AGREEMENT AND PLAN OF MERGER AND REORGANIZATION dated as of October 1, 2000 (the
"Agreement") by and among Adar Alternative Two, Inc, a Florida corporation
("Adar Two") and Xfone, Inc., a Nevada corporation ("Xfone").
R E C I T A L S
The respective Boards of Directors of Adar Two and Xfone deem it desirable
and in the best interests of their respective corporations, and of their
respective shareholders, subject to, among other things, the approval of the
shareholders of Adar Two and Xfone, Xfone shall merge with and into Adar Two; as
a result of which the holders of shares of capital stock of Xfone will, in the
aggregate, receive the consideration hereinafter set forth (collectively, the
"Merger"). Upon the terms and subject to the conditions of this Agreement, at
the Effective Date (as defined in Section 2.3 of this Agreement) in accordance
with the merger laws of the state of Nevada ("MERGER LAWS"), Xfone shall be
merged with and into Adar Two and the separate existence of Xfone shall
thereupon cease. Adar Two shall be the surviving corporation in the Merger and
is hereinafter sometimes referred to as the "Surviving Corporation."
NOW, THEREFORE, in consideration of the terms, conditions, agreements and
covenants contained herein, and in reliance upon the representations and
warranties contained in this Agreement, the parties hereto agree as follows:
I. RECITALS; TRUE AND CORRECT
The above stated recitals are true and correct and are incorporated into
this Agreement.
II. MERGER
2.1 Merger. In the manner and subject to the terms and conditions set forth
herein, Xfone shall merge with and into Adar Two, and Adar Two shall be the
surviving corporation after the Merger and shall continue to exist as a
corporation governed by the laws of Nevada.
2.2 Incorporation and Name Change. Prior to the closing of the merger, Adar
Two shall change its state of incorporation to Nevada and in so doing adopt
Xfone's Articles of Incorporation and ByLaws (the "Reincorporation"). Upon the
Closing of the Merger, Adar Two shall change its name to Xfone, Inc. (the "Name
Change").
2.3 Effective Date. If all of the conditions precedent to the obligations
of each of the parties hereto as hereinafter set forth shall have been satisfied
or shall have been waived, the Merger shall become effective on the date (the
"Effective Date") the Articles of Merger, together with Plans of Merger
reflecting the Merger, shall be accepted for filing by the Secretary of State of
Nevada.
2.4 Securities of the Corporations. The authorized capital stock of Xfone
is comprised of 50,000,000 shares of Common Stock, (the "Xfone Stock"), of which
4,800,000 shares are issued and outstanding.
As set forth in the registration statement, there are certain options
outstanding in Xfone
The authorized capital stock of Adar Two is comprised of 50,000,000 shares
of Common Stock, no par value per share (the "Adar Two Stock"), of which 200,000
shares will be issued and outstanding as of the date of closing of the Merger.
In addition, Adar Two has authorized but unissued 20,000,000 shares of no par
value Preferred Stock
2.5 Shares of the Constituent and Surviving Corporations. The manner and
basis of converting the shares of Xfone Stock into shares of Adar Two Stock
shall be as follows:
At the Effective Date, by virtue of the Merger and without any action on
the part of any holder of any capital stock of either Adar Two or Xfone, each
share of Xfone Stock issued and outstanding shall be converted into the right to
receive one share of Adar Two Stock (the "Exchange Ratio").
As set forth in the registration statement, there are certain options
outstanding in Xfone. Adar Two will issue options with the same terms and
conditions to the option holders upon closing of the merger.
2.6 Effect of the Merger. As of the Effective Date, all of the following
shall occur:
(a) The separate existence and corporate organization of Xfone shall
cease (except insofar as it may be continued by statute), Adar Two shall exist
as a surviving corporation.
(b) Except as otherwise specifically set forth herein, the corporate
identity, existence, purposes, powers, franchises, rights and immunities of Adar
Two shall continue unaffected and unimpaired by the Merger, and the corporate
identity, existence, purposes, powers, franchises and immunities of Xfone shall
be merged with and into Adar Two as the surviving corporation, shall be fully
vested therewith.
(c) Neither the rights of creditors nor any liens upon or security
interests in the property of Xfone shall be impaired by the Merger.
(d) All corporate acts, plans, policies, agreements approvals and
authorizations of the shareholders and Board of Directors of Xfone and of its
respective officers, directors and agents, which were valid and effective
immediately prior to the Effective Date, shall be the acts, plans, policies,
agreements, approvals and authorizations of Adar Two and shall be as effective
and binding on Adar Two as the same were on Xfone.
(e) Adar Two shall be liable for all of the obligations and
liabilities of Xfone.
(f) The rights, privileges, goodwill, inchoate rights, franchises and
property, real, personal and mixed, and debts due on whatever account and all
other things in action belonging to Xfone, shall be, and they hereby are,
bargained, conveyed, granted, confirmed, transferred, assigned and set over to
and vested in Adar Two, without further act or deed.
(g) No claim pending at the Effective Date by or against any of Xfone,
or any stockholder, officer or director thereof, shall xxxxx or be discontinued
by the Merger, but may be enforced, prosecuted, settled or compromised as if the
Merger had not occurred.
(h) All rights of employees and creditors and all liens upon the
property of Xfone shall be preserved unimpaired, limited in lien to the property
affected by such liens at the Effective Date, and all the debts, liabilities and
duties of Xfone shall attach to Adar Two and shall be enforceable against Adar
Two to the same extent as if all such debts, liabilities and duties had been
incurred or contracted by Xfone.
(i) The Articles of Incorporation of Adar Two, as in effect on the
Effective Date, shall continue to be the Articles of Incorporation of Adar Two
without change or amendment.
(j) The Bylaws of Adar Two, as in effect on the Effective Date, shall
continue to be the Bylaws of Adar Two without change or amendment until such
time, if ever, as it is amended thereafter in accordance with the provisions
thereof and applicable laws.
(k) Upon the Effective Date, the Board of Directors of Adar Two shall
consist of those persons set forth in the registration statement, and the
officers of Adar Two shall be the officers specified in the registration
statement.
2.7. Merger Fee. Xfone shall pay Adar Two a merger fee of $135,000 for this
transaction. It is payable $10,000 upon any agreement, formal or informal,
written or oral, to proceed with the transaction, $35,000 upon return of the
questionnaire, $40,000 when the registration statement is filed and $40,000
immediately prior to the date the registration statement is declared effective.
In addition, shareholders of Adar Two may retain 4% of the issued and
outstanding stock of the surviving company at the closing of the merger and
thereafter.
As Adar Two goes through the due diligence and filing process, facts and
circumstances not known to it when it started the process leading to closing the
merger may come to light that make proceeding with the transaction inadvisable
in the opinion of Adar Two. If this occurs or if Xfone cancels the agreement
after paying the first installment, all fees previously received by Adar Two
will be retained.
III. CONDUCT OF BUSINESS PENDING CLOSING; STOCKHOLDER APPROVAL
Xfone and Adar Two covenant that between the date hereof and the date of
the Closing:
3.1 Access to Xfone. Xfone shall (a) give to Adar Two and to Adar Two's
counsel, accountants and other representatives reasonable access, during normal
business hours, throughout the period prior to the Closing Date (as defined in
Section 6.1), to all of the books, contracts, commitments and other records of
Xfone and shall furnish Adar Two during such period with all information
concerning Xfone that Adar Two may reasonably request; and (b) afford to Adar
Two and to Adar Two's representatives, agents, employees and independent
contractors reasonable access, during normal business hours, to the properties
of Xfone, in order to conduct inspections at Adar Two's expense to determine
that Xfone is operating in compliance with all applicable federal, state, local
and foreign statutes, rules and regulations, and all material building, fire and
zoning laws or regulations and that the assets of Xfone are substantially in the
condition and of the capacities represented and warranted in this Agreement;
provided, however, that in every instance described in (a) and (b), Adar Two
shall make arrangements with Xfone reasonably in advance and shall use its best
efforts to avoid interruption and to minimize interference with the normal
business and operations of Xfone. Any such investigation or inspection by Adar
Two shall not be deemed a waiver of, or otherwise limit, the representations,
warranties or covenants of Xfone contained herein.
3.2 Conduct of Business. During the period from the date hereof to the
Closing Date, Xfone shall and shall use reasonable efforts, to the extent such
efforts are within Xfone's control, to cause its business to be operated in the
usual and ordinary course of business and in material compliance with the terms
of this Agreement.
3.3 Exclusivity to Adar Two. Until either the merger agreement is
terminated or the merger closed, Xfone agrees not to solicit any other
inquiries, proposals or offers to purchase or otherwise acquire, in a merger
transaction or another type of transaction, the business of Xfone or the shares
of capital stock of Xfone. Any person inquiring as to the availability of the
business or shares of capital stock of Xfone or making an offer therefor shall
be told that Xfone is bound by the provisions of this Agreement. Xfone as well
as its officers, directors, representatives or agents further agree to advise
Adar Two promptly of any such inquiry or offer.
3.4 Access to Adar Two. Adar Two shall (a) give to Xfone and to Xfone's
counsel, accountants and other representatives reasonable access, during normal
business hours, throughout the period prior to the Closing Date, to all of the
books, contracts, commitments and other records of Adar Two and shall furnish
Xfone during such period with all information concerning Adar Two that Xfone may
reasonably request; and (b) afford to Xfone and to Xfone's representatives,
agents, employees and independent contractors reasonable access, during normal
business hours, to the properties of Adar Two in order to conduct inspections at
Xfone's expense to determine that Adar Two is operating in compliance with all
applicable federal, state, local and foreign statutes, rules and regulations,
and all material building, fire and zoning laws or regulations and that the
assets of Adar Two are substantially in the condition and of the capacities
represented and warranted in this Agreement; provided, however, that in every
instance described in (a) and (b), Xfone shall make arrangements with Adar Two
reasonably in advance and shall use its best efforts to avoid interruption and
to minimize interference with the normal business and operations of Adar Two.
Any such investigation or inspection by Xfone shall not be deemed a waiver of,
or otherwise limit, the representations, warranties or covenants of Adar Two
contained herein.
3.5 Conduct of Business. During the period from the date hereof to the
Closing Date, the business of Adar Two shall be operated by Adar Two in the
usual and ordinary course of such business and in material compliance with the
terms of this Agreement.
3.6 Exclusivity to Xfone. Until either the merger agreement is terminated
or the merger closed, Adar Two has agreed not to make any other inquiries,
proposals or offers to purchase or otherwise acquire, in a merger transaction or
another type of transaction, the business or the shares of capital stock of any
other company. Any person inquiring as to the possibility of being acquired by
Adar Two or making an offer therefor shall be told that Adar Two is bound by the
provisions of this Agreement. Each of Adar Two and its officers, directors,
representatives or agents further agree to advise PC Universe promptly of any
such inquiry or offer.
3.7 Stockholder Approval. (a) As promptly as reasonably practicable
following the date of this Agreement, Adar Two shall take all action reasonably
necessary in accordance with the laws of the State of Florida and its Articles
of Incorporation and Bylaws to secure written consents for the approval and
adoption of the Merger and the Merger Agreement, as well as the Reincorporation
and Name Change. The Board of Directors of Adar Two shall unanimously recommend
that Adar Two's shareholders vote to approve and adopt the Merger, this
Agreement and any other matters to be submitted to Adar Two's shareholders in
connection therewith. Adar Two shall, subject as aforesaid, use its best efforts
to solicit and secure from shareholders of Adar Two such approval and adoption.
(b) As promptly as reasonably practicable following the date of this
Agreement, Adar Two shall prepare and file with the SEC under the Securities Act
of 1933, as amended (the "Securities Act"), and the rules and regulations
promulgated by the SEC thereunder a registration statement on Form S-4 (or other
form of registration statement as agreed by the parties) (the "registration
statement")covering all shares of Adar Two Stock issuable as a consequence of
the Merger. Adar Two may also register shares of existing shareholders for
resale on a companion S-1 or SB-2 filing. Xfone shall cooperate fully with Adar
Two in the preparation and filing of the Registration Statement and any
amendments and supplements thereto, including, without limitation, the
furnishing to Adar Two of such information regarding Xfone as shall be required
by each of the Securities Act and the Exchange Act and the respective rules and
regulations promulgated by the SEC thereunder.
(d) As promptly as practicable but in no event later than the Effective
Date, request that a market maker prepare and file with the NASD OTC Bulletin
Board ("BB"), an application to have the Adar Two Stock listed for trading on BB
after the merger closes.
IV. REPRESENTATIONS AND WARRANTIES OF Xfone
Xfone represents and warrants to Adar Two as follows, with the knowledge
and understanding that Adar Two is relying materially upon such representations
and warranties:
4.1 Organization and Standing. Xfone is a corporation duly organized,
validly existing and in good standing under the laws of the state of Nevada.
Xfone has all requisite corporate power to carry on its business as it is now
being conducted and is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where such qualification is
necessary under applicable law, except where the failure to qualify
(individually or in the aggregate) does not have any material adverse effect on
the assets, business or financial condition of Xfone, and all states in which
each is qualified to do business as of the date hereof, are listed in the
information in the registration statement concerning Xfone. The copies of the
Articles of Incorporation and Bylaws of Xfone, as amended to date, delivered to
Adar Two, are true and complete copies of these documents as now in effect.
Except as otherwise set forth in the information in the registration statement
concerning Xfone, Xfone does not own any interest in any other corporation,
business trust or similar entity. The minute book of Xfone contains accurate
records of all meetings of its respective Board of Directors and shareholders
since its incorporation.
4.2 Capitalization. The authorized capital stock of Xfone, the number of
shares of capital stock which are issued and outstanding and par value thereof
are as set forth in the Registration Statement. All of such shares of capital
stock are duly authorized, validly issued and outstanding, fully paid and
nonassessable, and were not issued in violation of the preemptive rights of any
person. There are no subscriptions, options, warrants, rights or calls or other
commitments or agreements to which Xfone is a party or by which it is bound,
calling for any issuance, transfer, sale or other disposition of any class of
securities of Xfone. There are no outstanding securities convertible or
exchangeable, actually or contingently, into shares of common stock or any other
securities of Xfone. Xfone has no subsidiaries.
4.3 Authority. This Agreement constitutes, and all other agreements
contemplated hereby will constitute, when executed and delivered by Xfone in
accordance therewith (and assuming due execution and delivery by the other
parties hereto), the valid and binding obligation of Xfone, enforceable in
accordance with their respective terms, subject to general principles of equity
and bankruptcy or other laws relating to or affecting the rights of creditors
generally.
4.4 Properties. Except as set forth on the information in the registration
statement concerning Xfone, Xfone has good title to all of the assets and
properties which it purports to own as reflected on the balance sheet included
in the Financial Statements (as hereinafter defined), or thereafter acquired.
Xfone has a valid leasehold interest in all material property of which it is the
lessee and each such lease is valid, binding and enforceable against Xfone, as
the case may be, and, to the knowledge of Xfone, the other parties thereto in
accordance with its terms. Neither Xfone nor the other parties thereto are in
material default in the performance of any material provisions thereunder.
Neither the whole nor any material portion of the assets of Xfone is subject to
any governmental decree or order to be sold or is being condemned, expropriated
or otherwise taken by any public authority with or without payment of
compensation therefor, nor, to the knowledge of Xfone, any such condemnation,
expropriation or taking been proposed. None of the assets of Xfone is subject to
any restriction which would prevent continuation of the use currently made
thereof or materially adversely affect the value thereof.
4.5 Contracts Listed; No Default. All contracts, agreements, licenses,
leases, easements, permits, rights of way, commitments, and understandings,
written or oral, connected with or relating in any respect to present or
proposed future operations of Xfone (except employment or other agreements
terminable at will and other agreements which, in the aggregate, are not
material to the business, properties or prospects of Xfone and except
governmental licenses, permits, authorizations, approvals and other matters
referred to in Section 4.17), which would be required to be listed as exhibits
to a Registration Statement on Form S-4 or an Annual Report on Form 10-K if
Xfone were subject to the reporting requirements of the Exchange Act
(individually, the "Xfone Contract" and collectively, the "Xfone Contracts"),
are listed and described in the information in the registration statement
concerning Xfone. Xfone is the holder of, or party to, all of the Xfone
Contracts. To the knowledge of Xfone, the Xfone Contracts are valid, binding and
enforceable by the signatory thereto against the other parties thereto in
accordance with their terms. Neither Xfone nor any signatory thereto is in
default or breach of any material provision of the Xfone Contracts. Xfone's
operation of its business has been, is, and will, between the date hereof and
the Closing Date, continue to be, consistent with the material terms and
conditions of the Xfone Contracts.
4.6 Litigation. Except as disclosed in the information in the registration
statement concerning Xfone, there is no claim, action, proceeding or
investigation pending or, to the knowledge of Xfone, threatened against or
affecting Xfone before or by any court, arbitrator or governmental agency or
authority which, in the reasonable judgment of Xfone, could have any materially
adverse effect on Xfone. There are no decrees, injunctions or orders of any
court, governmental department, agency or arbitration outstanding against Xfone.
4.7 Taxes. For purposes of this Agreement, (A) "Tax" (and, with correlative
meaning, "Taxes") shall mean any federal, state, local or foreign income,
alternative or add-on minimum, business, employment, franchise, occupancy,
payroll, property, sales, transfer, use, value added, withholding or other tax,
levy, impost, fee, imposition, assessment or similar charge, together with any
related addition to tax, interest, penalty or fine thereon; and (B) "Returns"
shall mean all returns (including, without limitation, information returns and
other material information), reports and forms relating to Taxes or to any
benefit plans.
Xfone has duly filed all Returns required by any law or regulation to be
filed by it, except for extensions duly obtained. All such Returns were, when
filed, and to the knowledge of Xfone are, accurate and complete in all material
respects and were prepared in conformity with applicable laws and regulations in
all material respects. Xfone has paid or will pay in full or has adequately
reserved against all Taxes otherwise assessed against it through the Closing
Date, and the assessment of any material amount of additional Taxes in excess of
those paid and reported is not reasonably expected.
Xfone is not a party to any pending action or proceeding by any
governmental authority for the assessment of any Tax, and no claim for
assessment or collection of any Tax has been asserted against Xfone that has not
been paid. There are no Tax liens upon the assets (other than the lien of
property taxes not yet due and payable) of Xfone. There is no valid basis, to
the knowledge of Xfone, except as set forth in the information in the
registration statement concerning Xfone, for any assessment, deficiency, notice,
30-day letter or similar intention to assess any Tax to be issued to Xfone by
any governmental authority.
4.8 Compliance with Laws and Regulations. To its knowledge, Xfone is in
compliance, in all material respects, with all laws, rules, regulations, orders
and requirements (federal, state and local) applicable to it in all
jurisdictions where the business of Xfone is currently conducted or to which
Xfone is currently subject which has a material impact on Xfone, including,
without limitation, all applicable civil rights and equal opportunity employment
laws and regulations, and all state and federal antitrust and fair trade
practice laws and the Federal Occupational Health and Safety Act. Xfone knows of
no assertion by any party that Xfone is in violation of any such laws, rules,
regulations, orders, restrictions or requirements with respect to its current
operations, and no notice in that regard has been received by Xfone. To the
knowledge of Xfone, there is not presently pending any proceeding, hearing or
investigation with respect to the adoption of amendments or modifications to
existing laws, rules, regulations, orders, restrictions or requirements which,
if adopted, would materially adversely affect the current operations of Xfone.
4.9 Compliance with Laws. (a) To its knowledge, the business, operations,
property and assets of Xfone (and, to the knowledge of Xfone, the business of
any sub-tenant or licensee which is occupying or has occupied any space on any
premises of Xfone and the activities of which could result in any material
adverse liability to Xfone) (i) conform with and are in compliance in all
material respects with all, and are not in material violation of any applicable
federal, state and local laws, rules and regulations, including, but not limited
to, the Comprehensive Environmental Response Compensation and Liability Act of
1980, as amended (including the 1986 Amendments thereto and the Superfund
Amendments and Reauthorization Act) ("CERCLA"), and the Resource Conservation
and Recovery Act ("RCRA"), as well as any other laws, rules or regulations
relating to tax, product liability, controlled substances, product registration,
environmental protection, hazardous or toxic waste, employment, or occupational
safety matters; and (ii) have been conducted and operated in a manner such that,
to Xfone's knowledge, Xfone has foreseeable potential liabilities for
environmental clean-up under CERCLA, RCRA or under any other law, rule,
regulation or common or civil law doctrine.
(b) To its knowledge, no predecessor-in-title to any real property now or
previously owned or operated by Xfone, nor any predecessor operator thereof
conducted its business or operated such property in violation of CERCLA and RCRA
or any other applicable federal, state and local laws, rules and regulations
relating to environmental protection or hazardous or toxic waste matters.
(c) Except as disclosed in the information in the registration statement
concerning Xfone, no suit, action, claim, proceeding, nor investigation, review
or inquiry by any court or federal, state, county, municipal or local
governmental department, commission, board, bureau, agency or instrumentality,
including, without limitation, any state or local health department (all of the
foregoing collectively referred to as "Governmental Entity") concerning any such
possible violations by Xfone is pending or, to the knowledge of Xfone,
threatened, including, but not limited to, matters relating to diagnostic tests
and products and product liability, environmental protection, hazardous or toxic
waste, controlled substances, employment, occupational safety or tax matters.
Xfone does not know of any reasonable basis or ground for any such suit, claim,
investigation, inquiry or proceeding. For purposes of this Section 4.9, the term
"inquiry" includes, without limitation, all pending regulatory issues (whether
before federal, state, local or inter-governmental regulatory authorities)
concerning any regulated product, including, without limitation, any diagnostic
drugs and products.
4.10 Information. Xfone has furnished Adar Two all information necessary to
prepare the registration statement.
4.11 Condition of Assets. The equipment, fixtures and other personal
property of Xfone, taken as a whole, is in good operating condition and repair
(ordinary wear and tear excepted) for the conduct of the business of Xfone as is
contemplated to be conducted.
4.12 No Breaches. To its knowledge, the making and performance of this
Agreement and the other agreements contemplated hereby by Xfone will not (i)
conflict with or violate the Articles of Incorporation or the Bylaws of Xfone;
(ii) violate any material laws, ordinances, rules or regulations, or any order,
writ, injunction or decree to which Xfone is a party or by which Xfone or any of
its respective assets, businesses, or operations may be bound or affected; or
(iii) result in any breach or termination of, or constitute a default under, or
constitute an event which, with notice or lapse of time, or both, would become a
default under, or result in the creation of any encumbrance upon any asset of
Xfone under, or create any rights of termination, cancellation or acceleration
in any person under, any Xfone Contract.
4.13 Employees. Except as set forth in the information in the registration
statement concerning Xfone, none of the employees of Xfone is represented by any
labor union or collective bargaining unit and, to the knowledge of Xfone, no
discussions are taking place with respect to such representation.
4.14 Financial Statements. To its knowledge, the information in the
registration statement concerning Xfone contains, as to Xfone, certain financial
statements (the "Financial Statements"). The Financial Statements present
fairly, in all respects, the consolidated financial position and results of
operations of Xfone as of the dates and periods indicated, prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP"). The Financial Statements, when submitted to Adar Two for inclusion in
the Registration Statement, will have been prepared in accordance with
Regulation S-X of the SEC and, in particular, Rules 1-02 and 3-05 promulgated
thereunder. Without limiting the generality of the foregoing, (i) there is no
basis for any assertion against Xfone as of the date of the Financial Statements
of any debt, liability or obligation of any nature not fully reflected or
reserved against in the Financial Statements; and (ii) there are no assets of
Xfone as of the date of the Financial Statements, the value of which is
overstated in the Financial Statements. Except as disclosed in the Financial
Statements, Xfone has no known contingent liabilities (including liabilities for
Taxes), forward or long-term commitments or unrealized or anticipated losses
from unfavorable commitments other than in the ordinary course of business.
Xfone is not a party to any contract or agreement for the forward purchase or
sale of any foreign currency that is material to Xfone taken as a whole.
4.15 Absence of Certain Changes or Events. Except as set forth in the
information in the registration statement concerning Xfone, since the date of
the last financial statement included in the registration statement, there has
not been:
(a) Any material adverse change in the financial condition,
properties, assets, liabilities or business of Xfone;
(b) Any material damage, destruction or loss of any material
properties of Xfone, whether or not covered by insurance;
(c) Any material change in the manner in which the business of Xfone
has been conducted;
(d) Any material change in the treatment and protection of trade
secrets or other confidential information of Xfone;
(e) Any material change in the business or contractual relationship of
Xfone with any customer or supplier which might reasonably be expected to
materially and adversely affect the business or prospects of Xfone;
(f) Any agreement by Xfone, whether written or oral, to do any of the
foregoing; and
(g) Any occurrence not included in paragraphs (a) through (f) of this
Section 4.16 which has resulted, or which Xfone has reason to believe, in its
reasonable judgment, might be expected to result, in a material adverse change
in the business or prospects of Xfone.
4.16 Governmental Licenses, Permits, Etc. To its knowledge, Xfone has all
governmental licenses, permits, authorizations and approvals necessary for the
conduct of its business as currently conducted ("Licenses and Permits"). The
information in the registration statement concerning Xfone includes a list of
all Licenses and Permits. All Licenses and Permits are in full force and effect,
and no proceedings for the suspension or cancellation of any thereof is pending
or threatened.
4.17 Employee Agreements. (a) For purposes of this Agreement, the following
definitions apply:
(1) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any regulations promulgated thereunder.
(2) "Multi-employer Plan" means a plan, as defined in ERISA Section
3(37), to which Xfone contributes or is required to contribute.
(3) "Employee Plan" means any pension, retirement, profit sharing,
deferred compensation, vacation, bonus, incentive, medical, vision, dental,
disability, life insurance or any other employee benefit plan as defined in
Section 3(3) of ERISA other than a Multi-employer Plan to which Xfone
contributes, sponsors, maintains or otherwise is bound to with regard to any
benefits on behalf of the employees of Xfone.
(4) "Employee Pension Plan" means any Employee Plan for the provision
of retirement income to employees or which results in the deferral of income by
employees extending to the termination of covered employment or beyond as
defined in Section 3(2) of ERISA.
(5) "Employee Welfare Plan" means any Employee Plan other than an
Employee Pension Plan.
(6) "Compensation Arrangement" means any plan or compensation
arrangement other than an Employee Plan, whether written or unwritten, which
provides to employees of Xfone, former employees, officers, directors or
shareholders of Xfone any compensation or other benefits, whether deferred or
not, in excess of base salary or wages, including, but not limited to, any bonus
or incentive plan, stock rights plan, deferred compensation arrangement, life
insurance, stock purchase plan, severance pay plan and any other employee fringe
benefit plan.
(b) The information in the registration statement concerning Xfone lists,
all (1) employment agreements and collective bargaining agreements to which
Xfone is a party; (2) Compensation Arrangements of Xfone; (3) Employee Welfare
Plans; (4) Employee Pension Plans; and (5) consulting agreements under which
Xfone has or may have any monetary obligations to employees or consultants of
Xfone or their beneficiaries or legal representatives or under which any such
persons may have any rights. Xfone has previously made available to Adar Two
true and complete copies of all of the foregoing employment contracts,
collective bargaining agreements, Employee Plans and Compensation Arrangements,
including descriptions of any unwritten contracts, agreements, Compensation
Arrangements or Employee Plans, as amended to date. In addition, with respect to
any Employee Plan which continues after the Closing Date, Xfone has previously
delivered or made available to Adar Two (1) any related trust agreements, master
trust agreements, annuity contracts or insurance contracts; (2) certified copies
of all Board of Directors' resolutions adopting such plans and trust documents
and amendments thereto; (3) current investment management agreements; (4)
custodial agreements; (5) fiduciary liability insurance policies; (6)
indemnification agreements; (7) the most recent determination letter (and
underlying application thereof and correspondence and supplemental material
related thereto) issued by the Internal Revenue Service with respect to the
qualification of each Employee Plan under the provisions of Section 401(a) of
the Code; (8) copies of all "advisory opinion letters," "private letter
rulings," "no action letters," and any similar correspondence (and the
underlying applications therefor and correspondence and supplemental material
related thereto) that was issued by any governmental or quasigovernmental agency
with respect to the last plan year; (9) Annual Reports (Form 5500 Series) and
Schedules A and B thereto for the last plan year; (10) all actuarial reports
prepared for the last plan year; (11) all certified Financial Statements for the
last plan year; and (12) all current Summary Plan Descriptions, Summaries of
Material Modifications and Summary Annual Reports. All documents delivered by
Xfone to Adar Two as photocopies faithfully reproduce the originals thereof,
such originals are authentic and were, to the extent execution was required,
duly executed.
(c) Except as otherwise disclosed in the information in the registration
statement concerning Xfone:
(1) It is not a party to and has, in effect or to become effective
after the date of this Agreement, any bonus, cash or deferred compensation,
severance, medical, health or hospitalization, pension, profit sharing or
thrift, retirement, stock option, employee stock ownership, life or group
insurance, death benefit, welfare, incentive, vacation, sick leave, cafeteria,
so-called "golden parachute" payment, disability or trust agreement or
arrangement.
4.18 Brokers. Xfone has not made any agreement or taken any action with any
person or taken any action which would cause any person to be entitled to any
agent's, broker's or finder's fee or commission in connection with the
transactions contemplated by this Agreement.
4.19 Business Locations. Xfone does not nor does it own or lease any real
or personal property in any state except as set forth on the information in the
registration statement concerning Xfone. Xfone does not have a place of business
(including, without limitation, Xfone's executive offices or place where Xfone's
books and records are kept) except as otherwise set forth on the information in
the registration statement concerning Xfone.
4.20 Intellectual Property. The information in the registration statement
concerning Xfone lists all of the Intellectual Property (as hereinafter defined)
used by Xfone which constitutes a material patent, trade name, trademark,
service xxxx or application for any of the foregoing. "Intellectual Property"
means all of Xfone's right, title and interest in and to all patents, trade
names, assumed names, trademarks, service marks, and proprietary names,
copyrights (including any registration and pending applications for any such
registration for any of them), together with all the goodwill relating thereto
and all other intellectual property of Xfone. Other than as disclosed in the
information in the registration statement concerning Xfone, Xfone does not have
any licenses granted by or to it or other agreements to which it is a party,
relating in whole or in part to any Intellectual Property, whether owned by
Xfone or otherwise. All of the patents, trademark registrations and copyrights
listed in the information in the registration statement concerning Xfone that
are owned by Xfone are valid and in full force and effect. To the knowledge of
Xfone, it is not infringing upon, or otherwise violating, the rights of any
third party with respect to any Intellectual Property. No proceedings have been
instituted against or claims received by Xfone, nor to its knowledge are any
proceedings threatened alleging any such violation, nor does Xfone know of any
valid basis for any such proceeding or claim. To the knowledge of Xfone, there
is no infringement or other adverse claims against any of the Intellectual
Property owned or used by Xfone. To the knowledge of Xfone, its use of software
does not violate or otherwise infringe the rights of any third party.
4.21 Warranties. The information in the registration statement concerning
Xfone sets forth a true and complete list of the forms of all express warranties
and guaranties made by Xfone to third parties with respect to any services
rendered by Xfone.
4.22 Suppliers. Except as set forth in the information in the registration
statement concerning Xfone, Xfone knows and has no reason to believe that,
either as a result of the transactions contemplated hereby or for any other
reason (exclusive of expiration of a contract upon the passage of time), any
present material supplier of Xfone will not continue to conduct business with
Xfone after the Closing Date in substantially the same manner as it has
conducted business prior thereto.
4.23 Accounts Receivable. The accounts receivable reflected on the balance
sheets included in the Financial Statements, or thereafter acquired by Xfone,
consists, in the aggregate in all material respects, of items which are
collectible in the ordinary and usual course of business.
4.24 Governmental Approvals. To its knowledge, other than as set forth
herein, no authorization, license, permit, franchise, approval, order or consent
of, and no registration, declaration or filing by Xfone with, any governmental
authority, federal, state or local, is required in connection with Xfone's
execution, delivery and performance of this Agreement.
4.25 No Omissions or Untrue Statements. None of the information relating to
Xfone supplied or to be supplied in writing by it specifically for inclusion in
the Registration Statement, at the respective times that the Registration
Statement becomes effective (or any registration statement included therein),
the Proxy Statement is first mailed to Adar Two's shareholders and the meeting
of Adar Two's shareholders takes place, as the case may be, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Adar Two shall give notice to Xfone in advance of the dates of
such effectiveness, mailing and meeting sufficient to permit Xfone to fulfill
its obligations under the second sentence of this Section.
4.26 information in the registration statement concerning Xfone Complete.
Xfone shall promptly supplement the information in the registration statement
concerning Xfone if events occur prior to the Closing Date that would have been
required to be disclosed had they existed at the time of executing this
Agreement. The information in the registration statement concerning Xfone, as
supplemented prior to the Closing Date, will contain a true, correct and
complete list and description of all items required to be set forth therein. The
information in the registration statement concerning Xfone, as supplemented
prior to the Closing Date, is expressly incorporated herein by reference.
Notwithstanding the foregoing, any such supplement to the information in the
registration statement concerning Xfone following the date hereof shall not in
any way affect Adar Two's right not to consummate the transactions contemplated
hereby as set forth in Section 8.2 hereof.
V. REPRESENTATIONS AND WARRANTIES OF Adar Two
Adar Two represents and warrants to Xfone as follows, with the knowledge
and understanding that Xfone is relying materially on such representations and
warranties:
5.1 Organization and Standing of Adar Two. Adar Two is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida, and has the corporate power to carry on its business as now conducted
and to own its assets and it not required to qualify to transact business as a
foreign corporation in any state or other jurisdiction. The copies of the
Articles of Incorporation and Bylaws of Adar Two, delivered to Xfone, are true
and complete copies of those documents as now in effect. Adar Two does not own
any capital stock in any other corporation, business trust or similar entity,
and is not engaged in a partnership, joint venture or similar arrangement with
any person or entity. The minute books of Adar Two contain accurate records of
all meetings of its incorporator, shareholders and Board of Directors since its
date of incorporation.
5.2 Adar Two's Authority. Adar Two's Board of Directors has approved and
adopted this Agreement and the Merger and has resolved to recommend approval and
adoption of this Agreement and the Merger by Adar Two's shareholders. This
Agreement constitutes, and all other agreements contemplated hereby will
constitute, when executed and delivered by Adar Two in accordance herewith (and
assuming due execution and delivery by the other parties hereto), the valid and
binding obligations of Adar Two, enforceable in accordance with their respective
terms, subject to general principles of equity and bankruptcy or other laws
relating to or affecting the rights of creditors generally.
5.4 No Breaches. To its knowledge, the making and performance of this
Agreement (including, without limitation, the issuance of the Adar Two Stock) by
Adar Two will not (i) conflict with the Articles of Incorporation or the Bylaws
of Adar Two; (ii) violate any order, writ, injunction, or decree applicable to
Adar Two; or (iii) result in any breach or termination of, or constitute a
default under, or constitute an event which, with notice or lapse of time, or
both, would become a default under, or result in the creation of any encumbrance
upon any asset of Adar Two under, or create any rights of termination,
cancellation or acceleration in any person under, any agreement, arrangement or
commitment, or violate any provisions of any laws, ordinances, rules or
regulations or any order, writ, injunction or decree to which Adar Two is a
party or by which Adar Two or any of its assets may be bound.
5.5 Capitalization. The Adar Two Stock consists of 50,000,000 shares of
common stock, no par value per share, of which 2,000,000 shares are issued and
outstanding and 20,000,000 shares of no par preferred stock, of which none are
outstanding. All of the outstanding Adar Two Stock is duly authorized, validly
issued, fully paid and nonassessable, and was not issued in violation of the
preemptive rights of any person. The Adar Two Stock to be issued upon
effectiveness of the Merger, when issued in accordance with the terms of this
Agreement shall be duly authorized, validly issued, fully paid and
nonassessable. Other than as stated in this Section 5.5, there are no
outstanding subscriptions, options, warrants, calls or rights of any kind issued
or granted by, or binding upon, Adar Two, to purchase or otherwise acquire any
shares of capital stock of Adar Two, or other equity securities or equity
interests of Adar Two or any debt securities of Adar Two. There are no
outstanding securities convertible or exchangeable, actually or contingently,
into shares of Adar Two Stock or other stock of Adar Two.
5.6 Business. Adar Two, since its formation, has engaged in no business
other than to seek to serve as a vehicle for the acquisition of an operating
business, and, except for this Agreement, is not a party to any contract or
agreement for the acquisition of an operating business.
5.7 Governmental Approval; Consents. To its knowledge, except for the
reports required to be filed in the future by Adar Two, as a reporting company,
under the Exchange Act, and under the Securities Act with respect to the shares
of Adar Two Stock issuable upon exercise of the Adar Two Warrants, the filing of
the Registration Statement under the Securities Act, the Proxy Statement under
the Exchange Act for the purpose of seeking stockholder approval of the Merger
referred to in Section 2.1 and the issuance of the Adar Two Stock pursuant to
the Merger and the filing of the S-4 Registration Statement (or other form of
registration statement as agreed by the parties), no authorization, license,
permit, franchise, approval, order or consent of, and no registration,
declaration or filing by Adar Two with, any governmental authority, federal,
state or local, is required in connection with Adar Two's execution, delivery
and performance of this Agreement. No consents of any other parties are required
to be received by or on the part of Adar Two to enable Adar Two to enter into
and carry out this Agreement.
5.8 Financial Statements. To its knowledge, the financial statements of
Adar Two previously furnished to Xfone (collectively, the "Adar Two Financial
Statements") present fairly, in all material respects, the financial position of
Adar Two as of the respective dates and the results of its operations for the
periods covered in accordance with GAAP. Without limiting the generality of the
foregoing, (i) except as set forth in the Adar Two Disclosure Schedule, there is
no basis for any assertion against Adar Two as of the date of said balance
sheets of any material debt, liability or obligation of any nature not fully
reflected or reserved against in such balance sheets or in the notes thereto;
and (ii) there are no assets of Adar Two, the value of which (in the reasonable
judgment of Adar Two) is materially overstated in said balance sheets. Except as
disclosed therein, Adar Two has no known material contingent liabilities
(including liabilities for taxes), unusual forward or long-term commitments or
unrealized or anticipated losses from unfavorable commitments. Adar Two is not a
party to any contract or agreement for the forward purchase or sale of any
foreign currency.
5.9 Adverse Developments. Except as expressly provided or set forth in, or
required by, this Agreement, or as set forth in the Adar Two Financial
Statements, since the last date of its financial information in the registration
statement, there have been no materially adverse changes in the assets,
liabilities, properties, operations or financial condition of Adar Two, and no
event has occurred other than in the ordinary and usual course of business or as
set forth in Adar Two's Registration statement or in the Adar Two Financial
Statements which could be reasonably expected to have a materially adverse
effect upon Adar Two, and Adar Two does not know of any development or
threatened development of a nature that will, or which could be reasonably
expected to, have a materially adverse effect upon Adar Two's operations or
future prospects.
5.10 Contracts Listed. All material contracts, agreements, licenses,
leases, easements, permits, rights of way, commitments, and understandings,
written or oral, connected with or relating in any respect to the present
operations of Adar Two are, with the exception of this Agreement, described in
Adar Two's Registration statement.
5.11; No Default. All of the contracts, agreements, leases, commitments and
understandings, written or oral, and any other contract, agreement, lease,
commitment or understanding, written or oral, binding upon Adar Two referred to
in section 5.10 above, are listed in the Adar Two Disclosure Schedule (the "Adar
Two Contracts"). To the knowledge of Adar Two, the Adar Two Contracts are valid,
binding and enforceable by Adar Two against the other parties thereto in
accordance with their terms. Neither Adar Two nor, to the knowledge of Adar Two,
any of the other parties thereto is in default or breach of any material
provision of the Adar Two Contracts. Adar Two has furnished Xfone with a true
and complete copy of each Adar Two Contract, as amended.
5.12 Taxes. Adar Two has duly filed all Returns required by any law or
regulation to be filed by it except for extensions duly obtained. All such
Returns were, when filed, and to the best of Adar Two's knowledge are, accurate
and complete in all material respects and were prepared in conformity with
applicable laws and regulations. Adar Two has paid or will pay in full or has
adequately reserved against all Taxes otherwise assessed against it through the
Closing Date, and the assessment of any material amount of additional Taxes in
excess of those paid and reported is not reasonably expected.
Adar Two is not a party to any pending action or proceeding by any
governmental authority for the assessment of any Tax, and no claim for
assessment or collection of any Tax has been asserted against Adar Two that has
not been paid. There are no Tax liens upon the assets of Adar Two (other than
the lien of personal property taxes not yet due and payable). There is no valid
basis, to the best of Adar Two's knowledge, except as set forth in the Adar Two
Disclosure Schedule, for any assessment, deficiency, notice, 30-day letter or
similar intention to assess any Tax to be issued to Adar Two by any governmental
authority.
5.13 Litigation. Except as disclosed in the Adar Two Disclosure Schedule,
there is no claim, action, proceeding or investigation pending or, to Adar Two's
knowledge, threatened against or affecting Adar Two before or by any court,
arbitrator or governmental agency or authority which, in the reasonable judgment
of Adar Two, could have a materially adverse effect on Adar Two. There are no
decrees, injunctions or orders of any court, governmental department, agency or
arbitration outstanding against Adar Two.
5.14 Compliance with Laws and Regulations. To its knowledge, Adar Two is in
compliance, in all material respects, with all laws, rules, regulations, orders
and requirements (federal, state and local) applicable to it in all
jurisdictions in which the business of Adar Two is currently conducted or to
which Adar Two is currently subject, which may have a material impact on Adar
Two, including, without limitation, all applicable civil rights and equal
opportunity employment laws and regulations, all state and federal antitrust and
fair trade practice laws and the Federal Occupational Health and Safety Act.
Adar Two does not know of any assertion by any party that Adar Two is in
violation of any such laws, rules, regulations, orders, restrictions or
requirements with respect to its current operations, and no notice in that
regard has been received by Adar Two. To Adar Two's knowledge, there is not
presently pending any proceeding, hearing or investigation with respect to the
adoption of amendments or modifications of existing laws, rules, regulations,
orders, restrictions or requirements which, if adopted, would materially
adversely affect the current operations of Adar Two.
5.15 Compliance with Laws. (a) To its knowledge, the business operations,
property and assets of Adar Two (and to the knowledge of Adar Two, the business
of any sub-tenant or license which is occupying or has occupied any space on any
premises of Adar Two and the activities of which could result in any material
adverse liability to Adar Two) (i) conform with and are in compliance in all
material respects with all, and are not in material violation of any applicable
federal, state and local laws, rules and regulations, including, but not limited
to, CERCLA and RCRA, as well as any other laws, rules or regulations relating to
tax, product liability, controlled substances, product registration,
environmental protection, hazardous or toxic waste, employment, or occupational
safety matters; and (ii) have been conducted and operated in a manner such that,
to Adar Two's knowledge, Adar Two has no foreseeable potential liabilities for
environmental clean-up under CERCLA, RCRA or under any law, rule, regulation or
common or civil law doctrine.
(b) To its knowledge, no predecessor-in-title to any real property now or
previously owned or operated by Adar Two, nor any predecessor operator thereof
conducted its business or operated such property in violation of CERCLA and RCRA
or any other applicable, federal, state and local laws, rules and regulations
relating to environmental protection or hazardous or toxic waste matters.
(c) Except as disclosed in the Adar Two Disclosure Schedule, no suit,
action, claim, proceeding nor investigation review or inquiry by any Government
Entity (as defined in Section 4.9) concerning any such possible violations by
Adar Two is pending or, to Adar Two's knowledge, threatened, including, but not
limited to, matters relating to diagnostic tests and products and product
liability, environmental protection, hazardous or toxic waste, controlled
substances, employment, occupational safety or tax matters. Adar Two does not
know of any reasonable basis or ground for any such suit, claim, investigation,
inquiry or proceeding.
5.16 Governmental Licenses, Permits, Etc. To its knowledge, Adar Two has
all governmental licenses, permits, authorizations and approvals necessary for
the conduct of its business as currently conducted. All such licenses, permits,
authorizations and approvals are in full force and effect, and no proceedings
for the suspension or cancellation of any thereof is pending or threatened.
5.17 Brokers. Adar Two has not made any agreement or taken any action with any
person or taken any action which would cause any person to be entitled to any
agent's, broker's or finder's fee or commission in connection with the
transactions contemplated by this Agreement.
5.18 Employee Plans. Except as listed in Adar Two's Registration statement,
Adar Two has no employees, consultants or agents, and Adar Two has no Employee
Plans or Compensation Arrangements.
VI. STOCKHOLDER APPROVAL; CLOSING DELIVERIES
6.1 Stockholder Approval. Xfone shall submit the Merger and this Agreement
to its shareholders for approval and adoption at the Meeting or by written
consent as soon as practicable following the date the SEC declares the
registration statement effective in accordance with Section 3.7 hereof. Subject
to the Merger and this Agreement receiving all approvals of Xfone and Xfone
shareholders and regulatory approvals and the absence of 96% or more of the
non-affiliated shareholders of Xfone (i) voting against the Merger; and (ii)
requesting redemption of their shares of Xfone Stock in the manner to be set
forth in the Information Statement, and subject to the other provisions of this
Agreement, the parties shall hold a closing (the "Closing") no later than the
fifth business day (or such later date as the parties hereto may agree)
following the later of (a) the date of the Meeting of Shareholders of Xfone to
consider and vote upon the Merger and this Agreement or the receipt of the
requisite percentage of written consents or (b) the business day on which the
last of the conditions set forth in Articles VII and VIII hereof is fulfilled or
waived (such later date, the "Closing Date"), at 10:00 A.M. at the offices of
XXXXXXXX LAW GROUP, P.A., or at such other time and place as the parties may
agree upon.
6.2 Closing Deliveries of Xfone. At the Closing, Xfone shall deliver, or
cause to be delivered, to Adar Two:
(a) A certificate dated as of the Closing Date, to the effect that the
representations and warranties of Xfone contained in this Agreement are true and
correct in all material respects at and as of the Closing Date and that Xfone
has complied with or performed in all material respects all terms, covenants and
conditions to be complied with or performed by Xfone on or prior to the Closing
Date;
(b) An opinion of Xfone's counsel, *, in form and substance reasonably
satisfactory to Adar Two, in a form to be mutually agreed to prior to the
Closing;
(c) a certificate, dated as of the Closing Date, certifying as to the
Articles of Incorporation and Bylaws of Xfone, the incumbency and signatures of
the officers of each of Xfone and copies of the directors' and shareholders'
resolutions of Xfone approving and authorizing the execution and delivery of
this Agreement, and the consummation of the transactions contemplated hereby;
(d) Such other documents, at the Closing or subsequently, as may be
reasonably requested by Adar Two as necessary for the implementation and
consummation of this Agreement and the transactions contemplated hereby.
6.3 Closing Deliveries of Adar Two. At the Closing, Adar Two shall deliver
to Xfone:
(a) A certificate of Adar Two, dated as of the Closing Date, to the
effect that the representations and warranties of Adar Two contained in this
Agreement are true and correct in all material respects and that Adar Two has
complied with or performed in all material respects all terms, covenants and
conditions to be complied with or performed by Adar Two on or prior to the
Closing Date;
(b) A certificate, dated as of the Closing Date, executed by the
Secretary of Adar Two, certifying the Articles of Incorporation, Bylaws,
incumbency and signatures of officers of Adar Two and copies of Adar Two's
directors' and shareholders' resolutions approving and authorizing the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby;
(c) An opinion of Adar Two's counsel, XXXXXXXX LAW GROUP, P.A., in
form and substance reasonably satisfactory to Xfone, in a form to be mutually
agreed to prior to the Closing;
(d) The written resignations of all officers, and all directors of
Adar Two.
(e) Certificates representing the Adar Two Stock issuable upon
consummation of the Merger;
(f) The books and records of Adar Two; and
(h) Documentation satisfactory to Xfone evidencing the fact that the
signatories on all relevant bank accounts of Adar Two have been changed to
signatories designated by Xfone.
VII. CONDITIONS TO OBLIGATIONS OF Xfone
The obligation of Xfone to consummate the Closing is subject to the
following conditions, any of which may be waived by Xfone in its sole
discretion:
7.1 Compliance by Adar Two. Adar Two shall have performed and complied in
all material respects with all agreements and conditions required by this
Agreement to be performed or complied with by Adar Two prior to or on the
Closing Date.
7.2 Accuracy of Adar Two's Representations. Adar Two's representations and
warranties contained in this Agreement (including the Adar Two Disclosure
Schedule) or any schedule, certificate or other instrument delivered pursuant to
the provisions hereof or in connection with the transactions contemplated hereby
shall be true and correct in all material respects at and as of the Closing Date
(except for such changes permitted by this Agreement) and shall be deemed to be
made again as of the Closing Date.
7.3 Material Adverse Change. No material adverse change shall have occurred
subsequent to the date of the last financial information in the registration
statement in the financial position, results of operations, assets, liabilities
or prospects of Adar Two, nor shall any event or circumstance have occurred
which would result in a material adverse change in the financial position,
results of operations, assets, liabilities or prospects of Adar Two within the
reasonable discretion of Xfone.
7.4 Documents. All documents and instruments delivered by Adar Two to Xfone
at the Closing shall be in form and substance reasonably satisfactory to Xfone
and its counsel.
7.5 Capitalization. At the Closing Date, Adar Two shall have not more than
shares of Adar Two Stock issued and outstanding.
7.6 Effectiveness of Registration Statement; No Stop Order. The
Registration Statement shall be effective under the Securities Act and shall not
be subject to a stop order or any threatened stop order.
7.7 Reorganization. The Merger shall qualify as a tax-free reorganization
under Section 368 of the Code.
7.8 Litigation. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on account hereof shall be
pending or, to Xfone's knowledge, be threatened.
7.9 Dissenters' Rights. It is a condition to Xfone's obligations to
consummate the merger that the holders of no more than 10% of the outstanding
shares of Xfone's common stock are entitled to dissenters' rights. If demands
for payment are made with respect to more than 10%, of the outstanding shares of
Xfone's common stock, and, as a consequence more than 10% of the shareholders of
Xfone's become entitled to exercise dissenters' rights, then Xfone will not be
obligated to consummate the merger.
VIII. CONDITIONS TO ADAR TWO'S OBLIGATIONS
Adar Two's obligation to consummate the closing is subject to the following
conditions, any of which may be waived by Adar Two in its sole discretion:
8.1 Compliance by Xfone. Xfone shall have performed and complied in all
material respects with all agreements and conditions required by this Agreement
to be performed or complied with prior to or on the Closing Date.
8.2 Accuracy of Xfone's Representations. Xfone's representations and
warranties contained in this Agreement (including the exhibits hereto and the
Adar Two Disclosure Schedule) or any schedule, certificate or other instrument
delivered pursuant to the provisions hereof or in connection with the
transactions contemplated hereby shall be true and correct in all material
respects at and as of the Closing Date (except for such changes permitted by
this Agreement) and shall be deemed to be made again as of the Closing Date.
8.3 Material Adverse Change. No material adverse change shall have occurred
subsequent to the last date of the financial statement of Xfone in the
registration statement in the financial position, results of operations, assets,
liabilities or prospects of Xfone taken as a whole, nor shall any event or
circumstance have occurred which would result in a material adverse change in
the business, assets or condition, financial or otherwise, of Xfone taken as a
whole, within reasonable discretion of Adar Two.
8.4 Litigation. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on account hereof shall be
pending or, to Adar Two's knowledge, be threatened.
8.5 Reorganization. The Merger shall qualify as a tax-free reorganization
under Section 368 of the Code and there are no material adverse tax consequences
to the Merger.
8.6 Documents. All documents and instruments delivered by Xfone to Adar Two
at the Closing shall be in form and substance reasonably satisfactory to Adar
Two and its counsel.
IX. INDEMNIFICATION
9.1 By Xfone. Subject to Section 9.4, Xfone shall indemnify, defend and
hold Adar Two, its directors, officers, shareholders, attorneys, agents and
affiliates, harmless from and against any and all losses, costs, liabilities,
damages, and expenses (including legal and other expenses incident thereto) of
every kind, nature and description, including any undisclosed liabilities
(collectively, "Losses") that result from or arise out of (i) the breach of any
representation or warranty of Xfone set forth in this Agreement or in any
certificate delivered to Adar Two pursuant hereto; or (ii) the breach of any of
the covenants of Xfone contained in or arising out of this Agreement or the
transactions contemplated hereby.
9.2 By Adar Two. Subject to Section 9.4, Adar Two shall indemnify, defend,
and hold Xfone its directors, officers, shareholders, attorneys, agents and
affiliates harmless from and against any and all Losses that arise out of (i)
the breach of any representation or warranty of Adar Two set forth in this
Agreement or in any certificate delivered to Xfone pursuant hereto; or (ii) the
breach of any of the covenants of Adar Two contained in or arising out of this
Agreement or the transactions contemplated hereby.
9.3 Claims Procedure. Should any claim covered by Sections 9.1 or 9.2 be
asserted against a party entitled to indemnification under this Article (the
"Indemnitee"), the Indemnitee shall promptly notify the party obligated to make
indemnification (the "Indemnitor"); provided, however, that any delay or failure
in notifying the Indemnitor shall not affect the Indemnitor's liability under
this Article if such delay or failure was not prejudicial to the Indemnitor. The
Indemnitor upon receipt of such notice shall assume the defense thereof with
counsel reasonably satisfactory to the Indemnitee and the Indemnitee shall
extend reasonable cooperation to the Indemnitor in connection with such defense.
No settlement of any such claim shall be made without the consent of the
Indemnitor and Indemnitee, such consent not to be unreasonably withheld or
delayed, nor shall any such settlement be made by the Indemnitor which does not
provide for the absolute, complete and unconditional release of the Indemnitee
from such claim. In the event that the Indemnitor shall fail, within a
reasonable time, to defend a claim, the Indemnitee shall have the right to
assume the defense thereof without prejudice to its rights to indemnification
hereunder.
9.4 Limitations on Liability. Neither Xfone nor Adar Two shall be liable
hereunder as a result of any misrepresentation or breach of such party's
representations, warranties or covenants contained in this Agreement unless and
until the Losses incurred by each, as the case may be, as a result of such
misrepresentations or breaches under this Agreement shall exceed, in the
aggregate, $200,000 (in which case the party liable therefor shall be liable for
the entire amount of such claims, including the first $200,000).
X. TERMINATION
10.1 Termination Prior to Closing. (a) If the Closing has not occurred by
any date as mutually agreed upon by the parties (the "Termination Date"), any of
the parties hereto may terminate this Agreement at any time thereafter by giving
written notice of termination to the other parties; provided, however, that no
party may terminate this Agreement if such party has willfully or materially
breached any of the terms and conditions hereof.
(b) Prior to the Termination Date either party to this Agreement may
terminate this Agreement following the insolvency or bankruptcy of the other, or
if any one or more of the conditions to Closing set forth in Article VI, Article
VII or Article VIII shall become incapable of fulfillment and shall not have
been waived by the party for whose benefit the condition was established, then
either party may terminate this Agreement.
10.2 Consequences of Termination. Upon termination of this Agreement
pursuant to this Article X or any other express right of termination provided
elsewhere in this Agreement, the parties shall be relieved of any further
obligation to the others except as follows: As Adar Two goes through the due
diligence and filing process, facts and circumstances not known to it when it
started the process leading to closing the merger may come to light that make
proceeding with the transaction inadvisable in the opinion of Adar Two. If this
occurs or if Xfone cancels the agreement after paying the first installment, all
fees previously received by Adar Two will be retained. No termination of this
Agreement, however, whether pursuant to this Article X hereof or under any other
express right of termination provided elsewhere in this Agreement, shall operate
to release any party from any liability to any other party incurred before the
date of such termination or from any liability resulting from any willful
misrepresentation made in connection with this Agreement or willful breach
hereof.
XI. ADDITIONAL COVENANTS
11.1 Mutual Cooperation. The parties hereto will cooperate with each other,
and will use all reasonable efforts to cause the fulfillment of the conditions
to the parties' obligations hereunder and to obtain as promptly as possible all
consents, authorizations, orders or approvals from each and every third party,
whether private or governmental, required in connection with the transactions
contemplated by this Agreement.
11.2 Changes in Representations and Warranties of Xfone. Between the date
of this Agreement and the Closing Date, Xfone shall not, directly or indirectly,
except as contemplated in the information in the registration statement
concerning Xfone, enter into any transaction, take any action, or by inaction
permit an event to occur, which would result in any of the representations and
warranties of Xfone herein contained not being true and correct at and as of (a)
the time immediately following the occurrence of such transaction or event or
(b) the Closing Date. Xfone shall promptly give written notice to Adar Two upon
becoming aware of (i) any fact which, if known on the date hereof, would have
been required to be set forth or disclosed pursuant to this Agreement and (ii)
any impending or threatened breach in any material respect of any of the
representations and warranties of Xfone contained in this Agreement and with
respect to the latter shall use all reasonable efforts to remedy same.
11.3 Changes in Representations and Warranties of Adar Two. Between the
date of this Agreement and the Closing Date, Adar Two shall not, directly or
indirectly, enter into any transaction, take any action, or by inaction permit
an event to occur, which would result in any of the representations and
warranties of Adar Two herein contained not being true and correct at and as of
(a) the time immediately following the occurrence of such transaction or event
or (b) the Closing Date. Adar Two shall promptly give written notice to Xfone
upon becoming aware of (i) any fact which, if known on the date hereof, would
have been required to be set forth or disclosed pursuant to this Agreement and
(ii) any impending or threatened breach in any material respect of any of the
representations and warranties of Adar Two contained in this Agreement and with
respect to the latter shall use all reasonable efforts to remedy same.
XII. MISCELLANEOUS
12.1 Expenses. Adar Two will pay for its counsel and financial consultant
and all their costs. Xfone will pay for your accountants and attorneys and all
their costs. Xfone will be responsible for paying the SEC filing fee, and state
filing fees and all costs of converting your documents to they can be filed with
the SEC.
.
12.2 Survival of Representations, Warranties and Covenants. All statements
contained in this Agreement or in any certificate delivered by or on behalf of
Xfone or Adar Two pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed representations, warranties and covenants by
Xfone or Adar Two, as the case may be, hereunder. All representations,
warranties and covenants made by Xfone and by Adar Two in this Agreement, or
pursuant hereto, shall survive through the Closing Date.
12.3 Nondisclosure. Adar Two will not at any time after the date of this
Agreement, without Xfone' consent, divulge, furnish to or make accessible to
anyone (other than to its representatives as part of its due diligence or
corporate investigation) any knowledge or information with respect to
confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, material, devices or ideas or know-how, whether patentable or
not, with respect to any confidential or secret aspects (including, without
limitation, customers or suppliers) ("Confidential Information") of Xfone.
Xfone will not at any time after the date of this Agreement, without Adar Two's
consent (except as may be required by law), use, divulge, furnish to or make
accessible to anyone any Confidential Information (other than to its
representatives as part of its due diligence or corporate investigation) with
respect to Adar Two. The undertakings set forth in the preceding two paragraphs
of this Section 12.3 shall lapse if the Closing takes place as to Adar Two and
Xfone, but shall not lapse as to the officers and directors of Adar Two,
individually.
Any information, which (i) at or prior to the time of disclosure by either
of Xfone or Adar Two was generally available to the public through no breach of
this covenant, (ii) was available to the public on a non-confidential basis
prior to its disclosure by either of Xfone or Adar Two or (iii) was made
available to the public from a third party, provided that such third party did
not obtain or disseminate such information in breach of any legal obligation to
Xfone or Adar Two, shall not be deemed Confidential Information for purposes
hereof, and the undertakings in this covenant with respect to Confidential
Information shall not apply thereto.
12.4 Succession and Assignments; Third Party Beneficiaries. This Agreement
may not be assigned (either voluntarily or involuntarily) by any party hereto
without the express written consent of the other party. Any attempted assignment
in violation of this Section shall be void and ineffective for all purposes. In
the event of an assignment permitted by this Section, this Agreement shall be
binding upon the heirs, successors and assigns of the parties hereto. Except as
expressly set forth in this Section, there shall be no third party beneficiaries
of this Agreement.
12.5 Notices. All notices, requests, demands or other communications with
respect to this Agreement shall be in writing and shall be (i) sent by facsimile
transmission, (ii) sent by the United States Postal Service, registered or
certified mail, return receipt requested, or (iii) personally delivered by a
nationally recognized express overnight courier service, charges prepaid, to the
addresses specified in writing by each party.
Any such notice shall, when sent in accordance with the preceding sentence,
be deemed to have been given and received on the earliest of (i) the day
delivered to such address or sent by facsimile transmission, (ii) the fifth
(5th) business day following the date deposited with the United States Postal
Service, or (iii) twenty-four (24) hours after shipment by such courier service.
12.6 Construction. This Agreement shall be construed and enforced in accordance
with the internal laws of the State of Florida without giving effect to the
principles of conflicts of law thereof, except to the extent that the Securities
Act or the Exchange Act applies to the Registration Statements and the Proxy
Statement.
12.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.
12.8 No Implied Waiver; Remedies. No failure or delay on the part of the
parties hereto to exercise any right, power or privilege hereunder or under any
instrument executed pursuant hereto shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. All rights, powers and privileges granted herein shall be in addition
to other rights and remedies to which the parties may be entitled at law or in
equity.
12.9 Entire Agreement. This Agreement, including the Exhibits and Schedules
attached hereto, sets forth the entire understandings of the parties with
respect to the subject matter hereof, and it incorporates and merges any and all
previous communications, understandings, oral or written, as to the subject
matter hereof, and cannot be amended or changed except in writing, signed by the
parties.
12.10 Headings. The headings of the Sections of this Agreement, where
employed, are for the convenience of reference only and do not form a part
hereof and in no way modify, interpret or construe the meanings of the parties.
12.11 Severability. To the extent that any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remainder of such provision and of this Agreement shall be unaffected and
shall continue in full force and effect.
12.12 Public Disclosure. From and after the date hereof through the Closing
Date, Adar Two shall not issue a press release or any other public announcement
with respect to the transactions contemplated hereby without the prior consent
of Xfone, which consent shall not be unreasonably withheld or delayed. It is
understood by Xfone that Adar Two is required under the Exchange Act to make
prompt disclosure of any material transaction.
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, HAVE HAD THE
OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF THEIR OWN CHOICE, AND
UNDERSTAND EACH OF THE PROVISIONS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
Adar Alternative Two, Inc., Inc.
By:____________________________
Its:_____________________________
Xfone, Inc., Inc.
By:____________________________
Its:____________________________
