AGREEMENT AND PLAN OF CORPORATE SEPARATION AND REORGANIZATION (Exhibit A1)
AGREEMENT AND PLAN OF
CORPORATE
SEPARATION AND
REORGANIZATION (Exhibit A1)
This
Agreement and Plan of Corporate Separation and Reorganization ("Agreement")
is made as of January 29, 2009 by and between Semotus, Inc., a California
corporation (“Semotus”), Flint Telecom Group, Inc., a Nevada corporation
(“Flint”), and the undersigned shareholder (the “Shareholder”).
STATEMENT OF
PURPOSE
Flint
Telecom, Inc. merged with Semotus Solutions, Inc. in October 2008 and continued
to operate the historic businesses of each entity under the name Flint Telecom
Group, Inc. Flint Telecom, Inc. had operated since 2005 to provide
telecom services to the global telecom and media industry (the “Flint Division”)
while Semotus Solutions, Inc. had operated since 1993 to provide software for
connecting people to critical business systems, information and processes (the
“Solutions Division”). For the business reasons described below, the
parties have agreed that Flint will transfer the assets described herein
constituting the Solutions Division to Semotus, a newly organized California
corporation, in exchange for the original issue of one thousand five
hundred (1,500) shares of common stock of Semotus, which shall
constitute all of the outstanding common stock of Semotus. Flint
intends to immediately thereafter transfer the one thousand five hundred (1,500)
shares of common stock of Semotus to be acquired by Flint in the manner
described above to the Shareholder, in exchange for the number of common Flint
shares owned by Shareholder specified on Exhibit “B” (the “Flint Shares”) in a
transaction qualifying as a tax-free reorganization under sections 355
and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended
(“Code”).
PLAN OF
REORGANIZATION
The
parties hereby adopt this plan of reorganization which is intended to effect a
tax-free reorganization under sections 361(a) and 368(a)(1)(D) of the
Code. Pursuant to the terms and provisions of the Agreement
hereinafter set forth, the reorganization will consist of:
1. The
transfer by Flint of the part of its assets (subject to certain liabilities)
which constitute the Solutions Division to Semotus in exchange solely for all
the outstanding voting stock of Semotus; and
2. The
distribution (“Distribution”) by Flint of all of the Semotus stock to the
Shareholder, in exchange for the Flint Shares.
AGREEMENT
The
parties hereby agree as follows:
1. Transfer of Solutions
Division to Semotus. Flint agrees to take or
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cause to
be taken the following action at or prior to the Closing Date as defined
herein:
(a) Shareholder
will cause Semotus to be organized as a California corporation, having articles
of incorporation, bylaws and organizational minutes. The corporate
name of Semotus shall be Semotus, Inc. The initial issued
capitalization of Semotus shall consist solely of one thousand five hundred
(1,500) shares of common stock. The initial director of Semotus shall
be Xxxxxxx XxXxxx.
(b) Flint
shall transfer all of the assets and properties, subject to all the liabilities,
debts, obligations and contracts, of the Solutions Division to Semotus in
exchange for one thousand five hundred (1,500) shares of its common
stock. The transfer and assignment of assets shall be by bulk or
individual assignments in form and substance satisfactory to Flint.
(c) More
specifically, the assets transferred to Semotus shall include the real and
personal property, accounts receivable, intangibles, prepaid expenses and
deposits as are attributable to the Solutions Division, as shown on
Exhibit “A.”
(d) Semotus
shall assume all the liabilities and obligations of Flint that are attributable
to or properly allocable to the Solutions Division.
(e) Semotus
hereby assumes any and all liabilities of the Solutions Division including any
unasserted, unknown, or contingent liabilities attributable or arising out of
the operation of the Solutions Division.
(g) On
or before the Closing Date, Flint and Semotus shall ratify and approve this plan
of reorganization by a resolution of their Boards of Directors and consents of
their shareholders.
2. Transfer of Semotus Stock to
The Shareholder. Flint and Shareholder agree to take the
following action at or prior to the Closing Date as defined herein:
(a) Following
the transfer of the Solutions Division to Semotus in exchange for one thousand
five hundred (1,500) shares of common stock of Semotus, Flint agrees to transfer
the one thousand five hundred (1,500) shares of common stock of Semotus to the
Shareholder in exchange for the Flint Shares.
(b) Following
the transfer of the Solutions Division to Semotus in exchange for one thousand
five hundred (1,500) shares of common stock of Semotus, the Shareholder agrees
to transfer the Flint Shares to Flint in exchange for Flint’s one thousand five
hundred (1,500) shares of common stock of Semotus.
3. Services
Agreement. Flint shall make available to Semotus the services
of the employees of the Solutions Division pursuant to a cost allocation as may
be agreed upon between the parties.
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4. No Representations or
Warranties as to Solutions Division. Flint makes no
representations or warranties as to its operations or the operations of the
Solutions Division. Flint further disclaims all warranties, express
or implied, with respect to the assets transferred to Semotus and Semotus will
receive all assets from Flint “AS IS”.
5. Employee Benefits/
Options. In the event that any Flint employees (“Transferred Employees”)
become employed by Semotus, Semotus shall provide similar benefits for such
employees.
6. Employees. Semotus
will be solely responsible for performing under any existing contracts of
employment between Transferred Employees and Flint and meeting all other
obligations of Flint to such employees. Semotus agrees to indemnify
Flint for any claims, losses, expenses and liabilities, including attorneys’
fees, to Flint arising out of the rights and claims of Transferred Employees so
assigned to Semotus.
7. Creditor
Consents. Within thirty (30) days after the Closing Date,
Semotus will obtain consents from creditors to the transfer of assets subject to
deeds of trust, liens and security interests from Flint to Semotus.
8. Indemnity and Hold
Harmless. Semotus shall indemnify and hold Flint harmless from any and
all claims, actions, losses, expenses, liabilities and obligations, including
attorneys’ fees, assumed by Semotus or incurred by Semotus on or after the
Closing Date. Flint shall indemnify and hold Semotus harmless from any and all
claims, actions, losses, expenses, liabilities and obligations, including
attorneys’ fees, retained by Flint or incurred by Flint on or after the Closing
Date.
9. Risk of
Loss. Until the Closing Date, Flint shall bear all risk of
loss, injury, damage or destruction of the business and the assets of the
Solutions Division.
10. Buy-Sell
Agreement. After the execution of this Agreement, the
Shareholder shall negotiate in good faith for the conclusion of a buy sell
agreement.
11. Stock Splits,
etc. If, from time to time during the term of this Agreement
there is any stock dividend or liquidating dividend of cash and/or property,
stock split or other change in the character or amount of any of the
outstanding securities of Semotus, or there is any consolidation, merger or sale
of all, or substantially all, of the assets of Semotus; then, in such event, any
and all new, substituted or additional securities or other property to which
Shareholder is entitled by reason of his ownership of Semotus shares shall be
immediately subject to this Agreement and be included in the word “Semotus
shares” for all purposes with the same force and effect as the Semotus
shares presently subject to this Agreement.
12. Legends. All
certificates representing any of the Semotus shares subject to the provisions of
this Agreement shall have endorsed thereon legends substantially in the
following form:
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“THESE SECURITIES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.”
Any legend that may be required by
the California Commissioner of Corporations or by applicable blue sky laws of
any state.
13. Representations and
Warranties of The Shareholder. Shareholder represents and
warrants as follows:
(a) On
the Closing Date, Semotus will be a corporation duly organized and existing and
in good standing under the laws of the State of California, with no liabilities
except as contemplated by this Agreement and the transactions related
hereto.
(b) On
the Closing Date, the authorized capital of Semotus shall consist of one
thousand five hundred (1,500) shares of common stock, of which one thousand five
hundred (1,500) shares will be issued and outstanding.
14. Further Representations and
Warranties of The Shareholder. The undersigned Shareholder represents and
warrants as follows:
(a) Owner of Flint
shares. As of the date hereof and as of immediately before the
Closing, the Shareholder owns beneficially and of record the number of shares of
Flint common stock set forth next to his signature to this
Agreement.
(b) No Plan of
Disposition. The undersigned Shareholder has no plan or
intention to dispose of any of his shares of Semotus acquired pursuant to this
Agreement, or to cause Semotus to redeem any of its stock issued pursuant to
this Agreement.
(c) Investment Intent; Capacity
to Protect Interests. The Shareholder is acquiring the shares of Semotus
solely for his own account for investment and not with a view to or for sale in
connection with any distribution of the shares or any portion thereof and not
with any present intention of selling, offering to sell or otherwise
disposing of or distributing the shares or any portion thereof in any
transaction other than a transaction exempt from registration under the
Securities Act of 1933, as amended (the “Act”). The Shareholder also
represents that the entire legal and beneficial interest of the shares received
in the Distribution will be held by the Shareholder, for the Shareholder’s
account only, and neither in whole or in part for any other
person. The Shareholder either has a pre-existing business or
personal relationship with Flint and Semotus or any of their officers, directors
or controlling persons or by reason of Shareholder’s business or financial
experience or the business or financial experience of Shareholder’s professional
advisors who are unaffiliated with
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and who
are not compensated by Flint or Semotus or any affiliate or selling agent
thereof, directly or indirectly, could be reasonably assumed to have the
capacity to evaluate the merits and risks of an investment in Semotus and to
protect Shareholder's own interests in connection with this
transaction.
(d) Resident. The
Shareholder’s principal residence is within the State of
California.
(e) Information Concerning
Flint. The Shareholder is an officer of Flint and has
heretofore received all such information as the Shareholder has deemed necessary
and appropriate to enable the Shareholder to evaluate the financial risk
inherent in holding shares of Semotus, and the Shareholder has received
satisfactory and complete information concerning the business and financial
condition of Flint and Semotus in response to all inquiries in respect
thereof.
(f) Economic
Risk. The Shareholder realizes that an investment in the
Semotus shares will be a highly speculative investment and involve a high degree
of risk, and the Shareholder is able, without impairing financial condition, to
hold the Semotus shares for an indefinite period of time and to suffer a
complete loss on the Shareholder’s investment.
(g) Restricted
Securities. The Shareholder understands and acknowledges
that:
1. the
issuance of the Semotus shares has not been registered under the Act, and the
Semotus shares must be held indefinitely unless subsequently registered under
the Act or an exemption from such registration is available (such as Rule 144 or
the resale provisions of Rule 701 under the Act) and Semotus is under no
obligation to register the shares;
2. unless
otherwise permitted by Flint, in any event, during the period ending on the
later of (i) nine months from the date of distribution of the shares to the
Shareholder and (ii) nine months from the date of any other sale by Semotus
of any of its stock or any similar security which might be deemed to be part of
the same issue as the issuance of the shares to the Shareholder, any resale or
other transfer of the shares by the Shareholder may be made only to persons
resident within the State of California;
3. the
share certificate representing the Semotus shares will be stamped with the
legend specified in Section 12 hereof; and
4. Semotus
will make a notation in its records of the aforementioned restrictions on
transfer and legends.
(h) Disposition under the
Act. The Shareholder understands that the Semotus shares
are restricted securities within the meaning of Rule 144 promulgated under
the Act; that the exemption from registration under Rule 144 will not be
available in any event for at least two years from the date of purchase and
payment
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of the
shares (unless Rule 701 promulgated under the Act is available), and even then
will not be available unless (i) a public trading market then exists for
the common stock of Semotus, (ii) adequate information concerning
Semotus is then available to the public, and (iii) other terms and
conditions of Rule 144 are complied with; and that any sale of the shares
may be made only in limited amounts in accordance with such terms and
conditions. The Shareholder further understands that the resale
provisions of Rule 701, if available, will not apply until 90 days after Semotus
becomes subject to the reporting obligations under the Securities Exchange Act
of 1934 (the “Exchange Act”). There can be no assurance that the
requirements of Rule 144 or Rule 701 will be met, or that the stock will ever be
saleable. The Shareholder further agrees that he shall in no event make any
disposition of all or any portion of the Semotus shares unless and until there
is then in effect a Registration Statement under the Act covering such proposed
disposition and such disposition is made in accordance with said Registration
Statement; (B) the resale provisions of Rule 701 or Rule 144 are available
in the opinion of counsel to Semotus; or (C)(1) the Shareholder shall have
notified Semotus of the proposed disposition and shall have furnished Semotus
with a detailed statement of the circumstances surrounding the proposed
disposition, (2) the Shareholder shall have furnished Semotus with an
opinion of the Shareholder’s counsel to the effect that such disposition will
not require registration of such Semotus shares under the Act, and (3) such
opinion of Shareholder’s counsel shall have been concurred in by counsel for
Semotus and Semotus shall have advised the Shareholder of such
concurrence.
(i) Valuation of Common
Stock. The Shareholder understands that the
distribution of the Semotus shares is intended to be tax free to the Shareholder
under Code section 355; however, the shares are being distributed without a
ruling from the Internal Revenue Service (“IRS”) as to the tax treatment of the
transaction, and no assurance can be given that the IRS will not assert that the
transaction is taxable to the Shareholder and Flint. If so, the IRS could assert
that the Shareholder is taxable on the value of the Semotus shares received by
Shareholder in the Distribution, as a dividend taxable at ordinary (and not
capital gain) rates. If the Internal Revenue Service were to succeed
in a determination that the transaction is taxable, the additional taxes (and
interest) due would be payable by the Shareholder, there is no provision for
Flint to reimburse him for that tax liability, and the Shareholder assumes all
responsibility for such potential tax liability. In the event such
additional value would represent more than 25 percent of the Shareholder’s gross
income for the year in which the distribution occurs, the Internal Revenue
Service would have six years from the due date for filing the return (or the
actual filing date of the return if filed thereafter) within which to assess the
Shareholder the additional tax and interest which would then be
due.
15. Representations and
Warranties of Semotus and Flint. Semotus and Flint warrant and
represent as follows:
(a) Flint’s
principal reasons for participating in the Distribution are bona fide business
purposes unrelated to taxes.
(b) In
the Distribution, all of the outstanding shares of stock of Semotus will be
distributed to the Shareholder. On the date of the
Distribution,
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Semotus
will have no outstanding equity interests other than the common stock which will
be distributed to the Shareholder. At the time of the Distribution, Semotus will
have no outstanding warrants, options, or convertible securities or any other
type of right outstanding pursuant to which any person could acquire shares of
Semotus common stock or any other equity interest in Semotus.
(c) Semotus
intends to continue its historic business or use a significant portion of its
historic business assets in a business following the Distribution.
(d) The
liabilities of Semotus have been incurred by Flint or Semotus in the ordinary
course of Semotus’ business.
(e) The
fair market value of Semotus’ assets will, on the date of the Distribution,
exceed the aggregate liabilities of Semotus plus the amount of liabilities, if
any, to which such assets are subject.
(f) Flint
and Semotus are not and will not be on the date of the Distribution an
“investment company” within the meaning of Section 368(a)(2)(F)(iii) and (iv) of
the Code.
(g) Flint
and Semotus are not and will not be on the date of the Distribution under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
(h) Each
of Flint, Semotus and the Shareholder will pay separately his, her or its own
expenses relating to the Distribution.
(i) There
is no intercorporate indebtedness existing between Semotus and
Flint.
(j) The
terms of the Plan of Reorganization and this Agreement and the other agreements
relating thereto are the product of arm’s length negotiations.
(k) With
respect to each instance, if any, in which shares of stock of Flint have been
purchased by Shareholder, to the best knowledge of Flint, the stock purchase was
made by such Shareholder on his or her own behalf, rather than as a
representative, or for the benefit, of any other party.
(l) The
Distribution of Semotus shares is not a device for the distribution of Flint’s
earnings and profits.
(m) Both
Flint and Semotus will be engaged in an active business immediately after the
spin-off, which “trade or business” has been conducted throughout the five-year
period ending on the date of the spin-off.
(n) No
part of the Semotus shares distributed by Flint will be received by any
Shareholder as a creditor, employee, or in any capacity other than that of a
Shareholder of Flint.
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(o) After
the Distribution, Flint and Semotus will each continue, independently and with
its separate employees, the active conduct of all integrated activities of its
businesses conducted prior to consummation of the Distribution.
(p) The
Distribution will be carried out for the following business
reasons:
(i) to
utilize equity compensation for divisional employees.
(ii) to
facilitate the expansion of the businesses;
(iii) to
enhance the success of the businesses by enabling the corporations to resolve
management, systemic, or other problems that arise by the taxpayer’s operation
of different businesses within a single corporation.
(q) The
above corporate business purposes cannot be achieved through a transaction that
does not involve the distribution of stock of Semotus and which is neither
impractical nor unduly expensive.
(r) There
is no plan or intention by either Flint or Semotus, directly or through any
subsidiary corporation, to purchase any of Semotus’ outstanding stock after the
Distribution.
(s) There
is no plan or intention to liquidate either Flint or Semotus, to merge either
corporation with any other corporation, or to sell or otherwise dispose of the
assets of either corporation after the Distribution.
(t) Flint
has neither accumulated its receivables nor made an extraordinary payment of its
payables in anticipation of the Distribution. No income items, including
accounts receivable or any item resulting from a sale, exchange or disposition
of property, that would have resulted in income to Flint, and no items of
expense will be transferred to Semotus if Flint has earned the right to receive
the income or could claim a deduction for the expense under the accrual or
similar method of accounting.
(u) Payments
made in all continuing transactions between Flint and Semotus will be for fair
market value based on terms and conditions arrived at by the parties bargaining
at arm’s length.
(v) The
Distribution is not part of a plan or series of related transactions (within the
meaning of Code section 355(e)) pursuant to which one or more persons will
acquire directly or indirectly stock possessing 50 percent or more of the total
combined voting power of all classes of stock of either Flint or Semotus, or
stock possessing 50 percent or more of the total value of all classes of stock
of either Flint or Semotus.
(w) The
transfer of assets by Flint to Semotus will be a transfer of “property” in
exchange for all the voting common stock of Semotus, qualifying under Code
section 351.
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(x) Immediately
after the Distribution, at least 90 percent of the fair market value of the
gross assets of Flint and Semotus will consist of trade or business assets or
the stock and securities of corporations that are engaged in the active conduct
of trade or business as defined in Code section 355(b)(2).
(y) Semotus
has no plan or intention to issue additional shares of stock after the
Distribution, or take any other action, that would result in the Shareholder
losing “Control” of Semotus. “Control” means direct ownership of
shares of stock possessing at least eighty percent (80%) of the total combined
voting power of shares of all classes of stock entitled to vote and at least
eighty percent (80%) of the total number of shares of all other classes of stock
of the corporation.
16. Representations and
Warranties to Survive the Closing Date. All representations,
warranties and covenants herein and any certificate or Agreement delivered in
connection herewith shall survive the Closing Date and be binding upon and inure
to the benefit of the successors, assigns and legal representatives of the
parties.
17. Closing
Date. The closing hereunder shall be deemed to take place
simultaneously with the execution of this Agreement, or at such place and time
as the parties may determine by written Agreement (“Closing Date”).
18. Governing
Law. This Agreement has been executed in the State of
California and shall be governed by the laws thereof.
19. Separate
Counsel. The parties acknowledge that this Agreement has been
drafted by counsel to Semotus and Flint has had the opportunity to consult with
and be represented by separate counsel and advisors of its own choosing with
regard to this Agreement, that Flint has read this Agreement, and that Flint’s
counsel and advisors have explained its meaning and legal consequences to
it.
20. Notice. Any
notices which one party may be required or desires to serve upon the other party
under the terms of this Agreement shall be served by personal delivery, or by
mailing a copy thereof, postage prepaid and addressed as set forth next to the
signatures below.
21. Counterparts and
Facsimiles. This Agreement may be executed simultaneously, in
counterparts or on facsimile copies, each of which shall be deemed to be an
original but all of which together shall constitute one and the same
document.
22. Cooperation. Each
party to this Agreement shall, from time to time, execute and deliver to the
other party, upon request, any documents and instruments and shall perform any
and all acts deemed necessary or desirable by that other party to carry into or
continue in effect the terms, conditions and provisions of this Agreement and
the transactions connected herewith, and shall file such returns and take such
further action as is necessary to effect this transaction as a tax free type D
Reorganization under the Code.
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IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the day and year first above
written.
Flint
Telecom Group,
Inc., Semotus,
Inc.,
a Nevada
corporation a
California corporation
__/s/ Xxxxxxx
Browne______ __/s/ Xxxxxxx
XxXxxx
By:
Xxxxxxx
Xxxxxx by:
Xxxxxxx XxXxxx
Its
:CEO Its:
CEO
Semotus, Inc.,
a California corporation
_/s/ Xxxxxx
LaPine___
By: Xxxxxx XxXxxx
Its: President
Shareholder
/s/ Xxxxxxx
LaPine_______
Name: Xxxxxxx XxXxxx
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SPOUSAL
CONSENT
I hereby
acknowledge that I have read and understand the foregoing AGREEMENT AND PLAN OF
CORPORATE SEPARATION AND REORGANIZATION (“Agreement”) among Semotus, Inc., a
California corporation, and Flint Telecom Group, Inc., a Nevada Corporation, and
my spouse. I hereby consent to this Agreement and my spouse’s execution and
performance thereof, and I hereby agree, to the extent necessary to enforce the
terms, provisions, and intent of the Agreement, to be bound by the terms and
provisions of such Agreement, and to execute such further documents and
take such further actions as may be necessary or desirable to carry out the
terms, provisions, and intent of the Agreement.
Dated: January
29, 2009
/s/ Xxxxxx
LaPine________________
Xxxxxx
XxXxxx
EXHIBIT
“A”
Schedule
of Items In Solutions Division as reflected in the 2nd Quarter
10Q filing attached and subsequently amended with details from the pending
12/31/08 auditor reviewed Flint 10Q Including all trademarks, intellectual
property, and other intangible assets in existent at the time of the merger with
Flint on 10/01/08
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EXHIBIT
“B”
Flint
Shares
3,508,000
shares of Restricted Common Stock of Flint Telecom Group, Inc., a Nevada
corporation.
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Agreement
and Plan of Corporate
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and Reorganization
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