contemplated hereby.
4.10 Federal
and State Securities Exemptions.
The
parties agree to use commercially reasonable efforts to ensure that the issuance
of the Parent Stock Consideration will be exempt from registration under
the
Securities Act by reason of Section 4(2) and/or Regulation D thereof (the
"Private
Placement Exemption").
4.11 Shareholder
List.
As of a
date which is two (2) calendar days prior to the Effective Date, the Company
shall provide Parent and its counsel with a statement certified by the principal
executive officer of the Company and Principals setting forth any changes
which
would have been required to be set forth on Schedule
2.03
or
Schedule
2.29
as if
such had been made and certification that there are no outstanding options
or
other rights to any equity interest in the Company (the "Updated
Capitalization Certificate").
4.12 Non-Competition
and Non-Solicitation.
(a) As
a
material inducement to Parent and Subsidiary to enter into and perform their
obligations under this Agreement, and in order to preserve and protect the
trade
secrets and proprietary, confidential information of Parent and Subsidiary
after
the Closing, during the period of employment and for a period of two (2)
years
following the date that the employment by the Subsidiary (or an affiliate
thereof) of the Principal ends (the "Noncompetition
Period"),
no
Principal will, directly or indirectly, either for themselves or for any
partnership, limited liability company, individual, corporation, joint venture
or any other entity "participate in" (as defined below) any business (including,
without limitation, any division, group or franchise of a larger organization)
which engages in any "Internet Services and Telecommunications Business"
in the
parishes and counties listed on Exhibit “F” (the "Restricted Area"). For
purposes of this Agreement, "Internet
Services and Telecommunications
Business"
shall
mean the business of providing any type of telecommunication services or
internet access services to any person or customer within the Restricted
Area,
including, without limitation, local, long distance, broadband, dial up data
services, wireless, DSL, Voice-over-Internet Protocol (VoIP) and any other
service or product being offered or provided by the Parent or Subsidiary
or any
of its affiliates. For purposes of this Agreement, the term "participate
in"
shall include, without limitation, having any direct or indirect interest
in any
corporation, partnership, limited liability company, joint venture or other
entity, whether as a sole proprietor, owner, shareholder, partner, member,
manager, joint venturer, creditor or otherwise, or rendering any direct or
indirect service or assistance to any individual corporation, partnership,
limited liability company, joint venture and other business entity (whether
as a
director, officer, manager, supervisor, employee, agent, consultant or
otherwise). Notwithstanding the foregoing, nothing in this Section 4.12 shall
prohibit any Principal or any other Non-Compete Party from owning not more
than
five percent (5%) of the debt or equity securities of a publicly traded
corporation which may compete with Parent.
(b) During
the Noncompetition Period, and in order to preserve and protect the trade
secrets and proprietary, confidential information of Parent and the Subsidiary
after the Effective Date, no Principal or any Non-Compete Party shall (i)
induce
or attempt to induce any employee of Parent or the Subsidiary to leave the
employ of Parent or the Subsidiary, or in any way interfere with the
relationship between Parent or Subsidiary or any employee thereof, (ii) hire
directly or through another entity any individual employed by Parent or the
Subsidiary who was previously employed by the Company, or (iii) induce or
attempt to induce any customer, supplier, licensee, distributor or other
business relation of Parent or the Subsidiary to cease doing business with
Parent or the Subsidiary, or in any way interfere with the relationship between
any such customer, supplier, licensee, distributor or business relation and
Parent or the Subsidiary (including, without limitation, making any negative
statements or communications concerning Parent or the Subsidiary).
(c) If,
at
the time of enforcement of this Section 4.12, a court shall hold that the
duration, scope or area restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum duration,
scope or area reasonable under such circumstances shall be substituted for
the
stated duration, scope or area and that the court shall be allowed to revise
the
restrictions contained herein to cover the maximum period, scope and area
permitted by law. Each of the Principals with respect to the terms of this
Section 4.12 agrees (and each other Non-Compete Party shall agree) that the
restrictions contained in this Section 4.12 are reasonable.
(d) If
at any
time during the Noncompetition Period a Principal or any other Non-Compete
Party
desires to participate in an activity that he or she believes might be
prohibited by this Section 4.12, such person may request in writing (a
"Clarification
Request")
a
determination by Parent as to whether such proposed activity would violate
this
Section 4.12. Parent shall respond in writing to such Clarification Request
(a
"Clarification
Response")
within
thirty (30) days of receipt thereof from the requesting person.
(e) Each
Principal by execution of this Agreement agrees to the terms of this Section
4.12 as to himself.
(f) The
non-competition and non-solicitation obligations of each Principal shall
be set
forth more fully in the Employment Agreements to be executed between each
Principal, respectively, and Subsidiary, on the forms attached to this Agreement
as Exhibits “C” and “D.”
4.13 Approval
of Shareholders.
The
Company will (i) take all steps necessary to call, give notice of, convene
and
hold a special meeting of its shareholders as soon as practicable for the
purpose of approving and adopting this Agreement and the transactions
contemplated thereby and for such other purposes as may be necessary or
desirable, (ii) recommend to its shareholders the approval of this Agreement
and
the transactions contemplated thereby and such other matters as may be submitted
to its shareholders in connection with this Agreement, and (iii) cooperate
and
consult with Parent and Subsidiary with respect to each of the foregoing
matters. The Principals agree to vote all of their Company Common Stock in
favor
of the Merger.
4.14 No
Shop.
Until
such time, if any, as this Agreement is terminated pursuant to Article VII,
neither the Company or any of the Principals will not and each of their
representatives will not directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, any person (other than Parent) relating
to any
transaction involving the sale of the business or assets of the Company,
or any
of the capital stock of the Company (other than a transfer of Capital Stock
caused by the exercise of the MCG Warrants), or any merger, consolidation,
business combination, or similar transaction involving the Company.
ARTICLE
V
CONDITIONS
TO THE MERGER
5.01 Conditions
to Obligations of Each Party to Effect the Merger.
The
respective obligations of the Company, Parent and Subsidiary to effect the
Merger shall be subject to the satisfaction at or prior to the Effective
Date of
the following conditions:
(a) Shareholder
Approval.
This
Agreement and the Merger shall be approved and adopted (i) by the Company
Shareholders by the requisite vote under applicable law and the Company's
Articles of Incorporation, (ii) by the shareholders of Subsidiary by the
requisite vote under applicable law and the Subsidiary’s Certificate of
Incorporation, and (iii) by the shareholders of the Parent by the requisite
vote
under applicable law and the Parent's Certificate of Incorporation.
(b) No
Order.
No
Governmental Entity shall have enacted, issued, promulgated, enforced or
entered
any statute, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is in effect and
which
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(c) No
Injunctions or Restraints; Illegality.
No
temporary restraining order, preliminary or permanent injunction or other
order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect,
nor
shall any proceeding brought by an administrative agency or commission or
other
governmental authority or instrumentality, domestic or foreign, seeking any
of
the foregoing be pending.
(d) Articles
of Merger.
The
Articles of Merger shall have been filed with the Secretary of State of the
State of Mississippi and the Certificate of Merger shall have been filed
with
the Louisiana Secretary of State.
(e) MCG
Debt
and Warrants. MCG shall have been paid in full for the MCG Debt, and all
obligations owed by Company to MCG under the MCG Credit Facility shall have
been
extinguished, including, but not limited to, the MCG Warrants.
(f) Tax-Free
Merger. The Merger and the proposed transaction among Parent, Subsidiary
and
I-55 Telecommunications, L.L.C., taken individually or together, shall have
no
adverse tax consequences to Company, I-55 Telecommunications, L.L.C., or
either
of their shareholders.
(g) Acquisition
of I-55 Telecommunications, L.L.C.
Parent
and Subsidiary shall have executed a definitive agreement for the acquisition
of
I-55 Telecommunications, L.L.C. by the Subsidiary.
5.02 Conditions
to the Obligations of Parent and Subsidiary.
The
obligation of Parent and Subsidiary to effect the Merger shall be subject
to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations,
Warranties and Covenants.
(i) The
representations and warranties of the Company and the Principals in this
Agreement (other than the representations and warranties of the Company and
the
Principals as of a specified date, which will be true and correct as of such
date) shall be true and correct on and as of: (A) the date of this Agreement
and
(B) the Effective Time as though such representations and warranties were
made
on and as of the Effective Time (it being understood that, for purposes
determining the accuracy of each such representation and warranty pursuant
to
clauses (A) and (B), any update of or modification to the Disclosure Schedule
made or purported to have been made after the date of this Agreement shall
be
disregarded).
(ii) Each
of
the Company and the Principals shall have performed and complied with all
covenants and obligations under this Agreement required to be performed and
complied with by such parties as of the Effective Time.
(b) Third
Party Consents.
Parent
shall have been furnished with evidence satisfactory to it that the Company
has
obtained all consents, waivers, approvals, and assignments listed in
Schedule
5.02(b).
(c) No
Material Adverse Change.
There
shall not have occurred any event or condition of any character since the
date
of this Agreement that has had or is reasonably likely to have a material
adverse effect on the Company or its business, assets or prospects.
(d) Company
Shareholder Approval.
No
holder of capital stock of the Company shall have exercised or given notice
of
their intent to exercise appraisal rights in accordance with Louisiana
Law.
(e) Certificate
of the Company and the Principals.
Parent
shall have received a certificate, validly executed by each of the Principals
and the principal executive officer of the Company for and on its behalf,
to the
effect that, as of the Closing:
(i) all
representations and warranties made by the Company and the Principals in
this
Agreement (other than the representations and warranties of the Company and
the
Principals as of a specified date, which will be true and correct as of such
date) were true and correct on and as of: (A) the date of this Agreement
and (B)
the Effective Date as though such representations and warranties were made
on
and as of the Effective Time;
(ii) all
covenants and obligations under this Agreement to be performed by the Company
or
the Principals on or before the Closing have been so performed; and
(iii) the
conditions to the obligations of Parent and Subsidiary set forth in Section
5.02
have been satisfied (unless otherwise waived in accordance with the terms
hereof).
(f) Certificate
of Secretary of the Company.
Parent
shall have received a certificate, validly executed by the Secretary of the
Company, certifying as to (i) the correct form and effectiveness of the Articles
of Incorporation and the Bylaws of the Company, including all amendments
thereto; and (ii) the valid adoption of resolutions of the board of directors
of
the Company and the Company Shareholders approving this Agreement and the
consummation of the transactions contemplated hereby.
(g) Certificate
of Good Standing.
Parent
shall have received certificates of good standing of the Company from the
Secretary of State of the State of Mississippi and Louisiana and any other
jurisdiction where the Company is required to qualify to do business, each
dated
within ten (10) business days prior to the Closing.
(h) Working
Capital Requirement.
The
Company’s "Working Capital" (as defined herein) as of the Closing Date shall not
be more than a deficit of $400,000 ("Working Capital Requirement"), as shown
on
a balance sheet and Profit and Loss Statement and combining worksheet (prepared
in accordance with GAAP and consistent with the December 31, 2004 Financials)
as
of the Closing Date ("Closing Date Financials"). "Working Capital" shall
mean
the current assets (excluding receivables due from I-55 Telecommunications,
L.L.C. to the Company) less the total liabilities (excluding the MCG debt
and
payables owed by the Company to I-55 Telecommunications, L.L.C.) as determined
in accordance with GAAP. In the event that the Working Capital Requirement
is
not met, the Parent and Acquisition Sub may nevertheless elect to close and
reduce the Parent Stock Consideration by an amount equal to the difference
between the Working Capital Requirement and the actual Working Capital Deficit.
In the event that the Working Capital deficit is less than the Working Capital
Requirement, then the Parent Stock Consideration shall be increased by an
amount
equal to the amount by which the Working Capital Deficit is less than the
Working Capital Requirement.
(i) MCG
Finance Corporation Debt/Warrants.
The
only debt of the Company (other than current liabilities for accounts payable,
accrued liabilities and deferred revenue reported consistent with the December
31, 2004 Financials and in accordance with GAAP) shall be the debt to MCG
Finance Corporation (“MCG”) pursuant to that certain Credit Facility Agreement
dated October 29, 1999 as amended by the First through Fourth Amendments
thereto
(the “MCG Credit Facility”). In the event that the total amounts due under the
MCG Credit Facility (the “MCG Debt”) which the Parent or Subsidiary assumes or
pays or restructures at the option of the Parent on the Effective Date is
greater than $1,763,000 (the “MCG Assumed Debt Amount”), then in such event the
Parent and Subsidiary may nevertheless proceed to close and reduce the Parent
Stock Consideration by an amount equal to the amount by which the MCG Debt
exceeds the MCG Assumed Debt Amount. In the event that the MCG Debt is less
than
$1,763,000, then in such event, then the Parent Stock Consideration shall
be
increased by an amount equal to the amount by which the MCG Debt is less
than
the MCG Assumed Debt Amount. The agreement that MCG entered in favor of the
Parent and Subsidiary on or before the date of this Agreement in which MCG
agreed (i) to exercise its 2,777,585 vested warrants immediately prior to
the
Effective Date in accordance with that certain Second Amended and Restated
Warrant Agreement dated May 31, 2005 (“MCG Warrant Agreement”); (ii) to the
cancellation of any other warrants, options or rights for Company Common
Stock
or any other equity in the Company under the MCG Warrant Agreement or otherwise;
and (iii) cancellation of the MCG Warrant Agreement or any rights thereunder
at
the Effective Date shall remain in full force and effect as of the Effective
Date.
(j) Shareholder
List.
Parent
shall have received from the principal executive officer of the Company the
Updated Capitalization Certificate.
(k) Employment
Agreements.
Subsidiary shall have received from Xxxxxx XxXxxxxxxx and Xxxxx Xxxxxx an
executed Employment Agreement substantially in the form attached hereto as
Exhibits
C and D.
(m) Amendments
to Certain Documents.
The
Parent shall have received a duly executed amendment or restated agreement
on
terms satisfactory to the Parent for the following agreements: An
interconnection agreement between Intercosmos and Company.
(n) Escrow
Agreement.
The
Principals and Escrow Agent shall have entered into the Escrow Agreement
in the
form of Exhibit
B
hereto.
(o) Irrevocable
Proxy from Principals.
Each of
the Principals shall have entered into an Irrevocable Proxy in form reasonably
satisfactory to Parent in which each Principal agrees to irrevocably appoint
Xxx
Xxxxxxxxx or such other party designated by Parent as proxy to vote the
Principal's Parent Common Stock or any Parent Common Stock issued to or acquired
hereafter by the Principal whether from the exercise of any of the Parent
Stock
Warrants or any other stock options or warrants granted hereafter or otherwise
until such time as the Principal sells all of his Parent Common Stock, subject
to the condition that if at any time, Xxx Xxxxxxxxx and Xxxxxxx Xxxxxx together
command less than 50% of the voting rights of Parent, then such proxies shall
automatically terminate.
(p)
Funding.
The
Parent and Subsidiary shall have obtained on terms and conditions satisfactory
to it such financing or funds it needs in order to pay in full the MCG Debt
at
Closing.
(q) Non-Compete
Agreements.
The
Subsidiary shall have received from each Principal a Non-Compete Agreement
in
the form attached hereto as Exhibits “C” and “D.”
(r) Releases.
Each
officer and director shall have executed and delivered a Release in
substantially the form attached hereto as Exhibit “E.”
5.03 Conditions
to Obligations of the Company and the Principals.
The
obligations of the Company and the Principals to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by the
Company:
(a) Representations,
Warranties and Covenants.
(i) The
representations and warranties of Parent and Subsidiary in this Agreement
(other
than the representations and warranties of Parent as of a specified date,
which
will be true and correct as of such date) shall be true and correct on and
as
of: (A) the date of this Agreement and (B) the Effective Time as though such
representations and warranties were made on and as of the Effective Time
(it
being understood that, for purposes determining the accuracy of each such
representation and warranty pursuant to clauses (A) and (B), any update of
or
modification to the Parent Disclosure Schedule made or purported to have
been
made after the date of this Agreement shall be disregarded).
(ii) Each
of
Parent and Subsidiary shall have performed and complied with all covenants
and
obligations of this Agreement required to be performed and complied with
by it
as of the Effective Time.
(b) Certificate
of Parent.
The
Company shall have received a certificate executed on behalf of Parent and
Subsidiary by the Chief Executive Officer of each to the effect that, as
of the
Closing:
(i) all
representations and warranties made by the Parent and Subsidiary in this
Agreement (other than the representations and warranties of the Parent and
Subsidiary as of a specified date, which will be true and correct as of such
date) were true and correct on and as of: (A) the date of this Agreement
and (B)
the Effective Time as though such representations and warranties were made
on
and as of the Effective Time;
(ii) all
covenants and obligations under this Agreement to be performed by Parent
and
Subsidiary on or before the Closing have been so performed; and
(iii) the
conditions to the obligations of the Company and the Principals set forth
in
Section 5.03 have been satisfied (unless otherwise waived in accordance with
the
terms hereof).
(c) No
Material Adverse Change.
There
shall not have occurred any event or condition of any character since the
date
of this Agreement that has had or is reasonably likely to have a Parent Material
Adverse Effect.
(d) Principals
Employment Agreements.
Xxxxxx
XxXxxxxxxx and Xxxxx Xxxxxx shall have received from Subsidiary an executed
Employment Agreement substantially in the form attached hereto as Exhibits
C and D
and such
agreement shall be in full force and effect.
ARTICLE
VI
SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; POST-CLOSING
COVENANTS
6.01 Survival
of Representations, Warranties and Covenants.
(a) The
representations and warranties of the Company and each of the Principals
contained in this Agreement, or in any certificate or other instrument delivered
pursuant to this Agreement, shall remain in effect until, and will expire
upon
the second year following the Closing Date (the "Termination
Date"),
except for the representations and warranties set forth in Section 2.10 (Tax
Matters) which shall survive the Termination Date until the expiration of
the
applicable statute of limitations. The representations and warranties of
the
Parent and the Subsidiary contained in this Agreement, or in any certificate
or
other instrument delivered pursuant to this Agreement will expire upon the
Termination Date, provided that the maximum liability of the Parent and
Subsidiary for any breach of a representation or warranty shall be twenty
percent of the Aggregate Merger Consideration, and any liability shall be
satisfied by the issuance of a number of shares of Parent Common Stock and
Parent Stock Warrants in a ratio of 2/3 Parent Common Stock and 1/3 Parent
Stock
Warrants with a value equal to the amount of such liability as established
at
the time of payment using the same formula as in the definition of such terms
as
provided in Section 1.03 hereof. Notwithstanding the foregoing:
(i) the
Termination Date or limitation or indemnification as set forth in 6.2(e)
shall
not apply to claims based upon intentional fraud; and
(ii) the
representation, warranty, covenant or obligation that is the subject matter
of a
timely submitted Claim Notice (as defined in Section 6.01(c)) shall not so
expire with respect to such Claim Notice or any subsequent Claim Notice that
is
reasonably related to the subject matter of such Claim Notice, but rather
shall
remain in full force and effect until such time as each and every claim that
is
based upon, or that reasonably relates to, any breach or alleged breach of
such
representation, warranty, covenant or obligation and that is reasonably related
to the subject matter of such Claim Notice or any such subsequent Claim Notice
has been fully and finally resolved, either by means of a written settlement
agreement executed by the Principals and the Parent and Subsidiary or by
means
of a final, non-appealable judgment issued by a court of competent
jurisdiction.
(b) No
disclosure in any Schedule referred to in Article II will be deemed adequate
to
disclose an exception to a representation or warranty made in this Agreement
unless the applicable disclosure schedule identifies the exception. Without
limiting the generality of the foregoing, the mere listing (or inclusion
of a
copy) of a document or other item will not be deemed adequate to disclose
an
exception to a representation or warranty made in this Agreement (unless
the
representation or warranty regards the existence of the document or other
item
itself).
(c) For
purposes of this Agreement, a "Claim
Notice"
relating to a particular representation, warranty, covenant or obligation
shall
be deemed to have been given if the Parent or Subsidiary, acting in good
faith,
delivers within the time periods provided in Section 6.01(a) to the Principals
and the Escrow Agent a written notice stating that such Indemnified Party
believes that there is or has been a possible breach of such representation,
warranty, covenant or obligation and containing (i) a brief description of
the
circumstances supporting such Indemnified Party's belief that there is or
has
been such a possible breach; and (ii) a non-binding, preliminary estimate
of the
aggregate dollar amount of the actual and potential damages that have arisen
and
may arise as a direct or indirect result of such possible breach. For purposes
of this Agreement, "Parent Indemnified Parties" shall mean the following
persons
and entities: (a) Parent; (b) Parent's current and future affiliates Subsidiary;
(c) the respective officers, directors, employees and agents of the persons
and
entities referred to in clauses "(a)" and "(b)" above; and (d) the respective
successors and assigns of the persons and entities referred to in clauses
"(a)"
and "(b)" above; provided, however, that none of Xxxxxx XxXxxxxxxx or Xxxxx
Xxxxxx or any of the Company Shareholders shall be deemed to be a Parent
Indemnified Party.
6.02 Indemnification
by the Principals; Escrow Fund.
(a) The
Principals, jointly and severally, agree that, subject to the limits of Sections
6.01 and 6.02(b)-(e), from and after the Effective Date, the Principals shall
indemnify and hold the Parent Indemnified Parties harmless against all claims,
losses, liabilities, damages, lawsuits, administrative proceedings,
investigations, audits, demands, assessments, adjustments, judgments, settlement
payments, penalties, fines, interest, deficiencies, costs and expenses,
including reasonable attorneys' fees and expenses of investigation and defense
(individually a "Loss"
and
collectively "Losses")
incurred by the Parent Indemnified Parties directly or indirectly as a result
of:
(i) any
inaccuracy or breach of a representation or warranty of the Company or any
Principal contained in: (A) this Agreement both as of the date of this Agreement
and as of the Effective Time as if made on and as of the Effective Time;
(B) any
of the agreements executed in connection with this Agreement; or (C) or in
any
certificate, instrument or other document delivered by the Company or any
Principal pursuant to the terms of this Agreement; or
(ii) any
failure by the Company or any of the Principals to perform or comply with
any
covenant contained in this Agreement or in any of the agreements executed
in
connection with this Agreement.
(b) (i) As
security for the indemnity provided to the Parent Indemnified Parties in
this
Article VI and by virtue of this Agreement and the Articles of Merger, the
Principals agree that an amount of the Parent Company Stock and Parent Stock
Warrants to which they are entitled at the Effective Date of the Merger equal
to
twenty percent (20%) of the Aggregate Merger Consideration (the "Escrow Shares")
shall be deposited with the Escrow Agent and held in the name of the Escrow
Agent pursuant to the Escrow Agreement and the Principals direct the Parent
to
deposit the Escrow Shares (plus any additional shares as may be issued in
respect of any stock split, stock dividend or recapitalization effected by
Parent after the Effective Time with respect to the Escrow Shares) with the
Escrow Agent, without any act of the Principals, such deposit to constitute
an
escrow fund (the "Escrow
Fund").
Each
Principal shall be required to contribute the Principal's Pro Rata Portion
(as
defined herein) of the Escrow Shares with the escrow to be funded in the
same
proportions of Parent Company Stock to Parent Stock Warrant that each Principal
received in connection with the Merger. It is understood and agreed that
the
portion of the Aggregate Merger Consideration deposited into the Escrow Fund
by
each of the Principals shall be issued and outstanding on the books of Parent,
and the Principals shall be the owners thereof, but registered in the Escrow
Agent's name until the Escrow Agreement is terminated.
Any
cash
dividends paid on Parent Common Stock in the Escrow Fund shall be deposited
with
the Escrow Agent and become part of the Escrow Fund. Each Principal shall
have
voting rights with respect to the shares of Parent Common Stock contributed
to
the Escrow Fund on behalf of such Principal (and on any voting securities
added
to the Escrow Fund in respect of such shares of Parent Common Stock) so long
as
such shares of Parent Common Stock or other voting securities are held in
the
Escrow Fund. The Escrow Fund shall be in existence immediately following
the
Effective Time and shall terminate at 5:00 p.m., Central Time, on the second
year from the Effective Date, unless sooner terminated due to the distribution
of the Escrow Fund at an earlier date or unless the termination date is extended
due to pending Claims Notice(s) for indemnification in accordance with this
Section 6.03. For purposes of satisfying the indemnification obligations
of this
Section 6.02, the shares of Parent Common Stock and Parent Stock Warrants
in the
Escrow Fund shall be valued as of (i) the date that the Parent Indemnified
Party
sends notice to release a portion of the Escrow Fund in satisfaction of a
Loss
as determined in accordance with this Article VI or (ii) the date that the
Principals request a release of a portion of the Escrow Fund in accordance
with
Section 6.02(b); provided if there is a counter-notice to the requested release
from the Escrow given disputing the requested release from the Escrow, then
the
date for valuation shall be suspended until such time as the Escrow Agent
is
requested to make payment upon a joint instruction or the date of a final
non-appealable order of a court of competent jurisdiction is entered as to
the
disputed release. The Parent Common Stock shall be valued at the closing
trading
price for the ten trading days immediately preceding the valuation date and
the
Parent Stock Warrants shall be valued at the price at which they were valued
and
issued on the Effective Date in connection with the Merger. The Escrow Agent
shall satisfy any indemnification obligations first with the Parent Common
Stock
and then with the Parent Stock Warrants. The Escrow Fund shall be governed
by
the terms of this Agreement and the Escrow Agreement. The Parent Indemnified
Parties' right to recover any property held pursuant to the Escrow Agreement
shall be in addition to and not in limitation of any other rights or remedies
of
the Parent Indemnified Parties at law or in equity.
"Principal's
Pro Rata Portion" shall mean, with respect to each Principal, an amount equal
to
the quotient obtained by dividing (x) the number of shares of the Parent
Common
Stock which the Principal is entitled to receive in connection with the Merger
by (y) the total number of shares of the Parent Common Stock that all Principals
are entitled to receive in connection with the Merger.
(ii) The
percentage set forth below of each Principal's Pro Rata Share of the Escrow
Fund
shall be released upon the happening of the following events provided that
at
the date of the required release that there remains sufficient Escrow Funds
to
cover the maximum amount of any pending Claims Notice(s) as provided in this
Article VI: (1) one-half (1/2) shall be released within 60 days after the
end of
the first full 12 month period following the Effective Date ("Post Close
Year 1"
and each succeeding 12 month period is hereinafter referred to as Post Close
Year 2, etc.); and (2) one-half (1/2) shall be released within 60 days after
the
end of Post Close Year 2. If there are any Pending Claims outstanding at
the
second anniversary of the Effective Date, the Escrow Agreement shall continue
until final resolution of any such Pending Claims in accordance with this
Article VI.
(iii) The
Parent Indemnified Party agrees that each Principal shall only be responsible
for such Principal's Pro Rata Portion of such Loss and each Principal's Escrowed
Shares in an amount equal to the Principal's Pro Rata Share of such Loss
shall
be subject to release to the Parent Indemnified Party to satisfy such
Principal's Pro Rata Share of the Loss.
(c) For
purposes of quantifying the amount owing to any Parent Indemnified Party
under
this Section 6.02 resulting from a Loss or Losses caused by a breach of any
representation or warranty given in Article II hereof, the term material
adverse
effect or other materiality qualification or any similar qualification contained
or incorporated directly or indirectly in such representation or warranty
shall
be disregarded.
(d) For
purposes of this Agreement and without limitation, a breach of the
representations and warranties included in Sections 2.01, 2.02 and 2.03 hereof
will be deemed a "willful misrepresentation."
(e) Limitation
on Indemnification.
Notwithstanding any provision of this Agreement to the contrary, after the
Effective Time, no Parent Indemnified Party shall be entitled to indemnification
until such Parent Indemnified Parties suffer Losses in excess of $60,000
in the
aggregate (the "Basket
Amount"),
in
which case the Parent Indemnified Parties shall be entitled to recover all
Losses including the Basket Amount; provided, however, any amounts required
to
be paid resulting from any failure by the Company or any of the Principals
to
perform or comply with any covenant contained in this Agreement or any Related
Agreement shall not be subject to such Basket Amount; and provided further,
however, that any amounts required to be paid by the Parent or the Surviving
Corporation as a result of the Company's breach of, or any inaccuracy contained
in, Section 2.21 herein shall not be subject to such Basket Amount. The total
liability of each Principal shall be limited to his Escrow Shares then remaining
in the escrow and no Principal shall not have any personal liability beyond
his
Escrow Shares unless the claim is based upon intentional fraud by such
Principal.
6.03 Indemnification
Procedures.
All
claims for indemnification under Section 6.02 shall be asserted and resolved
as
follows:
(a) Third-Party
Claims.
In the
event any Parent Indemnified Party becomes aware of a third-party claim that
such Parent Indemnified Party believes may result in a demand under Section
6.02, such Parent Indemnified Party shall notify the Principals of such claim,
and the Principals shall be entitled, at its expense, to participate in,
but not
to determine or conduct, the defense of such claim. The Parent Indemnified
Party
shall have the right in its sole discretion to conduct the defense of and
settle
any such claim; provided, however, that except with the written consent of
the
Principals, no settlement of any such claim with third-party claimants shall
alone be determinative of the amount of Losses relating to such matter. In
the
event that any of the Principals have consented to any such settlement, then
such Principals shall not have the power or authority to object to the amount
of
any claim by any Parent Indemnified Party with respect to such
settlement.
(b) Non-Third
Party Claims.
In the
event a Parent Indemnified Party has a claim hereunder that does not involve
a
claim being asserted against or sought to be collected by a third party,
the
Parent Indemnified Party shall with reasonable promptness send a Claim Notice
with respect to such claim to the Principals and the Escrow Agent (if
applicable). If both the Principals do not notify the Parent Indemnified
Party
within ten (10) calendar days from the date of receipt of such Claim Notice
that
indemnifying party disputes such claim, the amount of such claim shall be
conclusively deemed a liability of the indemnifying party hereunder. In case
the
Principals shall object in writing to any claim made in accordance with this
Section 6.03(b), the Parent Indemnified Party shall have fifteen (15) calendar
days to respond in a written statement to the objection of the Principals.
If
after such fifteen (15) calendar day period there remains a dispute as to
any
claim, the parties shall attempt in good faith for sixty (60) calendar days
to
agree upon the rights of the respective parties with respect to each of such
claims. If the parties should so agree, a memorandum setting forth such
agreement shall be prepared and signed by all parties. If the parties do
not so
agree, and a claim has been made against the Escrow Fund, the Escrow Agent
shall
refrain from disbursing any portion of the Escrow Fund until resolution of
such
dispute in the form of (i) a final written decision of an arbitrator or (ii)
a
final non-appealable order of a court of competent jurisdiction.
(c) The
Parent Indemnified Party's failure to give reasonably prompt notice to the
Shareholder Representative of any actual, threatened or possible claim or
demand
which may give rise to a right of indemnification hereunder shall not relieve
any indemnifying party of any liability which the indemnifying party may
have to
the Parent Indemnified Party unless the failure to give such notice materially
and adversely prejudiced the indemnifying party.
6.04 No
Contribution.
Each
Principal waives, and acknowledges and agrees that it shall not have and
shall
not exercise or assert (or attempt to exercise or assert), any right of
contribution, right of indemnity or other right or remedy against the Subsidiary
in connection with any indemnification or other rights any Indemnified Party
may
have under or in connection with this Agreement.
6.05 Benefit
Plans.
Each
former Company employee who is offered and accepts employment with Subsidiary
shall be entitled to credit for time served with the Company for any purpose
relating to the Subsidiary’s or Parent’s plans, including the amount of any
benefits, whether such benefits are available, and the vesting of any benefits.
Nothing in this Section 6.05 obligates Subsidiary to offer employment to
any
Company employee.
ARTICLE
VII
TERMINATION,
AMENDMENT AND WAIVER
7.01 Termination.
Except
as provided in Section 7.02 hereof, this Agreement may be terminated and
the
Merger abandoned at any time prior to the Effective Time:
(a) by
mutual
agreement of the Company and Parent;
(b) by
Parent
or the Company if the Effective Time has not occurred by October 31, 2005;
provided, however, that the right to terminate this Agreement under this
Section
7.01(b) shall not be available to any party whose action or failure to act
has
been a principal cause of the failure of the Merger to occur on or before
such
date and such action or failure to act constitutes a breach of this
Agreement.
Where
action is taken to terminate this Agreement pursuant to this Section 7.01,
it
shall be sufficient for such action to be authorized by the Board of Directors
of the party taking such action.
7.02 Effect
of Termination.
(a) In
the
event of termination of this Agreement as provided in Section 7.01 hereof,
this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Subsidiary, the Company, the Principals,
or
their respective officers, directors or shareholders; provided, however,
that
each party shall remain liable for any breaches of this Agreement prior to
its
termination and the Break-Up Fee as set forth in 7.02(b) hereof for any such
breach; and provided further, however, that, the provisions of Sections 4.03(c),
4.04, 7.03 and Article VIII hereof and this Section 7.02 shall remain in
full
force and effect and survive any termination of this Agreement.
(b) Break-Up
Fee.
In the
event that Company does not close the Merger as a result of the receipt,
consideration or acceptance of an offer relating to any transaction involving
the sale of the business or the assets of the Company, or any of the Capital
Stock of the Company, or any merger, consolidation, business combination,
or
similar transaction involving the Company, then Company shall pay to Parent
a
Break-Up Fee equal to $500,000, payable immediately.
7.03 Expenses;
Termination Fees.
(a) Except
as
set forth in Section 7.03(b), all fees and expenses incurred in connection
with
this Agreement and the transactions contemplated by this Agreement (i) by
the
Company and the Principals shall be paid by the Company and the Principals
and
(ii) by the Parent and Subsidiary shall be paid by the Parent, whether or
not
the Merger is consummated.
(b) Parent,
on the one hand, and the Company, on the other hand, agree that in the event
either party terminates this Agreement prior to the Effective Time for any
reason other than those allowable under Section 7.01, then the terminating
party
shall pay to the other party the amount of actual fees and expenses incurred
by
such party in connection with this transaction.
7.04 Amendment.
This
Agreement may be amended by the parties at any time by execution of an
instrument in writing signed on behalf of each of the parties
hereto.
7.05 Extension;
Waiver.
At any
time prior to the Effective Time, Parent and Acquisition Sub, on the one
hand,
and the Company, on the other hand, may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations of the other
party
hereto; (ii) waive any inaccuracies in the representations and warranties
made
to such party contained herein or in any document delivered pursuant hereto;
and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto
to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE
VIII
GENERAL
PROVISIONS
8.01 Notices.
All
notices and other communications hereunder shall be in writing and shall
be
deemed given if delivered personally or by commercial messenger or courier
service, or mailed by registered or certified mail (return receipt requested)
or
sent via facsimile (with acknowledgment of complete transmission) to the
parties
at the following addresses (or at such other address for a party as shall
be
specified by like notice); provided, however, that notices sent by mail will
not
be deemed given until received:
|
|
(a)
if to Parent or Subsidiary, to:
|
|
|
XFone,
Inc.
|
|
|
Xxxxxxxxx
Xxxxx
|
|
|
000
Xxxx Xxxx
|
|
|
Xxxxxx,
X000XX
|
|
|
Xxxxxx
Xxxxxxx USA
|
|
|
Attention:
Xxx Xxxxxxxxx
|
|
|
Telephone:
x00 000-000-0000
|
|
|
Facsimile:
x00 000-000-0000
|
|
|
Email:
xxx@xxxxx.xxx
|
|
|
and
|
|
|
Xfone
USA, Inc.
|
|
|
0000
Xxxxxxxx Xxxxx
|
|
|
Xxxxx
000
|
|
|
Xxxxxxx,
Xxxxxxxxxxx 00000
|
|
|
Attention:
Xxxx Xxxxxxx
|
|
|
Telephone:
000-000-0000
|
|
|
Facsimile:
000-000-0000
|
|
|
Email:
xxxxxxxx@xxxxxxx.xxx
|
|
|
|
|
|
with
a copy to:
|
|
|
Oberon
Securities, LLC
|
|
|
00
Xxxxxxx Xxx., 0xx
Xxxxx
|
|
|
Xxx
Xxxx, XX 00000
|
|
|
Attention:
Xxxx Xxxxxxxxxx
|
|
|
Telephone:
000-000-0000
|
|
|
Facsimile:
000-000-0000
|
|
|
Email:
xxxx@xxxxxxxxxxxxxxxx.xxx
|
|
|
and
|
|
|
Xxxxxxx
Xxxxxx Winter & Stennis, P.A.
|
|
|
000
Xxxxx Xxxxx Xxxxxx (39202)
|
|
|
P.
O. Xxx 000
|
|
|
Xxxxxxx,
XX 00000-0000
|
|
|
Attention:
Xxxx X. Xxxxxx
|
|
|
Telephone:
000-000-0000
|
|
|
Facsimile:
601-949-4804
|
|
|
Email:
xxxxxxx@xxxxxxxxxxxxx.xxx
|
|
|
(b)
if to the Company or the Principals, to:
|
|
|
Xxxxxx
XxXxxxxxxx
|
|
|
Xxxxx
Xxxxxx
|
|
|
000
X. Xxxxxx Xxxxxx
|
|
|
Xxxxxxx,
Xxxxxxxxx 00000
|
|
|
Telephone:
000-000-0000
|
|
|
Facsimile:
000-000-0000
|
|
|
Email:
xxxxxx@X-00.xxx
|
|
|
xxx@X-00.xxx
|
|
|
With
a copy to:
|
|
|
Xxxxx
Xxxxx
|
|
|
Baker,
Donelson, Bearman, Xxxxxxxx & Xxxxxxxxx, P.C.
|
|
|
000
Xx. Xxxxxxx Xxx., Xxxxx 0000
|
|
|
Xxx
Xxxxxxx, Xxxxxxxxx 00000
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000
|
|
|
Email:
xxxxxx@xxxxxxxxxxxxx.xxx
|
8.02 Interpretation.
The
words "include," "includes" and "including" when used herein shall be deemed
in
each case to be followed by the words "without limitation." References to
"property" includes both intangible and tangible property. References to
"assets" includes both intangible and tangible assets. The table of contents
and
headings contained in this Agreement are for reference purposes only and
shall
not affect in any way the meaning or interpretation of this
Agreement.
8.03 Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
constitute an original and all of which, when taken together, shall be
considered one and the same agreement.
8.04 Entire
Agreement; Assignment.
This
Agreement and the documents and instruments and other agreements among the
parties hereto referenced herein: (i) constitute the entire agreement among
the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings both written and oral, among the parties with
respect to the subject matter hereof; and (ii) shall not be assigned by
operation of law or otherwise.
8.05 No
Third Party Beneficiaries.
This
Agreement, the schedules and exhibits hereto and the documents and instruments
and other agreements among the parties hereto referenced herein are not intended
to confer upon any person other than the parties hereto any rights or remedies
hereunder.
8.06 Severability.
In the
event that any provision of this Agreement or the application thereof, becomes
or is declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in full force
and
effect and the application of such provision to persons or circumstances
other
than those with respect to which it is deemed void will be interpreted so
as
reasonably to effect the intent of the parties hereto within the boundaries
of
applicable law. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent practicable within applicable law, the economic, business
and other purposes of such void or unenforceable provision.
8.07 Other
Remedies.
Except
as otherwise provided herein, any and all remedies herein expressly conferred
upon a party will be deemed cumulative with and not exclusive of any other
remedy conferred hereby, or by law or equity upon such party, and the exercise
by a party of any one remedy will not preclude the exercise of any other
remedy.
8.08 Governing
Law; Dispute Resolution.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of Mississippi, regardless of the laws that might otherwise govern
under
applicable principles of conflicts of laws thereof. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH
OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
8.09 Rules
of Construction.
The
parties hereto agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefor, waive the application
of any law, regulation, holding or rule of construction providing that
ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
8.10 Attorneys'
Fees.
If any
action or other proceeding relating to the enforcement of any provision of
this
Agreement is brought by any party hereto, the prevailing party shall be entitled
to recover reasonable attorneys' fees, costs and disbursements (in addition
to
any other relief to which the prevailing party may be entitled).
8.11 Shareholder's
Post Closing Sale Restrictions.
Each
shareholder of the Company by submission of its Company Common Stock in exchange
for the Parent Common Stock and Warrants agrees that the total shares of
common
stock of the Parent sold by him/her in any one month period shall not exceed
2.5% of the average monthly trading volume of the Parent Common Stock for
the
month prior to the date in which sale takes place. Each shareholder of the
Company agrees that this Parent Common Stock sales restriction shall apply
to
any Parent Common Stock, whether owned as a result of the Merger or thereafter
acquired for as long as either owns any Parent Common Stock and that this
provision shall survive the consummation of the Merger.
8.12 Xfone
USA, Inc. Board Appointments.
The
Parent as the sole shareholder of Xfone USA, Inc. agrees to appoint each
of the
Principals to the Xfone USA, Inc. board of directors immediately following
the
Effective Time. Parent and Subsidiary agree to indemnify and/or insure against
claims commonly covered by directors’ and officers’ insurance to the same extent
as such indemnities or insurance are given to other officers or directors
of
Parent or Subsidiary, from time to time.
IN
WITNESS WHEREOF, Parent, Subsidiary, the Company, each of the Principals
and the
Shareholder Representative have caused this Agreement to be signed, all as
of
the date first written above.
|
XFONE,
INC.
By: /s/
Xxx Xxxxxxxxx
Name:
Xxx Xxxxxxxxx
Title:
President and CEO
|
I-55
INTERNET SERVICES, INC.
By: /s/
Xxxxxx XxXxxxxxxx
Name:
Xxxxxx XxXxxxxxxx
Title:
President and CEO
By: /s/
Xxxxx Xxxxxx
Name:
Xxxxx Xxxxxx
Title:
Chairman
|
|
XFONE
USA, INC.
By: /s/
Xxxx Xxxxxxx
Name:
Xxxx Xxxxxxx
Title:
President
|
PRINCIPALS
/s/
Xxxxxx XxXxxxxxxx
Xxxxxx
XxXxxxxxxx, Individually
/s/
Xxxxx Xxxxxx
Xxxxx
Xxxxxx, Individually
|
EXHIBIT
"A"
Form
of
(a)
Articles of Merger for Mississippi
(b)
Certificate of Merger for Louisiana
CERTIFICATE
OF MERGER
OF
I-55
INTERNET SERVICES, INC., A Louisiana Corporation,
INTO
XFONE
USA, INC., A Mississippi Corporation
In
accordance with the Louisiana Business Corporation Law, the undersigned hereto
certifies as follows in order to effect the merger of I-55 Internet Services,
Inc., a Louisiana Corporation (“Constituent Corporation”), with and into XFone
USA, Inc., a Mississippi Corporation (“Surviving Corporation”), to
wit:
1. An
Agreement and Plan of Merger by and among I-55 Internet Services, Inc., XFone,
Inc. and XFone USA, Inc., dated as of ____________, 2005 (the “Merger
Agreement”), has been approved, adopted, certified, executed, and acknowledged
by the Constituent Corporation, the Surviving Corporation and XFone, Inc.
in
accordance with the Louisiana Business Corporation Law, and in particular,
Section 112 thereof.
2. Under
the
terms of the Merger Agreement, the Constituent Corporation is merged with
and
into the Surviving Corporation.
3. The
name
of the Surviving Corporation is XFone USA, Inc. a Mississippi
Corporation.
4. The
Merger Agreement does not amend or change the Articles of Incorporation of
the
Surviving Corporation, and the Articles of Incorporation of the Surviving
Corporation shall continue to be its the Articles the
Incorporation.
5. The
executed Merger Agreement is on file at the principal place of business of
the
Surviving Corporation, _________________________, Jackson, Mississippi
______.
6. A
copy of
the Merger Agreement will be furnished by the Surviving Corporation upon
request
and without cost to any shareholder of any corporation that is a party to
the
Merger or consolidation.
WITNESS
my signature on the ____ day of ___________, 2005.
XFone
USA, Inc.
By:
Its: President
(Acknowledgement)
EXHIBIT
"B"
Form
of Escrow Agreement
ESCROW
AGREEMENT
This
Escrow Agreement, dated as of ____________, 2005 (the "Closing Date"), among
I-55 Internet Services, Inc., a Louisiana corporation (“I-55” or the Company”),
XFone, Inc., a Nevada corporation, and XFone USA, Inc., a Mississippi
corporation (collectively "Buyer"), Xxxxxx XxXxxxxxxx, an individual resident
of
Louisiana ("XxXxxxxxxx"), and Xxxxx Xxxxxx, an individual resident of Louisiana
("Xxxxxx" and collectively with XxXxxxxxxx, "Principals" or each as
"Principal"), and Trustmark National Bank, a national banking association
as
escrow agent ("Escrow Agent").
This
is
the Escrow Agreement referred to in the Agreement and Plan of Merger Agreement
dated August ___, 2005 (the "Merger Agreement") among Buyer, the Company
and the
Principals. Capitalized terms used in this agreement without definition shall
have the respective meanings given to them in the Merger Agreement.
In
order
to provide Buyer security for certain rights of indemnification that the
Buyer
possesses under the Merger Agreement in the event of a breach of the
representations, warranties or agreements by the Company or the Principals
thereunder, or otherwise pursuant to the terms of the Merger Agreement, the
Principals and the Buyer have agreed that the number of shares of XFone,
Inc.
Common Stock (the "XFone Common Stock") and the number of XFone, Inc. Stock
Warrants ("XFone Stock Warrants") as set forth in Exhibit "A", which constitutes
part of the purchase price under the Merger Agreement, shall be deposited
with
the Escrow Agent by the Principals and Buyer to be held and handled by Escrow
Agent in accordance with the terms and conditions herein set forth.
The
XFone, Inc. Common Stock is currently traded under the symbol AMEX:XFN and
the
Buyer shall notify the Escrow Agent of any change in the market on which
the
stock is listed or the symbol under which it is traded.
The
parties, intending to be legally bound, hereby agree as follows:
7. ESTABLISHMENT
OF ESCROW
(a) Deposit
of XFone Common Stock and XFone Stock Warrants.
The
Principals hereby deposit in escrow the number of shares of XFone Common
Stock
and XFone Common Stock Warrants set out opposite their names on Exhibit "A"
attached to this Agreement ("Escrow Shares"), registered in the name of the
Escrow Agent or its nominee. As used herein, the "Pro-Rata Share" refers
to a
fraction of which the numerator is the number of Escrow Shares deposited
by such
Principal and the denominator is the total number of Escrow Shares deposited
by
both Principals.
(b) Escrow
Fund.
The
Escrow Shares, all dividends and distributions thereon, and all income and
property resulting therefrom ("Escrow Fund") shall be held by the Escrow
Agent
for the benefit of the Principals and Buyer on the terms set out
herein.
(c) Voting
Rights of Shares in Escrow.
All
voting rights with respect to the XFone Common Stock composing a part of
the
Escrow Fund may be exercised by the Principal who deposited such XFone Common
Stock in escrow, and the Escrow Agent shall from time to time execute and
deliver to each Principal such proxies, consents, or other documents as may
be
necessary to enable each Principal to exercise such rights with respect to
any
XFone Common Stock deposited by such Principal which remains a part of the
Escrow Fund.
(d) Distributions
on Escrow Fund.
All
dividends and other distributions (whether in cash, securities, or other
property) paid or made on the Escrow Fund shall be deemed to have been paid
or
made to the Principals, in accordance with their respective Pro-Rata Share
in
the Escrow Fund, for income tax purposes, but shall be received by the Escrow
Agent and constitute part of the Escrow Fund.
(e) Taxes
and Charges on Escrow Fund.
The
Principals, with respect to their respective Pro-Rata Share of the Escrow
Fund,
shall maintain the Escrow Fund free and clear of all liens and encumbrances
and
shall, promptly upon request by the Escrow Agent, pay and discharge all taxes,
assessments, and governmental charges imposed on or with respect to the Escrow
Fund.
(f) Acceptance
of Escrow.
Escrow
Agent hereby agrees to act as escrow agent and to hold, safeguard and disburse
the Escrow Fund pursuant to the terms and conditions hereof.
(g) Notice
of Claim.
Buyer
shall be entitled to recover under this Escrow Agreement in respect of any
Loss
(as defined in Section 6.2 of the Merger Agreement) and may give notice in
writing in the form attached hereto as Appendix A ("Pending Claims Notice")
to
the Escrow Agent and the Principals of any claim on which a Loss may be based,
which Pending Claims Notice shall include a brief description of the nature
of
the claim, the identity of the party by whom it is being asserted, and an
estimate of the amount of loss that may be sustained by Buyer (the "Estimated
Loss").
8. DISTRIBUTIONS
FROM ESCROW FUND
(a) Buyer
Request.
If
Buyer (or either of them) submits a notice and request to the Principals
and
Escrow Agent in substantially the form attached as Appendix B stating that
a
Loss (as defined in the Merger Agreement) has been determined in accordance
with
Section 6.2 of the Merger Agreement and specifying the dollar amount of the
Loss
and the property from the Escrow Fund to be released to the Buyer in
satisfaction of the Loss (including specifying the number of shares of the
XFone
Common Stock and the XFone Stock Warrants of each Principal to be released
to
the Buyer or its designee from the Escrow Fund), then on the 15th
business
day following such notice, Escrow Agent shall release the number of shares
of
the XFone Common Stock and XFone Stock Warrants as directed in said notice,
unless the Escrow Agent has received a Counter-Notice (as defined herein)
from
any Principal that it disputes the requested release from the Escrow Fund
for
the Loss.
(b) Request
by Principals.
If the
Principals give a notice in substantially the form attached as Appendix C
to the
Escrow Agent and Buyer stating that they are entitled to a distribution from
their respective Pro-Rata Share of the Escrow Fund as required under Section
6.2(b)(ii) of the Merger Agreement specifying the number of XFone Common
Stock
and XFone Stock Warrants to be distributed to each Principal, then on the
15th
business
day following such notice, the Escrow Agent shall release the XFone Common
Stock
and XFone Stock Warrants pursuant to the directions given by the Principals
in
the notice, unless the Escrow Agent shall have received from Buyer a
Counter-Notice (as defined herein) that it disputes the requested release
from
the Escrow Fund requested by the Principals.
(c) If
a
counter-notice ("Counter-Notice") is given with respect to a request for
distributions from the Escrow Fund, then the Escrow Agent shall make a
distribution from the Escrow Fund only in accordance with (i) joint written
instructions of Buyer and the Principals or (ii) a final non-appealable order
of
a court of competent jurisdiction. Any court order shall be accompanied by
legal
opinion by counsel for the presenting party satisfactory to the Escrow Agent
to
the effect that the order is final and non-appealable. Escrow Agent shall
act on
such court order and legal opinion without further question.
(d) Notwithstanding
anything to the contrary contained in this Agreement, the Escrow Agent shall
make distributions from the Escrow Fund in accordance with the joint written
instructions of Buyer and Principals.
9. DURATION
AND TERMINATION OF ESCROW
(a) On
the
second anniversary date of this Agreement, the Escrow Agent shall retain
an
amount of the Escrow Fund (taken on a pro-rata basis from each Principal's
portion of the Escrow Fund) equal to the aggregate dollar value of the Estimated
Losses for all outstanding Pending Claims Notices and the remainder of each
Principal's portion of the Escrow Fund shall be disbursed to each Principal.
For
these purposes, the value of the Parent Common Stock and the Parent Stock
Warrants shall be determined in accordance with Exhibit "A."
(b) The
Escrow Agreement shall continue in full force and effect until the first
to
occur of the close of business on the last day during which there is any
Escrow
Fund remaining with the Escrow Agent or December 31, 2020, at which time
this
Escrow shall terminate and any Escrow Fund remaining shall be interpled with
the
registry or custody of any court of competent jurisdiction and thereupon
the
Escrow Agent shall be discharged of all further duties under this
Agreement.
10. DUTIES
OF
ESCROW AGENT
(a) Escrow
Agent shall not be under any duty to give the Escrow Fund held by it hereunder
any greater degree of care than it gives its own similar property and shall
not
be required to invest any funds held hereunder except as directed in this
Agreement. Uninvested funds held hereunder shall not earn or accrue
interest.
(b) Escrow
Agent shall not be liable, except for its own gross negligence or willful
misconduct and, except with respect to claims based upon such gross negligence
or willful misconduct that are successfully asserted against Escrow Agent,
the
others hereto shall jointly and severally indemnify and hold harmless Escrow
Agent (and any successor Escrow Agent) from and against any and all losses,
liabilities, claims, actions, damages and expenses, including reasonable
attorneys' fees and disbursements, arising out of and in connection with
this
Agreement.
(c) Escrow
Agent shall be entitled to rely upon any order, judgment, certification,
demand,
notice, instrument or other writing delivered to it hereunder without being
required to determine the authenticity or the correctness of any fact stated
therein or the propriety or validity of the service thereof. Escrow Agent
may
act in reliance upon any instrument or signature believed by it to be genuine
and may assume that the person purporting to give receipt or advice or make
any
statement or execute any document in connection with the provisions hereof
has
been duly authorized to do so. Escrow Agent may conclusively presume that
the
undersigned representative of any party hereto which is an entity other than
a
natural person has full power and authority to instruct Escrow Agent on behalf
of that party unless written notice to the contrary is delivered to Escrow
Agent.
(d) Escrow
Agent may act pursuant to the advice of counsel with respect to any matter
relating to this Agreement and shall not be liable for any action taken or
omitted by it in good faith in accordance with such advice.
(e) Escrow
Agent does not have any interest in the Escrow Fund deposited hereunder but
is
serving as escrow holder only and having only possession thereof. Any payments
of income from this Escrow Fund shall be subject to withholding regulations
then
in force with respect to United States taxes. The parties hereto will provide
Escrow Agent with appropriate Internal Revenue Service Forms W-9 for tax
identification number certification, or non-resident alien certifications.
This
Section 5(e) and Section 5(b) shall survive notwithstanding any termination
of
this Agreement or the resignation of Escrow Agent.
(f) Escrow
Agent makes no representation as to the validity, value, genuineness or the
collectibility of any security or other document or instrument held by or
delivered to it.
(g) Escrow
Agent (and any successor Escrow Agent) may at any time resign as such by
delivering the Escrow Fund to any successor Escrow Agent jointly designated
by
the other parties hereto in writing, or to any court of competent jurisdiction,
whereupon Escrow Agent shall be discharged of and from any and all further
obligations arising in connection with this Agreement. The resignation of
Escrow
Agent will take effect on the earlier of (a) the appointment of a successor
(including a court of competent jurisdiction) or (b) the day which is 30
days
after the date of delivery of its written notice of resignation to the other
parties hereto. If at that time Escrow Agent has not received a designation
of a
successor Escrow Agent, Escrow Agent's sole responsibility after that time
shall
be to retain and safeguard the Escrow Fund until receipt of a designation
of
successor Escrow Agent or a joint written disposition instruction by the
other
parties hereto or a final non-appealable order of a court of competent
jurisdiction.
(h) In
the
event of any disagreement between the other parties hereto resulting in adverse
claims or demands being made in connection with the Escrow Fund or in the
event
that Escrow Agent is in doubt as to what action it should take hereunder,
Escrow
Agent shall be entitled to retain the Escrow Fund until Escrow Agent shall
have
received (i) a final non-appealable order of a court of competent jurisdiction
directing delivery of the Escrow Fund or (ii) a written agreement executed
by
the other parties hereto directing delivery of the Escrow Fund, in which
event
Escrow Agent shall disburse the Escrow Fund in accordance with such order
or
agreement. Any court order shall be accompanied by a legal opinion by counsel
for the presenting party satisfactory to Escrow Agent to the effect that
the
order is final and non-appealable. Escrow Agent shall act on such court order
and legal opinion without further question.
(i) Buyers
and Principals shall pay Escrow Agent compensation (as payment in full) for
the
services to be rendered by Escrow Agent hereunder in the amount of [$1,000.00]
at the time of execution of this Agreement and [$1,000.00] annually thereafter
and agree to reimburse Escrow Agent for all reasonable expenses, disbursements
and advances incurred or made by Escrow Agent in performance of its duties
hereunder (including reasonable fees, expenses and disbursements of its
counsel). Any such compensation and reimbursement to which Escrow Agent is
entitled shall be borne 50% by Buyer, ____% by XxXxxxxxxx and ____% by Xxxxxx.
Any fees or expenses of Escrow Agent or its counsel that are not paid as
provided for herein may be taken from any property held by Escrow Agent
hereunder.
(j) No
printed or other matter in any language (including, without limitation,
prospectuses, notices, reports and promotional material) that mentions Escrow
Agent's name or the rights, powers, or duties of Escrow Agent shall be issued
by
the other parties hereto or on such parties' behalf unless Escrow Agent shall
first have given its specific written consent thereto.
11. LIMITED
RESPONSIBILITY
This
Agreement expressly sets forth all the duties of Escrow Agent with respect
to
any and all matters pertinent hereto. No implied duties or obligations shall
be
read into this agreement against Escrow Agent. Escrow Agent shall not be
bound
by the provisions of any agreement among the other parties hereto except
this
Agreement.
12. OWNERSHIP
FOR TAX PURPOSES
Principals
agree that, for purposes of federal and other taxes based on income, Xxxxxxx
and
Xxxxxxx will be treated as the owner of their pro-rata share of the Escrow
Fund,
respectively, and that Xxxxxxx and Xxxxxxx will report all income, if any,
that
is earned on, or derived from, the Escrow Fund as their income, in such
proportions, in the taxable year or years in which such income is properly
includible and pay any taxes attributable thereto.
13. NOTICES
All
notices, consents, waivers and other communications under this Agreement
must be
in writing and will be deemed to have been duly given when (a) delivered
by
hand (with written confirmation of receipt), (b) sent by telecopier
(with
written confirmation of receipt) provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee,
if
sent by a nationally recognized overnight delivery service (receipt requested),
in each case to the appropriate addresses and telecopier numbers set forth
below
(or to such other addresses and telecopier numbers as a party may designate
by
notice to the other parties):
IF
TO
COMPANY OR PRINCIPALS, TO:
I-55
Internet Services, Inc.
000
Xxxx
Xxxxxx Xxxxxx
Xxxxxxx,
XX 00000
Attention:
Xxxxxx XxXxxxxxxx, President and CEO
Xxxxx Xxxxxx, Chairman
Telephone:
(504) ___________
Facsimile:
(504) ___________
Email:
xxxxxx@x-00.xxx
xxxxx@x-00.xxx
IF
TO
PARENT OR SUBSIDIARY, TO:
XFone,
Inc.
Xxxxxxxxx
Xxxxx
000
Xxxx
Xxxx
Xxxxxx,
X000XX
Xxxxxx
Xxxxxxx
Attention: Xxx
Xxxxxxxxx
Telephone: x00
000-000-0000
Facsimile: x00
000-000-0000
Email:
xxx@xxxxx.xxx
and
XFone
USA, Inc.
0000
Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Attention: Xxxx
Xxxxxxx
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Email: xxxxxxxx@xxxxxxx.xxx
with
a
copy to:
The
Oberon Group, LLC
00
Xxxxxxx Xxx., 0xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attention: Xxxx
Xxxxxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email:
xxxx@xxxxxxxxxxx.xxx
Xxxxxxx
Xxxxxx Winter & Stennis, P.A.
000
Xxxxx
Xxxxx Xxxxxx (39202)
P.
O. Xxx
000
Xxxxxxx,
XX 00000-0000
Attention: Xxxx
X.
Xxxxxx
Telephone: 000-000-0000
Facsimile: 601-949-4804
Email:
xxxxxxx@xxxxxxxxxxxxx.xxx
IF
TO
ESCROW AGENT:
Trustmark
National Bank
000
Xxxx
Xxxxxxx Xxxxxx
Xxxxxxx,
XX 00000
Attention: X.
Xxxxxxx (“Xxxxx”) Xxxxxx, X.X.
14. JURISDICTION;
SERVICE OF PROCESS
Any
action or proceeding seeking to enforce any provision of, or based on any
right
arising out of, this Agreement may be brought against any of the parties
in the
courts of the State of Mississippi or, if it has or can acquire jurisdiction,
in
the United States District Court for the Southern District of Mississippi,
and
each of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives
any
objection to venue laid therein. Process in any action or proceeding referred
to
in the preceding sentence may be served on any party anywhere in the
world.
15. COUNTERPARTS
This
Agreement may be executed in one or more counterparts, each of which will
be
deemed to be an original and all of which, when taken together, will be deemed
to constitute one and the same.
16. SECTION
HEADINGS
The
headings of sections in this Agreement are provided for convenience only
and
will not affect its construction or interpretation.
17. WAIVER
The
rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising
any
right, power, or privilege under this Agreement or the documents referred
to in
this Agreement will operate as a waiver of such right, power, or privilege,
and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege
or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of
this
Agreement or the documents referred to in this Agreement can be discharged
by
one party, in whole or in part, by a waiver or renunciation of the claim
or
right unless in writing signed by the other party; (b) no waiver that
may
be given by a party will be applicable except in the specific instance for
which
it is given; and (c) no notice to or demand on one party will be deemed
to
be a waiver of any obligation of such party or of the right of the party
giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this
Agreement.
18. EXCLUSIVE
AGREEMENT AND MODIFICATION
This
Agreement supersedes all prior agreements among the parties with respect
to its
subject matter and constitutes (along with the documents referred to in this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may
not
be amended except by a written agreement executed by the Buyer, the Principals
and the Escrow Agent.
19. GOVERNING
LAW
This
Agreement shall be governed by the laws of the State of Mississippi, without
regard to conflicts of law principles.
IN
WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of
the date first written above.
|
BUYERS:
|
PRINCIPALS:
|
XFone,
Inc.
By:
Xxx
Xxxxxxxxx, President and CEO Xxxxxx
XxXxxxxxxx, Individually
XFone
USA, Inc.
Xxxxx
Xxxxxx,
Individually
By:
Xxx
Xxxxxxxxx, President and CEO
ESCROW
AGENT:
Trustmark
National Bank
By:
Title:
EXHIBIT
"A"
|
XFone
Common Stock
|
XFone
Stock Warrants
|
|
|
|
|
|
|
Xxxxxx
XxXxxxxxxx
|
________
Shares
|
________
Warrants
|
|
Xxxxx
Xxxxxx
|
________
Shares
|
________
Warrants
|
VALUATION
Parent
Stock Warrants
-
$_______ per warrant
Parent
Common Stock
- the
average of the closing price for the ten (10) trading days immediately preceding
the date of valuation.
APPENDIX
A
PENDING
CLAIM NOTICE
To:
_______________________,
or its successor ("Escrow Agent")
Xxxxxx
XxXxxxxxxx ("Principal")
Xxxxx
Xxxxxx ("Principal")
|
From:
|
|
XFone,
Inc. and/or XFone USA, Inc.
("XFone")
|
Date: _____________________
Please
be
advised that, pursuant to Section 1(g) of the Escrow Agreement dated
____________, 2005 by and among the undersigned, the Escrow Agent, and the
Principals, each of you are hereby notified that, Buyer believes that the
Buyer
has or may suffer a Loss pursuant to the provisions of Article 6.2 of the
Merger
Agreement dated as of _______________, 2005 ("Merger Agreement") by virtue
of
XFone
estimates that the Loss is $_____________ ("Estimated Loss").
Signed
this _____ day of _________________, 20__.
|
XFone,
Inc./XFone USA, Inc.
|
|
|
By:
|
|
|
Title:
|
APPENDIX
B
BUYER
DEPOSITION NOTICE REQUEST
|
To:
|
______________________,
or its successor ("Escrow Agent")
|
|
|
Xxxxxx
XxXxxxxxxx ("Principal")
|
|
|
Xxxxx
Xxxxxx ("Principal")
|
|
From:
|
XFone,
Inc./XFone USA, Inc. ("XFone")
|
|
Date:
|
_______________________
|
|
Re:
|
Escrow
Agreement Dated ____________, 2004 Among the Above-referenced
Parties
("Escrow Agreement")
|
Please
be
advised that pursuant to Section 2(a) of the Escrow Agreement you are hereby
notified that a Loss (as defined in the Merger Agreement dated ________________,
2005) has been determined and you are hereby instructed to deliver to XFone,
Inc. the following XFone Common Stock and XFone Stock Warrants endorsed for
transfer to XFone from the Escrow Fund.
|
(1)
|
_________
total shares XFone Common Stock as
follows:
|
(a) ____________
shares of Xxxxxx XxXxxxxxxx'x XFone Common Stock deposited in the Escrow
Fund.
(b) ____________
shares of Xxxxx Xxxxxx'x XFone Common Stock deposited in the Escrow
Fund.
|
(2)
|
_________
shares XFone Stock Warrants as
follows:
|
(a) ____________ XFone
Stock Warrants from Xxxxxx XxXxxxxxxx'x XFone Stock Warrants deposited in
the
Escrow Fund.
(b) ____________ XFone
Stock Warrants from Xxxxx Xxxxxx'x XFone Stock Warrants deposited in the
Escrow
Fund.
|
(3)
|
Cash
Dividends $________.
|
Check
One:
|
____
|
This
is the Loss as determined for Pending Claims Notice dated
|
.
|
|
____
|
This
notice also constitutes a Pending Claims Notice and the Loss arises
out of
the following:
|
|
Sincerely,
XFone,
Inc./XFone USA, Inc.
By:
Title:
APPENDIX
C
PRINCIPALS
DEPOSITION NOTICE REQUEST
|
To:
|
|
______________________,
or its successor ("Escrow Agent")
|
XFone, Inc./XFone USA, Inc. ("XFone")
|
From:
|
|
Xxxxxx
XxXxxxxxxx ("Principal")
|
Xxxxx Xxxxxx ("Principal")
|
Date:
|
|
_____________________
|
|
Re:
|
|
Escrow
Agreement Dated ____________, 2004 Among the Above-referenced Parties
("Escrow Agreement")
|
Please
be
advised that pursuant to Section 2(b) of the Escrow Agreement you are hereby
notified that each Principal is entitled to a distribution as set forth below
from the Escrow Fund pursuant to Section 6.2(b)(ii) of the Merger Agreement
dated ______________, 2005, and you are hereby requested to deliver to each
Principal the following XFone Common Stock and Parent Stock Warrants endorsed
as
follows for transfer from the Escrow Fund:
To
Xxxxxx XxXxxxxxxx:
__________ shares
of
XFone Common Stock Xxxxxx XxXxxxxxxx deposited in the Escrow Fund.
__________ XFone
Stock Warrants from Xxxxxx XxXxxxxxxx'x XFone Stock Warrants deposited in
the
Escrow Fund.
To
Xxxxx Xxxxxx:
__________ shares
of
XFone Common Stock Xxxxx Xxxxxx deposited in the Escrow
Fund.
__________ XFone
Stock Warrants from Xxxxx Xxxxxx' XFone Stock Warrants he deposited in
the
Escrow Fund.
Sincerely,
Xxxxxx
XxXxxxxxxx
Xxxxx
Xxxxxx
EXHIBIT
"C"
Form
of XxXxxxxxxx Employment Agreement
EMPLOYMENT
AGREEMENT
This
Employment Agreement (this "Agreement") is made as of ________________, 2005
by
XFone USA, Inc., a Mississippi corporation (the "Employer"), and Xxxxxx
XxXxxxxxxx, an individual (the "Executive").
RECITALS
The
Executive is currently the President and Chief Executive Officer and a principal
shareholder of I-55 Internet Services, Inc. (the "Company"). Concurrently
with
the execution and delivery of this Agreement, the Company is being merged
with
and into the Employer pursuant to and in accordance with that certain Agreement
and Plan of Merger dated among the Company, the Employer, XFone, Inc. (the
"Parent") and the Executive and Xxxxx Xxxxxx (the "Merger Agreement"). The
Executive's continued employment with the Employer after the merger and the
Employee's execution of this Agreement is a condition to the consummation
of the
merger pursuant to the Merger Agreement by the Employer and the Parent. The
Employer agrees to employ the Executive, and the Executive wishes to accept
such
continued employment, upon the terms and conditions set forth in this
Agreement.
AGREEMENT
The
parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For
the
purposes of this Agreement, the following terms have the meanings specified
or
referred to in this Section 1.
"Agreement"--this
Employment Agreement, as amended from time to time.
"Basic
Compensation"--Salary
and Benefits.
"Benefits"--as
defined in Section 3.1(b).
"Confidential
Information"
means
any and all of the following with respect to the Employer, its Parent, the
Company as predecessor to the Employer or any of their affiliates:
(a) trade
secrets concerning the business and affairs of the Employer, its Parent,
the
Company as predecessor to the Employer or any of their affiliates, product
specifications, data, know-how, formulae, compositions, processes, designs,
sketches, photographs, graphs, drawings, samples, inventions and ideas, past,
current, and planned research and development, current and planned manufacturing
or distribution methods and processes, customer lists, current and anticipated
customer requirements, price lists, market studies, business plans, computer
software and programs (including object code and source code), computer software
and database technologies, systems, structures, and architectures (and related
formulae, compositions, processes, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and information, any other
confidential or proprietary information or data), and any other information,
however documented, that is a trade secret within the meaning of any applicable
federal or state laws; and
(b) information
concerning the business and affairs of the Employer, its Parent, the Company
as
predecessor to the Employer or any of their affiliates (which includes but
is
not limited to historical financial statements, financial projections and
budgets, historical and projected sales, capital spending budgets and plans,
the
names and backgrounds of key personnel, personnel training and techniques
and
materials, interconnect agreements, supply sources, marketing, production
or
merchandising systems or plans), however documented; and
(c) notes,
analysis, compilations, studies, summaries, and other material prepared by
or
for the Employer, its Parent, the Company as predecessor to the Employer
or any
of their affiliates containing or based, in whole or in part, on any information
included in the foregoing.
"Effective
Date"--the
date stated in the first paragraph of the Agreement.
"Executive
Invention"--any
idea, invention, technique, modification, process, or improvement (whether
patentable or not), any industrial design (whether registerable or not),
any
mask work, however fixed or encoded, that is suitable to be fixed, embedded
or
programmed in a semiconductor product (whether recordable or not), and any
work
of authorship (whether or not copyright protection may be obtained for it)
created, conceived, or developed by the Executive, either solely or in
conjunction with others, during the Employment Period with Employer or its
predecessor, the Company, or a period that includes a portion of the Employment
Period, that relates in any way to, or is useful in any manner in, the business
then being conducted or proposed to be conducted by the Employer, and any
such
item created by the Executive, either solely or in conjunction with others,
following termination of the Executive's employment with the Employer, that
is
based upon or uses Confidential Information.
"Employment
Period"--the
term of the Executive's employment under this Agreement, and as used herein
the
term "Employment Year" means each twelve month period occurring during the
employment period and "Employment Year 1" shall mean the first twelve months
of
employment from the Effective Date and "Employment Year 2" shall mean the
12
month period following Employment Year 1 and "Employment Year 3" shall mean
the
12 month period following Employment Year 2.
"For
cause"--as
defined in Section 6.2.
"For
good reason"--as
defined in Section 6.3.
"Parent
Common Stock"
shall
mean shares of the common stock of Parent.
"Person"--any
individual, corporation (including any non-profit corporation), general or
limited partnership, limited liability company, joint venture, estate, trust,
association, organization, or governmental body.
"Post-Employment
Period"--as
defined in Section 8.2.
"Proprietary
Items"--as
defined in Section 7.2(a)(iv).
"Salary"--as
defined in Section 3.1(a).
2. EMPLOYMENT
TERMS AND DUTIES
2.1 EMPLOYMENT
The
Employer hereby employs the Executive, and the Executive hereby accepts
employment by the Employer, upon the terms and conditions set forth in this
Agreement.
2.2 TERM
Subject
to the provisions of Section 6, the term of the Executive's employment under
this Agreement will be three years, beginning on the Effective Date and ending
on the third anniversary of the Effective Date.
2.3 DUTIES
The
Executive will have such duties as are assigned or delegated to the Executive
by
the President, and will initially serve as Vice President, of Operations
of the
Employer. The Executive will devote his entire business time, attention,
skill,
and energy exclusively to the business of the Employer, will use his best
efforts to promote the success of the Employer's business, and will cooperate
fully with the President in the advancement of the best interests of the
Employer. If the Executive is elected as a director of the Employer or as
a
director or officer of any of its affiliates, the Executive will fulfill
his
duties as such director or officer without additional compensation. The
Executive’s duties shall be commensurate with his title and shall include
managerial responsibility and authority, particularly over the Louisiana
operations of Employer. Executive shall report directly to the President
of
Employer.
3. COMPENSATION
3.1 BASIC
COMPENSATION
(a) Salary.
The
Executive will be paid an annual salary of $100,000.00 for Employment Year
1;
$103,000 for Employment Year 2 and $106,090.00 for Employment Year 3 (the
"Salary"), which will be payable in equal periodic installments according
to the
Employer's customary payroll practices, but no less frequently than monthly,
and
shall be subject to all applicable withholding and other applicable taxes
as
required by law.
(b) Benefits.
The
Executive will, during the Employment Period, be permitted to participate
in
such life insurance, hospitalization, major medical, and other Executive
benefit
plans of the Employer that may be in effect from time to time, to the extent
the
Executive is eligible under the terms of those plans (collectively, the
"Benefits"). The Executive shall be entitled to car and cell phone allowances
at
least equal in value to those previously provided to Executive by the
Company.
3.2 INCENTIVE
COMPENSATION
Currently
the Company does not have an Executive Incentive Compensation Plan; however,
the
Executive will participate in such plan when developed.
3.3 PARENT
STOCK OPTION COMPENSATION
On
the
first business day of Employment Year 1, the Executive shall be granted and
issued options for 200,000 shares of restricted Parent Common Stock (25,000
of
which shall be attributable to Employment Year 1, 50,000 of which shall be
attributable to Employment Year 2, and 125,000 of which shall be attributable
to
Employment Year 3) (the "Options"). The Options shall vest as follows: Options
for 25,000 shares of restricted Parent Stock shall vest 3 years from the
grant
date, options for 50,000 shares of restricted Parent Stock shall vest 4 years
from the grant date and options for 125,000 shares of restricted Parent Stock
shall vest 5 years from the grant date. The stock options shall provide for
a
five (5) year term from the vesting date, a strike price that is 10% above
the
closing price of the Parent Common Stock on the date of issue of the Options.
The parties agree that the terms “Options” and “Parent Stock Options” as used in
this Agreement include only those Options granted pursuant to this
Agreement.
4. FACILITIES
AND EXPENSES
The
Employer will furnish the Executive office space, equipment, supplies, and
such
other facilities and personnel as the Employer deems necessary or appropriate
for the performance of the Executive's duties under this Agreement.
5. VACATIONS
AND HOLIDAYS
The
Executive will be entitled to three weeks' paid vacation each Employment
Year in
accordance with the vacation policies of the Employer in effect for its
executive officers from time to time. Vacation must be taken by the Executive
at
such time or times as approved by the Chairman of the Board or President.
The
Executive will also be entitled to the paid holidays set forth in the Employer's
policies. Up to five vacation days during any Employment Year that are not
used
by the Executive during such Employment Year may be used in any subsequent
Employment Year.
6. TERMINATION
6.1 EVENTS
OF
TERMINATION
The
Employment Period, the Executive's Basic Compensation, Incentive Compensation,
any Parent Stock Options which have not vested, and Parent Stock Warrants
which
have not vested and any and all other rights of the Executive under this
Agreement or otherwise as an Executive of the Employer will terminate (except
as
otherwise provided in this Section 6):
(a) upon
the
death of the Executive;
(b) upon
termination by Employer for cause (as defined in Section 6.2), immediately
upon
notice from the Employer to the Executive, or at such later time as such
notice
may specify; or
(c) upon
termination by Executive for good reason (as defined in Section 6.3) upon
not
less than thirty days' prior notice from the Executive to the
Employer.
(d) upon
termination of employment by Executive for any reason other than for good
reason
(as defined in Section 6.3).
6.2 DEFINITION
OF "FOR CAUSE"
For
purposes of Section 6.1, the phrase "for cause" means: (a) the Executive's
breach of this Agreement which remains uncorrected for 30 days following
notice
from the Employer; (b) the Executive's failure to adhere to any written
Employer policy if the Executive has been given a reasonable opportunity
to
comply with such policy or cure his failure to comply (which reasonable
opportunity must be granted during the ten-day period preceding termination
of
this Agreement); (c) the appropriation (or attempted appropriation)
of a
material business opportunity of the Employer, including attempting to secure
or
securing any personal profit in connection with any transaction entered into
on
behalf of the Employer; (d) the misappropriation (or attempted
misappropriation) of any of the Employer's funds or property; or (e) the
conviction of, the indictment for (or its procedural equivalent), or the
entering of a guilty plea or plea of no contest with respect to, a felony,
the
equivalent thereof, or any other crime with respect to which imprisonment
is a
possible punishment.
6.3 DEFINITION
OF "FOR GOOD REASON"
For
purposes of Section 6.1, the phrase "for good reason" means any of the
following: (a) The Employer's material breach of this Agreement which
is
not cured within 30 days from the date of notice from the Executive;
(b) the requirement by the Employer that the Executive be based anywhere
other than in the State of Louisiana without the Executive's consent; or
(c) the
Employer alters Executive’s duties such that he is stripped of all managerial
authorities.
6.4 TERMINATION
PAY
Effective
upon the termination of this Agreement, the Employer will be obligated to
pay
the Executive (or, in the event of his death, his designated beneficiary
as
defined below) only such compensation as is provided in this Section 6.4,
and in
lieu of all other amounts and in settlement and complete release of all claims
the Executive may have against the Employer arising from the employment
relationship. For purposes of this Section 6.4, the Executive's designated
beneficiary will be such individual beneficiary or trust, located at such
address, as the Executive may designate by notice to the Employer from time
to
time or, if the Executive fails to give notice to the Employer of such a
beneficiary, the Executive's estate. Notwithstanding the preceding sentence,
the
Employer will have no duty, in any circumstances, to attempt to open an estate
on behalf of the Executive, to determine whether any beneficiary designated
by
the Executive is alive or to ascertain the address of any such beneficiary,
to
determine the existence of any trust, to determine whether any person or
entity
purporting to act as the Executive's personal representative (or the trustee
of
a trust established by the Executive) is duly authorized to act in that
capacity, or to locate or attempt to locate any beneficiary, personal
representative, or trustee.
(a) Termination
by the Executive for Good Reason.
If the
Executive terminates this Agreement for good reason, the Employer will pay
the
Executive the Executive's Salary for the remainder of the term of this Agreement
(the "Remainder Term") as and when such salary would otherwise become due
and
payable. The Executive shall not have the right to any Incentive Compensation
as
provided in Section 3.2 for the Employment Year during which such termination
occurs or any subsequent Employment Year. The Executive shall have the right
to
retain the options attributable as provided in Section 3.3 hereof for the
Employment Year during which such termination occurs and any prior year and
such
options shall vest immediately, but the Executive shall not be entitled to
retain the options attributable to any Employment Year subsequent to the
Employment Year during which such termination occurred and such options shall
expire.
(b) Termination
by the Employer for Cause or Termination by Executive without Good
Reason.
If the
Employer terminates this Agreement for cause or the Executive terminates
his
employment for any reason other than for good reason (as defined in Section
6.3), the Executive will be entitled to receive his Salary only through the
date
such termination is effective, and will not be entitled to any Incentive
Compensation, Parent Stock Options or Parent Stock Warrants for the Employment
Year during which such termination occurs or any subsequent Employment Year
and
any Parent Stock Options granted to the Executive pursuant to Section 3.3
that
have not vested.
(c) Termination
upon Death.
If this
Agreement is terminated because of the Executive's death, the Executive will
be
entitled to receive his Salary through the end of the calendar month in which
his death occurs, but will not be entitled to receive any Incentive Compensation
or Parent Stock Options pursuant to Section 3.3 for the Employment Year during
which his death occurs or any subsequent Employment Year and any Parent Stock
Options granted to the Executive pursuant to Section 3.3 that have not vested
shall be cancelled except that any Parent Stock Options attributable to the
Employment Year of Executive’s death or any prior Employment Year shall be
deemed to have vested immediately prior to Executive’s death and may be
exercised by Executive’s heirs on the same terms and conditions that would have
applied to Executive.
(d) Benefits.
The
Executive's accrual of, or participation in plans providing for, the Benefits
will cease at the effective date of the termination of this Agreement, and
the
Executive will be entitled to accrued Benefits pursuant to such plans only
as
provided in such plans. The Executive will only receive, as part of his
termination pay pursuant to this Section 6, any payment or other
compensation for any vacation, holiday, sick leave, or other leave unused
on the
date the notice of termination is given under this Agreement if the termination
is due to the death of Executive or termination by the Executive for Good
Reason
per Section 6.3.
6.5 TERMINATION
DAMAGES PAYABLE BY EXECUTIVE
The
Executive and the Employer agree that it is impossible to determine with
any
reasonable accuracy the amount of the prospective damages to the Employer
if the
Executive's employment is terminated for any reason other than death or for
good
reason (as defined in Section 6.3) by the Executive (such termination referred
to in this paragraph as "Executive Termination Without Cause"). In the event
of
any Executive Termination Without Cause other than a Termination by the
Executive due to a disability that leaves him unable to work, the Executive
agrees to pay as liquidated damages to the Employer an amount equal as
follows:
(a) If
the
Executive Termination Without Cause occurs during Employment Year 1, then
the
Executive shall immediately pay to the Employer an amount equal to $225,000.00.
(b) If
the
Executive Termination Without Cause occurs during Employment Year 2, then
the
Executive shall immediately pay to the Employer an amount equal to
$150,000.00.
(c) If
the
Executive Termination Without Cause occurs during Employment Year 3, then
the
Executive shall immediately pay to the Employer an amount equal to
$75,000.000.
7. NON-DISCLOSURE
COVENANT; EXECUTIVE INVENTIONS; NON-COMPETE
7.1 ACKNOWLEDGMENTS
BY THE EXECUTIVE
The
Executive acknowledges that (a) during the Employment Period and his
prior
employment period with the Employer's predecessor, the Company, and as a
part of
his employment with the Employer and its predecessor, the Company, the Executive
was and will continue to be afforded access to Confidential Information;
(b) public disclosure of such Confidential Information could have
an
adverse effect on the Employer and its business; (c) because the Executive
possesses substantial technical expertise and skill with respect to the
Employer's business, the Employer desires to obtain exclusive ownership of
each
Executive Invention, and the Employer will be at a substantial competitive
disadvantage if it fails to acquire exclusive ownership of each Executive
Invention; (d) the Parent and Employer have each required that the
Executive make the covenants in this Section 7 as a condition to the merger
pursuant to the Merger Agreement; and (e) the provisions of this Section
7
are reasonable and necessary to prevent the improper use or disclosure of
Confidential Information and to provide the Employer with exclusive ownership
of
all Executive Inventions.
7.2 AGREEMENTS
OF THE EXECUTIVE
In
consideration of the compensation and benefits to be paid or provided to
the
Executive by the Employer under this Agreement, the Executive covenants as
follows:
(a) Confidentiality.
|
(i)
|
During
and following the Employment Period, the Executive will hold in
confidence
the Confidential Information and will not disclose it to any person
except
with the specific prior written consent of the Employer or except
as
otherwise expressly permitted by the terms of this
Agreement.
|
|
(ii)
|
Any
trade secrets of the Employer will be entitled to all of the protections
and benefits under any applicable federal or state trade secret
law and
any other applicable law. If any information that the Employer
deems to be
a trade secret is found by a court of competent jurisdiction not
to be a
trade secret for purposes of this Agreement, such information will,
nevertheless, be considered Confidential Information for purposes
of this
Agreement. The Executive hereby waives any requirement that the
Employer
submits proof of the economic value of any trade secret or posts
a bond or
other security.
|
|
(iii)
|
None
of the foregoing obligations and restrictions applies to any part
of the
Confidential Information that the Executive demonstrates was or
became
generally available to the public other than as a result of a disclosure
by the Executive.
|
|
(iv)
|
The
Executive will not remove from the Employer's premises (except
to the
extent such removal is for purposes of the performance of the Executive's
duties at home or while traveling, or except as otherwise specifically
authorized by the Employer) any document, record, notebook, plan,
model,
component, device, or computer software or code, whether embodied
in a
disk or in any other form (collectively, the "Proprietary Items").
The
Executive recognizes that, as between the Employer and the Executive,
all
of the Proprietary Items, whether or not developed by the Executive,
are
the exclusive property of the Employer. Upon termination of this
Agreement
by either party, or upon the request of the Employer during the
Employment
Period, the Executive will return to the Employer all of the Proprietary
Items in the Executive's possession or subject to the Executive's
control,
and the Executive shall not retain any copies, abstracts, sketches,
or
other physical embodiment of any of the Proprietary
Items.
|
(b) Executive
Inventions.
Each
Executive Invention will belong exclusively to the Employer. The Executive
acknowledges that all of the Executive's writing, works of authorship, and
other
Executive Inventions are works made for hire and the property of the Employer,
including any copyrights, patents, or other intellectual property rights
pertaining thereto. If it is determined that any such works are not works
made
for hire, the Executive hereby assigns to the Employer all of the Executive's
right, title, and interest, including all rights of copyright, patent, and
other
intellectual property rights, to or in such Executive Inventions. The Executive
covenants that he will promptly:
|
(i)
|
disclose
to the Employer in writing any Executive
Invention;
|
|
(ii)
|
assign
to the Employer or to a party designated by the Employer, at the
Employer's request and without additional compensation, all of
the
Executive's right to the Executive Invention for the United States
and all
foreign jurisdictions;
|
|
(iii)
|
execute
and deliver to the Employer such applications, assignments, and
other
documents as the Employer may request in order to apply for and
obtain
patents or other registrations with respect to any Executive Invention
in
the United States and any foreign
jurisdictions;
|
|
(iv)
|
sign
all other papers necessary to carry out the above obligations;
and
|
|
(v)
|
give
testimony and render any other assistance in support of the Employer's
rights to any Executive Invention.
|
7.3 DISPUTES
OR CONTROVERSIES
The
Executive recognizes that should a dispute or controversy arising from or
relating to this Agreement be submitted for adjudication to any court,
arbitration panel, or other third party, the preservation of the secrecy
of
Confidential Information may be jeopardized. All pleadings, documents,
testimony, and records relating to any such adjudication will be maintained
in
secrecy and will be available for inspection by the Employer, the Executive,
and
their respective attorneys and experts, who will agree, in advance and in
writing, to receive and maintain all such information in secrecy, except
as may
be limited by them in writing.
8. NON-COMPETITION
AND NON-INTERFERENCE
8.1 ACKNOWLEDGMENTS
BY THE EXECUTIVE
The
Executive acknowledges that: (a) the services to be performed by him
under
this Agreement are of a special, unique, unusual, extraordinary, and
intellectual character; (b) the Employer's business is currently regional
in scope and its products are marketed or may be marketed throughout the
parishes and counties indicated on Exhibit “A” hereto (the "Restricted Area");
(c) the Employer competes with other businesses that are or could
be
located in any part of the Restricted Area; (d) the Parent and Employer
have each required that the Executive make the covenants set forth in this
Section 8 as a condition to the merger under the Merger Agreement; and
(e) the provisions of this Section 8 are reasonable and necessary
to
protect the Employer's business.
8.2 COVENANTS
OF THE EXECUTIVE
In
consideration of the acknowledgments by the Executive, and in consideration
of
the compensation and benefits to be paid or provided to the Executive by
the
Employer, the Executive covenants that he will not, directly or
indirectly:
(a) during
the Employment Period, except in the course of his employment hereunder,
and
during the Post-Employment Period, directly or indirectly, either for himself
or
for any partnership, limited liability company, individual, corporation,
joint
venture or any other entity or person "participate in" (as defined below)
any
business (including, without limitation, any division, group or franchise
of a
larger organization) which engages in the "Internet Services and
Telecommunications Business" in the Restricted Area. For purposes of this
Agreement, "Internet Services and Telecommunications
Business"
shall
mean the business of providing any type of telecommunication services or
internet access services to any person or customer within the Restricted
Area,
including, without limitation, local, long distance, broadband, dial up data
services, wireless, DSL, Voice-over-Internet Protocol (VoIP) and any other
service or product being offered or provided by the Employer or the Parent
or
any of their respective affiliates. For purposes of this Agreement, the term
"participate in" shall include, without limitation, having any direct or
indirect interest in any corporation, partnership, limited liability company,
joint venture or other entity, whether as a sole proprietor, owner, shareholder,
partner, member, manager, joint venturer, creditor or otherwise, or rendering
any direct or indirect service or assistance to any individual corporation,
partnership, limited liability company, joint venture and other business
entity
(whether as a director, officer, manager, supervisor, Executive, agent,
consultant or otherwise). Notwithstanding the foregoing, nothing in this
Section
8.2(a) shall prohibit Executive from owning not more than five percent (5%)
of
the debt or equity securities of a publicly traded corporation which may
compete
with the Employer or the Parent.
(b) whether
for the Executive's own account or for the account of any other person, at
any
time during the Employment Period and the Post-Employment Period, solicit
business of the same or similar type being carried on by the Employer or
its
Parent or any of their affiliates, from any person known by the Executive
to be
a customer of the Employer or its Parent or any of their affiliates, whether
or
not the Executive had personal contact with such person during and by reason
of
the Executive's employment with the Employer;
(c) whether
for the Executive's own account or the account of any other person (i) at
any time during the Employment Period and the Post-Employment Period, solicit,
employ, or otherwise engage as an Executive, independent contractor, or
otherwise, any person who is or was an Executive of the Employer at any time
during the Employment Period or in the period of employment with the Employer's
predecessor or in any manner induce or attempt to induce any Executive of
the
Employer to terminate his employment with the Employer; or (ii) at
any time
during the Employment Period and for the Post-Employment Period, interfere
with
the Employer's relationship with any person, including any person who at
any
time during the Employment Period or the period of employment with the
Employer's predecessor was an Executive, contractor, supplier, or customer
of
the Employer or its predecessor; or
(d) at
any
time during or after the Employment Period, disparage the Employer or its
Parent
or any of their affiliates or any of their respective shareholders, directors,
officers, Executives, or agents.
For
purposes of this Section 8.2, the term "Post-Employment Period" means the
two
(2) year period beginning on the date of termination of the Executive's
employment with the Employer.
If
any
covenant in this Section 8.2 is held to be unreasonable, arbitrary, or against
public policy, such covenant will be considered to be divisible with respect
to
scope, time, and geographic area, and such lesser scope, time, or geographic
area, or all of them, as a court of competent jurisdiction may determine
to be
reasonable, not arbitrary, and not against public policy, will be effective,
binding, and enforceable against the Executive.
(e) If
at any
time during the Employment Period and the Post-Employment Period, Executive
desires to participate in an activity that he believes might be prohibited
by
this Section 8.2, such person may request in writing (a "Clarification
Request")
a
determination by Employer as to whether such proposed activity would violate
this Section 8.2. Employer shall respond in writing to such Clarification
Request (a "Clarification
Response")
within
thirty (30) days of receipt thereof.
9. GENERAL
PROVISIONS
9.1 INJUNCTIVE
RELIEF AND ADDITIONAL REMEDY
The
Executive acknowledges that the injury that would be suffered by the Employer
as
a result of a breach of the provisions of this Agreement (including any
provision of Sections 7 and 8) would be irreparable and that an award of
monetary damages to the Employer for such a breach would be an inadequate
remedy. Consequently, the Employer will have the right, in addition to any
other
rights it may have, to obtain injunctive relief to restrain any breach or
threatened breach or otherwise to specifically enforce any provision of this
Agreement, and the Employer will not be obligated to post bond or other security
in seeking such relief. Without limiting the Employer's rights under this
Section 9 or any other remedies of the Employer, if the Executive breaches
any
of the provisions of Section 7 or 8, the Employer will have the right to
cease
making any payments otherwise due to the Executive under this
Agreement.
9.2 COVENANTS
OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT COVENANTS
The
covenants by the Executive in Sections 7 and 8 are essential elements of
this
Agreement, and without the Executive's agreement to comply with such covenants,
the Parent and Employer would not have consummated the merger under the Merger
Agreement and the Employer would not have entered into this Agreement or
employed or continued the employment of the Executive. The Employer and the
Executive have independently consulted their respective counsel and have
been
advised in all respects concerning the reasonableness and propriety of such
covenants, with specific regard to the nature of the business conducted by
the
Employer. Executive agrees to notify Employer if Executive believes that
Employer or Parent have breached this Agreement in such a manner as to excuse
Executive from Executive’s obligations pursuant to the covenants of Sections 7
and 8, at least ten days prior to Executive taking any action inconsistent
with
such covenants.
If
the
Executive's employment hereunder expires or is terminated, this Agreement
will
continue in full force and effect as is necessary or appropriate to enforce
the
covenants and agreements of the Executive in Sections 7 and 8.
9.3 REPRESENTATIONS
AND WARRANTIES BY THE EXECUTIVE
(a) The
Executive represents and warrants to the Employer that the execution and
delivery by the Executive of this Agreement do not, and the performance by
the
Executive of the Executive's obligations hereunder will not, with or without
the
giving of notice or the passage of time, or both: (a) violate any
judgment,
writ, injunction, or order of any court, arbitrator, or governmental agency
applicable to the Executive; or (b) conflict with, result in the breach
of
any provisions of or the termination of, or constitute a default under, any
agreement to which the Executive is a party or by which the Executive is
or may
be bound.
(b) The
Employer represents and warrants to the Executive that the execution and
delivery by the Employer of this Agreement do not, and the performance by
the
Employer of the Employer's obligations hereunder will not, with or without
the
giving of notice or the passage of time, or both: (a) violate any
judgment,
writ, injunction, or order of any court, arbitrator, or governmental agency
applicable to the Employer; or (b) conflict with, result in the breach
of
any provisions of or the termination of, or constitute a default under, any
agreement to which the Employer is a party or by which the Employer is or
may be
bound.
9.4 OBLIGATIONS
CONTINGENT ON PERFORMANCE
The
obligations of the Employer hereunder, including its obligation to pay the
compensation provided for herein, are contingent upon the Executive's
performance of the Executive's obligations hereunder, and vice
versa.
9.5 WAIVER
The
rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by either party in exercising
any
right, power, or privilege under this Agreement will operate as a waiver
of such
right, power, or privilege, and no single or partial exercise of any such
right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege.
To
the maximum extent permitted by applicable law, (a) no claim or right
arising out of this Agreement can be discharged by one party, in whole or
in
part, by a waiver or renunciation of the claim or right unless in writing
signed
by the other party; (b) no waiver that may be given by a party will
be
applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver
of
any obligation of such party or of the right of the party giving such notice
or
demand to take further action without notice or demand as provided in this
Agreement.
9.6 BINDING
EFFECT; DELEGATION OF DUTIES PROHIBITED
This
Agreement shall inure to the benefit of, and shall be binding upon, the parties
hereto and their respective successors, assigns, heirs, and legal
representatives, including any entity with which the Employer may merge or
consolidate or to which all or substantially all of its assets may be
transferred. The duties and covenants of the Executive under this Agreement,
being personal, may not be delegated.
9.7 NOTICES
All
notices, consents, waivers, and other communications under this Agreement
must
be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by facsimile
(with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee,
if
sent by a nationally recognized overnight delivery service (receipt requested),
in each case to the appropriate addresses and facsimile numbers set forth
below
(or to such other addresses and facsimile numbers as a party may designate
by
notice to the other parties):
|
If
to Employer:
|
|
|
XFone,
Inc.
|
Xfone.USA,
Inc.
|
|
Britannia
House
|
0000
Xxxxxxxx Xxxxx
|
|
000
Xxxx Xxxx
|
Xxxxx
000
|
|
Xxxxxx,
X000XX
|
Xxxxxxx,
XX 00000
|
|
Xxxxxx
Xxxxxxx
|
XXX
|
|
Attention: Xxx
Xxxxxxxxx
|
Attention:
Xxxx Xxxxxxx
|
|
Telephone: x00
000-000-0000
|
Telephone:
000-000-0000
|
|
Facsimile: x00
000-000-0000
|
Facsimile:
000-000-0000
|
|
Email: xxx@xxxxx.xxx
|
Email:
xxxxxxxx@xxxxxxx.xxx
|
|
with
a copy to:
|
|
|
The
Oberon Group, LLC
|
|
|
00
Xxxxxxx Xxx., 0xx
Xxxxx
|
|
|
Xxx
Xxxx, XX 00000
|
|
|
Attention: Xxxx
Xxxxxxxxxx
|
|
|
Telephone: 000-000-0000
|
|
|
Facsimile: 000-000-0000
|
|
|
Email: xxxx@xxxxxxxxxxx.xxx
|
|
|
Xxxxxxx
Xxxxxx Winter & Stennis, P.A.
|
|
|
000
Xxxxx Xxxxx Xxxxxx (39202)
|
|
|
P.
O. Xxx 000
|
|
|
Xxxxxxx,
XX 00000-0000
|
|
|
Attention: Xxxx
X. Xxxxxx
|
|
|
Telephone: 000-000-0000
|
|
|
Facsimile: 601-949-4804
|
|
|
Email: xxxxxxx@xxxxxxxxxxxxx.xxx
|
|
|
If
to the Executive:
|
|
|
Xxxxxx
XxXxxxxxxx
|
|
|
000
X. Xxxxxx Xxxxxx
|
|
|
Xxxxxxx,
Xxxxxxxxx 00000
|
|
|
Telephone:
(H)
000-000-0000
|
|
|
(B)
000-000-0000
|
|
|
Facsimile:
000-000-0000
|
|
|
Email: xxxxxx@X-00.xxx
|
|
|
With
a copy to:
|
|
|
Xxxxx
Xxxxx
|
|
|
Baker,
Donelson, Bearman, Xxxxxxxx & Xxxxxxxxx, P.C.
|
|
|
000
Xx. Xxxxxxx Xxx., Xxxxx 0000
|
|
|
Xxx
Xxxxxxx, Xxxxxxxxx 00000
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
Email: xxxxxx@xxxxxxxxxxxxx.xxx
|
|
9.8 ENTIRE
AGREEMENT; AMENDMENTS
This
Agreement, the Merger Agreement, and the documents executed in connection
with
the Merger Agreement, contain the entire agreement between the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, between the parties hereto with respect
to the
subject matter hereof. This Agreement may not be amended orally, but only
by an
agreement in writing signed by the parties hereto.
9.9 GOVERNING
LAW
This
Agreement will be governed by the laws of the State of Louisiana without
regard
to conflicts of laws principles.
9.10 JURISDICTION
Any
action or proceeding seeking to enforce any provision of, or based on any
right
arising out of, this Agreement may be brought against either of the parties
in
the courts of the State of Louisiana, or, if it has or can acquire jurisdiction,
in any of the United States District Courts in Louisiana, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection
to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on either party anywhere in the
world.
9.11 SECTION
HEADINGS, CONSTRUCTION
The
headings of Sections in this Agreement are provided for convenience only
and
will not affect its construction or interpretation. All references to "Section"
or "Sections" refer to the corresponding Section or Sections of this Agreement
unless otherwise specified. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words
or
terms.
9.12 SEVERABILITY
If
any
provision of this Agreement is held invalid or unenforceable by any court
of
competent jurisdiction, the other provisions of this Agreement will remain
in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect
to the
extent not held invalid or unenforceable.
9.13 COUNTERPARTS
This
Agreement may be executed in one or more counterparts, each of which will
be
deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
9.14 WAIVER
OF
JURY TRIAL
THE
PARTIES HERETO HEREBY WAIVE A JURY TRIAL IN ANY LITIGATION WITH RESPECT TO
THIS
AGREEMENT.
9.15 IRREVOCABLE
PROXY FROM EXECUTIVE
As
a
condition to the employment of the Executive, the Executive shall have entered
into an Irrevocable Proxy in form reasonably satisfactory to Parent in which
the
Executive agrees to irrevocably appoint Xxx Xxxxxxxxx or such other party
designated by Parent as proxy to vote the Executive's Parent Common Stock
or any
Parent Common Stock issued to or acquired hereafter by the Executive whether
from the exercise of any of the Parent Stock Warrants or any other stock
options
or warrants granted hereafter or otherwise until such time as the Executive
sells such Parent Common Stock, subject to the condition that if at any time,
Xxx Xxxxxxxxx and Xxxxxxx Xxxxxx together command less than 50% of the voting
rights of Parent, then such proxies shall automatically terminate.
IN
WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of
the date above first written above.
EMPLOYER: EXECUTIVE:
XFone
USA, Inc.
By:
Xxxx
Xxxxxxx,
President/CEO Xxxxxx
XxXxxxxxxx, Individually
|
EMPLOYER:
|
EXECUTIVE:
|
|
XFone
USA, Inc.
|
|
|
By:
|
|
|
Xxxx Xxxxxxx, President/CEO
|
Xxxxxx
XxXxxxxxxx, Individually
|
EXHIBIT
“A”
Restricted
Area
Lousiana
Acadia
Parish, Xxxxx Xxxxxx, Ascension Parish, Assumption Parish, Avoyelles Parish,
Xxxxxxxxxx Parish, Bienville Parish, Bossier Parish, Caddo Parish, Calcasieu
Parish, Xxxxxxxx Parish, Cameron Parish, Catahoula Parish, Claiborne Parish,
Concordia Parish, De Soto Parish, East Baton Rouge Parish, East Xxxxxxx Xxxxxx,
East Xxxxxxxxx Xxxxxx, Xxxxxxxxxx Xxxxxx, Xxxxxxxx Xxxxxx, Xxxxx Xxxxxx,
Iberia
Parish, Iberville Parish, Xxxxxxx Parish, Xxxxxxxxx Xxxxxx, Xxxxxxxxx Xxxxx
Parish, La Salle Parish, Lafayette Parish, Lafourche Parish, Lincoln Parish,
Xxxxxxxxxx Parish, Madison Parish, Xxxxxxxxx Parish, Natchitoches Parish,
Orleans Parish, Ouachita Parish, Plaquemines Parish, Pointe Coupee Parish,
Rapides Parish, Red River Parish, Richland Parish, Xxxxxx Xxxxxx, St. Xxxxxxx
Xxxxxx, St. Xxxxxxx Xxxxxx, St. Xxxxxx Xxxxxx, St. Xxxxx Xxxxxx, St. Xxxx
the
Baptist Parish, St. Landry Parish, St. Xxxxxx Xxxxxx, St. Xxxx Xxxxxx, St.
Tammany Parish, Tangipahoa Parish, Tensas Parish, Terrebonne Parish, Union
Parish, Vermilion Parish, Xxxxxx Xxxxxx, Washington Parish, Webster Parish,
West
Baton Rouge Parish, West Xxxxxxx Xxxxxx, West Xxxxxxxxx Xxxxxx, Xxxx
Xxxxxx
Mississippi
Xxxxx
County, Xxxxxx County, Amite County, Attala County, Xxxxxx County, Bolivar
County, Xxxxxxx County, Xxxxxxx County, Chickasaw County, Choctaw County,
Claiborne County, Xxxxxx County, Clay County, Coahoma County, Copiah County,
Xxxxxxxxx County, DeSoto County, Xxxxxxx County, Franklin County, Xxxxxx
County,
Xxxxxx County, Grenada County, Xxxxxxx County, Xxxxxxxx County, Xxxxx County,
Xxxxxx County, Xxxxxxxxx County, Issaquena County, Itawamba County, Xxxxxxx
County, Jasper County, Jefferson County, Xxxxxxxxx Xxxxx County, Xxxxx County,
Xxxxxx County, Lafayette County, Xxxxx County, Lauderdale County, Xxxxxxxx
County, Xxxxx County, Xxx County, Xxxxxxx County, Lincoln County, Lowndes
County, Madison County, Xxxxxx County, Xxxxxxxx County, Monroe County,
Xxxxxxxxxx County, Neshoba County, Xxxxxx County, Noxubee County, Oktibbeha
County, Panola County, Pearl River County, Perry County, Pike County, Pontotoc
County, Xxxxxxxx County, Quitman County, Xxxxxx County, Xxxxx County, Xxxxxxx
County, Xxxxxxx County, Xxxxx County, Stone County, Sunflower County,
Tallahatchie County, Xxxx County, Tippah County, Tishomingo County, Tunica
County, Union County, Xxxxxxxx County, Xxxxxx County, Washington County,
Xxxxx
County, Xxxxxxx County, Xxxxxxxxx County, Winston County, Yalobusha County,
Yazoo County
EXHIBIT
"D"
Form
of Xxxxxx Employment Agreement
EMPLOYMENT
AGREEMENT
This
Employment Agreement (this "Agreement") is made as of ________________, 2005
by
XFone USA, Inc., a Mississippi corporation (the "Employer"), and Xxxxx Xxxxxx,
an individual (the "Executive").
RECITALS
The
Executive is currently the President and Chief Executive Officer and a principal
shareholder of I-55 Internet Services, Inc. (the "Company"). Concurrently
with
the execution and delivery of this Agreement, the Company is being merged
with
and into the Employer pursuant to and in accordance with that certain Agreement
and Plan of Merger dated among the Company, the Employer, XFone, Inc. (the
"Parent") and the Executive and Xxxxxx XxXxxxxxxx (the "Merger Agreement").
The
Executive's continued employment with the Employer after the merger and the
Employee's execution of this Agreement is a condition to the consummation
of the
merger pursuant to the Merger Agreement by the Employer and the Parent. The
Employer agrees to employ the Executive, and the Executive wishes to accept
such
continued employment, upon the terms and conditions set forth in this
Agreement.
AGREEMENT
The
parties, intending to be legally bound, agree as follows:
10. DEFINITIONS
For
the
purposes of this Agreement, the following terms have the meanings specified
or
referred to in this Section 1.
"Agreement"--this
Employment Agreement, as amended from time to time.
"Basic
Compensation"--Salary
and Benefits.
"Benefits"--as
defined in Section 3.1(b).
"Confidential
Information"
means
any and all of the following with respect to the Employer, its Parent, the
Company as predecessor to the Employer or any of their affiliates:
(a) trade
secrets concerning the business and affairs of the Employer, its Parent,
the
Company as predecessor to the Employer or any of their affiliates, product
specifications, data, know-how, formulae, compositions, processes, designs,
sketches, photographs, graphs, drawings, samples, inventions and ideas, past,
current, and planned research and development, current and planned manufacturing
or distribution methods and processes, customer lists, current and anticipated
customer requirements, price lists, market studies, business plans, computer
software and programs (including object code and source code), computer software
and database technologies, systems, structures, and architectures (and related
formulae, compositions, processes, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and information, any other
confidential or proprietary information or data), and any other information,
however documented, that is a trade secret within the meaning of any applicable
federal or state laws; and
(b) information
concerning the business and affairs of the Employer, its Parent, the Company
as
predecessor to the Employer or any of their affiliates (which includes but
is
not limited to historical financial statements, financial projections and
budgets, historical and projected sales, capital spending budgets and plans,
the
names and backgrounds of key personnel, personnel training and techniques
and
materials, interconnect agreements, supply sources, marketing, production
or
merchandising systems or plans), however documented; and
(c) notes,
analysis, compilations, studies, summaries, and other material prepared by
or
for the Employer, its Parent, the Company as predecessor to the Employer
or any
of their affiliates containing or based, in whole or in part, on any information
included in the foregoing.
"Effective
Date"--the
date stated in the first paragraph of the Agreement.
"Executive
Invention"--any
idea, invention, technique, modification, process, or improvement (whether
patentable or not), any industrial design (whether registerable or not),
any
mask work, however fixed or encoded, that is suitable to be fixed, embedded
or
programmed in a semiconductor product (whether recordable or not), and any
work
of authorship (whether or not copyright protection may be obtained for it)
created, conceived, or developed by the Executive, either solely or in
conjunction with others, during the Employment Period with Employer or its
predecessor, the Company, or a period that includes a portion of the Employment
Period, that relates in any way to, or is useful in any manner in, the business
then being conducted or proposed to be conducted by the Employer, and any
such
item created by the Executive, either solely or in conjunction with others,
following termination of the Executive's employment with the Employer, that
is
based upon or uses Confidential Information.
"Employment
Period"--the
term of the Executive's employment under this Agreement, and as used herein
the
term "Employment Year" means each twelve month period occurring during the
employment period and "Employment Year 1" shall mean the first twelve months
of
employment from the Effective Date and "Employment Year 2" shall mean the
12
month period following Employment Year 1 and "Employment Year 3" shall mean
the
12 month period following Employment Year 2.
"For
cause"--as
defined in Section 6.2.
"For
good reason"--as
defined in Section 6.3.
"Parent
Common Stock"
shall
mean shares of the common stock of Parent.
"Person"--any
individual, corporation (including any non-profit corporation), general or
limited partnership, limited liability company, joint venture, estate, trust,
association, organization, or governmental body.
"Post-Employment
Period"--as
defined in Section 8.2.
"Proprietary
Items"--as
defined in Section 7.2(a)(iv).
"Salary"--as
defined in Section 3.1(a).
11. EMPLOYMENT
TERMS AND DUTIES
11.1 EMPLOYMENT
The
Employer hereby employs the Executive, and the Executive hereby accepts
employment by the Employer, upon the terms and conditions set forth in this
Agreement.
11.2 TERM
Subject
to the provisions of Section 6, the term of the Executive's employment under
this Agreement will be three years, beginning on the Effective Date and ending
on the third anniversary of the Effective Date.
11.3 DUTIES
The
Executive will have such duties as are assigned or delegated to the Executive
by
the President, and will initially serve as Vice President - Information Systems
and Technology, of Operations of the Employer. The Executive will devote
his
entire business time, attention, skill, and energy exclusively to the business
of the Employer, will use his best efforts to promote the success of the
Employer's business, and will cooperate fully with the President in the
advancement of the best interests of the Employer. If the Executive is elected
as a director of the Employer or as a director or officer of any of its
affiliates, the Executive will fulfill his duties as such director or officer
without additional compensation. The Executive’s duties shall be commensurate
with his title. Executive shall report directly to the President of
Employer.
12. COMPENSATION
12.1 BASIC
COMPENSATION
(a) Salary.
The
Executive will be paid an annual salary of $132,000.00 for Employment Year
1;
$135,960.00 for Employment Year 2 and $140,039.00 for Employment Year 3 (the
"Salary"), which will be payable in equal periodic installments according
to the
Employer's customary payroll practices, but no less frequently than monthly,
and
shall be subject to all applicable withholding and other applicable taxes
as
required by law.
(b) Benefits.
The
Executive will, during the Employment Period, be permitted to participate
in
such life insurance, hospitalization, major medical, and other Executive
benefit
plans of the Employer that may be in effect from time to time, to the extent
the
Executive is eligible under the terms of those plans (collectively, the
"Benefits"). The Executive shall be entitled to car and cell phone allowances
at
least equal in value to those previously provided to Executive by the
Company.
12.2 INCENTIVE
COMPENSATION
Currently
the Company does not have an Executive Incentive Compensation Plan; however,
the
Executive will participate in such plan when developed.
12.3 PARENT
STOCK OPTION COMPENSATION
On
the
first business day of Employment Year 1, the Executive shall be granted and
issued options for 200,000 shares of restricted Parent Common Stock (25,000
of
which shall be attributable to Employment Year 1, 50,000 of which shall be
attributable to Employment Year 2, and 125,000 of which shall be attributable
to
Employment Year 3) (the "Options"). The Options shall vest as follows: Options
for 25,000 shares of restricted Parent Stock shall vest 3 years from the
grant
date, options for 50,000 shares of restricted Parent Stock shall vest 4 years
from the grant date and options for 125,000 shares of restricted Parent Stock
shall vest 5 years from the grant date. The stock options shall provide for
a
five (5) year term from the vesting date, a strike price that is 10% above
the
closing price of the Parent Common Stock on the date of issue of the Options.
The parties agree that the terms “Options” and “Parent Stock Options” as used in
this Agreement include only those Options granted pursuant to this
Agreement.
13. FACILITIES
AND EXPENSES
The
Employer will furnish the Executive office space, equipment, supplies, and
such
other facilities and personnel as the Employer deems necessary or appropriate
for the performance of the Executive's duties under this Agreement.
14. VACATIONS
AND HOLIDAYS
The
Executive will be entitled to three weeks' paid vacation each Employment
Year in
accordance with the vacation policies of the Employer in effect for its
executive officers from time to time. Vacation must be taken by the Executive
at
such time or times as approved by the Chairman of the Board or President.
The
Executive will also be entitled to the paid holidays set forth in the Employer's
policies. Up to five vacation days during any Employment Year that are not
used
by the Executive during such Employment Year may be used in any subsequent
Employment Year.
15. TERMINATION
15.1 EVENTS
OF
TERMINATION
The
Employment Period, the Executive's Basic Compensation, Incentive Compensation,
any Parent Stock Options which have not vested, and Parent Stock Warrants
which
have not vested and any and all other rights of the Executive under this
Agreement or otherwise as an Executive of the Employer will terminate (except
as
otherwise provided in this Section 6):
(a) upon
the
death of the Executive;
(b) upon
termination by Employer for cause (as defined in Section 6.2), immediately
upon
notice from the Employer to the Executive, or at such later time as such
notice
may specify; or
(c) upon
termination by Executive for good reason (as defined in Section 6.3) upon
not
less than thirty days' prior notice from the Executive to the
Employer.
(d) upon
termination of employment by Executive for any reason other than for good
reason
(as defined in Section 6.3).
15.2 DEFINITION
OF "FOR CAUSE"
For
purposes of Section 6.1, the phrase "for cause" means: (a) the Executive's
breach of this Agreement which remains uncorrected for 30 days following
notice
from the Employer; (b) the Executive's failure to adhere to any written
Employer policy if the Executive has been given a reasonable opportunity
to
comply with such policy or cure his failure to comply (which reasonable
opportunity must be granted during the ten-day period preceding termination
of
this Agreement); (c) the appropriation (or attempted appropriation)
of a
material business opportunity of the Employer, including attempting to secure
or
securing any personal profit in connection with any transaction entered into
on
behalf of the Employer; (d) the misappropriation (or attempted
misappropriation) of any of the Employer's funds or property; or (e) the
conviction of, the indictment for (or its procedural equivalent), or the
entering of a guilty plea or plea of no contest with respect to, a felony,
the
equivalent thereof, or any other crime with respect to which imprisonment
is a
possible punishment.
15.3 DEFINITION
OF "FOR GOOD REASON"
For
purposes of Section 6.1, the phrase "for good reason" means any of the
following: (a) The Employer's material breach of this Agreement which
is
not cured within 30 days from the date of notice from the Executive;
(b) the requirement by the Employer that the Executive be based anywhere
other than in the State of Louisiana without the Executive's consent; or
(c) the
Employer alters Executive’s duties such that he is stripped of all authority
over the information systems of the Employer.
15.4 TERMINATION
PAY
Effective
upon the termination of this Agreement, the Employer will be obligated to
pay
the Executive (or, in the event of his death, his designated beneficiary
as
defined below) only such compensation as is provided in this Section 6.4,
and in
lieu of all other amounts and in settlement and complete release of all claims
the Executive may have against the Employer arising from the employment
relationship. For purposes of this Section 6.4, the Executive's designated
beneficiary will be such individual beneficiary or trust, located at such
address, as the Executive may designate by notice to the Employer from time
to
time or, if the Executive fails to give notice to the Employer of such a
beneficiary, the Executive's estate. Notwithstanding the preceding sentence,
the
Employer will have no duty, in any circumstances, to attempt to open an estate
on behalf of the Executive, to determine whether any beneficiary designated
by
the Executive is alive or to ascertain the address of any such beneficiary,
to
determine the existence of any trust, to determine whether any person or
entity
purporting to act as the Executive's personal representative (or the trustee
of
a trust established by the Executive) is duly authorized to act in that
capacity, or to locate or attempt to locate any beneficiary, personal
representative, or trustee.
(a) Termination
by the Executive for Good Reason.
If the
Executive terminates
this Agreement for good reason, the Employer will pay the Executive the
Executive's Salary for the remainder of the term of this Agreement (the
"Remainder Term") as and when such salary would otherwise become due and
payable. The Executive shall not have the right to any Incentive Compensation
as
provided in Section 3.2 for the Employment Year during which such termination
occurs or any subsequent Employment Year. The Executive shall have the right
to
retain the options attributable as provided in Section 3.3 hereof for the
Employment Year during which such termination occurs and any prior year and
such
options shall vest immediately, but the Executive shall not be entitled to
retain the options attributable to any Employment Year subsequent to the
Employment Year during which such termination occurred and such options shall
expire.
(b) Termination
by the Employer for Cause or Termination by Executive without Good
Reason.
If the
Employer terminates this Agreement for cause or the Executive terminates
his
employment for any reason other than for good reason (as defined in Section
6.3), the Executive will be entitled to receive his Salary only through the
date
such termination is effective, and will not be entitled to any Incentive
Compensation, Parent Stock Options or Parent Stock Warrants for the Employment
Year during which such termination occurs or any subsequent Employment Year
and
any Parent Stock Options granted to the Executive pursuant to Section 3.3
that
have not vested.
(c) Termination
upon Death.
If this
Agreement is terminated because of the Executive's death, the Executive will
be
entitled to receive his Salary through the end of the calendar month in which
his death occurs, but will not be entitled to receive any Incentive Compensation
or Parent Stock Options pursuant to Section 3.3 for the Employment Year during
which his death occurs or any subsequent Employment Year and any Parent Stock
Options granted to the Executive pursuant to Section 3.3 that have not vested
shall be cancelled except that any Parent Stock Options attributable to the
Employment Year of Executive’s death or any prior Employment Year shall be
deemed to have vested immediately prior to Executive’s death and may be
exercised by Executive’s heirs on the same terms and conditions that would have
applied to Executive.
(d) Benefits.
The
Executive's accrual of, or participation in plans providing for, the Benefits
will cease at the effective date of the termination of this Agreement, and
the
Executive will be entitled to accrued Benefits pursuant to such plans only
as
provided in such plans. The Executive will only receive, as part of his
termination pay pursuant to this Section 6, any payment or other
compensation for any vacation, holiday, sick leave, or other leave unused
on the
date the notice of termination is given under this Agreement if the termination
is due to the death of Executive or termination by the Executive for Good
Reason
per Section 6.3.
15.5 TERMINATION
DAMAGES PAYABLE BY EXECUTIVE
The
Executive and the Employer agree that it is impossible to determine with
any
reasonable accuracy the amount of the prospective damages to the Employer
if the
Executive's employment is terminated for any reason other than death or for
good
reason (as defined in Section 6.3) by the Executive (such termination referred
to in this paragraph as "Executive Termination Without Cause"). In the event
of
any Executive Termination Without Cause other than a Termination by the
Executive due to a disability that leaves him unable to work, the Executive
agrees to pay as liquidated damages to the Employer an amount equal as
follows:
(a) If
the
Executive Termination Without Cause occurs during Employment Year 1, then
the
Executive shall immediately pay to the Employer an amount equal to $225,000.00.
(b) If
the
Executive Termination Without Cause occurs during Employment Year 2, then
the
Executive shall immediately pay to the Employer an amount equal to
$150,000.00.
(c) If
the
Executive Termination Without Cause occurs during Employment Year 3, then
the
Executive shall immediately pay to the Employer an amount equal to
$75,000.000.
16. NON-DISCLOSURE
COVENANT; EXECUTIVE INVENTIONS; NON-COMPETE
16.1 ACKNOWLEDGMENTS
BY THE EXECUTIVE
The
Executive acknowledges that (a) during the Employment Period and his
prior
employment period with the Employer's predecessor, the Company, and as a
part of
his employment with the Employer and its predecessor, the Company, the Executive
was and will continue to be afforded access to Confidential Information;
(b) public disclosure of such Confidential Information could have
an
adverse effect on the Employer and its business; (c) because the Executive
possesses substantial technical expertise and skill with respect to the
Employer's business, the Employer desires to obtain exclusive ownership of
each
Executive Invention, and the Employer will be at a substantial competitive
disadvantage if it fails to acquire exclusive ownership of each Executive
Invention; (d) the Parent and Employer have each required that the
Executive make the covenants in this Section 7 as a condition to the merger
pursuant to the Merger Agreement; and (e) the provisions of this Section
7
are reasonable and necessary to prevent the improper use or disclosure of
Confidential Information and to provide the Employer with exclusive ownership
of
all Executive Inventions.
16.2 AGREEMENTS
OF THE EXECUTIVE
In
consideration of the compensation and benefits to be paid or provided to
the
Executive by the Employer under this Agreement, the Executive covenants as
follows:
(a) Confidentiality.
|
(i)
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During
and following the Employment Period, the Executive will hold in
confidence
the Confidential Information and will not disclose it to any person
except
with the specific prior written consent of the Employer or except
as
otherwise expressly permitted by the terms of this
Agreement.
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(ii)
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Any
trade secrets of the Employer will be entitled to all of the protections
and benefits under any applicable federal or state trade secret
law and
any other applicable law. If any information that the Employer
deems to be
a trade secret is found by a court of competent jurisdiction not
to be a
trade secret for purposes of this Agreement, such information will,
nevertheless, be considered Confidential Information for purposes
of this
Agreement. The Executive hereby waives any requirement that the
Employer
submits proof of the economic value of any trade secret or posts
a bond or
other security.
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(iii)
|
None
of the foregoing obligations and restrictions applies to any part
of the
Confidential Information that the Executive demonstrates was or
became
generally available to the public other than as a result of a disclosure
by the Executive.
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(iv)
|
The
Executive will not remove from the Employer's premises (except
to the
extent such removal is for purposes of the performance of the Executive's
duties at home or while traveling, or except as otherwise specifically
authorized by the Employer) any document, record, notebook, plan,
model,
component, device, or computer software or code, whether embodied
in a
disk or in any other form (collectively, the "Proprietary Items").
The
Executive recognizes that, as between the Employer and the Executive,
all
of the Proprietary Items, whether or not developed by the Executive,
are
the exclusive property of the Employer. Upon termination of this
Agreement
by either party, or upon the request of the Employer during the
Employment
Period, the Executive will return to the Employer all of the Proprietary
Items in the Executive's possession or subject to the Executive's
control,
and the Executive shall not retain any copies, abstracts, sketches,
or
other physical embodiment of any of the Proprietary
Items.
|
(b) Executive
Inventions.
Each
Executive Invention will belong exclusively to the Employer. The Executive
acknowledges that all of the Executive's writing, works of authorship, and
other
Executive Inventions are works made for hire and the property of the Employer,
including any copyrights, patents, or other intellectual property rights
pertaining thereto. If it is determined that any such works are not works
made
for hire, the Executive hereby assigns to the Employer all of the Executive's
right, title, and interest, including all rights of copyright, patent, and
other
intellectual property rights, to or in such Executive Inventions. The Executive
covenants that he will promptly:
|
(i)
|
disclose
to the Employer in writing any Executive
Invention;
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(ii)
|
assign
to the Employer or to a party designated by the Employer, at the
Employer's request and without additional compensation, all of
the
Executive's right to the Executive Invention for the United States
and all
foreign jurisdictions;
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(iii)
|
execute
and deliver to the Employer such applications, assignments, and
other
documents as the Employer may request in order to apply for and
obtain
patents or other registrations with respect to any Executive Invention
in
the United States and any foreign
jurisdictions;
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(iv)
|
sign
all other papers necessary to carry out the above obligations;
and
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(v)
|
give
testimony and render any other assistance in support of the Employer's
rights to any Executive Invention.
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16.3 DISPUTES
OR CONTROVERSIES
The
Executive recognizes that should a dispute or controversy arising from or
relating to this Agreement be submitted for adjudication to any court,
arbitration panel, or other third party, the preservation of the secrecy
of
Confidential Information may be jeopardized. All pleadings, documents,
testimony, and records relating to any such adjudication will be maintained
in
secrecy and will be available for inspection by the Employer, the Executive,
and
their respective attorneys and experts, who will agree, in advance and in
writing, to receive and maintain all such information in secrecy, except
as may
be limited by them in writing.
17. NON-COMPETITION
AND NON-INTERFERENCE
17.1 ACKNOWLEDGMENTS
BY THE EXECUTIVE
The
Executive acknowledges that: (a) the services to be performed by him
under
this Agreement are of a special, unique, unusual, extraordinary, and
intellectual character; (b) the Employer's business is currently regional
in scope and its products are marketed or may be marketed throughout the
parishes and counties indicated on Exhibit “A” hereto (the "Restricted Area");
(c) the Employer competes with other businesses that are or could
be
located in any part of the Restricted Area; (d) the Parent and Employer
have each required that the Executive make the covenants set forth in this
Section 8 as a condition to the merger under the Merger Agreement; and
(e) the provisions of this Section 8 are reasonable and necessary
to
protect the Employer's business.
17.2 COVENANTS
OF THE EXECUTIVE
In
consideration of the acknowledgments by the Executive, and in consideration
of
the compensation and benefits to be paid or provided to the Executive by
the
Employer, the Executive covenants that he will not, directly or
indirectly:
(a) during
the Employment Period, except in the course of his employment hereunder,
and
during the Post-Employment Period, directly or indirectly, either for himself
or
for any partnership, limited liability company, individual, corporation,
joint
venture or any other entity or person "participate in" (as defined below)
any
business (including, without limitation, any division, group or franchise
of a
larger organization) which engages in the "Internet Services and
Telecommunications Business" in the Restricted Area. For purposes of this
Agreement, "Internet Services and Telecommunications
Business"
shall
mean the business of providing any type of telecommunication services or
internet access services to any person or customer within the Restricted
Area,
including, without limitation, local, long distance, broadband, dial up data
services, wireless, DSL, Voice-over-Internet Protocol (VoIP) and any other
service or product being offered or provided by the Employer or the Parent
or
any of their respective affiliates. For purposes of this Agreement, the term
"participate in" shall include, without limitation, having any direct or
indirect interest in any corporation, partnership, limited liability company,
joint venture or other entity, whether as a sole proprietor, owner, shareholder,
partner, member, manager, joint venturer, creditor or otherwise, or rendering
any direct or indirect service or assistance to any individual corporation,
partnership, limited liability company, joint venture and other business
entity
(whether as a director, officer, manager, supervisor, Executive, agent,
consultant or otherwise). Notwithstanding the foregoing, nothing in this
Section
8.2(a) shall prohibit Executive from owning not more than five percent (5%)
of
the debt or equity securities of a publicly traded corporation which may
compete
with the Employer or the Parent.
(b) whether
for the Executive's own account or for the account of any other person, at
any
time during the Employment Period and the Post-Employment Period, solicit
business of the same or similar type being carried on by the Employer or
its
Parent or any of their affiliates, from any person known by the Executive
to be
a customer of the Employer or its Parent or any of their affiliates, whether
or
not the Executive had personal contact with such person during and by reason
of
the Executive's employment with the Employer;
(c) whether
for the Executive's own account or the account of any other person (i) at
any time during the Employment Period and the Post-Employment Period, solicit,
employ, or otherwise engage as an Executive, independent contractor, or
otherwise, any person who is or was an Executive of the Employer at any time
during the Employment Period or in the period of employment with the Employer's
predecessor or in any manner induce or attempt to induce any Executive of
the
Employer to terminate his employment with the Employer; or (ii) at
any time
during the Employment Period and for the Post-Employment Period, interfere
with
the Employer's relationship with any person, including any person who at
any
time during the Employment Period or the period of employment with the
Employer's predecessor was an Executive, contractor, supplier, or customer
of
the Employer or its predecessor; or
(d) at
any
time during or after the Employment Period, disparage the Employer or its
Parent
or any of their affiliates or any of their respective shareholders, directors,
officers, Executives, or agents.
For
purposes of this Section 8.2, the term "Post-Employment Period" means the
two
(2) year period beginning on the date of termination of the Executive's
employment with the Employer.
If
any
covenant in this Section 8.2 is held to be unreasonable, arbitrary, or against
public policy, such covenant will be considered to be divisible with respect
to
scope, time, and geographic area, and such lesser scope, time, or geographic
area, or all of them, as a court of competent jurisdiction may determine
to be
reasonable, not arbitrary, and not against public policy, will be effective,
binding, and enforceable against the Executive.
(e) If
at any
time during the Employment Period and the Post-Employment Period, Executive
desires to participate in an activity that he believes might be prohibited
by
this Section 8.2, such person may request in writing (a "Clarification
Request")
a
determination by Employer as to whether such proposed activity would violate
this Section 8.2. Employer shall respond in writing to such Clarification
Request (a "Clarification
Response")
within
thirty (30) days of receipt thereof.
18. GENERAL
PROVISIONS
18.1 INJUNCTIVE
RELIEF AND ADDITIONAL REMEDY
The
Executive acknowledges that the injury that would be suffered by the Employer
as
a result of a breach of the provisions of this Agreement (including any
provision of Sections 7 and 8) would be irreparable and that an award of
monetary damages to the Employer for such a breach would be an inadequate
remedy. Consequently, the Employer will have the right, in addition to any
other
rights it may have, to obtain injunctive relief to restrain any breach or
threatened breach or otherwise to specifically enforce any provision of this
Agreement, and the Employer will not be obligated to post bond or other security
in seeking such relief. Without limiting the Employer's rights under this
Section 9 or any other remedies of the Employer, if the Executive breaches
any
of the provisions of Section 7 or 8, the Employer will have the right to
cease
making any payments otherwise due to the Executive under this
Agreement.
18.2 COVENANTS
OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT COVENANTS
The
covenants by the Executive in Sections 7 and 8 are essential elements of
this
Agreement, and without the Executive's agreement to comply with such covenants,
the Parent and Employer would not have consummated the merger under the Merger
Agreement and the Employer would not have entered into this Agreement or
employed or continued the employment of the Executive. The Employer and the
Executive have independently consulted their respective counsel and have
been
advised in all respects concerning the reasonableness and propriety of such
covenants, with specific regard to the nature of the business conducted by
the
Employer. Executive agrees to notify Employer if Executive believes that
Employer or Parent have breached this Agreement in such a manner as to excuse
Executive from Executive’s obligations pursuant to the covenants of Sections 7
and 8, at least ten days prior to Executive taking any action inconsistent
with
such covenants.
If
the
Executive's employment hereunder expires or is terminated, this Agreement
will
continue in full force and effect as is necessary or appropriate to enforce
the
covenants and agreements of the Executive in Sections 7 and 8.
18.3 REPRESENTATIONS
AND WARRANTIES BY THE EXECUTIVE
(a) The
Executive represents and warrants to the Employer that the execution and
delivery by the Executive of this Agreement do not, and the performance by
the
Executive of the Executive's obligations hereunder will not, with or without
the
giving of notice or the passage of time, or both: (a) violate any
judgment,
writ, injunction, or order of any court, arbitrator, or governmental agency
applicable to the Executive; or (b) conflict with, result in the breach
of
any provisions of or the termination of, or constitute a default under, any
agreement to which the Executive is a party or by which the Executive is
or may
be bound.
(b) The
Employer represents and warrants to the Executive that the execution and
delivery by the Employer of this Agreement do not, and the performance by
the
Employer of the Employer's obligations hereunder will not, with or without
the
giving of notice or the passage of time, or both: (a) violate any
judgment,
writ, injunction, or order of any court, arbitrator, or governmental agency
applicable to the Employer; or (b) conflict with, result in the breach
of
any provisions of or the termination of, or constitute a default under, any
agreement to which the Employer is a party or by which the Employer is or
may be
bound.
18.4 OBLIGATIONS
CONTINGENT ON PERFORMANCE
The
obligations of the Employer hereunder, including its obligation to pay the
compensation provided for herein, are contingent upon the Executive's
performance of the Executive's obligations hereunder, and vice
versa.
18.5 WAIVER
The
rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by either party in exercising
any
right, power, or privilege under this Agreement will operate as a waiver
of such
right, power, or privilege, and no single or partial exercise of any such
right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege.
To
the maximum extent permitted by applicable law, (a) no claim or right
arising out of this Agreement can be discharged by one party, in whole or
in
part, by a waiver or renunciation of the claim or right unless in writing
signed
by the other party; (b) no waiver that may be given by a party will
be
applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver
of
any obligation of such party or of the right of the party giving such notice
or
demand to take further action without notice or demand as provided in this
Agreement.
18.6 BINDING
EFFECT; DELEGATION OF DUTIES PROHIBITED
This
Agreement shall inure to the benefit of, and shall be binding upon, the parties
hereto and their respective successors, assigns, heirs, and legal
representatives, including any entity with which the Employer may merge or
consolidate or to which all or substantially all of its assets may be
transferred. The duties and covenants of the Executive under this Agreement,
being personal, may not be delegated.
18.7 NOTICES
All
notices, consents, waivers, and other communications under this Agreement
must
be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by facsimile
(with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee,
if
sent by a nationally recognized overnight delivery service (receipt requested),
in each case to the appropriate addresses and facsimile numbers set forth
below
(or to such other addresses and facsimile numbers as a party may designate
by
notice to the other parties):
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If
to Employer:
|
|
|
XFone,
Inc.
|
Xfone.USA,
Inc.
|
|
Britannia
House
|
0000
Xxxxxxxx Xxxxx
|
|
000
Xxxx Xxxx
|
Xxxxx
000
|
|
Xxxxxx,
X000XX
|
Xxxxxxx,
XX 00000
|
|
Xxxxxx
Xxxxxxx
|
XXX
|
|
Attention: Xxx
Xxxxxxxxx
|
Attention:
Xxxx Xxxxxxx
|
|
Telephone: x00
000-000-0000
|
Telephone:
000-000-0000
|
|
Facsimile: x00
000-000-0000
|
Facsimile:
000-000-0000
|
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Email: xxx@xxxxx.xxx
|
Email:
xxxxxxxx@xxxxxxx.xxx
|
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with
a copy to:
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The
Oberon Group, LLC
|
|
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00
Xxxxxxx Xxx., 0xx
Xxxxx
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Xxx
Xxxx, XX 00000
|
|
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Attention: Xxxx
Xxxxxxxxxx
|
|
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Telephone: 000-000-0000
|
|
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Facsimile: 000-000-0000
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|
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Email: xxxx@xxxxxxxxxxx.xxx
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Xxxxxxx
Xxxxxx Winter & Stennis, P.A.
|
|
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000
Xxxxx Xxxxx Xxxxxx (39202)
|
|
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P.
O. Xxx 000
|
|
|
Xxxxxxx,
XX 00000-0000
|
|
|
Attention: Xxxx
X. Xxxxxx
|
|
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Telephone: 000-000-0000
|
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Facsimile: 601-949-4804
|
|
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Email: xxxxxxx@xxxxxxxxxxxxx.xxx
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If
to the Executive:
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|
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Xxxxx
Xxxxxx
|
|
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000
X. Xxxxxx Xxxxxx
|
|
|
Xxxxxxx,
Xxxxxxxxx 00000
|
|
|
Telephone:
(H)
000-000-0000
|
|
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(B)
000-000-0000
|
|
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Facsimile:
000-000-0000
|
|
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Email: xxxxxx@X-00.xxx
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With
a copy to:
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|
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Xxxxx
Xxxxx
|
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Baker,
Donelson, Bearman, Xxxxxxxx & Xxxxxxxxx, P.C.
|
|
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000
Xx. Xxxxxxx Xxx., Xxxxx 0000
|
|
|
Xxx
Xxxxxxx, Xxxxxxxxx 00000
|
|
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Telephone: (000)
000-0000
|
|
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Facsimile: (000)
000-0000
|
|
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Email: xxxxxx@xxxxxxxxxxxxx.xxx
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18.8 ENTIRE
AGREEMENT; AMENDMENTS
This
Agreement, the Merger Agreement, and the documents executed in connection
with
the Merger Agreement, contain the entire agreement between the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, between the parties hereto with respect
to the
subject matter hereof. This Agreement may not be amended orally, but only
by an
agreement in writing signed by the parties hereto.
18.9 GOVERNING
LAW
This
Agreement will be governed by the laws of the State of Louisiana without
regard
to conflicts of laws principles.
18.10 JURISDICTION
Any
action or proceeding seeking to enforce any provision of, or based on any
right
arising out of, this Agreement may be brought against either of the parties
in
the courts of the State of Louisiana, or, if it has or can acquire jurisdiction,
in any of the United States District Courts in Louisiana, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection
to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on either party anywhere in the
world.
18.11 SECTION
HEADINGS, CONSTRUCTION
The
headings of Sections in this Agreement are provided for convenience only
and
will not affect its construction or interpretation. All references to "Section"
or "Sections" refer to the corresponding Section or Sections of this Agreement
unless otherwise specified. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words
or
terms.
18.12 SEVERABILITY
If
any
provision of this Agreement is held invalid or unenforceable by any court
of
competent jurisdiction, the other provisions of this Agreement will remain
in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect
to the
extent not held invalid or unenforceable.
18.13 COUNTERPARTS
This
Agreement may be executed in one or more counterparts, each of which will
be
deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
18.14 WAIVER
OF
JURY TRIAL
THE
PARTIES HERETO HEREBY WAIVE A JURY TRIAL IN ANY LITIGATION WITH RESPECT TO
THIS
AGREEMENT.
18.15 IRREVOCABLE
PROXY FROM EXECUTIVE
As
a
condition to the employment of the Executive, the Executive shall have entered
into an Irrevocable Proxy in form reasonably satisfactory to Parent in which
the
Executive agrees to irrevocably appoint Xxx Xxxxxxxxx or such other party
designated by Parent as proxy to vote the Executive's Parent Common Stock
or any
Parent Common Stock issued to or acquired hereafter by the Executive whether
from the exercise of any of the Parent Stock Warrants or any other stock
options
or warrants granted hereafter or otherwise until such time as the Executive
sells such Parent Common Stock, subject to the condition that if at any time,
Xxx Xxxxxxxxx and Xxxxxxx Xxxxxx together command less than 50% of the voting
rights of Parent, then such proxies shall automatically terminate.
IN
WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of
the date above first written above.
EMPLOYER: EXECUTIVE:
XFone
USA, Inc.
By:
Xxxx
Xxxxxxx,
President/CEO Xxxxx
Xxxxxx, Individually
EXHIBIT
“A”
Restricted
Area
Louisiana
Acadia
Parish, Xxxxx Xxxxxx, Ascension Parish, Assumption Parish, Avoyelles Parish,
Xxxxxxxxxx Parish, Bienville Parish, Bossier Parish, Caddo Parish, Calcasieu
Parish, Xxxxxxxx Parish, Cameron Parish, Catahoula Parish, Claiborne Parish,
Concordia Parish, De Soto Parish, East Baton Rouge Parish, East Xxxxxxx Xxxxxx,
East Xxxxxxxxx Xxxxxx, Xxxxxxxxxx Xxxxxx, Xxxxxxxx Xxxxxx, Xxxxx Xxxxxx,
Iberia
Parish, Iberville Parish, Xxxxxxx Parish, Xxxxxxxxx Xxxxxx, Xxxxxxxxx Xxxxx
Parish, La Salle Parish, Lafayette Parish, Lafourche Parish, Lincoln Parish,
Xxxxxxxxxx Parish, Madison Parish, Xxxxxxxxx Parish, Natchitoches Parish,
Orleans Parish, Ouachita Parish, Plaquemines Parish, Pointe Coupee Parish,
Rapides Parish, Red River Parish, Richland Parish, Xxxxxx Xxxxxx, St. Xxxxxxx
Xxxxxx, St. Xxxxxxx Xxxxxx, St. Xxxxxx Xxxxxx, St. Xxxxx Xxxxxx, St. Xxxx
the
Baptist Parish, St. Landry Parish, St. Xxxxxx Xxxxxx, St. Xxxx Xxxxxx, St.
Tammany Parish, Tangipahoa Parish, Tensas Parish, Terrebonne Parish, Union
Parish, Vermilion Parish, Xxxxxx Xxxxxx, Washington Parish, Webster Parish,
West
Baton Rouge Parish, West Xxxxxxx Xxxxxx, West Xxxxxxxxx Xxxxxx, Xxxx
Xxxxxx
Mississippi
Xxxxx
County, Xxxxxx County, Amite County, Attala County, Xxxxxx County, Bolivar
County, Xxxxxxx County, Xxxxxxx County, Chickasaw County, Choctaw County,
Claiborne County, Xxxxxx County, Clay County, Coahoma County, Copiah County,
Xxxxxxxxx County, DeSoto County, Xxxxxxx County, Franklin County, Xxxxxx
County,
Xxxxxx County, Grenada County, Xxxxxxx County, Xxxxxxxx County, Xxxxx County,
Xxxxxx County, Xxxxxxxxx County, Issaquena County, Itawamba County, Xxxxxxx
County, Jasper County, Jefferson County, Xxxxxxxxx Xxxxx County, Xxxxx County,
Xxxxxx County, Lafayette County, Xxxxx County, Lauderdale County, Xxxxxxxx
County, Xxxxx County, Xxx County, Xxxxxxx County, Lincoln County, Lowndes
County, Madison County, Xxxxxx County, Xxxxxxxx County, Monroe County,
Xxxxxxxxxx County, Neshoba County, Xxxxxx County, Noxubee County, Oktibbeha
County, Panola County, Pearl River County, Perry County, Pike County, Pontotoc
County, Xxxxxxxx County, Quitman County, Xxxxxx County, Xxxxx County, Xxxxxxx
County, Xxxxxxx County, Xxxxx County, Stone County, Sunflower County,
Tallahatchie County, Xxxx County, Tippah County, Tishomingo County, Tunica
County, Union County, Xxxxxxxx County, Xxxxxx County, Washington County,
Xxxxx
County, Xxxxxxx County, Xxxxxxxxx County, Winston County, Yalobusha County,
Yazoo County
EXHIBIT
"E"
Form
of Release
RELEASE
This
Release (this "Release") is entered into by the undersigned officers and
directors of the Company (as defined herein) (the "Officers and Directors"),
effective as of the _____ day of _______________, 2005 in connection with
the
Transaction contemplated by the terms and provisions of that certain Agreement
and Plan of Merger dated August ___, 2005 (the "Merger Agreement") I-55 Internet
Services, Inc., a Louisiana corporation (the "Company"), XFone, Inc., a Nevada
corporation (the "Parent"), XFone USA, Inc., a Mississippi corporation (the
"Subsidiary") and Xxxxxx XxXxxxxxxx and Xxxxx Xxxxxx.
WHEREAS,
execution of this Release by each of the Officers and Directors of the Company
is a condition precedent to the Closing of the Merger contemplated by the
Agreement and Plan of Merger and as such is a material inducement to the
Parent
and the Subsidiary in order for them to enter into the Merger; and
WHEREAS,
the Parent and the Subsidiary would not have closed the Merger without the
execution of this Release by each and everyone of the undersigned Officers
and
Directors; and
WHEREAS,
each Officer and Director has agreed to execute this Release.
NOW,
THEREFORE, as additional consideration for the Merger and the covenants,
representations, agreements and undertakings contained herein and other good
and
valuable consideration, the receipt and sufficiency of all of which is hereby
acknowledged and intending to be legally bound, the undersigned parties do
hereby severally agree as follows:
20. Recitals.
Each of
the above referenced recitals is true and correct and incorporated into this
Release by this reference.
21. Merger
Agreement.
Each of
the undersigned hereby acknowledges receipt of a copy of the Merger Agreement
and any amendments thereto. In the event of a conflict between the terms
of this
Release and the terms of the Merger Agreement, the terms and provisions of
this
Release shall govern. All capitalized terms which are not otherwise defined
in
this Release shall have the respective meaning ascribed to such terms in
the
Merger Agreement.
22. Release
by Each Officer and Director.
Each
Officer and Director hereby severally releases and forever discharges the
Company, and each of its respective officers, directors, partners, shareholders,
members, employees and all of their successors and assigns (collectively,
"
Releasees") of and from any and all claims, causes or rights of action, demands
and damages of every kind and nature which such Officer or Director may now
have, whether known or unknown, anticipated or unanticipated and whether
accrued
or hereafter to accrue, against Releasees, caused by or arising out of or
in any
way related to the following: (i) the business, affairs, actions or omissions
of
the Company and/or the Officers or Directors or any other employee or
independent contractor of the Company through the date of Closing under the
Merger Agreement; (ii) such Officer's or Director's direct or beneficial
ownership or interests in the Company, if any; (iii) such Officer's or
Director's status as an Officer or Director or shareholder of the Company;
(iv)
any action or omission by any of the Officers or Directors of the Company,
or
any other employees or independent contractors of the Company through the
date
of Closing under the Merger Agreement; (v) any claims of such Officer or
Director arising out of or relating in any manner to any prior business
relationship or service of or with respect to the Company through the date
of
Closing under the Merger Agreement, and (vi) any and all agreements, events
or
occurrences by, between or among any Officer or Director and/or the Company
prior to Closing or relating in any manner to this Merger, including, without
limitation, any tax analysis with respect to the transactions contemplated
by
the Merger Agreement.
23. Compromise.
Each
Officer and Director agrees that this settlement is a compromise of doubtful
and
disputed claims through the date of Closing under the Merger Agreement, and
that
the agreement to pay the consideration recited herein is not to be construed
as
an admission of any liability whatsoever by Releasees and that Releasees
expressly deny any such liability.
24. Scope
of Release.
Each
Officer and Director agrees that the consideration for this release was paid
to
secure full, complete, and final discharge of Releasees from any and all
claims,
demands, actions, or causes of action that any of the undersigned Officers
or
Directors of the Company may have against the Releasees as of the date hereof
with respect to matters hereby released as set forth in paragraph 3 hereof,
and
each of the Officers or Directors of the Company hereby agree that such claims,
demands, actions, or causes of action are wholly and forever satisfied and
extinguished.
25. Covenant
Not to Xxx.
Each
Officer and Director will forever refrain and desist from instituting,
prosecuting, or asserting against Releasees, or any of them, any further
claim,
demand, action, cause of action or suit of any kind or nature, either directly
or indirectly, on account of matters hereby releases as set forth in paragraph
3
hereof.
26. No
Prior Assignment.
Each
Officer and Director specifically acknowledges, covenants, represents and
warrants that there has been no assignment of any right or claim released
hereby
and that each Officer and Director will, severally, as with respect to actions
by any such Officer and Director defend and hold harmless Releasees with
respect
to any matters hereby released.
27. Authority.
Each
Officer and Director represents and warrants that each are fully competent
and
authorized to execute this Release, and that upon execution this Release
will be
valid and binding upon each of them. Each Officer and Director represents
and
warrants that the undersigned constitute all of the Directors and Officers
of
the Company. Releasees
represent and warrant that they are fully competent and authorized to execute
this Release, and that upon execution this Release will be valid and binding
upon each of them.
28. Acknowledgment.
Each
Officer and Director represents and warrants that the terms of this Release
have
been read, voluntarily accepted, understood by each such Officer and Director
or
explained to each such Officer and Director by its attorney(s), and agreed
to
and approved by its attorney(s). Each Officer and Director further represents
and warrants that it has relied upon its own judgment, knowledge and belief
as
to the nature and extent of any damages which may have been suffered or
sustained, or may be sustained in the future, with regard to the items released
hereby under paragraph 3 hereof.
29. Entire
Agreement.
This
Release constitutes the entire agreement between the parties with respect
to the
releases contemplated hereby. All prior to or contemporaneous agreements,
understandings, representations, warranties and statements, oral or written
are
hereby superceded. Any alterations or additions shall be effective only if
reduced to writing, dated and signed by the party against whom the enforcement
thereof is or may be sought.
30. Waiver.
No
waiver of a breach of any of the terms, covenants or conditions of this Release
by any party shall be construed or held to be a waiver of any succeeding
or
preceding breach of the same or any other term, covenant or condition herein
contained. No waiver of any default by any party hereunder shall be implied
from
any omissions by either party to take any action on account of such default.
If
such default persists or is repeated, and no express waiver shall affect
a
default other than as specified in such waiver.
31. Severability.
If any
term, provision, covenant or condition of this Release is held to be invalid,
void or otherwise unenforceable to any extent by any court of competent
jurisdiction, the remainder of this Release shall not be affected thereby,
and
each term, provision, covenant or condition of this Release shall be valid
and
enforceable to the fullest extent permitted by law.
32. Successors.
Subject
to the restriction on assignment provided herein, all terms of this Release
shall be binding upon, inure to the benefit of, and be enforceable by the
parties hereto and their respective heirs, legal representatives, successors
and
assigns.
33. Assignment.
No
party hereto shall assign their respective rights, obligations or interest
under
this Release in any manner.
34. Headings.
The
captions and paragraph headings used in this Release are inserted for
convenience of reference only and are not intended to define, limit or affect
the interpretation or construction of any term or provision hereof.
35. Counterparts.
This
Release may be executed in multiple copies, each of which shall be deemed
an
original, but all of which shall constitute one Agreement binding on all
parties.
36. Facsimile
Signatures.
In
order to expedite the Merger contemplated herein, telecopied signatures may
be
used in place of original signatures on this Release. All parties hereto
intend
to be bound by the signatures on the telecopied document, are aware that
other
parties will rely on the telecopied signatures, and hereby waive any and
all
defenses to the enforcement of the terms of this Release based on the form
of
signature.
37. Governing
Law.
This
Release shall be governed, construed and enforced in accordance with the
laws of
the State of Louisiana.
38. Effective
Date.
The
terms and provisions of this Release shall be effective upon Closing of the
Transaction contemplated by the Merger Agreement.
IN
WITNESS WHEREOF, each Officer and Director set forth below has executed this
Release as of the Effective Date.
|
DIRECTORS:
|
OFFICERS:
|
|
Xxxxxx
XxXxxxxxxx
|
Xxxxxx
XxXxxxxxxx, President and CEO
|
|
Xxxxx
Xxxxxx, Chairman
|
|
Xxxxx
Xxxxxx, CTO
|
|
Xxxxx
Xxxxxx
|
Xxxxx
Xxxxxx, COO
|
|
|
Xxxxx
Xxxxxx
|
Xxxxx
Xxxxxx, Secretary
|
|
Xxxxx
Xxxxxx
|
Xxxx
Xxxxxxxxxx, CFO
|
| Xxxxxx Xxxxxx | |
| Xxxxx Xxxxxx | |
| Xxxxx Xxxxx | |
| Xxxx Xxxxxxx |
EXHIBIT
"F"
Restricted
Area
Louisiana
Acadia
Parish, Xxxxx Xxxxxx, Ascension Parish, Assumption Parish, Avoyelles Parish,
Xxxxxxxxxx Parish, Bienville Parish, Bossier Parish, Caddo Parish, Calcasieu
Parish, Xxxxxxxx Parish, Cameron Parish, Catahoula Parish, Claiborne Parish,
Concordia Parish, De Soto Parish, East Baton Rouge Parish, East Xxxxxxx Xxxxxx,
East Xxxxxxxxx Xxxxxx, Xxxxxxxxxx Xxxxxx, Xxxxxxxx Xxxxxx, Xxxxx Xxxxxx,
Iberia
Parish, Iberville Parish, Xxxxxxx Parish, Xxxxxxxxx Xxxxxx, Xxxxxxxxx Xxxxx
Parish, La Salle Parish, Lafayette Parish, Lafourche Parish, Lincoln Parish,
Xxxxxxxxxx Parish, Madison Parish, Xxxxxxxxx Parish, Natchitoches Parish,
Orleans Parish, Ouachita Parish, Plaquemines Parish, Pointe Coupee Parish,
Rapides Parish, Red River Parish, Richland Parish, Xxxxxx Xxxxxx, St. Xxxxxxx
Xxxxxx, St. Xxxxxxx Xxxxxx, St. Xxxxxx Xxxxxx, St. Xxxxx Xxxxxx, St. Xxxx
the
Baptist Parish, St. Landry Parish, St. Xxxxxx Xxxxxx, St. Xxxx Xxxxxx, St.
Tammany Parish, Tangipahoa Parish, Tensas Parish, Terrebonne Parish, Union
Parish, Vermilion Parish, Xxxxxx Xxxxxx, Washington Parish, Webster Parish,
West
Baton Rouge Parish, West Xxxxxxx Xxxxxx, West Xxxxxxxxx Xxxxxx, Xxxx
Xxxxxx
Mississippi
Xxxxx
County, Xxxxxx County, Amite County, Attala County, Xxxxxx County, Bolivar
County, Xxxxxxx County, Xxxxxxx County, Chickasaw County, Choctaw County,
Claiborne County, Xxxxxx County, Clay County, Coahoma County, Copiah County,
Xxxxxxxxx County, DeSoto County, Xxxxxxx County, Franklin County, Xxxxxx
County,
Xxxxxx County, Grenada County, Xxxxxxx County, Xxxxxxxx County, Xxxxx County,
Xxxxxx County, Xxxxxxxxx County, Issaquena County, Itawamba County, Xxxxxxx
County, Jasper County, Jefferson County, Xxxxxxxxx Xxxxx County, Xxxxx County,
Xxxxxx County, Lafayette County, Xxxxx County, Lauderdale County, Xxxxxxxx
County, Xxxxx County, Xxx County, Xxxxxxx County, Lincoln County, Lowndes
County, Madison County, Xxxxxx County, Xxxxxxxx County, Monroe County,
Xxxxxxxxxx County, Neshoba County, Xxxxxx County, Noxubee County, Oktibbeha
County, Panola County, Pearl River County, Perry County, Pike County, Pontotoc
County, Xxxxxxxx County, Quitman County, Xxxxxx County, Xxxxx County, Xxxxxxx
County, Xxxxxxx County, Xxxxx County, Stone County, Sunflower County,
Tallahatchie County, Xxxx County, Tippah County, Tishomingo County, Tunica
County, Union County, Xxxxxxxx County, Xxxxxx County, Washington County,
Xxxxx
County, Xxxxxxx County, Xxxxxxxxx County, Winston County, Yalobusha County,
Yazoo County
