AGREEMENT AND PLAN OF REORGANIZATION
by and among
EUROMED, INC.,
REDSTONE ACQUISITION CORP.
and
REDSTONE SECURITIES, INC.
September ______, 1998
TABLE OF CONTENTS
(Continued)
TABLE OF CONTENTS
ARTICLE 1 Page
THE MERGER...................................................................................................1
1.1 The Merger ...............................................................................................1
1.2 Closing ...............................................................................................1
1.3 Effective Time of the Merger.................................................................................1
ARTICLE 2
THE SURVIVING CORPORATION....................................................................................2
2.1 Articles of Incorporation....................................................................................2
2.2 Bylaws ...............................................................................................2
2.3 Directors and Officers of the Surviving Corporation..........................................................2
ARTICLE 3
CONVERSION OF SHARES.........................................................................................2
3.1 Conversion of Shares.........................................................................................2
3.2 Exchange of Stock Certificates; Payment of Cash Consideration................................................3
3.3 No Further Rights in Company Common Stock....................................................................5
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
THE ACQUIROR AND THE MERGER SUB..............................................................................5
4.1 Organization ...............................................................................................5
4.2 Capitalization and Ownership of the Acquiror.................................................................5
4.3 Certain Corporate Matters....................................................................................6
4.4 Subsidiaries. ...............................................................................................6
4.5 Authority Relative to this Agreement.........................................................................6
4.6 Consents and Approvals; No Violations........................................................................6
4.7 Reports and Financial Statements.............................................................................7
4.8 Events Subsequent to Financial Statements....................................................................8
4.9 Tax Returns and Audits.......................................................................................9
4.10 Property.......................................................................................9
4.11 Tangible Property.............................................................................10
4.12 Inventory.....................................................................................10
4.13 Licenses and Permits..........................................................................10
4.14 Assets Necessary to the Business..............................................................10
4.15 Books and Records.............................................................................10
4.16 Product Liability.............................................................................10
4.17 Questionable Payments.........................................................................10
4.18 Environmental Matters.........................................................................10
4.19 Equipment.....................................................................................11
4.20 Intellectual Property.........................................................................11
4.21 Insurance.....................................................................................11
4.22 Contracts.....................................................................................11
4.23 Litigation....................................................................................12
ii
TABLE OF CONTENTS
(Continued)
Page
4.24 Employees.....................................................................................12
4.25 Employee Benefit Plans........................................................................12
4.26 Legal Compliance..............................................................................13
4.27 Broker's Fees.................................................................................13
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................................14
5.1 Organization ..............................................................................................14
5.2 Capitalization and Ownership of the Company.................................................................14
5.3 Certain Corporate Matters...................................................................................14
5.4 Subsidiaries. ..............................................................................................15
5.5 Authority Relative to this Agreement........................................................................15
5.6 Consents and Approvals; No Violations.......................................................................15
5.7 Financial Statements; Liabilities...........................................................................16
5.8 Events Subsequent to Financial Statements...................................................................16
5.9 Tax Returns and Audits......................................................................................17
5.10 Property......................................................................................18
5.11 Tangible Property.............................................................................19
5.12 Licenses and Permits..........................................................................19
5.13 Assets Necessary to the Business..............................................................19
5.14 Books and Records.............................................................................19
5.15 Questionable Payments.........................................................................19
5.16 Environmental Matters.........................................................................19
5.17 Equipment.....................................................................................20
5.18 Intellectual Property.........................................................................20
5.19 Insurance.....................................................................................20
5.20 Contracts.....................................................................................20
5.21 Litigation....................................................................................21
5.22 Employees.....................................................................................21
5.23 Employee Benefit Plans........................................................................21
5.24 Legal Compliance..............................................................................23
5.25 Broker's Fees.................................................................................23
ARTICLE 6
PRE-CLOSING COVENANTS.......................................................................................23
6.1 Interim Operations of the Company...........................................................................23
6.2 Conduct of the Acquiror.....................................................................................24
6.3 Press Releases..............................................................................................25
6.4 Access to Information and Confidentiality...................................................................26
iii
TABLE OF CONTENTS
(Continued)
Page
6.6 Merger Sub Stockholder Approval.............................................................................26
6.7 Reasonable Efforts; Consents, Approvals and Waivers.........................................................26
ARTICLE 7
CLOSING CONDITIONS..........................................................................................27
7.1 Conditions to Obligations of Each Party Under This Agreement. .............................................27
7.2 Conditions to the Acquiror's Obligations....................................................................27
7.3 Conditions to the Company's Obligations.....................................................................28
ARTICLE 8
ADDITIONAL AGREEMENTS.......................................................................................28
8.1 Indemnification of the Company's Officers and Directors. ..................................................28
8.2 Shareholders Fee............................................................................................28
8.3 Release from Guaranties.....................................................................................29
8.4 Equity Subordinated Loans...................................................................................29
8.5 Underwriter's Warrants......................................................................................29
8.6 Excluded Assets.............................................................................................29
ARTICLE 9
TERMINATION.................................................................................................29
9.1 Termination by Mutual Consent...............................................................................29
9.2 Termination by Either the Acquiror or the Company...........................................................29
9.3 Termination by the Company..................................................................................29
9.4 Termination by the Acquiror.................................................................................30
9.5 Effect of Termination and Abandonment.......................................................................30
ARTICLE 10
GENERAL PROVISIONS..........................................................................................30
10.1 Expenses......................................................................................30
10.2 Notices.......................................................................................30
10.3 Interpretation................................................................................31
10.4 Severability..................................................................................31
10.5 Miscellaneous.................................................................................31
10.6 GOVERNING LAW.................................................................................32
10.7 Counterparts..................................................................................32
iv
TABLE OF EXHIBITS AND SCHEDULES
Exhibits
EXHIBIT A Form of Employment Agreement
Schedules
SCHEDULE 4.2 Warrants
SCHEDULE 4.6 Consents and Approvals
SCHEDULE 4.7 Reports and Financial Statements
SCHEDULE 4.8 Material Changes
SCHEDULE 4.9 Tax Returns and Audits
SCHEDULE 4.11 Liens
SCHEDULE 4.13 Licenses and Permits
SCHEDULE 4.15 Books and Records
SCHEDULE 4.16 Product Liability
SCHEDULE 4.20 Intellectual Property
SCHEDULE 4.22 Acquiror Material Contracts
SCHEDULE 4.23 Litigation
SCHEDULE 4.24 Employees
SCHEDULE 4.25 Employee Benefit Plans
SCHEDULE 4.27 Broker's Fees
SCHEDULE 5.2(a) Convertible Securities
SCHEDULE 5.2(b) List of Stockholders
SCHEDULE 5.3 Jurisdictions in which the Company Operates
SCHEDULE 5.6 Consents and Approvals
SCHEDULE 5.7 Undisclosed Liabilities
SCHEDULE 5.8 Material Changes
SCHEDULE 5.9 Tax Returns and Audits
SCHEDULE 5.10 Real Property
SCHEDULE 5.11 Liens
SCHEDULE 5.12 Licenses and Permits
SCHEDULE 5.17 Equipment
SCHEDULE 5.18 Intellectual Property
SCHEDULE 5.19 Insurance
SCHEDULE 5.20 Material Contracts
SCHEDULE 5.21 Litigation
SCHEDULE 5.22 Employees
SCHEDULE 5.23 Employee Benefit Plans
ANNEX I Allocation of Merger Consideration
ANNEX II Vesting Restrictions
ANNEX III Assets to be Excluded
v
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION, dated as of September __,
1998 (this "Agreement"), is by and among EUROMED, INC., a Nevada corporation
(the "Acquiror"), REDSTONE ACQUISITION CORP., a New Jersey corporation and a
wholly-owned subsidiary of the Acquiror (the "Merger Sub"), and REDSTONE
SECURITIES, INC., a New Jersey corporation (the "Company").
RECITALS
WHEREAS, the respective Boards of Directors of the Acquiror, the Merger
Sub and the Company deem it advisable and in the best interests of their
respective stockholders that the Acquiror acquire the Company through a merger
(the "Merger") of the Merger Sub with and into the Company upon the terms and
subject to the conditions of this Agreement;
WHEREAS, the parties hereto intend the Merger to qualify as a tax-free
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties and agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the conditions set forth herein, the parties hereto
agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.3 hereof), the Merger Sub shall
be merged with and into the Company and the separate corporate existence of the
Merger Sub shall thereupon cease. The Company (sometimes hereinafter referred to
as the "Surviving Corporation") shall be the surviving corporation in the
Merger. The Merger shall have the effects set forth in the applicable provisions
of the New Jersey Business Corporation Act (the "Act").
1.2 Closing. The closing of the Merger (the "Closing") shall take place
at 9:00 a.m., Central Standard time, at the offices of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, LLC.,
located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ on November 6, 1998,
or as soon as reasonably practicable thereafter as the conditions set forth in
Article 7 hereof have been satisfied or waived (the date on which the Closing
occurs being herein referred to as the "Closing Date").
1.3 Effective Time of the Merger. If all of the conditions to the
Merger set forth in Article 7 hereof shall have been fulfilled or waived in
accordance herewith and this Agreement shall not have been terminated as
provided in Article 9 hereof, the parties hereto shall cause Articles of Merger
to be filed with the Secretary of State of the State of New Jersey on the
Closing Date. The Merger shall be effective at the time of filing of the
Articles of Merger with the Secretary of State of the State of New Jersey in
accordance with the Act or at such later time which the parties hereto shall
have agreed upon and designated in such filing as the effective time of the
Merger (the "Effective Time").
AGREEMENT AND PLAN OF REORGANIZATION - 1
ARTICLE 2
THE SURVIVING CORPORATION
2.1 Articles of Incorporation. The Articles of Incorporation of the
Company as in effect at the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation unless and until amended in
accordance with its terms and as provided by law.
2.2 Bylaws. The Bylaws of the Company as in effect at the Effective
Time shall be the Bylaws of the Surviving Corporation unless and until amended
in accordance with their terms, the terms of the Articles of Incorporation of
the Surviving Corporation or as provided by law.
2.3 Directors and Officers of the Surviving Corporation.
(a) The directors of the Company at the Effective Time shall
be the initial directors of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Articles of Incorporation and Bylaws of the Surviving Corporation, or
as otherwise provided by law.
(b) The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving
Corporation and shall hold office from the Effective Time until their
respective successors are duly elected or appointed and qualified in
the manner provided in the Articles of Incorporation and Bylaws of the
Surviving Corporation, or as otherwise provided by law.
ARTICLE 3
CONVERSION OF SHARES
3.1 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and without
any further action on the part of the Acquiror, the Merger Sub, the
Company, the Surviving Corporation, or any holder of any equity
securities of any of them, the following events shall occur:
(1) each share of the common stock, par value $0.01
per share, of the Merger Sub issued and outstanding at the
Effective Time shall continue to be issued and outstanding and
shall represent the same number of shares of common stock of
the Surviving Corporation;
(2) the Equity Subordinated Lender Shares (as defined
in Section 8.4) and each issued and outstanding share of
common stock, par value $.01 per share, of the Company
("Company Common Stock"), that is held in treasury by the
Company, held by any direct or indirect subsidiary of the
Company or held by the Acquiror (collectively, the "Excluded
Shares") shall be canceled, and no Merger Consideration (as
hereinafter defined) shall be delivered in exchange therefor;
and
AGREEMENT AND PLAN OF REORGANIZATION - 2
(3) each share of Company Common Stock issued and
outstanding at the Effective Time (after cancellation of the
Excluded Shares) (the "Company Shares") shall be converted
into the right to receive that portion of the Merger
Consideration (as hereinafter defined) set forth beside the
name of the holders of such Company Shares on Annex I hereto.
(b) The "Merger Consideration" shall consist in the aggregate
of (and such term shall be defined to mean) 1,100,000 shares of fully
paid and non-assessable shares of the common stock, par value $.01 per
share, of the Acquiror (the "Acquiror Common Stock"). A portion of the
Merger Consideration equal to 800,000 shares of Acquiror Common Stock
(the "Restricted Shares") shall be issued subject to the vesting
restrictions described on Annex II hereto.
3.2 Exchange of Stock Certificates; Payment of Cash Consideration.
(a) Promptly after the Effective Time, the Surviving
Corporation shall mail to each holder of record of Company Shares (i) a
letter of transmittal specifying that delivery of the stock
certificates (each, a "Certificate") representing Company Shares shall
be effected, and risk of loss of and title thereto shall pass, only
upon delivery of the Certificates (or affidavits of loss in lieu
thereof) to the Surviving Corporation, such letter of transmittal to be
in such form and have such other provisions as the Acquiror and the
Company may reasonably agree, and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Only upon delivery of a Certificate for cancellation to
the Surviving Corporation together with a letter of transmittal, duly
executed, shall the holder of such Certificate be entitled to receive
in exchange therefor the Merger Consideration described in Section 3.1
hereof, plus any unpaid non-stock dividends and any other dividends or
other distributions that such holder has the right to receive pursuant
to the provisions of this Article 3. No interest will be paid or
accrued on any amount payable upon due surrender of the Certificates.
In the event of a transfer by any holder of Company Shares of ownership
of such Company Shares that is not registered in the transfer records
of the Company, a certificate representing the Merger Consideration
payable to such holder, together with a check payable to the holder of
such shares for any Fractional Payment (as hereinafter defined), and
any other dividends or distributions in respect thereof, may be issued
and/or paid to such a transferee if the Certificate(s) representing
such Company Shares is presented to the Surviving Corporation,
accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes have
been paid. If any certificate for shares of Acquiror Common Stock is to
be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition
of such exchange that the person requesting such exchange shall pay any
transfer or other taxes required by reason of the issuance of
certificates of shares of Acquiror Common Stock in a name other than
that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Acquiror or the Surviving
Corporation that such tax has been paid or is not applicable.
Notwithstanding the foregoing or any other provisions of Section 3.1 or
this Section 3.2 to the contrary, no Merger Consideration shall be
issued in respect of any Company Shares, the holders of which object
AGREEMENT AND PLAN OF REORGANIZATION - 3
to the Merger in writing and demand payment of the value of their
shares pursuant to Article 5.12 of the TBCA, such holders to have only
the rights provided by the TBCA.
(b) Notwithstanding anything herein to the contrary, no
certificates or scrip evidencing fractional shares of Acquiror Common
Stock shall be issued in connection with the Merger, and any such
fractional share interests to which a holder of record of Company
Shares would otherwise be entitled will not entitle such holder to vote
or to any rights of a stockholder of the Acquiror. In lieu of any such
fractional shares, each holder of record of Company Shares who but for
the provisions of this Section 3.2(b) would be entitled to receive a
fractional interest of a share of Acquiror Common Stock pursuant to the
Merger shall be paid cash (such distribution being such holder's
"Fractional Payment"), without any interest thereon, in an amount equal
to the fraction of a share to which such holder is entitled, multiplied
by the Average Market Price (as hereinafter defined). For purposes of
this agreement, the "Average Market Price" shall mean the average of
the daily closing sales price of the Acquiror Common Stock as reported
on the "over the counter" market (or other market on which the Acquiror
Common Stock is traded) over the twenty (20) consecutive trading days
ending on the trading day immediately prior to the Closing Date.
(c) All shares of Acquiror Common Stock to be issued pursuant
to the Merger shall be deemed issued and outstanding as of the
Effective Time. The Acquiror shall not declare or pay any dividends or
other distributions in respect of Acquiror Common Stock during the
period beginning on the date hereof and ending on the Closing Date.
Whenever a dividend or other distribution is declared by the Acquiror
in respect of the Acquiror Common Stock, the record date for which is
at or after the Effective Time, that declaration shall include
dividends or other distributions in respect of all shares issuable
pursuant to this Agreement. No dividends or other distributions in
respect of the Acquiror Common Stock shall be paid to any holder of any
unsurrendered Company Share until such Company Share is surrendered for
exchange in accordance with this Article 3. Subject to the effect of
applicable laws, following surrender of any such Company Share, there
shall be issued and/or paid to the holder of the certificates
representing whole shares of Acquiror Common Stock issued in exchange
therefor, without interest, (A) at the time of such surrender, the
dividends or other distributions with a record date after the Effective
Time theretofore payable with respect to such whole shares of Acquiror
Common Stock and not paid and (B) at the appropriate payment date, the
dividends or other distributions payable with respect to such whole
shares of Acquiror Common Stock with a record date after the Effective
Time but with a payment date subsequent to surrender.
(d) After the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the shares of Company Common
Stock that were outstanding at the Effective Time.
(e) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and,
if required by the Acquiror, the posting by such person of a bond in
customary amount as indemnity against any claim that may be made
against it with respect
(f) In the event that the Acquiror effects a reclassification, stock split
( including a reverse split), a stock dividend or distribution, recapitalization
subdivision, or other similar capital transaction, the Merger Consideration
shall be equitably adjusted.
3.3 No Further Rights in Company Common Stock. As of the Effective Time,
all shares of Company Common Stock shall no longer be outstanding and shall
automatically be canceled and shall cease to exists, and each other of a
Certificate as of the Effective Time shall cease to have any rights with respect
thereto, except the right to recieve the Merger Consideration, the Fractional
Payments and distribution or dividends to which such holder is entitled pursuant
to the terms of this Article 3 and applicable law.
AGREEMENT AND PLAN OF REORGANIZATION - 4
to such Certificate, the Acquiror will issue in exchange for such lost,
stolen or destroyed Certificate the shares of Acquiror Common Stock and
cash payable and any unpaid dividends or other distributions in respect
of Acquiror Common Stock pursuant hereto upon due surrender of and
deliverable in respect of the Company Shares represented by such
Certificate pursuant to this Agreement.
(f) In the event that the Acquiror effects a reclassification,
stock split (including a reverse split), stock dividend or
distribution, recapitalization, subdivision, or other similar capital
transaction, the Merger Consideration shall be equitably adjusted.
3.3 No Further Rights in Company Common Stock. As of the Effective
Time, all shares of Company Common Stock shall no longer be outstanding and
shall automatically be canceled and shall cease to exist, and each holder of a
Certificate as of the Effective Time shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration, the Fractional
Payments and the distribution or dividends to which such holder is entitled
pursuant to the terms of this Article 3 and applicable law.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
THE ACQUIROR AND THE MERGER SUB
Each of the Acquiror and the Merger Sub hereby jointly and severally
represents and warrants to the Company as follows:
4.1 Organization. Each of the Acquiror and the Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation, and has the requisite corporate power to carry on
its business as now conducted.
4.2 Capitalization and Ownership of the Acquiror. The entire authorized
capital stock of the Acquiror consists of 20,000,000 shares of Acquiror Common
Stock, and 5,000,000 shares of preferred stock, par value $.01 per share. As of
November 1, 1998, 3,207,000 shares of Acquiror Common Stock were issued and
outstanding (1,800,000 of which are held in escrow in The Netherlands and are
being delivered to the Acquiror for cancellation). As of the date hereof, no
shares of the Acquiror's preferred stock are issued and outstanding. As of
September 1, 1998, (a) stock options to acquire no shares of Acquiror Common
Stock (the "Acquiror Stock Options") were outstanding under all stock option
plans of the Acquiror and 300,000 shares of Acquiror Common Stock were reserved
for issuance pursuant to all stock option plans of the Acquiror, and (b)
warrants to acquire 300,000 shares of Acquiror Common Stock were outstanding,
which warrants are held by the persons listed on Schedule 4.2 hereto, together
with a description of the terms of all such warrants. All issued and outstanding
shares of Acquiror Common Stock are validly issued, fully paid and nonassessable
and free of preemptive rights. Except as described above, the Acquiror has not
reserved any shares of its capital stock for issuance, nor are there any
outstanding stock option rights, phantom equity or similar rights, contracts,
arrangements or commitments based upon the book value, income or other
attributes of the Acquiror. There are no voting trusts or any other agreements
or understandings with respect to the voting of the Acquiror's capital stock.
There are
AGREEMENT AND PLAN OF REORGANIZATION - 5
no contracts or other obligations to restructure or recapitalize the Acquiror
and no outstanding contracts, arrangements or commitments of the Acquiror to
repurchase, redeem or otherwise acquire any of its equity securities. All shares
of Acquiror Common Stock issuable as part of the Merger Consideration will be,
when so issued, duly authorized, validly issued, fully paid and nonassessable.
The authorized capital stock of the Merger Sub consists of 1,000 shares of
Common Stock, par value $0.01 per share, all of which are validly issued and
outstanding, fully paid and nonassessable and are owned by the Acquiror.
4.3 Certain Corporate Matters. The Acquiror is duly licensed or
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the ownership of its properties, the employment of
its personnel or the conduct of its business requires it to be so licensed or
qualified, except where such failure would not have a material adverse effect on
the Acquiror's financial condition, results of operations or business. The
Acquiror has full corporate power and authority and all material authorizations,
licenses and permits necessary to carry on the business in which it is engaged
and to own and use the properties owned and used by it. Neither the Acquiror nor
the Merger Sub is in default under or in violation of any provision of its
Articles of Incorporation or Bylaws. To the best of its knowledge, the Acquiror
is not in material default or in material violation of any restriction, lien,
encumbrance, indenture, contract, lease, sublease, loan agreement, note or other
obligation or liability by which it is bound or to which any of its assets is
subject.
4.4 Subsidiaries. Except for the Merger Sub, the Acquiror does not own
more than 50% of the voting stock or other equity interests of any entity. As of
the date of this Agreement, the Merger Sub was in formation and is being formed
solely for the purpose of effecting the Merger. The Merger Sub has had no
operations since its inception. The Merger Sub does not have, and immediately
prior to the Closing of the Merger will not have, any assets or liabilities or
obligations other than cash paid by the Acquiror to the Merger Sub in the amount
of $1,000.00 in payment for the shares of common stock of the Merger Sub issued
to the Acquiror.
4.5 Authority Relative to this Agreement. Each of the Acquiror and the
Merger Sub has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder. The execution, delivery and
performance of this Agreement by the Acquiror and the Merger Sub and the
consummation by the Acquiror and the Merger Sub of the transactions contemplated
hereby have been duly authorized by the Boards of Directors of the Acquiror and
the Merger Sub, and by the Acquiror as the sole shareholder of the Merger Sub,
and, except for the authorization of the shareholders of the Acquiror, no other
corporate action on the part of the Acquiror or the Merger Sub are necessary to
authorize this Agreement or the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by each of the Acquiror and the
Merger Sub and constitutes a valid and binding agreement of each of the Acquiror
and the Merger Sub, enforceable against the Acquiror and the Merger Sub in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity.
4.6 Consents and Approvals; No Violations. Except for applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Securities Exchange Act of 1934 (as amended, the "Exchange Act"), state or
foreign laws relating to takeovers, if applicable, state
AGREEMENT AND PLAN OF REORGANIZATION - 6
securities or blue sky laws, and the filing and recordation of the Articles of
Merger as required by the TBCA, no filing with, and no permit, authorization,
consent or approval of, any public body or authority is necessary for the
consummation by the Acquiror or the Merger Sub of the transactions contemplated
by this Agreement. Neither the execution and delivery of this Agreement by the
Acquiror or the Merger Sub nor the consummation by the Acquiror or the Merger
Sub of the transactions contemplated hereby, nor compliance by the Acquiror or
the Merger Sub with any of the provisions hereof, will require any consent,
approval or notice under, or result in a material violation or breach of, or
materially conflict with or constitute a material default (or an event that,
with notice or lapse of time or both, would constitute a material default)
under, or permit the termination of, or result in the creation or imposition of
any lien, charge or encumbrance upon any properties, assets or business of the
Acquiror or the Merger Sub under any note, bond, indenture, mortgage, deed of
trust, lease, franchise, permit, authorization, license, contract, instrument or
other agreement or commitment or any order, judgment or decree to which the
Acquiror or the Merger Sub is a party or by which the Acquiror or the Merger Sub
or any of their respective assets or properties are bound or encumbered, except
those that have already been given, obtained or filed, all as set forth on
Schedule 4.6 hereto. Neither the execution and delivery of this Agreement by the
Acquiror or the Merger Sub, nor the consummation by the Acquiror or the Merger
Sub of the transactions contemplated hereby, nor compliance by the Acquiror or
the Merger Sub with any of the provisions hereof, will (i) conflict with or
result in any breach of any provisions of the Articles of Incorporation or
Bylaws (or similar organizational documents) of the Acquiror or the Merger Sub,
or (ii) violate in any material respect any existing judgment, order, writ,
injunction, decree, statute, rule or regulation applicable to the Acquiror or
the Merger Sub or any of their properties or assets.
4.7 Reports and Financial Statements.
(a) Except as set forth on Schedule 4.7 hereto, the Acquiror
has filed all reports, schedules, forms, statements and other documents
required to be filed with the Securities and Exchange Commission (the
"SEC") pursuant to the Exchange Act since March 19, 1996 (collectively,
the "Acquiror SEC Documents"). The Acquiror SEC Documents, and any
reports, forms and documents filed by the Acquiror with the SEC after
the date hereof, as amended, complied, or will comply, as of their
respective dates, as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder
applicable to the Acquiror SEC Documents, and except to the extent that
information contained in any Acquiror SEC Document has been superseded
by a later filed Acquiror SEC Document, none of such SEC Documents, as
of their respective dates, contained any untrue statement of a material
fact or omitted 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.
(b) The consolidated balance sheets and related consolidated
statements of income, stockholders' equity and cash flows, and the
related notes of the Acquiror as of and for the years ended December
31, 1997 and 1996 (the "Acquiror Audited Financial Statements") have
been audited by ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Company, P.C., independent
accountants, in accordance with generally accepted auditing standards.
The Acquiror
AGREEMENT AND PLAN OF REORGANIZATION - 7
Audited Financial Statements and the balance sheet and related
statement of income, stockholders' equity and cash flow as of and for
the six month period ended June 30, 1998 (the "Acquiror Interim
Financial Statements," and together with the Acquiror Audited Financial
Statements, the "Acquiror Financial Statements") included in the
Acquiror SEC Documents have been prepared in accordance with United
States generally accepted accounting principles applied on a basis
consistent with prior periods, and present fairly the consolidated
financial position of the Acquiror at such dates and the results of
operations and cash flows for the periods then ended, except, in the
case of the Acquiror Interim Financial Statements, as permitted by Rule
10-01 of Regulation S-X of the SEC. The Acquiror Interim Financial
Statements reflect all adjustments (consisting only of normal,
recurring adjustments) that are necessary for a fair statement of the
results for the interim periods presented therein. Except as set forth
in the Acquiror Interim Financial Statements or on Schedule 4.7 hereto,
neither the Acquiror nor the Merger Sub, nor any of their respective
assets, are subject to any liability, commitment, debt or obligation
(of any kind whatsoever whether absolute or contingent, accrued, fixed,
known, unknown, matured or unmatured) ("Undisclosed Liabilities"),
except (i) as and to the extent reflected on the Acquiror's unaudited
balance sheet as of June 30, 1998, or (ii) as may have been incurred or
may have arisen since June 30, 1998 in the ordinary course of business,
or (iii) that, individually or in the aggregate, have not had and are
not reasonably likely to have a material adverse effect on the
financial condition, results of operations or business of the Acquiror
or the Merger Sub taken as a whole (an "Acquiror Material Adverse
Effect").
(c) Except as set forth on Schedule 4.7 hereto, the most
recent balance sheet of the Acquiror included in the Acquiror Interim
Financial Statements includes appropriate reserves for all taxes and
other liabilities incurred as of such date but not yet payable.
4.8 Events Subsequent to Financial Statements. Except as disclosed in
the Acquiror Financial Statements or on Schedule 4.8 hereto, since June 30,
1998, there has not been:
(a) Any material adverse change in the financial condition, results of
operations or business of the Acquiror;
(b) Any sale, lease, transfer, license or assignment of any
assets, tangible or intangible, of the Acquiror, other than in the
ordinary course of business;
(c) Any damage, destruction or property loss, whether or not
covered by insurance, affecting adversely and materially the properties
or business of the Acquiror;
(d) Any declaration or setting aside or payment of any
dividend or distribution with respect to the shares of capital stock of
the Acquiror or any redemption, purchase or other acquisition of any
such shares;
(e) Any subjection to any lien, pledge, security interest or
other encumbrance (each, a "Lien") on any of the assets, tangible or
intangible, of the Acquiror(other than Liens arising by operation of
law which secure obligations which are not yet due and payable);
AGREEMENT AND PLAN OF REORGANIZATION - 8
(f) Any incurrence of indebtedness or liability or assumption
of obligations by the Acquiror other than (i) those incurred in the
ordinary course of business, and (ii) those incurred in the course of
negotiating, documenting and consummating the transactions contemplated
by this Agreement;
(g) Any cancellation or compromise by the Acquiror of any debt
or claim, except for adjustments made in the ordinary course of
business which, in the aggregate, are not material;
(h) Any waiver or release by the Acquiror of any right of any material
value;
(i) Any sale, assignment, transfer or grant by the Acquiror of
any rights under any concessions, leases, licenses, agreements,
patents, inventions, trademarks, trade names or copyrights, except in
the ordinary course of business;
(j) Any change made or authorized in the Articles of
Incorporation or Bylaws (or similar organizational documents) of the
Acquiror; or
(k) Any acceleration, termination, modification or
cancellation (or threat thereof) by any party of any contract, lease or
other agreement or instrument to which the Acquiror is a party or by
which it is bound so as to affect, materially and adversely, the
properties or business of the Acquiror.
4.9 Tax Returns and Audits. Except as set forth on Schedule 4.9 hereto,
the Acquiror has duly and timely filed or duly and timely caused to be filed, or
will file or cause to be filed, with the appropriate taxing authorities all
federal, foreign, state and local income, franchise, sales, value added and
property tax returns ("Tax Returns") required to be filed prior to the Closing
Date, including, but not limited to, all Tax Returns the filing of which is
necessary for the conduct of the Acquiror's business, and each such Tax Return
has been or will be prepared in all material respects in compliance with all
applicable laws and regulations. The Acquiror has paid or will pay in a timely
manner all taxes that are shown to be due on such Tax Returns or pursuant to any
assessment received by the Acquiror from any taxing authority, except such
taxes, if any, as are being contested diligently and in good faith. There are no
claims for taxes pending against the Acquiror nor any threatened claim for tax
deficiencies against the Acquiror. There exist no actual or, to the knowledge of
the Acquiror, proposed additional assessments of taxes by any taxing authority
to which it is reasonably likely that the assets of the Acquiror will be
subject. There are no outstanding agreements or waivers that would extend the
statutory period in which a taxing authority may assess or collect a tax against
the Acquiror. There are no Liens for taxes, other than for current taxes not yet
due and payable, upon the assets of the Acquiror.
4.10 Property. The Acquiror does not own, directly or indirectly, any
fee interest in real property. With respect to each lease of the Acquiror: (a)
the lease has been validly executed and delivered by the Acquiror and, to the
knowledge of the Acquiror, by the other party or parties thereto and is a
binding agreement; (b) the Acquiror is not, and to the Acquiror's knowledge, no
other party to the lease is in material breach or default, and no event has
occurred on the part of the Acquiror
AGREEMENT AND PLAN OF REORGANIZATION - 9
or, to the Acquiror's knowledge, on the part of any other party which, with
notice or lapse of time, would constitute such a breach or default or permit
termination, modification or acceleration under the lease; (c) the lease will
continue to be binding in accordance with its terms following the Closing Date;
(d) the Acquiror has not repudiated and, to the Acquiror's knowledge, no other
party to the lease has repudiated any provision thereof; (e) there are no
disputes, oral agreements or delayed payment programs in effect as to the lease;
and (f) all facilities leased thereunder, taken as a whole, have been reasonably
maintained.
4.11 Tangible Property. The Acquiror has good title to, or a valid
leasehold interest in, each item of tangible property, whether real, personal or
mixed, reflected on its books and records as owned or leased by it, subject to
no Liens, except (i) Liens for taxes not yet due and payable; (ii) mechanics',
carriers', workmens', landlord's statutory and common law Liens either not
delinquent or being contested in good faith; (iii) imperfections of title,
restrictions, variances and easements that do not materially detract from value;
and (iv) Liens listed on Schedule 4.11 hereto.
4.12 Inventory. The Acquiror has no inventory.
4.13 Licenses and Permits. The Acquiror has obtained all material
licenses, product and establishment registrations, franchises, permits,
easements, certificates and consents necessary to the conduct of its business,
except as provided on Schedule 4.13.
4.14 Assets Necessary to the Business. The personal property and other
assets owned or leased by the Acquiror are sufficient in all material respects
to carry on the Acquiror's business as presently conducted. Except as set forth
in Section 4.12 or Section 4.19 hereof, the tangible personal property of the
Acquiror necessary to the operation of the business of the Acquiror, taken as a
whole, is fit for the purposes for which they are presently being used and are
in reasonably good operating condition and repair, ordinary wear and tear
excepted.
4.15 Books and Records. Except as set forth on Schedule 4.15 hereto,
the books and records of the Acquiror fairly reflect the transactions to which
the Acquiror is a party or by which its properties are bound, and such books and
records are and have been properly kept and maintained, with the revenues,
expenses, assets and liabilities of the Acquiror accurately recorded therein in
all material respects.
4.16 Product Liability. Except as set forth on Schedule 4.16 hereto,
the Acquiror has not given or made any express warranties to third parties with
respect to any products sold by it except for the warranties imposed by the
provisions of applicable law.
4.17 Questionable Payments. Neither the Acquiror nor, to the Acquiror's
knowledge, any employee, agent, representative or shareholder of the Acquiror
has, directly or indirectly, made any bribes, kickbacks, illegal payments or
illegal political contributions using Acquiror funds or made any payments from
the Acquiror's funds to governmental officials for improper purposes or made any
illegal payments from the Acquiror's funds to obtain or retain business.
AGREEMENT AND PLAN OF REORGANIZATION - 10
4.18 Environmental Matters. There are no material claims, actions,
suits, proceedings or investigations pending against or affecting the Acquiror's
business at law or in equity before any court or before or by any federal,
state, municipal or other governmental department, commission, board, agency or
instrumentality, relating to environmental matters. The Acquiror is not subject
to any continuing court or administrative order, writ, injunction or decree
applicable to the Acquiror's business relating to any environmental matter. The
Acquiror to its knowledge is not in material violation of or in default in any
material respect with regards to any existing statute, regulation, order, writ,
injunction or decree of any court or federal, state, municipal or other
governmental department, commission, board, agency or instrumentality relating
to any environmental matter.
4.19 Equipment. All of the Acquiror's items of equipment, taken as a
whole, are (a) mechanically sound and in a condition to perform in the manner
needed for the operation of the Acquiror's business; (b) in good cosmetic
condition; and (c) in material compliance with all applicable statutes,
ordinances and regulations, including, without limitation, those related to
safety, in each case ordinary wear and tear excepted.
4.20 Intellectual Property. Set forth on Schedule 4.20 hereto is a true
and complete list of all United States and foreign patents and patent
applications; all copyright registrations and applications to register
copyrights; and all trade name, trademark, service ▇▇▇▇, and trade dress
registrations and applications to register the same that are owned by the
Acquiror or which the Acquiror is licensed to use or under which the Acquiror or
any Subsidiary possesses any rights ("Acquiror Registered Intellectual
Property"). Schedule 4.20 also lists any unregistered copyrights, common law
trademarks or service marks, or trade secrets of the Acquiror("Unregistered
Acquiror Intellectual Property"). The Acquiror is not obligated or under any
liability whatsoever to make any payments by way of royalties, fees, or
otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service ▇▇▇▇, trade name, or other intangible asset, with respect to
the use thereof or in connection with the conduct of its business or otherwise.
The Acquiror has no reason to believe that there are any conflicting rights
which might impair the Acquiror's use of the Acquiror Registered Intellectual
Property or Unregistered Acquiror Intellectual Property or has received any
notice of a conflict with the asserted rights of others with respect to any
patent, copyright, trade secret, or trademark right that could, singly or in the
aggregate, materially and adversely affect the business of the Acquiror,
furthermore, to the Acquiror's knowledge, no other persons or entities have
infringed upon or are infringing upon the Acquiror Registered Intellectual
Property or the Unregistered Acquiror Intellectual Property.
4.21 Insurance. The Acquiror does not have any insurance.
4.22 Contracts. (a) Set forth on Exhibit 4.22 is a list of all material
contracts, leases, arrangements and commitments (whether oral or written) of the
Acquiror(collectively, the "Acquiror Material Contracts"). Except as set forth
in Schedule 4.22, the Acquiror is not a party to or bound or affected by any
contract, lease, arrangement or commitment (whether oral or written) relating
to: (i) the employment of any person other than personnel employed at the
pleasure of the Acquiror in the ordinary course of business at rates of
compensation and on terms consistent with past business practice; (ii)
collective bargaining with, or any representation of any employees by, any labor
union or association; (iii) the acquisition of services, supplies, equipment or
other personal property
AGREEMENT AND PLAN OF REORGANIZATION - 11
involving more than $10,000 or which is not terminable by the Acquiror upon not
more than 30 days' notice without obligation on the part of the Acquiror; (iv)
the purchase or sale of real property; (v) distribution, agency or construction;
(vi) lending or advancing of funds (other than accounts receivable); (vii)
borrowing of funds or receipt of credit (other than accounts payable); (viii)
incurring of any obligation or liability (except for the accounts payable); (ix)
the sale of personal property; or (x) any matter or transaction not in the
ordinary course of business of the Acquiror or inconsistent with past business
practice of the Acquiror.
(b) The Acquiror is not in default in any material respect under any of
the Acquiror Material Contracts, except as disclosed on Schedule 4.22, and the
Acquiror Material Contracts are legal, valid and binding obligations of the
Acquiror, and to the Acquiror's knowledge, the respective parties thereto, in
accordance with their terms and, except to the extent reflected in Schedule
4.22, have not been amended; and no defenses, offsets or counterclaims thereto
have been asserted nor has the Acquiror waived any substantial rights
thereunder.
4.23 Litigation. Schedule 4.23 hereto lists (a) the name of each
action, complaint, petition, suit or other proceeding, whether civil or
criminal, in law or equity or before any arbitrator or government entity against
the Acquiror and the amount of same; (b) any instances in which the Acquiror is
subject to any judgment or order (other than orders of general applicability) of
any court of quasi-judicial or administrative agency of any jurisdiction,
domestic or foreign; or (c) any instances in which the Acquiror is a plaintiff
in any action, domestic or foreign, judicial or administrative in which a
counterclaim against the Acquiror is pending or might be brought. Except as set
forth on Schedule 5.21, there are no existing actions, suits, proceedings or
investigations that could result in any material adverse change in the
condition, financial or otherwise, of the Acquiror, the same being appropriately
reserved against in the Acquiror Financial Statements. There are no unsatisfied
judgments, orders (other than orders of general applicability), decrees or
stipulations affecting the Acquiror or to which the Acquiror is a party.
4.24 Employees. The Acquiror has listed on Schedule 4.24 hereto (to the
extent not listed on Schedule 4.22 hereto) and has made available to the Company
true and complete copies of: (a) any written employment agreements with any
officer or director of the Acquiror; and (b) any written employment agreement
with any employee of the Acquiror which by its terms may not be terminated by
the Acquiror at will or which ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ payments. The Acquiror has not
entered into any similar oral employment agreements. The Acquiror is not a party
to or bound by any collective bargaining agreement. Except as disclosed on
Schedule 4.24, there are no loans or other obligations payable or owing by the
Acquiror to any shareholder, officer, director or employee of the Acquiror
(except salaries and wages incurred and accrued in the ordinary course of
business), nor are there any loans or debts payable or owing by any of such
persons to the Acquiror or, except as described on Schedule 4.24 hereto, any
guarantees by the Acquiror of any loan or obligation of any nature to which any
such person is a party. The Acquiror has, in all material respects, complied
with all laws and regulations which relate to the employment of labor, employee
civil rights or equal employment opportunities. Except as set forth on Schedule
4.24 hereto, there is no material charge or complaint actually pending or, to
the Acquiror's knowledge, threatened against the Acquiror before the Equal
Employment Opportunity Commission or the Department of Labor or any state or
local agency of similar jurisdiction with respect to the Acquiror's business.
There is no organizational effort
AGREEMENT AND PLAN OF REORGANIZATION - 12
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Acquiror.
4.25 Employee Benefit Plans. The Acquiror has listed on Schedule 4.25
hereto (a) any nonqualified deferred or incentive compensation or retirement
plans or arrangements, (b) any qualified retirement plans or arrangements, (c)
any other employee compensation, severance or termination pay or welfare benefit
plans, programs or arrangements, (d) any material employee benefit plans,
programs, or arrangements, and (e) any related trusts, insurance contracts or
other funding arrangements maintained, established or contributed to by the
Acquiror or any entity ("Acquiror ERISA Affiliate") otherwise required to be
aggregated with the Acquiror pursuant to the provisions of Sections 414(b), (c),
(m) or (o) of the Code or Section 4001(a)(14) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") within the last six years or to which
the Acquiror or any Acquiror ERISA Affiliate of any of them is a party or
otherwise is bound ("Acquiror Employee Benefit Plans"). With respect to each
Acquiror Employee Benefit Plan for which an annual report has been filed, no
material adverse change has occurred with respect to the matters covered by the
annual report since the date thereof. Each of the Acquiror Employee Benefits
Plans (i) has been operated in all material respects in accordance with its
terms and applicable provisions of law, including ERISA and the Code, and (ii)
has not engaged in any "prohibited transaction" (as such term is defined in
Section 4975 of the Code or in Section 406 of ERISA) which would result in a
material liability. Since the enactment of ERISA, neither the Acquiror nor any
Acquiror ERISA Affiliate has completely or partially terminated any employee
pension benefit plan (as defined in Section 3(2) of ERISA) ("Pension Plan") or
withdrawn (in either a total or partial withdrawal) from any multiemployer
pension plan, as defined in Section 3(37)(A) of ERISA. There is no suit, action
or proceeding pending or threatened against or affecting or likely to have an
adverse impact on any Acquiror Employee Benefit Plan, and no claims have been
filed against any Acquiror Employee Benefit Plan, other than routine claims for
benefits in the ordinary course. One or more of the Acquiror Employee Benefit
Plans may be covered by the Consolidated Omnibus Budget Reconciliation Act of
1986 ("COBRA"). If so, each such plan has been operated in, and is in,
compliance with COBRA. All notices required to be given under COBRA have been
timely and properly given in accordance with COBRA, and the rules and
regulations promulgated thereunder, and no employee, former employee or
"qualified beneficiary" (as defined in COBRA) has any claim or contingent claim
against the Acquiror or any Acquiror ERISA Affiliate for failure to comply with
COBRA or the rules and regulations promulgated thereunder. Schedule 4.25 lists
all persons currently eligible for benefits under COBRA. No Acquiror Employee
Benefit Plan which is not a Pension Plan provides for continuing benefits or
coverage for any participant or beneficiary thereof after termination of the
participant's employment (except as may be required under COBRA and at the sole
expense of the participant or beneficiary). Neither the Acquiror nor any
Acquiror ERISA Affiliate of the Acquiror has engaged in a transaction described
in Section 4069(a) of ERISA. Neither the Acquiror nor any Acquiror ERISA
Affiliate is subject to withdrawal liability (whether asserted or unasserted)
under Section 4201, et seq., of ERISA. No employee or former employee of the
Acquiror will become entitled to any bonus, retirement, severance, job security
or similar benefit or enhanced benefit (including acceleration of an award,
vesting or exercise of an incentive award) or any fee or payment of any kind as
a result of any of the transactions contemplated hereby. The Acquiror has not
communicated to any employee or former employee any intention or
AGREEMENT AND PLAN OF REORGANIZATION - 13
commitment to modify any Acquiror Employee Benefit Plan or to establish or
implement any other employee or retiree benefit or compensation plans or
arrangements.
4.26 Legal Compliance. Except as set forth on Schedule 4.23 hereto, no
material claim has been filed against the Acquiror alleging a violation of any
applicable law or regulation of any foreign, federal, state or local government
or any agency thereof.
4.27 Broker's Fees. Except as set forth on Schedule 4.27 hereto,
neither the Acquiror nor the Merger Sub, nor anyone on their behalf has any
liability to any broker, finder, investment banker or agent, or has agreed to
pay any brokerage fees, finder's fees or commissions, or to reimburse any
expenses of any broker, finder, investment banker or agent in connection with
the Merger.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Acquiror and the
Merger Sub as follows:
5.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey, and has
the requisite corporate power to carry on its business as now conducted.
5.2 Capitalization and Ownership of the Company.
(a) The Company's entire authorized capital stock consists of
(i) 1,000 shares of Company Common Stock, of which 1,000 shares are
issued and outstanding and no shares are held in treasury. All
outstanding shares of Company Common Stock have been duly authorized
and are validly issued, fully paid and nonassessable and have not been
issued in violation of any preemptive rights. Except as set forth in
Schedule 5.2(a), there are no outstanding or authorized unexercised
options, rights, warrants, calls, convertible securities, rights to
subscribe, conversion rights or other rights to acquire shares of
Company Common Stock (each, a "Company Convertible Security") and the
Company has not reserved any shares of its capital stock for issuance,
nor are there any outstanding stock option rights, phantom equity or
similar rights, contracts, arrangements or commitments based upon the
book value, income or other attributes of the Company. There are no
voting trusts or any other agreements or understandings with respect to
the voting of the Company's capital stock. There are no contracts or
other obligations to restructure or recapitalize the Company and no
outstanding contracts, arrangements or commitments, of the Company to
repurchase, redeem or otherwise acquire any of its equity securities.
(b) Schedule 5.2(b) hereto sets forth a true, accurate and
complete list of all holders of capital stock of the Company and the
number of shares of capital stock held by each such person (each, a
"Shareholder" and collectively, the "Shareholders"). All securities
issued by the Company have been issued in compliance, in all respects,
with all applicable federal and state securities laws.
AGREEMENT AND PLAN OF REORGANIZATION - 14
5.3 Certain Corporate Matters. The Company is duly licensed or
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction specified on Schedule 5.3 hereto, which is every jurisdiction
in which the character of the Company's properties or nature of the Company's
business requires it to be so licensed or qualified other than such
jurisdictions in which the failure to be so licensed or qualified would not have
a material adverse effect on its financial condition, results of operations or
business. The Company has full corporate power and authority and all material
authorizations, licenses and permits necessary to carry on the business in which
it is engaged and to own and use the properties owned and used by it. The
Company has delivered to the Acquiror true, accurate and complete copies of its
Articles of Incorporation and Bylaws, which reflect all amendments made thereto
at any time prior to the date of this Agreement. The minute books containing the
records of meetings of the shareholders and Board of Directors of the Company
are complete and correct in all material respects. The Company is not in default
under or in violation of any provision of its Articles of Incorporation or
Bylaws. To the best of its knowledge, the Company is not in material default or
in material violation of any restriction, Lien, encumbrance, indenture,
contract, lease, sublease, loan agreement, note or other obligation or liability
by which it is bound or to which any of its assets is subject.
5.4 Subsidiaries. The Company does not own more than 50% of the voting
stock or other equity interests of any entity.
5.5 Authority Relative to this Agreement. The Company has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated by this Agreement have been duly authorized by the Company's Board
of Directors and stockholders, and no other corporate action on the part of the
Company is necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally or by general
principles of equity.
5.6 Consents and Approvals; No Violations. Except as set forth on
Schedule 5.6 hereto, and except for applicable requirements of the rules and
regulations of the National Association of Securities Dealers, Inc. (the
"NASD"), the Securities Act, the Exchange Act, state or foreign laws relating to
takeovers, if applicable, state securities or blue sky laws and the filing and
recordation of the Articles of Merger as required by the TBCA, no filing with,
and no permit, authorization, consent or approval of, any public body or
authority is necessary for the consummation by the Company of the transactions
contemplated by this Agreement. Except as otherwise provided on Schedule 5.6
hereto, none of the execution and delivery of this Agreement by the Company, the
performance by the Company of its obligations hereunder or the consummation of
the transactions contemplated hereby by the Company will require any consent,
approval or notice under, or result in a material violation or breach of, or
materially conflict with or constitute a material default (or an event that,
with notice or lapse of time or both, would constitute a material default)
under, or permit the termination of, or result in the creation or imposition of
any Lien upon any properties, assets or business of the Company under any note,
bond, indenture, mortgage, deed of trust, lease, franchise,
AGREEMENT AND PLAN OF REORGANIZATION - 15
permit, authorization, license, contract, instrument or other agreement or
commitment or any order, judgment or decree to which, the Company is a party or
by which the Company or any of its assets or properties are bound or encumbered.
Neither the execution and delivery of this Agreement by the Company, nor the
consummation by the Company of the transactions contemplated hereby, nor
compliance by the Company with any of the provisions hereof, will (i) conflict
with or result in any breach of any provisions of the Articles of Incorporation
or Bylaws of the Company, or (ii) violate in any material respect any existing
judgment, order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its properties or assets.
5.7 Financial Statements; Liabilities.
(a) The consolidated balance sheets and related consolidated
statements of income, stockholders' equity and cash flows, and the
related notes of the Company as of and for the years ended December 31,
1997, 1996 and 1995 (the "Company Audited Financial Statements") have
been audited by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, CPA, independent accountants, in
accordance with generally accepted auditing standards. The consolidated
balance sheets and related consolidated statements of income,
stockholders' equity and cash flows, and the related notes of the
Company as of and for the eight month period ended August 31, 1998 (the
"Company Interim Financial Statements") have been prepared by the
Company in accordance with past practices. The Company Audited
Financial Statements and the Company Interim Financial Statements have
been prepared in accordance with United States generally accepted
accounting principles applied on a basis consistent with prior periods,
and present fairly the financial position of the Company at such dates
and the results of operations and cash flows for the periods then
ended, except in the case of the Company Interim Financial Statements,
as permitted by United States generally accepting accounting
principles. The Company Interim Financial Statements reflect all
adjustments (consisting only of normal, recurring adjustments) that are
necessary for a fair statement of the results for the interim periods
presented therein. Except as set forth on Schedule 5.7 hereto, neither
the Company, nor any of its assets, are subject to any Undisclosed
Liabilities, except (i) as and to the extent reflected on the Company's
unaudited balance sheet as of August 31, 1998, or (ii) as may have been
incurred or may have arisen since August 31, 1998 in the ordinary
course of business, or (iii) that, individually or in the aggregate,
have not had and are not reasonably likely to have a material adverse
effect on the financial condition, results of operations or business of
the Company (a "Company Material Adverse Effect").
(b) Except as set forth on Schedule 5.7 hereto, the most
recent balance sheet of the Company included in the Company Interim
Financial Statements includes appropriate reserves for all taxes and
other liabilities incurred as of such date but not yet payable.
5.8 Events Subsequent to Financial Statements. Except as disclosed in
the Company Audited Financial Statements or on Schedule 5.8 hereto, since August
31, 1998 there has not been:
(a) Any material adverse change in the financial condition, results of
operations or business of the Company;
AGREEMENT AND PLAN OF REORGANIZATION - 16
(b) Any sale, lease, transfer, license or assignment of any
assets, tangible or intangible, of the Company, other than in the
ordinary course of business;
(c) Any damage, destruction or property loss, whether or not
covered by insurance, affecting adversely and materially the properties
or business of the Company;
(d) Any declaration or setting aside or payment of any
dividend or distribution with respect to the shares of capital stock of
the Company or any redemption, purchase or other acquisition of any
such shares;
(e) Any subjection to any Lien on any of the assets, tangible
or intangible, of the Company (other than Liens arising by operation of
law which secure obligations which are not yet due and payable);
(f) Any incurrence of indebtedness or liability or assumption
of obligations by the Company other than (i) those incurred in the
ordinary course of business, and (ii) those incurred in the course of
negotiating, documenting and consummating the transactions contemplated
by this Agreement;
(g) Any cancellation or compromise by the Company of any
material debt or claim, except for adjustments made in the ordinary
course of business which, in the aggregate, are not material;
(h) Any waiver or release by the Company of any right of any material value;
(i) Any sale, assignment, transfer or grant by the Company of
any rights under any concessions, leases, licenses, agreements,
patents, inventions, trademarks, trade names or copyrights, except in
the ordinary course of business;
(j) Any change made or authorized in the Articles of
Incorporation or Bylaws (or similar organizational documents) of the
Company;
(k) Any acceleration, termination, modification or
cancellation (or threat thereof) by any party of any contract, lease or
other agreement or instrument to which the Company is a party or by
which it is bound so as to affect, materially and adversely, the
properties or business of the Company;
(l) Any material arrangement, agreement or undertaking entered
into by the Company not terminable on 30 days or less notice without
cost or liability (including, without limitation, any payment of or
promise to pay any bonus or special compensation) with employees or any
increase in compensation or benefits to officers or directors of the
Company;
(m) Except as disclosed on Schedule 5.22 hereof, any
issuance, transfer, sale or other disposition by the Company of any
shares of its capital stock or other equity securities,
AGREEMENT AND PLAN OF REORGANIZATION - 17
or any grant of any options, warrants or other rights to purchase or
obtain (including upon conversion or exercise) shares of its capital
stock or other equity securities; or
(n) Except as disclosed in Schedule 5.22 hereof, any loan to
or other transaction with any officer, director or shareholder of the
Company giving rise to any claim or right of the Company against any
such person or of such person against the Company.
5.9 Tax Returns and Audits. Except as disclosed on Schedule 5.9, the
Company has duly and timely filed or duly and timely caused to be filed, or will
duly and timely file or cause to be filed with the appropriate taxing
authorities, all Tax Returns required to be filed by it for all periods ending
on or before the Closing Date. Each such Tax Return has been or will be prepared
in all material respects in compliance with all applicable laws and regulations.
Except as otherwise disclosed on Schedule 5.9, the Company has paid in full or
fully reserved against in the Company Financial Statements all taxes, interest,
penalties, assessments and deficiencies due or claimed to be due by the Company
to foreign, federal, state or local taxing authorities (including taxes on
properties, income, franchises, licenses, sales, use and payrolls). Except as
set forth on Schedule 5.9, all taxes shown as due on such Tax Returns have been
paid or will be timely paid. Except as set forth on Schedule 5.9, the Tax
Returns filed by the Company have not been, and are not being, to the knowledge
of the Company, examined by the IRS or other applicable taxing authorities for
any period which is open under the applicable statute of limitations nor are
there any pending or threatened examinations or tax claims asserted by any such
authorities. There are no tax Liens (other than Liens for taxes which are not
yet due and payable) on any of the property of the Company. Except as set forth
on Schedule 5.9 hereto, the Company has not granted any extensions of limitation
periods applicable to tax claims. Except jurisdictions in which the Company
filed Tax Returns, no claim has ever been made by a taxing authority that the
Company is or may be subject to taxation by that jurisdiction. True and correct
copies of all Tax Returns (and amendment claims for refunds), notices from
foreign, federal, state and local taxing authorities, tax examination reports
and statements of deficiencies assessed against or agreed to by the Company,
have been made available to the Acquiror. Except as otherwise disclosed on
Schedule 5.9, the Company is not a party to, or bound by, any tax indemnity, tax
sharing or tax allocation agreement. The Company is not a party to any agreement
that has resulted or would result, in the payment of any compensation to any
employee, which would constitute an "excess parachute payment," as defined in
Section 280G(a) of the Code. The Company has never been a member of an
"affiliated group," as defined in Section 1504(a) of the Code (other than a
group of which the Company is the sole member) and is not the owner of an
interest in a partnership, joint venture, trust, limited liability company or
other entity or organization. Except as reflected on the Tax Returns, the
Company has not made any material tax elections under any section of the Code,
including, without limitation, under any of Sections 108, 338, 441, 463, 472,
1017, 1033 or 4977 of the Code (or any predecessor thereof). The Company has not
filed a consent under Section 341(f) of the Code (or any predecessor thereof),
relating to collapsible corporations. None of the assets and properties of the
Company is an asset or property that the Acquiror or any of its affiliates is or
will be required to treat as being (a) owned by any other person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended, and in effect immediately before the enactment of the Tax Reform Act of
1986, or (b) tax-exempt use property within the meaning of Section 168(h)(1) of
the Code. No closing agreement pursuant to Section 7121 of the Code (or any
predecessor provision) or any similar
AGREEMENT AND PLAN OF REORGANIZATION - 18
provision of any state, local, or foreign law has been entered into by or with
respect to the Company or any assets thereof. Except as set forth on Schedule
5.9, the Company has not agreed to and is not required to make any adjustment
pursuant to Section 481(a) of the Code (or any predecessor provision) by reason
of any change in any accounting method. Except as otherwise disclosed on
Schedule 5.9, the Company is not subject to any limitation under Section 382 or
Section 383 of the Code.
5.10 Property. The Company does not own, directly or indirectly, any
fee interest in real property. Set forth on Schedule 5.10 is a complete and
accurate list of each Company location where property is leased by the Company.
With respect to each lease of the Company: (a) the lease has been validly
executed and delivered by the Company and, to the knowledge of the Company, by
the other party or parties thereto and is a binding agreement; (b) the Company
is not and to the Company's knowledge, no other party to the lease is in
material breach or default, and no event has occurred on the part of the Company
or, to the Company's knowledge, on the part of any other party which, with
notice or lapse of time, would constitute such a breach or default or permit
termination, modification or acceleration under the lease; (c) the lease will
continue to be binding in accordance with its terms following the Closing Date;
(d) the Company has not repudiated and, to the Company's knowledge, no other
party to the lease has repudiated any provision thereof; (e) there are no
disputes, oral agreements or delayed payment programs in effect as to the lease;
and (f) all facilities leased thereunder, taken as a whole, have been reasonably
maintained.
5.11 Tangible Property. The Company has good title to, or a valid
leasehold interest in, each item of tangible property, whether real, personal or
mixed, reflected on its books and records as owned or leased by it, subject to
no Liens except (i) Liens for taxes not yet due and payable; (ii) mechanics',
carriers', workmens', landlord's statutory and common law Liens either not
delinquent or being contested in good faith; (iii) imperfections of title,
restrictions, variances and easements that do not materially detract from value;
(iv) Liens described in the Company Financial Statements; and (v) Liens listed
on Schedule 5.11 hereto.
5.12 Licenses and Permits. The Company has obtained all material
licenses, product and establishment registrations, franchises, permits,
easements, certificates and consents necessary to the conduct of the Company's
business, except as provided on Schedule 5.12.
5.13 Assets Necessary to the Business. The personal property and other
assets owned or leased by the Company are sufficient in all material respects to
carry on the Company's business as presently conducted. Except as set forth in
Section 5.17 hereof, the tangible personal property of the Company necessary to
the operation of the business of the Company, taken as a whole, is fit for the
purposes for which they are presently being used and are in reasonably good
operating condition and repair, ordinary wear and tear excepted.
5.14 Books and Records. The books and records of the Company fairly
reflect the transactions to which the Company is a party or by which its
properties are bound, and such books and records are and have been properly kept
and maintained, with the revenues, expenses, assets and liabilities of the
Company accurately recorded therein.
AGREEMENT AND PLAN OF REORGANIZATION - 19
5.15 Questionable Payments. Neither the Company nor to the Company's
knowledge, any employee, agent, representative or shareholder of the Company
has, directly or indirectly, made any bribes, kickbacks, illegal payments or
illegal political contributions using Company funds or made any payments from
the Company's funds to governmental officials for improper purposes or made any
illegal payments from the Company's funds to obtain or retain business.
5.16 Environmental Matters. There are no claims, actions, suits,
proceedings or investigations pending against or affecting the Company's
business at law or in equity before any court or before or by any federal,
state, municipal or other governmental department, commission, board, agency or
instrumentality, relating to environmental matters. The Company is not subject
to any continuing court or administrative order, writ, injunction or decree
applicable to the Company's business relating to any environmental matter. The
Company to its knowledge is not in violation of or in default in any material
respect with regards to any existing statute, regulation, order, writ,
injunction or decree of any court or federal, state, municipal or other
governmental department, commission, board, agency or instrumentality relating
to any environmental matter.
5.17 Equipment. Except as set forth on Schedule 5.17, all items of
equipment of the Company, taken as a whole, are (a) mechanically sound and in a
condition to perform in the manner needed for the operation of the Company's
business; (b) in good cosmetic condition; and (c) in material compliance with
all applicable statutes, ordinances and regulations, including, without
limitation, those related to safety, in each case ordinary wear and tear
excepted.
5.18 Intellectual Property. Set forth on Schedule 5.18 hereto is a true
and complete list of all United States patents and patent applications; all
copyright registrations and applications to register copyrights; and all trade
name, trademark, service ▇▇▇▇, and trade dress registrations and applications to
register the same that are owned by the Company or which the Company is licensed
to use or under which the Company possesses any rights ("Company Registered
Intellectual Property"). Schedule 5.18 also lists any unregistered copyrights,
common law trademarks or service marks, or trade secrets of the Company
("Unregistered Company Intellectual Property"). The Company is not obligated or
under any liability whatsoever to make any payments by way of royalties, fees,
or otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service ▇▇▇▇, trade name, or other intangible asset, with respect to
the use thereof or in connection with the conduct of its business or otherwise.
The Company has no reason to believe that there are any conflicting rights which
might impair the Company's use of the Company Registered Intellectual Property
or Unregistered Company Intellectual Property and has not received any notice of
a conflict with the asserted rights of others with respect to any patent,
copyright, trade secret, or trademark right that could, singly or in the
aggregate, materially and adversely affect the business of the Company;
furthermore, to the Company's knowledge, no other persons or entities have
infringed upon or are infringing upon the Company Registered Intellectual
Property or the Unregistered Company Intellectual Property.
5.19 Insurance. The Company currently maintains fire and casualty,
general liability and workers compensation policies with reputable insurance
carriers, which the Company reasonably believes provide full and adequate
coverage for all normal risks incident to the business of the
AGREEMENT AND PLAN OF REORGANIZATION - 20
Company and its properties and assets. Set forth on Schedule 5.19 hereto is a
list of all insurance policies which are currently in effect for the Company.
5.20 Contracts. (a) Set forth on Schedule 5.20 is a list of all
material contracts, leases, arrangements and commitments (whether oral or
written) of the Company (collectively, the "Company Material Contracts"). Except
as set forth in Schedule 5.20, the Company is not a party to or bound or
affected by any contract, lease, arrangement or commitment (whether oral or
written) relating to: (i) the employment of any person other than personnel
employed at the pleasure of the Company in the ordinary course of business at
rates of compensation and on terms consistent with past business practice; (ii)
collective bargaining with, or any representation of any employees by, any labor
union or association; (iii) the acquisition of services, supplies, equipment or
other personal property involving more than $10,000 or which is not terminable
by the Company upon not more than 30 days' notice without obligation on the part
of the Company; (iv) the purchase or sale of real property; (v) distribution,
agency or construction; (vi) lending or advancing of funds (other than accounts
receivable); (vii) borrowing of funds or receipt of credit (other than accounts
payable); (viii) incurring of any obligation or liability (except for the
accounts payable); (ix) the sale of personal property; or (x) any matter or
transaction not in the ordinary course of business of the Company or
inconsistent with past business practice of the Company.
(b) The Company is not in default in any material respect
under any of the Company Material Contracts, except as disclosed on Schedule
5.20, and the Company Material Contracts are legal, valid and binding
obligations of the Company, and to the Company's knowledge, the respective
parties thereto, in accordance with their terms and, except to the extent
reflected in Schedule 5.20, have not been amended; and no defenses, offsets or
counterclaims thereto have been asserted nor has the Company waived any
substantial rights thereunder.
5.21 Litigation. Schedule 5.21 hereto lists (a) the name of each
action, complaint, petition, suit or other proceeding, whether civil or
criminal, in law or equity or before any arbitrator or government entity against
the Company and the amount of same; (b) any instances in which the Company is
subject to any judgment or order (other than orders of general applicability) of
any court of quasi-judicial or administrative agency of any jurisdiction,
domestic or foreign; or (c) any instances in which the Company is a plaintiff in
any action, domestic or foreign, judicial or administrative in which a
counterclaim against the Company is pending or might be brought. Except as set
forth on Schedule 5.21, there are no existing actions, suits, proceedings or
investigations that could result in any material adverse change in the
condition, financial or otherwise, of the Company, the same being appropriately
reserved against in the Company Financial Statements. There are no unsatisfied
judgments, orders (other than orders of general applicability), decrees or
stipulations affecting the Company or to which the Company is a party.
5.22 Employees. The Company has listed on Schedule 5.22 hereto (to the
extent not listed on Schedule 5.20 hereto) and has made available to the
Acquiror true and complete copies of: (a) any written employment agreements with
any officer or director of the Company; and (b) any written employment agreement
with any employee of the Company which by its terms may not be terminated by the
Company at will or which ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ payments. The Company has not entered
into any similar oral employment agreements. The Company is not a party to or
bound by
AGREEMENT AND PLAN OF REORGANIZATION - 21
any collective bargaining agreement. Except as disclosed on Schedule 5.22, there
are no loans or other obligations payable or owing by the Company to any
shareholder, officer, director or employee of the Company (except salaries and
wages incurred and accrued in the ordinary course of business), nor are there
any loans or debts payable or owing by any of such persons to the Company or,
except as described on Schedule 5.22 hereto, any guarantees by the Company of
any loan or obligation of any nature to which any such person is a party. The
Company has, in all material respects, complied with all laws and regulations
which relate to the employment of labor, employee civil rights or equal
employment opportunities. Except as set forth on Schedule 5.22 hereto, there is
no charge or complaint actually pending or, to the Company's knowledge,
threatened against the Company before the Equal Employment Opportunity
Commission or the Department of Labor or any state or local agency of similar
jurisdiction with respect to the Company's business. There is no organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of the Company.
5.23 Employee Benefit Plans. The Company has listed on Schedule 5.23
hereto and has made available to the Acquiror true and complete copies of (a)
any nonqualified deferred or incentive compensation or retirement plans or
arrangements, (b) any qualified retirement plans or arrangements, (c) any other
employee compensation, severance or termination pay or welfare benefit plans,
programs or arrangements, (d) any material employee benefit plans, programs, or
arrangements, and (e) any related trusts, insurance contracts or other funding
arrangements main tained, established or contributed to by the Company or any
entity (a "Company ERISA Affiliate") required to be aggregated with the Company
pursuant to the provisions of Sections 414(b), (c), (m) or (o) of the Code or
Section 4001(a)(14) of ERISA within the last six years or to which the Company
or any Company ERISA Affiliate is a party or otherwise is bound ("Company
Employee Benefit Plans"). Except as set forth on Schedule 5.23 hereto, with
respect to each Company Employee Benefit Plan for which an annual report has
been filed, no material adverse change has occurred with respect to the matters
covered by the annual report since the date thereof. The Company has made
available to the Acquiror true and complete copies of the following documents,
as applicable, with respect to each of the Company Employee Benefit Plans: (a)
current summary plan descriptions, (b) the three most recent annual reports on
the Form 5500 Series, (c) the three most recent actuarial reports, and (d) all
material communications received from or sent to the Internal Revenue Service or
the Department of Labor within the last two years (including a written
description of any material oral communications relating to the IRS Voluntary
Compliance Resolution or Closing Agreement programs). Each of the Company
Employee Benefits Plans (i) has been operated in all material respects in
accordance with its terms and applicable provisions of law, including ERISA and
the Code, and (ii) has not engaged in any "prohibited transaction" (as such term
is defined in Section 4975 of the Code or in Section 406 of ERISA) which would
result in a material liability. Each of the Company Employee Benefit Plans that
is a Pension Plan is qualified within the meaning of Section 401(a) of the Code,
except as heretofore disclosed in writing to the Acquiror, and either a
favorable determination letter has been issued by the IRS with respect to each
such Pension Plan or the applicable remedial amendment period under Treasury
Regulation Section 1.401(b)-1 has not ended. No Pension Plan has been amended
since issuance of the most recent determination letter by the IRS with respect
thereto, except as disclosed on Schedule 5.23. Each Pension Plan has been
administered in all material respects in accordance with Section 401(a) of the
Code, where applicable. Since the enactment of ERISA, neither the Company nor
any ERISA
AGREEMENT AND PLAN OF REORGANIZATION - 22
Affiliate has completely or partially terminated any employee pension benefit
plan, (as defined above) or withdrawn (in either a total or partial withdrawal)
from any multiemployer pension plan, as defined in Section 3(37)(A) of ERISA.
There is no suit, action or proceeding pending or threatened against or
affecting or likely to have an adverse impact on any Company Employee Benefit
Plan, and no claims have been filed against any Company Employee Benefit Plan,
other than routine claims for benefits in the ordinary course. One or more of
the Company Employee Benefit Plans may be covered by COBRA. If so, each such
plan has been operated in, and is in, compliance with COBRA in all material
respects. All notices required to be given under COBRA have been timely and
properly given in accordance with COBRA, and the rules and regulations
promulgated thereunder, and no employee, former employee or "qualified
beneficiary" (as defined in COBRA) has any claim or contingent claim against the
Company, any Subsidiary or any Company ERISA Affiliate for failure to comply
with COBRA or the rules and regulations promulgated thereunder. Schedule 5.23
lists all persons receiving benefits under COBRA. Except as disclosed in
Schedule 5.22 or Schedule 5.23, no Company Employee Benefit Plan which is not a
Pension Plan provides for continuing benefits or coverage for any participant or
beneficiary thereof after termination of the participant's employment (except as
may be required under COBRA and at the sole expense of the participant or
beneficiary). Neither the Company nor any Company ERISA Affiliate has engaged in
a transaction described in Section 4069(a) of ERISA. Neither the Company nor any
Company ERISA Affiliate is subject to withdrawal liability (whether asserted or
unasserted) under Section 4201, et seq., of ERISA. No employee or former
employee of the Company will become entitled to any bonus, retirement,
severance, job security or similar benefit or enhanced benefit (including
acceleration of an award, vesting or exercise of an incentive award) or any fee
or payment of any kind as a result of any of the transactions contemplated
hereby, except as disclosed on Schedule 5.23. The Company has not communicated
to any employee or former employee any intention or commitment to modify any
Company Employee Benefit Plan or to establish or implement any other employee or
retiree benefit or compensation plans or arrangements.
5.24 Legal Compliance. Except as set forth on Schedule 5.24 hereto, no
material claim has been filed against the Company alleging a violation of any
applicable law or regulation of any foreign, federal, state or local government
thereof.
5.25 Broker's Fees. Neither the Company nor anyone on its behalf has
any liability to any broker, finder, investment banker or agent, or has agreed
to pay any brokerage fees, finder's fees or commissions, or to reimburse any
expenses of any broker, finder, investment banker or agent in connection with
the Merger.
ARTICLE 6
PRE-CLOSING COVENANTS
6.1 Interim Operations of the Company. (a) The Company covenants and
agrees that, after the date hereof and prior to the Effective Time (unless the
Acquiror shall otherwise approve in writing, which approval shall not be
unreasonably withheld or delayed, and except as otherwise expressly contemplated
by this Agreement, including, but not limited to, paragraph (b) of this Section
6.1):
AGREEMENT AND PLAN OF REORGANIZATION - 23
(i) the business of the Company shall be conducted in
the ordinary and usual course and, to the extent consistent
therewith, the Company shall use its best efforts to preserve
its business organization intact and maintain its existing
relations and goodwill with customers, suppliers,
distributors, creditors, lessors, employees and business
associates;
(ii) the Company shall not (i) amend its Articles of
Incorporation or Bylaws or amend, modify or terminate any
stock option plan or Company Employee Benefit Plan, except as
described in 6.1(a)(iv) below; (ii) split, combine or
reclassify its outstanding shares of capital stock; (iii)
declare, set aside or pay any dividend payable in cash, stock,
or property in respect of any capital stock; or (iv)
repurchase, redeem or otherwise acquire, any shares of its
capital stock or any securities convertible into or
exchangeable or exercisable for any shares of its capital
stock;
(iii) the Company shall not (i) issue, sell, pledge,
dispose of or encumber any shares of, or securities
convertible into or exchangeable or exercisable for, or
options, warrants, calls, commitments or rights of any kind to
acquire, any shares of its capital stock of any class or any
other property or assets); (ii) other than in the ordinary and
usual course of business, transfer, lease, license, guarantee,
sell, mortgage, pledge, dispose of or encumber any other
material property or assets or incur or modify any material
indebtedness or other material liability; or (iii) make any
commitments for, make or authorize any capital expenditures
other than in the ordinary and usual course of business or, by
any means, make any acquisition of, or investment in, assets
or stock of any other person or entity;
(iv) the Company shall not terminate, establish,
adopt, enter into, make any new grants or awards under, amend
or otherwise modify, any stock option plan or Company Employee
Benefit Plan. In addition, the Company shall not increase the
salary, wage, bonus or other compensation of any employees
except increases occurring in the ordinary and usual course of
business (which shall include normal periodic performance
reviews and related compensation and benefit increases);
(v) the Company shall not settle or compromise any
material claims or litigation or, except in the ordinary and
usual course of business modify, amend or terminate any of the
Company Material Contracts or waive, release or assign any
material rights or claims;
(vi) the Company shall not make any tax election or
permit any insurance policy naming it as a beneficiary or
loss-payable payee to be canceled or terminated except in the
ordinary and usual course of business;
(vii) the Company shall not take any action or omit
to take any action that would cause any of the representations
and warranties of the Company herein to become untrue in any
material respect; and
AGREEMENT AND PLAN OF REORGANIZATION - 24
(viii) the Company shall not authorize or enter into
an agreement to do any of the foregoing.
(b) Notwithstanding anything herein to the contrary, prior to
the Effective Time, the Company shall take all action necessary to
ensure that there are no Company Convertible Securities outstanding as
of the Effective Time.
6.2 Conduct of the Acquiror. The Acquiror covenants and agrees that,
after the date hereof and prior to the Effective Time (unless the Company shall
otherwise approve in writing, which approval shall not be unreasonably withheld
or delayed, and except as otherwise expressly contemplated by this Agreement):
(i) the business of the Acquiror shall be conducted
in the ordinary and usual course and, to the extent consistent
therewith, the Acquiror shall use its best efforts to preserve
its business organization intact and maintain its existing
relations and goodwill with customers, suppliers,
distributors, creditors, lessors, employees and business
associates;
(ii) the Acquiror shall not (i) amend its Articles of
Incorporation or Bylaws or amend, modify or terminate any
stock option plan or Acquiror Employee Benefit Plan, except as
described in 6.2(a)(iv) below; (ii) split, combine or
reclassify its outstanding shares of capital stock; (iii)
declare, set aside or pay any dividend payable in cash, stock,
or property in respect of any capital stock; or (iv)
repurchase, redeem or otherwise acquire, any shares of its
capital stock or any securities convertible into or
exchangeable or exercisable for any shares of its capital
stock;
(iii) the Acquiror shall not (i) issue, sell, pledge,
dispose of or encumber any shares of, or securities
convertible into or exchangeable or exercisable for, or
options, warrants, calls, commitments or rights of any kind to
acquire, any shares of its capital stock of any class or any
other property or assets); (ii) other than in the ordinary and
usual course of business, transfer, lease, license, guarantee,
sell, mortgage, pledge, dispose of or encumber any other
material property or assets or incur or modify any material
indebtedness or other material liability; or (iii) make any
commitments for, make or authorize any capital expenditures
other than in the ordinary and usual course of business or, by
any means, make any acquisition of, or investment in, assets
or stock of any other person or entity;
(iv) the Acquiror shall not terminate, establish,
adopt, enter into, make any new grants or awards under, amend
or otherwise modify, any stock option plan or Acquiror
Employee Benefit Plan. In addition, the Acquiror shall not
increase the salary, wage, bonus or other compensation of any
employees except increases occurring in the ordinary and usual
course of business (which shall include normal periodic
performance reviews and related compensation and benefit
increases);
AGREEMENT AND PLAN OF REORGANIZATION - 25
(v) the Acquiror shall not settle or compromise any
material claims or litigation or, except in the ordinary and
usual course of business modify, amend or terminate any of the
Acquiror Material Contracts or waive, release or assign any
material rights or claims;
(vi) the Acquiror shall not make any tax election or
permit any insurance policy naming it as a beneficiary or
loss-payable payee to be canceled or terminated except in the
ordinary and usual course of business;
(vii) the Acquiror shall not take any action or omit
to take any action that would cause any of the representations
and warranties of the Acquiror and the Merger Sub herein to
become untrue in any material respect; and
(viii) the Acquiror shall not authorize or enter into
an agreement to do any of the foregoing.
6.3 Press Releases. The Company, the Acquiror and the Merger Sub will
consult with each other before issuing, and provide each other the opportunity
to review and comment upon, any press releases or other public statements with
respect to any transactions described in this Agreement, including the Merger,
and shall not issue any such press releases or make any such public statement
prior to such consultation, except as may be required by applicable law and
then, if practicable, only after consulting with the other parties hereto.
6.4 Access to Information and Confidentiality.
(a) Prior to the Closing Date, each of the Company and the
Acquiror shall afford to the other party and to the officers,
employees, accountants, counsel, financial advisors and other
representatives of such other party, reasonable access during normal
business hours to their respective premises, books and records and will
furnish to the other party (i) a copy of each report, schedule,
registration statement and other documents filed by it during such
period pursuant to the requirements of federal or state securities
laws, and (ii) such other information with respect to its business and
properties as such other party reasonably requests.
(b) Each of the Company and the Acquiror will, and will cause
its officers, directors, employees, agents and representatives to, (i)
hold in confidence, unless compelled to disclose by judicial or
administrative process, or, in the opinion of its counsel, by other
requirements of law, all nonpublic information concerning the other
party furnished in connection with the transactions contemplated by
this Agreement until such time as such information becomes publicly
available (otherwise than through the wrongful act of such person),
(ii) not release or disclose such information to any other person,
except in connection with this Agreement to its auditors, attorneys,
financial advisors, other consultants and advisors, and (iii) not use
such information for any competitive or other purpose other than with
respect to its consideration and evaluation of the transactions
contemplated by this Agreement. In the event of termination of this
Agreement for any
AGREEMENT AND PLAN OF REORGANIZATION - 26
reason, the parties hereto will promptly return or destroy all
documents containing nonpublic information so obtained from any other
party hereto and any copies made of such documents and any summaries,
analyses or compilations made therefrom.
6.5 Notice of Developments. Prior to the Closing, each of the parties
hereto shall promptly notify the other in writing of all events, circumstances,
facts and occurrences, whether arising prior to or subsequent to the date of
this Agreement, that will or are reasonably likely to result in any breach of a
representation or warranty or covenant made by the notifying party in this
Agreement or any failure to be satisfied of any condition to the obligations of
the party receiving such notice under this Agreement.
6.6 Merger Sub Stockholder Approval. The Acquiror, as the sole
shareholder of the Merger Sub, shall take all action necessary to effect the
necessary shareholder approval by the Merger Sub of this Agreement.
6.7 Reasonable Efforts; Consents, Approvals and Waivers. Upon the terms
and subject to the conditions set forth in this Agreement, each of the parties
agrees to use reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other party in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger, and the other
transactions contemplated by this Agreement, including, without limitation, (i)
the obtaining of all necessary consents, approvals or waivers required in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the Merger (provided that no such consent, approval or
waiver shall require such party to take any action that would impair the value
that such party reasonably attributes to the Merger), and (ii) the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated by this Agreement.
ARTICLE 7
CLOSING CONDITIONS
7.1 Conditions to Obligations of Each Party Under This Agreement. The
respective obligations of each party to effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived by the parties hereto, in whole or in part, to the extent permitted by
applicable law:
(a) No Restraining Action. No action, suit, or proceeding
before any court or governmental or regulatory authority will be
pending, no investigation by any governmental or regulatory authority
will have been commenced against the Company, the Acquiror or any of
the principals, officers or directors of either of them, seeking to
restrain, prevent or change the transactions contemplated hereby or
questioning the legality or validity of any such transactions or
seeking damages in connection with any such transactions.
(b) Consents and Approvals. All material governmental and
other third-party consents and approvals, if any, necessary to permit
the consummation of the transactions
AGREEMENT AND PLAN OF REORGANIZATION - 27
contemplated by this Agreement, or to permit the continued operation of
the business of the Surviving Corporation in substantially the same
manner after the Closing Date as the Company before, including, without
limitation, all required approvals of the NASD, will have been
received.
7.2 Conditions to the Acquiror's Obligations. The obligations of the
Acquiror to effect the Merger and the other transactions contemplated by this
Agreement are subject to the satisfaction or waiver of the following conditions
at or prior to the Closing:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of the Company in this Agreement or in
any certificate delivered to the Acquiror pursuant hereto as of the
date hereof will be deemed to have been made again at and as of the
Closing Date and (without regard to any Schedule updates furnished by
the Company after the date hereof unless consented to by the Acquiror)
will then be true and correct in all material respects, and (ii) the
Company will have performed and complied in all material respects with
all agreements and conditions required by this Agreement to be
performed or complied with by the Company prior to or on the Closing
Date.
(b) Closing Certificate. The receipt by the Acquiror of a
certificate executed by the Chief Executive Officer and Chief Financial
Officer of the Company dated the Closing Date, certifying that the
conditions specified in Section 7.2(a) hereof have been fulfilled.
(c) Investor Representation Letters. Each Shareholder shall
have completed, executed and delivered to the Acquiror an Investor
Questionnaire and an Accredited Investor Representation Letter
(pursuant to forms provided by the Acquiror) acceptable in all respects
to the Acquiror and all such Investor Questionnaires and Investor
Representation Letters shall be sufficient to satisfy the Acquiror, in
its reasonable discretion, of the availability of an exemption from the
registration requirements of the federal securities laws and any
applicable state securities or "blue sky" laws for the offer and sale
of shares of Acquiror Common Stock.
(d) Employment Agreements. ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇ shall have each entered into an employment agreement with
the Surviving Corporation substantially in the form attached hereto as
Exhibit A.
7.3 Conditions to the Company's Obligations. The obligations of the
Company to effect the Merger and the other transactions contemplated by this
Agreement are also subject to the satisfaction or waiver of the following
conditions at or prior to the Closing:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of the Acquiror in this Agreement or in
any certificate delivered to the Company pursuant hereto as of the date
hereof will be deemed to have been made again at and as of the Closing
Date (without regard to any Schedule updates furnished by the Acquiror
after the date hereof unless consented to by the Company) and will then
be true and correct in all material respects, and (ii) the Acquiror
will have performed and complied in all material
AGREEMENT AND PLAN OF REORGANIZATION - 28
respects with all agreements and conditions required by this Agreement
to be performed or complied with by the Acquiror prior to or on the
Closing Date.
(b) Closing Certificate. The receipt by the Company of a
certificate executed by the Chief Executive Officer and Chief Financial
Officer of the Acquiror dated the Closing Date, certifying that the
conditions specified in Section 7.3(a) hereof have been fulfilled.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Indemnification of the Company's Officers and Directors. For a
period of six (6) years following the Effective Time, the Company shall
indemnify, defend and hold harmless the present officers and directors of the
Company with respect to any act or omission occurring prior to the Effective
Time to the full extent permitted under the Company's Articles of Incorporation
and Bylaws as of the date hereof (to the extent consistent with applicable law);
provided, however, that such indemnification shall not apply to any matter which
constitutes a breach of the representations and warranties of the Acquiror under
this Agreement.
8.2 Shareholders Fee. On the Closing Date, the Surviving Corporation
shall pay to the Shareholders an aggregate amount of $100,000. Such amount shall
be shared equally by ▇▇▇▇▇▇▇ ▇▇▇▇ ("▇▇▇▇"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇") and
▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇").
8.3 Release from Guaranties. The Acquiror shall use reasonable efforts
and cooperate with each of ▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ to have each such
individual released from all guaranties listed on Schedule 8.3 attached hereto,
including by repayment of such debt or obligation if necessary to effect such
release, provided, however, that in no event shall the Acquiror be required to
repay more than $10,000.00 in indebtedness to obtain such releases.
8.4 Equity Subordinated Loans. The equity subordinated lenders (the
"Equity Subordinated Lenders") of the Company and the number of shares of
Company Common Stock (collectively, the "Equity Subordinated Lender Shares")
held by such Equity Subordinated Lenders are as follows: EMH Enterprises - 10
shares; ▇▇▇▇ - 10 shares, ▇▇▇▇▇▇▇▇ - 10 shares; and ▇▇▇▇▇▇▇ - 10 shares. All
equity subordinated loans of the Company currently outstanding shall remain
valid and in full force and effect at the Effective Time. Each Equity
Subordinated Lender Share held by the Equity Subordinated Lenders shall be
canceled as of the Effective Time pursuant to Section 3.1. The Surviving
Corporation shall issue to each Equity Subordinated Lender that number of shares
of the common stock of the Surviving Corporation equal to the number of Equity
Subordinated Lender Shares held by such Equity Subordinated Lender immediately
prior to the Effective Time.
8.5 Underwriter's Warrants. Any underwriter's warrants which may be
issued to the Surviving Corporation following the Effective Time shall be
allocated sixty percent (60%) to the Surviving Corporation and forty percent
(40%) to the Acquiror. ▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ may cause the Surviving
Corporation to further distribute such underwriter's warrants in any manner that
the Shareholders may determine in their sole discretion.
AGREEMENT AND PLAN OF REORGANIZATION - 29
8.6 Excluded Assets. Those assets listed on Annex III hereto shall be
transferred (to the extent necessary to remove such assets from the books of the
Company) to such persons or entities as the Company may determine in its sole
discretion prior to the Effective Time.
ARTICLE 9
TERMINATION
9.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, by mutual
written consent of the Company, the Acquiror and the Merger Sub, by action of
their respective Boards of Directors.
9.2 Termination by Either the Acquiror or the Company. This Agreement
may be terminated and the Merger may be abandoned at any time prior to the
Effective Time by action of the Board of Directors of either the Acquiror or the
Company if (i) the Merger shall not have been consummated by December 31, 1998,
or (ii) any order permanently restraining, enjoining or otherwise prohibiting
the Merger shall become final and nonappealable, provided that the right to
terminate this Agreement pursuant to clause (i) above shall not be available to
any party that has breached in any material respect its obligations under this
Agreement in any manner that shall have proximately contributed to the
occurrence of the failure of the Merger to be consummated.
9.3 Termination by the Company. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by action of
the Board of Directors of the Company if there has been a material breach by the
Acquiror or the Merger Sub of any representation, warranty, covenant or
agreement contained in this Agreement that is not curable or, if curable, is not
cured within 30 days after written notice of such breach is given by the Company
to the party committing such breach.
9.4 Termination by the Acquiror. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, by action
of the Board of Directors of the Acquiror if there has been a material breach by
the Company of any representation, warranty, covenant or agreement contained in
this Agreement that is not curable or, if curable, is not cured within 30 days
after written notice of such breach is given by the Acquiror to the party
committing such breach.
9.5 Effect of Termination and Abandonment. In the event of termination
of this Agreement and the abandonment of the Merger pursuant to this Article 9,
this Agreement shall become void and of no effect with no liability of any party
hereto (or any of its directors, officers, employees, agents, legal and
financial advisors or other representatives) except as otherwise set forth
herein; provided, however, except as otherwise provided herein, no such
termination shall relieve any party hereto of any liability or damages resulting
from any willful breach of this Agreement.
AGREEMENT AND PLAN OF REORGANIZATION - 30
ARTICLE 10
GENERAL PROVISIONS
10.1 Expenses. Except as otherwise specifically set forth herein, each
party hereto shall pay all of its own costs and expenses in connection with (i)
the preparation, negotiation, execution and delivery of this Agreement and all
related agreements, and (ii) the consummation of the transactions contemplated
hereby and thereby. Redstone shall cause its costs and expenses to be paid in
full as of the Effective Time.
10.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered personally,
sent by telex, telecopy, facsimile or overnight courier, or mailed by registered
or certified mail (postage prepaid and return receipt requested), to the party
to whom the same is so delivered, sent or mailed at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to the Acquiror or the Merger Sub:
Euromed, Inc.
c/o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company:
Redstone Securities, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
AGREEMENT AND PLAN OF REORGANIZATION - 31
With a copy to:
▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ 11530
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Notices delivered personally or by telex, telecopy or facsimile shall be deemed
delivered as of actual receipt, mailed notices shall be deemed delivered three
days after mailing and overnight courier notices shall be deemed delivered one
day after the date of sending.
10.3 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
sections and articles of this Agreement unless otherwise stated.
10.4 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated and the parties shall negotiate
in good faith to modify this Agreement to preserve each party's anticipated
benefits under this Agreement.
10.5 Miscellaneous. This Agreement (together with all other documents
and instruments referred to herein): (a) constitutes the entire agreement and
supersedes all other prior agreements and undertakings, both written and oral,
among the parties with respect to the subject matter hereof; (b) is not intended
to confer upon any other person any rights or remedies hereunder and (c) shall
not be assigned by operation of law or otherwise.
10.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE
INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICT OF LAWS THEREOF.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts which together shall constitute a single agreement.
[Balance of Page Intentionally Left Blank]
AGREEMENT AND PLAN OF REORGANIZATION - 32
AGREEMENT AND PLAN OF REORGANIZATION
Signature Page
IN WITNESS WHEREOF, the Acquiror, the Merger Sub and the Company have
executed or caused this Agreement to be executed on the date first written
above.
EUROMED, INC.
By:/s/: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Name:▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Title:Chief Executive Officer
REDSTONE ACQUISITION CORP.
By:▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Name:▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Title:Chief Executive Officer
REDSTONE SECURITIES, INC.
By:/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name:▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:President
AGREEMENT AND PLAN OF REORGANIZATION - 33
EXHIBIT A
Form of Employment Agreement
ANNEX I
Allocation of Merger Consideration
Merger
Consideration
Number of
Shares of
Number of Acquiror Number of
Company Common Restricted
Shareholder Shares Stock Shares
----------- ------ ----- ------
▇▇▇▇▇▇▇ ▇▇▇▇ 320 366,667 166,667
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 320 366,667 166,667
▇▇▇▇ ▇▇▇▇▇▇▇ 320 366,666 166,666
ANNEX II
Vesting Restrictions
The Restricted Shares will vest as follows: 166,667 shares when the
Acquiror Common Stock has traded at $2.25 or more for twenty (20) consecutive
trading days; an additional 166,667 shares when the Acquiror Common Stock has
traded at $3.75 or more for twenty (20) consecutive trading days; and the
remaining 166,666 shares when the Acquiror Common Stock has traded at $5.25 or
more for twenty (20) consecutive trading days (all such prices and number of
shares shall be appropriately adjusted in the event of any reclassification,
stock split (including a reverse split), stock dividend or distribution,
recapitalization, subdivision, or other similar capital transaction involving
the Acquiror Common Stock). Notwithstanding the foregoing, all of the Restricted
Shares will vest at any time that the Surviving Corporation reports annual net
income of more than (i) $200,000 during the calendar year ending December 31,
1999; (ii) $350,000 during the calendar year ending December 31, 2000; or (iii)
$525,000 during the calendar year ending December 31, 2001. Any remaining
Restricted Shares will vest in their entirety on the third anniversary of the
Closing Date.
ANNEX III
Excluded Assets
1. Accounts receivable (broker payable debit balance) from ▇▇▇ ▇▇▇▇▇▇▇ (not on
balance sheet).
2. Accounts receivable (broker payable debit balance) from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(not on balance sheet).
3. Accounts receivable (broker payable debit balance) from ▇▇▇▇ ▇▇▇▇▇ (not on
balance sheet).
4. Any proceeds from the Company's lawsuit against Franklin Consolidated
Mining Co. remaining after repayment to the Surviving Corporation of
the promissory note from ▇▇▇▇ ▇▇▇▇▇ and any out of pocket expenses
incurred by the Company or the Surviving Corporation in connection with
defending the counter suit.
5. Fifty percent of consulting options earned from Triangle Imaging Group
after payment to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ are to be excluded. The Acquiror will
be entitled to fifty percent of the consulting options earned from
Triangle Imaging Group after payment to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ provided the
Acquiror (or someone on its behalf) provides services and the research
report to Triangle Imaging Group and pays all outstanding subloans of
the Company.
6. Consulting options earned from Stelax.
7. Consulting options earned from An-Con Genetics, Inc.
8. Consulting options earned from Kaleidoscope Media Group, Inc.
9. Promissory Note from The Trading Post, Inc.
- Balance sheet balance on 7/31/98 ..$45,500.00
- Balance sheet balance on 8/31/98 ...45,500.00
- Balance sheet balance on closing ...32,000.00
10. 125,000 shares (pre-reverse split) of Transglobal Services, Inc.
(formerly Concept Technologies).
11. Four season tickets to New York Mets baseball games.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into this 6th day of
November, 1998, by and between REDSTONE SECURITIES, INC., a New Jersey
corporation (the "Employer"), and ▇▇▇▇▇▇▇ ▇▇▇▇, residing at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ (the "Employee").
W I T N E S S E T H:
1. Employment. The Employer hereby employs the Employee, and the
Employee hereby accepts such employment, upon the terms and subject to the
conditions set forth in this Agreement.
2. Term.
The term of employment under this Agreement shall commence on the date
hereof and shall continue for a period of three (3) years unless earlier
terminated as herein provided.
3. Compensation; Reimbursement; etc.
(a) The Employer shall pay to the Employee as compensation for all
services rendered by the Employee during the term of this Agreement a basic
annualized salary of $60,000 per year (the "Basic Salary"), or such other sums
as the parties may agree on from time to time, payable monthly or in other more
frequent installments, as determined by the Employer. The Basic Salary shall be
increased by ten percent (10%) each year.
(b) In addition to the Basic Salary paid pursuant to Section 3(a), the
Employer shall pay as incentive compensation an annual bonus in an amount equal
to twenty percent (20%) of the amount that the annual net income of the Employer
is in excess of the Target Earnings for such year. For purposes of this Section
3(b), the Target Earnings shall be $200,000 for calendar year 1999, $350,000 for
calendar year 2000 and $525,000 for calendar year 2001.
(c) The Employer shall reimburse the Employee for all reasonable
expenses incurred by the Employee in the performance of his duties under this
Agreement; provided, however, that the Employee must furnish to the Employer an
itemized account, satisfactory to the Employer, in substantiation of such
expenditures.
-5-
(d) The Employee shall be entitled to such fringe benefits including,
but not limited to, medical and insurance benefits as may be provided from time
to time by the Employer to other senior officers of the Employer, a
non-accountable expense account and a car/insurance allowance. The value of such
fringe benefits (exclusive of any 401-K matching contributions made by Employer)
shall initially be equal to $30,000 per year and shall increase by ten percent
(10%) each year.
(e) The Employee shall be entitled to a commission payout in the amount
of sixty percent (60%) on brokerage transactions effected by such Employee. No
ticket charges will be assessed against such commission payout.
4. Duties. The Employee is engaged as the Vice-President and Chief
Financial Officer. In addition, the Employee shall have such other duties and
hold such other offices as may from time to time be reasonably assigned to him
by the Board of Directors of the Employer.
5. Extent of Services; Vacations and Days Off.
(a) During the term of his employment under this Agreement, the
Employee shall devote such time, energy and attention during regular business
hours to the benefit and business of the Employer as may be reasonably necessary
in performing his duties pursuant to this Agreement.
(b) The Employee shall be entitled to vacations with pay and to such
personal and sick leave with pay in accordance with the policy of the Employer
as may be established from time to time by the Employer and applied to other
senior officers of the Employer.
6. Illness or Incapacity, Termination on Death, Etc.
(a) If the Employee dies during the term of his employment, the
Employer shall pay to the estate of the Employee such compensation, including
any bonus compensation earned but not yet paid, as would otherwise have been
payable to the Employee up to the end of the month in which his death occurs.
The Employer shall have no additional financial obligation under this Agreement
to the Employee or his estate. After receiving the payments provided in this
subparagraph (a), the Employee and his estate shall have no further rights under
this Agreement.
(b) (i) During any period of disability, illness or incapacity during
the term of this Agreement which renders the Employee at least temporarily
unable to perform the services required under this Agreement for a period which
shall not equal or exceed one hundred and eighty (180) days in any one (1) year
period, the Employee shall receive the compensation payable under Section 3(a)
of this Agreement plus any bonus compensation earned but not yet paid, less any
benefits received by him under any disability insurance carried by or provided
by the Employer. All rights of the Employee under this Agreement (other than
rights already accrued) shall terminate as provided below upon the Employee's
permanent disability (as defined below), although the Employee shall continue to
receive any disability benefits to which he may be entitled under any disability
income insurance which may be carried by or provided by the Employer from time
to time.
(ii) The term "permanent disability" as used in this Agreement
shall mean the inability of the Employee, as determined by the Board of
Directors of the Employer, by reason of physical or mental disability to perform
the duties required of him under this Agreement for a period of one hundred and
eighty (180) days in any one-year period. Successive periods of disability,
illness or incapacity will be considered separate periods unless the later
period of disability, illness or incapacity is due to the same or related cause
and commences less than six months from the ending of the previous period of
disability. Upon such determination, the Board of Directors may terminate the
Employee's employment under this Agreement upon ten (10) days' prior written
notice. If any determination of the Board of Directors with respect to permanent
disability is disputed by the Employee, the parties hereto agree to abide by the
decision of a panel of three physicians. The Employee and Employer shall each
appoint one member, and the third member of the panel shall be appointed by the
other two members. The Employee agrees to make himself available for and submit
to examinations by such physicians as may be directed by the Employer. Failure
to submit to any such examination shall constitute a breach of a material part
of this Agreement.
7. Other Terminations.
(a) (i) The Employee may terminate his employment hereunder upon giving
at least ninety (90) days' prior written notice.
(ii) If the Employee gives notice pursuant to Section 8(a)
above, the Employer shall have the right to relieve the Employee, in whole or in
part, of his duties under this Agreement (without reduction in compensation
through the termination date).
(b) (i) Except as otherwise provided in this Agreement, the Employer
may terminate the employment of the Employee hereunder only for good cause and
upon written notice; provided, however, that no breach or default by the
Employee shall be deemed to occur hereunder unless the Employee shall have
failed to cure the breach or default within thirty (30) days after he received
written notice thereof indicating that it is a notice of termination pursuant to
this Section of this Agreement.
(ii) As used herein, "good cause" shall include:
(1) the Employee's conviction of either a felony involving moral turpitude
or any crime in connection with his employment by the Employer which causes the
Employer a substantial detriment.
(2) actions by the Employee as an executive officer of the Employer which
clearly are contrary to the best interests of the Employer;
(3) the Employee's willful failure to take actions permitted by law and
necessary to implement policies of the Employer's Board of Directors which the
Board of Directors has communicated to him in writing, provided that minutes of
a Board of Directors meeting attended in its entirety by the Employee shall be
deemed communicated to the Employee;
(4) the Employee's continued failure to attend to his duties as an
executive officer of the Employer; or
(5) any condition which either resulted from the Employee's substantial
dependence, as determined by the Board of Directors of the Employer, on alcohol,
or any narcotic drug or other controlled or illegal substance. If any
determination of substantial dependence is disputed by the Employee, the parties
hereto agree to abide by the decision of a panel of three physicians appointed
in the manner and subject to the same penalties for noncompliance as specified
in Section 7(b)(ii) of this Agreement.
(iii) Termination of the employment of the Employee for
reasons other than those expressly specified in this Agreement as good cause
shall be deemed to be a termination of employment "without good cause."
(c) (i) If the Employer shall terminate the employment of the Employee
without good cause effective on a date earlier than the termination date
provided for in Section 2 (with the effective date of termination as so
identified by the Employer being referred to herein as the "Accelerated
Termination Date"), the Employee, until the termination date provided for in
Section 2 or until the date which is six (6) months after Accelerated
Termination Date, whichever is later, shall continue to receive the salary and
other compensation and employee benefits that the Employer has heretofore in
Section 3 agreed to pay and to provide for the Employee, in each case in the
amount and kind and at the time provided for in Section 3; provided that,
notwithstanding such termination of employment, the Employee's covenants set
forth in Section 10 and Section 11 are intended to and shall remain in full
force and effect.
(ii) The parties agree that, because there can be no exact
measure of the damage that would occur to the Employee as a result of a
termination by the Employer of the Employee's employment without good cause, the
payments and benefits paid and provided pursuant to this Section 8(c) shall be
deemed to constitute liquidated damages and not a penalty for the Employer's
termination of the Employee's employment without good cause, and the Employer
agrees that the Employee should not be required to mitigate his damages.
(d) If the employment of the Employee is terminated for good cause
under Section 8(b)(ii) of this Agreement, or if the Employee voluntarily
terminates his employment by written notice to the Employer under Section 8(a)
of this Agreement, the Employer shall pay to the Employee any compensation
earned but not paid to the Employee prior to the effective date of such
termination. Under such circumstances, such payment shall be in full and
complete discharge of any and all liabilities or obligations of the Employer to
the Employee hereunder, and the Employee shall be entitled to no further
benefits under this Agreement.
8. Disclosure. The Employee agrees that during the term of his
employment by the Employer, he will disclose and disclose only to the Employer
all ideas, methods, plans, developments or improvements known by him which
relate directly or indirectly to the business of the Employer, whether acquired
by the Employee before or during his employment by the Employer. Nothing in this
Section 9 shall be construed as requiring any such communication where the idea,
plan, method or development is lawfully protected from disclosure as a trade
secret of a third party or by any other lawful prohibition against such
communication.
9. Confidentiality. The Employee agrees to keep in strict secrecy and
confidence any and all information the Employee assimilates or to which he has
access during his employment by the Employer and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Employer. The Employee agrees that both during and after the term of his
employment by the Employer, he will not, without the prior written consent of
the Employer, disclose any such confidential information to any third person,
partnership, joint venture, company, corporation or other organization.
10. Noncompetition and Nonsolicitation.
The Employee hereby acknowledges that, during and solely as a result of
his employment by the Employer, he has received and shall continue to receive:
(1) special training and education with respect to the operations of a
registered broker/dealer in securities and other related matters, and (2) access
to confidential information and business and professional contacts. In
consideration of the special and unique opportunities afforded to the Employee
by the Employer as a result of the Employee's employment, as outlined in the
previous sentence, the Employee hereby agrees as follows:
(a) During the term of the Employee's employment, whether pursuant to
this Agreement, any automatic or other renewal hereof or otherwise, and, except
as may be otherwise herein provided, for a period of one (1) year after the
termination of his employment with the Employer, regardless of the reason for
such termination, the Employee shall not, directly or indirectly, exercise
control over any business which competes with the business of the Employer. For
purposes of this Agreement, "control" shall mean acting in a decision making
capacity for any person, firm, partnership, corporation or other entity so
competing with the Employer (a "Competing Entity"). The Employee shall not own
an equity interest in any Competing Entity. The restrictions of this Section 10
shall not be violated by outside business investments that do not in any manner
conflict with the services to be rendered by the Employee for the Employer and
that do not diminish or detract from the Employee's ability to render his
required attention to the business of the Employer.
(b) During his employment with the Employer and, except as may be
otherwise herein provided, for a period of two (2) years following the
termination of his employment with the Employer, regardless of the reason for
such termination, the Employee agrees he will refrain from and will not,
directly or indirectly, as an individual, partner, officer, director,
stockholder, employee, advisor, independent contractor, joint venturer,
consultant, agent, representative, salesman or otherwise (1) solicit any of the
employees of the Employer to terminate their employment or (2) accept employment
with or seek remuneration by any of the clients or customers of the Employer
with whom the Employer did business during the term of the Employee's
employment.
(c) The period of time during which the Employee is prohibited from
engaging in certain business practices pursuant to Sections 10(a) or (b) shall
be extended by any length of time during which the Employee is in breach of such
covenants.
(d) It is understood by and between the parties hereto that the
foregoing restrictive covenants set forth in Sections 10(a) through (c) are
essential elements of this Agreement, and that, but for the agreement of the
Employee to comply with such covenants, the Employer would not have agreed to
enter into this Agreement. Such covenants by the Employee shall be construed as
agreements independent of any other provision in this Agreement. The existence
of any claim or cause of action of the Employee against the Employer, whether
predicated on this Agreement, or otherwise, shall not constitute a defense to
the enforcement by the Employer of such covenants.
(e) It is agreed by the Employer and Employee that if any portion of
the covenants set forth in this Section 10 are held to be invalid, unreasonable,
arbitrary or against public policy, then such portion of such covenants shall be
considered divisible both as to time and geographical area. The Employer and
Employee agree that, if any court of competent jurisdiction determines the
specified time period or the specified geographical area applicable to this
Section 10 to be invalid, unreasonable, arbitrary or against public policy, a
lesser time period or geographical area which is determined to be reasonable,
non-arbitrary and not against public policy may be enforced against the
Employee. The Employer and the Employee agree that the foregoing covenants are
appropriate and reasonable when considered in light of the nature and extent of
the business conducted by the Employer.
11. Specific Performance. The Employee agrees that damages at law will
be an insufficient remedy to the Employer if the Employee violates the terms of
Sections 9, 10 or 11 of this Agreement and that the Employer would suffer
irreparable damage as a result of such violation. Accordingly, it is agreed that
the Employer shall be entitled, upon application to a court of competent
jurisdiction, to obtain injunctive relief to enforce the provisions of such
Sections, which injunctive relief shall be in addition to any other rights or
remedies available to the Employer. The Employee agrees to pay to the Employer
all costs and expenses incurred by the Employer relating to the enforcement of
the terms of Sections 9, 10 or 11 of this Agreement, including reasonable fees
and disbursements of counsel (both at trial and in appellate proceedings).
12. Compliance with Other Agreements. The Employee represents and
warrants that the execution of this Agreement by him and his performance of his
obligations hereunder will not conflict with, result in the breach of any
provision of or the termination of or constitute a default under any Agreement
to which the Employee is a party or by which the Employee is or may be bound.
13. Waiver of Breach. The waiver by the Employer of a breach of any of
the provisions of this Agreement by the Employee shall not be construed as a
waiver of any subsequent breach by the Employee.
14. Binding Effect; Assignment. The rights and obligations of the
Employer under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Employer. This Agreement is a personal
employment contract and the rights, obligations and interests of the Employee
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
15. Entire Agreement. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge is sought.
16. Construction and Interpretation.
(a) This Agreement shall be construed pursuant to and governed by the
laws of the State of New York.
(b) The headings of the various sections in this Agreement are inserted
for convenience of the parties and shall not affect the meaning, construction or
interpretation of this Agreement.
(c) Any provision of this Agreement which is determined by a court of
competent jurisdiction to be prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or non-authorization without invalidating the
remaining provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction. In any such case, such
determination shall not affect any other provision of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect. If
any provision or term of this Agreement is susceptible to two or more
constructions or interpretations, one or more of which would render the
provision or term void or unenforceable, the parties agree that a construction
or interpretation which renders the term or provision valid shall be favored.
17. Notice. All notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy or
similar electronic transmission method; one working day after it is sent, if
sent by recognized expedited delivery service; and five days after it is sent,
if mailed, first class mail, certified mail, return receipt requested, with
postage prepaid. In each case notice shall be sent to:
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To the Employer: Redstone Securities, Inc.
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Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
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Telecopy: (▇▇▇)▇▇▇-▇▇▇▇
To the Employee at his address herein first above written.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
REDSTONE SECURITIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
EMPLOYEE:
/S/ ▇▇▇▇▇▇▇ ▇▇▇▇
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into this 6th day of
November, 1998, by and between REDSTONE SECURITIES, INC., a New Jersey
corporation (the "Employer"), and ▇▇▇▇ ▇▇▇▇▇▇▇, residing at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ (the "Employee").
W I T N E S S E T H:
1. Employment. The Employer hereby employs the Employee, and the
Employee hereby accepts such employment, upon the terms and subject to the
conditions set forth in this Agreement.
2. Term.
The term of employment under this Agreement shall commence on the date
hereof and shall continue for a period of three (3) years unless earlier
terminated as herein provided.
3. Compensation; Reimbursement; etc.
(a) The Employer shall pay to the Employee as compensation for all
services rendered by the Employee during the term of this Agreement a basic
annualized salary of $60,000 per year (the "Basic Salary"), or such other sums
as the parties may agree on from time to time, payable monthly or in other more
frequent installments, as determined by the Employer. The Basic Salary shall be
increased by ten percent (10%) each year.
(b) In addition to the Basic Salary paid pursuant to Section 3(a), the
Employer shall pay as incentive compensation an annual bonus in an amount equal
to twenty percent (20%) of the amount that the annual net income of the Employer
is in excess of the Target Earnings for such year. For purposes of this Section
3(b), the Target Earnings shall be $200,000 for calendar year 1999, $350,000 for
calendar year 2000 and $525,000 for calendar year 2001.
(c) The Employer shall reimburse the Employee for all reasonable
expenses incurred by the Employee in the performance of his duties under this
Agreement; provided, however, that the Employee must furnish to the Employer an
itemized account, satisfactory to the Employer, in substantiation of such
expenditures.
7
(d) The Employee shall be entitled to such fringe benefits including,
but not limited to, medical and insurance benefits as may be provided from time
to time by the Employer to other senior officers of the Employer, a
non-accountable expense account and a car/insurance allowance. The value of such
fringe benefits (exclusive of any 401-K matching contributions made by Employer)
shall initially be equal to $30,000 per year and shall increase by ten percent
(10%) each year.
(e) The Employee shall be entitled to a commission payout in the amount
of sixty percent (60%) on brokerage transactions effected by such Employee. No
ticket charges will be assessed against such commission payout.
4. Duties. The Employee is engaged as the Vice-President. In addition,
the Employee shall have such other duties and hold such other offices as may
from time to time be reasonably assigned to him by the Board of Directors of the
Employer.
5. Extent of Services; Vacations and Days Off.
(a) During the term of his employment under this Agreement, the
Employee shall devote such time, energy and attention during regular business
hours to the benefit and business of the Employer as may be reasonably necessary
in performing his duties pursuant to this Agreement.
(b) The Employee shall be entitled to vacations with pay and to such
personal and sick leave with pay in accordance with the policy of the Employer
as may be established from time to time by the Employer and applied to other
senior officers of the Employer.
6. Illness or Incapacity, Termination on Death, Etc.
(a) If the Employee dies during the term of his employment, the
Employer shall pay to the estate of the Employee such compensation, including
any bonus compensation earned but not yet paid, as would otherwise have been
payable to the Employee up to the end of the month in which his death occurs.
The Employer shall have no additional financial obligation under this Agreement
to the Employee or his estate. After receiving the payments provided in this
subparagraph (a), the Employee and his estate shall have no further rights under
this Agreement.
(b) (i) During any period of disability, illness or incapacity during
the term of this Agreement which renders the Employee at least temporarily
unable to perform the services required under this Agreement for a period which
shall not equal or exceed one hundred and eighty (180) days in any one (1) year
period, the Employee shall receive the compensation payable under Section 3(a)
of this Agreement plus any bonus compensation earned but not yet paid, less any
benefits received by him under any disability insurance carried by or provided
by the Employer. All rights of the Employee under this Agreement (other than
rights already accrued) shall terminate as provided below upon the Employee's
permanent disability (as defined below), although the Employee shall continue to
receive any disability benefits to which he may be entitled under any disability
income insurance which may be carried by or provided by the Employer from time
to time.
(ii) The term "permanent disability" as used in this Agreement
shall mean the inability of the Employee, as determined by the Board of
Directors of the Employer, by reason of physical or mental disability to perform
the duties required of him under this Agreement for a period of one hundred and
eighty (180) days in any one-year period. Successive periods of disability,
illness or incapacity will be considered separate periods unless the later
period of disability, illness or incapacity is due to the same or related cause
and commences less than six months from the ending of the previous period of
disability. Upon such determination, the Board of Directors may terminate the
Employee's employment under this Agreement upon ten (10) days' prior written
notice. If any determination of the Board of Directors with respect to permanent
disability is disputed by the Employee, the parties hereto agree to abide by the
decision of a panel of three physicians. The Employee and Employer shall each
appoint one member, and the third member of the panel shall be appointed by the
other two members. The Employee agrees to make himself available for and submit
to examinations by such physicians as may be directed by the Employer. Failure
to submit to any such examination shall constitute a breach of a material part
of this Agreement.
7. Other Terminations.
(a) (i) The Employee may terminate his employment hereunder upon giving
at least ninety (90) days' prior written notice.
(ii) If the Employee gives notice pursuant to Section 8(a)
above, the Employer shall have the right to relieve the Employee, in whole or in
part, of his duties under this Agreement (without reduction in compensation
through the termination date).
(b) (i) Except as otherwise provided in this Agreement, the Employer
may terminate the employment of the Employee hereunder only for good cause and
upon written notice; provided, however, that no breach or default by the
Employee shall be deemed to occur hereunder unless the Employee shall have
failed to cure the breach or default within thirty (30) days after he received
written notice thereof indicating that it is a notice of termination pursuant to
this Section of this Agreement.
(ii) As used herein, "good cause" shall include:
(1) the Employee's conviction of either a felony involving moral turpitude or
any crime in connection with his employment by the Employer which causes the
Employer a substantial detriment.
(2) actions by the Employee as an executive officer of the Employer which
clearly are contrary to the best interests of the Employer;
(3) the Employee's willful failure to take actions permitted by law and
necessary to implement policies of the Employer's Board of Directors which the
Board of Directors has communicated to him in writing, provided that minutes of
a Board of Directors meeting attended in its entirety by the Employee shall be
deemed communicated to the Employee;
(4) the Employee's continued failure to attend to his duties as an
executive officer of the Employer; or
(5) any condition which either resulted from the Employee's substantial
dependence, as determined by the Board of Directors of the Employer, on alcohol,
or any narcotic drug or other controlled or illegal substance. If any
determination of substantial dependence is disputed by the Employee, the parties
hereto agree to abide by the decision of a panel of three physicians appointed
in the manner and subject to the same penalties for noncompliance as specified
in Section 7(b)(ii) of this Agreement.
(iii) Termination of the employment of the Employee for
reasons other than those expressly specified in this Agreement as good cause
shall be deemed to be a termination of employment "without good cause."
(c) (i) If the Employer shall terminate the employment of the Employee
without good cause effective on a date earlier than the termination date
provided for in Section 2 (with the effective date of termination as so
identified by the Employer being referred to herein as the "Accelerated
Termination Date"), the Employee, until the termination date provided for in
Section 2 or until the date which is six (6) months after Accelerated
Termination Date, whichever is later, shall continue to receive the salary and
other compensation and employee benefits that the Employer has heretofore in
Section 3 agreed to pay and to provide for the Employee, in each case in the
amount and kind and at the time provided for in Section 3; provided that,
notwithstanding such termination of employment, the Employee's covenants set
forth in Section 10 and Section 11 are intended to and shall remain in full
force and effect.
(ii) The parties agree that, because there can be no exact
measure of the damage that would occur to the Employee as a result of a
termination by the Employer of the Employee's employment without good cause, the
payments and benefits paid and provided pursuant to this Section 8(c) shall be
deemed to constitute liquidated damages and not a penalty for the Employer's
termination of the Employee's employment without good cause, and the Employer
agrees that the Employee should not be required to mitigate his damages.
(d) If the employment of the Employee is terminated for good cause
under Section 8(b)(ii) of this Agreement, or if the Employee voluntarily
terminates his employment by written notice to the Employer under Section 8(a)
of this Agreement, the Employer shall pay to the Employee any compensation
earned but not paid to the Employee prior to the effective date of such
termination. Under such circumstances, such payment shall be in full and
complete discharge of any and all liabilities or obligations of the Employer to
the Employee hereunder, and the Employee shall be entitled to no further
benefits under this Agreement.
8. Disclosure. The Employee agrees that during the term of his
employment by the Employer, he will disclose and disclose only to the Employer
all ideas, methods, plans, developments or improvements known by him which
relate directly or indirectly to the business of the Employer, whether acquired
by the Employee before or during his employment by the Employer. Nothing in this
Section 9 shall be construed as requiring any such communication where the idea,
plan, method or development is lawfully protected from disclosure as a trade
secret of a third party or by any other lawful prohibition against such
communication.
9. Confidentiality. The Employee agrees to keep in strict secrecy and
confidence any and all information the Employee assimilates or to which he has
access during his employment by the Employer and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Employer. The Employee agrees that both during and after the term of his
employment by the Employer, he will not, without the prior written consent of
the Employer, disclose any such confidential information to any third person,
partnership, joint venture, company, corporation or other organization.
10. Noncompetition and Nonsolicitation.
The Employee hereby acknowledges that, during and solely as a result of
his employment by the Employer, he has received and shall continue to receive:
(1) special training and education with respect to the operations of a
registered broker/dealer in securities and other related matters, and (2) access
to confidential information and business and professional contacts. In
consideration of the special and unique opportunities afforded to the Employee
by the Employer as a result of the Employee's employment, as outlined in the
previous sentence, the Employee hereby agrees as follows:
(a) During the term of the Employee's employment, whether pursuant to
this Agreement, any automatic or other renewal hereof or otherwise, and, except
as may be otherwise herein provided, for a period of one (1) year after the
termination of his employment with the Employer, regardless of the reason for
such termination, the Employee shall not, directly or indirectly, exercise
control over any business which competes with the business of the Employer. For
purposes of this Agreement, "control" shall mean acting in a decision making
capacity for any person, firm, partnership, corporation or other entity so
competing with the Employer (a "Competing Entity"). The Employee shall not own
an equity interest in any Competing Entity. The restrictions of this Section 10
shall not be violated by outside business investments that do not in any manner
conflict with the services to be rendered by the Employee for the Employer and
that do not diminish or detract from the Employee's ability to render his
required attention to the business of the Employer.
(b) During his employment with the Employer and, except as may be
otherwise herein provided, for a period of two (2) years following the
termination of his employment with the Employer, regardless of the reason for
such termination, the Employee agrees he will refrain from and will not,
directly or indirectly, as an individual, partner, officer, director,
stockholder, employee, advisor, independent contractor, joint venturer,
consultant, agent, representative, salesman or otherwise (1) solicit any of the
employees of the Employer to terminate their employment or (2) accept employment
with or seek remuneration by any of the clients or customers of the Employer
with whom the Employer did business during the term of the Employee's
employment.
(c) The period of time during which the Employee is prohibited from
engaging in certain business practices pursuant to Sections 10(a) or (b) shall
be extended by any length of time during which the Employee is in breach of such
covenants.
(d) It is understood by and between the parties hereto that the
foregoing restrictive covenants set forth in Sections 10(a) through (c) are
essential elements of this Agreement, and that, but for the agreement of the
Employee to comply with such covenants, the Employer would not have agreed to
enter into this Agreement. Such covenants by the Employee shall be construed as
agreements independent of any other provision in this Agreement. The existence
of any claim or cause of action of the Employee against the Employer, whether
predicated on this Agreement, or otherwise, shall not constitute a defense to
the enforcement by the Employer of such covenants.
(e) It is agreed by the Employer and Employee that if any portion of
the covenants set forth in this Section 10 are held to be invalid, unreasonable,
arbitrary or against public policy, then such portion of such covenants shall be
considered divisible both as to time and geographical area. The Employer and
Employee agree that, if any court of competent jurisdiction determines the
specified time period or the specified geographical area applicable to this
Section 10 to be invalid, unreasonable, arbitrary or against public policy, a
lesser time period or geographical area which is determined to be reasonable,
non-arbitrary and not against public policy may be enforced against the
Employee. The Employer and the Employee agree that the foregoing covenants are
appropriate and reasonable when considered in light of the nature and extent of
the business conducted by the Employer.
11. Specific Performance. The Employee agrees that damages at law will
be an insufficient remedy to the Employer if the Employee violates the terms of
Sections 9, 10 or 11 of this Agreement and that the Employer would suffer
irreparable damage as a result of such violation. Accordingly, it is agreed that
the Employer shall be entitled, upon application to a court of competent
jurisdiction, to obtain injunctive relief to enforce the provisions of such
Sections, which injunctive relief shall be in addition to any other rights or
remedies available to the Employer. The Employee agrees to pay to the Employer
all costs and expenses incurred by the Employer relating to the enforcement of
the terms of Sections 9, 10 or 11 of this Agreement, including reasonable fees
and disbursements of counsel (both at trial and in appellate proceedings).
12. Compliance with Other Agreements. The Employee represents and
warrants that the execution of this Agreement by him and his performance of his
obligations hereunder will not conflict with, result in the breach of any
provision of or the termination of or constitute a default under any Agreement
to which the Employee is a party or by which the Employee is or may be bound.
13. Waiver of Breach. The waiver by the Employer of a breach of any of
the provisions of this Agreement by the Employee shall not be construed as a
waiver of any subsequent breach by the Employee.
14. Binding Effect; Assignment. The rights and obligations of the
Employer under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Employer. This Agreement is a personal
employment contract and the rights, obligations and interests of the Employee
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
15. Entire Agreement. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge is sought.
16. Construction and Interpretation.
(a) This Agreement shall be construed pursuant to and governed by the
laws of the State of New York.
(b) The headings of the various sections in this Agreement are inserted
for convenience of the parties and shall not affect the meaning, construction or
interpretation of this Agreement.
(c) Any provision of this Agreement which is determined by a court of
competent jurisdiction to be prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or non-authorization without invalidating the
remaining provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction. In any such case, such
determination shall not affect any other provision of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect. If
any provision or term of this Agreement is susceptible to two or more
constructions or interpretations, one or more of which would render the
provision or term void or unenforceable, the parties agree that a construction
or interpretation which renders the term or provision valid shall be favored.
17. Notice. All notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy or
similar electronic transmission method; one working day after it is sent, if
sent by recognized expedited delivery service; and five days after it is sent,
if mailed, first class mail, certified mail, return receipt requested, with
postage prepaid. In each case notice shall be sent to:
To the Employer:
Redstone Securities, Inc.
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Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
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▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: 214/987-2091
To the Employee at his address herein first above written.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
REDSTONE SECURITIES, INC.
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Title: Chief Executive Officer
EMPLOYEE:
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into this 6th day of
November, 1998, by and between REDSTONE SECURITIES, INC., a New Jersey
corporation (the "Employer"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, residing at ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ (the "Employee").
W I T N E S S E T H:
1. Employment. The Employer hereby employs the Employee, and the
Employee hereby accepts such employment, upon the terms and subject to the
conditions set forth in this Agreement.
2. Term.
The term of employment under this Agreement shall commence on the date
hereof and shall continue for a period of three (3) years unless earlier
terminated as herein provided.
3. Compensation; Reimbursement; etc.
(a) The Employer shall pay to the Employee as compensation for all
services rendered by the Employee during the term of this Agreement a basic
annualized salary of $60,000 per year (the "Basic Salary"), or such other sums
as the parties may agree on from time to time, payable monthly or in other more
frequent installments, as determined by the Employer. The Basic Salary shall be
increased by ten percent (10%) each year.
(b) In addition to the Basic Salary paid pursuant to Section 3(a), the
Employer shall pay as incentive compensation an annual bonus in an amount equal
to twenty percent (20%) of the amount that the annual net income of the Employer
is in excess of the Target Earnings for such year. For purposes of this Section
3(b), the Target Earnings shall be $200,000 for calendar year 1999, $350,000 for
calendar year 2000 and $525,000 for calendar year 2001.
(c) The Employer shall reimburse the Employee for all reasonable
expenses incurred by the Employee in the performance of his duties under this
Agreement; provided, however, that the Employee must furnish to the Employer an
itemized account, satisfactory to the Employer, in substantiation of such
expenditures.
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(d) The Employee shall be entitled to such fringe benefits including,
but not limited to, medical and insurance benefits as may be provided from time
to time by the Employer to other senior officers of the Employer, a
non-accountable expense account and a car/insurance allowance. The value of such
fringe benefits (exclusive of any 401-K matching contributions made by Employer)
shall initially be equal to $30,000 per year and shall increase by ten percent
(10%) each year.
(e) The Employee shall be entitled to a commission payout in the amount
of sixty percent (60%) on brokerage transactions effected by such Employee. No
ticket charges will be assessed against such commission payout.
4. Duties. The Employee is engaged as the President. In addition, the
Employee shall have such other duties and hold such other offices as may from
time to time be reasonably assigned to him by the Board of Directors of the
Employer.
5. Extent of Services; Vacations and Days Off.
(a) During the term of his employment under this Agreement, the
Employee shall devote such time, energy and attention during regular business
hours to the benefit and business of the Employer as may be reasonably necessary
in performing his duties pursuant to this Agreement.
(b) The Employee shall be entitled to vacations with pay and to such
personal and sick leave with pay in accordance with the policy of the Employer
as may be established from time to time by the Employer and applied to other
senior officers of the Employer.
6. Illness or Incapacity, Termination on Death, Etc.
(a) If the Employee dies during the term of his employment, the
Employer shall pay to the estate of the Employee such compensation, including
any bonus compensation earned but not yet paid, as would otherwise have been
payable to the Employee up to the end of the month in which his death occurs.
The Employer shall have no additional financial obligation under this Agreement
to the Employee or his estate. After receiving the payments provided in this
subparagraph (a), the Employee and his estate shall have no further rights under
this Agreement.
(b) (i) During any period of disability, illness or incapacity during
the term of this Agreement which renders the Employee at least temporarily
unable to perform the services required under this Agreement for a period which
shall not equal or exceed one hundred and eighty (180) days in any one (1) year
period, the Employee shall receive the compensation payable under Section 3(a)
of this Agreement plus any bonus compensation earned but not yet paid, less any
benefits received by him under any disability insurance carried by or provided
by the Employer. All rights of the Employee under this Agreement (other than
rights already accrued) shall terminate as provided below upon the Employee's
permanent disability (as defined below), although the Employee shall continue to
receive any disability benefits to which he may be entitled under any disability
income insurance which may be carried by or provided by the Employer from time
to time.
(ii) The term "permanent disability" as used in this Agreement
shall mean the inability of the Employee, as determined by the Board of
Directors of the Employer, by reason of physical or mental disability to perform
the duties required of him under this Agreement for a period of one hundred and
eighty (180) days in any one-year period. Successive periods of disability,
illness or incapacity will be considered separate periods unless the later
period of disability, illness or incapacity is due to the same or related cause
and commences less than six months from the ending of the previous period of
disability. Upon such determination, the Board of Directors may terminate the
Employee's employment under this Agreement upon ten (10) days' prior written
notice. If any determination of the Board of Directors with respect to permanent
disability is disputed by the Employee, the parties hereto agree to abide by the
decision of a panel of three physicians. The Employee and Employer shall each
appoint one member, and the third member of the panel shall be appointed by the
other two members. The Employee agrees to make himself available for and submit
to examinations by such physicians as may be directed by the Employer. Failure
to submit to any such examination shall constitute a breach of a material part
of this Agreement.
7. Other Terminations.
(a) (i) The Employee may terminate his employment hereunder upon giving
at least ninety (90) days' prior written notice.
(ii) If the Employee gives notice pursuant to Section 8(a)
above, the Employer shall have the right to relieve the Employee, in whole or in
part, of his duties under this Agreement (without reduction in compensation
through the termination date).
(b) (i) Except as otherwise provided in this Agreement, the Employer
may terminate the employment of the Employee hereunder only for good cause and
upon written notice; provided, however, that no breach or default by the
Employee shall be deemed to occur hereunder unless the Employee shall have
failed to cure the breach or default within thirty (30) days after he received
written notice thereof indicating that it is a notice of termination pursuant to
this Section of this Agreement.
(ii) As used herein, "good cause" shall include:
(1) the Employee's conviction of either a felony involving moral turpitude
or any crime in connection with his employment by the Employer which causes the
Employer a substantial detriment.
(2) actions by the Employee as an executive officer of the Employer which
clearly are contrary to the best interests of the Employer;
(3) the Employee's willful failure to take actions permitted by law and
necessary to implement policies of the Employer's Board of Directors which the
Board of Directors has communicated to him in writing, provided that minutes of
a Board
of Directors meeting attended in its entirety by the Employee shall be deemed
communicated to the Employee;
(4) the Employee's continued failure to attend to his duties as an
executive officer of the Employer; or
(5) any condition which either resulted from the Employee's substantial
dependence, as determined by the Board of Directors of the Employer, on alcohol,
or any narcotic drug or other controlled or illegal substance. If any
determination of substantial dependence is disputed by the Employee, the parties
hereto agree to abide by the decision of a panel of three physicians appointed
in the manner and subject to the same penalties for noncompliance as specified
in Section 7(b)(ii) of this Agreement.
(iii) Termination of the employment of the Employee for
reasons other than those expressly specified in this Agreement as good cause
shall be deemed to be a termination of employment "without good cause."
(c) (i) If the Employer shall terminate the employment of the Employee
without good cause effective on a date earlier than the termination date
provided for in Section 2 (with the effective date of termination as so
identified by the Employer being referred to herein as the "Accelerated
Termination Date"), the Employee, until the termination date provided for in
Section 2 or until the date which is six (6) months after Accelerated
Termination Date, whichever is later, shall continue to receive the salary and
other compensation and employee benefits that the Employer has heretofore in
Section 3 agreed to pay and to provide for the Employee, in each case in the
amount and kind and at the time provided for in Section 3; provided that,
notwithstanding such termination of employment, the Employee's covenants set
forth in Section 10 and Section 11 are intended to and shall remain in full
force and effect.
(ii) The parties agree that, because there can be no exact
measure of the damage that would occur to the Employee as a result of a
termination by the Employer of the Employee's employment without good cause, the
payments and benefits paid and provided pursuant to this Section 8(c) shall be
deemed to constitute liquidated damages and not a penalty for the Employer's
termination of the Employee's employment without good cause, and the Employer
agrees that the Employee should not be required to mitigate his damages.
(d) If the employment of the Employee is terminated for good cause
under Section 8(b)(ii) of this Agreement, or if the Employee voluntarily
terminates his employment by written notice to the Employer under Section 8(a)
of this Agreement, the Employer shall pay to the Employee any compensation
earned but not paid to the Employee prior to the effective date of such
termination. Under such circumstances, such payment shall be in full and
complete discharge of any and all liabilities or obligations of the Employer to
the Employee hereunder, and the Employee shall be entitled to no further
benefits under this Agreement.
8. Disclosure. The Employee agrees that during the term of his
employment by the Employer, he will disclose and disclose only to the Employer
all ideas, methods, plans, developments or improvements known by him which
relate directly or indirectly to the business of the Employer, whether acquired
by the Employee before or during his employment by the Employer. Nothing in this
Section 9 shall be construed as requiring any such communication where the idea,
plan, method or development is lawfully protected from disclosure as a trade
secret of a third party or by any other lawful prohibition against such
communication.
9. Confidentiality. The Employee agrees to keep in strict secrecy and
confidence any and all information the Employee assimilates or to which he has
access during his employment by the Employer and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Employer. The Employee agrees that both during and after the term of his
employment by the Employer, he will not, without the prior written consent of
the Employer, disclose any such confidential information to any third person,
partnership, joint venture, company, corporation or other organization.
10. Noncompetition and Nonsolicitation.
The Employee hereby acknowledges that, during and solely as a result of
his employment by the Employer, he has received and shall continue to receive:
(1) special training and education with respect to the operations of a
registered broker/dealer in securities and other related matters, and (2) access
to confidential information and business and professional contacts. In
consideration of the special and unique opportunities afforded to the Employee
by the Employer as a result of the Employee's employment, as outlined in the
previous sentence, the Employee hereby agrees as follows:
(a) During the term of the Employee's employment, whether pursuant to
this Agreement, any automatic or other renewal hereof or otherwise, and, except
as may be otherwise herein provided, for a period of one (1) year after the
termination of his employment with the Employer, regardless of the reason for
such termination, the Employee shall not, directly or indirectly, exercise
control over any business which competes with the business of the Employer. For
purposes of this Agreement, "control" shall mean acting in a decision making
capacity for any person, firm, partnership, corporation or other entity so
competing with the Employer (a "Competing Entity"). The Employee shall not own
an equity interest in any Competing Entity. The restrictions of this Section 10
shall not be violated by outside business investments that do not in any manner
conflict with the services to be rendered by the Employee for the Employer and
that do not diminish or detract from the Employee's ability to render his
required attention to the business of the Employer.
(b) During his employment with the Employer and, except as may be
otherwise herein provided, for a period of two (2) years following the
termination of his employment with the Employer, regardless of the reason for
such termination, the Employee agrees he will refrain from and will not,
directly or indirectly, as an individual, partner, officer, director,
stockholder, employee, advisor, independent contractor, joint venturer,
consultant, agent, representative, salesman or otherwise (1) solicit any of the
employees of the Employer to terminate their employment or (2) accept employment
with or seek remuneration by any of the clients or customers of the Employer
with whom the Employer did business during the term of the Employee's
employment.
(c) The period of time during which the Employee is prohibited from
engaging in certain business practices pursuant to Sections 10(a) or (b) shall
be extended by any length of time during which the Employee is in breach of such
covenants.
(d) It is understood by and between the parties hereto that the
foregoing restrictive covenants set forth in Sections 10(a) through (c) are
essential elements of this Agreement, and that, but for the agreement of the
Employee to comply with such covenants, the Employer would not have agreed to
enter into this Agreement. Such covenants by the Employee shall be construed as
agreements independent of any other provision in this Agreement. The existence
of any claim or cause of action of the Employee against the Employer, whether
predicated on this Agreement, or otherwise, shall not constitute a defense to
the enforcement by the Employer of such covenants.
(e) It is agreed by the Employer and Employee that if any portion of
the covenants set forth in this Section 10 are held to be invalid, unreasonable,
arbitrary or against public policy, then such portion of such covenants shall be
considered divisible both as to time and geographical area. The Employer and
Employee agree that, if any court of competent jurisdiction determines the
specified time period or the specified geographical area applicable to this
Section 10 to be invalid, unreasonable, arbitrary or against public policy, a
lesser time period or geographical area which is determined to be reasonable,
non-arbitrary and not against public policy may be enforced against the
Employee. The Employer and the Employee agree that the foregoing covenants are
appropriate and reasonable when considered in light of the nature and extent of
the business conducted by the Employer.
11. Specific Performance. The Employee agrees that damages at law will
be an insufficient remedy to the Employer if the Employee violates the terms of
Sections 9, 10 or 11 of this Agreement and that the Employer would suffer
irreparable damage as a result of such violation. Accordingly, it is agreed that
the Employer shall be entitled, upon application to a court of competent
jurisdiction, to obtain injunctive relief to enforce the provisions of such
Sections, which injunctive relief shall be in addition to any other rights or
remedies available to the Employer. The Employee agrees to pay to the Employer
all costs and expenses incurred by the Employer relating to the enforcement of
the terms of Sections 9, 10 or 11 of this Agreement, including reasonable fees
and disbursements of counsel (both at trial and in appellate proceedings).
12. Compliance with Other Agreements. The Employee represents and
warrants that the execution of this Agreement by him and his performance of his
obligations hereunder will not conflict with, result in the breach of any
provision of or the termination of or constitute a default under any Agreement
to which the Employee is a party or by which the Employee is or may be bound.
13. Waiver of Breach. The waiver by the Employer of a breach of any of
the provisions of this Agreement by the Employee shall not be construed as a
waiver of any subsequent breach by the Employee.
14. Binding Effect; Assignment. The rights and obligations of the
Employer under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Employer. This Agreement is a personal
employment contract and the rights, obligations and interests of the Employee
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
15. Entire Agreement. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge is sought.
16. Construction and Interpretation.
(a) This Agreement shall be construed pursuant to and governed by the
laws of the State of New York.
(b) The headings of the various sections in this Agreement are inserted
for convenience of the parties and shall not affect the meaning, construction or
interpretation of this Agreement.
(c) Any provision of this Agreement which is determined by a court of
competent jurisdiction to be prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or non-authorization without invalidating the
remaining provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction. In any such case, such
determination shall not affect any other provision of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect. If
any provision or term of this Agreement is susceptible to two or more
constructions or interpretations, one or more of which would render the
provision or term void or unenforceable, the parties agree that a construction
or interpretation which renders the term or provision valid shall be favored.
17. Notice. All notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy or
similar electronic transmission method; one working day after it is sent, if
sent by recognized expedited delivery service; and five days after it is sent,
if mailed, first class mail, certified mail, return receipt requested, with
postage prepaid. In each case notice shall be sent to:
To the Employer: Redstone Securities, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
To the Employee at his address herein first above written.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
REDSTONE SECURITIES, INC.
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Title: Chief Executive Officer
EMPLOYEE:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
AMENDMENT TO AGREEMENT
AND
PLAN OF REORGANIZARION
WHEREAS, the undersigned are parties to a certain Agreement and Plan of
Reorganization dated November 6, 1998; and
WHEREAS, Article 3.1(a)(2) and Article 8.4 set forth the terms of
conversion and disposition of the Equity Subordinated Lender Shares; and
WHEREAS, the parties desire to amend said articles as follows:
1. The Equity subordinated Lender Shares held ten shares each by EMH
Enterprises, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ Laundire and ▇▇▇▇ ▇▇▇▇▇▇▇ shall be delivered
along with a stock power endorsed in blank to ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇, Esq. to be
held in escrow until said escrow agent receives evidence that the NASD Equity
Subordinated Loans to Redstone Securities, Inc. by lenders is paid in full. Upon
such evidence of payment, the 40 Equity subordinated Lender Shares shall be
delivered by the escrow agent to the Company and such shares shall be cancelled
without further consideration to the Lenders.
2. All references in the above stated articles to the cancellation of
the Equity Subordinated Lender Shares at the Effective Time is hereby amended to
read that such Shares shall be cancelled at the time of payoff of the Equity
Subordinated Loans outstanding held by said Lenders.
IN WITNESS WHEREOF, the Acquiror, the Merger Sub and the Company have
executed or caused this Amended agreement to be executed effective this 3rd day
of February 1999.
EUROMED, Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Title: Chief Executive Officer
REDSTONE ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Title: Chief Executive Officer
REDSTONE SECURITIES, INC..
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
Agreed and Accepted:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
EMH ENTERPRISES
By: /s/ Abe Fishman____________
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