AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VDC COMMUNICATIONS, INC.
Voice & Data Communications (Latin America), Inc.
RARE TELEPHONY, INC.
AND
THE SHAREHOLDERS OF RARE TELEPHONY, INC.
Effective Date: May ___, 2000
TABLE OF CONTENTS
ARTICLE I: MERGER OF RARE TELEPHONY WITH AND INTO SUB AND RELATED MATTERS 1
1.1 The Merger. 1
1.2 Conversion of Stock. 2
1.3 Merger Consideration. 3
1.4 Additional Rights; Taking of Necessary Action; Further Action. 4
1.5 Dissenters' Rights. 4
1.6 No Further Rights or Transfers. 4
ARTICLE II: THE CLOSING 5
2.1 Closing Date. 5
2.2 Closing Transactions. 5
ARTICLE III: CERTAIN CORPORATE ACTION 10
3.1 Rare Telephony Corporate Action. 10
3.2 Acquiror Corporate Action. 10
ARTICLE IV: REPRESENTATIONS AND WARRANTIES 10
4.1 Representations and Warranties of Rare Telephony and the Rare Telephony Shareholders. 10
4.2 Representations and Warranties of Acquiror and the Sub. 21
ARTICLE V: AGREEMENTS OF THE PARTIES 23
5.1 Access to Information. 23
5.2 Confidentiality; No Solicitation. 23
5.3 Interim Operations. 25
5.4 Consents. 26
5.5 Filings. 27
5.6 All Reasonable Efforts. 27
5.7 Public Announcements. 27
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5.8 Notification of Certain Matters. 27
5.9 Expenses. 28
5.10 Registration Rights; Resale Restrictions 28
5.11 Documents at Closing. 29
5.12 Prohibition on Trading in Acquiror and Sub Stock. 29
5.13 Production of Schedules and Exhibits. 30
5.14 Loan Documents. 30
5.15 Acknowledgment of Approvals. 30
5.16 Audit. 30
5.17 Appointment to Board of Directors. 30
5.18 Consents from Rare Telephony Shareholders. 31
5.19 Xxxxxx Indemnification. 31
ARTICLE VI: CONDITIONS TO CONSUMMATION OF THE MERGER 31
6.1 Conditions to Obligations of Rare Telephony and the Rare Telephony Shareholders. 32
6.2 Conditions to Acquiror's and the Sub's Obligations. 32
ARTICLE VII: INDEMNIFICATION 34
7.1 Indemnification. 35
ARTICLE VIII: TERMINATION 36
8.1 Termination. 36
8.2 Notice and Effect of Termination. 37
8.3 Extension; Waiver. 38
8.4 Amendment and Modification. 38
ARTICLE IX: MISCELLANEOUS 39
9.1 Survival of Representations and Warranties. 39
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9.2 Notices. 39
9.3 Entire Agreement; Assignment. 40
9.4 Binding Effect; Benefit. 40
9.5 Headings. 40
9.6 Counterparts. 40
9.7 Governing Law; Arbitration. 40
9.8 Severability. 41
9.9 Release and Discharge. 41
9.10 Construction. 41
9.11 Read and Understood. 42
9.12 Remedies Cumulative. 42
9.13 Certain Definitions. 42
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EXHIBITS AND SCHEDULES
EXHIBITS
--------
Exhibit 1.3(b)(ii) Escrow Agreement
Exhibit 2.2(a)(ii) Investment Letter
Exhibit 5.10 Registration Rights Agreement
Exhibit 5.14 Funding Agreement
Exhibit 6.2(m)(1) Form of Employment Agreement
Exhibit 6.2(m)(2) Form of Employment Agreement
Exhibit 6.2(m)(3) Form of Executive Employment Agreement
Exhibit 6.2(m)(4) Form of Consulting Agreement for Xxxxxx X. Xxxxxxx
Exhibit 6.2(m)(5) Form of Consulting Agreement for Xxxxx X. Xxxxxxx
SCHEDULES
---------
Schedule 4.1(a) Articles of Incorporation and Bylaws of Rare Telephony
Communications, Inc.
Schedule 4.1(a)(i) Certificate of Incorporation and Bylaws of Cash Back Rebates XX.xxx, Inc.
Schedule 4.1(a)(ii) Articles of Incorporation of Free dot Xxxxxxx.xxx, Inc.
Schedule 4.1(d) Options, etc. - Rare Companies
Schedule 4.1(d)(iii) Names changes, etc. - Rare Companies
Schedule 4.1(e) Financial Statements - Rare Companies
Schedule 4.1(g) Litigation - Rare Companies
Schedule 4.1(h) Tax Returns - Rare Companies
Schedule 4.1(k) Encumbrances on Personal Property - Rare Companies
Schedule 4.1(l) Names and Marks - Rare Companies
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Schedule 4.1(m) Leases and Agreements - Rare Companies
Schedule 4.1(n) Conflicting Interests - Rare Companies
Schedule 4.1(p) Certain Changes and Events - Rare Companies
Schedule 4.2(g) Litigation - VDC Communications, Inc.
Schedule 6.2(m) Employees to Sign New Agreements - Rare Companies
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and
entered into as of May 25, 2000, by and among VDC COMMUNICATIONS, INC., a
Delaware corporation ("Acquiror"), Voice & Data Communications (Latin America),
Inc., a Delaware corporation and wholly-owned subsidiary of Acquiror ("Sub"),
RARE TELEPHONY, INC., a Nevada corporation (f/k/a Washoe Technology Corporation)
("Rare Telephony"), and those individuals and entities whose names appear on the
signature page hereof in their capacity as holders of all of the outstanding
common stock of Rare Telephony (the "Rare Telephony Shareholders").
Recitals
WHEREAS, Acquiror, Sub, and Rare Telephony have determined that it is
in the best interests of their respective shareholders for Rare Telephony to
merge with and into Sub upon the terms and subject to the conditions set forth
in this Agreement;
WHEREAS, the respective Boards of Directors of Acquiror, Sub, and Rare
Telephony have each approved this Agreement and the consummation of the
transactions contemplated hereby and approved the execution and delivery of this
Agreement; and
WHEREAS, for federal income tax purposes, it is intended that this
merger shall qualify as a tax-free reorganization under the provisions of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties and agreements contained herein, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that the Agreement and Plan of
Merger shall be as follows:
ARTICLE I
MERGER OF RARE TELEPHONY WITH AND INTO SUB
AND RELATED MATTERS
1.1 The Merger.
(a) Upon the terms and conditions of this Agreement, at
the "Effective Time" (as defined herein), Rare Telephony shall be merged with
and into the Sub (the "Merger") in accordance with the provisions of Chapters 78
and 92A of the Nevada Revised Statutes ("NRS") and the Delaware General
Corporation Law (the "DGCL") and the separate corporate existence of Rare
Telephony shall cease, and the Sub shall continue as the surviving corporation
under the laws of the state of Delaware with the corporate name "RARE TELEPHONY,
INC." (the "Surviving Corporation").
(b) The Merger shall become effective as of the filing
of a certificate of merger (the "Certificate of Merger") with the Secretary of
State of Delaware and Articles of Merger (or a Certificate of Merger) with the
Secretary of State of Nevada, in accordance with the provisions of Section 252
of the DGCL and Section 92A.200 of the NRS, and the confirmation by the
Certificate of Merger that the Merger is effective as of such filing date. The
date and time when the Merger shall become effective is referred to herein as
the "Effective Time."
(c) At the Effective Time:
(i) the Sub shall continue its existence under
the laws of the State of Delaware as the Surviving Corporation;
(ii) the separate corporate existence of Rare
Telephony shall cease;
(iii) all rights, title and interests to all
assets, whether tangible or intangible and any property or property rights owned
by Rare Telephony shall be allocated to and vested in the Sub as the Surviving
Corporation without reversion or impairment, without further act or deed, and
without any transfer or assignment having occurred, but subject to any existing
liens or other encumbrances thereon, and all liabilities and obligations of Rare
Telephony shall be allocated to the Sub as the Surviving Corporation which shall
be the primary obligor therefor and, except as otherwise provided by law or
contract, no other party to the Merger, other than the Sub as the Surviving
Corporation, shall be liable therefor;
(iv) the Certificate of Incorporation of the Sub
as in effect immediately prior to the consummation of the Merger, other than the
name of the Sub which shall be changed to "Rare Telephony, Inc." in connection
with the Merger, shall be the Certificate of Incorporation of the Surviving
Corporation, until thereafter amended as provided by law and such Certificate of
Incorporation;
(v) Each of Acquiror, Sub and Rare Telephony
shall execute and deliver, and file or cause to be filed with the Secretary of
State of the State of Delaware, the Certificate of Merger and with the Secretary
of State of the State of Nevada, the Articles of Merger (or Certificate of
Merger), with such amendments thereto as the parties hereto shall deem mutually
acceptable; and
(vi) the Bylaws of Sub, as in effect immediately
prior to the consummation of the Merger, shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by law and such Bylaws.
1.2 Conversion of Stock.
At the Effective Time, and without any action on the part of
the parties hereto, the Rare Telephony Shareholders or any other party:
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(a) the shares representing 100% of the issued and
outstanding common stock of Rare Telephony ("Rare Telephony Common Stock") as of
the Closing (the "Closing") (as such term is defined in Section 2.1 below)
(other than "Dissenting Shares", as defined herein) shall, by virtue of the
Merger and without any action on the part of any holder thereof, be converted
into and represent the right to receive, and shall be exchangeable for the
merger consideration identified at Section 1.3 hereafter (the "Merger
Consideration");
(b) each share of capital stock of Rare Telephony held
in treasury as of the Effective Time shall, by virtue of the Merger, be canceled
without payment of any consideration therefor and without any conversion
thereof;
(c) each share of common stock of the Sub that is issued
and outstanding as of the Effective Time (100 shares of common stock of Sub
owned by Acquiror prior to the Effective Time) shall continue to represent one
share of common stock of the Surviving Corporation after the Merger, which
shares shall thereafter constitute all of the issued and outstanding shares of
capital stock of the Surviving Corporation;
(d) from and after the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of shares of
Rare Telephony Common Stock (or any warrants or other rights to acquire any of
the same) that were outstanding immediately prior to the Effective Time. After
the Effective Time, certificates for shares of Rare Telephony Common Stock (or
any warrants or other rights to acquire any of the same) that were outstanding
immediately prior to the Effective Time shall be canceled and exchanged for the
consideration to be received therefor in connection with the Merger as provided
in this Agreement; and
(e) no fractional shares of stock shall be issued in the
Merger, and each holder of Rare Telephony Common Stock entitled to receive as
part of the Merger Consideration fractional shares shall receive that number of
shares of stock rounded to the nearest whole number; provided, however, that the
Merger Consideration shall in no event exceed 1,551,020 shares of Acquiror
common stock.
1.3 Merger Consideration.
The Merger Consideration consisting of the total purchase price payable
to the holders of 100% of the Rare Telephony Common Stock in connection with the
acquisition by merger of Rare Telephony shall consist exclusively of 1,551,020
shares of Acquiror common stock (the "Merger Consideration"), par value $.0001
per share ("Acquiror Common Stock").
(a) The Merger Consideration shall be allocated among
the holders of 100% of the Rare Telephony Common Stock in the proportion of
their share ownership of the outstanding common stock of Rare Telephony as of
the date of the Closing.
(b) The Merger Consideration shall be paid and delivered
in the following manner:
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(i) At the Closing, 775,512 shares of Acquiror
Common Stock shall be delivered to the Rare Telephony Shareholders; and
(ii) At the Closing, Acquiror shall issue in the
name of the Rare Telephony Shareholders an additional 775,508 shares of Acquiror
Common Stock (the "Escrow Shares") and shall deliver such shares to the Escrow
Agent to be held in accordance with the terms and conditions of the Escrow
Agreement attached hereto as Exhibit 1.3(b)(ii) and made a part hereto (the
"Escrow Agreement"). THE Rare Telephony Shareholders ACKNOWLEDGE THAT THE ESCROW
AGREEMENT PROVIDES FOR THE FORFEITURE OF a portion OF THE MERGER CONSIDERATION
UNDER CERTAIN CONDITIONS.
(c) The shares of Acquiror Common Stock to be delivered
at the Closing and the shares of Acquiror Common Stock released from escrow by
the Escrow Agent shall be fully paid and non-assessable and shall be free and
clear of all liens, levies and encumbrances except that all of such shares of
Acquiror Common Stock shall be "restricted securities" as such term is defined
in Rule 144, promulgated under the Securities Act of 1933, as amended (the
"Act") and shall be subject to contractual restrictions on resale as provided
for in Section 5.10.
1.4 Additional Rights; Taking of Necessary Action; Further Action.
Each of Acquiror, Sub, Rare Telephony and Rare Telephony
Shareholders, respectively, shall use their best efforts to take all such action
as may be necessary and appropriate to effectuate the Merger under the NRS and
DGCL as promptly as possible, including, without limitation, the filing of the
Certificate of Merger and the Articles of Merger (or Certificate of Merger)
consistent with the terms of this Agreement. If at any time after the Effective
Time, any further action is necessary or desirable to carry out the purposes of
this Agreement and to vest in Sub as the Surviving Corporation full right, title
and possession to all assets, property, rights, privileges, powers and
franchises of Rare Telephony, the officers of such corporations are fully
authorized in the name of their corporations or otherwise, and notwithstanding
the Merger, to take, and shall take, all lawful and necessary action.
1.5 Dissenters' Rights.
Each of Rare Telephony and the Rare Telephony Shareholders
acknowledge that dissenters' rights are available to each of the Rare Telephony
Shareholders pursuant to the NRS and that (i) Rare Telephony has complied with
the provisions of the NRS in notifying each Rare Telephony Shareholder of the
availability of such rights; and (ii) pursuant to the provisions of the NRS, if
the appropriate procedures and guidelines are followed, any dissenting
shareholders ("Dissenting Shareholders"), in lieu of the Merger Consideration,
shall be entitled to receive the fair value of their shares in accordance with
the provisions of the NRS.
1.6 No Further Rights or Transfers.
At and after the Effective Time, the shares of capital stock
of Rare Telephony outstanding immediately prior to the Effective Time shall
cease to provide any rights to the shareholders of Rare Telephony or the
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Surviving Corporation, except for the right to surrender the certificate or
certificates representing such shares and to receive the Merger Consideration as
provided in this Agreement.
ARTICLE II
THE CLOSING
2.1 Closing Date.
Subject to satisfaction or waiver of all conditions precedent
set forth in Article VI of this Agreement, the closing of the Merger (the
"Closing") shall take place at the offices of the Acquiror, 00 Xxxxx Xxxx Xxxx,
Xxxxxxxxx, XX 00000, at 10:00 a.m., local time on the later of: (i) the first
Business Day following the day upon which all appropriate Acquiror corporate
action and Rare Telephony corporate action has been taken in accordance with
Article III of this Agreement; or (ii) the day on which the last of the
conditions precedent set forth in Article VI of this Agreement is fulfilled or
waived, or (iii) at such other time, date and place as the parties may agree,
but in no event shall such date be later than June 30, 2000, unless such date is
extended by the mutual written agreement of the parties.
2.2 Closing Transactions.
At the Closing, the following transactions shall occur, all of
such transactions being deemed to occur simultaneously:
(a) Rare Telephony and all holders of the Rare Telephony
Common Stock shall take, or shall cause to be taken, the following actions:
(i) Each of the holders of Rare Telephony Common
Stock (other than Dissenting Shareholders) shall surrender and deliver to the
Sub as the Surviving Corporation the certificate or certificates representing
all of their shares of Rare Telephony Common Stock;
(ii) Each of the holders of Rare Telephony Common
Stock (other than Dissenting Shareholders) shall, to the extent necessary to
comply with applicable federal and state securities laws (including, if
applicable, Rule 145 promulgated under the Act), execute and deliver at the
Closing a copy of an investment letter in a form mutually agreed upon by the
parties and attached to this Agreement as Exhibit 2.2(a)(ii) ("Investment
Letter");
(iii) Any outstanding shareholder agreements relating
to Rare Telephony Common Stock shall have been terminated and evidence of such
termination satisfactory to Acquiror shall have been delivered to Acquiror;
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(iv) Rare Telephony and the holders of Rare
Telephony Common Stock shall execute and deliver, and file or cause to be filed
with the Secretary of State of the State of Nevada, the Articles of Merger (or
Certificate of Merger) with such amendments thereto as the parties hereto shall
deem mutually acceptable;
(v) A certificate shall be executed by Rare
Telephony and the holders of Rare Telephony Common Stock to the effect that all
representations and warranties made by Rare Telephony and the Rare Telephony
Shareholders under this Agreement are true and correct as of the Closing, as
though originally given to Acquiror and Sub on said date;
(vi) Certificates of good standing shall be
delivered by Rare Telephony from the Secretary of State of the State of Nevada
or the Secretary of State of the State of Delaware, as the case may be, dated at
or about the Closing, to the effect that Rare Telephony, Cash Back Rebates
XX.xxx, Inc., a Delaware corporation ("Cash Back") and Free dot Xxxxxxx.xxx,
Inc., a Nevada corporation ("Free"), are in good standing under the laws of the
State of Nevada or Delaware, as the case may be;
(vii) An incumbency certificate shall be delivered
by Rare Telephony, Cash Back and Free signed by all of the officers thereof
dated at or about the Closing;
(viii) Certified Articles of Incorporation of
Rare Telephony and Cash Back shall be delivered by Rare Telephony dated at or
about the Closing and a copy of the Bylaws of Rare Telephony and Cash Back
certified by the Secretary of Rare Telephony and Cash Back, respectively, dated
at or about the Closing;
(ix) Certified Board and shareholder resolutions
shall be delivered by the Secretary of Rare Telephony dated at or about the
Closing authorizing the transactions contemplated under this Agreement;
(x) Rare Telephony and the holders of Rare
Telephony Common Stock shall execute and deliver the Escrow Agreement to
Acquiror and the Escrow Agent;
(xi) A legal opinion from corporate counsel to
Rare Telephony satisfactory to Acquiror's counsel shall be delivered by Rare
Telephony opining, among other things, that the representations made in Sections
4.1(a), (b), (c)(i), (d) and (g) are true and correct;
(xii) A legal opinion from telecommunications
counsel to Rare Telephony satisfactory to Acquiror's counsel shall be delivered
by Rare Telephony opining, among other things, that: (1) no consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental authority or
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instrumentality, domestic or foreign, is required by or with respect to Rare
Telephony in connection with the execution and delivery of this Agreement by
Rare Telephony and the Rare Telephony Shareholders or the consummation by Rare
Telephony and the Rare Telephony Shareholders of the transactions contemplated
hereby, except certain filings with the Federal Communications Commission
("FCC") and state telecommunications agencies in connection with a change of
control of Cash Back; (2) Cash Back has all telecommunications licenses,
tariffs, permits, certificates and authorizations (collectively,
"Telecommunications Licenses") needed or required for the conduct of Cash Back's
business as presently conducted and for the use of its properties and premises
occupied by it, except where the failure to obtain a licenses, permit,
certificate or authorization would not have a Material Adverse Effect; (3) the
Telecommunications Licenses are duly and validly issued, are in full force and
effect, and are not now subject to any condition outside the ordinary course;
(4) to the best of counsel's knowledge there is no outstanding adverse judgment,
injunction, decree or order that has been issued by the FCC or any state
telecommunications office or regulatory agency against Cash Back (or any
predecessors in interest), or any action, proceeding, complaint, or
investigation initiated by the FCC or any state telecommunications office or
regulatory agency against Cash Back (or any predecessors in interest); and (5)
neither the consummation of this Merger nor the execution of this Agreement
shall result in any violation of the Communications Act of 1934, as amended, the
FCC's rules, regulations, decisions or published policies, and will not cause
any forfeiture or impairment of Cash Back's 214 license or any other
Telecommunications License;
(xiii) An exclusive license or assignment,
satisfactory in the sole discretion of Acquiror, (or other license acceptable to
Acquiror and its counsel) (the "Email License") for Cash Back, Free, or any
other Acquiror subsidiary, in Acquiror's sole discretion, to use, for as long as
is legally permissible, patent pending email business method which is the
subject of a provisional patent application filed by Xxxx X. Xxxxxxxx for Xxxxx
X. Xxxxxxx, Inventor, dated April 7, 2000 shall be delivered by Rare Telephony;
(xiv) An agreement, satisfactory in the sole
discretion of Acquiror, shall be delivered by Rare Telephony executed by Network
Consulting Group, Inc. ("Network") and Acquiror, Rare Telephony or Cash Back, or
any combination of said companies in Acquiror's sole discretion (the "Network
Agreement"), which documents the fact that Network shall continue to pay and
otherwise perform on all equipment leases outstanding as of the date of this
Agreement for equipment used by Rare Telephony and Cash Back in their respective
businesses (the "Network Equipment") throughout the term of said leases and, at
the end of said leases, assuming any one of Acquiror, Sub, Free (as defined
below) or Cash Back (as defined below), has paid either the $1 or FMV end of
lease payment, shall ensure that title to the Network Equipment passes to Rare
Telephony or Cash Back, or both in Acquiror's sole discretion; further the
Network Agreement shall provide that Network shall take whatever action is
requested by Acquiror or Sub to assign the Qwest Contract to Acquiror, Sub, or
one of the Rare Companies, in the sole discretion of Acquiror, if and when
Acquiror or Sub so requests;
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(xv) Documentation shall be delivered by Rare
Telephony that documents to the sole satisfaction of Acquiror and its counsel,
the transfer of the domain name "XXXXXXXXXXXXXXXXX.XXX" from The Internet Trust
to Cash Back;
(xvi) Rare Telephony shall execute and deliver the
Funding Agreement, satisfactory in the sole discretion of Acquiror, to Acquiror;
(xvii) Rare Telephony shall deliver executed
general releases, satisfactory in the sole discretion of Acquiror, from each of
its directors, officers, consultants, employees and shareholders and from any
Cash Back directors, officers, consultants, employees and shareholders requested
by Acquiror agreeing to: (i) release Rare Telephony and Cash Back from any and
all claims, liabilities, obligations and demands; (ii) terminate any employment
agreements; and (iii) terminate any shareholder agreements;
(xviii) Each of the parties to this Agreement shall
have otherwise executed whatever documents and agreements, provided whatever
consents or approvals and taken all such actions as are required under this
Agreement;
(xix) The Board of Directors of Cash Back and Free
shall be reconstituted. Each of the existing members of Board of Directors of
Cash Back and Free shall tender his resignation and nominate to their Board of
Directors Xxxxxxxxx X. Xxxxx to serve as the sole director. The newly
constituted Boards of Directors shall hold office in accordance with the DGCL or
NRS, as the case may be, and shall appoint executive officers in accordance with
the DGCL or NRS, as the case may be. Xx. Xxxxx shall also serve as the sole
director of Sub; and
(xx) A certificate of good standing shall be
delivered by Rare Telephony from the Secretary of State of the state of
incorporation of Network, dated at or about the Closing, to the effect that
Network is in good standing under the laws of the state of Network's
incorporation.
(b) Acquiror and/or Sub shall take, or shall cause to be
taken, the following actions:
(i) Acquiror shall deliver or shall cause to be
delivered to all of the holders of the Rare Telephony Common Stock (other than
Dissenting Shareholders) a certificate or certificates representing the number
of shares of that portion of an aggregate number of 775,512 shares of Acquiror
Common Stock as such holder is entitled to receive at the Closing (or as soon
thereafter as is practical) in connection with the Merger;
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(ii) Acquiror shall, on behalf of itself and
the Rare Telephony Shareholders, deliver or shall cause to be delivered to the
Escrow Agent certificates representing 775,508 shares of Acquiror Common Stock
at Closing (or as soon thereafter as is practical);
(iii) Acquiror and the Sub shall execute and
deliver, and file or cause to be filed with the Secretary of the State of
Delaware, the Certificate of Merger with such amendments thereto as the parties
hereto shall deem mutually acceptable;
(iv) Sub shall receive from the Secretary of
State of Delaware a final Certificate of Merger;
(v) A certificate for each of the Acquiror and
the Sub shall be executed by their respective Presidents or Chief Executive
Officers to the effect that all of the respective representations and warranties
of the Acquiror and Sub under this Agreement are true and correct as of the
Closing, as though originally given to Rare Telephony on said date;
(vi) A certificate of good standing shall be
delivered by Sub from the Secretary of State of the State of Delaware, dated at
or about the Closing, stating that Sub is in good standing under the laws of
such state;
(vii) A certificate of good standing shall be
delivered by Acquiror from the State of Delaware, dated at or about the Closing,
stating that Acquiror is in good standing under the laws of such State;
(viii) Certified Board resolutions shall be
delivered by the respective Secretary of the Acquiror and Sub dated at or about
the Closing authorizing the transactions contemplated under this Agreement;
(ix) Sub will deliver Employment Agreements or
Consulting Agreements, satisfactory in the sole discretion of Acquiror, as the
case may be, to the individuals listed on Schedule 6.2(m) to this Agreement;
(x) Acquiror and Sub shall execute and deliver
the Escrow Agreement, satisfactory in the sole discretion of Acquiror, to Rare
Telephony and the Escrow Agent;
(xi) Acquiror shall execute and deliver the
Funding Agreement, satisfactory in the sole discretion of Acquiror, to Rare
Telephony;
(c) Each of the parties to this Agreement shall have
otherwise executed whatever documents and agreements, provided whatever consents
or approvals and taken all such actions as are required under this Agreement.
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ARTICLE III
CERTAIN CORPORATE ACTION
3.1 Rare Telephony Corporate Action.
Rare Telephony shall cause to occur all corporate action
necessary to effect the Merger and to consummate the other transactions
contemplated hereby.
3.2 Acquiror Corporate Action.
Acquiror and the Sub shall cause to occur all corporate action
necessary on behalf of either of them to effect the Merger and to consummate the
other transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Rare Telephony and the Rare
Telephony Shareholders.
As a material inducement to Acquiror and Sub to execute this
Agreement and consummate the Merger and other transactions contemplated hereby,
Rare Telephony and the Rare Telephony Shareholders, jointly and severally,
hereby make the following representations and warranties to Acquiror and Sub.
The representations and warranties are true and correct in all material respects
at this date, and will be true and correct in all material respects on the
Closing as though made on and as of such date.
(a) Corporate Existence and Power. There are currently
two wholly-owned subsidiaries of Rare Telephony: (1) Cash Back; and (2) Free.
Rare Telephony, Cash Back and Free are collectively referred to as the "Rare
Companies." Rare Telephony is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Nevada, and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted. Rare Telephony is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary. True,
correct and complete copies of the Articles of Incorporation and Bylaws of Rare
Telephony as amended to date are attached hereto as Schedule 4.1(a) and are made
a part hereof.
(i) Cash Back is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
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conducted. Cash Back is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary. True, correct and complete copies of the Articles of Incorporation
and Bylaws of Cash Back as amended to date are attached hereto as Schedule
4.1(a)(i) and are made a part hereof.
(ii) Free is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Nevada, and
has all corporate powers and all governmental licenses, authorizations, consents
and approvals required to carry on its business as now conducted. Free is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary. True, correct
and complete copies of the Articles of Incorporation of Free as amended to date
are attached hereto as Schedule 4.1(a)(ii) and are made a part hereof.
(iii) Network is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted. Network is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary.
(b) Due Authorization. This Agreement has been duly
authorized, executed and delivered by Rare Telephony and the Rare Telephony
Shareholders and constitutes a valid and binding agreement of Rare Telephony and
the Rare Telephony Shareholders, enforceable in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium, and other similar laws relating to, limiting or affecting the
enforcement of creditors' rights generally or by the application of equitable
principles. As of the Closing all corporate action on the part of Rare Telephony
required under applicable law in order to consummate the Merger will have
occurred.
(c) No Contravention. Neither the execution and delivery
of the Agreement nor the consummation of the transactions contemplated thereby
(including the execution of any documents referenced herein, including, without
limitation, employment agreements) will: (i) conflict with or result in any
violation of any provision of the Articles of Incorporation or Bylaws of Rare
Telephony; or (ii) conflict with or result in any violation or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of a right or obligation or loss
under, any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to any of
the Rare Companies or the Rare Telephony Shareholders or their properties or
assets, or result in the creation or imposition of any mortgage, lien, pledge,
charge or security interest of any kind ("Encumbrance") on any assets of any of
the Rare Companies. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, is required by or with respect to Rare Telephony in connection with the
11
execution and delivery of this Agreement by Rare Telephony and the Rare
Telephony Shareholders or the consummation by Rare Telephony and the Rare
Telephony Shareholders of the transactions contemplated hereby, except the
filing of the Articles of Merger (or Certificate of Merger) with the States of
Delaware and Nevada, and certain filings with the FCC and state
telecommunications agencies in connection with a change of control of Cash Back.
(d) Capitalization and Share Ownership. The currently
authorized capital stock of Rare Telephony is 25,000 shares of common stock
("Rare Telephony Common Stock"). There are currently outstanding 25,000 shares
of Rare Telephony Common Stock. The outstanding shares of capital stock of Rare
Telephony have been duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive rights. Except as described on Schedule
4.1(d) hereto, there are outstanding (A) no shares of preferred stock or other
voting securities of Rare Telephony, (B) no securities of Rare Telephony
convertible into or exchangeable for shares of capital stock or voting
securities of Rare Telephony and (C) no options, warrants or other rights to
acquire from Rare Telephony, and no obligation of Rare Telephony to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of Rare Telephony, and there are no
agreements or commitments to do any of the foregoing. There are no voting trusts
or voting agreements applicable to any capital stock of Rare Telephony. The Rare
Telephony Common Stock to be surrendered in the Merger will be owned of record
and beneficially by the Rare Telephony Shareholders, free and clear of all
Encumbrances, and have not been sold, pledged, assigned or otherwise
transferred. The Rare Telephony Common Stock to be surrendered in the Merger
have been issued in compliance with all applicable securities laws. There are no
agreements (other than this Agreement) to sell, pledge, assign or otherwise
transfer such securities.
(i) The currently authorized capital stock of
Cash Back is 1,000 shares of common stock. There are currently outstanding 1,000
shares of Cash Back common stock. Rare Telephony owns all of the outstanding
shares of Cash Back common stock. The outstanding shares of capital stock of
Cash Back have been duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive rights.
(ii) The currently authorized capital stock of
Free is 10,000,000 shares of common stock. There are currently outstanding 100
shares of Free common stock. Rare Telephony owns all of the outstanding shares
of Free common stock. The outstanding shares of capital stock of Free have been
duly authorized and validly issued and are fully paid and nonassessable and free
of preemptive rights.
(iii) Except as set forth in Schedule 4.1(d)(iii),
neither Rare Telephony nor any of its Subsidiaries has, during the six-year
period immediately preceding the date hereof, changed its name, been the
surviving entity of a merger, consolidation or other reorganization, or acquired
all or substantially all of the assets of any Person.
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(e) Financial Statements. Attached hereto as Schedule 4.1
(e) and incorporated herein by reference are unaudited interim financial
statements for Rare Telephony on a consolidated basis (the "Financial
Statements"). Such Financial Statements fairly present in all material respects
the financial position of Rare Telephony on a consolidated basis with Cash Back
and Free as of the date thereof and the results of operations for the periods
then ended (subject to normal year-end adjustments). Upon Acquiror's request
Rare Telephony shall update the Financial Statements.
(f) No Liabilities. Except for the Remaining Indebtedness
(as defined below), at the Closing, Rare Telephony shall have no liabilities,
whether related to tax or non-tax matters, known or unknown, due or not yet due,
liquidated or unliquidated, fixed or contingent, determined or determinable in
amount or otherwise and, to the knowledge of Rare Telephony and the Rare
Telephony Shareholders after due inquiry, there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability, except as and to the extent reflected in this Agreement or
any Schedule or Exhibit hereto.
(g) Legal Proceedings; Orders. Except as described on
Schedule 4.1(g) hereto, there is no action, suit, investigation or proceeding
(or, to the knowledge of Rare Telephony or any one of the Rare Telephony
Shareholders, any basis therefor) pending against, or to the knowledge of Rare
Telephony or any one of the Rare Telephony Shareholders threatened, against or
affecting any of the Rare Companies or any of their properties before any court
or arbitrator or any governmental body, agency or official. Except as described
on Schedule 4.1(g) hereto:
(i) There is no Order to which any of the Rare
Companies or any of their properties is subject.
(ii) Neither any of the Rare Companies nor any
Rare Telephony Shareholder is subject to any Order that relates to the business
of, or any of the assets owned or used by any of the Rare Companies.
(iii) No officer, director, agent, consultant, or
employee of any one of the Rare Companies is subject to any Order that prohibits
such officer, director, agent, consultant, or employee from engaging in or
continuing any conduct, activity, or practice relating to the business of any
one of the Rare Companies.
(iv) Both Rare Telephony and Cash Back is, and at
all times since its organization, has been, in full compliance with all of the
terms and requirements of each Order to which it, or any of the assets owned or
used by it, is or has been subject.
(v) No event has occurred or circumstance exists
that may constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any Order to
which any of the Rare Companies or any of their properties is subject.
13
(vi) None of the Rare Companies has received, at
any time since its organization, any notice or other communication (whether oral
or written) from any Governmental Body or any other Person regarding any actual,
alleged, possible, or potential violation of, or failure to comply with, any
term or requirement of any Order to which any of the Rare Companies or any of
their properties is subject.
Rare Telephony currently has a dispute (the "Dispute") with the landlord of its
offices in Passaic, New Jersey (the "Landlord"). Rare Telephony has not breached
its lease with the Landlord and none of the Rare Companies will be liable to the
Landlord for breach of its lease with the Landlord, or for damages in connection
therewith. Due, in part, to the Dispute, the Rare Companies plan to move their
operations to a new office at 00 Xxxxx Xxxxxx in Newark, NJ (the "Move"). The
Move will not cost the Rare Companies, or any one of them, more than $55,000 in
out of pocket expenses. Any shut down of the operations of the Rare Companies,
or any one of them, in connection with the Move shall not exceed two full
calendar days (one of which days shall be a Saturday).
The various judgments obtained against the former officer, directors, and/or
principals, and/or the spouses of the foregoing, of National TeleCommunications,
Inc. (a/k/a National Telecommunications, Inc.) ("NTC") arising out of the
operation, management, or business of NTC (the "NTC Judgments") do not, and will
not, have a Material Adverse Effect on any one of the Rare Companies or any of
their assets. The NTC Judgments do not, and will not, have a Material Adverse
Effect on the operations of any one of the Rare Companies.
(h) Taxes. Except as set forth on Schedule 4.1(h), Rare
Telephony and Cash Back have timely filed all tax returns required to be filed
by them, and will timely file when due all tax returns required to be filed by
them between the date hereof and the Closing. Rare Telephony and Cash Back have
paid in a timely fashion or will pay when due in a timely fashion, all taxes
required to be paid in respect of the periods covered by such returns, and the
books and the financial statements of Rare Telephony and Cash Back reflect, or
will reflect, adequate reserves for all taxes payable by Rare Telephony which
have been, or will be, accrued but are not yet due. None of the Rare Companies
is delinquent in the payment of any material tax, assessment or governmental
charge. No deficiencies for any taxes have been proposed, asserted or assessed
against any one of the Rare Companies, Rare Telephony and the Rare Telephony
Shareholders are not aware of any facts which would constitute the basis for the
proposal or assertion of any such deficiency and there is no action, suit,
proceeding, audit or claim now pending or threatened against any one of the Rare
Companies. All taxes which any one of the Rare Companies is required by law to
withhold and collect have been duly withheld and collected, and have been timely
paid over to the proper authorities to the extent due and payable. For the
purposes of this Agreement, the term "tax" shall include all federal state,
local and foreign income, property, sales, excise and other taxes of any nature
whatsoever. Except as set forth on Schedule 4.1(h), neither Rare Telephony, nor
any member of any affiliated or combined group of which Rare Telephony is or has
been a member, has granted any extension or waiver of the limitation period
applicable to any tax returns. There are no Encumbrances for taxes upon the
assets of any one of the Rare Companies, except Encumbrances for current taxes
not yet due. There are no tax sharing or tax allocation agreements to which any
one of the Rare Companies is now or ever has been a party. None of the Rare
Companies will not be required under Section 481(c) of the Code, of 1986, to
14
include any material adjustment in taxable income for any period subsequent to
the Merger. None of the Rare Companies (a) has been a member of an affiliated
group filing a consolidated federal income tax return (other than a group the
common parent of which was Rare Telephony) and (b) has no liability for the
taxes of any Person (other than Rare Telephony) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise.
(i) Compliance with Laws. None of the Rare Companies is
in violation of, or has violated, any applicable provisions of any laws,
statues, ordinances or regulations, other than as would not be reasonably likely
to have a Material Adverse Effect or constitute a felony. None of the Rare
Telephony Shareholders has violated, any applicable provisions of any laws,
statues, ordinances or regulations other than as would not be reasonably likely
to constitute a felony or misdemeanor. No such laws, statutes, ordinances or
regulations require or are expected to require capital expenditures by any of
the Rare Companies that are reasonably likely to have a Material Adverse Effect.
Without limiting the generality of the foregoing, Rare Telephony has all
licenses, permits, certificates and authorizations needed or required for the
conduct of Rare Telephony's business as presently conducted and for the use of
its properties and premises occupied by it, except where the failure to obtain a
license, permit, certificate or authorization would not have a Material Adverse
Effect. Without limiting the generality of the foregoing, Cash Back has all
licenses, permits, certificates and authorizations needed or required for the
conduct of Cash Back's business as presently conducted and for the use of its
properties and premises occupied by it, except where the failure to obtain a
licenses, permit, certificate or authorization would not have a Material Adverse
Effect.
(j) Investment Banking Fees. Other than RC&A Group (which
will receive an investment banking fee of 81,633 shares of Acquiror Common Stock
to be paid directly to RC&A Group by Acquiror (the "Investment Banking
Shares")), there is no investment banker, broker, finder or other similar
intermediary which has been retained by, or is authorized by, Rare Telephony or
the Rare Telephony Shareholders to act on its or their behalf who might be
entitled to any fee or commission from Rare Telephony, the Rare Telephony
Shareholders, Acquiror or the Sub or any of their respective Affiliates upon
consummation of the transactions contemplated by this Agreement.
(k) Personal Property. Other than as set forth on
Schedule 4.1(k), each of the Rare Companies has good and valid title to all of
its personal property, tangible and intangible, reflected on the Financial
Statements and to all other personal property owned by it, free and clear of any
Encumbrance. All equipment, furniture and fixtures and other tangible personal
property used by Rare Telephony and Cash Back is in good operating condition and
repair and none require any repairs other than normal routine maintenance to
maintain such property in good operating condition and repair. All inventory as
reflected on the Financial Statements is useable in the ordinary course of
business free from material defects. None of the Rare Companies owns a motor
vehicle.
(l) Intellectual Property; Intangible Property. The
corporate names of Rare Telephony, Cash Back, and Free and the trade names,
trademarks, and service marks listed on Schedule 4.1(l) are the only names and
15
marks which are used by any one of the Rare Companies in the operation of its
business (the "Names and Marks"). Other than Washoe Technology Corporation, Rare
Telephony has not done business and has not been known by any other name other
than by its Names and Marks. Other than Common Concerns, Inc., Cash Back has not
done business and has not been known by any other name other than by its Names
and Marks. Each of the Rare Companies owns and has the exclusive right to use
all intellectual property presently in use by it and necessary for the operation
of its business as now being conducted, which intellectual property includes,
but is not limited to, patents, trademarks, trade names, service marks,
copyrights, trade secrets, customer lists, inventions, formulas, methods,
processes and other proprietary information. There are no outstanding licenses
or consents granting third parties the right to use any intellectual property
owned by any one of the Rare Companies or the patent pending email business
method which is the subject of a provisional patent application filed by Xxxx X.
Xxxxxxxx for Xxxxx X. Xxxxxxx, Inventor, dated April 7, 2000 (the "Email
Technology"); other than as set forth in the Email License, no royalties or fees
are payable by any one of the Rare Companies, Xxxxx X. Xxxxxxx or any other
Person to any third party by reason of the use of the Email Technology. No
royalties or fees are payable by any one of the Rare Companies to any third
party by reason of the use of any of its intellectual property. None of the Rare
Companies has received notice of any adversely held patent, invention,
trademark, copyright, service xxxx or trade name of any Person, or any claims of
any other Person relating to any of the intellectual property subject hereto,
and to the knowledge of Rare Telephony and the Rare Telephony Shareholders,
there is no reasonable basis for any such charge or claim. Neither Xxxxx X.
Xxxxxxx nor Xxxx X. Xxxxxxxx (or any associate or partner of Xx. Xxxxxxxx) has
received notice of any adversely held patent, invention, or any claims of any
other Person relating to any of the Email Technology, and to the knowledge of
Xxxxx X. Xxxxxxx and Xxxx X. Xxxxxxxx, there is no reasonable basis for any such
charge or claim. There is no presently known threatened use or encroachment of
any such intellectual property.
(m) Contracts, Leases, Agreements and Other Commitments.
None of the Rare Companies is a party to or bound by any oral, written or
implied contracts, agreements, licenses, leases, employment agreements, powers
of attorney, guaranties, surety arrangements or other commitments, except for
the following (which are hereinafter collectively called the "Corporation
Agreements"):
(i) The leases and agreements described on
Schedule 4.1(m); and
(ii) Agreements involving a maximum possible
liability or obligation on the part of Rare Telephony of less than Five Hundred
Dollars ($500) in the aggregate.
True, correct and complete copies of each Corporation
Agreement described and listed under Subsection 4.1(m) have been made available
to Acquiror prior to the execution of this Agreement. All of the Corporation
Agreements are valid, binding and enforceable against the respective parties
thereto in accordance with their respective terms. Following the Merger, the
Surviving Corporation shall become entitled to all rights of Rare Telephony
under such of the Corporation Agreements to which Rare Telephony is a party as
if the Surviving Corporation were the original party to such Corporation
Agreements. Additionally, the Corporation Agreements which are executed by Cash
Back or Free, as the case may be, shall continue to be valid, binding and
enforceable against the respective parties thereto in accordance with their
16
respective terms following the Merger. All parties to all of the Corporation
Agreements have performed all obligations required to be performed to date under
such Corporation Agreements, and no party is in default or in arrears under the
terms thereof, and no condition exists or event has occurred which, with the
giving of notice or lapse of time or both, would constitute a default
thereunder. The consummation of this Agreement and the Merger will not result in
an impairment or termination of any of the rights of any of the Rare Companies
under any Corporation Agreement. None of the terms or provisions of any
Corporation Agreement materially adversely affects the business, prospects,
financial condition or results of operations of any one of the Rare Companies.
(n) Conflicting Interests. Except as set forth on
Schedule 4.1(n), no director, officer, consultant, employee of any one of the
Rare Companies, no Rare Telephony Shareholder, and no relative or Affiliate of
any of the foregoing (i) sells or purchases goods or services from any one of
the Rare Companies or has any pecuniary interest in any supplier or client of
any of the foregoing or in any other business enterprise with which any one of
the Rare Companies conducts business or with which any of the foregoing is in
competition, or (ii) is indebted to any one of the Rare Companies except for
money borrowed and as set forth on the Financial Statements.
(o) Environmental Protection. None of the Rare Companies
and the Rare Telephony Shareholders have been notified by any governmental
authority, agency or third party, and none of the Rare Companies and the Rare
Telephony Shareholders have any knowledge, of any violation by any one of the
Rare Companies of any Environmental Statute (as defined below). All
registrations by each of the Rare Companies with, licenses from or permits
issued by governmental agencies pursuant to environmental, health and safety
laws are in full force and effect. The term "Environmental Statutes" means all
statutes, ordinances, regulations, orders and requirements of common law
concerning discharges to the air, soil, surface water or groundwater and
concerning the storage, treatment or disposal of any waste or hazardous
substance. There is no hazardous substance at any premises currently or
previously occupied by any one of the Rare Companies. None of the Rare Companies
has received any notice or any request for information, notice of claim, demand
or other notification that it may be potentially responsible with respect to any
investigation or clean-up of any threatened or actual release of hazardous
substances. All hazardous wastes and substances have been stored, treated,
disposed of and transported in conformance with all requirements applicable to
such hazardous substances and wastes.
(p) Absence of Certain Changes or Events. Except as and
to the extent set forth on Schedule 4.1(p), since February 1, 2000 there has not
been (i) any material adverse change in the business, assets, properties,
results of operations, financial condition or prospects of any one of the Rare
Companies; (ii) any entry by any one of the Rare Companies into any material
commitment or transaction which is not in the ordinary course of business; (iii)
any declaration, payment or setting aside for payment of any dividends or other
distributions (whether in cash, stock or property) in respect of capital stock
of Rare Telephony or any Subsidiary, or any direct or indirect redemption,
purchase or any other type of acquisition by any one of the Rare Companies of
any shares of its capital stock or any other securities; (iv) any agreement by
any one of the Rare Companies, whether in writing or otherwise, to take any
17
action which, if taken prior to the date of this Agreement, would have made any
representation or warranty in this Section 4.1 untrue or incorrect; (v) any
acquisition of the assets of any one of the Rare Companies, other than in the
ordinary course of business and consistent with past practice; or (vi) any
execution of any agreement with any executive officer of any one of the Rare
Companies providing for his or her employment, or any increase in the
compensation or in severance or termination benefits payable or to become
payable by any one of the Rare Companies to its officers or key employees, or
any material increase in benefits under any collective bargaining agreement or
in benefits under any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, insurance or other plan or arrangement or understanding
(whether or not legally binding) providing benefits to any present or former
employee of any one of the Rare Companies. Since the date of the Financial
Statements (dated April 30, 2000), there has not been and there is not
threatened, any material adverse change in financial condition, business,
results of operations or prospects of the business or any material physical
damage or loss to any of the properties or assets of the business or to the
premises occupied in connection with the business, whether or not such loss is
covered by insurance.
(q) Investment Intent.
(i) The shares of Acquiror Common Stock are not
being registered under the Act on the basis of the statutory exemption provided
by Section 4(2) thereof and/or Regulation D thereunder, relating to transactions
not involving a public offering, and the Acquiror's reliance on the statutory
exemption thereof is based in part on the representations contained in this
Agreement;
(ii) The Rare Telephony Shareholders represent
(a) that they have reviewed such quarterly, annual and periodic reports of the
Acquiror (the "Reports") as have been filed with the Securities and Exchange
Commission (the "SEC") and that they have such knowledge and experience in
financial and business matters that they are capable of utilizing the
information set forth therein concerning Acquiror to evaluate the risk of
investing in the Acquiror; (b) that they have been advised that the shares of
Acquiror Common Stock to be issued to each of them by the Acquiror constitute
"restricted securities" as defined in Rule 144 promulgated under the Act and
accordingly, have not been and will not be registered under the Act, except as
otherwise provided in this Agreement, and therefore, the Rare Telephony
Shareholders may not be able to sell or otherwise dispose of such shares except
if such shares are subject to an effective registration statement filed with the
SEC, in compliance with Rule 144 or otherwise pursuant to an exemption from
registration under the Act; (c) that the shares of Acquiror Common Stock are
being acquired by them for their own benefit and on their own behalf for
investment purposes and not with a view to, or for sale or resale in connection
with, a public offering or distribution thereof; (d) that the shares of Acquiror
Common Stock so issued will not be sold (I) without registration thereof under
the Act (unless such shares are subject to registration or in the opinion of
counsel acceptable to the Acquiror, an exemption from such registration is
available), or (II) in violation of any law; (e) that the certificate or
certificates representing the shares of Acquiror Common Stock comprising the
Merger Consideration to be issued will be imprinted with a legend in form and
substance substantially as follows:
18
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAWS. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION, OR THE AVAILABILITY OF EXEMPTION
FROM REGISTRATION, UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, BASED ON AN
OPINION LETTER OF COUNSEL SATISFACTORY TO THE
COMPANY OR A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION."
(f) Acquiror is hereby authorized to notify its transfer agent of the status of
the shares of Acquiror Common Stock comprising the Merger Consideration, and to
take such other action including, but not limited to, the placing of a
"stop-transfer" order on the transfer agent's books and records to ensure
compliance with the foregoing; (g) Acquiror is hereby authorized to place any
other legends on the shares of Acquior Common Stock to be issued and take any
other actions it believes necessary or reasonable to ensure compliance with
federal and state securities laws; and (h) the shares of Acquiror Common Stock
comprising the Merger Consideration to be issued will be imprinted with a legend
in form and substance substantially as follows (it being understood that the
actual legends may contain specific date references):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO AN AGREEMENT AND PLAN OF MERGER
BY AND AMONG VDC COMMUNICATIONS, INC., VOICE
& DATA COMMUNICATIONS (LATIN AMERICA), INC.,
RARE TELEPHONY, INC., AND THE SHAREHOLDERS OF
RARE TELEPHONY, INC. AND MAY NOT BE TRANSFERRED
OR ENCUMBERED EXCEPT IN ACCORDANCE WITH THE
TERMS OF THAT AGREEMENT."
(iii) Rare Telephony and the Rare Telephony
Shareholders have been afforded the opportunity to review and are familiar with
the Reports and have based their decision to invest solely on the information
contained therein, and the information contained within this Agreement and the
associated exhibits and schedules, and have not been furnished with any other
literature, prospectus or other information except as included in the Reports or
this Agreement;
(iv) The Rare Telephony Shareholders are able to
bear the economic risks of an investment in the shares of Acquiror Common Stock
comprising the Merger Consideration and that their overall commitment to their
investments which are not readily marketable is not disproportionate to their
net worth;
19
(v) The Rare Telephony Shareholders have relied
solely upon the advice of their own tax and legal advisors with respect to the
tax and other legal aspects of this investment;
(vi) The Rare Telephony Shareholders acknowledge
that they have had the opportunity to ask questions of and receive answers from,
and to obtain additional information from, representatives of Acquiror
concerning the terms and conditions of the acquisition of the shares of Acquiror
Common Stock comprising the Merger Consideration and the present and proposed
business and financial condition of the Acquiror, and have had all such
questions answered to its satisfaction and has been supplied all information
requested; and
(vii) The Rare Telephony Shareholders understand
that no federal or state agency has approved or disapproved the shares of
Acquiror Common Stock comprising the Merger Consideration, passed upon or
endorsed the merits of the transfer of such shares set forth within this
Agreement or made any finding or determination as to the fairness of such shares
for investment.
(r) Books and Records. The books of account, minute
books, and other records of the Rare Companies, all of which have been made
available to Acquiror, are complete and correct and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls. The minute books of Rare Telephony, Cash
Back, and Free contain accurate and complete records of all meetings held of,
and corporate action taken by, the members, the Board of Directors, and
committees of the Board of Directors of Rare Telephony, Cash Back, and Free, as
the case may be, and no meeting of any such members, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
will be in the possession of Rare Telephony, Cash Back, and Free as the case may
be.
(s) Employee Benefits. None of the Rare Companies has any
pension, retirement, profit sharing and bonus plans, dental plan, deferred
compensation, health (other than standard medical insurance (excluding dental
coverage) whereby the Rare Company pays no more than 70% of the employee's
medical insurance premium, which insurance excludes the employee's family
members (other than executives of the Rare Companies, as that term is defined by
the Board of Directors for the Rare Companies, who may have standard medical
insurance for their immediate family members whereby the Rare Company pays no
more than 70% of the employee's immediate family members' medical insurance
premium)), welfare, severance management, severance package or termination
payment, or other similar plans for the benefit of any employees of any one of
the Rare Companies, including employee plans ("Employee Benefit Plan"). Subject
to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
none of the Rare Companies at present is, or since its organization, has been a
sponsor of, party to or obligated to contribute to any employee benefit plan (as
defined in Section 3(3) of ERISA), and is not, and has not been, a party to any
collective bargaining agreement. None of the Rare Companies has ever been a
member of a "controlled group of corporations" within the meaning of Internal
Revenue Code Section 414(b) or has ever maintained a defined benefit pension
plan or contributed to a multiemployer plan as defined in Section 3(37) of
20
ERISA. None of the Rare Companies is obligated to or (directly or indirectly)
provides death benefits to any former employees or retirees. Both Rare Telephony
and Cash Back have complied with all applicable provisions of the Immigration
Reform and Control Act of 1986.
(t) Certain Payments. Since their organization, none of
the Rare Companies, nor any of their directors, officers, agents, or employees,
nor any other Person associated with or acting for or on behalf of any one of
the Rare Companies, has directly or indirectly (a) made any contribution, gift,
bribe, payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or services,
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions,
or for special concessions already obtained, for or in respect of any one of the
Rare Companies or any Affiliate of any one of the Rare Companies, or (iv) in
violation of any Legal Requirement; or (b) established or maintained any fund or
asset that has not been recorded in the books and records of the Rare Companies.
(u) Stock Purchase Agreement. Pursuant to a Stock
Purchase Agreement by and among Xxxxx XxXxxxxx, Xxx Xxxxxxxxx, and Xxxxx
Xxxxxxxx (collectively, the "Common Sellers") and Rare Telephony (then known as
Washoe Technology Corporation), dated July 20, 1999 (the "Common Purchase
Agreement"), Rare Telephony purchased all of the outstanding securities of
Common Concerns, Inc. (now know as Cash Back); Rare Telephony does not have any
liabilities or obligations to the Common Sellers or any other Person arising out
of Common Purchase Agreement.
(v) Dissenters' Rights. Rare Telephony has complied with
the provisions of the NRS in notifying each Rare Telephony Shareholder of the
availability of dissenters' rights and all Rare Telephony Shareholders have
consented to the transactions contemplated by this Agreement and have, thereby,
waived their entitlement to dissenters' rights.
(w) Statements And Other Documents Not Misleading.
Neither this Agreement, including all exhibits and schedules and other closing
documents, nor any other financial statement, document or other instrument
heretofore or hereafter furnished by Rare Telephony or the Rare Telephony
Shareholders to Acquiror or Sub in connection with the Merger or the other
transactions contemplated hereby, contains or will contain any untrue statement
of any material fact or omit or will omit to state any material fact required to
be stated in order to make such statement, information, document or other
instruments, in light of the circumstances in which they are made, not
misleading. There is no fact known to Rare Telephony or the Rare Telephony
Shareholders which may have a Material Adverse Effect on the business,
prospects, financial condition or results of operations of any one of the Rare
Companies or of any of its properties or assets which has not been set forth in
this Agreement as an exhibit or schedule hereto.
4.2 Representations and Warranties of Acquiror and the Sub.
As a material inducement to Rare Telephony and the Rare
Telephony Shareholders to execute this Agreement and to consummate the Merger
21
and the other transactions contemplated hereby, Acquiror and Sub hereby make the
following representations and warranties to Rare Telephony and the Rare
Telephony Shareholders.
(a) Corporate Existence and Power. Acquiror is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and the Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. Each of
Acquiror and the Sub has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except where the failure to have any of the foregoing would not have
a Material Adverse Effect on their respective businesses. Each of Acquiror and
the Sub is duly qualified to do business and is in good standing in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary, except for those
jurisdictions where the failure to be so qualified would not, individually or in
the aggregate, have a Material Adverse Effect. Acquiror owns all of the issued
and outstanding shares of capital stock of the Sub, and there are no other
rights or obligations of Acquiror or the Sub to issue any other shares of
capital stock of the Sub.
(b) Due Authorization. This Agreement has been duly
authorized, executed and delivered by Acquiror and the Sub and constitutes a
valid and binding agreement of Acquiror and the Sub, enforceable in accordance
with its terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, moratorium, and other similar laws relating to, limiting
or affecting the enforcement of creditors' rights generally or by the
application of equitable principles. As of the Closing all corporate action on
the part of Acquiror and the Sub required under applicable law in order to
consummate the Merger (other than the delivery of the shares of Merger
Consideration) will have occurred.
(c) No Contravention. Neither the execution and delivery
of the Agreement nor the consummation of the transactions contemplated thereby
will conflict with or result in any violation of any provision of the
Certificate of Incorporation or Bylaws of Acquiror or the Certificate of
Incorporation or Bylaws of Sub or (ii) conflict with or result in any violation
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of an right or
obligation or to loss or a benefit under, any provision of the Certificate of
Incorporation or Bylaws of Acquiror or the Certificate of Incorporation or
Bylaws of Sub except, only as to clause (ii) above, such as is not reasonably
likely to have a Material Adverse Effect or prevent Acquiror or Sub from
consummating the transactions contemplated by this Agreement.
(d) Merger Consideration Authorized. Except as limited
by Section 1.3(c), the shares of Acquiror Common Stock to be issued in the
Merger will be duly authorized, validly issued, fully paid and nonassessable.
(e) SEC Filings. Upon request Acquiror will make
available to Rare Telephony copies of its periodic reports filed pursuant to the
Securities Exchange Act of 1934, as well as its proxy or information statements
relating to meetings of, or actions taken without a meeting by the stockholders
of Acquiror held since 1998 and all of its other reports, statements, schedules
22
and registration statements filed with the SEC since inception, other than
pre-effective amendments to such registration statements. The documents referred
to in the preceding sentence are sometimes referred to herein as the "SEC
Documents."
(f) Litigation. Except as set forth in any of the SEC
Documents or Schedule 4.2(g), to the best of Acquiror's knowledge there is no
formally filed lawsuit against or affecting Acquiror or Sub or any of their
properties before any court or arbitrator or any governmental body, agency or
official that (i) if adversely determined against Acquiror, would have a
Material Adverse Effect on Acquiror and Sub, taken as a whole, or (ii) in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
Merger or any of the other transactions contemplated by the Agreement.
ARTICLE V
AGREEMENTS OF THE PARTIES
5.1 Access to Information.
At all times prior to the Closing or the earlier termination
of this Agreement in accordance with the provisions of Article VIII, and in each
case subject to Section 5.2 below, each of the parties hereto shall provide to
the other parties (and the other parties' authorized representatives) full
access during normal business hours and upon reasonable prior notice to the
premises, properties, books, records, assets, liabilities, operations,
contracts, personnel, financial information and other data and information of or
relating to such party (including without limitation all written proprietary and
trade secret information and documents, and other written information and
documents relating to intellectual property rights and matters), and will
cooperate with the other party in conducting its due diligence investigation of
such party.
5.2 Confidentiality; No Solicitation.
(a) Confidentiality of Rare Telephony-Related
Information. With respect to information concerning Rare Telephony that is made
available to Acquiror pursuant to the terms of this Agreement, Acquiror agrees
that, except in connection with the private placement and other securities
purchase agreements associated therewith and except as required by or implicated
by federal or state securities laws or the rules or regulations of the United
States Securities and Exchange Commission or any national securities exchange,
it shall hold such information in confidence, and shall not use such information
except for the sole purpose of evaluating the Merger and related transactions.
If this Agreement is terminated pursuant to the provisions of Article VIII,
Acquiror shall immediately return all such information, all copies thereof and
all information prepared by Acquiror based upon the same; provided, however,
that one copy of all such material may be retained by Acquiror's legal counsel
for purposes only of resolving any disputes under this Agreement. The above
limitations on use, dissemination and disclosure shall not apply to information
that (i) is learned by Acquiror from a third party entitled to disclose it; (ii)
become known publicly other than through Acquiror or any party who received the
23
same through Acquiror, provided that Acquiror has no knowledge that the
disclosing party was subject to an obligation of confidentiality; (iii) is
required by law or court order to be disclosed by Acquiror; or (iv) is disclosed
with the express prior written consent thereto of Rare Telephony or the Rare
Telephony Shareholders. Notwithstanding anything contained herein to the
contrary, in the event a party is required by court order or subpoena to
disclose information which is otherwise deemed to be confidential or subject to
the confidentiality obligations hereunder, prior to such disclosure, the
disclosing party shall: (i) promptly notify the non-disclosing party and, if
having received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (ii) cooperate with the non-disclosing party, at the
expense of the non-disclosing party, in obtaining a protective or similar order
with respect to such information; and (iii) provide only such of the
confidential information as the disclosing party is advised by its counsel is
necessary to strictly comply with such court order or subpoena.
(b) Confidentiality of Acquiror-Related Information.
With respect to information concerning Acquiror that is made available to Rare
Telephony and the Rare Telephony Shareholders pursuant to the provisions of this
Agreement, Rare Telephony and the Rare Telephony Shareholders agree that they
shall hold such information in confidence, and shall not use such information
except for the sole purpose of evaluating the Merger and the related
transactions. If this Agreement is terminated pursuant to the provisions of
Article VIII, Rare Telephony and the Rare Telephony Shareholders agree to return
immediately all such information, all copies thereof and all information
prepared by either of them based upon the same; provided, however, that one copy
of all such material may be retained by Rare Telephony's legal counsel for
purposes only of resolving any disputes under this Agreement. The above
limitations on use, dissemination and disclosure shall not apply to information
that (i) is learned by Rare Telephony or the Rare Telephony Shareholders from a
third party entitled to disclose it; (ii) becomes known publicly other than
through Rare Telephony, the Rare Telephony Shareholders or any party who
received the same through Rare Telephony or the Rare Telephony Shareholders,
provided that Rare Telephony or the Rare Telephony Shareholders have no
knowledge that the disclosing party was subject to an obligation of
confidentiality; (iii) is required by law or court order to be disclosed by Rare
Telephony; or (iv) is disclosed with the express prior written consent thereto
of Acquiror. Notwithstanding any thing contained herein to the contrary, in the
event a party is required by court order or subpoena to disclose information
which is otherwise deemed to be confidential or subject to the confidentiality
obligations hereunder, prior to such disclosure, the disclosing party shall: (i)
promptly notify the non-disclosing party and, if having received a court order
or subpoena, deliver a copy of the same to the non-disclosing party; (ii)
cooperate with the non-disclosing party at the expense of the non-disclosing
party in obtaining a protective or similar order with respect to such
information; and (iii) provide only such of the confidential information as the
disclosing party is advised by its counsel is necessary to strictly comply with
such court order or subpoena.
(c) No Solicitation. In consideration of the substantial
expenditure of time, effort and money to be undertaken by Acquiror in connection
with the transactions contemplated by this Agreement, neither the Rare Telephony
Shareholders, Rare Telephony nor any Affiliate thereof will, prior to the
earlier of the Closing or ninety (90) calendar days after the termination of
this Agreement, directly or indirectly, through any officer, director, agent,
consultant or otherwise: (i) solicit, initiate or encourage the submission of
inquiries, proposals or offers from any Person or entity relating to any
24
acquisition or purchase of assets of or any equity interest in Rare Telephony or
any Affiliate thereof or any tender offer (including a self-tender offer),
exchange offer, merger, consolidation, business combination, sale of a
substantial amount of assets or sale of securities, liquidation, dissolution or
similar transaction involving Rare Telephony or its Affiliates (a "Transaction
Proposal"); (b) enter into or participate in any discussions or negotiations
regarding a Transaction Proposal, or furnish to any other Person or entity any
information with respect to the business, properties or assets of Rare Telephony
or its Affiliates in connection with a Transaction Proposal; or (c) otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage
any effort or attempt by any other Person to do or seek a Transaction Proposal.
Rare Telephony or the Rare Telephony Shareholders shall within six (6) hours
notify Acquiror if any such proposal or offer, or any inquiry or contact with
any Person or entity with respect thereto is made.
5.3 Interim Operations.
During the period from the date of this Agreement and continuing until
the Closing, Rare Telephony agrees (except as expressly contemplated by this
Agreement, including any Exhibits and Schedules hereto, or to the extent that
Acquiror shall otherwise consent in writing) that as to the Rare Companies:
(a) Ordinary Course. Each of the Rare Companies shall
----------------
carry on its business in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted and, to the extent consistent with such
business, use all reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers and employees
and preserve its relationships with customers, suppliers and others having
business dealings with it;
(b) Dividends; Changes in Stock. Each of the Rare
-------------------------------
Companies shall not and shall not propose to (a) declare, set aside or pay any
dividend, on, or make other distributions in respect of, any of its capital
stock, (b) split, combine or reclassify any of its capital stock or issue,
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, (c) redeem, repurchase or
otherwise acquire any shares of its capital stock or (d) otherwise change its
capitalization.
(c) Issuance of Securities. Except for the Merger, none
-----------------------
of the Rare Companies shall sell, issue, pledge, authorize or propose the sale
or issuance of, pledge or purchase or propose the purchase of, any shares of its
capital stock of any class or securities convertible into, or rights, warrants
or options to acquire, any such shares or other convertible securities.
(d) Governing Documents. None of the Rare Companies shall
--------------------
amend its Certificate of Incorporation, or Articles of Incorporation, as the
case may be, or its Bylaws.
25
(e) No Dispositions. None of the Rare Companies shall
-----------------
sell, lease, pledge, encumber or otherwise dispose of or agree to sell, lease,
pledge, encumber or otherwise dispose of, any of its assets that are material to
its business or any other assets except in the ordinary course of business
consistent with prior practice.
(f) Indebtedness. None of the Rare Companies shall incur
-------------
any indebtedness for borrowed money or guarantee any such indebtedness or issue
or sell any debt securities of any one of the Rare Companies or guarantee any
debt securities of others other than in the ordinary course of business
consistent with prior practice.
(g) Benefit Plans; Etc. None of the Rare Companies shall
-------------------
adopt or amend in any material respect any collective bargaining agreement or
Employee Benefit Plan.
(h) Compensation. None of the Rare Companies shall grant
-------------
to any management level employee or officer any increase in compensation or in
severance or termination pay, or enter into any employment agreement with any
management level employee or officer.
(i) Acquisitions. None of the Rare Companies shall
-------------
acquire (by merger, consolidation or acquisition of stock or assets or
otherwise) any corporation, partnership or other business organization or
subdivision thereof, or make any investment by either purchase of stock or
securities, contributions to capital, property transfer or, except in the
ordinary course of business, purchase of any property or assets, of any other
individual or entity.
(j) Tax Elections. None of the Rare Companies shall make
--------------
any material tax election or settle or compromise any material federal, state,
local or foreign tax liability.
(k) Waivers and Releases. None of the Rare Companies
---------------------
shall waive, release, grant or transfer any rights of material value or modify
or change in any material respect any Corporation Agreement other than in the
ordinary course of business and consistent with past practice.
(l) Other Actions. None of the Rare Companies shall enter
--------------
into any agreement or arrangement to do any of the foregoing. None of the Rare
Companies shall take any action, or fail to take any action, that is reasonably
likely to result in any of the representations and warranties of Rare Telephony
set forth in this Agreement becoming untrue in any material respect.
5.4 Consents.
Acquiror, Sub, Rare Telephony and the Rare Telephony
Shareholders shall cooperate and use their best efforts to obtain, prior to the
Closing, all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
as are necessary for the consummation of the transactions contemplated by this
Agreement; provided, however, that no loan agreement or contract for borrowed
monies shall be repaid and no contract shall be amended materially to increase
26
the amount payable thereunder or otherwise to be materially more burdensome in
order to obtain any such consent, approval or authorization without first
obtaining the written approval of the other parties hereto.
5.5 Filings.
Acquiror, the Sub, Rare Telephony and the Rare Telephony
Shareholders shall, as promptly as practicable, make any required filing, and
any other required submissions, under any law, statute, order rule or regulation
with respect to the Merger and the related transactions and shall cooperate with
each other with respect to the foregoing and any shareholder of the Acquiror who
has an obligation to file a Schedule 13D shall do so prior to the Closing.
5.6 All Reasonable Efforts.
Subject to the terms and conditions of this Agreement and to
the fiduciary duties and obligations of the boards of directors of the parties
hereto to their respective shareholders, as advised by their counsel, each of
the parties to this Agreement shall use all reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations, or to remove any
injunctions or other impediments or delays, legal or otherwise, as soon as
reasonable practicable, to consummate the Merger and the other transactions
contemplated by this Agreement.
5.7 Public Announcements.
Acquiror and Rare Telephony shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to the Merger, this Agreement or the other transactions contemplated by
this Agreement and shall not issue any other press release or make any other
public statement without prior consultation with the other parties, except as
may be required by law or, with respect to Acquiror, by obligations pursuant to
any listing agreement with any national securities exchange or as otherwise
deemed reasonable or necessary in the sole discretion of Acquiror's counsel. The
Rare Telephony Shareholders shall not issue any other press release or make any
other public statement with respect to the Merger, this Agreement or the other
transactions contemplated by this Agreement.
5.8 Notification of Certain Matters.
Rare Telephony and the Rare Telephony Shareholders shall give
prompt notice to Acquiror, and Acquiror and the Sub shall give prompt notice to
Rare Telephony and the Rare Telephony Shareholders, of (a) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which would
cause any of their representations or warranties in this Agreement to be untrue
or inaccurate in any material respect, as to Rare Telephony and the Rare
Telephony Shareholders, at or prior to the Closing, and, as to Acquiror and Sub,
as of the Closing and (b) any material failure of Rare Telephony and the Rare
27
Telephony Shareholders, on the one hand, or Acquiror or the Sub, on the other
hand, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by them under this Agreement;
provided, however, that the delivery of any notice pursuant to this Section
shall not limit or otherwise affect the remedies available to the party
receiving such notice under this Agreement as expressly provided in this
Agreement.
5.9 Expenses.
Except as otherwise expressly provided herein, all costs and
expenses incurred in connection with the Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated. Without limiting the generality of the
foregoing, neither Rare Telephony nor Sub (including the Surviving Corporation)
will be responsible for the legal fees (or fees of other advisors or experts) of
the Rare Telephony Shareholders.
5.10 Registration Rights; Resale Restrictions
(a) In accordance with the terms and conditions of
Registration Rights Agreements to be provided by the Acquiror (in substantially
the form attached hereto as Exhibit 5.10), Acquiror shall offer piggy back
registration rights for the following shares of Acquiror Common Stock: (i) the
Investment Banking Shares; (ii) 50,000 shares of Acquiror Common Stock issued in
the name of Xxxxx X. Xxxxxxx in connection with the Merger (the "Xxxxxxx
Registerable Shares"); and (iii) 45,000 shares of Acquiror Common Stock issued
in the name of Xxxxxx Xxxxxxx in connection with the Merger (the "Xxxxxxx
Registerable Shares") Other than as set forth above, there are no registration
rights associated with the Merger Consideration. The Acquiror's registration
rights obligations in accordance with this paragraph shall extend only to the
inclusion of the Investment Banking Shares, the Xxxxxxx Registerable Shares, and
the Xxxxxxx Registerable Shares (collectively, the "Registerable Shares") in a
Registration Statement filed under the Act. The Acquiror shall have no
obligation to assure the terms and conditions of distribution, to obtain a
commitment from an underwriter relative to the sale of the Registerable Shares
or to otherwise assume any responsibility for the manner, price or terms of the
distribution of the Registerable Shares. Furthermore, the Acquiror shall not be
restricted in any manner from including within the Registration Statement the
distribution, issuance or resale of any of its or any other securities.
(b) In addition to any restrictions on the sale,
offering, or transfer pursuant to federal or state securities laws (and the
rules and regulations thereunder), the shares of Acquiror Common Stock
constituting the Merger Consideration shall be subject to the following
restrictions upon resale (the "Restrictions"): 34% of the holder's Acquiror
Common Stock no earlier than one (1) year following the Closing; an additional
33% of the holder's Acquiror Common Stock no earlier than two (2) years
following the Closing; and the remaining 33% of the holder's Acquiror Common
Stock no earlier than three (3) years following the Closing. Notwithstanding the
foregoing, the Registerable Shares shall not be subject to the Restrictions;
provided however: (i) the Registerable Shares will remain subject to any
restrictions on the sale, offering, or transfer pursuant to federal or state
28
securities laws (and the rules and regulations thereunder); and (ii) the shares
of Acquiror Common Stock issued to both Xxxxx X. Xxxxxxx and Xxxxxx Xxxxxxx
pursuant to this Merger Agreement (other than the Xxxxxxx Registerable Shares
and the Xxxxxxx Registerable Shares, as the case may be), shall remain subject
to the Restrictions. THE RARE TELEPHONY SHAREHOLDERS ACKNOWLEDGE THAT THE SHARES
CONSTITUTING THE MERGER CONSIDERATION ARE SUBJECT TO FORFEITURE.
(c) Notwithstanding the foregoing, the Restrictions shall
immediately expire (and counsel for Acquiror shall send a letter to Acquiror's
transfer agent instructing the transfer agent to remove the Restriction legends
from all certificates representing outstanding shares of Acquiror Common Stock
constituting the Merger Consideration) if and only if the Acquiror upon
direction from its Board of Directors: (1) completely shuts down the operations
of all of the Rare Companies; and (2) fires, other than five (5) or fewer
individuals, all employees, consultants, and agents of all of the Rare
Companies. Moreover, if a Rare Telephony Shareholder dies prior to the
expiration of the Restrictions, the Restrictions on the shares of Acquiror
Common Stock issued in the name of the deceased Rare Telephony Shareholder only
shall immediately expire (and counsel for Acquiror shall send a letter to
Acquiror's transfer agent instructing the transfer agent to remove the
Restriction legends from all certificates representing outstanding shares of
Acquiror Common Stock issued in the name of the deceased Rare Telephony
Shareholder) upon the estate of the deceased Rare Telephony Shareholder
providing the Acquiror's counsel with an original death certificate for the
deceased Rare Telephony Shareholder. It is understood that the Restrictions to
be removed, if removed, in accordance with this Section 5.10(c) are contractual
restrictions on resale. The removal of the Restrictions shall not in any way
impact or relieve any Rare Telephony Shareholder from compliance with any and
all federal or state securities laws (and the rules and regulations thereunder).
5.11 Documents at Closing.
Each party to this Agreement agrees to execute and deliver at
the Closing those documents identified in Section 2.2 which are required to be
executed and delivered by such party.
5.12 Prohibition on Trading in Acquiror and Sub Stock.
Rare Telephony and the Rare Telephony Shareholders acknowledge
that the United States securities laws prohibit any person who has received
material non-public information concerning the matters which are the subject
matter of this Agreement from purchasing or selling the securities of the
Acquiror or Sub, or from communicating such information to any Person under
circumstances in which it is reasonably foreseeable that such Person is likely
to purchase or sell securities of the Acquiror or Sub. Accordingly, the Rare
Telephony Shareholders agree that they will not purchase or sell any securities
of the Acquiror or Sub, or communicate such information to any other Person
under circumstances in which it is reasonably foreseeable that such Person is
likely to purchase or sell securities of the Acquiror or Sub, until no earlier
than 72 hours following the dissemination of a Current Report on Form 8-K to the
SEC announcing the Closing pursuant to this Agreement.
29
5.13 Production of Schedules and Exhibits.
Within fifteen (15) calendar days of the execution of this
Agreement each of the parties hereto shall produce to the other parties, to the
extent not previously done, all of the Schedules and Exhibits required to be
produced pursuant to this Agreement. The Schedules and Exhibits produced
subsequent to the execution of this Agreement, shall be given such force and
effect as though such Schedules and Exhibits were produced upon execution of
this Agreement.
5.14 Loan Documents
On the terms and conditions set forth in the Funding Agreement
attached hereto as Exhibit 5.14 and made a part hereto, the Acquiror shall
provide limited financing to Rare Telephony.
5.15 Acknowledgment of Approvals.
By virtue of their respective signatures to this Agreement,
Acquiror, Sub, Rare Telephony and the Rare Telephony Shareholders acknowledge
their approval of this Agreement and their consent to the consummation of the
transactions identified herein.
5.16 Audit.
After the Closing, Rare Telephony and the Rare Telephony
Shareholders shall cooperate with Acquiror, its accountants and representatives
in furnishing information on the Rare Companies and their businesses for the
purposes of conducting an audit of the Rare Companies, and, without limiting the
generality of the foregoing, shall provide, execute and deliver standard and
customary management representation letters.
5.17 Appointment to Board of Directors.
For the six (6) months following the Effective Time, the Rare
Telephony Shareholders shall have the right, upon the delivery to Acquiror of a
written consent of a majority of the Rare Telephony Shareholders (as opposed to
the written consent of a majority of the shares held by the Rare Telephony
Shareholders in either Rare Telephony or the Acquiror), to designate one person
to attend, either telephonically or in person, all meetings of the Board of
Directors of the Acquiror (the "Attendance Right"). The Attendance Right (i.e.
the right to have a designate attend, either telephonically or in person, all
meetings of the Board of Directors of the Acquiror) shall expire on the calendar
day after the six month anniversary of the Effective Time. The Attendance Right
shall not extend to meetings of the committees of the Acquiror's Board of
Directors. Additionally, on or before September 15, 2000, the Rare Telephony
Shareholders shall have the right, upon the delivery to Acquiror of a written
consent of a majority of the Rare Telephony Shareholders (as opposed to the
30
written consent of a majority of the shares held by the Rare Telephony
Shareholders in either Rare Telephony or the Acquiror), to designate one person
to be elected to the Acquiror's Board of Directors (the "Rare Telephony
Candidate"). If, and only if, the Rare Telephony Candidate is an acceptable
candidate for serving on the Acquiror's Board of Directors (in the sole
discretion of the members of the Acquiror's Board of Directors), then the
members of the Acquiror's Board of Directors shall elect the Rare Telephony
Candidate to serve as a Class II member of the Acquiror's Board of Directors
with a term to expire at the annual meeting of the Acquiror's stockholders held
in 2000. The right of the Rare Telephony Shareholders to designate a Rare
Telephony Candidate shall expire at 5:01 p.m. Eastern Standard Time on September
15, 2000. If the Rare Telephony Shareholders designate a Rare Telephony
Candidate and the members of Acquiror's Board of Directors elect the Rare
Telephony Candidate to the Acquiror's Board of Directors then the Attendance
Right shall immediately expire.
5.18 Consents from Rare Telephony Shareholders.
To the extent the Rare Telephony Shareholders receive options
to purchase shares of Acquiror common stock pursuant to the Acquiror's 1998
Stock Incentive Plan, as Amended (the "Plan") in connection with their serving
as employees of or consultants to Acquiror or its subsidiaries (as defined in
the Plan), all such Rare Telephony Shareholders agree to approve any
amendment(s) to the Plan approved by the Acquiror's Board of Directors in the
six months following the Effective Date.
5.19 Xxxxxx Indemnification.
Rare Telephony (then known as Washoe Technology Corporation)
and Cash Back executed on March 7, 2000 a promissory note in the principal
amount of $200,000.00 bearing interest at the rate of 15% per annum in favor of
Xxxxx & Xxxxx, a partnership (the "Xxxxx Note"). The Sub shall indemnify and
hold harmless Xxxxxx X. Xxxxxx against any damage or cost (including reasonable
attorney's fees) incurred by Xx. Xxxxxx arising out of his personal guarantee of
the Xxxxx Note if, and only if, the said damage or cost is incurred due to the
fact that: (1) Rare Telephony and/or Cash Back are (is) in default under the
Xxxxx Note pursuant to Section 8(a) through 8(f) of the Xxxxx Note; and (2) said
default has occurred due to the fact that the treasurer of Sub has not timely
approved payment of the Xxxxx Note. In no event shall Acquiror indemnify Xx.
Xxxxxx hereunder if the source of the default is Section 8(g) of the Xxxxx Note
or any provision of an Agreement by and among Rare Telephony (then known as
Washoe Technology Corporation), Cash Back and Xxxxx and Xxxxx, dated March 6,
2000.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
31
6.1 Conditions to Obligations of Rare Telephony and the Rare
Telephony Shareholders.
The obligations of Rare Telephony and the Rare Telephony
Shareholders to consummate the Merger and the other transactions contemplated to
be consummated by it at the Closing are subject to the satisfaction (or waiver
by Rare Telephony and the Rare Telephony Shareholders) at or prior to the
Closing (or at such other time prior thereto as may be expressly provided in
this Agreement) of each of the following conditions:
(a) The representations and warranties of Acquiror and
the Sub set out in this Agreement shall be true and correct in all material
respects at and as of the time of the Closing as though such representations and
warranties were made at and as of such time.
(b) The approval of the Merger by the Board of Directors
of Rare Telephony and the Rare Telephony Shareholders in accordance with the
provisions of the NRS shall not have been revoked or altered in any way.
(c) No statute, rule, regulation, executive order,
decree, injunction or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or governmental
authority that prohibits or restricts the consummation of the Merger or the
related transactions.
6.2 Conditions to Acquiror's and the Sub's Obligations.
The obligations of Acquiror and the Sub to consummate the
Merger and the other transactions contemplated to be consummated by it at the
Closing are subject to the satisfaction (or waiver by Acquiror) at or prior to
the Closing (or at such other time prior thereto as may be expressly provided in
this Agreement) of each of the following conditions:
(a) On or before the Closing, Rare Telephony shall
have secured general releases from each of its directors, officers, consultants,
employees and shareholders agreeing to (and to the extent requested by the
Acquiror the directors, officers, and employees of Cash Back): (i) release Rare
Telephony, Cash Back, and Free from any and all claims, liabilities, obligations
and demands; (ii) terminate any employment agreements with Rare Telephony, Cash
Back, or Free; and (iii) terminate any shareholder agreements.
(b) On or before the Closing, each of the Rare Companies
shall have secured the resignation of each of its directors and officers to the
extent requested by Acquiror.
(c) No Rare Telephony Shareholder shall have filed with
Rare Telephony, prior to the Rare Telephony shareholder meeting at which a vote
is to be taken with respect to a proposal to approve this Agreement, a written
notice of intent to demand payment for his shares if the proposed action is
32
effectuated, as required by the NRS in order for such shareholder to perfect the
right to dissent from such proposed action.
(d) The representations and warranties of Rare Telephony
and the Rare Telephony Shareholders set out in this Agreement shall be true and
correct in all material respects at and as of the time of the Closing as though
such representations and warranties were made at and as of such time.
(e) Rare Telephony and the Rare Telephony Shareholders
shall have complied in a timely manner and in all material respects with its
covenants and agreements set out in this Agreement.
(f) There shall be delivered to Acquiror and Sub an
officer's certificate of Rare Telephony to the effect that all of the
representations and warranties of Rare Telephony set forth herein are true and
complete in all respects as of the Closing, and that Rare Telephony has complied
in all material respects with covenants and agreements set forth herein required
to be complied with by the Closing, and there shall be delivered to Acquiror and
Sub a certificate signed by the Rare Telephony Shareholders to the effect that
the representations and warranties of the Rare Telephony Shareholders set forth
herein are true and correct in all material respects and that the Rare Telephony
Shareholders have complied in all material respects with their covenants and
agreements set forth herein required to be complied with by Closing.
(g) Rare Telephony and the Rare Telephony Shareholders
shall have executed and delivered the Escrow Agreement to Acquiror and the
Escrow Agent.
(h) Acquiror and Sub shall have completed prior to
the Closing, to their satisfaction, a due diligence review of the financial
condition, results of operations, properties, assets, liabilities, businesses
and prospects of Rare Telephony.
(i) All director, shareholder, lender, lessor and other
parties' consents and approvals, as well as all filings with, and all necessary
consents or approvals of, all federal, state and local governmental authorities
and agencies, as are required under this Agreement, applicable law or any
applicable contract or agreement (other than as contemplated by this Agreement)
to complete the Merger shall have been secured.
(j) No statute, rule, regulation, executive order,
decree, injunction or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or governmental
authority that prohibits or restricts the consummation of the Merger or the
related transactions.
(k) Acquiror's and Sub's Board of Directors, and
shareholders to the extent necessary, shall have approved the Merger in
accordance with the DGCL.
33
(l) The approval of the Merger by the Board of Directors
of Rare Telephony and the Rare Telephony Shareholders in accordance with the
provisions of the NRS shall not have been revoked or altered in any way.
(m) The Rare Telephony and Cash Back employees and
consultants listed on Schedule 6.2(m) have terminated their existing employment
agreements or consultant agreements, as the case may be, and
(1) Xxxxxxx Xxxxxx, Xxxxxxx Xxxxx, Xxxxxx Xxxx,
Xxxxxxxxxxx XxXxxxxx, Xxxxxxx Xxxxx, Xxxxx Santa Lucia, Xxxx Xxxxxx, and
Xxxxxxxx Xxxx Xxxxxxx shall have entered into new employment agreements with Sub
in the form attached hereto as Exhibit 6.2(m)(1);
(2) Xxxxxxx Xxxxxxx and Xxxx Xxx Xxxxxxxx shall
have entered into new employment agreements with Sub in the form attached hereto
as Exhibit 6.2(m)(2)
(3) Xxxxxx Xxxxxxxx, Xxxxxx Xxxxxx, and Xxxxxx
Xxxxxxx shall have entered into new employment agreements with Sub in the form
attached hereto as Exhibit 6.2(m)(3);
(4) Xxxxxx Xxxxxxx shall have entered into a
new consulting agreement with Sub in the form attached hereto as Exhibit
6.2(m)(4); and
(5) Xxxxx X. Xxxxxxx shall have entered into a
new consulting agreement with Sub in the form attached hereto as Exhibit
6.2(m)(5).
(n) Rare Telephony, Cash Back, and Free shall not have
more than $300,000 of indebtedness, on a consolidated basis (as determined to
the sole satisfaction of Acquiror) (the "Remaining Indebtedness"); $200,000 of
the Remaining Indebtedness shall bear interest at 15% per annum (provided,
however, that if the creditor for the $200,000 indebtedness shall be an officer,
director, consultant, agent or Affiliate of any Rare Company, then said
indebtedness shall bear interest at the rate of 8% per annum); $100,000 of the
Remaining Indebtedness shall bear interest at 8% per annum; the Remaining
Indebtedness shall have a maturity date of three years from Closing (or later)
and shall be able to be prepaid without penalty. A $50,000 loan by Xxxxxx X.
Xxxxxx to any one or more of the Rare Companies shall be extinguished as of
Closing. The Remaining Indebtedness shall exclude trade debt, accounts payable,
and accrued expenses. At Closing, the Rare Companies on a consolidated basis
shall not have more than, in the aggregate, $450,000 of trade debt, accounts
payable, and accrued expenses (excluding salaries).
(o) Rare Telephony shall have executed and delivered
the Funding Agreement to Acquiror.
ARTICLE VII
34
INDEMNIFICATION
7.1 Indemnification.
(a) Rare Telephony and Rare Telephony Shareholders. The
------------------------------------------------
Rare Telephony Shareholders shall jointly and severally, indemnify, defend and
hold harmless Acquiror, Sub, and their respective Representatives, stockholders,
controlling persons, and affiliates from and against any and all demands,
claims, actions or causes of action, judgments, assessments, losses,
liabilities, damages or penalties and reasonable attorneys' fees and related
disbursements (collectively, "Claims") incurred by Acquiror, Sub, or their
respective Representatives, stockholders, controlling persons, or affiliates
which arise out of or result from a misrepresentation, breach of warranty, or
breach of any covenant of Rare Telephony or the Rare Telephony Shareholders
contained herein or in the Schedules annexed hereto or in any deed, exhibit,
closing certificate, schedule or any ancillary certificates or other documents
or instruments furnished by Rare Telephony or the Rare Telephony Shareholders
pursuant hereto or in connection with the transactions contemplated hereby or
thereby.
(b) Acquiror and Sub. Acquiror and Sub shall indemnify,
-----------------
defend and hold harmless Rare Telephony and the Rare Telephony Shareholders from
and against any and all Claims, as defined at Subsection 7.1(a) above, incurred
by Rare Telephony and/or the Rare Telephony Shareholders which arise out of or
result from a misrepresentation, breach of warranty or breach of any covenant of
Acquiror and Sub contained herein or in the Schedules annexed hereto or in any
deed, exhibit, closing certificate, schedule or any ancillary certificates or
other documents or instruments furnished by Acquiror or the Sub pursuant hereto
or in connection with the transactions contemplated hereby or thereby.
(c) Escrow Claim. Upon notice to the Rare Telephony
-------------
Shareholders (or any one of them as specified in the Escrow Agreement)
specifying in reasonable detail the basis for such setoff, either Acquiror or
Sub may give notice of a Claim under the Escrow Agreement in such amount to
which it may be entitled under this Article VII. Neither the exercise of nor the
failure to give a notice of a Claim under the Escrow Agreement will constitute
an election of remedies or limit Buyer in any manner in the enforcement of any
other remedies that may be available to it.
(d) Right to Indemnification Not Affected by Knowledge.
-----------------------------------------------------
The right to indemnification or other remedy based on such representations,
warranties, covenants, and obligations will not be affected by any investigation
conducted with respect to, or any Knowledge acquired (or capable of being
acquired) at any time, whether before or after the execution and delivery of
this Agreement or the Closing Date, with respect to the accuracy or inaccuracy
of or compliance with, any such representation, warranty, covenant, or
obligation. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, or other
remedy based on such representations, warranties, covenants, and obligations.
35
(e) Methods of Asserting Claims for Indemnification.
-----------------------------------------------------
All claims for indemnification under this Agreement shall be asserted as
follows:
(i) Third Party Claims. In the event that any
---------------------
Claim for which a party (the "Indemnitee") would be entitled to indemnification
under this Agreement is asserted against or sought to be collected from the
Indemnitee by a third party the Indemnitee shall promptly notify the other party
(the "Indemnitor") of such Claim, specifying the nature thereof, the applicable
provision in this Agreement or other instrument under which the Claim arises,
and the amount or the estimated amount thereof (the "Claim Notice"); provided,
however, that the failure to notify the Indemnitor will not relieve the
Indemnitor of any liability that it may have to any Indemnitee, except to the
extent that the Indemnitor demonstrates that the defense of such action is
materially prejudiced by the Indemnitee's failure to give such notice. The
Indemnitor shall have thirty (30) calendar days (or, if shorter, a period to a
date not less than ten (10) calendar days prior to when a responsive pleading or
other document is required to be filed but in no event less than ten (10)
calendar days from delivery or mailing of the Claim Notice) (the "Notice
Period") to notify the Indemnitee (a) whether or not it disputes the Claim and
(b) if liability hereunder is not disputed, whether or not it desires to defend
the Indemnitee. If the Indemnitor elects to defend by appropriate proceedings,
such proceedings shall be promptly settled or prosecuted to a final conclusion
in such a manner as to avoid any risk of damage to the Indemnitee; and all costs
and expenses of such proceedings and the amount of any judgment shall be paid by
the Indemnitor.
If the Indemnitee desires to participate in, but
not control, any such defense or settlement, it may do so at its sole cost and
expense. If the Indemnitor has disputed the Claim, as provided above, and shall
not defend such Claim, the Indemnitee shall have the right to control the
defense or settlement of such Claim, in its sole discretion, and shall be
reimbursed by the Indemnitor for its reasonable costs and expenses of such
defense (provided that the Indemnitee is entitled to such reimbursement under
this Agreement).
(ii) Non-Third Party Claims. In the event that
------------------------
the Indemnitee should have a Claim for indemnification hereunder which does not
involve a Claim being asserted against it or sought to be collected by a third
party, the Indemnitee shall promptly send a Claim Notice with respect to such
Claim to the Indemnitor. If the Indemnitor does not notify the Indemnitee within
the Notice Period that it disputes such Claim, the Indemnitor shall pay the
amount thereof to the Indemnitee. If the Indemnitor disputes the amount of such
Claim, then the Indemnitee and the Indemnitor shall attempt to resolve the
dispute in good faith and if such attempts shall fail shall be free to commence
arbitration pursuant to Section 9.7.
ARTICLE VIII
TERMINATION
8.1 Termination.
36
This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Closing:
(a) by written consent of all of the following: the
Rare Telephony Shareholders and the boards of directors of Acquiror, the Sub,
and Rare Telephony;
(b) by either of Acquiror or Sub:
(i) if the Closing shall not have occurred on or before
June 30, 2000 (or such later date upon the mutual written agreement of the
parties); provided, however, that the right to terminate this Agreement under
this Section 8.1(b)(i) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before that date; or
(ii) if any court of competent jurisdiction, or any
governmental body, regulatory or administrative agency or commission having
appropriate jurisdiction shall have issued an order, decree or filing or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable.
(c) by Rare Telephony and the Rare Telephony Shareholders
if any of the conditions specified in Section 6.1 have not been materially met
and the sole remedy of Rare Telephony and the Rare Telephony Shareholders in
that event, shall be either to waive such failure and proceed to close
hereunder, or to terminate this Agreement in which event neither Rare Telephony
and the Rare Telephony Shareholders nor Acquiror shall have any claim or action
against the other (other than as provided for in Section 8.2); or
(d) by Acquiror and Sub if any of the conditions
specified in Section 6.2 have not been met and the sole remedy of Acquiror and
Sub in that event, shall be either to waive such failure and proceed to close
hereunder, or to terminate this Agreement in which event neither Acquiror and
the Sub nor Rare Telephony and the Rare Telephony Shareholders shall have any
claim or action against the other (other than as provided for in Section 8.2).
8.2 Notice and Effect of Termination.
(a) In the event of the termination and abandonment of
this Agreement pursuant to Section 8.1, written notice thereof shall forthwith
be given to the other party or parties specifying the provision pursuant to
which such termination is made, and this Agreement shall forthwith become void
and have no effect without any liability on the part of any party or its
directors, officers or shareholders, except for the provisions of this Section
8.2 and Sections 5.2, 5.7, 5.9, 8.1, and 9.7 which shall survive any termination
of this Agreement. Nothing contained in this Section 8.2 shall relieve any party
from any liability for any breach of this Agreement provided that the sole
remedy available to Rare Telephony and the Rare Telephony Shareholders for any
breach of this Agreement by Acquiror or Sub shall be as set forth in Section 7.1
37
hereof and provided, further, that, to the maximum extent permitted by law, in
no event shall Acquiror, Sub, or their officers, directors, employees or agents
be liable to either Rare Telephony or any Rare Telephony Shareholder(s) or any
other person or entity for any indirect, special, incidental, punitive or
consequential losses or damages, including without limitation loss of revenue,
loss of customers or clients, loss of goodwill or loss of profits arising in any
manner from this Agreement or the performance or non-performance of obligations
hereunder, even if such party has been advised of the possibility of such
damages.
(b) If: (1) Acquiror or Sub shall terminate this
Agreement pursuant to Section 8.1(d) (provided that the basis for said
termination is that the condition(s) set forth in Sections 6.2(a), 6.2(b),
6.2(c), 6.2(d), 6.2(e), 6.2(g), 6.2(l), 6.2(m), 6.2(n), or 6.2(o) have not been
satisfied), (2) Rare Telephony or the Rare Telephony Shareholders terminate this
Agreement pursuant to Section 8.1(c) (provided that the basis for said
termination is that the conditions set forth in Sections 6.1(b) have not been
satisfied, or (3) Section 5.2(c) is violated or any of the officers, directors,
employees or consultants of any one of the Rare Companies receives any
information regarding a Transaction Proposal at any time between the date of
this Agreement and 90 calendar days following the termination of this Agreement,
this Agreement is terminated by any party hereto, and within twelve months of
any such termination of this Agreement, a definitive agreement with respect to a
Transaction Proposal is entered into or a transaction with respect to a
Transaction Proposal is consummated, (each of the foregoing being a "Fee Event")
then Rare Telephony shall immediately pay to the Acquiror, by wire transfer or
immediately available funds, TWO MILLION DOLLARS AND NO/100 ($2,000,000.00).
(c) The parties acknowledge that the payments described
in Section 8.2(b) are a payment of liquidated damages which are paid in lieu of
damages and as a genuine pre-estimate of the damages which the Acquiror will
suffer or incur as a result of the event giving rise to such damages and
resultant termination of this Agreement, are not penalties and are the sole
monetary remedy of the Acquiror (other than the repayment of loans made by
Acquiror to Rare Telephony and Cash Back which shall remain on the terms set
forth in the relevant loan documents). Nothing herein shall preclude a party
from seeking injunctive relief to restrain any breach or threatened breach of
the covenants and agreements set forth in this Agreement or otherwise to obtain
specific performance of any such covenant or agreement, without the necessity of
posting bond or security in connection therewith.
8.3 Extension; Waiver.
Any time prior to the Closing, the parties may (a) extend the
time for the performance of any of the obligations or other acts of any other
party under or relating to this Agreement; (b) waive any inaccuracies in the
representations or warranties by any other party or (c) waive compliance with
any of the agreements of any other party or with any conditions to its own
obligations. Any agreement on the part of any other party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
8.4 Amendment and Modification.
38
This Agreement may be amended by written agreement of all of
the parties hereto. This Agreement may not be amended except by an instrument in
writing signed on behalf of Acquiror, the Sub, Rare Telephony and the Rare
Telephony Shareholders.
ARTICLE IX
MISCELLANEOUS
9.1 Survival of Representations and Warranties.
The respective representations and warranties of Acquiror, the
Sub, Rare Telephony and the Rare Telephony Shareholders shall not be deemed
waived or otherwise affected by any investigation made by any party. Each
representation and warranty shall survive the Closing through all applicable
statutes of limitations.
9.2 Notices.
All notices, requests, instructions, consents and other
communications to be given pursuant to this Agreement shall be in writing and
shall be deemed received (i) on the same day if delivered in person, by same-day
courier or by telegraph, telex or facsimile transmission (receipt confirmed)
(provided that telegraph, telex or facsimile notice shall be deemed received on
the next business day if received after 5:00 p.m. Eastern Standard Time), (ii)
on the next day if delivered by overnight mail or courier, or (iii) on the date
indicated on the return receipt, or if there is no such receipt, on the third
calendar day (excluding Sundays) if delivered by certified or registered mail,
postage prepaid, to the party for whom intended to the following addresses:
(a) if to Rare Telephony or the Rare Telephony
Shareholders, or any one of them, at:
Xxxxxx X. Xxxxxx
Rare Telephony, Inc.
000 Xxxx Xxxxxx, Xxxxx 000
P.O. Box 9101
Passaic, NJ 07055-9101
Facsimile: (000) 000-0000
(b) if to Acquiror or the Sub at:
Xxxxxxxxx X. Xxxxx
VDC Communications, Inc.
00 Xxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to:
39
Xxxxx X. Xxxxx, Esq.
VDC Communications, Inc.
00 Xxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
9.3 Entire Agreement; Assignment.
This Agreement, including all Exhibits and Schedules hereto,
constitutes the entire Agreement among the parties with respect to its subject
matter and supersedes all prior agreements and understandings, both written and
oral, among the parties or any of them with respect to such subject matter and
shall not be assigned by operation of law or otherwise.
9.4 Binding Effect; Benefit.
This Agreement shall inure to the benefit of and be binding
upon the parties and their respective successors and assigns. Except as
otherwise provided in this Agreement, nothing in this Agreement is intended to
confer on any Person other than the parties to this Agreement or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.5 Headings.
The descriptive headings of the sections of this Agreement are
inserted for convenience only, do not constitute a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
9.6 Counterparts.
This Agreement may be executed in multiple counterparts each
of which shall be an original but all of which together shall constitute one and
the same instrument. This Agreement may also be executed and delivered by
exchange of facsimile copies showing the signatures of the parties, and those
signatures need not be affixed to the same copy. The facsimile copies showing
the signatures of the parties will constitute originally signed copies of the
Agreement requiring no further execution.
9.7 Governing Law; Arbitration.
This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Connecticut applicable
to contracts executed and to be performed entirely within said State. All
40
controversies or claims arising out of or relating to this Agreement shall be
determined by binding arbitration applying the laws of the State of Connecticut.
The arbitration shall be conducted at Acquiror's offices in Greenwich,
Connecticut, or at such other location designated by Acquiror, before the
American Arbitration Association. The decision of the arbitrator(s) shall be
final and binding upon the parties, and judgment may be obtained thereon in any
court of competent jurisdiction. Each party shall bear the cost of preparing and
presenting its own case. The cost of the arbitration, including the fees and
expenses of the arbitrator(s), shall be shared equally by the parties thereto
unless the award otherwise provides. Nothing herein shall preclude a party from
seeking injunctive relief to restrain any breach or threatened breach of the
covenants and agreements set forth in this Agreement or otherwise to obtain
specific performance of any such covenant or agreement, without the necessity of
posting bond or security in connection therewith.
9.8 Severability.
The invalidity or unenforceability of any term of this
Agreement shall not affect the validity or enforceability of this Agreement or
any of its other terms; in the event that any court or arbitrator determines
that any provision of this Agreement is invalid or unenforceable, as the case
may be, then, and in either such event, neither the enforceability nor the
validity of said paragraph or section as a whole shall be affected. Rather, the
scope of said paragraph or section shall be revised by the court or arbitrator
as little as possible to make the paragraph or section enforceable. If the court
or arbitrator will not revise said paragraph or section, then this Agreement
shall be construed as though the invalid or unenforceable term(s) were not
included herein.
9.9 Release and Discharge.
By virtue of their execution of this Agreement, as of the
Closing and thereafter, any and all Rare Telephony directors, officers and
shareholders hereby agree to release, remise and forever discharge Rare
Telephony, Cash Back, and Free from and against any and all debts, obligations,
liabilities and amounts owing from Rare Telephony, Cash Back or Free prior to
the Closing, and none of Rare Telephony, Cash Back and Free is obligated to take
any action or make any payments to third parties on behalf of the Rare Telephony
Shareholders.
9.10 Construction.
This Agreement and any related instruments will not be
construed more strictly against one party then against the other by virtue of
the fact that drafts may have been prepared by counsel for one of the parties,
it being recognized that this Agreement and any related instruments and
documents are the product of negotiations between the parties and that the
parties have contributed to the final preparation of this Agreement and all
related instruments and documents.
41
9.11 Read and Understood.
Each party acknowledges that (i) it has carefully read this
Agreement, (ii) it has had the assistance of legal counsel of its choosing (and
such other professionals and advisors as it has deemed necessary) in the review
and execution hereof, (iii) the meaning and effect of the various terms and
provision hereof have been fully explained to it by such counsel, (iv) it has
conducted such investigation, review and analysis as it has deemed necessary to
understand the provisions of this Agreement and the transactions contemplated
hereby, and (v) it has executed this Agreement of its own free will.
9.12 Remedies Cumulative.
Except as otherwise expressly provided herein, each of the
rights and remedies of the parties set forth in this Agreement shall be
cumulative with all other such rights and remedies, as well as with all rights
and remedies of the parties otherwise available at law or in equity.
9.13 Certain Definitions.
As used herein:
(a) "Act" means the Securities Act of 1933, as amended;
(b) "Affiliate" shall have the meanings ascribed to such
term in Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended to date (the "Exchange Act");
(c) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which federally chartered financial institutions
are not open for business in Greenwich, Connecticut;
(d) "Dissenting Shares" shall mean the shares of Rare
Telephony Common Stock held by the Dissenting Shareholders, as such term is
defined in Section 1.5;
(e) "Employee Benefit Plan" means any employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended, or any employment contract, employee loan, incentive
compensation, profit sharing, retirement, pension, deferred compensation,
severance, termination pay, stock option or purchase plan, guaranteed annual
income plan, fund or arrangement, payroll incentive, policy, fund, agreement or
arrangement, non-competition or consulting agreement, hospitalization,
disability, life or other insurance plan, or other employee fringe benefit
42
program or plan, or any other plan, payroll practice, policy fund agreement or
arrangement similar to or in the nature of the foregoing, oral or written;
(f) "Escrow Agent" means that person or entity mutually
agreed upon by the parties hereto to act as escrow agent to hold, safeguard and
disburse the Escrow Shares (as such term is defined in Section 1.3) pursuant to
the terms and conditions of this Agreement;
(g) "Governmental Body" means any:
(i) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign,
or other government;
(iii) governmental or quasi-governmental authority
of any nature (including any governmental agency, branch, department, official,
or entity and any court or other tribunal);
(iv) multinational organization or body; or
(v) body exercising, or entitled to exercise,
any administrative, executive, judicial, legislative, police, regulatory, or
taxing authority or power of any nature.
(h) "Knowledge" shall mean the actual current knowledge
of the executive management of the party to this Agreement to whom knowledge is
ascribed together with the knowledge such executive management should reasonably
be expected to have in the performance of its duties and responsibilities;
(i) "Legal Requirement" means any federal, state, local,
municipal, foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
(i) "Funding Agreement" shall have the meaning set forth
in Section 5.14.
(j) "Material Adverse Effect" shall mean any adverse
effect on the business, condition (financial or otherwise) or results of
operation of the relevant party and its subsidiaries, if any, which is material
to such party and its subsidiaries, if any, taken as a whole.
(k) "Order" shall mean any award, decision, injunction,
judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered
by any court, administrative agency, or other Governmental Body or by any
arbitrator.
43
(l) "Person" means any individual, corporation,
partnership, association, trust or other entity or organization, including a
governmental or political subdivision or any agency or institution thereof; and
(m) "Representative" shall mean with respect to a
particular Person, any director, officer, employee, agent, consultant, advisor,
or other representative of such Person, including legal counsel, accountants,
and financial advisors.
(n) "Subsidiary" shall mean, when used with reference to
an entity, any corporation, a majority of the outstanding voting securities of
which is owned directly or indirectly, or a majority of the board of directors
of which may be elected, by such entity.
IN WITNESS WHEREOF, Acquiror, Sub, Rare Telephony and the Rare
Telephony Shareholders have caused this Agreement to be signed by their
respective officers hereunto duly authorized, effective as of the date first
written above.
Attest: VDC COMMUNICATIONS, INC.
By: /s/ Xxxx Xxxxx By: /s/ Xxxxxxxxx X. Xxxxx
---------------------------------- --------------------------------
Xxxxxxxxx X. Xxxxx
Chief Executive Officer
Attest: VOICE & DATA COMMUNICATIONS (LATIN AMERICA), INC.
By: /s/ Xxxx Xxxxx By: /s/ Xxxxxxxxx X. Xxxxx
---------------------------------- --------------------------------
Xxxxxxxxx X. Xxxxx
Chief Executive Officer
Attest: RARE TELEPHONY, INC.
By: /s/ Xxxxx Santa Xxxxx By: /s/ Xxxxxx X. Xxxxxx
---------------------------------- --------------------------------
Xxxxxx X. Xxxxxx
Chief Executive Officer and President
Witness RARE TELEPHONY SHAREHOLDERS
/s/ Xxxxx Santa Lucia /s/ Xxxxxx X. Xxxxxx
------------------------------------- -----------------------------------
Name: Xxxxx Santa Lucia Signature
-------------------------------- Name: Xxxxxx X. Xxxxxx
Address:
-----------------------------
44
------------------------------------- Address:
---------------------------
-----------------------------------
Ownership Percentage:
[signatures continue onto next page]
Witness
/s/ Xxxxx Santa Lucia /s/ Xxxxx X. Xxxxxxx
------------------------------------- -----------------------------------
Name: Xxxxx Santa Lucia Signature
-------------------------------- Name: Xxxxx X. Xxxxxxx
Address: Address:
----------------------------- ---------------------------
------------------------------------- -----------------------------------
Ownership Percentage:
Witness
/s/ Xxxxx Santa Lucia /s/ Xxxxxxx Xxxxxx
------------------------------------- -----------------------------------
Name: Xxxxx Santa Lucia Signature
-------------------------------- Name: Xxxxxxx Xxxxxx
Address: Address:
----------------------------- ---------------------------
------------------------------------- -----------------------------------
Ownership Percentage:
Witness
/s/ Xxxxx Santa Lucia /s/ Xxxxxxxxxxx XxXxxxxx
------------------------------------- -----------------------------------
Name: Xxxxx Santa Lucia Signature
-------------------------------- Name: Xxxxxxxxxxx XxXxxxxx
Address: Address:
----------------------------- ---------------------------
------------------------------------- -----------------------------------
Ownership Percentage:
Witness
/s/ Xxxxx Santa Lucia /s/ Xxxxxx Xxxxxxxx
------------------------------------- -----------------------------------
Name: Xxxxx Santa Lucia Signature
-------------------------------- Name: Xxxxxx Xxxxxxxx
Address: Address:
----------------------------- ---------------------------
------------------------------------- -----------------------------------
Ownership Percentage:
Witness
/s/ Xxxxx Xxxxxxxx /s/ Xxxxx Santa Xxxxx
------------------------------------- -----------------------------------
45
Name: Xxxxx Xxxxxxxx Signature
-------------------------------- Name: Xxxxx Santa Xxxxx
Address: Address:
----------------------------- ---------------------------
------------------------------------- -----------------------------------
Ownership Percentage:
Witness
/s/ Xxxxx X. Xxxxxxx, President
/s/ Xxxxx Santa Xxxxx -----------------------------------
------------------------------------- Signature
Name: Xxxxx Santa Lucia Name: Network Consulting Group, Inc.
-------------------------------- --------------------------------
Address: Address:
----------------------------- ---------------------------
-----------------------------------
Ownership Percentage:
[signatures continue onto next page]
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxxxx Xxxxxxx
------------------------------------- -----------------------------------
Name: Xxxxx Santa Xxxxx Signature
-------------------------------- Name: Xxxxxx Xxxxxxx
Address: Address:
----------------------------- ---------------------------
------------------------------------- -----------------------------------
Ownership Percentage:
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxx Xxxxxxx
------------------------------------- -----------------------------------
Name: Xxxxx Santa Xxxxx Signature
-------------------------------- Name: Xxxx Xxxxxxx
Address: Address:
----------------------------- ---------------------------
------------------------------------- -----------------------------------
Ownership Percentage:
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxxxxx Xxxxxx
------------------------------------- -----------------------------------
Name: Xxxxx Santa Xxxxx Signature
-------------------------------- Name: Xxxxxxx Xxxxxx
Address: Address:
----------------------------- ---------------------------
------------------------------------- -----------------------------------
Ownership Percentage:
46
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxxxxx Xxxxx
------------------------------------- -----------------------------------
Name: Xxxxx Santa Xxxxx Signature
-------------------------------- Name: Xxxxxxx Xxxxx
Address: Address:
----------------------------- ---------------------------
------------------------------------- -----------------------------------
Ownership Percentage:
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxxxx Xxxx
------------------------------------- -----------------------------------
Name: Xxxxx Santa Xxxxx Signature
-------------------------------- Name: Xxxxxx Xxxx
Address: Address:
----------------------------- ---------------------------
------------------------------------- -----------------------------------
Ownership Percentage:
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxxxxx Xxxxx
------------------------------------- -----------------------------------
Name: Xxxxx Santa Xxxxx Signature
-------------------------------- Name: Xxxxxxx Xxxxx
Address: Address:
----------------------------- ---------------------------
------------------------------------- -----------------------------------
Ownership Percentage:
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxx Xxxxxx
------------------------------------- -----------------------------------
Name: Xxxxx Santa Xxxxx Signature
-------------------------------- Name: Xxxx Xxxxxx
Address: Address:
----------------------------- ---------------------------
------------------------------------- -----------------------------------
Ownership Percentage:
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxxxxxx Xxxx Xxxxxxx
------------------------------------- -----------------------------------
Name: Xxxxx Santa Lucia Signature
-------------------------------- Name: Xxxxxxxx Xxxx Xxxxxxx
Address: Address:
----------------------------- ---------------------------
------------------------------------- -----------------------------------
Ownership Percentage:
47
