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EXHIBIT 2.1
MERGER AGREEMENT
BY AND AMONG
2CONNECT EXPRESS, INC.,
2CONNECT ACQUISITION CORP.,
XXXXX XXXXXXX CELLULAR SYSTEMS OF FLORIDA, INC.
AND
ALL OF THE SHAREHOLDERS
OF
XXXXX XXXXXXX CELLULAR SYSTEMS OF FLORIDA, INC.
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MAY 1, 1998
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LIST OF EXHIBITS
Exhibit A - Articles of Merger
Exhibit B - Allocation of Purchase Price to the Shareholders
Exhibit C - Employment Agreement between Xxxxxx X. XxXxxxxx and 2Connect
Exhibit D - Employment Agreement between Xxxxx X. Xxxxx and 2Connect
Exhibit E - Financing Plan
Exhibit F - Opinion of 2Connect Counsel
Exhibit G - Opinion of Xxxxx & Associates, P.A.
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MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is made and entered
into as of May 1, 1998, by and among (i) 2CONNECT EXPRESS, INC., a Florida
corporation ("2Connect"),(ii) 2CONNECT ACQUISITION CORP., a Florida corporation
and a wholly-owned subsidiary of 2Connect ("Acquisition"), (iii) XXXXX XXXXXXX
CELLULAR SYSTEMS OF FLORIDA, INC., a Florida corporation (the "Company"), and
(iv) all of the shareholders of the Company (collectively, the "Shareholders").
PRELIMINARY STATEMENTS:
A. 2Connect intends to submit a Plan of Liquidation (the "Plan") to the
United States Bankruptcy Court for the Southern District of Florida (the
"Bankruptcy Court"), in connection with Case No. (98-20169-BKC-RBR) (the
"Bankruptcy Case").
B. The respective Boards of Directors of each of 2Connect, Acquisition
and the Company deem it advisable for the welfare and best interests of such
corporations and for the best interests of the respective shareholders of such
corporations that, following the date of the entry of a final and non-appealable
order confirming the Plan by the Bankruptcy Court ("the Effective Date"), the
Company be merged with and into Acquisition, with Acquisition surviving such
merger, upon the terms and subject to the conditions hereinafter set forth and
in accordance with the provisions of the Florida Business Corporation Act (the
"FBCA") which permit such merger. The Plan to be filed with the Bankruptcy Court
will describe such merger and the transactions contemplated by this Agreement.
C. The Shareholders of each of Acquisition and the Company have
approved this Agreement and the transactions contemplated hereby.
D. Capitalized terms used herein which have not been defined prior to
such use shall have the respective meanings given such terms in Article XIII
hereof.
AGREEMENT
In consideration of the premises, the mutual covenants and agreements
contained herein and the benefits to accrue to the parties hereto, and subject
to the satisfaction or waiver of the conditions contained herein, the parties
hereto hereby agree that the Company shall merge with and into Acquisition
pursuant to the laws of the State of Florida and hereby agree, prescribe and set
forth the terms and conditions of the merger, and the other details and
provisions of the merger and matters related thereto, as follows:
ARTICLE I
MERGER OF THE COMPANY WITH AND INTO ACQUISITION
SECTION 1.01 MERGER Subject to the terms and conditions set forth in
this Agreement, on the Effective Date, the Company shall merge with and into
Acquisition (the "Merger"), with Acquisition surviving the Merger. Acquisition
is hereinafter sometimes referred to as the "Surviving Corporation." The Merger
shall be effected in accordance with the applicable provisions of the FBCA.
Following the Merger, the Surviving Corporation shall continue its corporate
existence under the laws of the State of Florida. The separate corporate
existence of the Company shall terminate at the Effective Time (as defined in
Section1.02 hereof) and all of the assets and liabilities of the Company will
thereupon become the property and obligations of the Surviving Corporation.
SECTION 1.02 MANNER OF MERGER The Merger shall be effected by filing
Articles of Merger in substantially the form annexed hereto as EXHIBIT A (the
"Articles of Merger") with the Department of State of the State of Florida. The
terms of the Merger shall be as set forth in Section 1.03 hereof. The term
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"Effective Time" shall mean the time at which the Articles of Merger are so
filed or at such other time as the parties shall have otherwise specified in the
Articles of Merger.
SECTION 1.03 TERMS OF MERGER
(a) The manner and basis for converting the issued and
outstanding shares of the capital stock of each of the constituent corporations
upon the Merger will be as set forth below in this subsection 1.03 (a).
(i) At the Effective Time, by virtue of the Merger
and without any action on the part of the parties hereto, the shares of the
Company's common stock, par value $.10 per share ("Company Common Stock"),
issued and outstanding immediately prior to the Effective Time ("Outstanding
Company Common Stock") will be converted into the right to receive an aggregate
amount (the "Purchase Price") equal to such number of shares of Voting Stock of
2Connect required by the Recapitalization of 2Connect, as set forth in
subsection 1.05(a) hereof.
(ii) At the Effective Time, by virtue of the Merger
and without any action on the part of the parties hereto, the Bridge Debentures,
if any, will be converted into the right to receive a Convertible Subordinate
Debenture of 2Connect of equivalent principal value in accordance with
Exhibit E.
(iii) After the Effective Time, no share of
Outstanding Company Common Stock shall be deemed to be outstanding, and each
share of the Company Common Stock, preferred stock, if any, and any options or
warrants or other securities convertible into or exchangeable for shares of
Company Common Stock shall automatically be canceled and retired and shall cease
to exist, and each holder of any such securities of the Company shall cease to
have any rights with respect thereto, except the right to receive the Purchase
Price as stated in subsection 1.03(a)(i).
(iv) Each share of Common Stock, par value $.01 per
share, of Acquisition issued and outstanding immediately prior to the Effective
Time shall be unaffected by the Merger and shall continue to be one validly
issued, fully paid and nonassessable share of Common Stock, par value $.01 per
share, of the Surviving Corporation. Certificates which immediately prior to the
Effective Time represented issued shares of Common Stock of Acquisition will,
without the need for further action by any Person, immediately after the
Effective Time represent a like number of shares of Common Stock of the
Surviving Corporation.
(b) The Articles of Incorporation of Acquisition, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
of the Surviving Corporation. The Bylaws of Acquisition, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation.
(c) As of the Effective Time, the directors and officers of
the Surviving Corporation shall be as set forth on EXHIBIT B hereto, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified.
SECTION 1.04 CORPORATE NAME. The Articles of Merger will provide that
the corporate name of the Surviving Corporation will be changed to "Xxxxx
Xxxxxxx Wireless, Inc.", provided that the Company obtains the prior written
consent of Xxxxx Xxxxxxx Systems, Inc., an Alabama corporation, to use such
name. In the event such consent is not obtained, the corporate name of the
Surviving Corporation will be changed to a name mutually agreed upon by 2Connect
and the Shareholders.
Section 1.05 OTHER TRANSACTIONS.
(a) As of the Effective Time, all equity interests in 2Connect,
including options and warrants to purchase shares of Common
Stock in 2Connect in existence prior to the Effective Date
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shall be terminated. In addition, upon receipt of the full
amount of the Investment (as described in Exhibit E) by
2Connect, 2Connect will have the following capitalization,
excluding any Voting Stock or securities convertible into
Voting Stock issued in satisfaction of, or in connection with,
the Debentures and the Private Notes, which are defined in
Exhibit E (the "Recapitalization"): (i) the Shareholders will
own thirty-five percent (35%) of the Voting Stock (as defined
in subsection 1.05(b) hereof) of 2Connect; (ii) the Investor
Group (as defined in Exhibit E) and the holders of the Bridge
Debentures (as defined in Exhibit E), if any, will own or be
entitled to own pursuant to a conversion right forty-five
percent (45%) of the Voting Stock of 2Connect, on a pro rata
basis; and (iii) the holders of Common Stock and Units (as
defined below) of 2Connect in existence prior to the Effective
Date will own twenty percent (20%) of the Voting Stock of
2Connect, on a pro rata basis. However, no Voting Stock of
2Connect issued pursuant to the Merger shall be issued to
replace any outstanding warrants or options to purchase any
equity in 2Connect in existence prior to the Effective Date.
To the extent that 2Connect has not received any amount or
portion of the Investment at the Effective Time (as defined in
Section 1.02 hereof) of the Merger (as defined in Section 1.01
hereof), the foregoing percentages of the Recapitalization
shall be adjusted at the Effective Time in accordance with the
amount of the Investment not received by 2Connect at such time
and such that at such subsequent date upon which the full
amount of the Investment is received by 2Connect, the
Recapitalization will be in accordance with the foregoing
percentages. The "Units" mean the 520,000 units issued in
connection with 2Connect's public offering that was
consummated on May 14, 1997.
(b) The term "Voting Stock", as used in this Agreement, shall
refer to any capital stock of 2Connect, either authorized or
to be authorized and either issued or to be issued, which have
equal voting rights, including, but not limited to, the Common
Stock, any other series of common stock, or any series of
preferred stock.
(c) If, upon the issuance of the Voting Stock at the Effective
Time, the Voting Stock is not registered, and therefore
constitutes restricted stock, each certificate evidencing
shares of the Voting Stock shall bear the following
restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (the "1933
ACT"), NOR UNDER ANY STATE SECURITIES LAWS AND SHALL NOT BE
TRANSFERRED, SOLD, ASSIGNED OR HYPOTHECATED UNTIL EITHER (i) A
RESIGRATION STATEMENT WITH RESPECT THERETO IS DECLARED
EFFECTIVE UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES
LAWS OR (ii) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH SHARES, WHICH
OPINION IS SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH SECURITIES MAY BE TRANSFERRED, SOLD, ASSIGNED, OR
HYPOTHECATED WITHOUT REGISTRATION UNDER THE 1933 ACT OR
APPLICABLE STATE SECURITIES LAWS.
(d) Immediately upon, and simultaneously with, the latest to occur
of (i) the execution of this Agreement, (ii) the execution of
the management agreement referred to in subsection 1.05 (f)
below, and (iii) an agreement with the creditor's committee of
the Bankruptcy Case even though such agreement is not yet
approved by the Bankruptcy Court, Xxxxxx X. Xxxxx, Xxxxx X.
Xxxxxxxx, Xxxx Xxxxx, Xxxxx Xxxxx and Xxxxxx Xxxxxx, each of
whom are directors of 2Connect, shall submit their resignation
from the Board of Directors of 2Connect to the Board of
Directors of 2Connect, and the remaining members of the Board
of Directors of 2Connect shall have accepted such
resignations. New directors of 2Connect will be appointed by
the remaining members of the Board of Directors immediately
after the acceptance of such resignations in accordance with
the Bylaws of 2Connect.
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(e) Immediately after the Effective Time, the Board of Directors
of 2Connect will consist of no more than seven (7) directors,
two of whom shall be the Shareholders, one of whom shall be a
representative of Sterne, Agee & Xxxxx, Inc. (the"XXX
Director") and four of whom shall be persons who are not
employees of 2Connect who shall be designated by the mutual
agreement of the Shareholders and the XXX Director. All
members of the Board of Directors shall serve until their
successors are duly elected and qualified or until their
earlier death, resignation or removal in accordance with the
Articles of Incorporation and Bylaws of 2Connect.
(f) The Company and 2Connect shall use their best efforts to enter
into a management agreement whereby the Company agrees to
manage the operations of 2Connect until the Effective Time,
which agreement shall be mutually acceptable to the Company
and 2Connect and shall be subject to the Bankruptcy Court's
approval.
ARTICLE II
CLOSING
SECTION 2.01 CLOSING. Subject to the satisfaction or waiver of the
conditions stated in Article VII hereof, the closing of the transactions
contemplated hereby (the "Closing") shall be held at 10:00 a.m., Eastern time,
on the Effective Date or, if the conditions set forth in Article VIII have not
been satisfied or waived on such date, no later than seven (7) days after all
such conditions shall have been satisfied or waived, at the place and in the
manner mutually agreed to in writing by the parties hereto. The date upon which
the Closing occurs is hereinafter referred to as the "Closing Date." The Closing
shall be deemed completed as of 11:59 p.m., Eastern time, on the Closing Date.
SECTION 2.02 DELIVERIES BY THE SHAREHOLDERS TO 2CONNECT. At or prior to
the Closing, the Company shall deliver to 2Connect:
(i) a certificate executed by the Shareholders
to the effect that the conditions set forth
in Sections7.03(b) through7.03(e) hereof
have been satisfied;
(ii) Evidence of the consents required pursuant
to Section7.03(k) hereof; and
(iii) all other instruments and documents required
to be delivered pursuant to Section7.03
hereof.
SECTION 2.03 DELIVERIES BY 2CONNECT AND ACQUISITION.
(a) At or prior to the Closing, 2Connect or Acquisition, as
applicable, shall deliver to the Shareholders:
(i) a certified copy of all necessary corporate
action on behalf of each of 2Connect and
Acquisition approving its execution,
delivery and performance of this Agreement
and the Collateral Agreements to which it is
a party pursuant to Section7.02(a) hereof;
(ii) a certificate executed by an authorized
officer of each of 2Connect and Acquisition
to the effect that the conditions set forth
in Sections7.02(b) and7.02(c) hereof have
been satisfied;
(iii) the executed Employment Agreements; and
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(iv) all other instruments and documents required
to be delivered pursuant to Section7.03
hereof.
SECTION 2.04 TERMINATION IN ABSENCE OF CLOSING. If by the close of
business on _______, 1998 (the "Termination Date"), the Closing has not
occurred, or, if prior to the Effective Date of the Plan, the Plan is withdrawn,
modified or amended to not pursue the Merger or if the Confirmation Order is
vacated or reversed, then any party hereto may thereafter terminate this
Agreement by written notice to such effect, to the other parties hereto, without
liability of or to any party to this Agreement or any shareholder, director,
officer, employee or representatives of such party unless the reason for Closing
having not occurred is (i) such party's willful breach of the provisions of this
Agreement, or (ii) if all of the conditions to such party's obligations set
forth in Article VII have been satisfied or waived in writing by the date
scheduled for the Closing pursuant to Section 2.01, the failure of such party to
perform its obligations under this Article III on such date; provided, however,
that any termination pursuant to this Section 2.04 shall not relieve any party
hereto who was responsible for Closing having not occurred as described in
clauses (i) or (ii) above of any liability for (x) such party's willful breach
of the provisions of this Agreement, or (y) if all of the conditions to such
party's obligations set forth in Article VIII have been satisfied or waived in
writing by the date scheduled for the Closing pursuant to Section 2.01, the
failure of such party to perform its obligations under this Article III on such
date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders, jointly and severally, represent and
warrant to 2Connect and Acquisition that:
SECTION 3.01 CORPORATE EXISTENCE AND QUALIFICATION: CORPORATE
DOCUMENTS.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of Florida, and is not required to
be qualified to do business as a foreign corporation in any other jurisdiction
where the failure to so qualify would have a material adverse effect on the
Company. The Company has all required corporate power and authority to own its
properties and to carry on its business as presently conducted. The Articles of
Incorporation and Bylaws of the Company, copies of which are attached as
Schedule 3.01(a), are complete and reflect all amendments thereto through the
date hereof.
(b) The stock and minute books of the Company that have been
made available to 2Connect for review contain a complete and accurate record of
all shareholders of the Company and all material actions of the shareholders and
directors (and any committees thereof) taken at a meeting of shareholders or
directors of the Company.
(c) The Company does not have any subsidiaries, participate in
any partnership or joint venture, or own any outstanding capital stock of any
other corporation.
SECTION 3.02 CAPITALIZATION AND OWNERSHIP.
As of the date of this Agreement, the entire authorized
capital stock of the Company consists of 10,000 shares of Company Common Stock,
of which 2,000 shares of Company Common Stock have been issued to each of Xxxxxx
X. XxXxxxxx and Xxxxx X. Xxxxx, and all of such shares are currently issued and
outstanding. The issued and outstanding shares of Company Common Stock are owned
of record and beneficially by the Shareholders as shown on EXHIBIT B hereof. All
of the presently outstanding shares of capital stock of the Company have been
validly authorized and issued and are fully paid and nonassessable. Except as
otherwise set forth in Schedule 3.02, the Company has not issued any other
shares of its capital stock and there are no outstanding options, warrants,
subscriptions or other rights or obligations to purchase or acquire any of such
shares, nor any outstanding securities convertible
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into or exchangeable for such shares. Except as contemplated under this
Agreement, there are no agreements to which the Company is a party regarding the
issuance, registration, voting or transfer of its outstanding shares of its
capital stock. No dividends are accrued but unpaid on any capital stock of the
Company.
SECTION 3.03 NO PREEMPTIVE RIGHTS. There are no preemptive rights
affecting the issuance or sale of the Company Common Stock.
SECTION 3.04 NO COMPANY DEFAULTS OR CONSENTS. Except as otherwise set
forth in Schedule 3.04 attached hereto and subject to the entry and provisions
of a final and non-appealable order confirming the Plan (the "Confirmation
Order") and assuming that the consents, approvals or authorizations of, or
declarations or filings with the Bankruptcy Court have been made or obtained and
shall remain in full force and effect, neither the execution and delivery of
this Agreement nor the carrying out of the transactions contemplated hereby
will:
(i) violate or conflict with any of the terms,
conditions or provisions of the Articles of Incorporation or Bylaws of the
Company;
(ii) violate any Legal Requirements applicable to the
Company;
(iii) violate, conflict with, result in a breach of,
constitute a default under (whether with or without notice or the lapse of time
or both), or accelerate or permit the acceleration of the performance required
by, or give any other party the right to terminate, any Contract or Permit
applicable to the Company;
(iv) result in the creation of any lien, charge or
other encumbrance on the shares of capital stock or any Property of the Company;
or
(v) require any of the Shareholders or the Company to
obtain or make any waiver, consent, action, approval or authorization of, or
registration, declaration, notice or filing with, any private non-governmental
third party or any Governmental Authority. Any and all consents required to be
obtained by the Company as set forth in Schedule 3.04 shall be obtained and
copies thereof delivered to 2Connect upon execution of this Agreement.
SECTION 3.05 NO PROCEEDINGS. Except for the Bankruptcy Case and as set
forth on Schedule 3.05, no suit, action or other proceeding is pending or, to
the Knowledge of the Company, threatened before any Governmental Authority
seeking to restrain any of the Shareholders or prohibit their entry into this
Agreement or prohibit the Closing, or seeking damages against the Company or its
Properties, as a result of the consummation of the transactions contemplated by
this Agreement.
SECTION 3.06 FINANCIAL STATEMENTS Attached as Schedule 3.06 are true
and correct copies of the Company's unaudited balance sheets at January 31, 1998
(the "Interim Company Balance Sheet") and the related statements of income and
shareholders' equity for the one month ended January 31, 1998 (the "Interim
Company Financial Statements"), as well as the Company's balance sheet and
statements of income and shareholders' equity as of and for each of the three
fiscal years ended December 31, 1995, 1996 and 1997 (the "Company Financial
Statements"). The foregoing financial statements (i) have been prepared from the
books and records of the Company and (ii) present fairly the financial condition
of the Company and its results of operations as at and for the respective
periods then ended.
SECTION 3.07 LIABILITIES AND OBLIGATIONS Except as set forth in
Schedule 3.07, the Company Financial Statements reflect all liabilities of the
Company arising out of transactions effected or events occurring on or prior to
the date of the Interim Company Balance Sheet, except for liabilities not
exceeding $10,000 in the aggregate. All reserves shown in the Company Financial
Statements are appropriate and reasonable to provide for losses thereby
contemplated. Except as set forth in the Company Financial Statements (including
the Notes thereto), the Company is not liable upon or with
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respect to, or obligated in any other way to provide funds in respect of or to
guarantee or assume in any manner, any debt, obligation or dividend of any
person, corporation, association, partnership, joint venture, trust or other
entity.
SECTION 3.08 ACCOUNTS RECEIVABLE. Except as otherwise set forth in
Schedule 3.08, the accounts receivable reflected on the Interim Company Balance
Sheet and all accounts receivable arising between the date of the Interim
Company Balance Sheet (the "Interim Balance Sheet Dates") and the date hereof,
arose from bona fide transactions in the ordinary course of business, and the
goods and services involved have been sold, delivered and performed to the
account of the obligors, and no further filings (with Governmental Authorities,
insurers or others) are required to be made, no further goods are required to be
provided and no further services are required to be rendered in order to
complete the sales and fully render the services and to entitle the Company to
collect the accounts receivable in full. Except as otherwise set forth in
Schedule 3.08, no such account has been assigned or pledged to any other person,
firm or corporation; moreover, except only to the extent fully reserved against
as set forth in the Interim Company Balance Sheet or except as otherwise set
forth in Schedule 3.08, no defense or setoff to any such account has been
asserted by the account obligor.
SECTION 3.09 EMPLOYEE MATTERS.
(a) Schedule 3.09(a) contains a complete and accurate list of
the names, titles and compensation of all executive officers of the Company,
regardless of compensation levels, and other employees who are currently
compensated at a rate in excess of $50,000 per year (including any reasonably
anticipated bonus) or who earned in excess of $50,000 during the Company's
fiscal year ended December 31, 1997 (collectively, the "Company Key Employees").
In addition, Schedule 3.09(a) contains a complete and accurate description of
(i) all increases in compensation of the Company Key Employees during the fiscal
years of the Company ending December 31, 1996 and 1997, respectively, and (ii)
any promised increases in compensation of the Company Key Employees that have
not yet been effected.
(b) Schedule 3.09(b) contains a complete and accurate list of
all Compensation Plans sponsored by the Company or to which the Company
contributes on behalf of its employees, other than Employee Benefit Plans listed
in Schedule 3.10. As used herein, "Compensation Plans" shall mean and include,
without limitation, plans, arrangements or practices that provide for severance
pay, deferred compensation, incentive, bonus or performance awards, and stock
ownership or stock options. As used herein, an "Employee Benefit Plan" means
each employee benefit plan, as such term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended.
(c) Schedule 3.09(c) contains a complete and accurate list of
all Employment Agreements. As used herein, "Employment Agreements" shall mean
and include, without limitation, employee leasing agreements, employee services
agreements and noncompetition agreements to which the Company is a party.
(d) The Company has provided 2Connect with a complete and
accurate list of all significant written employee policies and procedures.
(e) To the Knowledge of the Company, no unwritten material
amendments have been made, whether by oral communication, pattern of conduct or
otherwise, with respect to any Compensation Plans, Employment Agreements or
employee policies and procedures.
(f) Except as set forth in Schedule 3.09(f), the Company (i)
has been and is in material compliance with all laws, rules, regulations and
ordinances respecting employment and employment practices, terms and conditions
of employment and wages and hours, and (ii) is not liable in any material amount
for any arrears of wages or penalties for failure to comply with any of the
foregoing. The Company has not engaged in any unfair labor practice or
discriminated on the basis of race, color, religion, sex, national origin, age
or handicap in its employment conditions or practices. To the Knowledge of the
Company, there are no (i) material unfair labor practice charges or complaints
or racial,
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color, religious, sex, national origin, race or handicap discrimination charges
or complaints pending or threatened against the Company before the National
Labor Relations Board or any similar state or foreign commission or agency or
(ii) existing or threatened material labor strikes, disputes, grievances,
controversies or other labor troubles affecting the Company.
(g) The Company has not ever been a party to any agreement
with any union, labor organization or collective bargaining unit. No employees
of the Company are represented by any union, labor organization or collective
bargaining unit. The employees of the Company have not threatened to organize or
join a union, labor organization or collective bargaining unit.
(h) Except as disclosed on Schedule 3.09(h), no Key Employee
of the Company has indicated his or her desire or intent to terminate employment
with the Company, and the Company has no present intent of terminating the
employment of any Company Key Employee.
SECTION 3.10 EMPLOYEE BENEFIT MATTERS.
(a) Schedule 3.10 contains a complete and accurate list of all
Employee Benefit Plans sponsored by the Company or to which the Company
contributes on behalf of its employees and all Employee Benefit Plans previously
sponsored or contributed to on behalf of its employees within the three years
preceding the date hereof. No unwritten amendment exists with respect to any
Employee Benefit Plan.
(b) The Company has no obligation or commitment to provide
medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired from
employment with the Company.
SECTION 3.11 ABSENCE OF CERTAIN CHANGES. Except as set forth in
Schedule 3.11, from the Interim Balance Sheet Date to the date of this
Agreement, the Company has not:
(a) suffered any material adverse change, whether or not
caused by any deliberate act or omission of the Company, or any Shareholder, in
its condition (financial or otherwise), operations, assets, liabilities,
business or prospects;
(b) contracted for the purchase of any capital assets having a
cost in excess of $10,000 or paid any capital expenditures in excess of $10,000,
except in the ordinary course of business consistent with past practice;
(c) incurred any indebtedness for borrowed money or issued or
sold any debt securities, except in the ordinary course of business consistent
with past practice;
(d) incurred or discharged any liabilities or obligations
except in the ordinary course of business consistent with past practice;
(e) paid any amount on any indebtedness prior to the due date,
forgiven or canceled any debts or claims or released or waived any rights or
claims, except in the ordinary course of business consistent with past practice;
(f) mortgaged, pledged or subjected to any security interest,
lien, lease or other charge or encumbrance any of its Properties or Company
Assets, except in the ordinary course of business consistent with past practice;
(g) suffered any damage or destruction to or loss of any
Company Assets (whether or not covered by insurance) that has materially
adversely affected, or could materially adversely affect, its business;
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(h) acquired or disposed of any Company Assets except in the
ordinary course of business consistent with past practice;
(i) written up or written down the carrying value of any of
the Company Assets, except in the ordinary course of business consistent with
past practice;
(j) changed any accounting principles methods or practices
followed or changed the costing system or depreciation methods of accounting for
the Company Assets;
(k) waived any material rights or forgiven any material
claims;
(l) lost, terminated or experienced any change in the
relationship with any employee, customer, joint venture partner or supplier,
which termination or change has materially and adversely affected, or could
reasonably be expected to materially and adversely affect, its business or
Company Assets;
(m) increased the compensation of any director or officer;
(n) increased the compensation of any employee except in the
ordinary course of business consistent with past practice;
(o) made any payments to or loaned any money to any person or
entity except in the ordinary course of business consistent with past practice;
(p) formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(q) redeemed, purchased or otherwise acquired, or sold,
granted or otherwise disposed of, directly or indirectly, any of its capital
stock or securities or any rights to acquire such capital stock or securities,
or agreed to change the terms and conditions of any such rights or paid any
dividends or made any distribution to the holders of the Company's capital
stock;
(r) entered into any material agreement with any person or
group, or modified or amended in any material respect the terms of any material
existing agreement except in the ordinary course of business consistent with
past practice;
(s) entered into, adopted or amended any Employee Benefit
Plan; or
(t) entered into any agreement (written or oral) to do any of
the foregoing, except in the ordinary course of business consistent with past
practice.
SECTION 3.12 COMMITMENTS. Except the material contracts, agreements,
commitments and other arrangements, whether oral or written, to which the
Company is a party (the "Company Contracts") set forth in Schedule 3.12, the
Company has not entered into, nor is the capital stock, the assets or the
business of the Company bound by, whether or not in writing, any
(i) partnership or joint venture agreement;
(ii) deed of trust or other security agreement,
except in the ordinary course of business
(iii) guaranty or suretyship, indemnification or
contribution agreement or performance bond;
(iv) employment, consulting or compensation agreement
or arrangement, including the election or retention in office of any director or
officer;
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(v) labor or collective bargaining agreement;
(vi) debt instrument, loan agreement or other
obligation relating to indebtedness for borrowed money or money lent or to be
lent to another, except in the ordinary course of business;
(vii) deed or other document evidencing an interest
in or contract to purchase or sell real property;
(viii) agreement with dealers or sales or commission
agents, investment bankers, financial advisors, business brokers, public
relations or advertising agencies, accountants or attorneys, except with respect
to confidentiality agreements;
(ix) lease of real or personal property, whether as
lessor, lessee, sublessor or sublessee, except in the ordinary course of
business and excluding the real estate leases set forth on Schedule 3.15(c);
(x) agreement between the Company and any Affiliate;
(xi) agreement relating to any material matter or
transaction in which an interest is held by a person or entity that is an
affiliate of the Company;
(xii) any agreement for the acquisition of services,
supplies, equipment or other personal property and involving more than $25,000
in the aggregate, except in the ordinary course of business;
(xiii) powers of attorney;
(xiv) contracts containing noncompetition covenants;
(xv) any other contract or arrangement that involves
either an unperformed commitment in excess of $5,000 or that terminates more
than thirty (30) days after the date hereof, except in the ordinary course of
business;
(xvi) agreement relating to any material matter or
transaction in which an interest is held by any person or entity referred to in
Section 3.23; or
(xvii) any other agreement or commitment not made in
the ordinary course of business that is material to the business or financial
condition of the Company.
True, correct and complete copies of the written Company Contracts, and true,
correct and complete written descriptions of the oral Company Contracts, have
heretofore been delivered or made available to 2Connect. There are no existing
material defaults, material events of default or events, occurrences, acts or
omissions that, with the giving of notice or lapse of time or both, would
constitute material defaults by the Company, and no material penalties have been
incurred nor are amendments pending, with respect to the Company Contracts. The
Company Contracts are in full force and effect and are valid and enforceable
obligations of the Company, except as such enforceability may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally, and except as the
availability of equity remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principles are
applied in a proceeding at law or in equity). The Company has not received
notice of any material default with respect to any Company Contracts. For the
purposes of this Section 3.12(a), the term "material" shall mean a condition the
existence or breach of which could result in damage or loss to the Company
valued in excess of $5,000 individually or $25,000 in the aggregate.
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(b) Except as contemplated hereby, the Company has not
received notice of any plan or intention of any other party to any Company
Contract to exercise any right to cancel or terminate any Company Contract. The
Company does not currently contemplate, and has reason to believe any person or
entity currently contemplates, any amendment or change to any Company Contract.
None of the customers, joint venture partners or suppliers of the Company has
refused, or communicated that it will or may refuse, to purchase or supply goods
or services, as the case may be, or has communicated that it will or may
substantially reduce the amounts of goods or services that it is willing to
purchase from, or sell to, the Company.
SECTION 3.13 INSURANCE. The Company has previously made available to
2Connect all insurance policies of the Company. All of such policies are valid
and enforceable against the Company, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equity remedies may be limited by the application
of general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity).
SECTION 3.14 PATENTS, TRADE-MARKS, SERVICE MARKS AND COPYRIGHTS.
(a) Except as disclosed on Schedule 3.14(a), the Company owns
all patents, trade-marks, service marks and copyrights (collectively
"Proprietary Rights"), if any, necessary to conduct its business, or possesses
adequate licenses or other rights, if any, therefor, without conflict with the
rights of others. Set forth in Schedule 3.14(a) is a true and correct
description of all Proprietary Rights.
(b) Except as disclosed on Schedule 3.14(a), the Company has
the sole and exclusive right to use the Proprietary Rights without infringing or
violating the rights of any third parties. Use of the Proprietary Rights does
not require the consent of any other person and the Proprietary Rights are
freely transferable. No claim has been asserted by any person to the ownership
of or right to use any Proprietary Right or challenging or questioning the
validity or effectiveness of any license or agreement constituting a part of any
Proprietary Right. Each of the Proprietary Rights is valid and subsisting, has
not been canceled, abandoned or otherwise terminated and, if applicable, has
been duly issued or filed.
SECTION 3.15 TITLE TO ASSETS; CONDITION OF ASSETS.
(a) A description of all interests in real property owned by
the Company is set forth in Schedule 3.15(a).
(b) Except as disclosed on Schedule 3.15(b), the Company has
good and marketable title to the Company Assets, including, without limitation,
those reflected on the Interim Balance Sheet (other than those since disposed of
in the ordinary course of business), free and clear of all security interests,
liens, charges and other encumbrances, except for (i) liens for taxes not yet
due and payable or being contested in good faith in appropriate proceedings, and
(ii) encumbrances that are incidental to the conduct of its businesses or
ownership of property, not incurred in connection with the borrowing of money or
the obtaining of credit, and which do not in the aggregate materially detract
from the value of the assets affected or materially impair their use by the
Company. All facilities, machinery, equipment, fixtures, vehicles and other
properties owned, leased or used by the Company are in good operating condition
and repair, normal wear and tear excepted, are adequate and sufficient for the
Company's business and conform in all material respects with all applicable
ordinances, regulations and laws relating to their use and operation.
(c) A listing of all real property leases, their terms and
total lease payments is attached hereto as Schedule 3.15(c). The Company enjoys
peaceful and undisturbed possession under all real property leases under which
the Company is operating, and all such leases are valid and subsisting and none
of them is in default, except for those defaults.
SECTION 3.16 COMPLIANCE WITH LAWS. The Company has all material
franchises, Permits, licenses and other rights and privileges necessary to
permit it to own its properties and to conduct its
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businesses as presently conducted. The business and operations of the Company
have been and are being conducted in accordance in all material respects with
all applicable laws, rules and regulations, and the Company is not in violation
of any judgment, law or regulation except where any such violation would not
have a material adverse effect on the Company's results of operations, business,
assets or financial condition.
SECTION 3.17 LITIGATION: DEFAULT. Except as otherwise set forth in
Schedule 3.17, there are no claims, actions, suits, investigations or
proceedings against the Company pending or, to the Knowledge of the Company,
threatened in any court or before or by any Governmental Authority, or before
any arbitrator, that could reasonably be expected to have a material adverse
effect (whether covered by insurance or not) on the business, operations,
prospects, Properties, securities or financial condition of the Company. Except
as otherwise set forth in Schedule 3.17, the Company is not in default under,
and no condition exists (whether covered by insurance or not) that with or
without notice or lapse of time or both would (i) constitute a default under, or
breach or violation of, any Company Contract or any Legal Requirement or Permit
applicable to the Company, or (ii) accelerate or permit the acceleration of the
performance required under, or give any other party the right to terminate, any
Company Contract, other than defaults, breaches, violations or accelerations
that would not have a material adverse effect on the business, operations,
prospects, Properties, securities or financial condition of the Company.
SECTION 3.18 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of the Company, (i) The property, assets
and operations of the Company's business are and have been in material
compliance with all applicable Environmental Laws, and the Company possesses and
is in compliance with all licenses, authorizations or permits required by any
applicable Environmental Laws; (ii) there are no Hazardous Substances stored or
otherwise located in, on or under any of the property or assets of the Company,
except in compliance with and as would not be expected to result in liability
under any Environmental Laws and (iii) there have been no releases or threatened
releases of Hazardous Substances by the Company, on or under any property
currently or formerly owned or operated by the Company.
(b) None of the assets or operations of the Company is the
subject of any pending or, to the Knowledge of the Company, threatened federal,
state or local investigation evaluating whether (i) any remedial action is
needed to respond to a release or threatened release of any Hazardous Substances
into the environment or (ii) any release or threatened release of any Hazardous
Substances into the environment is in contravention of any Environmental Laws.
(c) There are no facts or circumstances or conditions known to
and relating to the Company, its current or former operations or facilities,
whether on-site or off-site, present or contingent, or the operations of any
predecessor of the Company, that could result in material liability under any
Environmental Laws.
The Company's representation(s) with respect to this Section 3.18 shall
not be interpreted to imply that 2Connect has constructive knowledge regarding
any aspect of the Company Business with respect to environmental matters nor to
limit the scope of any of the Company's or any Shareholders' representations
under this Agreement. No such due diligence examination or related activities
of, or on behalf of, 2Connect however, shall constitute a waiver or
relinquishment by 2Connect of its right to rely upon the Company's or any
Shareholders' representations, warranties, covenants and agreements as made
herein or pursuant hereto, and no such disclosure shall constitute an assumption
by 2Connect of an conditions or liabilities, and such disclosure shall not
relieve the Company or any Shareholder of its duties and obligations hereunder.
SECTION 3.19 BANKS. Schedule 3.19 sets forth (i) the name of each bank,
trust company or other financial institution and stock or other broker with
which the Company has an account, credit line or safe deposit box or vault, (ii)
the names of all persons authorized to draw thereon or to have access to any
safe deposit box or vault, (iii) the purpose of each such account, safe deposit
box or vault, and (iv) the names of all persons authorized by proxies, powers of
attorney or other like instrument to act on
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behalf of the Company in matters concerning any of its business or affairs.
Except as otherwise set forth in Schedule 3.19, no such proxies, powers of
attorney or other like instruments are irrevocable.
SECTION 3.20 SUPPLIERS AND CUSTOMERS SALES. Schedule 3.20 sets forth
all the Company's material suppliers during the twelve month period ended
December 31, 1997 and the one month period ended January 31, 1998 together with
the dollar amount of goods purchased by the Company from each such supplier
during the twelve month period ended December 31, 1997 and the one month period
ended January 31, 1998 as well as each of the principal customers of the Company
during the twelve month period ended December 31, 1997 and the one month period
ended January 31, 1998. Except as otherwise set forth in Schedule 3.20, since
January 31, 1998 there has been no material adverse change in the business
relationship of the Company with any supplier or customer named in Schedule
3.20. No customer or supplier named in Schedule 3.20 has terminated or
materially altered, or notified the Company of any intention to terminate or
materially alter, its relationship with the Company, and the Company has no
reason to believe that any such customer or supplier will terminate or
materially alter its relationship with the Company or to materially decrease its
services or supplies to the Company or its direct or indirect usage of the
services of the Company. For purposes of Sections 3.20 and 3.23, "material
suppliers" refers to suppliers from whom Company purchased five percent (5%) or
more of the total amount of the goods purchased by the Company during the twelve
month period ended December 31, 1997 or the one month period ended January 31,
1998 and "principal customers" refers to customers who accounted for 5% or more
of the Company's total revenues during the twelve month period ended December
31, 1997 or the one month period ended January 31, 1998.
SECTION 3.21 BROKERAGE. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by the
Company or any Shareholder.
SECTION 3.22 DISCLOSURE; DUE DILIGENCE. This Agreement and the Exhibits
and Schedules hereto, when taken as a whole with other documents and
certificates furnished by the Company or the Shareholders to 2Connect or its
counsel, do not contain any untrue statement of material fact or omit any
material fact necessary in order to make the statements therein not misleading;
provided, however, certain materials provided to 2Connect contain projections
and estimates of future events, and such projections and estimates have been
based upon certain assumptions that management of the Company made in good faith
and believed are reasonable at the time such materials were prepared.
SECTION 3.23 OWNERSHIP INTERESTS OF INTERESTED PERSONS. Except as set
forth in Schedule 3.23, no director or executive officer of the Company or their
respective spouses or children, owns directly or indirectly, on an individual or
joint basis, any material interest in, or serves as an officer or director of,
any principal customer or material supplier which has a business relationship
with the Company or any organization that has a material contract or arrangement
with the Company.
SECTION 3.24 INVESTMENTS IN COMPETITORS. No director or executive
officer of the Company owns directly or indirectly any material interest or has
any investment equal to 5% or more of the outstanding voting securities in any
corporation, business or other person that is a direct competitor of the
Company.
SECTION 3.25 CERTAIN PAYMENTS. Neither the Company, nor any director,
officer or employee of the Company, has paid or caused to be paid, directly or
indirectly, in connection with the business of the Company: (a) to any
government or agency thereof or any agent of any supplier or customer any bribe,
kick-back or other similar payment; or (b) any material contribution to any
political party or candidate (other than from personal funds of directors,
officers or employees not reimbursed by their respective employers or as
otherwise permitted by applicable law).
SECTION 3.26 GOVERNMENT INQUIRIES. Except for the Bankruptcy Case and
as set forth on Schedule 3.26, there have been no material inspection reports,
questionnaires, inquiries, demands or requests for information received by the
Company from, or any material statement, report or other document filed by the
Company with, the federal government or any federal administrative agency
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(including but not limited to, the Justice Department, Internal Revenue Service,
Department of Labor, Occupational Safety and Health Administration, Federal
Trade Commission, National Labor Relations Board, and Interstate Commerce
Commission), any state securities administrator or any local or state taxing
authority.
SECTION 3.27 OTHER TRANSACTIONS. The Company has not entered into any
agreements or arrangements and there are no pending offers or discussions
concerning or providing for the merger or consolidation of the Company or all or
any substantial portion of its assets, the sale by the Company or any
Shareholder of any securities of the Company or any similar transaction
affecting the Company or the Shareholders.
SECTION 3.28 TAX MATTERS.
(a) Except as set forth in Schedule 3.28 hereto:
(i) the Company has filed all federal income Tax
Returns, and all other material Tax Returns which it is required to file under
applicable laws and regulations;
(ii) all such Tax Returns are true and accurate in
all material respects;
(iii) the Company has paid all Taxes due and owing by
it (whether or not such Taxes are required to be shown on a Tax Return) and has
withheld and paid over to the appropriate taxing authority all Taxes which it is
required to withhold from amounts paid or owing to any employee, shareholder,
creditor or other third party, except where the amounts of such unpaid Taxes or
the amounts that have not been withheld and paid over do not, in the aggregate,
exceed $25,000;
(iv) the accrual for Taxes on the Closing Date
Unaudited Balance Sheet (excluding any amount recorded which is attributable to
timing differences between book and Tax income) is sufficient to pay in full all
Tax liabilities of the Company and the Shareholders with respect to earnings of
the Company prior to the Closing; and
(v) the federal income Tax Returns of the Company
have been filed through December 31, 1996 and, as of the date hereof, none of
such Tax Returns has been audited.
(b) To the Knowledge of the Company, no claim has 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 taxation by that jurisdiction.
(c) To the Knowledge of the Company:
(i) there are no foreign, federal, state or local tax
audits or administrative or judicial proceedings pending or being conducted with
respect to the Company;
(ii) no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority and no
written notice indicating an intent to open an audit or other review has been
received by the Company from any foreign, federal, state or local taxing
authority; and
(iii) there are no material unresolved claims
concerning the Company's Tax liability.
(d) No waivers of statutes of limitation have been given or
requested with respect to the Company in connection with any Tax returns
covering the Company, except where such waiver would not have a material adverse
effect on the Company.
(e) The Company has not executed or entered into a closing
agreement pursuant to IRC ss. 7121 or any predecessor provision thereof or any
similar provision of state, local or foreign law; nor
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has the Company agreed to or is required to make any adjustments pursuant to the
Internal Revenue Code of 1986, as amended ("IRC"), ss. 481(a) or any similar
provision of state, local or foreign law by reason of a change iN accounting
method initiated by the Company. The Company has no knowledge that the Internal
Revenue Service has proposed any such adjustment or change in accounting method,
or has any knowledge with respect to any application pending with any taxing
authority requesting permission for any changes in accounting methods that
relate to the business or operations of the Company.
(f) The Company has not made an election under IRC Section
341(f).
(g) The Company is not liable for the Taxes of another person.
(h) The Company is not a party to any tax sharing agreement.
(i) The Company has not made any payments nor is it obligated
to make payments nor is it a party to an agreement that could obligate it to
make any payments that would not be deductible under IRC ss. 280G.
SECTION 3.29 STATE TAKEOVER STATUTES. The Board of Directors of the
Company and the Shareholders have approved the Merger and this Agreement, and
such approval is sufficient to render inapplicable to the Merger and this
Agreement, and the transactions contemplated by this Agreement, the provisions
of Sections 607.0901 and 607.0902 of the FBCA to the extent, if any, any such
section is applicable to the Merger and this Agreement and the transactions
contemplated by this Agreement.
SECTION 3.30 INFORMATION IN DISCLOSURE STATEMENT. None of the
information contained in the Disclosure Statement will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (except that the
Company makes no representation or warranty as to any information supplied by
2Connect for inclusion therein).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER
Each Shareholder represents and warrants to 2Connect and Acquisition as
follows:
SECTION 4.01 TITLE TO THE SHARES. Except as disclosed on Schedule 4.01,
as of the Closing Date, such Shareholder shall own beneficially and of record,
free and clear of any lien, option or other encumbrance, the shares of Company
Common Stock set forth opposite such Shareholders' name on EXHIBIT B hereof.
SECTION 4.02 AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. Such
Shareholder has the full legal right and power and all authority and approval
required to enter into, execute and deliver this Agreement and to perform fully
such Shareholders' obligations hereunder. This Agreement has been duly executed
and delivered by such Shareholder and is a valid and binding obligation of such
Shareholder enforceable in accordance with its terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and except as the availability of equity remedies
may be limited by the application of general principles of equity (regardless of
whether such equitable principles are applied in a proceeding at law or in
equity). The execution and delivery by such Shareholder of this Agreement and
the performance by such Shareholder of this Agreement in accordance with its
terms and conditions will not (i) require the approval or consent of any
foreign, federal, state, county, local or other governmental or regulatory body
or the approval or consent of any other person (except for consents, approvals
or authorizations of, or declarations or filings with the Bankruptcy Court); or
(ii) conflict with or result in any breach or violation of any of the terms and
conditions of, or constitute (or with notice or lapse
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of time or both constitute) a default under, any statute, regulation, order,
judgment or decree applicable to such Shareholder or to the shares of Company
Common Stock held by such Shareholder, or any instrument, contract or other
agreement to which such Shareholder is a party or by or to which such
Shareholder is or the shares of Company Common Stock held by such Shareholder
are bound or subject.
SECTION 4.03 NO SHAREHOLDER DEFAULTS OR CONSENTS. The execution and
delivery of this Agreement and the Collateral Agreements by such Shareholder and
the performance by such Shareholder who is a party thereto of his or her
obligations hereunder and thereunder will not violate any provision of law or
any judgment, award or decree or any indenture, agreement or other instrument to
which such Shareholder is a party, or by which such Shareholder or any
properties or assets of such Shareholder is bound or affected, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under, any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge, security interest or encumbrance
of any nature whatsoever upon any of the properties or assets of such
Shareholder. Any and all consents required to be obtained by such Shareholder as
set forth in Schedule 4.03 shall be obtained and copies thereof delivered to
2Connect upon execution of this Agreement.
SECTION 4.04 INVESTMENT REPRESENTATIONS. This Section 4.04 shall be
applicable only in the event the Voting Stock received by the Shareholders in
the Merger constitutes unregistered, restricted stock.
(a) Such Shareholder is acquiring the shares of the Voting
Stock to be issued to it pursuant to the Merger (the "Merger Shares") for its
own account and not on behalf of any other person; such Shareholder is aware and
acknowledges that the Merger Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be
offered or sold unless the Merger Shares are registered under the Securities Act
or an exemption from the registration requirements of the Securities Act is
available;
(b) Such Shareholder has been furnished all information that
it deems necessary to enable it to evaluate the merits and risks of an
investment in 2Connect; such Shareholder has had a reasonable opportunity to ask
questions of and receive answers from 2Connect concerning 2Connect and the
Merger Shares, and all such questions, if any, have been answered to the full
satisfaction of such Shareholder;
(c) No person or entity other than such Shareholder has (i)
any rights in and to the Merger Shares, which rights were obtained through or
from such Shareholder or (ii) any rights to acquire the Merger Shares, which
rights were obtained through or from such Shareholder;
(d) Such Shareholder has such knowledge and expertise in
financial and business matters (including knowledge and expertise in the retail
telecommunications and computer industry) that it is capable of evaluating the
merits and risks involved in an investment in the Merger Shares: and such
Shareholder is financially able to bear the economic risk of the investment in
the Merger Shares, including a total loss of such investment;
(e) Such Shareholder represents that it has adequate means of
providing for its current needs and has no need for liquidity in its investment
in the Merger Shares; such Shareholder has no reason to anticipate any material
change in its financial condition for the foreseeable future;
(f) Such Shareholder is aware that the acquisition of the
Merger Shares is a speculative investment involving a high degree of risk and
that there is no guarantee that such Shareholder will realize any gain from this
investment, and that such Shareholder could lose the total amount of its
investment;
(g) Such Shareholder understands that no United States federal
or state agency has made any finding of determination regarding the fairness of
the offering of the Merger Shares for investment, or any recommendation or
endorsement of the offering of the Merger Shares;
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(h) Such Shareholder is acquiring the Merger Shares for
investment, with no present intention of dividing or allowing others to
participate in such investment or of reselling, or otherwise participating,
directly or indirectly, in a distribution of the Merger Shares, and shall not
make any sale, transfer or pledge thereof without registration under the
Securities Act and any applicable securities laws of any state or unless an
exemption from registration is available;
(i) Except as set forth herein, no representations or
warranties have been made to such Shareholder by 2Connect or any agent, employee
or affiliate of 2Connect, and in entering into this transaction 2Connect is not
relying upon any information, other than from the results of independent
investigation by such Shareholder;
(j) Such Shareholder understands that the Merger Shares are
being offered to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that
2Connect is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of such Shareholder
set forth herein in order to determine the applicability of such exemptions and
the suitability of such Shareholder to acquire the Merger Shares; and
(k) Such Shareholder will not sell, assign or transfer any of
the Merger Shares except (i) pursuant to an effective registration statement
under the Securities Act, (ii) in a transaction which, in the opinion of the
general counsel of 2Connect or other counsel reasonably satisfactory to
2Connect, is not required to be registered under the Securities Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF 2CONNECT
2Connect represents and warrants to the Shareholders that:
SECTION 5.01 CORPORATE EXISTENCE AND QUALIFICATION: CORPORATE
DOCUMENTS.
(a) Each of 2Connect and Acquisition is a corporation duly
organized, validly existing and in good standing under the laws of Florida, and
is not required to be qualified to do business as a foreign corporation in any
other jurisdiction where the failure to so qualify would have a material adverse
effect on 2Connect. Subject to Bankruptcy Court approval, each of 2Connect and
Acquisition has all required corporate power and authority to own its properties
and to carry on its business as presently conducted. The Articles of
Incorporation and Bylaws of each of 2Connect and Acquisition, copies of which
are attached as Schedule 5.01(a), are complete and reflect all amendments
thereto through the date hereof.
(b) The stock and minute books of 2Connect and Acquisition
that have been made available to the Shareholders for review contain a complete
and accurate record of all shareholders of 2Connect and Acquisition, as the case
may be, and all material actions of the shareholders and directors (and any
committees thereof) of 2Connect and Acquisition, as the case may be.
(c) Except for Acquisition, 2Connect does not have any
subsidiaries, participate in any partnership or joint venture, or own any
outstanding capital stock of any other corporation. Acquisition is sometimes
referred to as a "Subsidiary."
SECTION 5.02 AUTHORITY, APPROVAL AND ENFORCEABILITY. Subject to the
entry of a final and non-appealable Confirmation Order, and the provisions
thereof, and assuming that the consents, approvals or authorizations of, or
declarations or filings with the Bankruptcy Court have been made or obtained and
shall remain in full force and effect, this Agreement has been duly executed and
delivered by 2Connect and Acquisition, and each of 2Connect and Acquisition has
all requisite power and legal authority to
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execute and deliver this Agreement and all Collateral Agreements executed and
delivered or to be executed and delivered in connection with the transactions
provided for hereby, to consummate the transactions contemplated hereby and by
the Collateral Agreements, and to perform its obligations hereunder and under
the Collateral Agreements. Subject to Bankruptcy Court approval, this Agreement
and each Collateral Agreement to which 2Connect and Acquisition is a party
constitutes, or upon execution and delivery will constitute, the legal, valid
and binding obligation of 2Connect and Acquisition, as the case may be,
enforceable in accordance with its terms, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equity remedies may be limited by the application
of general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity).
SECTION 5.03 CAPITALIZATION AND OWNERSHIP. As of the date of this
Agreement, the entire authorized capital stock of Acquisition consists of 10,000
shares of Common Stock, par value $.01 per share. All of the presently
outstanding shares of capital stock of Acquisition have been validly authorized
and issued and are fully paid and nonassessable. Acquisition has not issued any
other shares of its capital stock and there are no outstanding options,
warrants, subscriptions or other rights or obligations to purchase or acquire
any of such shares, nor any outstanding securities convertible into or
exchangeable for such shares. No dividends are accrued but unpaid on any capital
stock of Acquisition.
SECTION 5.04 NO PREEMPTIVE RIGHTS. There are no preemptive rights
affecting the issuance or sale of the capital stock of Acquisition.
SECTION 5.05 NO 2CONNECT OR ACQUISITION DEFAULTS OR CONSENTS. Except as
otherwise set forth in Schedule 5.05 attached hereto and subject to the entry of
a final and non-appealable Confirmation Order, and the provisions thereof, and
assuming that the consents, approvals or authorizations of, or declarations or
filings with the Bankruptcy Court have been made or obtained and shall remain in
full force and effect, neither the execution and delivery of this Agreement nor
the carrying out of the transactions contemplated hereby will:
(i) violate or conflict with any of the terms,
conditions or provisions of the articles of incorporation or bylaws of 2Connect
or any Subsidiary;
(ii) violate any Legal Requirements applicable to
2Connect or any Subsidiary;
(iii) violate, conflict with, result in a breach of,
constitute a default under (whether with or without notice or the lapse of time
or both), or accelerate or permit the acceleration of the performance required
by, or give any other party the right to terminate, any Contract or Permit
applicable to 2Connect or any Subsidiary;
(iv) result in the creation of any lien, charge or
other encumbrance on the shares of capital stock or any Property of 2Connect or
any Subsidiary; or
(v) require 2Connect or any Subsidiary to obtain or
make any waiver, consent, action, approval or authorization of, or registration,
declaration, notice or filing with, any private non-governmental third party or
any Governmental Authority (except for consents, approvals or authorizations of,
or declarations or filings with the Bankruptcy Court). Any and all consents
required to be obtained by 2Connect or any Subsidiary as set forth in Schedule
5.05 shall be obtained and copies thereof delivered to 2Connect upon execution
of this Agreement.
SECTION 5.06 NO PROCEEDINGS. Except for the Bankruptcy Case and as set
forth on Schedule 5.06, no suit, action or other proceeding is pending or, to
the Knowledge of 2Connect, threatened before any Governmental Authority seeking
to restrain 2Connect or Acquisition or prohibit their entry into this Agreement
or prohibit the Closing, or seeking damages against 2Connect or any Subsidiary
or their
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respective Properties, as a result of the consummation of the transaction
contemplated by this Agreement.
SECTION 5.07 FINANCIAL STATEMENTS. Attached as Schedule 5.07 are true
and correct copies of 2Connect's unaudited balance sheet at January 31, 1998
(the "Interim 2Connect Balance Sheet") and the related statement of income,
shareholders' equity and cash flow for the one month ended January 31, 1998 (the
"Interim 2Connect Financial Statements"), as well as 2Connect's balance sheet
and statements of income, shareholders' equity and cash flow as of and for the
fiscal years ended December 31, 1996 and 1997 (the "2Connect Financial
Statements"). The foregoing financial statements (i) have been prepared from the
books and records of 2Connect, (ii) present fairly the financial condition of
2Connect and its results of operations as at and for the respective periods then
ended, and (iii) have been prepared in accordance with generally accepted
accounting principles applied consistently throughout the periods indicated
(except for the omission of footnotes in the Interim 2Connect Financial
Statements).
SECTION 5.08 BROKERAGE. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by
2Connect or any Subsidiary.
SECTION 5.09 STATE TAKEOVER STATUTES. The Board of Directors of
2Connect and the Board of Directors and sole shareholder of Acquisition have
approved the Merger and this Agreement, and such approval is sufficient to
render inapplicable to the Merger and this Agreement, and the transactions
contemplated by this Agreement, the provisions of Sections 607.0901 and 607.0902
of the FBCA to the extent, if any, any such section is applicable to the Merger
and this Agreement and the transactions contemplated by this Agreement.
Section 5.10 INFORMATION IN DISCLOSURE STATEMENT. None of the
information contained in the Disclosure Statement will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (except that 2Connect
makes no representation or warranty as to any information supplied by the
Company for inclusion therein).
ARTICLE VI
OBLIGATIONS PRIOR TO CLOSING
From the date of this Agreement through the Closing:
SECTION 6.01 ACCESS TO INFORMATION AND ASSETS.
(a) The Company and the Shareholders shall permit 2Connect and
its authorized employees, agents, accountants, legal counsel and other
representatives, at 2Connect's own expense, to have access to the books,
records, employees, counsel, accountants, and other representatives of the
Company at all times reasonably requested by 2Connect for the purpose of
conducting an investigation (the "2Connect's Due Diligence Investigation") of
the Company's financial condition, corporate status, operations, business and
Properties. The Shareholders shall make available to 2Connect for examination
and reproduction, at 2Connect's own expense, all documents and data of every
kind and character relating to the Company in the possession or control of, or
subject to reasonable access by, the Shareholders or the Company, including,
without limitation, all files, records, data and information relating to the
Company Assets (whether stored in paper, magnetic or other storage media) and
all agreements, instruments, contracts, assignments, certificates, orders, and
amendments thereto. Also, the Company shall allow 2Connect, at 2Connect's own
expense, access to, and the right to inspect, the Company Assets.
(b) 2Connect shall permit the Company and its authorized
employees, agents, accountants, legal counsel and other representatives, at the
Company's own expense, to have access to
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the books, records, employees, counsel, accountants, and other representatives
of 2Connect at all times reasonably requested by the Company for the purpose of
conducting an investigation (the "Company's Due Diligence Investigation") of
2Connect's financial condition, corporate status, operations, business and
Properties. 2Connect shall make available to the Company for examination and
reproduction, at the Company's own expense, all documents and data of every kind
and character relating to 2Connect in the possession or control of, or subject
to reasonable access by, 2Connect, including, without limitation, all files,
records, data and information relating to the 2Connect Assets (whether stored in
paper, magnetic or other storage media) and all agreements, instruments,
contracts, assignments, certificates, orders, and amendments thereto. Also,
2Connect shall allow the Company, at the Company's own expense, access to, and
the right to inspect, the 2Connect Assets.
SECTION 6.02 COMPANY'S CONDUCT OF BUSINESS AND OPERATIONS. The
Shareholders shall keep 2Connect advised as to all material operations and
proposed material operations relating to the Company or the Company Assets. The
Company shall (a) conduct its business in the ordinary course, (b) use its best
efforts to keep available to the Company the services of present employees, (c)
maintain and operate Company Assets in a good and workmanlike manner, (d) pay or
cause to be paid all costs and expenses (including but not limited to insurance
premiums) incurred in connection therewith in a timely manner, (e) use
reasonable efforts to keep all Company Contracts listed or required to be listed
on Schedule 3.12 in full force and effect, (f) comply with all of the covenants
contained in all such Company Contracts, (g) maintain in force until the Closing
Date insurance policies (subject to the provisions of Section 6.06) equivalent
to those in effect on the date hereof, and (h) comply in all material respects
with all applicable Legal Requirements. Except as otherwise contemplated in this
Agreement, the Shareholders shall use their best efforts to preserve the present
relationships of the Company with persons having significant business relations
therewith.
SECTION 6.03 GENERAL RESTRICTIONS. Except as otherwise expressly
permitted in this Agreement or as contemplated by the Plan, or as disclosed on
Schedule 6.03, without the prior written consent of 2Connect, the Company will
not:
(i) (A) declare, set aside or pay any dividends on,
or make any other distribution (whether in cash, stock or property) in
respect of, any of its capital stock, (B) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in view of or in substitution for
shares of its capital stock, or (C) purchase, redeem or otherwise
acquire any shares of capital stock of the Company or any other
securities thereof or any rights, warrants or options to acquire any
such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock, any other voting securities
or any securities convertible into, or any rights, warrants or options
to acquire, any such shares, voting securities or convertible
securities;
(iii) amend its Articles of Incorporation or Bylaws;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business of any corporation,
partnership, joint venture, association or other business organization
or division thereof or (B) any assets that are material, individually
or in the aggregate, to the Company, except purchases of assets in the
ordinary course of business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise
encumber or otherwise dispose of, or agree to sell, transfer, lease,
mortgage, encumber or otherwise dispose of, any Properties except (A)
in the ordinary course of business consistent with past practice, or
(B) pursuant to any Contract or (C) as approved by the Bankruptcy Court
after notice and a hearing;
(vi) except as approved by the Bankruptcy Court after
notice and a hearing (A) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another
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person, issue or sell any debt securities or warrants or other rights
to acquire any debt securities of the Company, guarantee any debt
securities of another person, enter into any "keep well" or other
agreements to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of the
foregoing, except for borrowings incurred in the ordinary course of
business consistent with past practice, or (B) make any loans, advances
or capital contributions to, or investments in, any other person;
(vii) except for and excluding the Company's receipt
and use of the bridge financing referred to in Exhibit E, unless
mutually agreed by 2Connect and the Company, make or agree to make any
new capital expenditure or expenditures which, individually is in
excess of $25,000 or, in the aggregate, are in excess of $50,000 (other
than those required pursuant to currently outstanding Contracts or in
the ordinary course of business consistent with past practice);
(viii) make any material tax election or settle or
compromise any material tax liability;
(ix) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement
or satisfaction, in the ordinary course of business consistent with
past practice or in the accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the Company
Financial Statements (or the notes thereto) or incurred in the ordinary
course of business consistent with past practice, or waive any material
benefits of, or agree to modify in any material respect, any
confidentiality, standstill or similar agreements to which the Company
is a party;
(x) except in the ordinary course of business
consistent with past practice, or as approved by the Bankruptcy Court,
modify, amend or terminate any Contract;
(xi) except in the ordinary course of business
consistent with past practice, enter into any contracts, agreements,
arrangements or understandings relating to performance by third parties
of the Company's services;
(xii) except as required to comply with applicable
law or as approved by the Bankruptcy Court (A) adopt, enter into,
terminate or amend any Benefit Plan or other arrangement for the
benefit or welfare of any director, officer or current or former
employee, (B) increase in any manner the compensation or fringe
benefits of, or pay any bonus to, any director, officer or employee,
(C) pay any benefit not provided for under any Benefit Plan, (D) grant
any awards under any bonus, incentive, performance or other
compensation plan or arrangement or Benefit Plan (including the grant
of stock options, stock appreciation rights, stock based or stock
related awards, performance units or restricted stock, or the removal
of existing restrictions in any Benefit Plans or agreement or awards
made thereunder) or (E) take any action to fund or in any other way
secure the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or Benefit Plan;
(xiii) make any change in any method of accounting or
accounting practice or policy other than those required by generally
accepted accounting principles; or
(xiv) authorize any of, or commit or agree to take
any of, the foregoing actions.
SECTION 6.04 NOTICE REGARDING CHANGES. The Shareholders shall promptly
inform 2Connect in writing of any change in facts and circumstances that could
render any of the representations, warranties or covenants made herein by the
Company or the Shareholders inaccurate or misleading if such representations and
warranties had been made upon the occurrence of the fact or circumstance in
question. 2Connect shall promptly inform the Shareholders in writing of any
change in facts and
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circumstances that could render any of the representations and warranties made
herein by it inaccurate or misleading if such representations and warranties had
been made upon the occurrence of the fact or circumstance in question.
SECTION 6.05 CONSENTS AND BEST EFFORTS. Each of the parties hereto
shall use all commercial best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations, and consult and fully cooperate
with and provide reasonable assistance to each other party and their respective
representatives in order to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable hereafter, including
without limitation, (i) using all commercially reasonable good faith efforts to
make all filings, applications, notifications, reports, submissions and
registrations with, and to obtain all consents, approvals, authorizations or
permits of, governmental entities or other persons or entities as are necessary
for the consummation of the transactions contemplated by this Agreement and the
Plan, and (ii) taking such actions and doing such things as any other party
hereto may reasonably request in order to cause any of the conditions to such
other party's obligation to consummate the transactions contemplated hereby as
specified in Article VIII of this Agreement to be fully satisfied.
SECTION 6.06 CASUALTY LOSS. If, between the date of this Agreement and
the Closing, any of the Properties of the Company shall be destroyed or damaged
in whole or in part by fire, earthquake, flood, other casualty or any other
cause (a "Casualty Loss"), then the Shareholders shall, at 2Connect's election,
(i) cause the Company to cause such Properties to be repaired or replaced prior
to the Closing with Property of substantially the same condition and function,
(ii) cause the Company to deposit in a separate account an amount sufficient to
cause such Property to be so repaired or replaced, or (iii) enter into
contractual arrangements with the Company satisfactory to 2Connect so that the
Company will have at the Closing the same economic value as if such casualty had
not occurred; provided, however, that the financial obligations of the
Shareholders with respect to any such Casualty Loss shall be limited to the
insurance proceeds with respect thereto.
SECTION 6.07 EMPLOYEE MATTERS. The Shareholders shall take (or cause
the Company to take) all actions necessary or appropriate to cause each Employee
Benefit Plan in effect on the date of this Agreement to remain in full force and
effect until the Closing Date; provided, however, that, to the extent requested
in writing by 2Connect at least ten (10) days prior to the Closing Date, the
Shareholders shall cause the Company to cease to sponsor, maintain or contribute
to any Employee Benefit Plan specified by 2Connect in such written request and
2Connect shall pay the costs associated with the Company ceasing to sponsor,
maintain or contribute to such Employee Benefit Plan specified by 2Connect in
such written request, including the costs of preparing a request for, and
obtaining, a favorable IRS determination letter in connection therewith.
SECTION 6.08 NO SOLICITATION REGARDING THE COMPANY. The Shareholders and
the Company and its officers, directors, employees, representatives and agents
shall immediately cease any discussions or negotiations with any parties that
may be ongoing with respect to a Third Party Acquisition Proposal (as defined
below). Neither the Company nor any of the Shareholders shall, nor shall they
permit any of their Affiliates to, nor shall they authorize or permit any of
their officers, directors or employees or any investment banker, attorney or
other advisor or representatives retained by them or any of their Affiliates to,
(i) solicit, initiate or knowingly encourage the submission of, any Third Party
Acquisition Proposal, or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any non-public information with respect to,
or take any other action knowingly to facilitate any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to lead to, any
Third Party Acquisition Proposal. For purposes of this Agreement, "Third Party
Acquisition Proposal" means any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of all or a portion
of the assets of the Company or all or a portion any class of equity securities
of the Company or any offer to acquire or purchase that if consummated would
result in any person beneficially owning all or a portion of any class of equity
securities of the Company, or any merger, consolidation, business combination,
sale of assets, recapitalization, liquidation, dissolution or similar
transaction involving the Company, other than the transactions contemplated by
this Agreement, or any
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other transaction the consummation of which could reasonably be expected to
impede, interfere with, prevent or delay, or dilute materially the benefits to
2Connect of the transactions contemplated hereby.
SECTION 6.09 EMPLOYMENT AGREEMENTS. On or before Closing, Xxxxxx X.
XxXxxxxx and Xxxxx X. Xxxxx shall have entered into employment agreements in the
form of EXHIBITS C and D respectively (collectively, the "Employment
Agreements"), which shall include, without limitation, non-competition
provisions, to take effect on the Closing Date.
Section 6.10 NO SOLICITATION REGARDING 2CONNECT AND ACQUISITION.
2Connect and Acquisition shall not solicit, contact, invite or seek out any
third party other than the Company and Sterne, Agee, & Xxxxx, Inc. ("Third
Party") as a merger partner with or potential capital source for 2Connect and
Acquisition, including, but not limited to, any other communication, retailer,
investment banker, commercial banker, broker/dealer, agent or financial
consultant. Furthermore, if any Third Party contacts or indicates an interest in
discussing with 2Connect or Acquisition any possible or potential transaction
between or including such Third Party and 2Connect or Acquisition, including,
but not limited to, any bid for or offer to purchase any assets (excluding sales
of inventory and assets not to be used by 2Connect, Acquisition, and/or the
Company pursuant to this Agreement either in or out of the ordinary course of
business) or capital stock of 2Connect or Acquisition, by business combination,
acquisition or otherwise, or any proposal to provide, raise or assist with the
raising of capital or financing for 2Connect or Acquisition by public offering,
private placement, loan or otherwise (collectively, the "Third Party Event"),
then 2Connect shall immediately notify the Company and Sterne, Agee & Xxxxx,
Inc. in writing of the Third Party and the terms and conditions, if any, of the
Third Party Event, and instruct such Third Party to directly contact the Company
and Sterne, Agee & Xxxxx, Inc. at the addresses and facsimile numbers set forth
in Section 11.02 below, regarding the Third Party Event.
ARTICLE VII
CONDITIONS TO THE SHAREHOLDERS' AND 2CONNECT'S OBLIGATIONS
SECTION 7.01 CONDITIONS TO OBLIGATIONS OF ALL PARTIES. The respective
obligations of each party to carry out the transactions contemplated by this
Agreement are subject to the satisfaction or waiver on or prior to the Closing
Date of the following conditions:
(a) The Plan shall have been approved by the Bankruptcy Court.
The Confirmation Order shall have been entered, no stay of the Confirmation
Order pending appeal shall have been entered, and the Confirmation Order shall
have become final and non-appealable and all other conditions to the
effectiveness of the Plan as set forth in the Plan shall have been satisfied or
waived.
(b) All filings with all Governmental Authorities required to
be made in connection with the transactions contemplated hereby shall have been
made, and all orders, permits, waivers, authorizations, exemptions, and
approvals of such entities required to be in effect on the date of the Closing
in connection with the transactions contemplated hereby shall have been issued,
and all such orders, permits, waivers, authorizations, exemptions or approvals
shall be in full force and effect on the date of the Closing; provided, however,
that no provision of this Agreement shall be construed as requiring any party to
accept, in connection with obtaining any other requisite approval, clearance or
assurance of non-opposition, avoiding any challenge, or negotiating settlement,
any condition that would materially change or restrict the manner in which the
Company, the Surviving Corporation or 2Connect conducts or proposes to conduct
its business, and no transfers of licenses shall occur prior to the Closing.
(c) None of the parties hereto shall be subject to any
statute, rule, regulation, decree, ruling, injunction or other order issued by
the Bankruptcy Court or any Governmental Entity of competent jurisdiction
(collectively, an "Injunction") which prohibits, restrains, enjoins or restricts
the consummation of the transactions contemplated by this Agreement.
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(d) 2Connect and/or the Company shall have entered into a
letter of intent or other agreement on or prior to the Effective Time with
Sterne, Agee & Xxxxx, Inc., or such other underwriter, group of investors or
representative thereof to provide financing for the Surviving Corporation upon
the terms, and subject to the conditions, set forth on EXHIBIT E hereto, or upon
such other terms, and subject to such other conditions, as may be mutually
agreed upon by the Company, 2Connect, and Sterne, Agee, & Xxxxx, Inc. (or such
other underwriter, group of investors, or representative).
SECTION 7.02 CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS. The
obligations of the Shareholders to carry out the transactions contemplated by
this Agreement, including the Merger are subject, at the option of the
Shareholders, to the satisfaction, or waiver by Shareholders, of the following
conditions:
(a) 2Connect and Acquisition shall have furnished the Company
with a certified copy of all necessary corporate action on its behalf approving
its execution, delivery and performance of this Agreement and each of the
Collateral Agreements.
(b) All representations and warranties of 2Connect and
Acquisition contained in this Agreement qualified by materiality shall be true
and correct in all respects at Closing and all other representations and
warranties of 2Connect and Acquisition contained in this Agreement shall be true
and correct in all material respects at and as of the Closing, as if such
representations and warranties were made at and as of the Closing, except for
changes contemplated by the terms of this Agreement except as and to the extent
that the facts and conditions upon which such representations and warranties are
based are expressly required or permitted to be changed by the terms thereof,
and 2Connect and Acquisition shall have performed and satisfied in all material
respects all covenants and agreements required by this Agreement to be performed
and satisfied by 2Connect and Acquisition at or prior to the Closing; provided,
however, that no Shareholder shall be entitled to refuse to consummate the
transaction in reliance upon its own breach or failure to perform.
(c) As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by or on behalf of the
Shareholders or the Company) shall be pending or threatened before any
Governmental Authority seeking to restrain the Shareholders from effectuating
the Merger or prohibit the Closing or seeking Damages against the Shareholders
or the Company as a result of the consummation of this Agreement.
(d) 2Connect and Acquisition shall have executed and delivered
to the Shareholders and the Company the documents referred to in Section 2.03
hereof.
(e) 2Connect's officer's and director's liability insurance
policy shall have been renewed.
(f) 2Connect shall have provided to the Company the 2Connect
Financial Statements, as described in Schedule 5.07.
(g) The Company shall be satisfied in its sole and absolute
discretion with the Company's Due Diligence Investigation and shall have
notified 2Connect in writing on or before May 15, 1998 that it has waived this
condition precedent.
(h) The Company shall have received the opinion of counsel to
2Connect, dated as of the Closing Date, in form and substance reasonably
satisfactory to the Company, as to the matters set forth on EXHIBIT F. In
rendering such opinion, 2Connect's counsel may rely as to factual matters on
certificates of officers and directors of 2Connect and Acquisition and on
certificates of governmental officials, and as to legal matters on opinions of
other counsel reasonably acceptable to the Shareholders and the Company.
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SECTION 7.03 CONDITIONS TO OBLIGATIONS OF 2CONNECT AND ACQUISITION. The
obligations of 2Connect and Acquisition to carry out the transactions
contemplated by this Agreement are subject, at the option of 2Connect, to the
satisfaction, or waiver by 2Connect, of the following conditions:
(a) All of the Company Common Stock shall have been tendered
to 2Connect.
(b) All representations and warranties of Shareholders and the
Company contained in this Agreement qualified by materiality shall be true and
correct in all respects at Closing and all other representations and warranties
of the Shareholders and the Company contained in this Agreement shall be true
and correct in all material respects at and as of the Closing as if such
representations and warranties were made at and as of the Closing, except for
changes contemplated by the terms of this Agreement except as and to the extent
that the facts and conditions upon which such representations and warranties are
based are expressly required or permitted to be changed by the terms thereof,
and the Shareholders and the Company shall have performed and satisfied in all
material respects all agreements and covenants required by this Agreement to be
performed and satisfied by Shareholders and the Company at or prior to the
Closing; provided, however, that neither 2Connect nor Acquisition shall be
entitled to refuse to consummate the transaction in reliance upon its own breach
or failure to perform.
(c) As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by or on behalf of 2Connect)
shall be pending or threatened before any court or governmental agency seeking
to restrain 2Connect or Acquisition or prohibit the Closing or seeking Damages
against 2Connect, Acquisition, the Company or its Properties as a result of the
consummation of the transactions contemplated by this Agreement.
(d) All notices required to be given in connection with the
transactions contemplated by this Agreement shall have been duly and timely
given, and there shall not be any preferential purchase rights or consent
requirements with respect to the transactions contemplated by this Agreement
that have not expired or been waived.
(e) Except for matters disclosed in the Schedules hereto,
since December 31, 1997 and up to and including the Closing there shall not have
been:
(i) any change in the business, operations, prospects
or financial condition of the Company that had or would reasonably be likely to
have a material adverse effect on the business, operations, prospects,
Properties, securities or financial condition of the Company; and
(ii) any damage, destruction or loss to the Company
(whether or not covered by insurance) that had or would reasonably be likely to
have a material adverse effect on the business, operations, prospects,
Properties, securities or financial condition of the Company.
(f) 2Connect and Acquisition shall have received the opinion
of Xxxxx & Associates, P.A., counsel to the Company and the Shareholders, dated
as of the Closing Date, in form and substance reasonably satisfactory to
2Connect, as to the matters set forth on EXHIBIT G. In rendering such opinion,
Xxxxx & Associates, P.A., may rely as to factual matters on certificates of
officers, directors and shareholders of the Company and on certificates of
governmental officials, and as to legal matters on opinions of other counsel
reasonably acceptable to 2Connect.
(g) The Company shall have provided to 2Connect the Company
Financial Statements which shall have been audited by the Company's independent
certified public accountants and accompanied by a report of such certified
public accountants. All costs related to such audit, regardless of whether or
not the Merger is consummated, shall be paid from the proceeds received by the
Company pursuant to the Investment (as defined in Exhibit E) or pursuant to the
Bridge Debentures (as defined in Exhibit E). The selection of the Company's
certified public accountants who perform the audit on the Company's Financial
Statements is subject to the prior written approval of 2Connect. The parties
acknowledge and agree that such audit is necessary in order to pursue the stock
registration objectives described in Section 10.08 below.
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(h) The Shareholders shall have executed and delivered to
2Connect and Acquisition the Articles of Merger.
(i) 2Connect shall have received the executed Employment
Agreements from Xxxxxx X. XxXxxxxx and Xxxxx X. Xxxxx.
(j) All proceedings to be taken by Shareholders and the
Company in connection with the transactions contemplated hereby and all
documents incident thereto shall be satisfactory in form and substance to
2Connect and its counsel, and 2Connect and said counsel shall have received all
such counterpart originals or certified or other copies of such documents as it
or they may reasonably request.
(k) 2Connect shall have received written evidence, in form and
substance satisfactory to 2Connect, of the consent to the transactions
contemplated by this Agreement of all governmental, quasi-governmental and
private third parties (including, without limitation, persons or other entities
leasing real or personal property to the Company), except where the failure to
have obtained any such consent would not have an adverse effect on the Company
following the Closing.
(l) 2Connect shall be satisfied in its sole and absolute
discretion with 2Connect's Due Diligence Investigation and shall have notified
the Company in writing on or before May 15, 1998 that it has waived this
condition precedent.
ARTICLE VIII
SURVIVAL
SECTION 8.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Notwithstanding any right of any party to fully to investigate the affairs of
the other parties and notwithstanding any knowledge of facts determined or
determinable by such party pursuant to such investigation or right of
investigation, each party has the right to rely fully upon the representations,
warranties, covenants and agreements of the other parties contained in this
Agreement, or in any certificate delivered pursuant to any of the foregoing;
provided, that no party shall be entitled to rely on any representation or
warranty made by the other parties herein to the extent that it has actual
knowledge that such representation or warranty is untrue or incorrect in any
material respect. Except as otherwise set forth below, all representations and
warranties of the parties contained in this Agreement or in any certificate or
other writing delivered pursuant hereto shall survive the Closing and expire one
year from the date of the Closing; provided, however, that (i) the
representations and warranties contained in Section 3.28 (Tax Matters) shall
survive the Closing until the expiration of the statute of limitations
applicable to the matters covered thereby and (ii) the representations and
warranties contained in Article V shall survive the Closing and expire two years
from the date of the Closing. Notwithstanding any contrary provision in this
Section 8.01 or this Agreement, the write-offs and chargebacks described in
Schedule 3.08 shall not be subject to indemnification hereunder and shall not be
the responsibility of the Shareholders or the Company.
ARTICLE IX
INDEMNIFICATION
[THIS ARTICLE IX HAS BEEN INTENTIONALLY DELETED]
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ARTICLE X
POST-CLOSING OBLIGATIONS
SECTION 10.01 FURTHER ASSURANCES. Following the Closing, each of the
Company, the Shareholders and 2Connect shall execute and deliver such documents,
and take such other action, as shall be reasonably requested by any other party
hereto to carry out the transactions contemplated by this Agreement.
SECTION 10.02 PUBLICITY. None of the parties hereto shall issue or
make, or cause to have issued or made, any public release or announcement
concerning this Agreement or the transactions contemplated hereby, without the
advance approval in writing of the form and substance thereof by each of the
other parties, and the parties shall endeavor jointly to agree on the text of
any announcement or circular so approved or required.
SECTION 10.03 CONFIDENTIALITY. The confidentiality provisions set forth
in Section 9 of that certain letter dated February 28, 1998 from 2Connect to
Xxxxxx X. XxXxxxxx, Chief Executive Officer of the Company, shall survive,
without modification, the execution of this Agreement and any termination
hereof.
SECTION 10.04 ACCESS TO RECORDS. From and after the Closing, (i) each
of the Shareholders shall (A) permit 2Connect and its authorized employees,
agents, accountants, legal counsel and other representatives to have access to
the books, records, files, agreements and other information in the possession of
the Shareholders or their respective Affiliates, and (B) use his or her best
efforts to permit 2Connect and its authorized employees, agents, accountants,
legal counsel and other representatives to have access to the employees,
counsel, accountants and other representatives of the Shareholders and their
respective Affiliates, in each case, to the extent and at all times reasonably
requested by 2Connect for the purpose of investigating or defending any claim
made against the Shareholders or the Company in connection with periods ending
on or before the Closing Date and (ii) 2Connect shall use its best efforts to
permit the Shareholders and their respective authorized employees, agents,
accountants, legal counsel and other representatives to have access to the
employees, counsel, accountants and other representatives of 2Connect, the
Company and their Affiliates, in each case, to the extent and at all time
reasonably requested by the Shareholders, or any of them, for the purpose of
investigating or defending any claim made against the Shareholders in connection
with Section 8.01.
SECTION 10.05 NASDAQ SMALLCAP MARKET LISTING. Immediately after the
Closing, the Shareholders, in their capacities as employees of 2Connect, shall
use their best efforts to cause 2Connect to be approved for listing on the
Nasdaq Stock Market's SmallCap Market, (or the successor to the NASDAQ SmallCap
Market resulting from the consummation of the proposed AMEX/NASDAQ merger) after
the Effective Date.
SECTION 10.06 TAX REIMBURSEMENT TO SHAREHOLDERS. In the event that the
Merger results in the imposition of income taxes or capital gains taxes to the
Shareholders in excess of $10,000 in the
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aggregate, then 2Connect shall, after the Effective Date, reimburse the
Shareholders for all income taxes or capital gains taxes, directly or
indirectly, related to the Merger in excess of $10,000; provided, however, the
Shareholders shall authorize and allow 2Connect to be involved in the
preparation and filing of tax returns or an audit which give rise to the payment
of the taxes referred to in this Section 10.06.
SECTION 10.07 GLOBAL GROUP MARKETING, INC. As of the Closing, or
immediately thereafter, 2Connect or Acquisition shall have repaid, refinanced,
or assumed indebtedness owed by Global Group Marketing, Inc. to Southern
Commerce Bank, such indebtedness having been previously personally guaranteed by
at least one of the Shareholders.
Section 10.08 REGISTRATION OF THE VOTING STOCK. After the Closing Date,
2Connect shall use its best commercial efforts to provide to each of the
Shareholders, the holders of the Bridge Debentures, the holders of the
Debentures, any of the private note holders of the Company contemplated in
Exhibit E who convert their notes into Convertible Subordinated Debentures of
2Connect, and any other holders of securities which comprise any portion of the
Investment, securities of 2Connect which have been registered with the U.S.
Securities and Exchange Commission under the Securities Act of 1933, as amended,
and applicable state securities commissions pursuant to any available mechanism
including, but not limited to, the registration of their securities issued
pursuant to this Agreement and/or the exchange of Common Stock of 2Connect for
such securities in a recapitalization conducted under Section 368(a)(1)(E) of
the Internal Revenue Code of 1986, as amended.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 BROKERS. Regardless of whether the Closing shall occur,
(i) each Shareholder shall jointly and severally indemnify and hold harmless
2Connect and the Company from and against any and all liability for any brokers'
or finders' fees arising with respect to brokers or finders retained or engaged
by the Company or any of the Shareholders in respect of the transactions
contemplated by this Agreement, and (ii) 2Connect shall indemnify and hold
harmless the Shareholders from and against any and all liability for any
brokers' or finders' fees arising with respect to brokers or finders retained or
engaged by 2Connect in respect of the transactions contemplated by this
Agreement.
SECTION 11.02 NOTICES. Any notice, request, instruction, correspondence
or other document to be given hereunder by any party hereto to another (herein
collectively called "Notice") shall be in writing and delivered personally or
mailed by registered or certified mail, postage prepaid and return receipt
requested, or by telecopier, as follows:
If to 2Connect: 2Connect Express, Inc.
0000 XX 00xx Xxxxxx, Xxxxx 0
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
WITH A COPY TO: Xxxxxx, Xxxx & Xxxxxx, LLP
000 X. Xxxxxxxx Xxxxxxxxx
0000 Xxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
If to the Company: Xxxxx Xxxxxxx Cellular Systems of Florida, Inc.
0000 Xxxx Xxxxxx, X.X., Xxxxx X
Xxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxxx X. XxXxxxxx
Telecopy No.:(000) 000-0000
WITH A COPY TO: Xxxxx & Associates, P.A.
000 X. Xxxx Xxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
If to the Shareholders: Xx. Xxxxxx X. XxXxxxxx
Xx. Xxxxx X. Xxxxx
0000 Xxxx Xxxxxx, X.X., Xxxxx X
Xxxxx, Xxxxxxx 00000
Telecopy No.:(000) 000-0000
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WITH A COPY TO: Xxxxx & Associates, P.A.
000 X. Xxxx Xxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
Each of the above addresses for notice purposes may be changed by providing
appropriate notice hereunder. Notice given by personal delivery or registered
mail shall be effective upon actual receipt. Notice given by telecopier shall be
effective upon actual receipt if received during the recipient's normal business
hours, or at the beginning of the recipient's next normal business day after
receipt if not received during the recipient's normal business hours. All
Notices by telecopier shall be confirmed by the sender thereof promptly after
transmission in writing by registered mail or personal delivery. Anything to the
contrary contained herein notwithstanding, notices to any party hereto shall not
be deemed effective with respect to such party until such Notice would, but for
this sentence, be effective both as to such party and as to all other persons to
whom copies are provided above to be given.
SECTION 11.03 GOVERNING LAW. The provisions of this agreement and the
documents delivered pursuant hereto shall be governed by and construed in
accordance with the laws of the State of Florida (excluding any conflict of law
rule or principle that would refer to the laws of another jurisdiction). Each
party hereto irrevocably submits to the jurisdiction of the Bankruptcy Court for
so long as the proceedings of 2Connect remain open, and thereafter the Circuit
Court located in Broward County, Florida, in any action or proceeding arising
out of or relating to this Agreement or any of the Collateral Agreements, and
each party hereby irrevocably agrees that all claims in respect of any such
action or proceeding must be brought and/or defended in such court; provided,
however, that matters which are under the exclusive jurisdiction of the Federal
courts shall be brought in the Federal District Court for the Southern District
of Florida. Each party hereto consents to service of process by any means
authorized by the applicable law of the forum in any action brought under or
arising out of this Agreement or any of the Collateral Agreements, and each
party irrevocably waives, to the fullest extent each may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
SECTION 11.04 REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of each of the parties to this Agreement shall be
deemed to have been made at the date hereof and at and as of the Closing Date.
SECTION 11.05 ENTIRE AGREEMENT, AMENDMENTS AND WAIVERS. This Agreement,
together with all exhibits and schedules attached hereto, constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein or contemplated
hereby. No supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (regardless of whether similar), nor shall any such
waiver constitute a continuing waiver unless otherwise expressly provided.
SECTION 11.06 BINDING EFFECT AND ASSIGNMENT. Subject to the approval of
the Bankruptcy Court, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors and
assigns; but neither this Agreement nor any of the rights, benefits or
obligations hereunder shall be assigned, by operation of law or otherwise, by
any party hereto without the prior written consent of each other party. Nothing
in this Agreement, express or implied, is intended to confer upon any person or
entity other than the parties hereto and their respective permitted successors
and assigns, any rights, benefits or obligations hereunder.
SECTION 11.07 REMEDIES. The rights and remedies provided by this
Agreement are cumulative, and the use of any one right or remedy by any party
hereto shall not preclude or constitute a waiver of its
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right to use any or all other remedies. Such rights and remedies are given in
addition to any other rights and remedies a party may have by law, statute, or
otherwise.
SECTION 11.08 EXHIBITS AND SCHEDULES. The exhibits and schedules
referred to herein are attached hereto and incorporated herein by this
reference. Disclosure of a specific item in any one schedule shall be deemed
restricted only to the Section to which such disclosure specifically relates
except where (i) there is an explicit cross-reference to another Schedule, and
(ii) 2Connect could reasonably be expected to ascertain the scope of the
modification to a representation intended by such cross-reference.
SECTION 11.09 MULTIPLE COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 11.10 REFERENCES. Whenever required by the context, and is used
in this Agreement, the singular number shall include the plural and pronouns and
any variations thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural, as the identification the person may require.
References to monetary amounts and specific named statutes are intended to be
and shall be construed as references to United States dollars and statutes of
the United States of the stated name, respectively, unless the context otherwise
requires.
SECTION 11.11 SURVIVAL. Any provision of this Agreement which
contemplates performance or the existence of obligations after the Closing Date,
and any and all representations and warranties set forth in this Agreement,
shall not be deemed to be merged into or waived by the execution and delivery of
the instruments executed at the Closing, but shall expressly survive Closing for
the time period set forth in Section 8.01 hereof and shall be binding upon the
party or parties obligated thereby in accordance with the terms of this
Agreement, subject to any limitations expressly set forth in this Agreement.
SECTION 11.12 ATTORNEYS' FEES. In the event any suit or other legal
proceeding is brought for the enforcement of any of the provisions of this
Agreement, the parties hereto agree that the prevailing party or parties shall
be entitled to recover from the other party or parties upon final judgment on
the merits reasonable attorneys' fees (and sales taxes thereon, if any),
including attorneys' fees for any appeal, and costs incurred in bringing such
suit or proceeding, provided that any fees sought against 2Connect are approved
by the Bankruptcy Court.
SECTION 11.13 EXPENSES. Except as otherwise provided in subsection
7.03(g) and Section 10.06, the Company and the Shareholders shall be responsible
for the payment of all expenses incurred by the Company and the Shareholders in
connection with the Merger and the Plan, including all fees of attorneys,
brokers, finders, accountants, and financial advisors, whether or not the Merger
or the Plan shall be consummated. 2Connect and Acquisition shall be responsible
for the payment of all expenses incurred by 2Connect and Acquisition in
connection with the Merger and the Plan, including all fees of attorneys,
brokers, finders, accountants, and financial advisors, whether or not the Merger
or the Plan shall be consummated, subject to the approval of the Bankruptcy
Court.
ARTICLE XII
DEFINITIONS
Capitalized terms used in this Agreement shall have the respective
meanings ascribed to such terms in this Article XII, unless otherwise defined in
this Agreement.
SECTION 12.01 AFFILIATE. The term "Affiliate" shall mean, with respect
to any Person, any other Person controlling, controlled by or under common
control with such Person. The term "Control" as used in the preceding sentence
means, with respect to a corporation, the right to exercise, directly or
indirectly, more than fifty percent (50%) of the voting rights attributable to
the shares of the controlled corporation
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33
and, with respect to any Person other than a corporation, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person.
SECTION 12.02 COLLATERAL AGREEMENTS. The term "Collateral Agreements"
shall mean any or all of the following agreements, the forms of which are
attached hereto as exhibits to this Agreement, indicated below:
Exhibit C - Employment Agreement between 2Connect and Xxxxxx X. XxXxxxxx
Exhibit D - Employment Agreement between 2Connect and Xxxxx X. Xxxxx
and any and all other agreements, instruments or documents required or expressly
provided under this Agreement to be executed and delivered in connection with
the transactions contemplated by this Agreement.
SECTION 12.03 COMPANY ASSETS. The term "Company Assets" shall mean,
with respect to the Company, all of the Properties, Contracts, and Permits, that
were Used by the Company as of the Interim Balance Sheet Date and those Used by
the Company at any time after that date until the Closing Date.
SECTION 12.04 CONTRACT. The term "Contract" shall mean, all written or
oral contracts to which 2Connect, Acquisition, the Company or the Shareholders
is a party.
SECTION 12.05 DAMAGES. The term "Damages" shall mean any and all
damages, liabilities, obligations, penalties, fines, Judgments, claims,
deficiencies, losses, costs, expenses and assessments (including without
limitation income and other taxes, interest, penalties and attorneys' and
accountants' fees and disbursements).
SECTION 12.06 ENVIRONMENTAL LAW. "Environmental Law" shall mean any
governmental statute, law, ordinance, code, rule, regulation, order or decree
relating to or imposing liability or standards of conduct as may now in effect
regarding any air emission, water discharge or use, storage, handling,
generation or disposal of any Hazardous Substances, including, without
limitation, the following, and all regulations promulgated thereunder or in
connection therewith: the Comprehensive Environmental Response, Compensation,
and Liability Act, the Clean Air Act, the Clean Water Act, the Toxic Substances
Control Act, the Resource Conservation and Recovery Act, the Used Oil Recycling
Act, the Occupational Safety and Health Act, the Federal Safe Drinking Water
Act, the Federal Water Pollution Control Act, the Oil Pollution Act, the
Emergency Planning and Community Right-to-Know Act, and all other federal,
state, tribal and local laws, rules and regulations relating to protection of
human health and the environment, reclamation of land, wetlands and waterways or
relating to the use, storage, emissions, discharge, clean-up or release of
Hazardous Substances on or into the work-place or the environment (including,
without limitation, ambient air, oceans, waterways, wetlands, surface water,
ground water (tributary and nontributary), land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation or handling of contaminants, as all of the
foregoing may be amended, supplemented and reauthorized from time to time.
SECTION 12.07 GOVERNMENTAL AUTHORITIES. The term "Governmental
Authorities" shall mean any nation or country (including but not limited to the
United States) and any commonwealth, territory or possession thereof and any
political subdivision of any of the foregoing, including but not limited to
courts, departments, commissions, boards, bureaus, agencies, ministries or other
instrumentalities.
SECTION 12.08 HAZARDOUS SUBSTANCES. "Hazardous Substances" shall mean
industrial, toxic or hazardous substances or wastes or other pollutants,
contaminants, petroleum products, asbestos, polychlorinated biphenyls ("PCBs")
or chemicals, all as defined and regulated under Environmental Law.
SECTION 12.09 KNOWLEDGE. The term "Knowledge" shall mean the actual
knowledge of a party or, in the case of the Company, 2Connect, or Acquisition
any of their respective directors or executive
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34
officers with respect to the representation being made, and such knowledge of
any such persons as reasonably should have obtained upon due investigation and
inquiry into the representation being made.
SECTION 12.10 LEGAL REQUIREMENTS. The term "Legal Requirements", when
described as being applicable to any Person, shall mean any and all laws
(statutory, judicial or otherwise), ordinances, regulations, judgments, orders,
directives, injunctions, writs, decrees or awards of, and any Contracts with,
any Governmental Authority, in each case as and to the extent applicable to such
Person or such Person's business, operations or Properties.
SECTION 12.11 PERMITS. The term "Permits" shall mean any and all
permits or orders under any Legal Requirement or otherwise granted by any
Governmental Authority.
SECTION 12.12 PROPERTIES. The term "Properties" shall mean any and all
properties and assets (real, personal or mixed, tangible or intangible).
SECTION 12.13 PROPORTIONATE SHARE. The term "Proportionate Share" shall
mean each Shareholder's respective percentage ownership interest in the Company
as set forth on EXHIBIT A.
SECTION 12.14 REGULATIONS. The term "Regulations" shall mean any and
all regulations promulgated by the Department of the Treasury pursuant to the
Internal Revenue Code of 1986, as amended.
SECTION 12.15 TAXES. The term "Tax or Taxes" means any federal, state,
local, foreign or other income, gross receipts, ad valorem, franchise, profits,
sales or use, transfer, registration, excise, utility, environmental,
communications, real or personal property, capital stock, license, payroll, wage
or other withholding, employment, social security, severance, transfer, stamp,
occupation, alternative or add-on minimum, estimated or other taxes of any kind
whatsoever (including, without limitation, fines, deficiencies, penalties,
additions to tax, and interest attributable thereto) whether disputed or not.
SECTION 12.16 USED. The term "Used" shall mean, with respect to the
Properties, Contracts or Permits of the Company or the Subsidiary, those owned,
leased, licensed or otherwise held by the Company or the Subsidiary which were
acquired for use or held for use by the Company or the Subsidiary in connection
with the Company's business and operations, whether or not reflected on the
Company's or the Subsidiary's books of account.
SECTION 12.17 2CONNECT ASSETS. The term "2Connect Assets" shall mean,
with respect to 2Connect, all of the Properties, Contracts, and Permits, that
were Used by 2Connect as of the Interim Balance Sheet Date and those Used by
2Connect at any time after that date until the Closing Date.
ARTICLE XIII
Notwithstanding any contrary provision of, or contrary interpretation
of, this Agreement, the obligations of the Company and the Shareholders to
consummate the transactions contemplated by this Agreement, including the
Merger, are subject to the condition precedent set forth in this Article XIII
with respect to that certain lawsuit filed in Jefferson County, Alabama, the
case number being CV-9802407 ("the Lawsuit"), the plaintiffs being
Xxxxx-Xxxxxxxxx Trust, Xxxxxx X. Xxxxx R/O XXX, Xxxxx X. Xxxxx & Xxxxxx X. Xxxxx
JTWROS, and Xxxxx X. Xxxxx XXX, on behalf of themselves and others similarly
situated, and the defendants being Xxxx X. Xxxxxxx, Xxxxx Xxxxxxx, Xxx Xxxxxxx,
Xxxxx Xxxxx, Xxxx Xxxxxx, Xxxxxx Xxxxxx, and Xxxxxx, Xxxx & Xxxxx, Inc. If the
Company and the Shareholders conclude, in their sole discretion, that the
Lawsuit may adversely affect, directly or indirectly, the Company, the
Shareholders, 2Connect, Acquisition, the Merger, or any transaction contemplated
by this Agreement, then the Corporation and the Shareholders shall be entitled
to terminate this Agreement prior to the consummation of the Merger; provided,
further, any such termination shall not cause the Company and the Shareholders
to have any liability, directly or indirectly, with respect to this Agreement,
and this Agreement shall be deemed to be void ab initio.
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EXECUTED as of the date first written above.
2CONNECT EXPRESS, INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------
Title: CEO (Interim)
-----------------------------
2CONNECT ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------
Title: CEO (Interim)
-----------------------------
XXXXX XXXXXXX CELLULAR SYSTEMS OF
FLORIDA, INC.
By: /s/ Xxxxxx X. XxXxxxxx
-----------------------------------
Name: Xxxxxx X. XxXxxxxx
------------------------------
Title: CEO
-----------------------------
SHAREHOLDERS:
/s/ Xxxxxx X. XxXxxxxx
-----------------------------------
Xxxxxx X. XxXxxxxx
/s/ Xxxxx X. Xxxxx
-----------------------------------
Xxxxx X. Xxxxx
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EXHIBIT B
---------
o Current ownership of the Company Common Stock referred to in Section
3.02 of the Merger Agreement:
Number Ownership
Name of Shareholder of Shares Percentage
------------------- --------- ----------
Xxxxxx X. XxXxxxxx 2,000 50%
Xxxxx X. Xxxxx 2,000 50%
----- ----
4,000 100%
===== ====
o The Voting Stock to be received by Shareholders, as referred to in
subsection 1.05(a) of the Merger Agreement, shall be allocated equally
between Xxxxxx X. XxXxxxxx and Xxxxx X. Xxxxx.
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EXHIBIT C
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("this Agreement") is made and entered into
to be effective for all purposes as of the _____ day of ________________, 1998
("the Effective Date"), by and between 2Connect Express, Inc. ("Employer"), a
corporation organized and existing under the laws of the State of Florida, and
XXXXXX X. XxXXXXXX ("Employee"), a Florida resident.
W I T N E S S E T H:
- - - - - - - - - -
1. EMPLOYMENT. Employer hereby employs Employee as its Chief Executive
Officer and Employee hereby accepts such employment upon the terms and
conditions hereinafter set forth.
2. TERM. Subject to the provisions of termination set forth
hereinbelow, the initial term of this Agreement shall commence on the Effective
Date and shall expire three (3) years thereafter ("the Initial Term"). The
Initial Term shall be comprised of three (3) consecutive twelve (12) month
periods; moreover, for the purposes of this Agreement, each such period is
hereinafter referred to as a "twelve (12) month period", wherever such
terminology appears in this Agreement. Upon expiration of the Initial Term,
this Agreement shall be automatically renewed for successive one (1) year terms
unless sooner terminated in accordance with the provisions of termination set
forth hereinbelow. For the purposes of this Agreement, all references to "the
term of this Agreement", "the term hereof", the "term", or similar terminology
shall include the Initial Term and each renewal term; moreover, each renewal
term is hereinafter referred to as a "twelve (12) month period", wherever such
terminology appears in this Agreement.
3. COMPENSATION.
(a) During the first twelve (12) month period of this Agreement,
Employer shall pay Employee an annual salary of $135,000; provided further,
such salary shall be paid in periodic installments in accordance with
Employer's customary payroll practices. Upon the completion of each twelve (12)
month period of this Agreement, Employer's Board of Directors shall review
Employee's annual salary to determine Employee's annual salary with respect to
the twelve (12) month period immediately succeeding such completed twelve (12)
month period; however, Employee's annual salary for such immediately succeeding
twelve (12) month period shall, at a minimum, be six percent (6%) more than
Employee's annual salary for such completed twelve (12) month period.
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(b) Employer uses [A CALENDAR YEAR ENDING DECEMBER 31 OR A FISCAL YEAR ENDING
________________] for financial accounting and reporting purposes ("Employer
Year"). With respect to each partial or full Employer Year in which all or part
of any twelve (12) month period of this Agreement is included, Employee shall
be entitled to receive incentive compensation determined with reference to each
such Employer Year, as provided for in this Subsection (b). Employee shall be
entitled to receive incentive compensation determined with reference to the net
income earned during the partial Employer Year commencing as of the effective
time ("the Effective Time") of the merger between 2Connect Acquisition Corp.
and Xxxxx Xxxxxxx Cellular Systems of Florida, Inc., pursuant to that certain
merger agreement among 2Connect Acquisition Corp., Xxxxx Xxxxxxx Cellular
Systems of Florida, Inc., and Employer. For the purpose of this Agreement, the
Effective Time shall have the same meaning as that set forth in such merger
agreement. Employee shall also be entitled to receive incentive compensation
determined with reference to the net income earned during each full and partial
Employer Year occurring subsequent to the partial Employer Year that commenced
as of the Effective Time. For the purposes of this Subsection (b), each full
and partial Employer Year with respect to which Employee's incentive
compensation is to be determined is hereinafter referred to as an "Applicable
Employer Year". Employer's Board of Directors shall establish and approve an
incentive compensation plan with respect to Employee that incorporates the
provisions of this Subsection (b); however, Employee's incentive compensation
with respect to each Applicable Employer Year shall, at a minimum, be an amount
equal to two percent (2%) of Employer's net income for such Applicable Employer
Year. The term "net income", as used in this Subsection (b), shall be
determined in accordance with generally accepted accounting principles applied
consistently with respect to each Applicable Employer Year; provided, however,
any incentive compensation, bonuses, or other performance-based compensation
paid to any stockholders of Employer employed by Employer, and to any stock
option holders or any stock warrant holders employed by Employer, shall be
eliminated in calculating net income, and any net operating losses and net
operating loss carryforwards attributable to periods of time that occurred
prior to the Effective Date shall be eliminated in calculating net income. The
incentive compensation with respect to each Applicable Employer Year shall be
paid to Employee within ninety (90) days after the last day of such Applicable
Employer Year.
4. FRINGE BENEFITS.
(a) BENEFIT AND RETIREMENT PLANS. Upon meeting the applicable
eligibility requirements, Employee shall be entitled to be a participant in any
employee benefit plans, retirement plans, and deferred compensation plans
maintained by Employer.
(b) HEALTH INSURANCE. During the term of this Agreement, Employer
shall provide and maintain health insurance coverage for Employee. Such health
insurance shall cover Employee, Employee's spouse, and Employee's dependents.
Employer shall pay all of the
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health insurance premiums for Employee's coverage and for coverage of
Employee's spouse and dependents. Except as otherwise provided by the foregoing
provisions of this Subsection (b), such health insurance coverage shall be
comparable to the health insurance coverage provided to Employee by his former
employer, namely Xxxxx Xxxxxxx Cellular Systems of Florida, Inc., a Florida
corporation.
(c) BUSINESS LIABILITY INSURANCE. During the term of this Agreement,
Employer shall, at its expense, acquire and maintain business liability
insurance coverage as may be necessary to protect Employee for any claims
arising out of Employee's conduct, acts, or omissions arising within the scope
of employment hereunder.
(d) AUTOMOBILE. During the term of this Agreement, Employer shall, at
its expense, provide Employee with an automobile for use by Employee in
connection with rendering services on behalf of Employer; moreover, with
respect to Employee's use of such automobile, Employer shall pay directly, or
reimburse Employee for, any expenses that are directly or indirectly related to
Employee's performance of services on behalf of Employer or to the furtherance
of Employer's business. Notwithstanding the foregoing provisions of this
Subsection (d), during the term of this Agreement, in lieu of providing
Employee with such automobile and covering such expenses, Employer shall, at
Employee's request and in Employee's sole discretion, provide employee with an
automobile allowance in the event Employee desires to use his personal
automobile instead of using an automobile provided by Employer.
(e) BUSINESS EXPENSES. During the term of this Agreement, Employer
shall pay directly, or reimburse Employee for, reasonable business expenses
incurred by Employee that are directly or indirectly related to Employee's
performance of services on behalf of Employer or to the furtherance of
Employer's business. Employee shall keep appropriate records and documentation
for such expenses in accordance with policies established by Employer and
communicated to Employee.
(f) SUPPLEMENTAL RETIREMENT BENEFIT. In addition to any retirement
plans or deferred compensation plans of Employer in which Employee is entitled
to participate, Employer shall establish for Employee's benefit a supplemental
retirement plan through the use of a split-dollar life insurance arrangement
("the Split-Dollar Plan"). To implement the Split-Dollar Plan, Employee shall
obtain, in Employee's name, a permanent life insurance policy ("the Policy") in
a face amount that will cause the annual premium for the Policy to exceed the
annual cost of term life insurance protection on the life of Employee by
$15,000 ("Excess Premium"). Employee shall be the owner of the Policy;
moreover, Employee shall execute a collateral assignment in favor of Employer.
Employer shall pay all premiums with respect to the Policy. Each Excess Premium
shall be credited to cash surrender value. Each Excess Premium, as well as all
earnings thereon, shall be set aside for Employee's benefit. In the event the
use of any Excess Premium in the foregoing manner causes Employee to recognize
taxable income, Employer shall pay to Employee a bonus that will provide
Employee with a net amount that is sufficient to pay income taxes attributable
to such use of such Excess Premium. As long as the Split-Dollar Plan is in
force,
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Employer shall be entitled to receive the death benefit attributable to the
term life insurance protection on the life of Employee; provided, however,
Employee's designated beneficiary or beneficiaries shall be entitled to receive
any remaining death benefit that is not attributable to such term life
insurance protection. Upon the termination of the Split-Dollar Plan, which
termination shall occur in the event Employee's employment hereunder is
terminated for any reason whatsoever, Employee's designated beneficiary or
beneficiaries shall be entitled to receive all death benefits from the Policy.
The net cash surrender value of the Policy shall at all times be the sole and
exclusive property of Employee. In connection with Employer's implementation of
the Split-Dollar Plan, Employer and Employee shall execute a definitive
agreement for the same; provided, however, at a minimum, such agreement shall
incorporate the provisions of this Subsection (f).
(g) DISABILITY INSURANCE. During the term of this Agreement, Employer
shall, at its expense, provide and maintain disability insurance coverage for
the benefit of Employee. Such coverage shall pertain to both partial disability
and total disability; moreover, such coverage shall, at all times, permit
Employee to receive the maximum disability benefit allowed by the applicable
insurer, as determined with respect to Employee's compensation.
(h) STOCK OPTIONS. During the term of this Agreement, Employee shall
be entitled to participate in Employer's stock option plan with respect to
Employer's capital stock. Such stock option plan provides all of Employer's
employees with grants to purchase, on an aggregate basis, ten percent (10%) of
the issued and outstanding capital stock of Employer. Employee's participation
rights with respect to such stock option plan shall, at a minimum, be identical
to the rights possessed by other executive and management employees of Employer
under such stock option plan.
(i) SEVERANCE COMPENSATION. If Employee terminates Employee's
employment hereunder pursuant to Section 10(c) hereinbelow, then in addition to
the compensation and benefits to which Employee is otherwise entitled as of
such termination date, Employer shall pay to Employee as severance compensation
an amount equal to two-thirds (2/3) of Employee's annual salary in effect
immediately prior to such termination. If Employer terminates Employee's
employment hereunder pursuant to Section 10(c) hereinbelow with respect to any
renewal term, then in addition to the compensation and benefits to which
Employee is otherwise entitled as of such termination date, Employer shall pay
to Employee as severance compensation an amount equal to one-fourth (1/4) of
Employee's annual salary in effect immediately prior to such termination.
(j) OTHER BENEFITS. During the term of this Agreement, in addition to
the fringe benefits discussed hereinabove, Employee shall be entitled to
participate in any other fringe benefits that are generally made available by
Employer to other executive and management employees of Employer.
- 4 -
41
5. DUTIES. Employee is hereby engaged to render services, on behalf of
Employer, in accordance with the laws of the State of Florida, applicable
federal and state laws and regulations, and any applicable ethics rules.
Employee shall perform the duties that are assigned from time to time by
Employer's Board of Directors. Employer and Employee acknowledge and agree that
Employee shall perform such duties customarily performed by similarly situated
executive and management employees of companies of a size and stature
qualitatively and quantitatively comparable to Employer.
6. DEVOTION OF FULL-TIME TO EMPLOYER'S BUSINESS. During the term of
this Agreement, Employee shall devote Employee's full attention and best
efforts to the business of Employer. Except as otherwise provided in this
Section 6, during the term of this Agreement, Employee shall not engage in or
carry on or be employed by, directly or indirectly, any other business or
profession, whether or not such other business or profession is in competition
with Employer's business. Employee shall not write with respect to, or speak
on, any aspect of Employer's business, without the prior written consent of
Employer. Employee may, with the advance approval of Employer, seek and accept
any elective or appointive office or position within any recognized trade or
business association, attend meetings, seminars and conventions, and perform
such other business activities as may be mutually agreed upon by Employee and
Employer. Nothing herein contained shall prohibit Employee from investing or
trading in stocks, bonds, commodities or other securities or forms of
investments, including real property, provided such activities do not require
an unreasonable amount of time by Employee and do not otherwise adversely
affect Employer's business or Employee's performance of services on behalf of
Employer under this Agreement.
7. BUSINESS OF EMPLOYER.
(a) BUSINESS POLICIES AND PROCEDURES. Employer shall have the
authority to establish from time to time the business policies and procedures
to be followed by Employee in performing services for Employer. Employee shall
comply with all such policies and procedures, including Employer's drug testing
policies and procedures.
(b) CLIENTELE. Employer shall have the authority to determine who
shall be accepted as clients, customers, and contractors of Employer, and
Employee recognizes that such accepted clients, customers, or contractors are
Employer's, not Employee's clients, customers, or contractors.
8. VACATIONS. With respect to the each twelve (12) month period of
this Agreement, Employee shall be entitled to paid vacation, at times to be
determined by Employer, in the manner most convenient to Employer's business,
and in accordance with Employer's policies. Such policies shall be comparable
to those commonly established by companies of a size and stature qualitatively
and quantitatively comparable to Employer. Unused vacation days shall be
carried over into future periods. In the event Employee's employment hereunder
is terminated
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42
for any reason whatsoever, Employer shall pay additional compensation to
Employee for any unused vacation days, based on Employee's annual salary in
effect as of the date of such termination.
9. ILLNESS OR INCAPACITY.
(a) If Employee becomes unable to devote the required time to the
business of Employer during the term of this Agreement because of illness,
incapacity, or disability, then during the period commencing with the date of
such illness, incapacity, or disability and ending ninety (90) days thereafter,
Employee shall continue to receive Employee's annual salary with respect to
such period, in accordance with Section 3(a) hereinabove. Any amounts due to
Employee pursuant to this Subsection (a) shall be reduced by the amount of
disability benefits received by Employee as a result of disability insurance
coverage purchased and paid for by Employer.
(b) If Employee shall not have resumed his duties on or before the
last day of the period specified in Subsection (a) immediately above, then
Employee's employment hereunder shall be deemed terminated as of the end of
said period, provided that Employee is then receiving disability benefits. If
employee is not receiving disability benefits as of the end of said period,
Employer shall commence to pay to Employee monthly payments based on two-thirds
(2/3) of Employee's annual salary in effect immediately prior to Employee's
illness, incapacity, or disability.
(c) If Employee resumes his duties at any time on or before the last
day of the period specified Subsection (a) immediately above, and if Employee
continues to devote his required time to the business of Employer for at least
thirty (30) days following resumption of his duties, then the period specified
in Subsection (a) immediately above shall be deemed a separate and an
independent period with respect to any illness, incapacity, or disability of
Employee that arises after said resumption of duties and said devotion of time
to Employer's business, and any subsequent period specified in Subsection (a)
immediately above shall commence to run in the event of Employee's failure to
carry out his duties after said resumption of duties and said devotion of time,
because of illness, incapacity, or disability. However, if such resumed period
of work is less than thirty (30) days, the portion of the period specified in
Subsection (a) immediately above that immediately precedes Employee's resumed
period of work shall be aggregated with the period of illness or incapacity
immediately following Employee's resumed period of work and treated as a single
period in determining the payments and the periods of time set forth in
Subsection (a) immediately above and in determining the termination date of
Employee's employment pursuant to Subsection (b) immediately above.
(d) Any dispute regarding the existence, extent, or continuance of
Employee's illness, incapacity, or disability shall be resolved by the
determination of a majority of three (3) competent and reputable
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43
physicians who are not employees or contractors of Employer, one of whom shall
be selected by Employee, one of whom shall be selected by Employer, and the
third of whom shall be selected jointly by the other two (2) physicians. The
determination of said physicians shall be binding upon the parties hereto. The
costs of such determination shall be borne by Employer.
10. TERMINATION OF EMPLOYMENT.
(a) Employee may terminate his employment hereunder, without cause,
upon ninety (90) days prior written notice. Upon Employer's receipt of such
notice from Employee, Employer shall have the right to pay Employee, in
advance, the compensation to which Employee is otherwise entitled for such
ninety (90) day period and demand that Employee physically leave Employer's
business premises; provided, further, Employer shall pay to Employee any other
compensation and benefits to which Employee is entitled as of such termination
date by virtue of any other provisions of this Agreement. With respect to any
renewal term, either party may terminate Employee's employment hereunder upon
written notice, without cause, provided such notice is given at least one
hundred twenty (120) days prior to the commencement of such renewal term;
provided, further, Employer shall pay to Employee any compensation and benefits
to which Employee is entitled as of such termination date.
(b) Except as otherwise provided in Subsection (a) immediately above,
Employer may terminate the employment of Employee hereunder, without notice,
only upon Employee's failure to perform the duties assigned to him by
Employer's Board of Directors, or for good cause. For the purpose of this
Agreement, the term "good cause" shall mean: (1) a pattern of conduct which
tends to hold Employer up to ridicule, or which adversely affects Employer, in
the business community pertaining to Employer's business, (2) engaging in
conduct disloyal to Employer, (3) non-diligent performance of duties, (4)
failure to appear for work during regularly scheduled hours without a
sufficient reason, (5) conviction of any felony crime, and (6) dependence upon,
or abuse of, any addictive substance, including but not limited to, alcohol,
amphetamines, barbiturates, LSD, cocaine, marijuana, or narcotic drugs.
Notwithstanding the foregoing, Employee's employment may not be terminated for
any conduct set forth in clauses (1) through (4) above unless such conduct
continues after Employer has served written demand on Employee to cease or
rectify such conduct and Employee has failed to comply with such demand. For
the purposes of clause (6) above, a determination of such dependence or such
abuse shall be made by the decision of a majority of three (3) competent and
reputable physicians who are not employees or contractors of Employer, one of
whom shall be selected by Employer, one of whom shall be selected by Employee,
and the third of whom shall be selected jointly by the other two (2)
physicians; provided, further, the determination of said physicians shall be
binding upon the parties hereto, and the costs of such determination shall be
borne by Employer.
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44
(c) Employee may immediately terminate his employment with Employer
hereunder, without notice, upon Employer's breach of any material provision of
this Agreement.
11. EMPLOYEE PURCHASE OF INSURANCE UPON TERMINATION.
(a) Except for and excluding any life insurance policies that are the
subject matter of the Split-Dollar Plan (which policies shall be exclusively
governed by Section 4(f) hereinabove), in the event of the termination of
Employee's employment for any reason whatsoever, other than the death of
Employee, then and in that event, Employee shall be entitled to purchase from
Employer at any time within thirty (30) days after the effective date of the
termination of his employment any life insurance policies on the life of
Employee that are owned by Employer. The purchase price of such policies shall
be equal to the sum of the following items:
(1) the cash surrender value thereof, if any, calculated on a
prorated basis to the date of termination, exclusive of any dividend, dividend
accumulations or policy loans, but inclusive of the cash value of any paid-up
insurance additions; plus
(2) the prorated portion of any premiums paid prior to such
termination date which covers a period extending beyond such termination date;
plus
(3) any dividends or dividend accumulations, and less
(4) any policy loan plus interest then due.
(b) Employer shall have the right to deduct from any payment of
compensation owed to Employee, the purchase price described in Subsection (a)
above, or any portion thereof.
12. COVENANT NOT TO COMPETE.
(a) Employee recognizes and agrees that by virtue of his employment
with Employer, he will be afforded opportunities to become known to various
referral sources, clients, customers, and contractors of Employer, and
prospective clients, customers, and contractors of Employer. Employee
recognizes that these opportunities are valuable rights, are of great personal
benefit to him in his professional or business endeavors, and therefore provide
a sufficient basis for the restrictive covenants contained herein. In
recognition of the above, and in further consideration of this Agreement,
Employee further agrees that, during the term of this Agreement and for a
period of twelve (12) months from the date of the termination of Employee's
employment with Employer for any reason whatsoever, Employee shall not directly
within the "restricted geographical area" enter into or engage in any endeavors
in competition with the business of Employer as it exists as of the termination
of Employee's employment, as an individual on his own account, or as a partner,
an employee or an agent for any partnership, entity, or corporation, or as an
officer or a director of
- 8 -
45
a corporation. For the purpose of this Agreement, the "restricted geographical
area" shall encompass the following area: the ten (10) mile radius of each
retail store at which Employer is conducting business as of the termination of
Employee's employment.
(b) The period of time during which Employee is prohibited from
engaging in the business practices specified in Subsection (a) above shall be
extended by any length of time during which Employee is in breach of any
covenant specified in Subsection (a) above.
(c) It is acknowledged and agreed by the parties hereto that the
foregoing restrictive covenants are essential elements of this Agreement, and
that, but for the agreement of Employee to comply with such covenants, Employer
would not have agreed to enter into this Agreement. Such covenants by Employee
shall be construed as agreements independent of any other provision in this
Agreement. The existence of any claim or cause of action of Employee against
Employer, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Employer of such covenants.
(d) It is agreed by parties hereto that if any covenant set forth in
this Section 12 is held to be unreasonable, arbitrary, or against public
policy, then such covenant shall be considered divisible both as to time and as
to geographical area. Employer and Employee agree that, if any court of
competent jurisdiction determines the specified time period or the specified
geographical area to be unreasonable, arbitrary, or against public policy, then
a lesser time period or geographical area which is determined to be reasonable,
non-arbitrary, and not against public policy may be enforced against Employee.
Employer and Employee agree that the foregoing covenants are appropriate and
reasonable when considered in light of the nature and extent of the business
conducted by Employer.
(e) In the event of the breach or threatened breach by Employee of the
covenants contained herein, Employee agrees that Employer shall be entitled to
injunctions, both preliminary and final, upon Employer's providing bond or
security, enjoining and restraining such breach or threatened breach, and such
remedies shall be in addition to all other remedies which may be available to
Employer either at law or in equity. Employer and Employee agree and
acknowledge that a violation of any covenant contained herein shall cause
Employer to suffer irreparable damages and Employee agrees that he is estopped
from subsequently asserting in any action to enforce the provisions of any
covenant contained herein that Employer has an adequate remedy at law and
therefore is not entitled to injunctive relief.
(f) Notwithstanding anything contained herein to the contrary, this
Section 12 shall not be applicable if Employee's employment is terminated for
any reason whatsoever within twelve (12) months after the Effective Date.
13. BUSINESS RECORDS. All business records, contracts, business
documents, and data of any type concerning clients, customers, or
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46
contractors of Employer, or concerning any aspect of Employer's business, shall
be and shall remain the property of Employer, notwithstanding the subsequent
termination of this Agreement for any reason whatsoever. Employee hereby agrees
that any and all of the aforesaid items, and any directly or indirectly related
information of any nature, are solely Employer's property. Employee further
agrees that upon the termination of his employment at any time for any reason
whatsoever, any and all of the aforesaid items, and any directly or indirectly
related information of any nature, shall continue to be Employer's property.
Employee further agrees that now and upon termination of his employment at any
time for any reason whatsoever, such aforesaid items and such related
information shall not be removed from Employer's premises and shall not be
copied by facsimile, notation or otherwise, without the prior written consent
of Employer or Employer's Board of Directors.
14. DISCLOSURE. During the term of this Agreement, Employee shall
disclose, and disclose only to Employer, all ideas, methods, plans, development
or improvements known by him which relate directly or indirectly to the
business of Employer, whether acquired by Employee before or during his
employment with Employer; provided, however, nothing in this Section 14 shall
be construed as requiring any such communication or disclosure where the idea,
plan, method, development, or improvement is lawfully protected from disclosure
as a trade secret of a third party or by any other lawful prohibition against
such communication or disclosure.
15. CONFIDENTIALITY. Employee agrees to keep in strict secrecy and
confidence any and all information Employee assimilates or to which he has
access during his employment with Employer, and which has not been publicly
disclosed and is not a matter of common knowledge in the business in which
Employer is engaged. Employee agrees that both during and after the term of his
employment with Employer, he will not, without the prior written consent of
Employer or Employer's Board of Directors, disclose any such confidential
information to any third person, individual, partnership, joint venture,
company, limited liability company, corporation, organization, or other entity.
16. SPECIFIC PERFORMANCE. Employee agrees that damages at law will be
an insufficient remedy to Employer in the event that Employee violates the
terms of Sections 12, 13, 14, or 15 of this Agreement, and that Employer, upon
application to a court of competent jurisdiction, shall be entitled to obtain
injunctive relief to enforce the provisions of such Sections, which injunctive
relief shall be in addition to any other rights or remedies available to
Employer. Employee shall reimburse Employer for all costs and expenses that
directly or indirectly relate to Employer's successful enforcement of the terms
of Sections 12, 13, 14, or 15 of this Agreement, including reasonable
attorneys' fees incurred before trial, at trial, and in any appellate,
arbitration, or mediation proceedings; provided, further, Employer shall
reimburse Employee for all costs and expenses that directly or indirectly
relate to Employee's successful defense of the terms of Section 12, 13, 14, or
15 of the this Agreement, or to Employer's unsuccessful enforcement
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47
of the terms of Section 12, 13, 14, or 15 of this Agreement, including
reasonable attorneys' fees incurred before trial, at trial, and in any
appellate, arbitration, or mediation proceedings.
17. COMPLIANCE WITH OTHER AGREEMENTS. Employee represents and warrants
that the execution of this Agreement by him and the performance of his
obligations hereunder will not conflict with, result in a breach of, cause the
termination of, or constitute a default under any other agreement to which
Employee is a party or by which Employee is or may be bound. Employee agrees
and promises to indemnify and hold harmless Employer from all loss, liability,
claims, and expenses of any kind whatsoever, to which Employer is or might be
subjected, either directly or indirectly, as a result of a breach by Employee
of the representation and warranty specified in this Section 17.
18. NOTICE TO PARTIES. Any notice or other communication which is
required or which may be given under this Agreement shall be in writing and
shall be deemed to be effective (a) upon receipt if personally delivered or
transmitted by telecopy or similar electronic transmission method; (b) upon
receipt, if sent by recognized expedited delivery service; and (c) upon
receipt, if mailed certified mail, return receipt requested, first class
postage prepaid. In each case, notice shall be given to the parties hereto at
the following addresses:
To Employer at: 2Connect Express, Inc.
0000 XX 00xx Xxxxxx, Xxxxx 0
Xxxxxxxxxx, Xxxxxxx 00000
Attn:____________________
Facsimile No. 000-000-0000
With copy to: ----------------------------
----------------------------
----------------------------
----------------------------
----------------------------
----------------------------
To Employee at: ----------------------------
----------------------------
----------------------------
----------------------------
----------------------------
Facsimile No.
---------------
With a copy to: Xxxxxxxxxxx X. Xxxxxx, Esq.
Xxxxx & Associates, P.A.
000 Xxxxx Xxxx Xxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Facsimile No. 000-000-0000
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48
Either party may change such party's address for the purposes of this Agreement
by giving written notice of the new address to the other party in accordance
with any medium described hereinabove. Rejection or other refusal to accept
delivery of any notice or communication required or permitted to be given under
this Agreement shall cause the same to be effective when sent. The inability to
deliver any notice or communication required or permitted to be given under
this Agreement because of a changed address for which no notice was given shall
cause the same to be effective when sent.
19. WAIVER OF BREACH. No assent or waiver, express or implied, of any
breach of any one or more of the covenants, conditions or provisions of this
Agreement shall be deemed a waiver of any subsequent breach, or a waiver of any
other covenant, condition or provision of this Agreement.
20. BINDING EFFECT. The rights and obligations of the parties under
this Agreement shall inure to the benefit of, and shall be binding upon, the
respective heirs, devisees, executors, administrators, legal representatives,
personal representatives, successors and assigns of the parties.
21. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Florida. The state courts of
Florida shall have exclusive jurisdiction over any judicial proceeding relating
to any dispute arising out of the interpretation, performance, or breach of
this Agreement.
22. ENTIRE AGREEMENT. This Agreement contains all representations and
the entire understanding and agreement between the parties. Correspondence,
memoranda or agreements, whether written or oral, originating before the date
of this Agreement are replaced in total by this Agreement unless otherwise
specifically provided for in this Agreement.
23. ATTORNEY'S FEES. The prevailing party to a dispute between, or
litigation between, the parties hereto, if said dispute or litigation relates
to this Agreement, shall be entitled to reimbursement from the non-prevailing
party or parties for such prevailing party's reasonable costs and expenses,
including reasonable attorneys' fees. For purposes of this Agreement, the
"prevailing party" shall be deemed to be that party who obtains substantially
the result sought, whether by settlement, mediated or otherwise, dismissal, or
judgment. For purposes of this Agreement, the term "reasonable attorneys' fees"
shall include, without limitation, the actual attorneys' fees incurred in
retaining counsel for advice, negotiations, suit, appeal, or any other legal
proceeding, including mediation and arbitration.
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49
24. HEADINGS. The titles and headings of the various sections of this
Agreement are intended solely for convenience of reference and are not intended
to explain, modify or place any interpretation upon any of the provisions of
this Agreement.
25. AMENDMENT. This Agreement may be amended only by a writing signed
by both of the parties hereto.
26. SEVERABILITY. If any part of this Agreement is determined to be
illegal or unenforceable, all other parts shall be given effect separately and
shall not be affected.
27. ADDITIONAL DOCUMENTS. Each party hereto agrees to execute and
acknowledge, if required, any and all other documents and writings which may be
necessary to carry out the purposes and provisions of this Agreement.
28. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
29. INTERPRETATION. The language used in this Agreement shall not be
construed in favor of or against either of the parties hereto, but shall be
construed as if both of the parties hereto prepared this Agreement. The
language used in this Agreement shall be deemed to be the language chosen by
the parties hereto to express their mutual intent, and no rule of strict
construction shall be applied against any such party.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates or date set forth hereinbelow to be effective as of the Effective Date
2CONNECT EXPRESS, INC.
By:
------------------------------ --------------------------------
Xxxxxx X. XxXxxxxx Printed Name:
----------------------
Title: Its President
Date: Date:
------------------------- ------------------------------
By:
--------------------------------
Printed Name:
----------------------
Title: Its Secretary
Date:
------------------------------ ------------------------------
Signature of Witness
------------------------------
Printed Name of Witness
------------------------------
Signature of Witness
------------------------------
Printed Name of Witness
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50
EXHIBIT D
---------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("this Agreement") is made and entered into
to be effective for all purposes as of the _____ day of ________________, 1998
("the Effective Date"), by and between 2Connect Express, Inc. ("Employer"), a
corporation organized and existing under the laws of the State of Florida, and
XXXXX X. XXXXX ("Employee"), a Florida resident.
W I T N E S S E T H:
1. EMPLOYMENT. Employer hereby employs Employee as its President and
Employee hereby accepts such employment upon the terms and conditions
hereinafter set forth.
2. TERM. Subject to the provisions of termination set forth
hereinbelow, the initial term of this Agreement shall commence on the Effective
Date and shall expire three (3) years thereafter ("the Initial Term"). The
Initial Term shall be comprised of three (3) consecutive twelve (12) month
periods; moreover, for the purposes of this Agreement, each such period is
hereinafter referred to as a "twelve (12) month period", wherever such
terminology appears in this Agreement. Upon expiration of the Initial Term, this
Agreement shall be automatically renewed for successive one (1) year terms
unless sooner terminated in accordance with the provisions of termination set
forth hereinbelow. For the purposes of this Agreement, all references to "the
term of this Agreement", "the term hereof", the "term", or similar terminology
shall include the Initial Term and each renewal term; moreover, each renewal
term is hereinafter referred to as a "twelve (12) month period", wherever such
terminology appears in this Agreement.
3. COMPENSATION.
(a) During the first twelve (12) month period of this Agreement,
Employer shall pay Employee an annual salary of $135,000; provided further, such
salary shall be paid in periodic installments in accordance with Employer's
customary payroll practices. Upon the completion of each twelve (12) month
period of this Agreement, Employer's Board of Directors shall review Employee's
annual salary to determine Employee's annual salary with respect to the twelve
(12) month period immediately succeeding such completed twelve (12) month
period; however, Employee's annual salary for such immediately succeeding twelve
(12) month period shall, at a minimum, be six percent (6%) more than Employee's
annual salary for such completed twelve (12) month period.
51
(b) Employer uses [A CALENDAR YEAR ENDING DECEMBER 31 OR A FISCAL YEAR ENDING
________________] for financial accounting and reporting purposes ("Employer
Year"). With respect to each partial or full Employer Year in which all or part
of any twelve (12) month period of this Agreement is included, Employee shall be
entitled to receive incentive compensation determined with reference to each
such Employer Year, as provided for in this Subsection (b). Employee shall be
entitled to receive incentive compensation determined with reference to the net
income earned during the partial Employer Year commencing as of the effective
time ("the Effective Time") of the merger between 2Connect Acquisition Corp. and
Xxxxx Xxxxxxx Cellular Systems of Florida, Inc., pursuant to that certain merger
agreement among 2Connect Acquisition Corp., Xxxxx Xxxxxxx Cellular Systems of
Florida, Inc., and Employer. For the purpose of this Agreement, the Effective
Time shall have the same meaning as that set forth in such merger agreement.
Employee shall also be entitled to receive incentive compensation determined
with reference to the net income earned during each full and partial Employer
Year occurring subsequent to the partial Employer Year that commenced as of the
Effective Time. For the purposes of this Subsection (b), each full and partial
Employer Year with respect to which Employee's incentive compensation is to be
determined is hereinafter referred to as an "Applicable Employer Year".
Employer's Board of Directors shall establish and approve an incentive
compensation plan with respect to Employee that incorporates the provisions of
this Subsection (b); however, Employee's incentive compensation with respect to
each Applicable Employer Year shall, at a minimum, be an amount equal to two
percent (2%) of Employer's net income for such Applicable Employer Year. The
term "net income", as used in this Subsection (b), shall be determined in
accordance with generally accepted accounting principles applied consistently
with respect to each Applicable Employer Year; provided, however, any incentive
compensation, bonuses, or other performance-based compensation paid to any
stockholders of Employer employed by Employer, and to any stock option holders
or any stock warrant holders employed by Employer, shall be eliminated in
calculating net income, and any net operating losses and net operating loss
carryforwards attributable to periods of time that occurred prior to the
Effective Date shall be eliminated in calculating net income. The incentive
compensation with respect to each Applicable Employer Year shall be paid to
Employee within ninety (90) days after the last day of such Applicable Employer
Year.
4. FRINGE BENEFITS.
(a) BENEFIT AND RETIREMENT PLANS. Upon meeting the applicable
eligibility requirements, Employee shall be entitled to be a participant in any
employee benefit plans, retirement plans, and deferred compensation plans
maintained by Employer.
(b) HEALTH INSURANCE. During the term of this Agreement, Employer shall
provide and maintain health insurance coverage for Employee. Such health
insurance shall cover Employee, Employee's spouse, and Employee's dependents.
Employer shall pay all of the
2
52
health insurance premiums for Employee's coverage and for coverage of Employee's
spouse and dependents. Except as otherwise provided by the foregoing provisions
of this Subsection (b), such health insurance coverage shall be comparable to
the health insurance coverage provided to Employee by his former employer,
namely Xxxxx Xxxxxxx Cellular Systems of Florida, Inc., a Florida corporation.
(c) BUSINESS LIABILITY INSURANCE. During the term of this Agreement,
Employer shall, at its expense, acquire and maintain business liability
insurance coverage as may be necessary to protect Employee for any claims
arising out of Employee's conduct, acts, or omissions arising within the scope
of employment hereunder.
(d) AUTOMOBILE. During the term of this Agreement, Employer shall, at
its expense, provide Employee with an automobile for use by Employee in
connection with rendering services on behalf of Employer; moreover, with respect
to Employee's use of such automobile, Employer shall pay directly, or reimburse
Employee for, any expenses that are directly or indirectly related to Employee's
performance of services on behalf of Employer or to the furtherance of
Employer's business. Notwithstanding the foregoing provisions of this Subsection
(d), during the term of this Agreement, in lieu of providing Employee with such
automobile and covering such expenses, Employer shall, at Employee's request and
in Employee's sole discretion, provide employee with an automobile allowance in
the event Employee desires to use his personal automobile instead of using an
automobile provided by Employer.
(e) BUSINESS EXPENSES. During the term of this Agreement, Employer
shall pay directly, or reimburse Employee for, reasonable business expenses
incurred by Employee that are directly or indirectly related to Employee's
performance of services on behalf of Employer or to the furtherance of
Employer's business. Employee shall keep appropriate records and documentation
for such expenses in accordance with policies established by Employer and
communicated to Employee.
(f) SUPPLEMENTAL RETIREMENT BENEFIT. In addition to any retirement
plans or deferred compensation plans of Employer in which Employee is entitled
to participate, Employer shall establish for Employee's benefit a supplemental
retirement plan through the use of a split-dollar life insurance arrangement
("the Split-Dollar Plan"). To implement the Split-Dollar Plan, Employee shall
obtain, in Employee's name, a permanent life insurance policy ("the Policy") in
a face amount that will cause the annual premium for the Policy to exceed the
annual cost of term life insurance protection on the life of Employee by $10,000
("Excess Premium"). Employee shall be the owner of the Policy; moreover,
Employee shall execute a collateral assignment in favor of Employer. Employer
shall pay all premiums with respect to the Policy. Each Excess Premium shall be
credited to cash surrender value. Each Excess Premium, as well as all earnings
thereon, shall be set aside for Employee's benefit. In the event the use of any
Excess Premium in the foregoing manner causes Employee to recognize taxable
income, Employer shall pay to Employee a bonus that will provide Employee with a
net amount that is sufficient to pay income taxes attributable to such use of
such Excess Premium. As long as the Split-Dollar Plan is in force,
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Employer shall be entitled to receive the death benefit attributable to the term
life insurance protection on the life of Employee; provided, however, Employee's
designated beneficiary or beneficiaries shall be entitled to receive any
remaining death benefit that is not attributable to such term life insurance
protection. Upon the termination of the Split-Dollar Plan, which termination
shall occur in the event Employee's employment hereunder is terminated for any
reason whatsoever, Employee's designated beneficiary or beneficiaries shall be
entitled to receive all death benefits from the Policy. The net cash surrender
value of the Policy shall at all times be the sole and exclusive property of
Employee. In connection with Employer's implementation of the Split-Dollar Plan,
Employer and Employee shall execute a definitive agreement for the same;
provided, however, at a minimum, such agreement shall incorporate the provisions
of this Subsection (f).
(g) DISABILITY INSURANCE. During the term of this Agreement, Employer
shall, at its expense, provide and maintain disability insurance coverage for
the benefit of Employee. Such coverage shall pertain to both partial disability
and total disability; moreover, such coverage shall, at all times, permit
Employee to receive the maximum disability benefit allowed by the applicable
insurer, as determined with respect to Employee's compensation.
(h) STOCK OPTIONS. During the term of this Agreement, Employee shall be
entitled to participate in Employer's stock option plan with respect to
Employer's capital stock. Such stock option plan provides all of Employer's
employees with grants to purchase, on an aggregate basis, ten percent (10%) of
the issued and outstanding capital stock of Employer. Employee's participation
rights with respect to such stock option plan shall, at a minimum, be identical
to the rights possessed by other executive and management employees of Employer
under such stock option plan.
(i) SEVERANCE COMPENSATION. If Employee terminates Employee's
employment hereunder pursuant to Section 10(c) hereinbelow, then in addition to
the compensation and benefits to which Employee is otherwise entitled as of such
termination date, Employer shall pay to Employee as severance compensation an
amount equal to two-thirds (2/3) of Employee's annual salary in effect
immediately prior to such termination. If Employer terminates Employee's
employment hereunder pursuant to Section 10(c) hereinbelow with respect to any
renewal term, then in addition to the compensation and benefits to which
Employee is otherwise entitled as of such termination date, Employer shall pay
to Employee as severance compensation an amount equal to one-fourth (1/4) of
Employee's annual salary in effect immediately prior to such termination.
(j) OTHER BENEFITS. During the term of this Agreement, in addition to
the fringe benefits discussed hereinabove, Employee shall be entitled to
participate in any other fringe benefits that are generally made available by
Employer to other executive and management employees of Employer.
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5. DUTIES. Employee is hereby engaged to render services, on behalf of
Employer, in accordance with the laws of the State of Florida, applicable
federal and state laws and regulations, and any applicable ethics rules.
Employee shall perform the duties that are assigned from time to time by
Employer's Board of Directors. Employer and Employee acknowledge and agree that
Employee shall perform such duties customarily performed by similarly situated
executive and management employees of companies of a size and stature
qualitatively and quantitatively comparable to Employer.
6. DEVOTION OF FULL-TIME TO EMPLOYER'S BUSINESS. During the term of
this Agreement, Employee shall devote Employee's full attention and best efforts
to the business of Employer. Except as otherwise provided in this Section 6,
during the term of this Agreement, Employee shall not engage in or carry on or
be employed by, directly or indirectly, any other business or profession,
whether or not such other business or profession is in competition with
Employer's business. Employee shall not write with respect to, or speak on, any
aspect of Employer's business, without the prior written consent of Employer.
Employee may, with the advance approval of Employer, seek and accept any
elective or appointive office or position within any recognized trade or
business association, attend meetings, seminars and conventions, and perform
such other business activities as may be mutually agreed upon by Employee and
Employer. Nothing herein contained shall prohibit Employee from investing or
trading in stocks, bonds, commodities or other securities or forms of
investments, including real property, provided such activities do not require an
unreasonable amount of time by Employee and do not otherwise adversely affect
Employer's business or Employee's performance of services on behalf of Employer
under this Agreement.
7. BUSINESS OF EMPLOYER.
(a) BUSINESS POLICIES AND PROCEDURES. Employer shall have the authority
to establish from time to time the business policies and procedures to be
followed by Employee in performing services for Employer. Employee shall comply
with all such policies and procedures, including Employer's drug testing
policies and procedures.
(b) CLIENTELE. Employer shall have the authority to determine who shall
be accepted as clients, customers, and contractors of Employer, and Employee
recognizes that such accepted clients, customers, or contractors are Employer's,
not Employee's clients, customers, or contractors.
8. VACATIONS. With respect to the each twelve (12) month period of this
Agreement, Employee shall be entitled to paid vacation, at times to be
determined by Employer, in the manner most convenient to Employer's business,
and in accordance with Employer's policies. Such policies shall be comparable to
those commonly established by companies of a size and stature qualitatively and
quantitatively comparable to Employer. Unused vacation days shall be carried
over into future periods. In the event Employee's employment hereunder is
terminated
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for any reason whatsoever, Employer shall pay additional compensation to
Employee for any unused vacation days, based on Employee's annual salary in
effect as of the date of such termination.
9. ILLNESS OR INCAPACITY.
(a) If Employee becomes unable to devote the required time to the
business of Employer during the term of this Agreement because of illness,
incapacity, or disability, then during the period commencing with the date of
such illness, incapacity, or disability and ending ninety (90) days thereafter,
Employee shall continue to receive Employee's annual salary with respect to such
period, in accordance with Section 3(a) hereinabove. Any amounts due to Employee
pursuant to this Subsection (a) shall be reduced by the amount of disability
benefits received by Employee as a result of disability insurance coverage
purchased and paid for by Employer.
(b) If Employee shall not have resumed his duties on or before the last
day of the period specified in Subsection (a) immediately above, then Employee's
employment hereunder shall be deemed terminated as of the end of said period,
provided that Employee is then receiving disability benefits. If employee is not
receiving disability benefits as of the end of said period, Employer shall
commence to pay to Employee monthly payments based on two-thirds (2/3) of
Employee's annual salary in effect immediately prior to Employee's illness,
incapacity, or disability.
(c) If Employee resumes his duties at any time on or before the last
day of the period specified Subsection (a) immediately above, and if Employee
continues to devote his required time to the business of Employer for at least
thirty (30) days following resumption of his duties, then the period specified
in Subsection (a) immediately above shall be deemed a separate and an
independent period with respect to any illness, incapacity, or disability of
Employee that arises after said resumption of duties and said devotion of time
to Employer's business, and any subsequent period specified in Subsection (a)
immediately above shall commence to run in the event of Employee's failure to
carry out his duties after said resumption of duties and said devotion of time,
because of illness, incapacity, or disability. However, if such resumed period
of work is less than thirty (30) days, the portion of the period specified in
Subsection (a) immediately above that immediately precedes Employee's resumed
period of work shall be aggregated with the period of illness or incapacity
immediately following Employee's resumed period of work and treated as a single
period in determining the payments and the periods of time set forth in
Subsection (a) immediately above and in determining the termination date of
Employee's employment pursuant to Subsection (b) immediately above.
(d) Any dispute regarding the existence, extent, or continuance of
Employee's illness, incapacity, or disability shall be resolved by the
determination of a majority of three (3) competent and reputable physicians who
are not employees or contractors of Employer, one of whom shall be selected by
Employee, one of
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whom shall be selected by Employer, and the third of whom shall be selected
jointly by the other two (2) physicians. The determination of said physicians
shall be binding upon the parties hereto. The costs of such determination shall
be borne by Employer.
10. TERMINATION OF EMPLOYMENT.
(a) Employee may terminate his employment hereunder, without cause,
upon ninety (90) days prior written notice. Upon Employer's receipt of such
notice from Employee, Employer shall have the right to pay Employee, in advance,
the compensation to which Employee is otherwise entitled for such ninety (90)
day period and demand that Employee physically leave Employer's business
premises; provided, further, Employer shall pay to Employee any other
compensation and benefits to which Employee is entitled as of such termination
date by virtue of any other provisions of this Agreement. With respect to any
renewal term, either party may terminate Employee's employment hereunder upon
written notice, without cause, provided such notice is given at least one
hundred twenty (120) days prior to the commencement of such renewal term;
provided, further, Employer shall pay to Employee any compensation and benefits
to which Employee is entitled as of such termination date.
(b) Except as otherwise provided in Subsection (a) immediately above,
Employer may terminate the employment of Employee hereunder, without notice,
only upon Employee's failure to perform the duties assigned to him by Employer's
Board of Directors, or for good cause. For the purpose of this Agreement, the
term "good cause" shall mean: (1) a pattern of conduct which tends to hold
Employer up to ridicule, or which adversely affects Employer, in the business
community pertaining to Employer's business, (2) engaging in conduct disloyal to
Employer, (3) non-diligent performance of duties, (4) failure to appear for work
during regularly scheduled hours without a sufficient reason, (5) conviction of
any felony crime, and (6) dependence upon, or abuse of, any addictive substance,
including but not limited to, alcohol, amphetamines, barbiturates, LSD, cocaine,
marijuana, or narcotic drugs. Notwithstanding the foregoing, Employee's
employment may not be terminated for any conduct set forth in clauses (1)
through (4) above unless such conduct continues after Employer has served
written demand on Employee to cease or rectify such conduct and Employee has
failed to comply with such demand. For the purposes of clause (6) above, a
determination of such dependence or such abuse shall be made by the decision of
a majority of three (3) competent and reputable physicians who are not employees
or contractors of Employer, one of whom shall be selected by Employer, one of
whom shall be selected by Employee, and the third of whom shall be selected
jointly by the other two (2) physicians; provided, further, the determination of
said physicians shall be binding upon the parties hereto, and the costs of such
determination shall be borne by Employer.
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(c) Employee may immediately terminate his employment with Employer
hereunder, without notice, upon Employer's breach of any material provision of
this Agreement.
11. EMPLOYEE PURCHASE OF INSURANCE UPON TERMINATION.
(a) Except for and excluding any life insurance policies that are the
subject matter of the Split-Dollar Plan (which policies shall be exclusively
governed by Section 4(f) hereinabove), in the event of the termination of
Employee's employment for any reason whatsoever, other than the death of
Employee, then and in that event, Employee shall be entitled to purchase from
Employer at any time within thirty (30) days after the effective date of the
termination of his employment any life insurance policies on the life of
Employee that are owned by Employer. The purchase price of such policies shall
be equal to the sum of the following items:
(1) the cash surrender value thereof, if any, calculated on a
prorated basis to the date of termination, exclusive of any dividend, dividend
accumulations or policy loans, but inclusive of the cash value of any paid-up
insurance additions; plus
(2) the prorated portion of any premiums paid prior to such
termination date which covers a period extending beyond such termination date;
plus
(3) any dividends or dividend accumulations, and less
(4) any policy loan plus interest then due.
(b) Employer shall have the right to deduct from any payment of
compensation owed to Employee, the purchase price described in Subsection (a)
above, or any portion thereof.
12. COVENANT NOT TO COMPETE.
(a) Employee recognizes and agrees that by virtue of his employment
with Employer, he will be afforded opportunities to become known to various
referral sources, clients, customers, and contractors of Employer, and
prospective clients, customers, and contractors of Employer. Employee recognizes
that these opportunities are valuable rights, are of great personal benefit to
him in his professional or business endeavors, and therefore provide a
sufficient basis for the restrictive covenants contained herein. In recognition
of the above, and in further consideration of this Agreement, Employee further
agrees that, during the term of this Agreement and for a period of twelve (12)
months from the date of the termination of Employee's employment with Employer
for any reason whatsoever, Employee shall not directly within the "restricted
geographical area" enter into or engage in any endeavors in competition with the
business of Employer as it exists as of the termination of Employee's
employment, as an individual on his own account, or as a partner, an employee or
an agent for any partnership, entity, or corporation, or as an officer or a
director of
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a corporation. For the purpose of this Agreement, the "restricted geographical
area" shall encompass the following area: the ten (10) mile radius of each
retail store at which Employer is conducting business as of the termination of
Employee's employment.
(b) The period of time during which Employee is prohibited from
engaging in the business practices specified in Subsection (a) above shall be
extended by any length of time during which Employee is in breach of any
covenant specified in Subsection (a) above.
(c) It is acknowledged and agreed by the parties hereto that the
foregoing restrictive covenants are essential elements of this Agreement, and
that, but for the agreement of Employee to comply with such covenants, Employer
would not have agreed to enter into this Agreement. Such covenants by Employee
shall be construed as agreements independent of any other provision in this
Agreement. The existence of any claim or cause of action of Employee against
Employer, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Employer of such covenants.
(d) It is agreed by parties hereto that if any covenant set forth in
this Section 12 is held to be unreasonable, arbitrary, or against public policy,
then such covenant shall be considered divisible both as to time and as to
geographical area. Employer and Employee agree that, if any court of competent
jurisdiction determines the specified time period or the specified geographical
area to be unreasonable, arbitrary, or against public policy, then a lesser time
period or geographical area which is determined to be reasonable, non-arbitrary,
and not against public policy may be enforced against Employee. Employer and
Employee agree that the foregoing covenants are appropriate and reasonable when
considered in light of the nature and extent of the business conducted by
Employer.
(e) In the event of the breach or threatened breach by Employee of the
covenants contained herein, Employee agrees that Employer shall be entitled to
injunctions, both preliminary and final, upon Employer's providing bond or
security, enjoining and restraining such breach or threatened breach, and such
remedies shall be in addition to all other remedies which may be available to
Employer either at law or in equity. Employer and Employee agree and acknowledge
that a violation of any covenant contained herein shall cause Employer to suffer
irreparable damages and Employee agrees that he is estopped from subsequently
asserting in any action to enforce the provisions of any covenant contained
herein that Employer has an adequate remedy at law and therefore is not entitled
to injunctive relief.
(f) Notwithstanding anything contained herein to the contrary, this
Section 12 shall not be applicable if Employee's employment is terminated for
any reason whatsoever within twelve (12) months after the Effective Date.
13. BUSINESS RECORDS. All business records, contracts, business
documents, and data of any type concerning clients, customers, or
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contractors of Employer, or concerning any aspect of Employer's business, shall
be and shall remain the property of Employer, notwithstanding the subsequent
termination of this Agreement for any reason whatsoever. Employee hereby agrees
that any and all of the aforesaid items, and any directly or indirectly related
information of any nature, are solely Employer's property. Employee further
agrees that upon the termination of his employment at any time for any reason
whatsoever, any and all of the aforesaid items, and any directly or indirectly
related information of any nature, shall continue to be Employer's property.
Employee further agrees that now and upon termination of his employment at any
time for any reason whatsoever, such aforesaid items and such related
information shall not be removed from Employer's premises and shall not be
copied by facsimile, notation or otherwise, without the prior written consent of
Employer or Employer's Board of Directors.
14. DISCLOSURE. During the term of this Agreement, Employee shall
disclose, and disclose only to Employer, all ideas, methods, plans, development
or improvements known by him which relate directly or indirectly to the business
of Employer, whether acquired by Employee before or during his employment with
Employer; provided, however, nothing in this Section 14 shall be construed as
requiring any such communication or disclosure where the idea, plan, method,
development, or improvement is lawfully protected from disclosure as a trade
secret of a third party or by any other lawful prohibition against such
communication or disclosure.
15. CONFIDENTIALITY. Employee agrees to keep in strict secrecy and
confidence any and all information Employee assimilates or to which he has
access during his employment with Employer, and which has not been publicly
disclosed and is not a matter of common knowledge in the business in which
Employer is engaged. Employee agrees that both during and after the term of his
employment with Employer, he will not, without the prior written consent of
Employer or Employer's Board of Directors, disclose any such confidential
information to any third person, individual, partnership, joint venture,
company, limited liability company, corporation, organization, or other entity.
16. SPECIFIC PERFORMANCE. Employee agrees that damages at law will be
an insufficient remedy to Employer in the event that Employee violates the terms
of Sections 12, 13, 14, or 15 of this Agreement, and that Employer, upon
application to a court of competent jurisdiction, shall be entitled to obtain
injunctive relief to enforce the provisions of such Sections, which injunctive
relief shall be in addition to any other rights or remedies available to
Employer. Employee shall reimburse Employer for all costs and expenses that
directly or indirectly relate to Employer's successful enforcement of the terms
of Sections 12, 13, 14, or 15 of this Agreement, including reasonable attorneys'
fees incurred before trial, at trial, and in any appellate, arbitration, or
mediation proceedings; provided, further, Employer shall reimburse Employee for
all costs and expenses that directly or indirectly relate to Employee's
successful defense of the terms of Section 12, 13, 14, or 15 of the this
Agreement, or to Employer's
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unsuccessful enforcement of the terms of Section 12, 13, 14, or 15 of this
Agreement, including reasonable attorneys' fees incurred before trial, at trial,
and in any appellate, arbitration, or mediation proceedings.
17. COMPLIANCE WITH OTHER AGREEMENTS. Employee represents and warrants
that the execution of this Agreement by him and the performance of his
obligations hereunder will not conflict with, result in a breach of, cause the
termination of, or constitute a default under any other agreement to which
Employee is a party or by which Employee is or may be bound. Employee agrees and
promises to indemnify and hold harmless Employer from all loss, liability,
claims, and expenses of any kind whatsoever, to which Employer is or might be
subjected, either directly or indirectly, as a result of a breach by Employee of
the representation and warranty specified in this Section 17.
18. NOTICE TO PARTIES. Any notice or other communication which is
required or which may be given under this Agreement shall be in writing and
shall be deemed to be effective (a) upon receipt if personally delivered or
transmitted by telecopy or similar electronic transmission method; (b) upon
receipt, if sent by recognized expedited delivery service; and (c) upon receipt,
if mailed certified mail, return receipt requested, first class postage prepaid.
In each case, notice shall be given to the parties hereto at the following
addresses:
To Employer at: 2Connect Express, Inc.
0000 XX 00xx Xxxxxx, Xxxxx 0
Xxxxxxxxxx, Xxxxxxx 00000
Attn:____________________
Facsimile No. 000-000-0000
With copy to: _________________________.
-------------------------
-------------------------
-------------------------
-------------------------
-------------------------
To Employee at:
-------------------------
-------------------------
-------------------------
Facsimile No.____________
With a copy to: Xxxxxxxxxxx X. Xxxxxx, Esq.
Xxxxx & Associates, P.A.
000 Xxxxx Xxxx Xxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Facsimile No. 000-000-0000
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Either party may change such party's address for the purposes of this Agreement
by giving written notice of the new address to the other party in accordance
with any medium described hereinabove. Rejection or other refusal to accept
delivery of any notice or communication required or permitted to be given under
this Agreement shall cause the same to be effective when sent. The inability to
deliver any notice or communication required or permitted to be given under this
Agreement because of a changed address for which no notice was given shall cause
the same to be effective when sent.
19. WAIVER OF BREACH. No assent or waiver, express or implied, of any
breach of any one or more of the covenants, conditions or provisions of this
Agreement shall be deemed a waiver of any subsequent breach, or a waiver of any
other covenant, condition or provision of this Agreement.
20. BINDING EFFECT. The rights and obligations of the parties under
this Agreement shall inure to the benefit of, and shall be binding upon, the
respective heirs, devisees, executors, administrators, legal representatives,
personal representatives, successors and assigns of the parties.
21. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Florida. The state courts of
Florida shall have exclusive jurisdiction over any judicial proceeding relating
to any dispute arising out of the interpretation, performance, or breach of this
Agreement.
22. ENTIRE AGREEMENT. This Agreement contains all representations and
the entire understanding and agreement between the parties. Correspondence,
memoranda or agreements, whether written or oral, originating before the date of
this Agreement are replaced in total by this Agreement unless otherwise
specifically provided for in this Agreement.
23. ATTORNEY'S FEES. The prevailing party to a dispute between, or
litigation between, the parties hereto, if said dispute or litigation relates to
this Agreement, shall be entitled to reimbursement from the non-prevailing party
or parties for such prevailing party's reasonable costs and expenses, including
reasonable attorneys' fees. For purposes of this Agreement, the "prevailing
party" shall be deemed to be that party who obtains substantially the result
sought, whether by settlement, mediated or otherwise, dismissal, or judgment.
For purposes of this Agreement, the term "reasonable attorneys' fees" shall
include, without limitation, the actual attorneys' fees incurred in retaining
counsel for advice, negotiations, suit, appeal, or any other legal proceeding,
including mediation and arbitration.
24. HEADINGS. The titles and headings of the various sections of this
Agreement are intended solely for convenience of reference and are not intended
to explain, modify or place any interpretation upon any of the provisions of
this Agreement.
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25. AMENDMENT. This Agreement may be amended only by a writing signed
by both of the parties hereto.
26. SEVERABILITY. If any part of this Agreement is determined to be
illegal or unenforceable, all other parts shall be given effect separately and
shall not be affected.
27. ADDITIONAL DOCUMENTS. Each party hereto agrees to execute and
acknowledge, if required, any and all other documents and writings which may be
necessary to carry out the purposes and provisions of this Agreement.
28. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
29. INTERPRETATION. The language used in this Agreement shall not be
construed in favor of or against either of the parties hereto, but shall be
construed as if both of the parties hereto prepared this Agreement. The language
used in this Agreement shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction shall
be applied against any such party.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates or date set forth hereinbelow to be effective as of the Effective Date
2CONNECT EXPRESS, INC.
By:
------------------------------ ---------------------------
Xxxxx X. Xxxxx Printed Name:
-----------------
Title: Its President
Date: Date:
------------------------------ -------------------------
By
---------------------------
Printed Name:
-----------------
Title: Its Secretary
Date:
------------------------------ -------------------------
Signature of Witness
------------------------------
Printed Name of Witness
------------------------------
Signature of Witness
------------------------------
Printed Name of Witness
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EXHIBIT E
I. In no event shall the ultimate investors be a group consisting of fewer
than 50 unaffiliated persons ("the "Investor Group"), which proposes or
provides for the sale of debt or equity of 2Connect in an amount not
less than $2.5 million (the "Investment"), which amount shall be
reduced on a dollar for dollar basis by the aggregate principal amount
of the Bridge Debentures (as defined hereinbelow), if any. The
Investment shall be used in a manner mutually agreeable to the Investor
Group, the Company, and 2Connect and shall be used in part, to repay
that certain working capital loan (the "Working Capital Loan") made to
the Company on February 27, 1998 by The Sterne Agee Investors No. 3, an
Alabama general partnership, in the aggregate principal amount of
$200,000, plus accrued and unpaid interest. In the event that the
transactions contemplated by this Agreement are not consummated,
2Connect and Acquisition shall have no liability or obligation
whatsoever in connection with the Working Capital Loan or the Bridge
Debentures, including but not limited to the obligation to repay or
refinance the Working Capital Loan or the Bridge Debentures.
II. The parties hereto contemplate that Sterne, Agee & Xxxxx, Inc. or such
other underwriter, group of investors or representative thereof may
provide bridge financing to the Company in an amount to be determined
by the Company and Sterne, Agee & Xxxxx, Inc. pursuant to the issuance
of debentures of other debt instruments of the Company ("the Bridge
Debentures"). In the event that the Bridge Debentures are issued by the
Company, then the Bridge Debentures shall be convertible into
Convertible Subordinated Debentures of 2Connect upon consummation of
the Merger and shall be subordinate in right of payment to all other
indebtedness of 2Connect in existence on the Effective Date except that
the Bridge Debentures shall be senior in right of payment to the
Debentures (as defined hereinbelow). After the consummation of the
Merger, at the election of any holder of the Bridge Debentures and upon
the delivery of written notice to 2Connect, such holder shall be
entitled to receive shares of Voting Stock in 2Connect in lieu of
payments of principal and interest under the Bridge Debentures on any
date for the payment of principal and interest under the Bridge
Debentures in an amount equal to the Per Share Value (as defined
hereinbelow). No fractional shares of Voting Stock in 2Connect shall be
issued. In lieu of such fractional shares of Voting Stock, such holder
who otherwise
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would have been entitled to such shares shall be paid in cash in an
amount equal to the Per Share Value of such fractional shares.
III. 2Connect shall have issued and delivered to the Shareholders a number
of shares of its Voting Stock as required by the Merger in connection
with the Recapitalization. The shares of Voting Stock issued to the
Shareholders shall have the same dilution and liquidity rights as all
other shares of Voting Stock of 2Connect issued pursuant to the Merger
for distribution under the Merger in accordance with the
Recapitalization.
IV. 2Connect shall have issued and delivered to the Shareholders the
$150,000 Convertible Subordinated Debentures (the "Debentures") in
exchange for all existing and future obligations owed by the Company to
the Shareholders. The Debentures shall be amortized over a period of
three years beginning on the Closing Date and shall bear interest at
the rate of five percent (5%) per annum. Principal and interest on the
Debentures shall be payable to the Shareholders in three consecutive
annual installments beginning one year from the Closing Date (each a
"Payment Date"). The Debentures shall be subordinate in right of
payment to all other indebtedness of 2Connect in existence on the
Effective Date, including the Bridge Debentures, if any. At the
election of the Shareholders and upon the delivery of written notice to
2Connect, the Shareholders shall be entitled to receive shares of
Voting Stock in 2Connect in lieu of payments of principal and interest
under the Debentures on any Payment Date (each a "Stock Payment"). The
Stock Payment shall be equal to the product of the Per Share Value
multiplied by 1.15. The Per Share Value shall be $6.00 per share. No
fractional shares of Voting Stock in 2Connect shall be issued pursuant
to any Stock Payment. In lieu of such fractional shares of Voting
Stock, the Shareholder who otherwise would have been entitled to such
shares shall be paid in cash in an amount equal to the Per Share Value
of such fractional shares. At least thirty (30) days, and no more than
forty-five (45) days, prior to each Payment Date, 2Connect shall
deliver to the Shareholders a written notice advising them of the
impending conversion opportunity.
V. 2Connect or Acquisition shall assume indebtedness owed by the Company
to AT&T in the amount of $310,000.
VI. 2Connect or Acquisition shall have assumed indebtedness owed by the
Company to Southern Commerce Bank in the amount of $475,000, or such
other amount owing at the Effective Time.
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VII. 2Connect or Acquisition shall have repaid or refinanced indebtedness of
the Company owed to Lang Environmental Management & Resources, Inc.,
Xxxx Xxxxxxxx, TCS Communications, Inc., and Xxxxx Xxxxxxx, in the
aggregate amount of $550,000 or such amount owing at the Effective Time
(collectively, the "Private Notes"), the terms of such repayment or
refinancing to be acceptable to 2Connect. At the election of 2Connect,
2Connect shall be entitled to issue securities of 2Connect (whether
debt or equity securities) or equivalent value in satisfaction of the
payment of such indebtedness; provided, however any debentures issued
to such debt holders shall be on the same terms and conditions as the
Debentures issued and delivered to the Shareholders, except that the
principal amount of the debentures issued to such debt holders may
differ.
VIII. The Board of Directors of 2Connect shall have adopted a stock option
plan for the benefit of the employees of 2Connect and Acquisition
within 90 days after the Closing Date, providing grants to purchase up
to 10% of the outstanding shares of Voting Stock of 2Connect upon terms
acceptable to the Board of Directors of 2Connect. Upon the issuance of
the registered securities of 2Connect, as contemplated by Section 10.08
of the Merger Agreement, such stock option plan shall become applicable
to such securities.
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