MERGER AND REORGANIZATION AGREEMENT
THIS MERGER AND REORGANIZATION AGREEMENT dated as of January 31, 1998, is
entered into among GLOBAL TELECOMMUNICATION SOLUTIONS, INC., a Delaware
corporation ("GTS"), CCI ACQUISITION CORP., a New Jersey corporation and
wholly-owned subsidiary of GTS ("Merger Subsidiary"), CENTERPIECE
COMMUNICATIONS, INC. , a New Jersey corporation ("CCI"), and J. XXXX XXXXXXXXXX,
an adult individual residing at 00 Xxxx Xxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000 (the
"Stockholder").
WHEREAS, Stockholder is the owner of all of the outstanding capital stock
of CCI as set forth in EXHIBIT A;
WHEREAS, subject to the terms and conditions of this Merger and
Reorganization Agreement ("Agreement"), the Parties desire to consummate a
merger, as contemplated herein, pursuant to which CCI shall be merged with and
into Merger Subsidiary; and
WHEREAS, for Federal income tax purposes, the parties intend that such
merger qualify as a reorganization under the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code").
IT IS AGREED:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the Business
Corporation Act of the State of New Jersey (the "BCA"), the Merger Subsidiary
and CCI shall consummate a merger (the "Merger") of CCI with and into the Merger
Subsidiary at the Effective Time (as defined) in accordance with the provisions
of this Agreement. Following the Merger, Merger Subsidiary shall continue as the
surviving corporation (the "Surviving Corporation") and shall continue its
existence under the laws of the State of New Jersey and the separate corporate
existence of CCI shall cease. Following the Merger, Merger Subsidiary shall
change its name and operate under the name CCI.
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SECTION 1.2 EFFECTIVE TIME. As soon as reasonably practicable after the
Closing, CCI and the Merger Subsidiary shall file with the New Jersey Secretary
of State in accordance with the BCA an executed copy of the Certificate of
Merger in the form of EXHIBIT B hereto (the "Articles of Merger") reflecting the
Merger. The Merger shall become effective at such time as the Merger Documents
are so filed with the New Jersey Secretary of State (the "Effective Time"). To
the extent permitted under law, GTS and the Stockholder hereby waive publication
of the Articles of Merger. GTS and the Stockholder hereby agree to the adoption
and filing of this Agreement and the Plan of Merger as required under the BCA,
and acknowledge and agree that their respective signatures hereto shall
constitute their written consent for purposes of authorizing the foregoing by
unanimous written consent of Stockholder as provided under the BCA.
SECTION 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 14A:10-6 of the BCA.
SECTION 1.4 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Articles of
Incorporation, as amended to effect the name change contemplated in Section 1.1,
and the By-Laws of Merger Subsidiary shall be the Articles of Incorporation and
By-Laws of the Surviving Corporation at the Effective Time.
SECTION 1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. At the
Effective Time, the Board of Directors and officers of the Surviving Corporation
shall consist of the persons listed in SCHEDULE 1.5, each to serve until his or
her successor is elected and qualified; provided, however, GTS agrees to cause
the Stockholder to be elected to the Board of Directors of the Surviving
Corporation for so long as he shall be employed by GTS or any of its Affiliates
pursuant to the Employment Agreement (as defined below).
ARTICLE II
CONVERSION OF SHARES AND RELATED MATTERS
SECTION 2.1 CONVERSION OF OUTSTANDING STOCK OF THE MERGER SUBSIDIARY AND
EXCHANGE FOR STOCK OF SURVIVING CORPORATION. Upon consummation of the Merger,
all 100 shares of the common stock, no par value, of the Merger Subsidiary
("Merger Subsidiary Stock") outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and exchanged for 100 shares of the common stock, par
value $.01 per share, of CCI ("Surviving Corporation Stock"), which shall
represent all of the issued and outstanding shares of capital stock of the
Surviving Corporation immediately after the Effective Time. All shares of
Surviving Corporation Stock shall be fully paid and non-assessable. Promptly
after the Effective Time, the Surviving Corporation shall issue to GTS a stock
certificate representing the 100 shares of Surviving Corporation Stock in
exchange for the certificate or
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certificates which formerly represented 100 shares of Merger Subsidiary Stock,
which stock certificates shall be immediately canceled.
SECTION 2.2 CONVERSION OF CCI SHARES. As of the Effective Time, all of the
outstanding shares of common stock, par value $.01 per share, of CCI that are
outstanding immediately prior to the Effective Time (the "CCI Shares") shall be
converted into the right to receive, at the Closing, an aggregate amount equal
to $5,000,000 (the "Merger Consideration"), comprised of the following:
(i) $1,500,000 in immediately available funds ( the "Cash
Consideration");
(ii) a number of shares ("Stock Consideration") of GTS common stock,
par value $.01 per share ("GTS Stock"), determined by dividing
$2,500,000 by the lesser of (a) average of the closing sales price
of one share of GTS Stock on the twenty trading days ending two
days immediately prior to the Closing Date; and (b) the stock
price used to calculate equity consideration paid to any other
entity involved in a merger, asset acquisition, or like
transaction with GTS during the sixty (60) day period immediately
prior to the Closing Date (the number of shares of GTS Stock
constituting the Stock Consideration payable to the Stockholder
shall be rounded up or down to the nearest whole number of
shares). The Common Stock, upon issuance, shall be subject to the
restrictions of Rule 144 promulgated by the United States of
America Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act"), until
properly disposed of in accordance with the terms and conditions
of Rule 144 or any other provision of the federal securities laws
authorizing disposal of such stock.
(iii) a secured non-negotiable promissory note substantially in the form
of EXHIBIT D attached to this Agreement (the "Promissory Note"),
in the principal amount of One Million Dollars ($1,000,000.00),
which shall accrue interest at the rate of eight percent (8%) per
annum, payable as follows: payments of Two Hundred and Fifty
Thousand Dollars ($250,000), plus interest accrued on the
Promissory Note up to the payment date, shall be made on October
31, 1998 and January 1, 1999; and payments of One Hundred Twenty
Five Thousand Dollars ($125,000), plus interest accrued on the
Promissory Note up to the payment date, shall be made on March 31,
1999, June 30, 1999, September 30, 1999 and January 1, 2000.
Amounts payable under the Promissory Note will be secured by a
Security Agreement in the form attached hereto as EXHIBIT E
delivered by Merger Subsidiary to the Stockholder concurrently
with the execution of this Agreement (the "Security Agreement").
Should GTS or Merger Subsidiary raise additional funds, either in
the form of debt or equity,
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following the Closing Date, in addition to the scheduled
principal and interest payments set forth herein, it shall use a
portion of such funds to pay down the balance due on the
Promissory Note according to the following formula: One Hundred
Thousand Dollars (or lesser sum as shall then be outstanding) for
each One Million Dollars ($1,000,000) raised. Such additional
payments shall be paid to Stockholder within Thirty (30) days
after the closing on each amount raised.
SECTION 2.3 BALANCE SHEET ADJUSTMENT. The Cash Consideration shall be
adjusted (the "Balance Sheet Adjustment") to reflect X in the following formula:
X = Y - Z, where
X = the dollar amount of the increase or decrease in the Cash
Consideration;
Y = The total cash and the net realizable value of CCI's accounts
receivable as of the Closing Date; and
Z = the total of all of CCI's liabilities as of the Closing Date,
except those liabilities set forth on SCHEDULE 2.3.
The Stockholder or its designee shall deliver to GTS a balance sheet and
income statement ( which shall be in the form of a compilation), dated as of the
Closing Date, no later than fourteen (14) days after the Closing Date. The
Balance Sheet Adjustment shall be determined on or before 90 days after the
Closing Date. GTS and the Stockholder will cooperate in good faith to prepare
the Balance Sheet Adjustment. If any dispute arises over the preparation of the
Balance Sheet Adjustment which cannot be reconciled by the Stockholder and GTS
in good faith, the Stockholder and GTS will engage a mutually acceptable
independent public accounting firm to determine the Balance Sheet Adjustment,
such accounting fees to be paid by the parties equally. The Balance Sheet
Adjustment determined by that accounting firm will be binding upon the
Stockholder and GTS.
SECTION 2.4 ADDITIONAL PAYMENTS. If the Balance Sheet Adjustment results in
the obligation of either party to the other, such amount shall be paid within
ten (10) days after final determination of the Balance Sheet Adjustment.
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SECTION 2.5 REGISTRATION RIGHTS.
(a) GENERAL. No later than November 1, 1998, GTS shall file a
registration statement with the SEC to register the shares issued to Stockholder
hereunder for resale, or shall include all such shares in a registration
statement which has been filed but not declared effective if allowable under the
Securities Act and the rules promulgated thereunder, so that they may be sold by
the Stockholder to the public except as otherwise provided herein (including,
without limitation, Exhibit F hereto). GTS shall use its best efforts to cause
such registration statement to be declared effective by the SEC no later than
January 31, 1999 and once such registration statement is declared effective, to
keep it effective until all securities registered thereby are either sold or can
be sold under the exemption from the registration requirements of the Securities
Act contained in Rule 144(k) thereof. GTS shall bear all fees and expenses
incurred by it in connection with the preparation and filing of such
registration statement. The Stockholder will pay all brokerage discounts and
commissions with respect to the sale of his GTS Shares and any fees and expenses
of separate counsel and accountants which may be retained by the Stockholder.
The Stockholder will be required to execute a lock-up agreement in the form
annexed hereto as EXHIBIT F pursuant to which he shall agree (i) not to sell any
GTS Shares until the one-year anniversary of the Closing Date and (ii) only to
sell up to 25% of the GTS Shares acquired by him in connection with the Merger
during any three-month period during the one-year period thereafter; PROVIDED,
HOWEVER, in the event the Stockholder fails to sell the complete 25% during any
calendar quarter the Stockholder shall be entitled to sell, during the next
calendar quarter, the lesser of the following percentage of the GTS Stock
acquired by him hereunder: (1) the sum of (A) 25% and (B) the difference between
25% and that percentage sold during the immediately preceding calendar quarter;
and (2) 40%.
Notwithstanding any other provision of this Section 2.5, GTS shall have no
obligation hereunder to register the GTS Shares on behalf of the Stockholder
unless (1) the Stockholder executes a lock-up agreement in the form annexed
hereto as Exhibit F and (2) the Stockholder provides to GTS information and
documents with respect to his ownership of the GTS Shares and other matters as
GTS shall reasonably request for disclosure in the registration statement.
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(b) INDEMNIFICATION.
(i) GTS shall indemnify and hold harmless, to the extent permitted by
law, the Stockholder against all losses, claims, damages, liabilities and
expenses (including reasonable attorneys' fees, costs and expenses) caused by
any untrue or alleged untrue statement of material fact contained in any
registration statement filed pursuant to Section 2.5 (a), prospectus or
preliminary prospectus or any amendment thereof or supplement thereto, or any
omission or alleged omission of material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are caused by or contained in or omitted from information furnished in
writing to GTS by the Stockholder for use therein.
(ii) In connection with any registration statement in which the
Stockholder participates, the Stockholder will furnish to GTS such information
as GTS reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will indemnify GTS,
its directors and officers and each Person who controls GTS (within the meaning
of Section 15 of the Securities Act of 1933, as amended (the "Securities Act")
or Section 20(a) of the Securities And Exchange Act of 1934, as amended (the
"Exchange Act")) against any loss, claims damages, liabilities and expenses
(including reasonable attorneys' fees, costs and expenses) resulting from any
untrue statement or alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such actual or alleged untrue
statement or omission is contained in or omitted from any information furnished
to GTS in writing by the Stockholder for use therein.
(iii) any person entitled to indemnification under this Section 2.5(b)
will (a) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification; provided, that the failure to give
such notice shall not relieve the indemnifying party of its obligations
hereunder; and, except to the extent that the indemnifying party is actually
prejudiced by the failure to give notice; and (b) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party and such indemnifying party shall promptly
and vigorously assume such defense at its cost and expense. If such defense is
assumed, the indemnifying party will not be subject to any liability for any
settlement made by the indemnified party without its consent (but such consent
shall not be unreasonably withheld). An indemnifying party who is not entitled
to, or elects not to, assume the defense of a claim shall promptly pay all costs
and expenses
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of the indemnified party's defense, but will not be obligated to pay the fees
and expenses of more than one counsel for each party indemnified by such
indemnifying party with respect to such claim.
ARTICLE III
CLOSING
SECTION 3.1 TIME AND PLACE OF THE CLOSING. Subject to the terms and
conditions of this Agreement, the consummation of the transactions contemplated
by this Agreement pursuant hereto shall take place at a closing (the "Closing")
to be held concurrently with the execution of this Agreement, at the offices of
GTS, on a date and at a time mutually agreeable to the parties (the "Closing
Date").
SECTION 3.2 PROCEDURE AT THE CLOSING. At the Closing, the parties agree to
take the following steps in the order listed below (provided, however, that upon
their completion all of these steps shall be deemed to have occurred
simultaneously):
(a) Merger Subsidiary shall deliver the Closing Cash and certificates
representing the Stock Consideration to the Stockholder in accordance with
EXHIBIT A;
(b) The Stockholder shall deliver to the Merger Subsidiary certificates
representing his shares of CCI common stock, duly endorsed or accompanied by
duly executed stock powers;
(c) GTS shall duly execute and deliver the Promissory Note and Merger
Subsidiary shall duly execute and deliver the Security Agreement;
(d) GTS and the Stockholder shall execute and deliver to each other an
employment agreement substantially in the form of EXHIBIT G annexed hereto (the
"Employment Agreement");
(e) CCI shall deliver to Merger Subsidiary certified copies of
resolutions of the stockholders and directors of CCI authorizing the execution
and delivery of this Agreement by CCI and the performance of CCI's obligations
hereunder and its consummation of the transaction contemplated hereby;
(f) Merger Subsidiary shall deliver to the Stockholder certified copies
of resolutions of the stockholder and directors of Merger Subsidiary authorizing
the execution and delivery of this Agreement by Merger Subsidiary and the
performance of Merger Subsidiary's obligations hereunder and its consummation of
the transaction contemplated hereby;
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(g) GTS shall deliver to the Stockholder certified copies of resolutions
of the directors of GTS authorizing the execution and delivery of this Agreement
by GTS and the performance of GTS' obligations hereunder and its consummation of
the transaction contemplated hereby;
(h) CCI shall deliver its corporate books and records, correspondence,
employment records to Merger Subsidiary;
(i) CCI shall deliver the opinion of Technology Law Group, and Xxxxxx &
Xxxxx, counsel to CCI and the Stockholder, in the form annexed hereto as EXHIBIT
H
(j) Merger Subsidiary and GTS shall deliver the opinion of counsel of
Xxxxxxxx Mollen & Xxxxxx, counsel to Purchaser, in the form annexed hereto as
EXHIBIT I;
(k) The Stockholder shall execute and deliver to GTS the Lock-Up
Agreement annexed to this Agreement as EXHIBIT F (the "Lock-Up Agreement"); and
(l) The Stockholder and Xxxxxx Xxxxxx, the Company's Chairman of the
Board, shall execute and deliver to one another the Stockholders Agreement
annexed to this Agreement as EXHIBIT J.
(m) Merger subsidiary and CCI shall duly execute the Merger Documents
and file the Merger Documents with the State of New Jersey Secretary of State as
soon as reasonably practicable after the Closing.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF CCI AND THE STOCKHOLDER
In order to induce GTS and Merger Subsidiary to enter into this Agreement
and to consummate the transactions contemplated under this Agreement, the
Stockholder and CCI, jointly and severally, hereby make the following
representations and warranties each of which is relied upon by GTS and Merger
Subsidiary regardless of any other action, omission to act, investigation made
or information obtained by GTS and Merger Subsidiary:
SECTION 4.1 ORGANIZATION, POWER AND AUTHORITY OF CCI. CCI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New Jersey and CCI has the requisite corporate power and
authority to own or lease its properties and to carry on its business as it is
now being conducted. CCI is duly qualified as a foreign corporation and is in
good standing under the laws of each other jurisdiction in which the conduct of
its business or the ownership of its assets requires such qualification, except
where the failure to qualify would not result in a material adverse effect on
CCI or its business. CCI has no subsidiaries.
SECTION 4.2 DUE AUTHORIZATION; BINDING OBLIGATION. CCI has the requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. This Agreement has been duly and
validly executed and delivered by CCI and is the legal, valid and binding
obligation of CCI, enforceable in accordance with its terms. Except for any
corporate action required by CCI, no other action on the part of any individual
or other person or entity is necessary to authorize this Agreement or for the
consummation of the transactions contemplated by this Agreement. CCI has duly
executed this Agreement and authorized the execution of this Agreement and the
consummation of the transactions contemplated by this Agreement as required
under the BCA. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement will: (i)
conflict with or violate any provision of CCI's Articles of Incorporation or
by-laws, or any law, ordinance or regulation or any decree or order of any court
or administrative or other governmental body which is either applicable to,
binding upon or enforceable against CCI; (ii) result in any material breach of
or default under any material mortgage, other contract, agreement, indenture,
will, trust or other instrument which is either binding upon or enforceable
against CCI or any of CCI's Assets; (iii) result in any breach of or default
under any contract; (iv) violate any legally protected right of any individual
or entity or give to any individual or entity a right or claim against CCI or
GTS, other than CCI's,
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the Stockholder's or GTS' rights arising under this Agreement; or, (v) impair
or in any way limit any material governmental license, approval, permit or
authorization of CCI to conduct its business. Attached to this Agreement and
marked as EXHIBIT K are true, correct and complete copies of the Articles of
Incorporation, as amended, and Bylaws, as amended, of CCI.
SECTION 4.3 FINANCIAL STATEMENTS. Attached to this Agreement as EXHIBIT
L are true, correct and complete copies of the unaudited financial statements of
CCI as of December 31, 1997 and the related statements of earnings and changes
in financial position for the period then ended (collectively, the "Financial
Statements"). The Financial Statements (i) have been prepared in accordance with
generally accepted accounting principles ("GAAP"), consistently applied, on a
basis consistent with past practices and (ii) fairly present the financial
condition of CCI as of their respective dates and the results of its operations
for the periods ending on their respective dates.
SECTION 4.4 NO UNDISCLOSED LIABILITIES. CCI has no liabilities or
obligations (whether secured, unsecured, absolute, accrued, asserted or
unasserted, contingent or otherwise) of any nature, whether as principal, agent,
partner, co-venturer, guarantor or in any other capacity except: (i) the
liabilities and obligations of CCI that are reflected in the Financial
Statements and only to the extent reflected; (ii) liabilities incurred or
accrued in the ordinary course of business since December 31, 1997 which do not,
either individually or in the aggregate, have a material adverse effect on the
financial condition of CCI; or (iii) liabilities otherwise disclosed in SCHEDULE
4.4.
SECTION 4.5 LICENSES; COMPLIANCE. To the best of CCI and Stockholder's
knowledge, CCI possesses all licenses and other required governmental or
official approvals, permits, consents and authorizations necessary for the
operation of the Business, all of which are listed on SCHEDULE 4.5 (collectively
the "CCI Authorizations"). CCI is in material compliance with: (i) the terms of
all Authorizations; (ii) all laws, ordinances, statutes and regulations where
noncompliance would have a material adverse effect on CCI and its business or
assets; and, (iii) all judgments, orders, rulings or other decisions of any
governmental or other regulatory authority, court or arbitrator having
jurisdiction over CCI. Neither the execution, delivery or performance of this
Agreement nor the performance of the transactions contemplated by this Agreement
will affect the validity of any CCI Authorizations and the same shall remain in
full force and effect upon the consummation of the transactions contemplated by
this Agreement, except for CCI Authorizations which by their terms are not
transferable.
SECTION 4.6 CONSENTS AND APPROVALS. No approval, consent or
authorization must be obtained by CCI for the execution, delivery or performance
of this Agreement or for the consummation of the
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transactions contemplated by this Agreement, including, without limitation the
filing or registration with any governmental or other regulatory authority.
SECTION 4.7 NO STOCKHOLDER OR AFFILIATE RELATIONSHIPS WITH CCI'S
CUSTOMERS; CCI'S INTEREST IN OTHER BUSINESSES. Neither CCI nor the Stockholder
or their respective affiliates (as such term is defined in Rule 405 promulgated
by the SEC under the Securities Act of 1933, as amended)("Affiliate") has, or
during the past five (5) years had, any direct or indirect material interest in
any of CCI's customers. CCI does not have any financial interest in any person,
firm or corporation which is, or during the past 5 years was, directly or
indirectly, (a) engaged in the business engaged in by CCI or (b) a customer or
supplier of CCI, other than ownership of not more than five percent (5%) of the
equity securities of a company whose common stock is publicly traded.
SECTION 4.8 LITIGATION, ORDERS AND DECREES. Except as listed on SCHEDULE
4.8, there are no actions, suits, claims, governmental investigations or
arbitration proceedings pending or to the best of CCI's and the Stockholder's
knowledge, threatened against or affecting CCI or the business, assets, or
financial condition of CCI and there are no facts or circumstances which are
reasonably likely to create a basis for any of the foregoing. There are no
outstanding orders, decrees or stipulations issued by any local, state or
federal judicial authority in any proceeding to which CCI is or was a party
which may have a material adverse effect on CCI.
SECTION 4.9 REAL PROPERTY OWNED OR LEASED. CCI does not own any real
property. Attached to this Agreement as SCHEDULE 4.9 are true and complete
copies of all leases of real property (the "Leased Real Property") to which CCI
is a party, including all amendments and modifications thereto (the "Real
Property Leases"). CCI enjoys peaceful and undisturbed possession of the Leased
Real Property, and the Real Property Leases are the valid and legally binding
obligations of CCI and the respective lessors, enforceable against CCI and the
respective lessors in accordance with their respective terms, and are in full
force and effect. CCI has not received written notice of default under any of
the Real Property Leases and is not in material default of any Real Property
Leases, and no event has occurred which, with the passage of time or the giving
of notice or both, would constitute a material default under any of the Real
Property Leases.
SECTION 4.10 PERSONAL PROPERTY LEASED AND PURCHASE OPTIONS. Attached as
SCHEDULE 4.10 is a list of all leases of personal property (the "Personal
Property Leases") to which CCI is a party. CCI has provided to GTS true and
complete copies of the Personal Property Leases, including all amendments
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and modifications thereto and true and complete copies of all agreements
regarding CCI's rights to purchase the leased personal property which is the
subject of the Personal Property Leases ("the Leased Personal Property") on or
before the expiration of the Personal Property Leases, including all amendments
and modifications thereto (the "Purchase Options"). CCI enjoys peaceful and
undisturbed possession of the Leased Personal Property, and the Personal
Property Leases and Purchase Options are the valid and legally binding
obligations of CCI and the respective lessors and option grantors, enforceable
against CCI and the respective lessors and option grantors in accordance with
their respective terms, and are in full force and effect. CCI has not received
written notice of default under any of the Personal Property Leases and is not
in default of any Personal Property Leases, and no event has occurred which,
with the passage of time or the giving of notice or both, would constitute a
material default under any of the Personal Property Leases. None of the Purchase
Options have expired.
SECTION 4.11 TITLE TO PURCHASED ASSETS. CCI has good and marketable
title to all of its property, tangible or intangible, subject to liens for
current taxes and assessments not yet due and payable. All of CCI's material
assets are free and clear of restrictions on or conditions to transfer or
assignment, and are free and clear of any mortgage, lien, charge, encumbrance,
security interest or other restrictions.
SECTION 4.12 CONDITION OF PURCHASED ASSETS. All of the material tangible
assets of CCI and the Leased Personal Property are in good condition, in good
operating order and are fit for the purposes for which those assets are used or
intended to be used, subject to normal wear and tear.
SECTION 4.13 MATERIAL CONTRACTS. Attached as SCHEDULE 4.13 is a complete
and correct list of each of the following types of contracts or commitments
(whether oral or written) to which CCI is a party (collectively the "CCI
Contracts" or the "Contracts"): (i) CCI Contracts for the employment of any
officer or employee and all bonus, incentive compensation, profit sharing,
retirement, pension, group insurance, death benefit or other fringe benefit
plans, deferred compensation or post-termination obligations; (ii) CCI Contracts
for the future purchase of materials, inventory, supplies, services or
equipment; (iii) distributor agreements and contracts for the purchase or sale
of inventory or supplies; (iv) agreements or arrangements for the purchase, sale
or lease of any other assets; (v) pledges, sales contracts, leases, security
agreements or other similar agreements with respect to CCI's properties; (vi)
leases of machinery or equipment; (vii) loan agreements, promissory notes,
guarantees, subordination or similar type agreements; (viii) consulting
agreements; and, (ix) any contract not otherwise covered by clauses (i) through
(viii) above which involves annual or aggregate payments in excess of $5,000.
CCI has furnished to GTS true, complete and accurate copies of all CCI
Contracts. Except as set forth in SCHEDULE 4.13, CCI has performed all of the
material obligations required to be performed by it to date under the CCI
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Contracts, and is not in default (with notice or lapse of time or both) under
any of the CCI Contracts. CCI has obtained all necessary consents with respect
to any CCI Contract requiring consent on or prior to the date hereof. The
consummation of the transactions contemplated by this Agreement will not
materially affect the continuation, validity or effectiveness of any of the CCI
Contracts.
SECTION 4.14 CONTRACTS WITH CUSTOMERS. SCHEDULE 4.14 sets forth (a) all
CCI Contracts or other understandings or arrangements to which CCI is a party
relating to the sale or furnishing by it of goods or services where the
consideration for such sale is $5,000 or more, in any single case, (b) any
claims by parties other than CCI with respect thereto, (c) product guarantees or
warranties made by CCI relating to its goods or services, and (d) any pending
claims by CCI with respect thereto. None of the customers, suppliers or other
persons which is a party to any of the Contracts listed in SCHEDULE 4.14 has
notified CCI of any intention to terminate its contract or arrangement for
service.
SECTION 4.15 CONTRACTS VALID; NO DEFAULT. All CCI Contracts required to
be listed in any of the Schedules referred to in this Agreement are valid and
binding, enforceable in accordance with their respective terms, and are in full
force and effect. Except as set forth in such Schedules, there is not, under any
such CCI Contract, (a) any existing default by CCI, or any event which, after
notice or lapse of time, or both, would constitute a default by CCI or result in
a right to accelerate by any other person or a loss of any rights of CCI and (b)
to the best of CCI's and the Stockholder's knowledge, any default by any other
person, or any event which, after notice or lapse of time, or both, would
constitute a default by any such person or result in a right to accelerate by
CCI or a loss of any rights of any such person. To the best of CCI's and
Stockholder's knowledge, no existing or completed Contract relating to the
business of CCI is reasonably likely to be canceled. Except as disclosed in such
Schedules, CCI is not a party to or bound by any Contract which, upon
performance, is reasonably expected to result in any loss or liability to CCI.
True and complete copies of all Contracts and other documents listed on such
Schedules (together with any and all amendments thereto) have been delivered to
GTS.
SECTION 4.16 LABOR MATTERS. CCI is not a party to any collective
bargaining agreements with its employees. CCI is in compliance with all federal,
state and local laws regarding employment and employment practices, conditions
of employment, wages and hours and occupational laws, the violation of which
would have a material adverse effect on CCI. CCI is not engaged in unfair labor
practices, and there are no unfair labor practice complaints pending or
threatened against CCI before the National Labor Relations Board or any other
governmental or regulatory board or agency performing similar functions. There
is no labor strike, slowdown, work stoppage or, except as set forth on Schedule
4.16, dispute pending or threatened against or involving CCI. To the best of
CCI's and the Stockholder's knowledge,
Page 13
none of CCI's employees are engaged in organizing or are members of any union or
other employee group that is seeking recognition as a bargaining unit.
SECTION 4.17 ABSENCE OF CHANGES. Except as set forth in SCHEDULE 4.17,
since December 31, 1997, there has not been: (i) any material adverse change in
the financial condition, assets, liabilities, Business or operations of CCI;
(ii) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the properties, financial condition or
business of CCI; (iii) any change in the outstanding capital stock of CCI; (iv)
declared, paid or set aside for payment any dividend or other distribution
(whether in cash, stock, property or any combination thereof) in respect of
CCI's common stock or any cancellation, exercise or redemption or other
acquisition by CCI of any shares of CCI's common stock; (v) any increase in the
rate or terms of compensation payable or to become payable by CCI to any of its
officers, directors or key employees or any increase in the rate or terms of
contribution to any employee benefit plans, except as required by law; (vi) any
liabilities or obligations incurred or agreed to be incurred (whether absolute,
accrued, contingent or otherwise), except as incurred in the ordinary course of
business consistent with past practices; (vii) any material capital expenditure
or commitment for replacements or additions or improvements; (viii) any change
by CCI in accounting methods, principles or practices; (ix) any disposal,
mortgage, pledge or other disposition of any of its assets other than in the
ordinary course of business; or (x) receipt by CCI of any notice of termination
of any contract, lease or other agreement.
SECTION 4.18 ACCURACY OF DOCUMENTS, EXHIBITS AND SCHEDULES. All
contracts, instruments, agreements and other documents delivered by CCI to GTS
for GTS's review in connection with this Agreement and the transactions
contemplated hereby, including all articles of incorporation, by-laws, corporate
minutes, stock record books and tax returns are true, correct and complete
copies of all those contracts, instruments, agreements and other documents. All
Exhibits and Schedules to this Agreement are true correct and complete as of the
date hereof. No statement contained in this Agreement or in any certificate,
Exhibit, Schedule or instrument furnished to GTS by CCI pursuant to the
provisions of this Agreement or in connection with the consummation of the
contemplated transactions contains or will contain any untrue statement of a
material fact or does not include or omit to state a material fact necessary in
order to make those statements not misleading.
SECTION 4.19 INVESTMENT REPRESENTATIONS. All shares of GTS Stock to be
acquired by the Stockholder pursuant to this Agreement will be acquired for his
own account and not with a view towards distribution thereof. The Stockholder
understands that he must bear the economic risk of the investment in the GTS
Stock, which cannot be sold by him unless (i) they are registered under the
Securities Act, (ii) an
Page 14
exemption therefrom is available thereunder or (iii) they are registered
pursuant to the terms of Section 2.5 of this Agreement. The Stockholder is an
"Accredited Investor" as defined in Regulation D promulgated under the
Securities Act. The Stockholder, acting through his representatives, have had
both the opportunity to ask questions and receive answers from the officers and
directors of GTS and all persons acting on its behalf concerning the business
and operations of GTS and to obtain any additional information to the extent GTS
possesses or may possess such information or can acquire it without unreasonable
effort or expense necessary to verify the accuracy of such information. The
Stockholder acknowledges receiving copies of the SEC Filings referred to in
Section 5.5. The certificates representing the shares of GTS Stock shall bear
the legends set forth in EXHIBIT M.
SECTION 4.20 PROPRIETARY RIGHTS.
(a) Except as listed on SCHEDULE 4.20(A), there are no trademarks,
trademark applications, trade names, assumed names, service marks, logos,
patents, patent applications, copyrights and copyright registrations, owned or
licensed by CCI and used in or necessary for the conduct of the business and
operation of CCI (the foregoing together with all inventions, trade secrets,
customer lists and confidential processes, and all other similar rights
presently owned or licensed by CCI are the "Proprietary Rights"). CCI owns or
possesses the royalty-free license or other right to use all of the Proprietary
Rights which are required to be listed on SCHEDULE 4.20(A) or which are
necessary to conduct its business as presently operated, and no person, firm,
corporation or other entity is entitled to restrain CCI from using any such
Proprietary Rights. No other Proprietary Rights are used in or are necessary for
the conduct of the business and operation of CCI as presently conducted.
(b) To the best of the Stockholder's knowledge, except as disclosed in
SCHEDULE 4.20 (B), no Proprietary Rights or know-how used in or necessary for
the conduct of the business and operation of CCI conflict with or infringe upon
any similar rights or services of any other person. Except as disclosed in
SCHEDULE 4.20 (B), no claims have been asserted by any person with respect to
the ownership, validity, license or use of the Proprietary Rights or the
provision of any services by CCI and to the best of CCI's and the Stockholder's
knowledge, there is no reasonable basis for any such claim.
(c) SCHEDULE 4.20(C) accurately identifies all material databases and
computer software owned, licensed or otherwise used in connection with CCI's
business. CCI has all the databases and computer software used or necessary to
conduct CCI's business.
Page 15
SECTION 4.21 BUSINESS RECORDS. The books and records, correspondence,
employment records and files of or relating to CCI's business are complete and
correct in all material respects, and there have been, and will be, no material
transactions which are required to be set forth therein which have not been so
set forth.
SECTION 4.22 TAXES, TAX RETURNS. All federal, state, local and foreign
income, excise, property, sales, and other taxes, assessments, governmental
charges, penalties, interest and fines due and payable by CCI and by any other
person, firm or corporation which will or may be liabilities of CCI ("TAXES"),
for all periods ending on or before the Balance Sheet Date, have been paid in
full or have been fully reserved against on the Balance Sheet. CCI has filed all
federal, state, local and foreign income, excise, property, sales, withholding,
social security, information returns, and other tax returns, reports and related
information ("RETURNS") required to have been filed by it to the date hereof,
and no extension of the time for filing a Return is presently in effect. The
Returns that have been filed have been accurately prepared and have been duly
and timely filed. CCI's federal income tax returns have not been audited by the
Internal Revenue Service for all fiscal years through the year ended 1996. There
are no agreements, waivers or other arrangements providing for an extension of
time with respect to the filing of any Return, or payment of any tax,
governmental charge or assessment or deficiency, by CCI; and there are no
actions, suits, proceedings, investigations or claims now threatened or pending
against CCI in respect of taxes, governmental charges or assessments, or any
matter under discussion with any governmental authority relating to taxes,
governmental charges or assessments asserted by any such authority.
SECTION 4.23 ENVIRONMENTAL MATTERS; HEALTH AND SAFETY LAWS. CCI is in
material compliance with all federal, state and local laws, regulations,
permits, orders and decrees relating to protection of the environment and
employee health and safety ("CCI Applicable Requirements"). CCI has not received
any notice to the effect that its operations are not in compliance with any of
the CCI Applicable Requirements or the subject of any governmental investigation
evaluating whether any remedial action is needed to respond to a release of any
toxic or hazardous waste or other substance (including petroleum products) into
the environment and neither CCI nor Stockholder knows of any facts which could
reasonably constitute the basis for any thereof.
SECTION 4.24 BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of CCI.
Page 16
SECTION 4.25 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF
CCI. All statements contained in any Schedule, document, certificate or other
instrument delivered by or on behalf of CCI or Stockholder pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed
representations, warranties, covenants and agreements made by CCI and
Stockholder. Each representation, warranty, covenant and agreement made by CCI
or Stockholder shall survive the Closing for eighteen (18) months. The
representations, warranties, covenants and agreements made by CCI or Stockholder
in this Agreement shall not be affected or deemed waived by reason of the fact
that GTS or its representative knew or should have known that any such
representations, warranties, covenants or agreement is or might be inaccurate in
any respect. Any furnishing of information to GTS by CCI or Stockholder pursuant
to, or otherwise in connection with, this Agreement, including, without
limitation, any information contained in any document, contract, book or record
of CCI or Stockholder to which GTS shall have access or any information obtained
by, or made available to, GTS as a result of any investigation made by or on
behalf of GTS prior to or after the date of this Agreement, shall not affect
GTS's right to rely on any representation, warranty, covenant or agreement made
by CCI or Stockholder in this Agreement and shall not be deemed a waiver
thereof.
SECTION 4.26 CAPITALIZATION. The number of authorized and issued shares
of capital stock of CCI is set forth in SCHEDULE 4.26. The Stockholder is the
record and beneficial owner of all of the outstanding capital stock of CCI, free
and clear of all liens and encumbrances. There are no options, warrants or other
contractual rights outstanding which require, or give any person the right to
require, the issuance of any capital stock of CCI, whether or not such rights
are presently exercisable.
SECTION 4.27 EMPLOYEE BENEFIT PLANS. SCHEDULE 4.27 sets forth a list of
all the employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), programs and
arrangements maintained for the benefit of any current or former employee,
officer or director of CCI (collectively, the "CCI Benefit Plans"). Each CCI
Benefit Plan and any related trust intended to be qualified under Sections
401(a) and 501(a) of the Code has received a favorable determination letter from
the Internal Revenue Service that it is so qualified and nothing has occurred
since the date of such letter that could reasonably be expected to materially
adversely affect the qualified status of such CCI Benefit Plan or related trust.
Each CCI Benefit Plan has been operated in all material respects in accordance
with the terms and requirements of applicable law and all required returns and
filings for each CCI Benefit Plan have been timely made. Neither CCI nor any
entity under common control with CCI has incurred any direct or indirect
liability under, arising out of or by operation of Title I or Title IV of ERISA
in connection with any CCI Benefit Plan and no fact or event exists that could
reasonably be expected to give rise to any such liability.
Page 17
All contributions due and payable on or before the date hereof in respect of
each CCI Benefit Plan have been made in full and in proper form.
SECTION 4.28 INSURANCE POLICIES; CLAIMS. SCHEDULE 4.28 sets forth all
insurance policies and bonds maintained by or on behalf of CCI. Except as
disclosed in Schedule 4.28, the insurance policies and bonds set forth in
Schedule 4.28, are provided by reputable insurers or issuers, and provide, in
the judgment of CCI and the Stockholder, adequate coverage for all normal risks
incident to the businesses of CCI and its assets. No claims have been made
against CCI as a result of allegedly failing to provide services which it has
agreed to provide and neither Stockholder nor CCI knows of any reasonable basis
for the assertion of any such claim. No insurance policy issued to or on behalf
of CCI has ever been canceled by the policy issuer.
SECTION 4.29 BANK ACCOUNTS. SCHEDULE 4.29 sets forth the name of each
bank in which CCI has an account or safe deposit box, vault, lock-box or other
arrangement, the account number and description of each account at each bank and
the names of all persons authorized to draw thereon or to have access thereto;
and the names of all persons, if any, holding tax or other powers of attorney
from CCI.
SECTION 4.30 CORPORATE RECORDS. The books of account, minute books,
stock certificate books and stock transfer ledgers of CCI are complete and
correct in all material respects, and there have been no material transactions
involving CCI of the type typically recorded in such records that have not been
recorded.
SECTION 4.31 NO ILLEGAL OR IMPROPER TRANSACTIONS. Neither CCI nor any
officer, director, employee, agent or affiliate of CCI has offered, paid or
agreed to pay to any person or entity (including any governmental official) or
solicited, received or agreed to receive from any such person or entity,
directly or indirectly, any money or anything of value for the purpose or with
the intent of (i) obtaining or maintaining business for the benefit of CCI, (ii)
illegally or improperly facilitating the purchase or sale of any product or
service, or (iii) avoiding the imposition of any fine or penalty, in any manner
which is in violation of any applicable ordinance, regulation or law.
SECTION 4.32 RELATED PARTY TRANSACTIONS. Except as disclosed in SCHEDULE
4.32, and except for compensation and related arrangements with employees for
services rendered consistent with past practices, no current or former director,
officer or stockholder of CCI is presently, or since its inception has been, (a)
a party to any transaction with CCI (including, but not limited to, any
contract, agreement or other arrangements providing for the furnishing of
services by, or rental of real or personal property from, or otherwise requiring
payments to, any such director, officer, employee or shareholder), or (b) the
direct or indirect owner of an interest in any corporation, firm, association or
business organization which is a present competitor, supplier
Page 18
or customer of CCI, nor does any such person receive income from any source
other than CCI which relates to the business of, or should properly accrue to,
CCI.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF GTS
AND MERGER SUBSIDIARY
In order to induce CCI and the Stockholder to enter into this Agreement and
to consummate the transactions contemplated under this Agreement, GTS and Merger
Subsidiary, jointly and severally, hereby make the following representations and
warranties each of which is relied upon by CCI and the Stockholder regardless of
any other action, omission to act, investigation made or information obtained by
CCI or the Stockholder:
SECTION 5.1 ORGANIZATION, POWER AND AUTHORITY. GTS and Merger Subsidiary
are corporations duly organized and validly existing under the laws of the
States of Delaware and New Jersey, respectively, with full corporate power and
authority to enter into this Agreement and perform their obligations under this
Agreement. GTS is duly qualified as a foreign corporation and is in good
standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its assets requires such qualification, except
where the failure to so qualify would not result in a material adverse effect on
GTS or its business.
SECTION 5.2 DUE AUTHORIZATION; BINDING OBLIGATION. The execution,
delivery and performance of this Agreement, the Promissory Note, the Employment
Agreement and all other agreements contemplated by this Agreement, the
consummation of the transactions contemplated by this Agreement and the issuance
of the Common Stock have been duly authorized by all necessary corporate action
of GTS and Merger Subsidiary. This Agreement has been duly executed and
delivered by GTS and Merger subsidiary and is the valid and binding obligation
of GTS and Merger subsidiary, enforceable in accordance with its terms. Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated by this Agreement will: (i) conflict with or violate
any provision of the articles of incorporation or by-laws of GTS, or of any law,
ordinance or regulation or any decree or order of any court or administrative or
other governmental body which is either applicable to, binding upon or
enforceable against GTS; (ii) result in any material breach of or default under
any material mortgage, contract, agreement, indenture, will, trust or other
instrument which is either binding upon or enforceable against GTS or its
assets; (iii) result in any breach of or default under any contract; (iv)
violate any legally protected right of any individual or entity; or (v) impair
or in any way limit any material governmental
Page 19
license, approval, permit or authorization. Attached to this Agreement as
EXHIBIT N are true, correct and complete copies of the Articles of
Incorporation, as amended, and Bylaws, as amended, of GTS.
SECTION 5.3 SHARES. When issued in accordance with the terms of this
Agreement, the GTS Stock to be issued to the Stockholder shall be validly
issued, fully paid and non-assessable and shall be free and clear of any liens
or encumbrances whatsoever.
SECTION 5.4 CONSENTS AND APPROVALS. The execution and delivery of this
Agreement by GTS does not, and the performance of this Agreement by GTS will
not, require GTS to obtain any consent, approval, authorization or other action
by, or to make any filing with or notification to, any governmental or
regulatory authority.
SECTION 5.5 SEC REPORTS. GTS has delivered to the Stockholder its Annual
Report on Form 10- KSB for the fiscal year ended December 31, 1996 ("10-K"), and
its Quarterly Reports on Form 10-QSB for the quarters ended March 31, 1997, June
30, 1997 and September 30, 1997 ("10-QS") and collectively, with the 8-Ks and
the 10-K, the "SEC FILINGS"). Each of the SEC Filings, including the financial
statements contained therein, as of their filing dates, complied in all material
respects with the requirements of the rules and regulations promulgated by the
SEC with respect thereto and did not contain any untrue statement of a material
fact or 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. GTS has made all filings required by the
SEC and other state and federal regulatory agencies for all periods ending
before the Closing Date and there are no agreements, waivers or other
arrangements providing for an extension of time with respect to any such filing.
To its knowledge, GTS is in material compliance with all applicable securities
laws and regulations and there are no actions suits, proceedings, investigations
or claims now threatened or pending against GTS in any forum nor are such
matters currently under discussion with any governmental authority and GTS is
not aware of any matter which is reasonably likely to cause such actions, suits,
proceedings, investigations or claims to arise.
SECTION 5.6 BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of GTS.
SECTION 5.7 NO UNDISCLOSED LIABILITIES. GTS has no liabilities or
obligations (whether secured, unsecured, absolute, accrued, asserted or
unasserted, contingent or otherwise) of any nature, whether as principal, agent,
partner, co-venturer, guarantor or in any other capacity except: (i) the
liabilities and
Page 20
obligations of GTS that are reflected in the Report filed with the SEC on Form
10-QSB for the period ending September 30, 1997 and only to the extent
reflected; (ii) liabilities incurred or accrued in the ordinary course of
business since September 30, 1997 which do not, either individually or in the
aggregate, have a material adverse effect on the financial condition of GTS; or
(iii) liabilities otherwise disclosed in SCHEDULE 5.7.
SECTION 5.8 LITIGATION, ORDERS AND DECREES. Except as listed on SCHEDULE
5.8, there are no actions, suits, claims, governmental investigations or
arbitration proceedings pending or to the best of GTS's knowledge, threatened
against or affecting GTS or the business, assets, or financial condition of GTS
and there are no facts or circumstances which are reasonably likely to create a
basis for any of the foregoing. There are no outstanding orders, decrees or
stipulations issued by any local, state or federal judicial authority in any
proceeding to which GTS is or was a party which may have a material adverse
effect on GTS.
SECTION 5.9 LABOR MATTERS. GTS is not a party to any collective
bargaining agreements with its employees. GTS is in compliance with all federal,
state and local laws regarding employment and employment practices, conditions
of employment, wages and hours and occupational laws, the violation of which
would have a material adverse effect on GTS. GTS is not engaged in unfair labor
practices, and there are no unfair labor practice complaints pending or
threatened against GTS before the National Labor Relations Board or any other
governmental or regulatory board or agency performing similar functions. There
is no labor strike, slowdown, work stoppage or dispute pending or threatened
against or involving GTS. To the best of GTS's knowledge, none of GTS's
employees are engaged in organizing or are members of any union or other
employee group that is seeking recognition as a bargaining unit.
SECTION 5.10 ABSENCE OF CHANGES. Except as set forth in SCHEDULE 5.10,
since September 30, 1997, there has not been any material adverse change in the
financial condition, assets, liabilities, business or operations of GTS that
would materially impact GTS's financial condition or its ability to fully and
timely comply with each of its obligations hereunder.
SECTION 5.11 ACCURACY OF DOCUMENTS, EXHIBITS AND SCHEDULES. All
contracts, instruments, agreements and other documents delivered by GTS to CCI
for CCI's review in connection with this Agreement and the transactions
contemplated hereby, including all articles of incorporation, by-laws, corporate
minutes, stock record books and tax returns are true, correct and complete
copies of all those contracts, instruments, agreements and other documents. All
Exhibits and Schedules to this Agreement
Page 21
are true correct and complete as of the date hereof. No statement contained in
this Agreement or in any certificate, Exhibit, Schedule or instrument furnished
to CCI pursuant to the provisions of this Agreement or in connection with the
consummation of the contemplated transactions contains or will contain any
untrue statement of a material fact or does not include or omit to state a
material fact necessary in order to make those statements not misleading.
SECTION 5.12 ENVIRONMENTAL MATTERS; HEALTH AND SAFETY LAWS. GTS is in
material compliance with all federal, state and local laws, regulations,
permits, orders and decrees relating to protection of the environment and
employee health and safety ("GTS Applicable Requirements"). GTS has not received
any notice to the effect that its operations are not in compliance with any of
the GTS Applicable Requirements or the subject of any governmental investigation
evaluating whether any remedial action is needed to respond to a release of any
toxic or hazardous waste or other substance (including petroleum products) into
the environment and GTS knows of no facts which could constitute the basis for
any thereof.
SECTION 5.13 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF
GTS. All statements contained in any Schedule, document, certificate or other
instrument delivered by or on behalf of GTS pursuant hereto or in connection
with the transactions contemplated hereby shall be deemed repre sentations,
warranties, covenants and agreements made by GTS. Each representation, warranty,
covenant and agreement made by GTS shall survive the Closing for eighteen (18)
months. The representations, warranties, covenants and agreements made by GTS in
this Agreement shall not be affected or deemed waived by reason of the fact that
CCI or its representative knew or should have known that any such
representations, warranties, covenants or agreement is or might be inaccurate in
any respect. Any furnishing of information to CCI by GTS pursuant to, or
otherwise in connection with, this Agreement, including, without limitation, any
information contained in any document, contract, book or record of GTS to which
CCI had access or any information obtained by, or made available to, CCI as a
result of any investigation made by or on behalf of CCI prior to the date of
this Agreement, shall not affect CCI's right to rely on any representation,
warranty, covenant or agreement made by GTS in this Agreement and shall not be
deemed a waiver thereof.
Page 22
ARTICLE VI
COVENANTS OF THE STOCKHOLDER
SECTION 6.1 FURTHER ASSURANCES. From time to time after the date of this
Agreement, the Stockholder shall execute and deliver such other instruments and
shall take such other actions as GTS may reasonably request to effectuate the
transactions contemplated by this Agreement.
SECTION 6.2 RESTRICTIVE COVENANT.
(a) To assure that GTS will realize the value inherent in the
transactions contemplated by this Agreement, the Stockholder agrees with GTS
that neither the Stockholder nor any of his Affiliates (except for the
Stockholder's performance under an Employment Agreement with GTS) nor any person
or entity controlling, controlled by or in any common control with the
Stockholder shall, directly or indirectly, for a period of four (4) years
following the date of this Agreement in any state of the United States of
America:
(i) own, manage, operate, control or otherwise engage in a Competitive
Business (as hereinafter defined);
(ii) attempt to solicit or solicit the customers or facilities serviced
by GTS (including, without limitation, those acquired by GTS hereunder) in
connection with a Competitive Business; or
(iii) attempt to solicit, solicit or employ any person employed or
contracted by GTS (except those listed on Schedule 6.2) to leave their
employment or not fulfill their contractual responsibility, whether or not the
employment or contracting is full-time or temporary, pursuant to a written or
oral agreement, or for a determined period or at will.
As used in this Section 6.2, "Competitive Business" shall mean the design,
development and/or marketing of prepaid telecommunications products, including,
without limitation, prepaid phone cards, prepaid cellular products and services,
prepaid dial tone and related services, or prepaid enhanced and/or prepaid
interactive telecommunications services and/or products.
Notwithstanding the foregoing, in the event GTS (i) breaches its
obligations to pay the Stockholder the amounts due under the Promissory Note and
fails to cure such breach after receipt of written notice from Stockholder
within the time periods permitted therein, or (iii) breaches its obligations
under Section 2.5 of this Agreement, then the Stockholder's obligations under
this Section 6.2(a) shall cease.
Page 23
(b) If Section 6.2(a) of this Agreement, as applied to the Stockholder
or any other person, is adjudged by a court to be invalid or unenforceable, the
same will in no way affect any other provision of that Section or any other part
of this Agreement, the application of that provision in any other circumstances
or the validity or enforceability of this Agreement. If any provision, or any
part of any provision, is held to be unenforceable because of the duration of
the provision or the geographic scope of the provision, the parties agree that
the court making such determination will have the power to reduce the duration
and/or geographic scope of the provision to the longest permissible duration and
largest permissible geographic scope, and/or to delete specific words or
phrases, and in its reduced form Section 6.2(a) will then be enforced.
Stockholder agrees that he will not, at any time, directly or indirectly,
(except in his duties to GTS or the Surviving Corporation) disclose to any
person any information concerning the methods of operation, sales, cost or
pricing methods, employees (number and location), customers (names, needs or
requirements), contracts or agreements of CCI's or GTS's respective businesses.
Because GTS will be irreparably damaged if the provisions of this Section
6.2 are not specifically enforced, GTS shall be entitled to an injunction
restraining any violation or threatened violation of this Section 6.2, or any
other appropriate decree of specific performance, without the necessity of
showing any actual damage or that monetary damages would not provide an adequate
remedy. Such remedies shall not be exclusive and shall be in addition to any
other remedy which GTS may have as a result of any such violation. Nothing
contained in this Section shall be construed as prohibiting GTS and its
Affiliates from pursuing all other remedies available to them for a breach of
the provisions of Section 6.2. The Stockholder further acknowledges and agrees
that the covenants contained in Section 6.2 are necessary for the protection of
the CCI's and Surviving Corporation's legitimate business interests, and are
reasonable in scope and content.
SECTION 6.3 PRESS RELEASES. Neither the Stockholder nor any of his
Affiliates shall issue or cause to be issued any press release in connection
with or referring to any of the transactions contemplated by this Agreement
without the express prior written consent of GTS.
SECTION 6.4 NON-USE OF NAME. From and after the date hereof, neither
Stockholder nor any of his Affiliates (other than the Surviving Corporation)
shall establish or otherwise be associated with, as an owner, partner,
shareholder, employee or otherwise, any firm which utilizes the name
"Centerpiece Communications" or any variant thereof as part of its business name
other than in connection with their employment by GTS
Page 24
after the Closing Date or grant to any person or entity the right to use he name
"Centerpiece Communications" or any variant thereof.
SECTION 6.5 LOCK-UP AGREEMENTS. Concurrently with the execution of this
Agreement, Stockholder will execute and deliver to GTS the Lock-Up Agreement.
SECTION 6.6 EMPLOYMENT AGREEMENT. Concurrently with the execution of
this Agreement, Stockholder will execute and deliver to GTS the Employment
Agreement.
ARTICLE VII
COVENANTS OF GTS
SECTION 7.1 FURTHER ASSURANCES. From time to time after the date of this
Agreement, GTS shall execute and deliver such other instruments and shall take
such other actions as the Stockholder may reasonably request to effectuate the
transactions contemplated by this Agreement.
SECTION 7.2 DISCLOSURE. GTS will not be required to obtain the prior
written consent of the Stockholder to disclose the existence or any term or
condition of this Agreement if, and only if, GTS believes (based upon the advice
of counsel) such disclosure is required under the securities laws of the United
States.
SECTION 7.3 MEMBERSHIP OF PURCHASER'S BOARD OF DIRECTORS. GTS agrees to
nominate the Stockholder for membership to GTS's board of directors at each
annual meeting of its stockholders for so long as the Stockholder (i) remains an
employee of GTS and (ii) continues to own at least 65% of the Stock
Consideration acquired by him pursuant to this Agreement. Notwithstanding the
foregoing, in the event the Stockholder is not a member of GTS' board of
directors, the Stockholder shall have the right to terminate his employment with
GTS as provided in Section 3.7 of the Employment Agreement.
SECTION 7.4 EMPLOYMENT AGREEMENT. Concurrently with the execution of
this Agreement, GTS will execute and deliver to the Stockholder the Employment
Agreement.
SECTION 7.5 PROMISSORY NOTE AND SECURITY AGREEMENT. Concurrently with
the execution of this Agreement, GTS will execute and deliver to the Stockholder
the Promissory Note and Security Agreement.
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ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 INDEMNIFICATION BY THE STOCKHOLDER. Subject to Section 8.3,
the Stockholder agrees to indemnify and hold harmless GTS, any Affiliate of GTS
and the directors, officers and employees of GTS or any of its Affiliates from
and against any and all claims, liabilities, losses, damages, costs and
expenses, including reasonable counsel fees and disbursements (singularly, a
"Loss," and collectively, the "Losses"), arising out of any claims by a third
party or between the parties hereto relating to: (a) liabilities or obligations
of CCI (whether absolute, accrued, contingent or otherwise), whether existing as
of the Closing or arising out of facts or circumstances existing at or prior to
the Closing, and whether or not those liabilities or obligations were known at
the time of the Closing (except for those post-closing contractual obligations
of the CCI specifically set forth on Schedule 8.1) including, without
limitation, any Losses arising from any tax, environmental or regulatory
matters; (b) any failure or breach by the Stockholder of any representation or
warranty made by the Stockholder in this Agreement, including any Exhibit,
Schedule, employment or other agreement delivered by CCI or the Stockholder
pursuant to this Agreement; (c) any failure to perform or breach by the
Stockholder of any covenant, agreement, obligation or undertaking made by the
CCI or Stockholder in this Agreement, including any Exhibit, Schedule or other
agreement delivered by CCI or the Stockholder pursuant to this Agreement; and
(d) any failure after the Closing to perform any of the ongoing contractual
obligations which are set forth on Schedule 8.1. GTS agrees that any for which
it is to be paid in connection with the indemnification provided hereunder shall
be in the following order (the "Set-Off Priority"): (i) recapture of the GTS
Stock, up to a maximum value of $100,000, at a price per share recapture price
equal to the per share price used to calculate the number of shares received by
Stockholder pursuant to Section 2.2(ii) of this Agreement; PROVIDED, HOWEVER,
the Stockholder may elect, in his sole discretion, to make payment in cash in
lieu of the recapture of GTS Stock; (ii) from amounts remaining due and owing
from GTS to the Stockholder under the Promissory Note; (iii) form the Cash
Consideration; (iv) from cash benefits (i.e., bonuses, etc.) due to the
Stockholder under the Employment Agreement; and (v) from salary payments due to
the Stockholder under the Employment Agreement.
SECTION 8.2 INDEMNIFICATION BY GTS AND MERGER SUBSIDIARY. Subject to
Section 8.3, GTS and Merger Subsidiary agree to indemnify and hold harmless the
Stockholder or any Affiliate thereof from and against any and all Losses,
arising out of any claims by a third party or between the parties hereto
relating to: (a) liabilities or obligations of GTS (whether absolute, accrued,
contingent or otherwise) whether existing as of the Closing or arising out of
facts our circumstances existing at or prior to the Closing,
Page 26
whether or not those liabilities or obligations were known at the time of
Closing, including, without limitation, any Losses arising from any tax,
environmental or regulatory matters; (b) any failure or breach by GTS and/or
Merger Subsidiary of any representation or warranty made by GTS or Merger
Subsidiary in this Agreement, including any Exhibit, Schedule, employment or
other agreement delivered by GTS or Merger Subsidiary pursuant to this
Agreement; (c) any failure to perform or breach by GTS and/or Merger Subsidiary
of any covenant, obligation or undertaking made by GTS or Merger Subsidiary in
this Agreement, including any Exhibit, Schedule or other agreement delivered
pursuant to this Agreement; or, (d) any failure after the Closing to perform any
of the ongoing contractual obligations which are set forth on Schedule 8.1.
SECTION 8.3 PROCEDURE FOR CLAIMS. A Party required to make an
indemnification payment pursuant to this Agreement ("INDEMNIFYING PARTY") shall
have no liability with respect to any claim or otherwise with respect to any
covenant, representation, warranty, agreement, undertaking or obligation under
this Agreement unless the Party entitled to receive such indemnification payment
("INDEMNIFIED PARTY") gives notice to the Indemnifying Party specifying (i) the
covenant, representation or warranty, agreement, undertaking or obligation
contained herein which it asserts has been breached, (ii) in reasonable detail,
the nature and dollar amount of any Claim the Indemnified Party may have against
the Indemnifying Party by reason thereof under this Agreement, and (iii) whether
or not the Claim is a Claim by a person, firm, corporation or government entity
other than a party hereto or any affiliate of such party ("Third-Party Claims").
With respect to Third-Party Claims, an Indemnified Party (a) shall give the
Indemnifying Party prompt notice of any Third-Party Claim, (b) prior to taking
any action with respect to such Third-Party Claim, shall consult with the
Indemnifying Party as to the procedure to be followed in defending, settling, or
compromising the Third-Party Claim, (c) shall not consent to any settlement or
compromise of the Third-Party Claim without the written consent of the
Indemnifying Party (which consent, unless the Indemnifying Party has elected to
assume the exclusive defense of such Claim, shall not be unreasonably withheld
or delayed) and (d) shall permit the Indemnifying Party, with the Indemnified
Party's prior written consent, which consent shall not be unreasonably withheld,
if it so elects, to assume the exclusive de fense of such Third-Party Claim
(including, except as provided in the last sentence of this Section 8.3, the
compromise or settlement thereof) at its own cost and expense. The Indemnifying
Party will not compromise or settle any Third-Party Claim without the written
consent of the Indemnified Party if the relief provided is other than monetary
damages and such relief would materially adversely affect the Indemnified Party.
SECTION 8.4 GTS RIGHT OF SETOFF. Subject to the Set-Off Priority
contained in Section 8.1, in addition to any other rights or remedies GTS may
have, it shall be entitled to withhold from any amounts
Page 27
payable to the Stockholder, the amount of any and all Losses which are claimed
by any party in any Claims against which GTS is indemnified pursuant to Section
8.1, and GTS shall not be liable for any amounts so set off.
SECTION 8.5 STOCKHOLDER RIGHT OF SETOFF. In addition to any other rights
or remedies Stockholder may have, he shall be entitled to withhold from any
amounts payable to GTS, the amount of any and all Losses which are claimed by
any party in any Claims against which the Stockholder is indemnified pursuant to
Section 8.2, and the Stockholder shall not be liable for any amounts so set off.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
respective representations and warranties of the parties to this Agreement shall
survive the consummation of the transactions contemplated by this Agreement for
a period of eighteen (18) months after the Closing Date. All covenants of the
parties to this Agreement shall survive the consummation of the transactions
contemplated by this Agreement.
SECTION 9.2 AMENDMENT AND MODIFICATION. The parties to this Agreement
may amend, modify and supplement this Agreement but only in writing and such
writing must be signed by all the parties.
SECTION 9.3 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, assigns,
heirs, estates, beneficiaries, executors and legal and personal representatives.
SECTION 9.4 ENTIRE AGREEMENT. This instrument and the Exhibit and
Schedules attached to this Agreement contain the entire agreement of the parties
with respect to the acquisition and the other transactions contemplated in this
Agreement, and supersede all prior understandings and agreements of the parties
with respect to the subject matter of this Agreement. Any reference to this
Agreement shall be deemed to include the Exhibits and the Schedules.
SECTION 9.5 HEADINGS. The descriptive headings in this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
Page 28
SECTION 9.6 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original.
SECTION 9.7 NOTICES. Any notice, request, information or other document
to be given hereunder to any of the parties by any other party shall be in
writing and delivered personally, sent by reputable overnight courier delivery,
prepaid, or by facsimile transmission as follows:
If to GTS: Global Telecommunication Solutions, Inc.
0000 Xxxxxx Xxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx
Attn: Xxxxx X. Xxxxx,
General Counsel
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxx Mollen & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Stockholder:Xxxx Xxxxxxxxxx
00 Xxxx Xxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Marked "Personal and Confidential"
with a copy to: Technology Law Group
0000 Xxxxxxxxx Xxxxxx, XX
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
with a copy to: Xxxxxx & Xxxxx, LLP
000 X. Xxxxxxxx Xxxx.
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. XxXxxxxxxx, Esq.
Facsimile: (000) 000-0000
Any party may change the address to which notices under this Agreement
are to be sent to it by giving written notice of a change of address in the
manner provided in this Agreement for giving notice. Any notice delivered
personally shall be deemed to have been given on the date it is so delivered,
and any notice delivered by reputable overnight courier delivery or by fax shall
be deemed to have been given on the date it is received.
Page 29
SECTION 9.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in New York without reference to the choice
of law principles. Each Party hereby submits to the exclusive jurisdiction of
the courts (city, state and federal) located in the County of New York, State of
New York, for all claims arising pursuant to this Agreement or any other
agreement, instrument or other document any action, proceeding or claim brought
by any other Party executed and delivered in connection with this Agreement or
pursuant hereto. Service of process in any such action or proceeding brought
against a Party may be made by registered mail addressed to such Party at the
address set forth in Section 9.7 or to such other address as such Party shall
notify the other Party in writing is to be used for such purpose pursuant to
Section 9.7. For purposes hereof, the address designated for GTS shall also be
the address designated for GTS's shareholders.
SECTION 9.9 EXPENSES. All accounting, legal and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring those fees, costs and
expenses.
SECTION 9.10 WAIVER. Any party to this Agreement may extend the time for
or waive the performance of any of the obligations of the other, waive any
inaccuracies in the representations or warranties by the other, or waive
compliance by the other with any of the covenants or conditions contained in
this Agreement. Any such extension or waiver shall be in writing and signed by
the parties. No such waiver shall operate or be construed as a waiver of any
subsequent act or omission of the parties.
SECTION 9.11 SEVERABILITY. The invalidity or unenforceability of any one
or more of the words, phrases, sentences, clauses, or sections contained in this
Agreement shall not affect the validity or enforceability of the remaining
provisions of this Agreement or any part of any provision, all of which are
inserted conditionally on their being valid in law, and in the event that any
one or more of the words, phrases, sentences, clauses or sections contained in
this Agreement shall be declared invalid or unenforceable, this Agreement shall
be construed as if such invalid or unenforceable word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted or shall be enforced as nearly as possible according to their
original terms and intent to eliminate any invalidity or unenforceability. If
any invalidity or unenforceability is caused by the length of any period of time
or the geographic scope set forth in any part of this Agreement, the period of
time or geographic scope, or both, shall be considered to be reduced to a period
or area which would cure the invalidity or unenforceability.
Page 30
SECTION 9.12 ATTORNEY'S FEES. In the event of any arbitration or
litigation, including appeals, with regard to this Agreement, the prevailing
party shall be entitled to recover from the non-prevailing party all reasonable
fees, costs, and expenses of counsel (at pre-trial, trial and appellate levels).
SECTION 9.13 NO BREACH. The parties agree that the execution of this
Agreement shall not be deemed to be an assignment of any contract where consent
to such assignment is required by the terms of the contract provided that the
foregoing shall not affect the GTS's obligation to obtain all consents as
provided in this Agreement.
SECTION 9.14 CONSTRUCTION. This Agreement shall be construed without
regard to any presumption or other rule requiring construction against the party
causing this Agreement to be drafted. If any words in this Agreement have been
stricken out or otherwise eliminated (whether or not any other words or phrases
have been added) and the stricken words initialed by the party against whom the
words are construed, this Agreement shall be construed as if the words so
stricken out or otherwise eliminated were never included in this Agreement and
no implication or inference shall be drawn from the fact that those words were
stricken out or otherwise eliminated.
SECTION 9.15 NO JURY TRIAL EACH PARTY WAIVES ALL RIGHTS TO ANY TRIAL BY
JURY IN ALL LITIGATION RELATING TO OR ARISING OUT OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed as of the date hereof.
GLOBAL TELECOMMUNCATION SOLUTIONS, INC.,
a Delaware corporation
By: ________________________________
Xxxxxxx X. Xxxxxxx,
Chief Financial Officer
GTS ACQUISITION CORPORATION,
a New Jersey corporation
By: ________________________________
Xxxxxxx X. Xxxxxxx,
Vice President and Treasurer
Page 31
CENTERPIECE COMMUNICATIONS, INC.,
a New Jersey corporation
By: _________________________________
Xxxx Xxxxxxxxxx,
President
STOCKHOLDER:
J. XXXX XXXXXXXXXX
By: _________________________________
J. Xxxx Xxxxxxxxxx
Page 32
EXHIBIT LIST
Exhibit A - CCI Capital Stock Ownership
Exhibit B - Certificate of Merger
Exhibit C - Intentionally deleted
Exhibit D - Promissory Note
Exhibit E - Security Agreement
Exhibit F - Lock-Up Agreement
Exhibit G - Employment Agreement
Exhibit H - TLG and S&B Opinion
Exhibit I - GM&M Opinion
Exhibit J - Stockholder Agreement
Exhibit K - CCI Articles and By-Laws
Exhibit L - CCI Financial Statements
Exhibit M - Legends
Exhibit N - GTS Articles and By-Laws
Page 33
