AGREEMENT AND PLAN OF REORGANIZATION
Between
FOUR RIVERS DEVELOPMENT, INC.,
TELECONNECT, INC.,
TELESHARE 900, INC.
and
Q COMM INTERNATIONAL, INC.
Dated July 1, 1998
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS 1
ARTICLE II. REPRESENTATIONS, COVENANTS, AND WARRANTIES OF TCI
2.01 Organization 4
2.02 Non-contravention 4
2.03 Authorization of Transaction 5
2.04 Subsidiaries 5
2.05 Capitalization 5
2.06 Financial Statements 5
2.07 Absence of Certain Changes or Events 5
2.08 Title and Related Matters 6
2.09 Tax Matters 6
2.10 Litigation and Proceedings 7
2.11 Contracts 7
2.12 Material Contact Defaults 8
2.13 Governmental Authorizations 8
2.14 Compliance with Laws and Regulations 8
2.15 Insurance 8
2.16 Employment Practices 8
2.17 Transactions with Affiliates; Arm's-Length
Transactions; Conflicts of Interest 9
2.18 Absence of Certain Practices 9
2.19 Information 9
2.20 TCI Schedules 9
ARTICLE III. REPRESENTATIONS, COVENANTS, AND WARRANTIES OF T900
3.01 Organization 10
3.02 Non-contravention 10
3.03 Authorization of Transaction 11
3.04 Subsidiaries 11
3.05 Capitalization II
3.06 Financial Statements 11
3.07 Absence of Certain Changes or Events 11
3.08 Title and Related Matters 12
3.09 Tax Matters 13
3.10 Litigation and Proceedings 13
3.11 Contracts 13
3.12 Material Contact Defaults 14
3.13 Governmental Authorizations 14
3.14 Compliance with Laws and Regulations 14
3.15 Insurance 14
3.16 Employment Practices 14
3.17 Transactions with Affiliates; Arm's-Length
Transactions; Conflicts of Interest 15
3.18 Absence of Certain Practices 15
3.19 Information 15
3.20 T900 Schedules 15
ARTICLE IV. REPRESENTATIONS, COVENANTS, AND WARRANTIES OF QCI
4.01 Organization 16
4.02 Non-contravention 16
4.03 Authorization of Transaction 17
4.04 Subsidiaries 17
4.05 Capitalization 17
4.06 Financial Statements 17
4.07 Absence of Certain Changes or Events 17
4.08 Title and Related Matters 18
4.09 Tax Matters 18
4.10 Litigation and Proceedings 19
4.11 Contracts 19
4.12 Material Contact Defaults 19
4.13 Governmental Authorizations 19
4.14 Compliance with Laws and Regulations 20
4.15 Insurance 20
4.16 Employment Practices 20
4.17 Transactions with Affiliates; Arm's-Length
Transactions; Conflicts of Interest 20
4.18 Absence of Certain Practices 20
4.19 Information 20
4.20 QCI Schedules 20
ARTICLE V. REPRESENTATIONS, COVENANTS, AND WARRANTIES OF FRD
5.01 Organization 21
5.02 Non-contravention 21
5.03 Authorization of Transaction 22
5.04 Subsidiaries 22
5.05 Capitalization 22
5.06 Financial Statements 22
5.07 Absence of Certain Changes or Events 22
5.08 Tax Matters 23
5.09 Litigation and Proceedings 24
5.10 Contracts 24
5.11 Material Contact Defaults 24
5.12 Governmental Authorizations 24
5.13 Continuity of Business Enterprise 24
5.14 Compliance With Laws and Regulations 24
5.15 Employment Practices 25
5.16 Transactions with Affiliates; Arm's-Length
Transactions; Conflicts of Interest 25
5.17 Absence of Certain Practices 25
5.18 Information 25
5.19 FRD Schedules 25
ii
ARTICLE VI. PLAN OF EXCHANGE
6.01 QSUB Formation 26
6.02 TCI Merger and Exchange of Shares 26
6.03 T900 Merger and Exchange of Shares 26
6.04 QCI Merger and Exchange of Shares 27
6.05 Fractional Shares 27
6.06 Effect of Merger 27
ARTICLE VII. SPECIAL COVENANTS
7.01 Stockholder Approval 27
7.02 Access to Properties and Records 27
7.03 Actions Prior to Closing 28
7.04 Special Covenants and Representations
Regarding the Exchanged FRD Stock 28
7.05 Indemnification 28
7.06 Third Person Consents and Agreements 29
7.07 Management of FRD 29
7.08 Termination 29
ARTICLE VIII. CLOSING
8.01 Closing 30
8.02 Closing Events 30
ARTICLE IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF FRD
9.01 Accuracy of Representation 31
9.02 Stockholder Approval 31
9.03 Officer's Certificates 31
9.04 No Material Adverse Change 31
9.05 Good Standing 31
9.06 Dissenters' Rights 31
9.07 Schedules 31
9.08 Consents/ Agreements 31
9.09 Other Items 31
ARTICLE X. CONDITIONS PRECEDENT TO OBLIGATIONS OF TCI, T900 and QCI
10.01 Accuracy of Representation 32
10.02 Stockholder Approval 32
10.03 Officer's Certificates 32
10.04 No Material Adverse Change 32
10.05 Good Standing 32
10.06 Schedules 32
10.07 Other Items 32
iii
ARTICLE XI. MISCELLANEOUS
11.01 Brokers 32
11.02 Governing Law 32
11.03 Notices 33
11.04 Attorneys' Fees 33
11.05 Third Party Beneficiaries 33
11.06 Entire Agreement 33
11.07 Counterparts 33
11.08 Amendment of Waiver 33
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
the 1st day of July, 1998, by and between FOUR RIVERS DEVELOPMENT, INC., a Utah
corporation, TELECONNECT, INC., a Utah corporation, TELESHARE 900, INC., a Utah
corporation, and Q COMM INTERNATIONAL, INC., a Nevada corporation.
Recitals
This Agreement provides for the merger of a Subsidiary incorporated and
organized by FRD under the laws of the state of Utah with each of TCI, T900, and
QCI, and in connection therewith the conversion of the outstanding common stock
of TCI, T900, and QCI into shares of common voting stock of FRD, par value
$0.001 per share, all for the purpose of accomplishing a "tax-free"
reorganization pursuant to section 368(a)(2)(D) of the Internal Revenue Code of
1986, as amended.
Agreement
NOW, THEREFORE, based upon the recitals above and for and in consideration
of the mutual covenants and agreements hereinafter set forth and the mutual
benefits to the Parties to be derived herefrom, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
Adverse Consequences means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims,
demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs,
reasonable amounts paid in settlement,
liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and
reasonable attorneys' fees and expenses.
Affiliate has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities
Exchange Act of 1934, as amended.
Agreement means this Agreement and Plan of Reorganization
dated July 1, 1998.
Closing means the acts by the Parties of issuing,
executing, and/or delivering the certificates of
officers, schedules, and other instruments
provided for in Articles VIII, IX, and X of this
Agreement.
Companies means, collectively, TCI, T900, and QCI.
Corporation Act means the Revised Business Corporation Act of the
state of Utah.
Effective Date has the meaning set forth in Section 8.02, below.
Exchanged FRD Stock means the common stock, par value $0.001, of FRD
to be issued to the Stockholders pursuant to this
Agreement. All references herein to the Exchanged
FRD Stock give effect to the Reverse Split.
FRD is Four Rivers Development, Inc., a Utah
corporation and a Party to this Agreement.
FRD Schedules means the schedules of FRD identified in Section
5.19 of this Agreement.
GAAP means the United States generally accepted
accounting principles as in effect from time to
time.
Knowledge means actual knowledge after reasonable
investigation.
Material means, when used as an adjective in conjunction
with an event, condition, circumstance, effect,
or other item, that there is a substantial
likelihood that a reasonable person would attach
importance to the event, condition, circumstance,
effect, or item in evaluating the Party to which
it relates and the transactions herein
contemplated.
Merger means the merger of each of the Companies with
and into QSUB as the surviving corporation, all
in accordance with this Agreement, the Plan of
Merger, the Corporation Act, and the Nevada
Corporation Law as applicable.
Nevada Corporation Law means Chapter 78 the Nevada Revised Statutes.
Ordinary Course of Business means the ordinary course of business consistent
with past custom and practice (including with
respect to quantity and frequency).
Party means any one or more of FRD, TCI, T900, or QCI,
as the context indicates.
Person means an individual, a partnership, a
corporation, an association, a joint stock
company, a trust, a joint venture, an
unincorporated organization, or a governmental
entity (or any department, agency, or political
subdivision thereof).
Plan of Merger is the form of the Plan of Merger attached hereto
as Exhibit "A" which provides for the merger of
each of the Companies with and into QSUB, with
QSUB being the surviving corporation.
QCI is Q Comm International, Inc., a Nevada
corporation and a Party to this Agreement.
QCI Merger means the merger of QCI with and into QSUB as
the surviving corporation, all in accordance with
this Agreement, the Plan of Merger, the
Corporation Act and the Nevada Corporation Law.
2
QCI Schedules means the schedules of QCI identified in Section
4.20 of this Agreement.
QCI Stockholder means any Person holding any of the shares of the
capital stock of QCI on the date of Closing.
QSUB is Q Comm, Inc., a corporation to be formed under
the laws of the State of Utah as a wholly-owned
subsidiary of FRD for the purpose of merging with
the Companies.
Reverse Split means a 20-to-1 reverse split in the issued and
outstanding common stock of FRD to be submitted
to the stockholders of FRD for Stockholder
Approval prior to the Closing.
SEC means the Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as amended.
Securities Exchange Act means the Securities Exchange Act of 1934, as
amended.
Security Interest means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than:
(a) mechanic's, materialmen's, and similar liens;
(b) liens for taxes not yet due and payable or
for taxes that the taxpayer is contesting in good
faith through appropriate proceedings; (c)
purchase money liens and liens securing rental
payments under capital lease arrangements; and
(d) other liens arising in the Ordinary Course of
Business and not incurred in connection with the
borrowing of money.
Stockholder Approval means the required affirmative vote of the
holders of capital stock of a corporation to
approve the Merger or any other matter
contemplated by this Agreement under the
Corporation Act and the Nevada Corporation Law.
Subsidiary means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a
majority of the common stock or has the power to
vote or direct the voting of sufficient
securities to elect a majority of the directors.
Tax means any federal, state, local, or foreign
income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental
(including taxes under Code Section 59A), customs
duties, capital stock, franchise, profits,
withholding, social security (or similar),
unemployment, disability, real property, personal
property, sales, use, transfer, registration,
value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition
thereto, whether disputed or not.
Tax Return means any return, declaration, report, claim for
refund, or information return or statement
relating to Taxes, including any schedule or
attachment thereto, and including any amendment
thereof.
3
T900 is Teleshare 900, Inc., a Utah corporation and a
Party to this Agreement.
T900 Merger means the merger of T900 with and into QSUB as
the surviving corporation, all in accordance with
this Agreement, the Plan of Merger and the
Corporation Act.
T900 Schedules means the schedules of T900 identified in Section
3.20 of this Agreement.
T900 Stockholder means any Person holding any of the shares of the
capital stock of T900 on the date of Closing.
TCI is Teleconnect, Inc., a Utah corporation and a
Party to this Agreement.
TCI Merger means the merger of TCI with and into QSUB as the
surviving corporation, all in accordance with
this Agreement, the Plan of Merger and the
Corporation Act.
TCI Schedules means the schedules of TCI identified in Section
2.20 of this Agreement.
TCI Stockholder means any Person holding any of the shares of the
capital stock of TCI on the date of Closing.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF TCI
As an inducement to, and to obtain the reliance of FRD, TCI represents and
warrants as follows:
Section 2.01 Organization. TCI is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Utah. TCI has the
corporate power and is duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances, and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, including qualification
to do business as a foreign corporation in the states in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification, except in such jurisdictions, if any, where the
failure to be so qualified would not, either individually or in the aggregate,
have a material adverse effect on the business, properties, or assets of TCI.
Included in the TCI Schedules (as hereinafter defined) are complete and correct
copies of the articles of incorporation, as amended, and bylaws of TCI as in
effect on the date hereof.
Section 2.02 Non-contravention. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated by
this Agreement in accordance with the terms hereof will not: violate any
provision of the articles of incorporation, charter, or bylaws of TCI; result in
the breach of, constitute a default under, result in the acceleration of, create
in any Person the right to accelerate, terminate, modify, cancel, or require any
notice under, any material agreement, contract, lease, license, instrument, or
other arrangement to which TCI is a party or by which it is bound or to which
any of its assets is subject; or, violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which TCI is subject.
4
Section 2.03 Authorization of Transaction. TCI has full power and
authority, and has taken all action required by law, its articles of
incorporation and bylaws, and otherwise to execute and deliver this Agreement
and to perform its obligations hereunder, subject to obtaining the requisite
Stockholder Approval of the TCI Merger. Without limiting the generality of the
foregoing, the board of directors of TCI has duly authorized the execution,
delivery, and performance of this Agreement by TCI. This Agreement represents
the valid and binding obligation of TCI enforceable in accordance with its
terms, except as limited by bankruptcy and insolvency laws and by other laws
affecting the rights of creditors generally.
Section 2.04 Subsidiaries. TCI has no Subsidiaries.
Section 2.05 Capitalization. The authorized capitalization of TCI consists
of 10,000 shares of common stock, no par value, of which 3,639 shares will be
issued and outstanding immediately prior to the Closing. All issued and
outstanding shares are legally issued, fully paid, and non-assessable and not
issued in violation of the pre-emptive or other rights of any Person. There are
no existing options, warrants, calls, or commitments of any character relating
to the authorized and unissued TCI common stock.
Section 2.06 Financial Statements.
(a) The TCI Schedules contain the audited balance sheets of TCI at
December 31, 1997, 1996, and 1995, and the audited statements of income,
stockholders' equity, and cash flows for each year in the three year
period ended December 31, 1997, including the notes thereto and the
opinion of Squire & Company, PC, certified public accountants with respect
thereto.
(b) All such financial statements have been prepared in accordance
with GAAP, which was applied on a consistent basis throughout the periods
covered, present fairly as of their respective dates the financial
condition of TCI and its results of operations, and are consistent with
the books and records of TCI.
(c) TCI did not have as of the date of its most recent balance sheet
any material liabilities or obligations (whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, and due or to become due), including any
liability for Taxes, except for (i) liabilities set forth on its most
recent balance sheet, and (ii) liabilities disclosed in this Agreement or
the TCI Schedules.
(d) All accounts receivable of TCI are reflected properly on its
books and records and, to the Knowledge of TCI, are valid receivables
subject to no material setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts, if any, set
forth on the balance sheet of TCI at December 31, 1997, as adjusted for
the passage of time through the date of this Agreement in accordance with
the past custom and practice of TCI.
Section 2.07 Absence of Certain Changes or Events. Except as described
herein or in the TCI Schedules, since December 31, 1997, the date of the most
recent balance sheet of TCI:
(a) There has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of TCI; or (ii) any
damage, destruction, or loss to TCI (whether or not covered by insurance)
materially and adversely affecting its business, operations, properties,
assets, or financial condition.
5
(b) TCI has not (i) amended its articles of incorporation, charter,
or bylaws: (ii) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any assets of any kind whatsoever
to stockholders, or purchased or redeemed, or agreed to purchase or
redeem, any of its capital stock; (iii) waived any rights of value which
in the aggregate are extraordinary or material considering its business;
(iv) made any material change in its method of management, operation, or
accounting; (v) entered into any other material transaction; (vi) made any
accrual or arrangement for payment of bonuses or special compensation of
any kind or any severance or termination pay to any Person; or (vii) made
any increase in any profit sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan, payment,
or arrangement made to, for, or with its officers, directors, Affiliates,
or employees, except in the Ordinary Course of Business.
(c) TCI has not (i) granted or agreed to grant any options,
warrants, or other rights for its stocks, bonds, or other corporate
securities calling for the issuance thereof; (ii) borrowed or agreed to
borrow any funds or incurred, or become subject to, any material
obligation or liability (absolute or contingent), except liabilities
incurred in the Ordinary Course of Business; (iii) paid any material
obligation or liability (absolute or contingent) other than current
liabilities reflected in or shown on the December 31, 1997, balance sheet
of TCI, and current liabilities incurred since that date in the Ordinary
Course of Business; (iv) except in the ordinary course of business, sold
or transferred, or agreed to sell or transfer, any of its assets,
properties, or rights (except assets, properties, or rights not used or
useful in its business which, in the aggregate, have a value of less than
$10,000), or canceled, or agreed to cancel, any debts or claims in excess
of reserves reflected on its balance sheet at December 31, 1997 (except
debts or claims which, in the aggregate, are of a value of less than
$10,000); or (v) made or permitted any amendment or termination of any
contract, agreement, or license to which it is a party if such amendment
or termination is material, considering its business.
(d) To the Knowledge of TCI, it has not become subject to any law or
regulation which materially and adversely affects, or in the future may
adversely affect its business as conducted on the date hereof.
Section 2.08 Title and Related Matters. TCI has good and marketable title
to all of its properties, interests in properties, and assets, real and
personal, which are reflected in its December 31, 1997, balance sheet or
acquired after that date (except properties, interests in properties, and assets
sold or otherwise disposed of since such date in the Ordinary Course of Business
or as provided in this Agreement or the TCI Schedules), free and clear of all
Security Interests, except as disclosed in the TCI Schedules. Except as set
forth in the TCI Schedules, TCI owns free and clear of any Security Interests
any and all trademarks, service marks, tradenames, copyrights, procedures,
techniques, marketing plans, business plans, methods of management, intellectual
property, and other information utilized in connection with its business and
necessary to conduct its business in an efficient manner. Except as set forth in
the TCI Schedules, no Person has any right to, and TCI has not received any
notice of, infringement of, or conflict with, asserted rights of others with
respect to any marketing rights, trade secrets, know-how, proprietary
techniques, trademarks, service marks, tradenames, copyrights, or intellectual
property, which, if the subject of an unfavorable decision, ruling, or finding,
would have a materially adverse effect on its business, operations, financial
condition, income, or business, or any material portion of its properties,
assets, or rights.
Section 2.09 Tax Matters.
6
(a) TCI has filed, or will have filed prior to the Closing, all Tax
Returns that it was required to file as of the date of Closing. All such
Tax Returns were correct and complete in all material respects. All Taxes
owed by TCI (whether or not shown on any Tax Return) have been paid. TCI
is not currently the beneficiary of any extension of time within which to
file any Tax Return, except as disclosed in the TCI Schedules. No claim
has ever been made by an authority in a jurisdiction where TCI does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of TCI
that arose in connection with any failure (or alleged failure) to pay any
Tax.
(b) TCI has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other Person.
(c) No TCI director or officer (or employee responsible for Tax
matters) of TCI reasonably expects any authority to assess against TCI any
additional Taxes for any period for which Tax Returns have been filed.
There is no dispute or claim concerning any Tax liability of TCI either
(i) claimed or raised by an authority in writing or, (ii) as to which any
of the TCI directors and officers (and employees responsible for Tax
matters) of TCI has knowledge based upon personal contact with any agent
of such authority. The TCI Schedules include a list of all federal, state,
local, and foreign income Tax Returns filed with respect to TCI for
taxable periods ended on or after December 31, 1995, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. TCI has delivered to FRD correct and
complete copies of all federal income Tax Returns, examination reports,
and statements of deficiencies assessed against or agreed to by TCI for
taxable periods ended on or after December 31, 1995.
(d) TCI has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment
or deficiency.
(e) The unpaid Taxes of TCI (i) did not, as of the December 31,
1997, balance sheet of TCI, exceed the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of said
balance sheet, and (ii) do not exceed that reserve as adjusted for the
passage of time through the date of Closing in accordance with the past
custom and practice of TCI in filing its Tax Returns.
Section 2.10 Litigation and Proceedings. Except as set forth in the TCI
Schedules, there are no actions, suits, proceedings, or investigations pending
or, to the Knowledge of TCI, threatened by or against TCI or affecting its
properties, at law or in equity, before any court or other governmental agency
or instrumentality, domestic or foreign, or before any arbitrator of any kind.
To the Knowledge of TCI, there is no material default on the part of TCI with
respect to any judgment, order, writ, injunction, decree, award, or ruling of
any court, arbitrator, or governmental agency or instrumentality.
Section 2.11 Contracts.
(a) Except as included or described herein or in the TCI Schedules,
there are no material contracts, agreements, franchises, license
agreements, or other commitments to which TCI is a party or by which its
properties are bound.
7
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which TCI is a party or by which its properties are
bound and which are material to its operations are, to the Knowledge of
TCI, valid and enforceable by TCI in all respects, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally.
(c) Except as included or described in the TCI Schedules or
reflected in the December 31, 1997, balance sheet, TCI is not a party to
any oral or written: (i) contract for the employment of any officer or
employee which is not terminable on 30 days or less notice; (ii) profit
sharing, bonus, deferred compensation, stock option, severance pay,
pension benefit or retirement plan, agreement, or arrangement; (iii)
agreement, contract, or indenture relating to the borrowing of money; (iv)
guaranty of any obligation, other than one on which it is a primary
obligor, for the borrowing of money or otherwise, excluding endorsements
made for collection and other guaranties of obligations, which, in the
aggregate, do not exceed $20,000; (v) consulting or other similar
contracts with an unexpired term of more than one year or providing for
payments in excess of $5,000 in the aggregate; (vi) collective bargaining
agreement; (vii) agreement with any present or former officer or director;
or (viii) contract, agreement, or other commitment involving payments by
it of more than $10,000 in the aggregate.
Section 2.12 Material Contract Defaults. Except as disclosed in the TCI
Schedules, to its Knowledge, TCI is not in default in any material respect under
the terms of any outstanding contract, agreement, lease, or other commitment
which is material to its business, operations, properties, assets, or business
condition, and there is no event of default or other event which, with notice or
lapse of time or both, would constitute a default in any material respect under
any such contract, agreement, lease, or other commitment in respect of which it
has not taken adequate steps to prevent such a default from occurring.
Section 2.13 Governmental Authorizations. Except as set forth in the TCI
Schedules, TCI has all licenses, franchises, permits, and other governmental
authorizations, whether state or federal that are legally required to enable it
to conduct its business in all material respects as conducted on the date
hereof. Except for compliance with the Securities Act and the Corporation Act,
as hereinafter provided, no authorization, approval, consent, or order of, or
registration, declaration, or filing with, any court or other governmental body
is required in connection with the execution and delivery by TCI of this
Agreement and the consummation by TCI of the transactions contemplated hereby.
Section 2.14 Compliance With Laws and Regulations. TCI has complied with
all applicable statutes and regulations of any country, state, provincial,
municipal, or local governmental entity or agency thereof, except to the extent
that noncompliance would not materially and adversely affect its business,
operations, properties, assets, or business condition, and except to the extent
non-compliance would not result in any material liability.
Section 2.15 Insurance. All the insurable properties of TCI are insured in
accordance with industry standards against all risks customarily insured against
by persons operating similar properties in localities where such properties are
located and under valid and enforceable policies by insurers of recognized
responsibility.
Section 2.16 Employment Practices. TCI is not a party to, or in the
process of negotiating, any collective bargaining or labor agreement or union
contract. There is no (i) charge, complaint or suit pending or, to the Knowledge
of TCI, threatened against TCI respecting employment, hiring for employment,
terminating from employment, employment practices, employment discrimination,
terms and conditions of employment, safety, wrongful termination, or wages and
hours, except as set forth in
8
the TCI Schedules, (ii) unfair labor practice charge or complaint pending or, to
the Knowledge of TCI, threatened against, or decision or order in effect and
binding on, TCI before or of the National Labor Relations Board, (iii) grievance
or arbitration proceeding arising out of or under collective bargaining
agreements pending or, to the Knowledge of TCI, threatened against TCI, (iv)
strike, labor dispute, slowdown, work stoppage or other interference with work
pending or, to the Knowledge of TCI, threatened against TCI, or (v) to the
Knowledge of TCI, union organizing activities or union representation question
threatened or existing with respect to any groups of employees of TCI.
Section 2.17 Transactions with Affiliates; Arm's-Length Transactions;
Conflicts of Interest. Except as set forth in the TCI Schedules, there are no
material transactions, agreements or understandings, existing or presently
contemplated, between or among TCI and its officers or directors or stockholders
or any of their Affiliates or associates. All transactions by TCI have been
conducted on an arms-length basis. Neither the elected officers of TCI nor the
key employees of TCI, or their respective spouses, have (or had during the past
three fiscal years) any material direct or indirect ownership or profit
participation in outside business enterprises with which TCI had material
purchases, sales. or business dealings.
Section 2.18 Absence of Certain Practices. TCI or any director, officer,
agent, employee, consultant, or other Person acting on its behalf has not given
or agreed to give any gift or similar benefit of more than nominal value to any
customer, supplier, or governmental employee or official or any other Person who
is or may be in a position to help or hinder TCI in connection with any proposed
transaction involving TCI. TCI or any director, officer, agent, employee,
consultant or other Person acting on behalf of TCI has not (i) used any
corporate or other funds for unlawful contributions, payments, gifts, or
entertainment, or made any unlawful expenditures relating to political activity
to, or on behalf of, government officials or others; (ii) accepted or received
any unlawful contributions, payments, gifts or expenditures; or (iii) has had
any transaction or payment which was not recorded in its accounting books and
records or disclosed on its financial statements.
Section 2.19 Information. The information concerning TCI set forth in this
Agreement and in the TCI Schedules is complete and accurate in all material
respects and does not contain any untrue statement of a material fact or omit to
state a material fact required to make the statements made, in light of the
circumstances under which they are made, not misleading.
Section 2.20 TCI Schedules. Not less than 10 days prior to the Closing,
TCI shall deliver to FRD the following schedules of exceptions, which are
collectively referred to as the "TCI Schedules" and which consist of separate
schedules dated as of the date of delivery to FRD and instruments and data as of
such date, all certified by the chief executive officer of TCI as complete,
true, and correct:
(a) Schedule 2.01 containing complete and correct copies of the
articles of incorporation, as amended, and bylaws of TCI in effect as of
the date of Closing;
(b) Schedule 2.05 containing a list indicating the name, address,
and number of shares held by each of the TCI Stockholders;
(c) Schedule 2.06 containing the financial statements of TCI
identified in paragraph 2.06(a);
(d) Schedule 2.07 describing certain changes and events;
9
(e) Schedule 2.08 describing real and personal property and all
Security Interests;
(f) Schedule 2.09 containing the income Tax Returns of TCI and
related Tax information;
(g) Schedule 2.10 describing litigation and proceedings involving
TCI;
(h) Schedule 2.11 describing material contracts and other
arrangements;
(i) Schedule 2.12 describing material contract defaults;
(j) Schedule 2.13 listing missing government authorizations;
(k) Schedule 2.17 describing transactions with Affiliates; and
(l) Schedule 2.20 setting forth any other information, together with
any copies of documents, required to be disclosed in the TCI Schedules by
Sections 2.01 through 2.19.
TCI shall cause the TCI Schedules and the instruments and data to be delivered
to FRD hereunder to be updated after the date of delivery up to and including
the date of Closing.
ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF T900
As an inducement to, and to obtain the reliance of FRD, T900 represents
and warrants as follows:
Section 3.01 Organization. T900 is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Utah. T900 has the
corporate power and is duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances, and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, including qualification
to do business as a foreign corporation in the states in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification, except in such jurisdictions, if any, where the
failure to be so qualified would not, either individually or in the aggregate,
have a material adverse effect on the business, properties, or assets of T900.
Included in the T900 Schedules (as hereinafter defined) are complete and correct
copies of the articles of incorporation, as amended, and bylaws of T900 as in
effect on the date hereof.
Section 3.02 Non-contravention. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated by
this Agreement in accordance with the terms hereof will not: violate any
provision of the articles of incorporation, charter, or bylaws of T900; result
in the breach of, constitute a default under, result in the acceleration of,
create in any Person the right to accelerate, terminate, modify, cancel, or
require any notice under, any material agreement, contract, lease, license,
instrument, or other arrangement to which T900 is a party or by which it is
bound or to which any of its assets is subject; or, violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
T900 is subject.
10
Section 3.03 Authorization of Transaction. T900 has full power and
authority, and has taken all action required by law, its articles of
incorporation and bylaws, and otherwise to execute and deliver this Agreement
and to perform its obligations hereunder, subject to obtaining the requisite
Stockholder Approval of the T900 Merger. Without limiting the generality of the
foregoing, the board of directors of T900 has duly authorized the execution,
delivery, and performance of this Agreement by T900. This Agreement represents
the valid and binding obligation of T900 enforceable in accordance with its
terms, except as limited by bankruptcy and insolvency laws and by other laws
affecting the rights of creditors generally.
Section 3.04 Subsidiaries. T900 has no Subsidiaries.
Section 3.05 Capitalization. The authorized capitalization of T900
consists of 10,000 shares of common stock, no par value, of which 3,326 shares
will be issued and outstanding immediately prior to the Closing. All issued and
outstanding shares are legally issued, fully paid, and non-assessable and not
issued in violation of the pre-emptive or other rights of any Person. There are
no existing options, warrants, calls, or commitments of any character relating
to the authorized and unissued T900 common stock.
Section 3.06 Financial Statements.
(a) The T900 Schedules contain the audited balance sheets of T900 at
December 31, 1997, 1996, and 1995, and the audited statements of income,
stockholders' equity, and cash flows for each year in the three year
period ended December 31, 1997, including the notes thereto and the
opinion of Squire & Company, PC, certified public accountants with respect
thereto.
(b) All such financial statements have been prepared in accordance
with GAAP, which was applied on a consistent basis throughout the periods
covered, present fairly as of their respective dates the financial
condition of T900 and its results of operations, and are consistent with
the books and records of T900.
(c) T900 did not have as of the date of its most recent balance
sheet any material liabilities or obligations (whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, and due or to become due), including any
liability for Taxes, except for (i) liabilities set forth on its most
recent balance sheet, and (ii) liabilities disclosed in this Agreement or
the T900 Schedules.
(d) All accounts receivable of T900 are reflected properly on its
books and records and, to the Knowledge of T900, are valid receivables
subject to no material setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts, if any, set
forth on the balance sheet of T900 at December 31, 1997, as adjusted for
the passage of time through the date of this Agreement in accordance with
the past custom and practice of T900.
Section 3.07 Absence of Certain Changes or Events. Except as described
herein or in the T900 Schedules, since December 31, 1997, the date of the most
recent balance sheet of T900:
(a) There has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of T900; or (ii)
any damage, destruction, or loss to T900 (whether or not covered by
insurance) materially and adversely affecting its business, operations,
properties, assets, or financial condition.
11
(b) T900 has not (i) amended its articles of incorporation, charter,
or bylaws; (ii) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any assets of any kind whatsoever
to stockholders, or purchased or redeemed, or agreed to purchase or
redeem, any of its capital stock; (iii) waived any rights of value which
in the aggregate are extraordinary or material considering its business;
(iv) made any material change in its method of management, operation, or
accounting; (v) entered into any other material transaction; (vi) made any
accrual or arrangement for payment of bonuses or special compensation of
any kind or any severance or termination pay to any Person; or (vii) made
any increase in any profit sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan, payment,
or arrangement made to, for, or with its officers, directors, Affiliates,
or employees, except in the Ordinary Course of Business.
(c) T900 has not (i) granted or agreed to grant any options,
warrants, or other rights for its stocks, bonds, or other corporate
securities calling for the issuance thereof; (ii) borrowed or agreed to
borrow any funds or incurred, or become subject to, any material
obligation or liability (absolute or contingent), except liabilities
incurred in the Ordinary Course of Business; (iii) paid any material
obligation or liability (absolute or contingent) other than current
liabilities reflected in or shown on the December 31, 1997, balance sheet
of T900, and current liabilities incurred since that date in the Ordinary
Course of Business; (iv) except in the ordinary course of business, sold
or transferred, or agreed to sell or transfer, any of its assets,
properties, or rights (except assets, properties, or rights not used or
useful in its business which, in the aggregate, have a value of less than
$10,000), or canceled, or agreed to cancel, any debts or claims in excess
of reserves reflected on its balance sheet at December 31, 1997 (except
debts or claims which, in the aggregate, are of a value of less than
$10,000); or (v) made or permitted any amendment or termination of any
contract, agreement, or license to which it is a party if such amendment
or termination is material, considering its business.
(d) To the Knowledge of T900, it has not become subject to any law
or regulation which materially and adversely affects, or in the future may
adversely affect its business as conducted on the date hereof.
Section 3.08 Title and Related Matters. T900 has good and marketable title
to all of its properties, interests in properties, and assets, real and
personal, which are reflected in its December 31, 1997, balance sheet or
acquired after that date (except properties, interests in properties, and assets
sold or otherwise disposed of since such date in the Ordinary Course of Business
or as provided in this Agreement or the T900 Schedules), free and clear of all
Security Interests, except as disclosed in the T900 Schedules. Except as set
forth in the T900 Schedules, T900 owns free and clear of any Security Interests
any and all trademarks, service marks, tradenames, copyrights, procedures,
techniques, marketing plans, business plans, methods of management, intellectual
property, and other information utilized in connection with its business and
necessary to conduct its business in an efficient manner. Except as set forth in
the T900 Schedules, no Person has any right to, and T900 has not received any
notice of, infringement of, or conflict with, asserted rights of others with
respect to any marketing rights, trade secrets, know-how, proprietary
techniques, trademarks, service marks, tradenames, copyrights, or intellectual
property, which, if the subject of an unfavorable decision, ruling, or finding,
would have a materially adverse effect on its business, operations, financial
condition, income, or business, or any material portion of its properties,
assets, or rights.
12
Section 3.09 Tax Matters.
(a) T900 has filed, or will have filed prior to the Closing, all Tax
Returns that it was required to file as of the date of Closing. All such
Tax Returns were correct and complete in all material respects. All Taxes
owed by T900 (whether or not shown on any Tax Return) have been paid. T900
is not currently the beneficiary of any extension of time within which to
file any Tax Return, except as disclosed in the T900 Schedules. No claim
has ever been made by an authority in a jurisdiction where T900 does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of T900
that arose in connection with any failure (or alleged failure) to pay any
Tax.
(b) T900 has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other Person.
(c) No T900 director or officer (or employee responsible for Tax
matters) of T900 reasonably expects any authority to assess against T900
any additional Taxes for any period for which Tax Returns have been filed.
There is no dispute or claim concerning any Tax liability of T900 either
(i) claimed or raised by an authority in writing or, (ii) as to which any
of the T900 directors and officers (and employees responsible for Tax
matters) of T900 has knowledge based upon personal contact with any agent
of such authority. The T900 Schedules include a list of all federal,
state, local, and foreign income Tax Returns filed with respect to T900
for taxable periods ended on or after December 31, 1995, indicates those
Tax Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. T900 has delivered to FRD correct and
complete copies of all federal income Tax Returns, examination reports,
and statements of deficiencies assessed against or agreed to by T900 for
taxable periods ended on or after December 31, 1995.
(d) T900 has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment
or deficiency.
(e) The unpaid Taxes of T900 (i) did not, as of the December 31,
1997, balance sheet of T900, exceed the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of said
balance sheet, and (ii) do not exceed that reserve as adjusted for the
passage of time through the date of Closing in accordance with the past
custom and practice of T900 in filing its Tax Returns.
Section 3.10 Litigation and Proceedings. Except as set forth in the T900
Schedules, there are no actions, suits, proceedings, or investigations pending
or, to the Knowledge of T900, threatened by or against T900 or affecting its
properties, at law or in equity, before any court or other governmental agency
or instrumentality, domestic or foreign, or before any arbitrator of any kind.
To the Knowledge of T900, there is no material default on the part of T900 with
respect to any judgment, order, writ, injunction, decree, award, or ruling of
any court, arbitrator, or governmental agency or instrumentality.
Section 3.11 Contracts.
(a) Except as included or described herein or in the T900 Schedules,
there are no material contracts, agreements, franchises, license
agreements, or other commitments to which T900 is a party or by which its
properties are bound.
13
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which T900 is a party or by which its properties are
bound and which are material to its operations are, to the Knowledge of
T900, valid and enforceable by T900 in all respects, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally.
(c) Except as included or described in the T900 Schedules or
reflected in the December 31, 1997, balance sheet, T900 is not a party to
any oral or written: (i) contract for the employment of any officer or
employee which is not terminable on 30 days or less notice; (ii) profit
sharing, bonus, deferred compensation, stock option, severance pay,
pension benefit or retirement plan, agreement, or arrangement; (iii)
agreement, contract, or indenture relating to the borrowing of money; (iv)
guaranty of any obligation, other than one on which it is a primary
obligor, for the borrowing of money or otherwise, excluding endorsements
made for collection and other guaranties of obligations, which, in the
aggregate, do not exceed $20,000; (v) consulting or other similar
contracts with an unexpired term of more than one year or providing for
payments in excess of $5,000 in the aggregate; (vi) collective bargaining
agreement; (vii) agreement with any present or former officer or director;
or (viii) contract, agreement, or other commitment involving payments by
it of more than $10,000 in the aggregate.
Section 3.12 Material Contract Defaults. Except as disclosed in the T900
Schedules, to its Knowledge, T900 is not in default in any material respect
under the terms of any outstanding contract, agreement, lease, or other
commitment which is material to its business, operations, properties, assets, or
business condition, and there is no event of default or other event which, with
notice or lapse of time or both, would constitute a default in any material
respect under any such contract, agreement, lease, or other commitment in
respect of which it has not taken adequate steps to prevent such a default from
occurring.
Section 3.13 Governmental Authorizations. Except as set forth in the T900
Schedules, T900 has all licenses, franchises, permits, and other governmental
authorizations, whether state or federal that are legally required to enable it
to conduct its business in all material respects as conducted on the date
hereof. Except for compliance with the Securities Act and the Corporation Act,
as hereinafter provided, no authorization, approval, consent, or order of, or
registration, declaration, or filing with, any court or other governmental body
is required in connection with the execution and delivery by T900 of this
Agreement and the consummation by T900 of the transactions contemplated hereby.
Section 3.14 Compliance With Laws and Regulations. T900 has complied with
all applicable statutes and regulations of any country, state, provincial,
municipal, or local governmental entity or agency thereof, except to the extent
that noncompliance would not materially and adversely affect its business,
operations, properties, assets, or business condition, and except to the extent
non-compliance would not result in any material liability.
Section 3.15 Insurance. All the insurable properties of T900 are insured
in accordance with industry standards against all risks customarily insured
against by persons operating similar properties in localities where such
properties are located and under valid and enforceable policies by insurers of
recognized responsibility.
Section 3.16 Employment Practices. T900 is not a party to, or in the
process of negotiating, any collective bargaining or labor agreement or union
contract. There is no (i) charge, complaint or suit pending or, to the Knowledge
of T900, threatened against T900 respecting employment, hiring for employment,
terminating from employment, employment practices, employment discrimination,
terms
14
and conditions of employment, safety, wrongful termination, or wages and hours,
except as set forth in the T900 Schedules, (ii) unfair labor practice charge or
complaint pending or, to the Knowledge of T900, threatened against, or decision
or order in effect and binding on, T900 before or of the National Labor
Relations Board, (iii) grievance or arbitration proceeding arising out of or
under collective bargaining agreements pending or, to the Knowledge of T900,
threatened against T900, (iv) strike, labor dispute, slow-down, work stoppage or
other interference with work pending or, to the Knowledge of T900, threatened
against T900, or (v) to the Knowledge of T900, union organizing activities or
union representation question threatened or existing with respect to any groups
of employees of T900.
Section 3.17 Transactions with Affiliates; Arm's-Length Transactions;
Conflicts of Interest. Except as set forth in the T900 Schedules, there are no
material transactions, agreements or understandings, existing or presently
contemplated, between or among T900 and its officers or directors or
stockholders or any of their Affiliates or associates. All transactions by T900
have been conducted on an arm's-length basis. Neither the elected officers of
T900 nor the key employees of T900, or their respective spouses, have (or had
during the past three fiscal years) any material direct or indirect ownership or
profit participation in outside business enterprises with which T900 had
material purchases, sales. or business dealings.
Section 3.18 Absence of Certain Practices. T900 or any director, officer,
agent, employee, consultant, or other Person acting on its behalf has not given
or agreed to give any gift or similar benefit of more than nominal value to any
customer, supplier, or governmental employee or official or any other Person who
is or may be in a position to help or hinder T900 in connection with any
proposed transaction involving T900. T900 or any director, officer, agent,
employee, consultant or other Person acting on behalf of T900 has not (i) used
any corporate or other funds for unlawful contributions, payments, gifts, or
entertainment, or made any unlawful expenditures relating to political activity
to, or on behalf of, government officials or others; (ii) accepted or received
any unlawful contributions, payments, gifts or expenditures; or (iii) has had
any transaction or payment which was not recorded in its accounting books and
records or disclosed on its financial statements.
Section 3.19 Information. The information concerning T900 set forth in
this Agreement and in the T900 Schedules is complete and accurate in all
material respects and does not contain any untrue statement of a material fact
or omit to state a material fact required to make the statements made, in light
of the circumstances under which they are made, not misleading.
Section 3.20 T900 Schedules. Not less than 10 days prior to the Closing,
T900 shall deliver to FRD the following schedules of exceptions, which are
collectively referred to as the "T900 Schedules" and which consist of separate
schedules dated as of the date of delivery to FRD and instruments and data as of
such date, all certified by the chief executive officer of T900 as complete,
true, and correct:
(a) Schedule 3.01 containing complete and correct copies of the
articles of incorporation, as amended, and bylaws of T900 in effect as of
the date of Closing;
(b) Schedule 3.05 containing a list indicating the name, address,
and number of shares held by each of the T900 Stockholders;
(c) Schedule 3.06 containing the financial statements of TCI
identified in paragraph 3.06(a);
(d) Schedule 3.07 describing certain changes and events;
15
(e) Schedule 3.08 describing real and personal property and all
Security Interests;
(f) Schedule 3.09 containing the income Tax Returns of T900 and
related Tax information;
(g) Schedule 3.10 describing litigation and proceedings involving
1900;
(h) Schedule 3.11 describing material contracts and other
arrangements;
(i) Schedule 3.12 describing material contract defaults;
(j) Schedule 3.13 listing missing government authorizations;
(k) Schedule 3.17 describing transactions with Affiliates; and
(l) Schedule 3.20 setting forth any other information, together with
any copies of documents, required to be disclosed in the T900 Schedules by
Sections 3.01 through 3.19.
T900 shall cause the T900 Schedules and the instruments and data to be delivered
to FRD hereunder to be updated after the date of delivery up to and including
the date of Closing.
ARTICLE IV
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF QCI
As an inducement to, and to obtain the reliance of FRD, QCI represents and
warrants as follows:
Section 4.01 Organization. QCI is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Nevada. QCI has
the corporate power and is duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances, and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, including qualification
to do business as a foreign corporation in the states in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification, except in such jurisdictions, if any, where the
failure to be so qualified would not, either individually or in the aggregate,
have a material adverse effect on the business, properties, or assets of QCI.
Included in the QCI Schedules (as hereinafter defined) are complete and correct
copies of the articles of incorporation, as amended, and bylaws of QCI as in
effect on the date hereof.
Section 4.02 Non-contravention. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated by
this Agreement in accordance with the terms hereof will not: violate any
provision of the articles of incorporation, charter, or bylaws of QCI; result in
the breach of, constitute a default under, result in the acceleration of, create
in any Person the right to accelerate, terminate, modify, cancel, or require any
notice under, any material agreement, contract, lease, license, instrument, or
other arrangement to which QCI is a party or by which it is bound or to which
any of its assets is subject; or, violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which QCI is subject.
16
Section 4.03 Authorization of Transaction. QCI has full power and
authority, and has taken all action required by law, its articles of
incorporation and bylaws, and otherwise to execute and deliver this Agreement
and to perform its obligations hereunder, subject to obtaining the requisite
Stockholder Approval of the QCI Merger. Without limiting the generality of the
foregoing, the board of directors of QCI has duly authorized the execution,
delivery, and performance of this Agreement by QCI. This Agreement represents
the valid and binding obligation of QCI enforceable in accordance with its
terms, except as limited by bankruptcy and insolvency laws and by other laws
affecting the rights of creditors generally.
Section 4.04 Subsidiaries. QCI has no Subsidiaries.
Section 4.05 Capitalization. The authorized capitalization of QCI consists
of 25,000,000 shares of common stock, par value $0.001 per share, of which
11,068,750 shares are currently issued and outstanding. As of the Closing, the
total number of issued and outstanding shares will be 180,550. All issued and
outstanding shares are legally issued, fully paid, and non-assessable and not
issued in violation of the pre-emptive or other rights of any Person. There are
no existing options, warrants, calls, or commitments of any character relating
to the authorized and unissued QCI common stock.
Section 4.06 Financial Statements.
(a) The QCI Schedules contain the unaudited balance sheet of QCI at
April 30, 1998, and the unaudited statement of income for the period from
the date of inception on December 5, 1997 through April 30, 1998.
(b) All such financial statements have been prepared in accordance
with GAAP, which was applied on a consistent basis throughout the periods
covered, present fairly as of their respective dates the financial
condition of QCI and its results of operations, and are consistent with
the books and records of QCI.
(c) QCI did not have as of the date of its most recent balance sheet
any material liabilities or obligations (whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, and due or to become due), including any
liability for Taxes, except for (i) liabilities set forth on its most
recent balance sheet, and (ii) liabilities disclosed in this Agreement or
the QCI Schedules.
Section 4.07 Absence of Certain Changes or Events. Except as described
herein or in the QCI Schedules, since April 30, 1998, the date of the most
recent balance sheet of QCI:
(a) There has not been any material adverse change in the
properties, assets, or condition of QCI.
(b) QCI has not (i) amended its articles of incorporation, charter,
or bylaws; (ii) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any assets of any kind whatsoever
to stockholders, or purchased or redeemed, or agreed to purchase or
redeem, any of its capital stock; (iii) waived any rights of value which
in the aggregate are extraordinary or material considering its business;
(iv) made any material change in its method of accounting; (v) entered
into any other material transaction; (vi) made any accrual or arrangement
for payment of bonuses or special compensation of any kind or any
severance or termination pay to any Person; or (vii) made any increase in
any profit sharing, bonus, deferred compensation,
17
insurance, pension, retirement, or other employee benefit plan, payment,
or arrangement made to, for, or with its officers, directors, Affiliates,
or employees.
(c) QCI has not (i) granted or agreed to grant any options,
warrants, or other rights for its stocks, bonds, or other corporate
securities calling for the issuance thereof; (ii) borrowed or agreed to
borrow any funds or incurred, or become subject to, any material
obligation or liability (absolute or contingent); (iii) paid any material
obligation or liability (absolute or contingent) other than current
liabilities reflected in or shown on the April 30, 1998, balance sheet of
QCI, and current liabilities incurred since that date in the Ordinary
Course of Business; (iv) sold or transferred, or agreed to sell or
transfer, any of its assets, properties, or rights, or canceled, or agreed
to cancel, any debts or claims in excess of reserves reflected on its
balance sheet at April 30, 1998 (except debts or claims which, in the
aggregate, are of a value of less than $1,000); or (v) made or permitted
any amendment or termination of any contract or agreement to which it is a
party.
Section 4.08 Title and Related Matters. QCI has good and marketable title
to all of its properties, interests in properties, and assets, real and
personal, which are reflected in its April 30, 1998, balance sheet or acquired
after that date, free and clear of all Security Interests, except as disclosed
in the QCI Schedules. Except as set forth in the QCI Schedules, no Person has
any right to, and QCI has not received any notice of, infringement of, or
conflict with, asserted rights of others with respect to any trademarks, service
marks, tradenames, copyrights, or intellectual property.
Section 4.09 Tax Matters.
(a) QCI has filed, or will have filed prior to the Closing, all Tax
Returns that it was required to file as of the date of Closing. All such
Tax Returns were correct and complete in all material respects. All Taxes
owed by QCI (whether or not shown on any Tax Return) have been paid. QCI
is not currently the beneficiary of any extension of time within which to
file any Tax Return, except as disclosed in the QCI Schedules. No claim
has ever been made by an authority in a jurisdiction where QCI does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of QCI
that arose in connection with any failure (or alleged failure) to pay any
Tax.
(b) QCI has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other Person.
(c) No QCI director or officer (or employee responsible for Tax
matters) of QCI reasonably expects any authority to assess against QCI any
additional Taxes for any period for which Tax Returns have been filed.
There is no dispute or claim concerning any Tax liability of QCI either
(i) claimed or raised by an authority in writing or, (ii) as to which any
of the QCI directors and officers (and employees responsible for Tax
matters) of QCI has knowledge based upon personal contact with any agent
of such authority. The QCI Schedules include a list of all federal, state,
local, and foreign income Tax Returns filed with respect to QCI for
taxable periods ended on or after December 31, 1997, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. QCI has delivered to FRD correct and
complete copies of all federal income Tax Returns, examination reports,
and statements of deficiencies assessed against or agreed to by QCI for
taxable periods ended on or after December 31, 1997.
18
(d) QCI has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment
or deficiency.
(e) The unpaid Taxes of QCI (i) did not, as of the April 30, 1998,
balance sheet of QCI, exceed the reserve for Tax liability (rather than
any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of said balance sheet,
and (ii) do not exceed that reserve as adjusted for the passage of time
through the date of Closing in accordance with the past custom and
practice of QCI in filing its Tax Returns.
Section 4.10 Litigation and Proceedings. Except as set forth in the QCI
Schedules, there are no actions, suits, proceedings, or investigations pending
or, to the Knowledge of QCI, threatened by or against QCI or affecting its
properties, at law or in equity, before any court or other governmental agency
or instrumentality, domestic or foreign, or before any arbitrator of any kind.
To the Knowledge of QCI, there is no material default on the part of QCI with
respect to any judgment, order, writ, injunction, decree, award, or ruling of
any court, arbitrator, or governmental agency or instrumentality.
Section 4.11 Contracts.
(a) Except as included or described herein or in the QCI Schedules,
there are no material contracts, agreements, franchises, license
agreements, or other commitments to which QCI is a party or by which its
properties are bound.
(b) Except as included or described in the QCI Schedules or
reflected in the April 30, 1998, balance sheet, QCI is not a party to any
oral or written: (i) contract for the employment of any officer or
employee which is not terminable on 30 days or less notice; (ii) profit
sharing, bonus, deferred compensation, stock option, severance pay,
pension benefit or retirement plan, agreement, or arrangement; (iii)
agreement, contract, or indenture relating to the borrowing of money; (iv)
guaranty of any obligation, other than one on which it is a primary
obligor, for the borrowing of money or otherwise, excluding endorsements
made for collection and other guaranties of obligations, which, in the
aggregate, do not exceed $5,000; (v) consulting or other similar contracts
with an unexpired term of more than one year or providing for payments in
excess of$l,000 in the aggregate; (vi) collective bargaining agreement,
(vii) agreement with any present or former officer or director, or (viii)
contract, agreement, or other commitment involving payments by it of more
than $5,000 in the aggregate.
Section 4.12 Material Contract Defaults. Except as disclosed in the QCI
Schedules, to its Knowledge, QCI is not in default in any material respect under
the terms of any outstanding contract agreement, lease, or other commitment, and
there is no event of default or other event which, with notice or lapse of time
or both, would constitute a default in any material respect under any such
contract, agreement, lease, or other commitment in respect of which it has not
taken adequate steps to prevent such a default from occurring.
Section 4.13 Governmental Authorizations. Except for compliance with the
Securities Act, the Corporation Act, and the Nevada Corporation Law, as
hereinafter provided, no authorization, approval, consent, or order of; or
registration, declaration, or filing with, any court or other governmental body
is required in connection with the execution and delivery by QCI of this
Agreement and the consummation by QCI of the transactions contemplated hereby.
19
Section 4.14 Compliance With Laws and Regulations. QCI has complied with
all applicable statutes and regulations of any country, state, provincial,
municipal, or local governmental entity or agency thereof, except to the extent
that noncompliance would not materially and adversely affect its properties,
assets, or business condition, and except to the extent non-compliance would not
result in any material liability.
Section 4.15 Insurance. All the insurable properties of QCI are insured in
accordance with industry standards against all risks customarily insured against
by persons operating similar properties in localities where such properties are
located and under valid and enforceable policies by insurers of recognized
responsibility.
Section 4.16 Employment Practices. QCI has no employees and has had no
employees since its inception.
Section 4.17 Transactions with Affiliates; Arm's-Length Transactions;
Conflicts of Interest. Except as set forth in the QCI Schedules, there are no
material transactions, agreements or understandings, existing or presently
contemplated, between or among QCI and its officers or directors or stockholders
or any of their Affiliates or associates. All transactions by QCI have been
conducted on an arms-length basis. Neither the elected officers of QCI nor the
key employees of QCI, or their respective spouses, have (or had during the past
three fiscal years) any material direct or indirect ownership or profit
participation in outside business enterprises with which QCI had material
purchases, sales. or business dealings.
Section 4.18 Absence of Certain Practices. QCI or any director, officer,
agent, employee, consultant, or other Person acting on its behalf has not given
or agreed to give any gift or similar benefit of more than nominal value to any
customer, supplier, or governmental employee or official or any other Person who
is or may be in a position to help or hinder QCI in connection with any proposed
transaction involving QCI. QCI or any director, officer, agent, employee,
consultant or other Person acting on behalf of QCI has not (i) used any
corporate or other funds for unlawful contributions, payments, gifts, or
entertainment, or made any unlawful expenditures relating to political activity
to, or on behalf of, government officials or others; (ii) accepted or received
any unlawful contributions, payments, gifts or expenditures; or (iii) has had
any transaction or payment which was not recorded in its accounting books and
records or disclosed on its financial statements.
Section 4.19 Information. The information concerning QCI set forth in this
Agreement and in the QCI Schedules is complete and accurate in all material
respects and does not contain any untrue statement of a material fact or omit to
state a material fact required to make the statements made, in light of the
circumstances under which they are made, not misleading.
Section 4.20 QCI Schedules. Not less than 10 days prior to the Closing,
QCI shall deliver to FRD the following schedules of exceptions, which are
collectively referred to as the "QCI Schedules" and which consist of separate
schedules dated as of the date of delivery to FRD and instruments and data as of
such date, all certified by the chief executive officer of QCI as complete,
true, and correct:
(a) Schedule 4.01 containing complete and correct copies of the
articles of incorporation, as amended, and bylaws of QCI in effect as of
the date of Closing;
(b) Schedule 4.05 containing a list indicating the name, address,
and number of shares held by each of the QCI Stockholders;
20
(c) Schedule 4.06 containing the financial statements of QCI
identified in paragraph 4.06(a);
(d) Schedule 4.07 describing certain changes and events;
(e) Schedule 4.08 describing real and personal property and all
Security Interests;
(f) Schedule 4.09 containing the income Tax Returns of QCI and
related Tax information;
(g) Schedule 4.10 describing litigation and proceedings involving
QCI;
(h) Schedule 4.11 describing material contracts and other
arrangements;
(i) Schedule 4.12 describing material contract defaults;
(j) Schedule 4.13 listing missing government authorizations;
(k) Schedule 4.17 describing transactions with Affiliates; and
(l) Schedule 4.20 setting forth any other information, together with
any copies of documents, required to be disclosed in the QCI Schedules by
Sections 4.01 through 4.19.
QCI shall cause the QCI Schedules and the instruments and data to be delivered
to FRD hereunder to be updated after the date of delivery up to and including
the date of Closing.
ARTICLE V
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF FRD
As an inducement to, and to obtain the reliance of; TCI, T900 and QCI, FRD
represents and warrants as follows:
Section 5.01 Organization. FRD is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Utah. FRD has the
corporate power and is duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances, and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, including qualification
to do business as a foreign corporation in the states in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification, except in such jurisdictions, if any, where the
failure to be so qualified would not, either individually or in the aggregate,
have a material adverse effect on the business, properties, or assets of FRD.
Section 5.02 Non-contravention. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated by
this Agreement in accordance with the terms hereof will not: violate any
provision of the articles of incorporation, charter, or bylaws of FRD; result in
the breach of, constitute a default under, result in the acceleration of, create
in any Person the right to accelerate, terminate, modify, cancel, or require any
notice under, any material agreement, contract, lease, license, instrument, or
other arrangement to which FRD is a party or by which it is bound or to which
any of its assets is subject; or, violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree,
21
ruling, charge, or other restriction of any government, governmental agency, or
court to which FRD is subject.
Section 5.03 Authorization of Transaction. FRD has full power and
authority, and has taken all action required by law, its articles of
incorporation and bylaws, and otherwise to execute and deliver this Agreement
and to perform its obligations hereunder, subject to obtaining the requisite
Stockholder Approval of the Reverse Split. Without limiting the generality of
the foregoing, the board of directors of FRD has duly authorized the execution,
delivery, and performance of this Agreement by FRD. This Agreement represents
the valid and binding obligation of FRD enforceable in accordance with its
terms, except as limited by bankruptcy and insolvency laws and by other laws
affecting the rights of creditors generally.
Section 5.04 Subsidiaries. FRD has no Subsidiaries.
Section 5.05 Capitalization. The authorized capitalization of FRD consists
of 50,000,000 shares of common stock, par value $0.001 per share, of which
10,987,722 shares are currently issued and outstanding (approximately 549,387
shares after giving effect to the Reverse Split). All issued and outstanding
shares are legally issued, fully paid, and non-assessable and not issued in
violation of the preemptive or other rights of any Person. There are no
outstanding or authorized phantom stock, profit participation, or similar rights
with respect to FRD. Except for a warrant to purchase 988,900 shares of FRD
common stock at an exercise price of $0.05 per share (post Reverse Split 49,445
shares at an exercise price of $1.00 per share) issued for professional and
consulting services, there are no existing options, warrants, calls, or
commitments of any character relating to the authorized and unissued FRD common
stock.
Section 5.06 Financial Statements.
(a) The FRD Schedules contain the audited balance sheet of FRD as of
December 31, 1997, and the related audited statements of income,
stockholders' equity, and cash flows for each year in the two year period
ended December 31, 1997, together with the notes to such statements and
the opinion of Xxxxxxxxx, Xxxxx & Xxxxx, PC, independent accountants, with
respect thereto.
(b) All such financial statements have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered,
present fairly as of their respective dates the financial condition of FRD
and the results of operations of FRD, are correct and complete, and are
consistent with the books and records of FRD (which books and records are
correct and complete).
(c) FRD did not have as of the date of its most recent balance sheet
any liabilities or obligations (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and due or to become due), including any liability for
Taxes, except for (i) liabilities set forth on the most recent balance
sheet of FRD, (ii) expenses incurred in connection with the transactions
contemplated by this Agreement, and (iii) liabilities disclosed in this
Agreement or the FRD Schedules.
Section 5.07 Absence of Certain Changes or Events. Except as described
herein or in the FRD Schedules, since the date of the most recent FRD balance
sheet:
(a) There has not been any material adverse change in the financial
condition of FRD.
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(b) FRD has not (i) amended its articles of incorporation, charter, or
bylaws; (ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to stockholders,
or purchased or redeemed, or agreed to purchase or redeem, any of its capital
stock; (iii) waived any rights of value which in the aggregate are extraordinary
or material considering its business; (iv) made any material change in its
method of accounting; (v) entered into any other material transaction; (vi) made
any accrual or arrangement for payment of bonuses or special compensation of any
kind or any severance or termination pay to any Person; or (vii) made any
increase in any profit sharing, bonus, deferred compensation, insurance,
pension, retirement, or other employee benefit plan, payment, or arrangement
made to, for, or with its officers, directors, Affiliates, or employees.
(c) FRD has not (i) granted or agreed to grant any options, warrants, or
other rights for its stocks, bonds, or other corporate securities calling for
the issuance thereof; or (ii) issued, delivered, or agreed to issue or deliver
any stock, bonds, or other corporate securities including debentures (whether
authorized and unissued or held as treasury stock).
Section 5.08 Tax Matters.
(a) FRD has filed, or will have filed prior to the Closing, all Tax
Returns that it was required to file as of the date of Closing. All such
Tax Returns were correct and complete in all respects. All Taxes owed by
FRD (whether or not shown on any Tax Return) have been paid. FRD is not
currently the beneficiary of any extension of time within which to file
any Tax Return. No claim has ever been made by an authority in a
jurisdiction where FRD does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Security Interests
on any of the assets of FRD that arose in connection with any failure (or
alleged failure) to pay any Tax.
(b) FRD has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other Person.
(c) No FRD director or officer (or employee responsible for Tax
matters) of FRD reasonably expects any authority to assess against FRD any
additional Taxes for any period for which Tax Returns have been filed.
There is no dispute or claim concerning any Tax liability of FRD either
(i) claimed or raised by an authority in writing or, (ii) as to which any
of the directors and officers (and employees responsible for Tax matters)
of FRD has knowledge based upon personal contact with any agent of such
authority. The FRD Schedules include a list of all federal, state, local,
and foreign income Tax Returns filed with respect to FRD for taxable
periods ended on or after December 31, 1995, indicates those Tax Returns
that have been audited, and indicates those Tax Returns that currently are
the subject of audit. FRD has delivered to TCI correct and complete copies
of all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by FRD for taxable periods
ended on or after December 31, 1995.
(d) FRD has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment
or deficiency.
(e) The unpaid Taxes of FRD (i) did not, as of the most recent
balance sheet of FRD, exceed the reserve for Tax liability (rather than
any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of said balance sheet,
and
23
(ii) do not exceed that reserve as adjusted for the passage of time
through the date of Closing in accordance with the past custom and
practice of FRD in filing its Tax Returns.
Section 5.09 Litigation and Proceedings. Except as set forth in the FRD
Schedules, there are no actions, suits, proceedings, or investigations pending
or, to the Knowledge of FRD. threatened by or against it or affecting its
properties, at law or in equity, before any court or other governmental agency
or instrumentality, domestic or foreign, or before any arbitrator of any kind.
FRD has no Knowledge of any material default on its part with respect to any
judgment, order, writ, injunction, decree, award, or ruling of any court,
arbitrator, or governmental agency or instrumentality.
Section 5.10 Contracts.
(a) Except as included or described in the FRD Schedules, there are
no material contracts, agreements, or other commitments to which FRD is a
party or by which its properties are bound.
(b) Except as included or described in the FRD Schedules or
reflected in the most recent FRD balance sheet, FRD is not a party to any
oral or written: (i) contract for the employment of any officer or
employee; (ii) profit sharing, bonus, deferred compensation, stock option,
severance pay, pension benefit, or retirement plan, agreement, or
arrangement covered by Title IV of the Employee Retirement Income Security
Act, as amended; (iii) agreement, contract, or indenture relating to the
borrowing of money; (iv) guaranty of any obligation; (v) consulting or
other similar contracts; (vi) collective bargaining agreement; (vii)
agreement with any present or former officer or director; or (viii)
contract, agreement, or other commitment involving payments by it of more
than $1,000 in the aggregate.
Section 5.11 Material Contract Defaults. FRD is not in default in any
material respect under the terms of any outstanding contract, agreement, lease,
or other commitment, and there is no event of default or other event which, with
notice or lapse of time or both, would constitute a default in any material
respect under any such contract, agreement, lease, or other commitment in
respect of which it has not taken adequate steps to prevent such a default from
occurring.
Section 5.12 Governmental Authorizations. Except for compliance with the
Securities Act, the Corporation Act, and Nevada Corporation Law, as hereinafter
provided, no authorization, approval, consent, or order of, or registration,
declaration, or filing with, any court or other governmental body is required in
connection with the execution and delivery by FRD of this Agreement and the
consummation by FRD of the transactions contemplated hereby..
Section 5.13 Continuity of Business Enterprise. It is the present
intention of FRD to continue at least one significant historic business of each
of TCI, T900, and QCI, or to use at least a significant portion of their
respective historic business assets in a business within the meaning of Treasury
Regulation Section 1.368-1(d).
Section 5.14 Compliance With Laws and Regulations. FRD has complied with
all applicable statutes and regulations of any country, state, provincial,
municipal, or local governmental entity or agency thereof, except to the extent
that noncompliance would not materially and adversely affect its properties,
assets, or business condition, and except to the extent non-compliance would not
result in any material liability.
24
Section 5.15 Employment Practices. FRD has no employees and has had no
employees during the three year period ended December 31, 1997.
Section 5.16 Transactions with Affiliates; Arm's-Length Transactions;
Conflicts of Interest. Except as set forth in the FRD Schedules, there are no
material transactions, agreements or understandings, existing or presently
contemplated, between or among FRD and its officers or directors or stockholders
or any of their Affiliates or associates. All transactions by FRD have been
conducted on an arm's-length basis. Neither the elected officers of FRD nor the
key employees of FRD, or their respective spouses, have (or had during the past
three fiscal years) any material direct or indirect ownership or profit
participation in outside business enterprises with which FRD had material
purchases, sales or business dealings.
Section 5.17 Absence of Certain Practices. FRD or any director, officer,
agent, employee, consultant, or other Person acting on its behalf has not given
or agreed to give any gift or similar benefit of more than nominal value to any
customer, supplier, or governmental employee or official or any other Person who
is or may be in a position to help or hinder FRD in connection with any proposed
transaction involving FRD. FRD or any director, officer, agent, employee,
consultant or other Person acting on behalf of FRD has not (i) used any
corporate or other funds for unlawful contributions, payments, gifts, or
entertainment, or made any unlawful expenditures relating to political activity
to, or on behalf of, government officials or others; (ii) accepted or received
any unlawful contributions, payments, gifts or expenditures; or (iii) has had
any transaction or payment which was not recorded in its accounting books and
records or disclosed on its financial statements.
Section 5.18 Information. The information concerning FRD set forth in this
Agreement and in the FRD Schedules is complete and accurate in all material
respects and does not contain any untrue statement of a material fact or omit to
state a material fact required to make the statements made, in light of the
circumstances under which they are made, not misleading.
Section 5.19 FRD Schedules. Not less than 10 days prior to the Closing,
FRD shall deliver to TCI the following schedules, which are collectively
referred to as the "FRD Schedules" and which consist of separate schedules dated
as of the date of delivery to TCI and instruments and data as of such date, all
certified by the chief executive officer of FRD as complete, true, and correct:
(a) Schedule 5.01 containing complete and correct copies of the
articles of incorporation, as amended, and bylaws of FRD in effect as of
the date of Closing;
(b) Schedule 5.05 containing a list indicating the name, address,
and number of shares held by each of the FRD Stockholders;
(c) Schedule 5.06 containing the financial statements of FRD
identified in paragraph 5.06(a);
(d) Schedule 5.07 describing certain changes and events;
(e) Schedule 5.08 containing the income Tax Returns of FRD and
related Tax information;
(f) Schedule 5.09 describing litigation and proceedings involving
FRD;
25
(g) Schedule 5.10 describing material contracts and other
arrangements;
(h) Schedule 5.11 describing material contract defaults;
(i) Schedule 5.12 listing missing government authorizations;
(j) Schedule 5.16 describing transactions with Affiliates; and
(l) Schedule 5.19 setting forth any other information, together with
any copies of documents, required to be disclosed in the FRD Schedules by
Sections 5.01 through 5.18.
FRD shall cause the FRD Schedules and the instruments and data to be delivered
to TCI hereunder to be updated after the date of delivery up to and including
the date of Closing.
ARTICLE VI
PLAN OF REORGANIZATION
Section 6.01 QSUB Formation. FRD agrees to organize, or cause to be
organized, QSUB as a Utah corporation and its wholly-owned Subsidiary, all for
the purpose and to the extent deemed necessary by FRD and its counsel to permit
QSUB to execute an acceptance of the terms of this Agreement pertaining to the
Companies Merger and each Plan of Merger pertaining thereto. At such time as
QSUB has been organized and is, in the opinion of FRD and its counsel, permitted
by law to execute an acceptance of this Agreement and each Plan of Merger, the
board of directors of QSUB shall adopt resolutions authorizing the execution and
delivery of such acceptance and each Plan of Merger, and approving the
transactions contemplated thereby. On adoption of such resolutions and in
consideration of the execution and delivery of this Agreement by the Companies,
QSUB shall execute and deliver to each of the Companies duplicate copies of the
acceptance of this Agreement and their respective Plan of Merger.
Section 6.02 TCI Merger and Exchange of Shares. Pursuant to this
Agreement, each share of TCI common stock outstanding on the Effective Date
shall be converted into 930.2808464 shares of Exchanged FRD Stock, or a total of
approximately 3,385,292 shares for the 3,639 issued and outstanding shares of
common stock of TCI on the date of Closing. After the Effective Date each TCI
Stockholder shall, on surrender to FRD of the certificate or certificates
representing the TCI common stock, be entitled to receive a certificate or
certificates evidencing shares of the Exchanged FRD Stock as provided herein. On
the Effective Date all previously issued shares of common stock of TCI shall be
canceled, and all rights in respect thereof shall cease. The shares of Exchanged
FRD Stock issued pursuant to this Section 6.02 and the TCI Merger shall be, when
issued, legally issued, fully paid, and non-assessable.
Section 6.03 T900 Merger and Exchange of Shares. Pursuant to this
Agreement, each share of T900 common stock outstanding on the Effective Date
shall be converted into 298.8686109 shares of Exchanged FRD Stock, or a total of
approximately 994,037 shares for the 3,326 issued and outstanding shares of
common stock of T900 on the date of Closing. After the Effective Date each T900
Stockholder shall, on surrender to FRD of the certificate or certificates
representing the T900 common stock, be entitled to receive a certificate or
certificates evidencing shares of the Exchanged FRD Stock as provided herein. On
the Effective Date all previously issued shares of common stock of T900 shall be
canceled, and all rights in respect thereof shall cease. The shares of Exchanged
FRD Stock issued pursuant to this Section 6.03 and the T900 Merger shall be,
when issued, legally issued, fully paid, and non-assessable.
26
Section 6.04 QCI Merger and Exchange of Shares. Pursuant to this
Agreement, each share of QCI common stock outstanding on the Effective Date
shall be converted into 3.13018 shares of Exchanged FRD Stock, or a total of
approximately 565,154 shares for the 180,550 issued and outstanding shares of
common stock of QCI on the date of Closing. After the Effective Date each QCI
Stockholder shall, on surrender to FRD of the certificate or certificates
representing the QCI common stock, be entitled to receive a certificate or
certificates evidencing shares of the Exchanged FRD Stock as provided herein. On
the Effective Date all previously issued shares of common stock of QCI shall be
canceled, and all rights in respect thereof shall cease. The shares of Exchanged
FRD Stock issued pursuant to this Section 6.04 and the QCI Merger shall be, when
issued, legally issued, fully paid, and non-assessable.
Section 6.05 Fractional Shares. FRD shall not issue any fractional shares
or interests in the Exchanged FRD Stock. If any XXX Xxxxxxxxxxx, X000
Xxxxxxxxxxx, xx XXX Stockholder would otherwise be entitled to a fractional
share as a result of the provisions of Sections 6.02, 6.03, or 6.04,
respectively, FRD shall round the number of shares of the Exchanged FRD Stock to
be issued to such stockholder up to the nearest whole share.
Section 6.06 Effect of Merger. The Companies Merger shall become effective
at the time articles of merger for each such Merger are filed with the Division
of Corporations and Commercial Code of the state of Utah and, only in the case
of QCI, with the Secretary of State of the state of Nevada, which is also the
Effective Date, and shall have the effect set forth in the Corporation Act and
the Nevada Corporation Law, as applicable. As the surviving corporation in each
Merger, QSUB may take any action subsequent to the Effective Date in the name
and on behalf of any of QSUB, TCI, T900, or QCI in order to carry out and
effectuate the transactions contemplated by this Agreement.
(a) The articles of incorporation of QSUB in effect immediately
prior to the Effective Date will become the articles of incorporation
after the Effective Date, without any modification or amendment as a
result of the Merger.
(c) The Bylaws of QSUB in effect immediately prior to the Effective
Date will remain the Bylaws after the Effective Date, without any
modification or amendment as a result of the Merger.
ARTICLE VII
SPECIAL COVENANTS
Section 7.01 Stockholder Approval. Promptly following the execution of
this Agreement, each of TCI and T900 shall take all steps required to obtain
Stockholder Approval of this Agreement and the TCI Merger and T900 Merger,
respectively, in accordance with the Corporation Act. Promptly following the
execution of this Agreement, QCI shall take all steps required to obtain
Stockholder Approval of this Agreement and the QCI Merger in accordance with the
Nevada Corporation Law. Promptly following the execution of this Agreement, FRD
shall take all steps required to obtain Stockholder Approval of the Reverse
Split and such other corporate changes as the Parties may agrees in accordance
with the Corporation Act. Prior to the Closing, FRD shall execute written
consents in its capacity as the sole stockholder of QSUB approving this
Agreement and the Companies Merger contemplated hereby.
Section 7.02 Access to Properties and Records. The Parties will each
afford to the officers and authorized representatives of the other Parties full
access to its properties, books, and records in order that each may have full
opportunity to make such reasonable investigation as it shall desire to make of
the
27
affairs of the others, and each will furnish the others with such additional
financial and operating data and other information as to its business and
properties as the others shall from time to time reasonably request.
Section 7.03 Actions Prior to Closing.
(a) From and after the date of this Agreement until the date of
Closing and except as permitted or contemplated by this Agreement, the
Parties hereto will each: (i) carry on its business in substantially the
same manner as it has heretofore; (ii) maintain and keep its properties in
states of good repair and condition as at present, except for depreciation
due to ordinary wear and tear and damage due to casualty; (iii) maintain
in full force and effect insurance comparable in amount and in scope of
coverage to that now maintained by it; (iv) perform in all material
respects all of its obligation under material contracts, leases, and
instruments relating to or affecting its assets, properties, and business;
(v) use its best efforts to maintain and preserve its business
organization intact, to retain its key employees, and to maintain its
relationship with its material suppliers and customers; and (vi) fully
comply with and perform in all material respects all obligations and
duties imposed on it by all federal and state laws and all rules,
regulations, and orders imposed by federal or state governmental
authorities.
(b) From and after the date of this Agreement until the date of
Closing Date, none of the Parties hereto will, except as provided herein:
(i) make any change in its articles of incorporation or bylaws; (ii) take
any action described in Section 2.07, in the case of QCI, Section 3.07 in
the case of T900, Section 4.07, in the case of QCI, or section 5.07, in
the case of FRD (all except as permitted therein or as disclosed in the
applicable Party's schedules); or (iii) enter into or amend any contract,
agreement, or other instrument of any of the types described in such
Party's schedules, except that a Party may enter into or amend any
contract, agreement, or other instrument in the Ordinary Course of
Business.
Section 7.04 Special Covenants and Representations Regarding the Exchanged
FRD Stock. The consummation of this Agreement and the transactions herein
contemplated, including the issuance of the Exchanged FRD Stock to the TCI
Stockholders, T900 Stockholders, and QCI Stockholders as contemplated hereby,
constitutes the offer and sale of securities under the Securities Act and
applicable state securities statutes. Such transactions shall be consummated in
reliance on exemptions from the registration and prospectus delivery
requirements of such statutes which depend, inter alia, upon the circumstances
under which such stockholders acquire such securities. In connection with
reliance upon exemptions from the registration and prospectus delivery
requirements for such transactions, each of TCI, T900, and QCI shall cause to be
delivered to their respective stockholders prior to the Effective Date
disclosures in form and substance satisfactory to FRD regarding the terms of the
Merger, the Parties, and restrictions under the Securities Act and state law.
Section 7.05 Indemnification.
(a) TCI hereby agrees to indemnify the other Parties and each of
their respective officers and directors as of the date of this Agreement
against any loss, liability, claim, damage, or expense (including, but not
limited to, any and all expense whatsoever reasonably incurred in
investigating, preparing, or defending against any litigation, commenced
or threatened, or any claim whatsoever), to which it or they may become
subject arising out of or based on any inaccuracy appearing in or
misrepresentation made under Article II of this Agreement. The
indemnification provided for in this paragraph (a) of Section 5.05 shall
survive the Closing and consummation of the transactions contemplated
hereby and termination of this Agreement.
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(b) T900 hereby agrees to indemnify the other Parties and each of
their respective officers and directors as of the date of this Agreement
against any loss, liability, claim, damage, or expense (including, but not
limited to, any and all expense whatsoever reasonably incurred in
investigating, preparing, or defending against any litigation, commenced
or threatened, or any claim whatsoever), to which it or they may become
subject arising out of or based on any inaccuracy appearing in or
misrepresentation made under Article III of this Agreement. The
indemnification provided for in this paragraph (b) of Section 7.05 shall
survive the Closing and consummation of the transactions contemplated
hereby and termination of this Agreement.
(c) QCI hereby agrees to indemnify the other Parties and each of
their respective officers and directors as of the date of this Agreement
against any loss, liability, claim, damage, or expense (including, but not
limited to, any and all expense whatsoever reasonably incurred in
investigating, preparing, or defending against any litigation, commenced
or threatened, or any claim whatsoever), to which it or they may become
subject arising out of or based on any inaccuracy appearing in or
misrepresentation made under Article IV of this Agreement. The
indemnification provided for in this paragraph (c) of Section 7.05 shall
survive the Closing and consummation of the transactions contemplated
hereby and termination of this Agreement.
(d) FRD hereby agrees to indemnify the other Parties and each of
their respective officers and directors as of the date of this Agreement
against any loss, liability, claim, damage, or expense (including, but not
limited to, any and all expense whatsoever reasonably incurred in
investigating, preparing, or defending against any litigation, commenced
or threatened, or any claim whatsoever), to which it or they may become
subject arising out of or based on any inaccuracy appearing in or
misrepresentation made under Article V of this Agreement. The
indemnification provided for in this paragraph (d) of Section 7.05 shall
survive the Closing and consummation of the transactions contemplated
hereby and termination of this Agreement.
Section 7.06 Third Person Consents and Agreements. The Parties agree to
cooperate with each other in order to obtain any required third Person consents
to this Agreement and the transactions herein contemplated.
Section 7.07 Management of FRD. Following the merger, the board of
directors of FRD will consist of Xxxx Xxxxxx, Xxxxxx Xxxxx, and Xxxx XxXxxxxx.
Section 7.08 Termination.
(a) This Agreement may be terminated by the board of directors of
any Party at any time prior to the Effective Date if:
(i) there shall be any actual or threatened action or
proceeding before any court or any governmental body which shall
seek to restrain, prohibit, or invalidate the transactions
contemplated by this Agreement and which, in the judgment of such
board of directors, made in good faith and based on the advice of
its legal counsel, makes it inadvisable to proceed with the mergers
and reorganization contemplated by this Agreement;
ii) any of the transactions contemplated hereby are
disapproved by any regulatory authority whose approval is required
to consummate such transactions or in the judgment of such board of
directors, made in good faith and based on the advice of
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counsel, there is substantial likelihood that any such approval will
not be obtained or will be obtained only on a condition or
conditions which would be unduly burdensome, making it inadvisable
to proceed with the mergers and reorganization;
(iii) there shall have been any change after the date of the
latest balance sheet in the assets, properties, business, or
financial condition of any Party, which could have a materially
adverse affect on the value of the business of any Party, except any
changes disclosed in the Schedules of any Party; or
(iv) the Parties shall fail to obtain the consents or waivers
required of any third Person to consummate the transactions
contemplated by this Agreement.
In the event of termination pursuant to this paragraph (a) of
Section 7.08, no obligation, right, or liability of a Party to any other
Party shall arise hereunder.
(b) This Agreement may be terminated at any time prior to the
Effective Date by action of the board of directors of FRD if any of TCI,
T900, or QCI shall fail to comply in any material respect with any of its
covenants or agreements contained in this Agreement or if any of the
representations or warranties of any of TCI, T900, or QCI contained herein
shall be inaccurate in any material respect. If this Agreement is
terminated pursuant to this paragraph (b) of Section 7.08, this Agreement
shall be of no further force or effect, and FRD shall have no obligation
or liability to any of TCI, T900, or QCI hereunder.
(c) This Agreement may be terminated at any time prior to the
Effective Date by action of the board of directors of any of TCI, T900, or
QCI if FRD shall fail to comply in any material respect with any of its
covenants or agreements contained in this Agreement or if any of the
representations or warranties of FRD contained herein shall be inaccurate
in any material respect. If this Agreement is terminated pursuant to this
paragraph (c) of Section 7.08, this Agreement shall be of no further force
or effect, and no obligation or liability of any of TCI, T900, or QCI to
FRD shall arise hereunder.
ARTICLE VIII
CLOSING
Section 8.01 Closing. The Closing of the transactions contemplated by this
Agreement shall take place at the offices of Xxxxxx, Xxxxxx & Xxxxxxx, X.X., 0
Xxxx 000 Xxxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000 on July 23, 1998, or at
such other place and on such other date as may be agreed to by the Parties.
Section 8.02 Closing Events. At the Closing, each of the respective
Parties hereto shall execute, acknowledge, and deliver (or shall cause to be
executed, acknowledged, and delivered) any and all certificates, financial
statements, schedules, agreements, resolutions, rulings, or other instruments
required by this Agreement to be so delivered at or prior to the Closing,
together with such other items as may be reasonably requested by the Parties
hereto in order to effectuate or evidence the transactions contemplated hereby.
The date on which all certificates and other documents required to effect the
transactions contemplated by this Agreement are filed with the states of Utah
and Nevada is the "Effective Date."
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ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF FRD
The obligations of FRD under this Agreement are subject to the
satisfaction, at or before the date of Closing, of the following conditions:
Section 9.01 Accuracy of Representations. The representations and
warranties made by each of TCI, T900, and QCI in this Agreement were true when
made and shall be true as of the date of Closing with the same force and effect
as if such representations and warranties were made at and as of the date of
Closing (except for changes therein permitted by this Agreement), and each of
TCI, T900, and QCI shall have performed or complied with all covenants and
conditions required by this Agreement to be performed or complied with by them
prior to or at the Closing. FRD shall be furnished with a certificate, signed by
a duly authorized officer of each of TCI, T900, and QCI and dated the date of
Closing, to the foregoing effect.
Section 9.02 Stockholder Approval. The TCI Stockholders shall have
approved this Agreement and the TCI Merger and the transactions contemplated
hereby. The T900 Stockholders shall have approved this Agreement and the T900
Merger and the transactions contemplated hereby. The QCI Stockholders shall have
approved this Agreement and the QCI Merger and the transactions contemplated
hereby.
Section 9.03 Officer's Certificates. FRD shall have been furnished with
certificates dated the date of Closing and signed by a duly authorized officer
of TCI, T900, and QCI to the effect that no litigation, proceeding,
investigation, or inquiry is pending which might result in an action to enjoin
or prevent the consummation of the transactions contemplated by this Agreement.
Section 9.04 No Material Adverse Change. Prior to the Closing, there shall
not have occurred any material adverse change in the financial condition,
business, or operations of any of TCI, T900, or QCI.
Section 9.05 Good Standing. FRD shall have received certificates of good
standing from the jurisdictions of formation of each of TCI, T900, and QCI, and
any other jurisdiction in which any of TCI, T900, or QCI is qualified to do
business dated as of a date within ten days prior to the Closing certifying that
they are in good standing as corporations in such states.
Section 9.06 Dissenters' Rights. The consummation of the transactions
contemplated by this Agreement is subject to and conditioned on no holders of
the issued and outstanding stock of TCI or T900 exercising and perfecting any
dissenter or similar rights they may have with respect to the TCI Merger and
T900 Merger.
Section 9.07 Schedules. The TCI Schedules, T900 Schedules, and QCI
Schedules shall be satisfactory to FRD.
Section 9.08 Consents/ Agreements. TCI, T900, and QCI shall have obtained
any third Person consents and agreements pursuant to Section 7.06.
Section 9.09 Other Items. FRD shall have received such further documents,
certificates, or instruments relating to the transactions contemplated hereby as
FRD may reasonably request.
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ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF TCI, T900 AND QCI
The obligations of each of TCI, T900, and QCI under this Agreement are
subject to the satisfaction, at or before the date of Closing, of the following
conditions:
Section 10.01 Accuracy of Representations. The representations and
warranties made by FRD in this Agreement were true when made and shall be true
as of the Closing with the same force and effect as if such representations and
warranties were made at and as of the date of Closing (except for changes
therein permitted by this Agreement), and FRD shall have performed and complied
with all covenants and conditions required by this Agreement to be performed or
complied with by FRD prior to or at the Closing. Each of the Companies shall
have been furnished with a certificate, signed by a duly authorized officer of
FRD and dated the date of Closing to the foregoing effect.
Section 10.02 Stockholder Approval. The FRD Stockholders shall have
approved the Reverse Split.
Section 10.03 Officer's Certificate. Each of the Companies shall have been
furnished with a certificate dated the date of Closing and signed by a duly
authorized officer of FRD to the effect that no litigation, proceeding,
investigation, or inquiry is pending which might result in an action to enjoin
or prevent the consummation of the transactions contemplated by this Agreement.
Section 10.04 No Material Adverse Change. Prior to the Closing, there
shall not have occurred any material adverse change in the financial condition,
business, or operations of FRD.
Section 10.05 Good Standing. Each of the Companies shall have received a
certificate of good standing from the state of Utah with respect to FRD dated as
of a date within ten days prior to the Closing Date certifying that FRD is in
good standing as a corporation in the state of Utah.
Section 10.06 Schedules. The FRD Schedules shall be satisfactory to each
of the Companies.
Section 10.07 Other Items. Each of the Companies shall have received such
further documents, certificates, or instruments relating to the transactions
contemplated hereby as they may reasonably request.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Brokers. The Parties agree that there were no finders or
brokers involved in bringing the Parties together or who were instrumental in
the negotiation, execution, or consummation of this Agreement. The Parties each
agree to indemnify the others against any claim by any Person other than those
described above for any commission, brokerage, or finders' fee arising from the
transactions contemplated hereby based on any alleged agreement or understanding
between the indemnifying Party and such Person, whether express or implied from
the actions of the indemnifying Party.
Section 11.02 Governing Law. This Agreement shall be governed by,
enforced, and construed under and in accordance with the laws of the United
States of America and, with respect to matters of state law, with the laws of
Utah.
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Section 11.03 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered to it or
sent by registered mail or certified mail, postage prepaid, or by prepaid
telegram addressed as follows:
If to FRD, to: Four Rivers Development, Inc.
Attn: Xxx Xxxxxx, President
0000 Xxxxxxx Xxxxx
Xxxx Xxxx Xxxx, XX 00000
If to TCI, T900, or QCI, to: Teleconnect, Inc.
Attn: Xxxx Xxxxxx, President
0000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxx, XX 00000
or such other addresses as shall be furnished in writing by any Party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered, mailed, or
telegraphed.
Section 11.04 Attorneys' Fees. In the event that any Party institutes any
action or suit to enforce this Agreement or to secure relief from any default
hereunder or breach hereof, the non-prevailing Party or Parties shall reimburse
the prevailing Party or Parties for all costs, including reasonable attorneys'
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.
Section 11.05 Third Party Beneficiaries. This Agreement is solely between
FRD, TCI, T900, and QCI, and except as specifically provided no director,
officer, stockholder, employee, agent, independent contractor, or any other
Person shall be deemed to be a third party beneficiary of this Agreement.
Section 11.06 Entire Agreement. This Agreement, including the exhibits and
schedules hereto, represents the entire agreement between the Parties relating
to the subject matter hereof. This Agreement alone fully and completely
expresses the agreement of the Parties. There are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein.
Section 11.07 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
Section 11.08 Amendment or Waiver. Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether conferred herein,
at law, or in equity, and may be enforced concurrently herewith, and no waiver
by any Party of the performance of any obligation by the other Parties shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Effective Date this
Agreement may be amended by a writing signed by all Parties hereto with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance hereof may be extended by a
writing signed by the Party or Parties for whose benefit the provision is
intended.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their officers hereunto duly authorized, as of the date first
above-written.
FOUR RIVERS DEVELOPMENT, INC.
By /s/ Xxx Xxxxxx
---------------------------------
Xxx Xxxxxx, President
TELECONNECT, INC.
By /s/ Xxxxxx Xxxxx
---------------------------------
Xxxxxx Xxxxx, President
TELESHARE 900, INC.
By /s/ Xxxxxx Xxxxx
---------------------------------
Xxxxxx Xxxxx, President
Q COMM INTERNATIONAL, INC.
By /s/ Xxxxxx Xxxxx
---------------------------------
Xxxxxx Xxxxx, President
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