Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 8, 2000
BY AND AMONG
RELIABLE NETWORKS, INC.
XXXXX XXXXXXX
9278 COMMUNICATIONS, INC.
AND
RELIABLE ACQUISITION CORP.
TABLE OF CONTENTS
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ARTICLE I THE MERGER.................................................................................1
1.01 The Merger; Closing............................................................................1
1.02 Effective Time.................................................................................2
1.03 Effects of the Merger..........................................................................2
1.04 Certificate of Incorporation and Bylaws........................................................2
1.05 Directors......................................................................................2
1.06 Officers.......................................................................................2
1.07 Merger Consideration...........................................................................2
1.08 Write-off of Certain Accounts Receivable.......................................................3
1.09 Adjustments to Merger Consideration............................................................3
1.10 Shareholders' Approval.........................................................................4
1.11 Filing of Certificate of Merger................................................................4
ARTICLE II REGISTRATION RIGHTS........................................................................4
2.01 Definitions....................................................................................4
2.02 Shelf Registration.............................................................................5
2.03 Piggyback Registration.........................................................................6
2.04 Permitted Transferees..........................................................................6
2.05 Registration Procedures........................................................................6
2.06 Expenses.......................................................................................8
2.07 Indemnification................................................................................8
2.08 Reports Under Securities Exchange Act of 1934..................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY SHAREHOLDER..................9
3.01 Organization...................................................................................9
3.02 Capitalization.................................................................................9
3.03 Authorization..................................................................................9
3.04 Financial Data................................................................................10
3.05 No Undisclosed Liabilities....................................................................10
3.06 Title to Assets...............................................................................11
3.07 Contracts and Commitments.....................................................................11
3.08 No Adverse Changes............................................................................11
3.09 Agents........................................................................................11
3.10 Proprietary Rights............................................................................11
3.11 Customers and Sales...........................................................................12
3.12 Manufacturers, Etc............................................................................12
3.13 Interest in Customers, Suppliers and Competitors..............................................12
3.14 Real Property.................................................................................12
3.15 Inventory and Equipment.......................................................................13
3.16 Accounts Receivable...........................................................................13
3.17 Permits.......................................................................................13
3.18 Legal Proceedings.............................................................................13
3.19 Conduct of Business...........................................................................13
3.20 Taxes.........................................................................................13
3.21 Employee Information..........................................................................13
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TABLE OF CONTENTS
(continued)
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3.22 Investment Matters............................................................................14
3.23 Consents......................................................................................14
3.24 Assets and Liabilities........................................................................14
3.25 Complete Representations; Full Disclosure.....................................................14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...........................................14
4.01 Organization..................................................................................14
4.02 Capitalization................................................................................15
4.03 Authority Relative to this Agreement..........................................................15
4.04 No Violations.................................................................................15
4.05 Financial Representation......................................................................16
4.06 Full Disclosure...............................................................................16
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PARENT..............................................16
5.01 Organization..................................................................................16
5.02 Capitalization................................................................................16
5.03 Authority Relative to this Agreement..........................................................17
5.04 No Violations.................................................................................17
5.05 Financial Statements..........................................................................17
5.06 Litigation....................................................................................18
5.07 Absence of Certain Changes....................................................................18
5.08 Full Disclosure...............................................................................18
5.09 SEC Reports and Financial Statements..........................................................19
ARTICLE VI COVENANTS.................................................................................19
6.01 Access to Books and Records...................................................................19
6.02 Best Efforts..................................................................................19
6.03 Additional Covenants..........................................................................19
ARTICLE VII DELIVERIES AT THE CLOSING ................................................................20
7.01 Mutual Deliveries.............................................................................20
7.02 Additional Deliveries by the Company..........................................................20
7.03 Additional Deliveries by the Purchaser and Parent.............................................21
ARTICLE VIII INDEMNITY.................................................................................21
8.01 Indemnity.....................................................................................21
8.02 Indemnification Period........................................................................21
8.03 Indemnification Procedure.....................................................................21
ARTICLE IX RESTRICTIVE COVENANT AND CONFIDENTIALITY..................................................22
9.01 Restrictive Covenant..........................................................................22
9.02 Confidentiality...............................................................................23
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TABLE OF CONTENTS
(continued)
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ARTICLE X TERMINATION...............................................................................24
10.01 Termination After Effective Time Due to Default in Payment....................................24
10.02 Termination After Effective Time Due to Termination of Employment.............................24
ARTICLE XI MISCELLANEOUS.............................................................................25
11.01 Survival......................................................................................25
11.02 Brokerage Fees and Commissions................................................................25
11.03 Expenses......................................................................................26
11.04 Entire Agreement; Assignment..................................................................26
11.05 Amendment.....................................................................................26
11.06 Extension; Waiver.............................................................................26
11.07 Validity......................................................................................26
11.08 Notices.......................................................................................26
11.09 Governing Law.................................................................................27
11.10 Descriptive Headings..........................................................................27
11.11 Parties in Interest...........................................................................27
11.12 Counterparts..................................................................................27
11.13 Specific Performance..........................................................................27
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 8, 2000, by and
among Reliable Networks, Inc., a New York corporation (the "Company"), Xxxxx
Xxxxxxx (the "Company Shareholder"), Reliable Acquisition Corp., a New York
corporation and wholly owned subsidiary of Parent (the "Purchaser"), and 9278
Communications, Inc., a Delaware corporation (the "Parent").
WHEREAS, the Board of Directors of the Company, Purchaser and Parent
have each determined that it is in the best interests of their respective
corporations for the Purchaser to acquire the Company upon the terms and subject
to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, the Board of Directors of
the Company, Purchaser and Parent have each approved the merger of the Company
with and into the Purchaser (the "Merger") in accordance with the General
Corporation Law of the State of Delaware ("DGCL") and the New York Business
Corporation Law (the "NYBCL"), upon the terms and subject to the conditions set
forth herein;
WHEREAS, all of the issued and outstanding shares of stock of any class
of the Company consists of 200 shares of common stock, without par value (the
"Issued Company Shares") which are owned and of record by the Company
Shareholder;
WHEREAS, it is the intent of this Agreement that the Merger constitute
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended; and
WHEREAS, the Company Shareholder has voted all of the Issued Company
Shares in favor of the approval of this Agreement and the transactions
contemplated hereby, including the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Purchaser, the Company and the Parent hereby agree as follows:
ARTICLE I
THE MERGER
1.01 THE MERGER; CLOSING. Upon the terms and subject to the conditions
hereof, and in accordance with the NYBCL, the Company shall be merged with and
into the Purchaser on the date hereof (the "Closing Date"). The closing shall
take place at the offices of Xxxx Marks & Xxxxx LLP, New York, New York, or such
other location designated by the Purchaser (the "Closing"), simultaneously with
the execution hereof. At the Closing the Purchaser shall deliver the Merger
Consideration, as defined in Section 1.07, to the Company Shareholder and the
Company Shareholder shall deliver the Issued Company Shares to the
Purchaser. Following the Merger, the Purchaser shall continue as the surviving
corporation and the separate corporate existence of the Company shall cease.
1.02 EFFECTIVE TIME. Subject to Section 1.01, the Merger shall become
effective upon filing with the New York Secretary of State of a Certificate of
Merger executed in accordance with the relevant provisions of the NYBCL (the
time the Merger becomes effective being the "Effective Time"). The Purchaser
shall use its best efforts to file such Certificate of Merger immediately upon
Closing. From and after the Effective Time, the Issued Company Shares shall
cease to exist.
1.03 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in the NYBCL. Without limitation, upon the effectiveness of the Merger: (i) the
separate existence of the Company shall cease; (ii) the Purchaser as the
surviving corporation shall possess all of the rights, privileges, powers,
immunities, purposes and franchises, both public and private, of each of the
Company and the Purchaser; (iii) all real and personal property, tangible and
intangible, of every kind and description belonging to the Company and the
Purchaser shall be vested in the Purchaser as the surviving corporation without
further act or deed, and the title to any real estate or any interest therein
vested in either the Company or the Purchaser shall not revert or in any way be
impaired by reason of the Merger; (iv) except as set forth in Section 6.08(a)
hereof, the Purchaser as the surviving corporation shall be liable for all the
obligations and liabilities of each of the Company and the Purchaser, and any
claim existing or action or proceeding pending by or against either the Company
or the Purchaser may be enforced against the Purchaser as if the Merger had not
taken place; and (v) neither the rights of creditors nor any liens upon or
security interests in the property of either the Company or the Purchaser shall
be impaired by the Merger.
1.04 CERTIFICATE OF INCORPORATION AND BYLAWS. Without further action by
the Company or the Purchaser, the Certificate of Incorporation and Bylaws of the
Purchaser as in effect at the Effective Time shall continue to be the
Certificate of Incorporation and Bylaws of the Purchaser as the surviving
corporation.
1.05 DIRECTORS. The directors of the Purchaser at the Effective Time
shall be the initial directors of the Purchaser as the surviving corporation,
until their successors shall have been duly elected or appointed and qualified.
1.06 OFFICERS. The officers of the Purchaser at the Effective Time
shall be the initial officers of the Purchaser as the surviving corporation,
until their successors have been duly appointed; provided, however, that on the
Closing Date, the Company Shareholder shall enter into an Employment Agreement
with the Purchaser, as President of the Purchaser, commencing as of the Closing
Date, in the form attached hereto as Exhibit A (the "Employment Agreement").
1.07 MERGER CONSIDERATION. At the Closing, all of the Issued Company
Shares shall, by virtue of the Merger, and without any action on the part of the
holder thereof, be exchanged for the following consideration (the "Merger
Consideration"), subject to adjustment pursuant to Section 1.09 hereof:
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a) A certified or bank check, or bank wire to an account
specified by the Company Shareholder, in the amount of $1,000,000, payable at
the Closing (the "Cash Payment");
b) A promissory note, in the amount of $400,000, payable
twenty (20) days after the Closing Date, in substantially the form attached
hereto as Exhibit B (the "Deferred Cash Payment");
c) A promissory note, in the amount of $100,000, payable
ninety (90) days after the Closing Date, in substantially the form attached
hereto as Exhibit C (the "$100,000 Note");
d) A promissory note, in the amount of $500,000, payable on
the six (6) month anniversary of the Closing Date, in substantially the form
attached hereto as Exhibit D (the "$500,000 Note", and together with the
$100,000 Note, the "Notes"); and
e) 1,000,000 shares of common stock of the Parent, deliverable
to the Company Shareholder within ten (10) business days after the Closing Date
(the "Merger Shares").
1.08 WRITE-OFF OF CERTAIN ACCOUNTS RECEIVABLE. Immediately prior to the
Closing, the Company shall write off any accounts receivable of the Company
which are outstanding for ninety (90) days or more, as of the Closing Date (the
"90 Day A/R").
1.09 ADJUSTMENTS TO MERGER CONSIDERATION. The Merger Consideration
shall be subject to adjustment, as follows:
a) The Merger Consideration shall (i) be reduced by the
amount, if any (the "Deficiency"), by which the accounts payable and other
liabilities of the Company, as of the Closing Date (the "Closing Liabilities")
exceed the inventory (valued at cost), cash and accounts receivable (not
including the 90 Day A/R) of the Company, as of the Closing Date (the "Closing
Assets"), or (ii) be increased by the amount, if any (the "Excess"), that the
Closing Assets exceed the Closing Liabilities. If there is a Deficiency, the
payment obligations of the Purchaser pursuant to the Deferred Cash Payment
and/or the Notes shall be reduced by the amount of the Deficiency. If there is
an Excess, the Merger Consideration shall be increased by the amount of the
Excess and the Parent shall pay to the Company Shareholder an amount equal to
the Excess within thirty (30) days after the calculation thereof, but in no
event more than forty (40) days after the Closing Date. Such calculations shall
be calculated by Purchaser's independent certified public accounting firm and
delivered to the Company Shareholder within ten (10) days after the Closing
Date, at the Parent's sole cost and expense. For the purposes of such
calculations, Closing Liabilities will not include the income tax liabilities of
the Company in excess of $100,000. If the Company Shareholder disagrees with the
findings of the Purchaser's independent certified public accountant, the parties
shall mutually agree on a third party accounting firm to review such
calculations. The expense of such third party accountant shall be borne by the
Company Shareholder; provided, however, that (i) if such third party
accountant's calculations differ from those of the Purchaser's certified public
accountant by between one (1%) percent and ten (10%) percent, in favor of the
Company Shareholder, then the
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Company Shareholder and the Parent shall each pay fifty (50%) percent of the
expense for such third party accountant, and (ii) if such third party
accountant's calculations differ from those of the Purchaser's certified public
accountant by greater than ten (10%) percent, in favor of the Company
Shareholder, then such expense shall be borne one hundred (100%) percent by the
Parent. The Parent shall pay any undisputed portions of the Excess in a timely
fashion without regard to a disagreement on the part of the Company Shareholder.
Any additional payment amounts resulting from such dispute shall be paid within
fifteen (15) days from the date of resolution.
b) On the one (1) year anniversary of the Closing Date (the
"Appraisal Date"), the parties shall appraise the fair market value of the
Merger Shares issued pursuant to Section 1.07(d) above. For the purposes of this
Agreement, if the Parent's common stock is quoted or listed on a securities
exchange or automated quotation system, the average of (i) the average bid price
for the fifteen (15) consecutive trading days immediately prior to, and the
fifteen (15) consecutive trading days immediately after, the Appraisal Date, and
(ii) the average ask price for the fifteen (15) consecutive trading days
immediately prior to, and the fifteen (15) consecutive trading days immediately
after, the Appraisal Date, shall be used to determine the fair market value of
the Merger Shares ("Fair Market Value"). The Company Shareholder shall, in the
Lock-up Agreement referred to in Section 2.02(b) hereof, agree not to sell,
assign, transfer, pledge, hypothecate or otherwise dispose of any of the Merger
Shares until after the Appraisal Date, except as otherwise set forth in the
Lock-up Agreement. If the Fair Market Value of the Merger Shares is determined
to equal or exceed $4,000,000, no adjustment to the number of Merger Shares
issued to the Company Shareholder shall be made. If, however, the Fair Market
Value of the Merger Shares is less than $4,000,000, then the Parent shall issue
to the Company Shareholder, within twenty-five (25) days of the Appraisal Date,
such number of additional shares of common stock of the Parent (the "Additional
Shares"), the Fair Market Value of which is equal to the difference between
$4,000,000 and the Fair Market Value of the Merger Shares; provided, however,
that the number of Additional Shares issued pursuant to this Subsection shall in
no event exceed 1,000,000 shares.
1.10 SHAREHOLDERS' APPROVAL. Prior to the execution of this Agreement,
the Purchaser and Company, acting through their respective Boards of Directors,
have each, in accordance with applicable law, duly called, given notice of,
convened and held a special meeting of their shareholders (or obtain consent)
for the purpose of considering and taking action upon this Agreement and the
transactions contemplated hereby. The Company represents to the Purchaser that
all required shareholder action has been taken by it and the Company has
provided the Purchaser with a copy of the consent of the Company Shareholder.
The Purchaser represents to the Company that all required shareholder action has
been taken by it and the Purchaser has provided the Company with a copy of the
consent of the Purchaser's sole shareholder.
1.11 FILING OF CERTIFICATE OF MERGER. Simultaneously herewith, the
Company and the Purchaser are executing a Certificate of Merger in the manner
required by the NYBCL, which shall be filed immediately following the Closing.
The parties hereto shall take all such other and further actions as may be
required by law to make the Merger effective.
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ARTICLE II
REGISTRATION RIGHTS
2.01 DEFINITIONS. For purposes of this Article II:
a) The terms "register," "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement or
statements or similar documents in compliance with the Securities Act of 1933,
as amended (the "Act") and pursuant to Rule 415 under the Act or any successor
rule providing for offering securities on a continuous basis ("Rule 415"), and
the declaration or ordering of effectiveness of such registration statement or
document by the Securities and Exchange Commission (the "SEC").
b) The term "Registrable Shares" means the Merger Shares and
Additional Shares, if any, as well as any common stock of the Parent issued as a
dividend or other distribution with respect to or in exchange for or in
replacement of common stock of the Parent.
c) The term "Registrable Additional Shares" means the
Additional Shares, if any, as well as any common stock of the Parent issued as a
dividend or other distribution with respect to or in exchange for or in
replacement of common stock of the Parent.
d) The term "Registration Statement" means any registration
statement or comparable document of the Parent under the Act, through which a
public sale or distribution of the Parent's securities may be registered (except
a form exclusively for the sale or distribution of securities in connection with
an employee or consultant stock option plan or for use exclusively in connection
with a business combination), the prospectus contained therein and all
amendments and supplements to such Registration Statement, including
post-effective amendments, all exhibits and all material incorporated by
reference in such Registration Statement.
2.02 SHELF REGISTRATION.
a) No later than sixty (60) days after the one (1) year
anniversary of the Closing Date (the "Filing Date"), the Parent shall file a
Registration Statement (the "Shelf Registration Statement") with the SEC, to
provide for the offer and sale of the Registrable Additional Shares, if any. The
Parent shall use commercially reasonable efforts to cause the Shelf Registration
Statement to become effective under the Act by the six (6) month anniversary of
the Closing Date.
b) Notwithstanding the Parent's obligations as set forth in
Section 2.02(a) hereof, the Company Shareholder shall, at the Closing, enter
into a Lock-up Agreement with the Parent, in the form attached hereto as Exhibit
E, pursuant to which the Company Shareholder shall agree not to sell, assign,
transfer, pledge, hypothecate or otherwise dispose of, except as otherwise set
forth in the Lock-up Agreement, (i) any of the Merger Shares until after
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the Appraisal Date, (ii) any of the Registrable Additional Shares until the six
(6) month anniversary of the Appraisal Date, after which time it may dispose of
up to fifty (50%) of the Registrable Additional Shares, and (iii) any of the
remaining fifty (50%) percent of the Registrable Additional Shares until after
the one (1) year anniversary of the Appraisal Date.
2.03 PIGGYBACK REGISTRATION. Commencing on the Appraisal Date and
continuing until such time as the Registrable Shares are freely salable without
restriction under Rule 144 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), if the Parent shall determine to proceed
with the preparation and filing of a Registration Statement in connection with
the proposed offer and sale of any of its securities by it or any of its
officers or directors (other than a registration statement on Form X-0, X-0 or
other limited purpose form), the Parent will give written notice of such
determination to the Company Shareholder. Upon receipt of a written request from
the Company Shareholder within thirty (30) days after receipt of any such notice
from the Parent, the Parent will, except as herein otherwise provided, cause all
the Registrable Shares to be included in such Registration Statement, to the
extent requisite to permit the sale or other disposition by the Company
Shareholder of the Registrable Shares (hereinafter referred to as "Piggyback
Registration"). If any registration pursuant to this Section 2.03 shall be
underwritten in whole or in part, the Parent may require that the Registrable
Shares requested for inclusion pursuant to this Section 2.03 be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. In the event that the Registrable Shares
requested for inclusion pursuant to this Section 2.03 together with any other
shares which have similar piggyback registration rights or otherwise included by
selling shareholders (such shares and the Registrable Shares being collectively
referred to as the "Requested Stock") would, in the good faith judgment of the
managing underwriter of such public offering, reduce the number of shares to be
offered by the Parent or interfere with the successful marketing of the shares
of stock offered by the Parent, the number of shares of Requested Stock
otherwise to be included in the underwritten public offering may be reduced
pro-rata (by number of shares) among the holders thereof requesting such
registration or excluded in their entirety if so required by the underwriter. To
the extent that only a portion of the Requested Stock is included in the
underwritten public offering, those shares of Requested Stock which are thus
excluded from the underwritten public offering shall be withheld from the market
by the holders thereof for a period, not to exceed sixty (60) days after the
consummation of the underwritten public offering, which the managing underwriter
reasonably determines is necessary in order to effect such offering; provided
however, that (except as to holders who are "affiliates" of the Parent) such
date shall not be later than the earliest date at which similar restrictions on
sales of securities of the Parent by any non-affiliates of the Parent are
terminated, released or waived. The obligation of the Parent under this Section
2.03 shall be unlimited as to the number of Registration Statements to which it
applies. The rights and obligations of the Company Shareholder pursuant to this
Article II shall extend to any Permitted Transferees (as defined in Section 2.04
hereunder).
2.04 PERMITTED TRANSFEREES. Notwithstanding the foregoing, the Company
Shareholder may transfer any or all of the Registrable Shares, either during his
lifetime or on death by will or intestacy, to his "immediate family", as defined
in Rule 16a-1 of the General Rules and Regulations of the Exchange Act, or to a
trust, the beneficiaries of which are exclusively the Company Shareholder and/or
a member or members of the Stockholder's
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"immediate family" (for the purposes of this Agreement, any such individuals or
entities to whom such permitted transfers shall be made shall be collectively
referred to as the "Permitted Transferees"); provided, however, that in any such
case it shall be a condition to the transfer that the Permitted Transferee
execute an agreement stating that the Permitted Transferee is receiving and
holding the Registrable Shares subject to the provisions of this Agreement and
the Lock-up Agreement, and there shall be no further transfer of such
Registrable Shares except in accordance with the Lock-up Agreement.
2.05 REGISTRATION PROCEDURES. If and whenever the Parent is required by
the provisions of Sections 2.02 or 2.03 to effect the registration of
Registrable Shares under the Act, the Parent will:
a) Prepare and file with the SEC a Registration Statement with
respect to such securities in the time frame required and to cause such
Registration Statement to become and remain effective (i) for a period of
eighteen (18) months with respect to the Shelf Registration Statement, (ii) for
a period of nine (9) months with respect to the Registrable Shares included in a
Registration Statement pursuant to Section 2.03 hereof, and (iii) for the
maximum period of time the Parent is otherwise obligated to keep any
Registration Statement of the type described in Section 2.03 effective;
provided, however, that any Registration Statement filed pursuant to Section
2.02 or 2.03 may be kept effective for such lesser period of time until which
all Registrable Shares included thereunder are freely salable without
restriction under Rule 144, if applicable;
b) Prepare and file with the SEC such amendments to such
Registration Statement and supplements to the prospectus contained therein as
may be necessary to keep such Registration Statement effective for the period of
time described in Section 2.05(a) above;
c) Furnish to the Company Shareholder and Permitted
Transferees such reasonable number of copies of the Registration Statement,
preliminary prospectus, final prospectus and such other documents as such
underwriters may reasonably request in order to facilitate the public offering
of such securities;
d) Notify the Company Shareholder and Permitted Transferees,
promptly after it shall receive notice thereof, of the time when such
Registration Statement has become effective or a supplement to any prospectus
forming a part of such Registration Statement has been filed;
e) Prepare and promptly file with the SEC and promptly notify
the Company Shareholder and Permitted Transferees of the filing of such
amendment or supplement to such Registration Statement or prospectus as may be
necessary to correct any statements or omissions if, at the time when a
prospectus relating to such securities is required to be delivered under the
Act, any event shall have occurred as the result of which any such prospectus or
any other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading;
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f) Advise the Company Shareholder and Permitted Transferees,
promptly after it shall receive notice or obtain knowledge thereof, of the
issuance of any stop order by the SEC suspending the effectiveness of such
Registration Statement or the initiation or threatening of any proceeding for
that purpose and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued; and
g) If the Parent's common stock is then listed on a national
securities exchange, cause the Registrable Shares to be listed on such exchange,
or if reported on Nasdaq, to be reported on Nasdaq.
2.06 EXPENSES. With respect to the Shelf Registration Statement, and
with respect to each inclusion of Registrable Shares in any additional
Registration Statement pursuant to Section 2.03 hereof, the fees, costs and
expenses of registration to be borne by the Parent shall include, all
registration, filing, and NASD fees, printing expenses, fees and disbursements
of counsel and accountants for the Parent and all legal fees and disbursements
and other expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered and
qualified. The Company Shareholder and Permitted Transferees shall each bear its
pro-rata share of the underwriting discounts and commissions and transfer taxes.
2.07 INDEMNIFICATION. The Parent will indemnify and hold harmless the
Company Shareholder and Permitted Transferees, from and against, and will
reimburse the Company Shareholder and Permitted Transferees with respect to, any
and all loss, damage, liability, cost and expense to which the Company
Shareholder or Permitted Transferees may become subject under the Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses are
caused by (i) any untrue statement or alleged untrue statement of any material
fact contained in such Registration Statement, any prospectus contained therein
or any amendment or supplement thereto, (ii) arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or (iii) arise out of any
violation or alleged violation by the Parent of any rule or regulation
promulgated under the Act or any applicable state securities laws in connection
with any such registration; provided, however, that the Parent will not be
liable in any such case to the extent that any such loss, damage, liability,
cost or expenses arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished by the Company Shareholder or a Permitted Transferee in
writing specifically for use in the preparation thereof, in which case, the
Company Shareholder or a Permitted Transferee shall indemnify and hold harmless
the Parent for any loss, damage, liability, cost and expense to which the Parent
may become subject under the Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by such untrue statement or alleged
untrue statement or omission or alleged omission for up to the aggregate Fair
Market Value of such individual's or entity's Registrable Shares.
2.08 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Company Shareholder and Permitted Transferees the
benefits of Rule 144 promulgated under the Exchange Act ("Rule 144") and any
other rule or regulation of the
8
SEC that may at any time permit the Company Shareholder and Permitted
Transferees to sell securities of the Parent to the public without registration,
the Parent agrees to use its best efforts to:
a) Make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;
b) File with the SEC in a timely manner all reports and other
documents required of the Parent under the Act and the Exchange Act; and
c) Furnish to the Company Shareholder and Permitted
Transferees, forthwith upon request (i) a written statement by the Parent that
it has complied with the reporting requirements of Rule 144, the Act and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Parent and such other reports and documents so filed by the Parent and (iii)
such other information as may be reasonably requested in availing the Company
Shareholder and Permitted Transferee of any rule or regulation of the SEC which
permits the selling of any such securities without registration.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE COMPANY SHAREHOLDER
In order to induce the Purchaser and Parent to enter into this Merger
Agreement, the Company and the Company Shareholder hereby represent and warrant
to the Purchaser and the Parent as follows:
3.01 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so existing and in good standing or to have such power and
authority would not in the aggregate have a material adverse effect on the
financial condition, results of operations or business of the Company taken as a
whole. The Company is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed and in good standing would not in the aggregate have
a material adverse effect on the financial condition, results of operations or
business of the Company taken as a whole. Schedule 3.01 sets forth each
jurisdiction where the Company is qualified to do business as a foreign
corporation. The Company has heretofore made available to the Purchaser accurate
and complete copies of the Certificate of Incorporation and Bylaws, as currently
in effect, of the Company. The Company has no subsidiaries and is not a party to
any partnership, agency or joint venture agreement.
3.02 CAPITALIZATION. The authorized capital stock of the Company
consists of 200 shares of common stock, without par value, of which 200 shares
(the "Company Shares") are issued and outstanding as of the date hereof. All of
the issued and outstanding Company
9
Shares are validly issued, fully paid and non-assessable and free of preemptive
rights. Except for the Company Shares, there are no shares of capital stock of
the Company issued or outstanding or any subscriptions, options, warrants,
calls, rights, convertible securities or other agreements or commitments of any
character obligating the Company to issue, transfer, sell or pay any amount with
respect to any of its securities.
3.03 AUTHORIZATION. The Company and the Company Shareholder each have
full right, power and authority to enter into this Agreement. The Company has
taken all requisite corporate action in order to authorize the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the
Company and the Company Shareholder and constitutes legal, valid and binding
obligations thereof, enforceable in accordance with its terms. No consent of any
lender, trustee, security holder or any other person or entity is required to be
obtained by the Company or the Company Shareholder in connection with the
execution, delivery and performance of this Agreement by the Company and the
Company Shareholder and the consummation of the transactions contemplated
hereby. Except as set forth on Schedule 3.03, attached hereto, the execution,
delivery and performance of this Agreement by the Company and the Company
Shareholder (i) does not violate or constitute a breach of or default under any
contract, agreement or commitment to which the Company or the Company
Shareholder is a party, under which either of them is obligated or to which
either of them or either of their properties is subject; (ii) does not violate
any judgment, order, statute, rule or regulation to which the Company or the
Company Shareholder is subject or the Certificate of Incorporation or Bylaws of
the Company; and (iii) will not result in the creation of any lien on any of the
assets of the Company or the Company Shareholder.
3.04 FINANCIAL DATA. Annexed hereto as Schedule 3.04 is a true and
correct copy of the audited financial statements of the Company, consisting of
(i) the Balance Sheets of the Company, as of December 31, 1999 and 1998, (ii)
the Income Statements of the Company, as of December 31, 1999, 1998 and 1997,
and (iii) the Statements of Cash Flows of the Company, as of December 31, 1999,
1998 and 1997 (the "Financial Statements"). The Financial Statements present
fairly the financial condition of the Company at such respective dates and the
results of operations of the Company for the respective fiscal periods reported
upon therein. The Financial Statements (i) were prepared based upon the
Company's past accounting practices and records, which practices and records
conform to generally accepted accounting principles consistently applied, and
(ii) fairly reflect the financial condition and results of operations of the
Seller for the periods covered thereby.
3.05 NO UNDISCLOSED LIABILITIES. There are no material liabilities of
the Company of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably result in such a
liability, other than:
a) liabilities disclosed in Schedule 3.04, attached hereto;
b) liabilities arising pursuant to this Agreement; and
10
c) liabilities incurred in the normal course of business which
would not, in aggregate, have a material adverse effect on the financial
condition, results of operations or business of the Company.
3.06 TITLE TO ASSETS. The Company has sole, good and valid title to all
of its assets consisting of tangible and intangible personal property, including
without limitation its accounts receivable, franchises, permits, contracts and
contract rights, subscriber accounts, customer/subscriber lists, inventory,
equipment and general intangibles, all free and clear of any and all liens,
claims, claims of infringement, charges, security interests and other
encumbrances (the "Assets"). A true and complete list of the Company's material
tangible Assets (other than real property) is set forth on Schedule 3.06. The
Company owns or has the right to use the Assets pursuant to valid and
enforceable written agreements.
3.07 CONTRACTS AND COMMITMENTS. Except as set forth in Schedule 3.07
hereto, the Company is not a party to any written or oral (i) lease agreement;
(ii) royalty, distribution, agency, territorial or license agreement; (iii)
contract or agreement (for employment or otherwise) with any officer, employee,
director, professional person or firm, independent contractor, agent or
advertising firm or agency; (iv) contract or collective bargaining agreement
with any labor union or representative of employees; (v) severance policy in
respect of employees; (vi) commitment, contract or agreement guaranteeing the
payment or performance of the obligations of others; (vii) group health or life
insurance, pension, profit sharing, retirement, medical, bonus, incentive, stock
option or purchase plan, or other similar benefit plan in effect with respect to
its employees or others; (viii) commitment, contract or agreement not made in
the ordinary course of business; or (ix) contract or agreement which is not
assignable to the Purchaser without the consent of the other party (the
"Agreements"). There are no arrangements, agreements or commitments to which the
Company is a party or by which it or the Assets are bound, other than the
Agreements. Each of the Agreements is a valid and subsisting contract in full
force and effect without modification and each party thereto has performed all
obligations required to be performed by it and no default or event of default
has occurred thereunder. True, complete and correct copies of all Agreements
have been delivered to the Purchaser prior to the date hereof.
3.08 NO ADVERSE CHANGES. Since December 31, 1999, there has not been:
(i) any material adverse change in the financial condition, assets, liabilities,
business or results of operations of the Company; (ii) any damage, destruction
or loss, whether or not covered by insurance, adversely affecting the Assets;
(iii) any increase in the rate of compensation or commission payable or to
become payable to any salesman, agent, employee or other person hired or
engaged, or any payment of any bonus, profit sharing or other extraordinary
compensation to any employee; (iv) any sale, lease, abandonment or other
disposition of any asset of the Company (other than in the ordinary course of
business of the Company), or mortgages or pledges of or the imposition of any
lien on any of the Company's assets; or (v) any debt or liability, whether
absolute or contingent, incurred by the Company, except current liabilities
incurred (and obligations under agreements entered into) in the ordinary course
of business.
11
3.09 AGENTS. Annexed hereto as Schedule 3.09, is a true and correct
list of all agents of the Company ("Agents"), setting forth the name of each
Agent and the terms of agency, including duration and compensation arrangements.
The Company has no outstanding liability to any of its Agents, except as set
forth on Schedule 3.09 and Company will pay such liabilities on or prior to the
date hereof.
3.10 PROPRIETARY RIGHTS. The Company owns, or has the rights to use,
all methods, processes and general know-how presently utilized by it in the
conduct of the pre-paid phone card distribution business (the "Business"), and
the Company owns such trademarks, trade names and service marks (collectively,
the "Proprietary Rights") as are necessary to conduct the Business and are set
forth on Schedule 3.10. There have been no claims made against the Company or
the Company Shareholder, and neither the Company nor the Company Shareholder has
received any notice, that any of the Proprietary Rights is invalid or conflicts
with the asserted rights of others. The Proprietary Rights are adequate and
sufficient to permit the Company to conduct its business as now operated, and no
other rights of the kind enumerated above are utilized or required by the Seller
in its operations.
3.11 CUSTOMERS AND SALES. Set forth on Schedule 3.11 annexed hereto is
a true, complete and correct list of the ten (10) largest customers of the
Company for the past year, with an Accounts Receivable Aging Summary, as of
December 7, 2000. Neither the Company nor the Company Shareholder has any
information and is not aware of any facts indicating that any of these customers
intends to cease doing business with the Company, or materially alter the amount
of the business it is presently doing with the Company.
3.12 MANUFACTURERS, ETC. Set forth on Schedule 3.12 annexed hereto is a
true, complete and correct list of the ten (10) largest distributors, suppliers
or manufacturers (collectively, "Third Parties") for the Company for the past
year. Neither the Company nor the Company Shareholder has any information and is
not aware of any facts indicating that any of the Third Parties intends to cease
doing business with the Company, or materially alter the amount of business it
is presently doing with the Company.
3.13 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as set
forth on Schedule 3.13, none of the Company, the Company Shareholder or any
affiliate of either such parties, or any officer, director or employee of the
Company, or any spouse, child, or other relative of any of these persons, has
any direct or indirect interest in any Third Party, or in any person with whom
the Company does business.
3.14 REAL PROPERTY. Schedule 3.14 sets forth, with respect to each
parcel of real property owned, leased or otherwise used in the Business, (i) the
record owner; (ii) the location and street address; (iii) the nature of
Company's interest therein; (iv) the use of the property; (v) the instrument
under which Company acquired its rights in the real property (deed, lease,
easement or otherwise); (vi) the lessor, with respect to any lease, or the
grantor, with respect to any other property interest other than fee simple; and
(vii) Company's good faith estimate of the fair market value thereof. Company
has good and marketable title in fee simple absolute to all real property owned
by it, or good and valid leasehold rights in all real property leased by it,
that is used in the Business. Except as set forth on Schedule 3.14, none of the
real
12
property included in the Assets is subject to any security interest, mortgage,
title defect or other encumbrance. Neither Company nor the Landlord under any
Lease to which Company is a party is in default or has intentionally breached
any promises of such Lease. To Company's knowledge, none of such real property
has been used or operated in violation of any applicable environmental law,
regulation or requirement. For purposes of this Agreement, "Company's knowledge"
or similar words means the actual knowledge, after due inquiry, of the Company's
president or chief financial officer.
3.15 INVENTORY AND EQUIPMENT. All inventory and equipment of the
Company is usable in the ordinary course of the Business and has been operated
and maintained in accordance with applicable law.
3.16 ACCOUNTS RECEIVABLE. All of the Company's accounts receivable are
bona fide and are attributable to transactions in the ordinary course of the
Business and are collectible when due in the ordinary course without offset,
credit, deduction, discount or counterclaim of any kind. All of the Company's
accounts receivable have been billed under the name Reliable Networks, Inc.
3.17 PERMITS. A true and complete list of all permits, licenses and
governmental authorizations utilized by the Company in the Business is listed on
Schedule 3.17. All of such licenses, permits and governmental authorizations are
in full force and effect, and the Company is not subject to any fines, penalties
or waivers in connection therewith.
3.18 LEGAL PROCEEDINGS. Except as set forth on Schedule 3.18, attached
hereto, there is no suit, action or proceeding pending or to Company's knowledge
threatened against the Company or otherwise involving the Business or any of the
Assets of the Company; nor is there any judgment, decree, injunction, rule or
order or any investigation or proceeding of any court, governmental department,
agency or instrumentality involving the Company, the Assets or the Business.
3.19 CONDUCT OF BUSINESS. The Company is, and the Business has been
operated, in compliance in all material respects with all applicable federal,
state and local laws, regulations, ordinances and other legal requirements
(including without limitation environmental laws and regulations) except where
any non-compliance would not have a material adverse effect on the Company, any
of the Assets or the Business. The Company does not conduct and has not
conducted any business other than the Business. The name "Reliable Networks,
Inc." is the only name that has been used in the conduct of the Business during
the past five (5) years. No affiliate of the Company, or of any officer,
director or shareholder of the Company, or any of its affiliates, is a party,
directly or indirectly, to any transaction with the Company with respect to the
Business, other than as an employee of the Company or any of its affiliates,
except as set forth on Schedule 3.19 hereto.
3.20 TAXES. The Company has filed all federal, state and local tax
returns required to be filed with respect to the operation of the Business, and
such returns accurately reflect all taxes due. The Company is not delinquent in
the payment of any tax relating to the Business. No deficiency has been
proposed, asserted or assessed, and no tax audit been proposed or conducted,
with respect to any such tax during the last six (6) years. The Company is not
part
13
of a consolidated group for tax purposes. The Company has delivered to the
Purchaser true and complete copies of all tax returns filed by it with respect
to the three complete tax years preceding the date of this Agreement.
3.21 EMPLOYEE INFORMATION. The Company has fewer than 50 employees, and
compliance with the federal or any state "WARN" Act is not required in
connection with the transactions contemplated hereby. Schedule 3.21 contains a
true and complete list of (i) all Company's employees, their titles or
positions, dates of hire, current compensation (salary, bonus and fringe
benefits), accrued vacation days and other benefits; (ii) all written
employment, consulting, non-competition, benefit or other arrangements with any
employee or former employee of the Company; (iii) all oral arrangements with any
employees of the Company together with a reasonably detailed summary of the
terms thereof. The Company has delivered to the Purchaser true and complete
copies of all written agreements described on Schedule 3.21. The Company is not
a party to any union agreement and is not aware of any labor dispute (current,
threatened or anticipated) with or organizational activity by or on behalf of
any of its employees. Neither the Company nor the Business is the subject of any
legal proceeding relating to employment discrimination or unfair labor practice
charges or claims, and no factual basis exists therefor. There are no labor
strikes or other labor troubles or grievances now pending or, to the Company's
or the Company Shareholder's knowledge, threatened against the Seller.
3.22 INVESTMENT MATTERS. The Company Shareholder (i) is acquiring the
Merger Shares and Additional Shares, if any, for investment purposes only and
not with a view to distribution, (ii) has had access to sufficient information
concerning the Parent and its business to evaluate the risks and merits inherent
in accepting the Merger Shares and Additional Shares, if any, as part of the
Merger Consideration, (iii) is aware that the Merger Shares and Additional
Shares, if any, to be issued to the Company Shareholder are restricted
securities and as such have not been registered under the Act and cannot be
offered for sale or sold without registration under the Act and all applicable
state securities laws or pursuant to an applicable exemption from registration.
3.23 CONSENTS. The Company has obtained all of the necessary consents
and approvals, and made all filings and notices, required to effectuate the
transactions contemplated by this Agreement which are set forth on Schedule
3.23.
3.24 ASSETS AND LIABILITIES. At the time of the Closing, the Company's
accounts payable and other liabilities do not exceed the Company's inventory
(valued at cost), cash and accounts receivable (other than the 90 Day A/R) by
greater than $50,000.
3.25 COMPLETE REPRESENTATIONS; FULL DISCLOSURE. The Company has not
failed to disclose any fact that would render any of the representations or
warranties herein misleading in any material respect or which would be material
to the Purchaser in order for the Purchaser to enjoy the title, possession and
full benefits of the Business and the Assets.
14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
In order to induce the Company and Company Shareholder to enter into
this Agreement, the Purchaser hereby represents and warrants, as follows:
4.01 ORGANIZATION. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted, except where
the failure to be so existing and in good standing or to have such power and
authority would not in the aggregate have a material adverse effect on the
financial condition, results of operations or business of the Purchaser taken as
a whole. The Purchaser is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not in
the aggregate have a material adverse effect on the financial condition, results
of operations or business of the Purchaser. Schedule 4.01 sets forth each
jurisdiction where the Purchaser is qualified to do business as a foreign
corporation. The Purchaser has heretofore made available to the Company accurate
and complete copies of the Certificate of Incorporation and Bylaws, as currently
in effect, of the Purchaser. The Purchaser has no subsidiaries and is not a
party to any partnership, agency or joint venture agreement.
4.02 CAPITALIZATION. The authorized capital stock of the Purchaser
consists of 1,000 shares of common stock, par value $.01 per share (the
"Purchaser Shares"), all of which were issued and outstanding as of the date
hereof and held of record and beneficially by the Parent, and shall remain that
way through the Closing Date. All of the issued and outstanding Purchaser Shares
are validly issued, fully paid and non-assessable and free of preemptive rights.
Except for the Purchaser Shares, there are no shares of capital stock of the
Purchaser issued or outstanding or any subscriptions, options, warrants, calls,
rights, convertible securities or other agreements or commitments of any
character obligating the Purchaser to issue, transfer, sell or pay any amount
with respect to any of its securities.
4.03 AUTHORITY RELATIVE TO THIS AGREEMENT. The Purchaser has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors and Shareholders of
the Purchaser and no other corporate proceedings on the part of the Purchaser
are necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
the Purchaser and constitutes a valid and binding agreement of the Purchaser,
enforceable against the
15
Purchaser in accordance with its terms, subject to the provisions of any
bankruptcy, insolvency, moratorium or similar law applicable to the rights of
creditors generally.
4.04 NO VIOLATIONS. Except for the filing and recordation of a
Certificate of Merger as required by the NYBCL, no filing with, and no permit,
authorization, consent or approval of, any public body or authority is necessary
for the consummation by the Purchaser of the transactions contemplated by this
Agreement, except for filings, permits, authorizations, consents or approvals,
the failure to obtain which would not in the aggregate have a material adverse
effect on the financial condition, results of operations or business of the
Purchaser taken as a whole or which would not prevent or delay in any material
respect the consummation of the transactions contemplated hereby. Neither the
execution and delivery of this Agreement by the Purchaser nor the consummation
by the Purchaser of the transactions contemplated hereby nor compliance by the
Purchaser with any provisions hereof will: (i) conflict with or result in any
breach of any provision of the Certificate of Incorporation or Bylaws of the
Purchaser, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license, lease,
contract, agreement or other instrument or obligation to which the Purchaser is
a party or by which it or its properties or assets may be bound, or (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Purchaser, or any of its properties or assets.
4.05 FINANCIAL REPRESENTATION. The Purchaser was organized on September
15, 2000, has had no operations and has performed no other acts other than those
incident to its organization. Purchaser's only asset is the $10 which the Parent
paid for the 1,000 issued and outstanding shares of the Purchaser's common
stock, par value $.01 per share and the Purchaser has no liabilities.
4.06 FULL DISCLOSURE. No representation, warranty or covenant made by
the Purchaser in this Agreement contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements
contained in this Agreement not misleading.
16
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT
In order to induce the Company and Company Shareholder to enter into
this Agreement, the Parent hereby represents and warrants, as follows:
5.01 ORGANIZATION. The Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so existing and in good standing or to have such power and
authority would not in the aggregate have a material adverse effect on the
financial condition, results of operations or business of the Parent taken as a
whole. The Parent is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed and in good standing would not in the aggregate have
a material adverse effect on the financial condition, results of operations or
business of the Parent and its subsidiary taken as a whole. Schedule 5.01 sets
forth each jurisdiction where the Parent is qualified to do business as a
foreign corporation. The Parent has heretofore made available to the Purchaser
accurate and complete copies of the Certificate of Incorporation and Bylaws, as
currently in effect, of the Parent.
5.02 CAPITALIZATION. The authorized capital stock of the Parent
consists of 40,000,000 shares of common stock, par value $.001 per share and
5,000,000 shares of preferred stock, par value $.001 per share (of which 1,500
shares have been designated series B convertible preferred stock). Of this
authorized capital stock, 21,186,209 shares of Common Stock and 625 shares of
series B convertible preferred stock, are issued and outstanding as of the date
hereof. All of the issued and outstanding securities of Parent have been validly
issued, fully paid and non-assessable and are free of preemptive rights. Except
for (i) the aforementioned shares of common stock and preferred stock, or (ii)
as disclosed in the Parent's Registration Statement on Form SB-2, declared
effective by the SEC on June 23, 2000 (the "SB-2 Registration Statement") and
10-QSB of the Parent for the period ended September 30, 2000 (the "10-QSB"),
copies of which have been provided to the Company, or (iii) as set forth in
Schedule 5.02 hereof, there are no shares of capital stock of the Parent issued
or outstanding or any subscriptions, options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
obligating the Parent to issue, transfer, sell or pay any amount with respect to
any of its securities. The Merger Shares and Additional Shares, if any, when
issued and delivered in accordance with this Agreement, will be duly and validly
issued and such common stock will be fully paid and non-assessable.
5.03 AUTHORITY RELATIVE TO THIS AGREEMENT. The Parent has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of
17
Directors of the Parent and no other corporate proceedings on the part of the
Parent are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by the Parent and constitutes a valid and binding agreement of the
Parent, enforceable against the Parent in accordance with its terms, subject to
the provisions of any bankruptcy, insolvency, moratorium or similar law
applicable to the rights of creditors generally.
5.04 NO VIOLATIONS. Except for the filing and recordation of a
Certificate of Merger as required by the NYBCL, no filing with, and no permit,
authorization, consent or approval of, any public body or authority is necessary
for the consummation by the Parent of the transactions contemplated by this
Agreement, except for filings, permits, authorizations, consents or approvals,
the failure to obtain which would not in the aggregate have a material adverse
effect on the financial condition, results of operations or business of the
Parent taken as a whole or which would not prevent or delay in any material
respect the consummation of the transactions contemplated hereby. Neither the
execution and delivery of this Agreement by the Parent nor the consummation by
the Parent of the transactions contemplated hereby nor compliance by the Parent
with any provisions hereof will: (i) conflict with or result in any breach of
any provision of the Certificate of Incorporation or Bylaws of the Parent, (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, lease, contract, agreement or
other instrument or obligation to which the Parent is a party or by which it or
its properties or assets may be bound or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Parent, or any
of its properties or assets.
5.05 FINANCIAL STATEMENTS. The SB-2 Registration Statement and 10-QSB,
copies of which have been provided to the Company Shareholder, contain the most
recent financial statements of the Parent. Each of such financial statements has
been prepared in accordance with generally accepted accounting principles
consistently applied during the periods covered, except as otherwise noted
therein.
5.06 LITIGATION. Except as set forth in the Registration Statement,
there are no actions, suits, or proceedings pending against, or to the knowledge
of the Parent, threatened against the Parent before any court or arbitrator or
any governmental body, agency or official required to be disclosed therein.
5.07 ABSENCE OF CERTAIN CHANGES. Except for: (i) transactions, changes,
events, obligations and liabilities contemplated by this Agreement; (ii)
transactions, changes, events, obligations and liabilities disclosed in the
Registration Statement; (iii) transactions, changes, events, obligations and
liabilities which individually or in the aggregate, have not had a material
adverse effect on the Parent:
a) There have been no changes in the business, condition
(financial or otherwise), operations, manner of conduct of business or
operations, assets or liabilities of the Parent, other than changes in the
ordinary course of business;
18
b) No liability or obligation of the Parent has been paid,
discharged or incurred other than in the ordinary course of business;
c) There has been no damage, destruction, or loss, whether or
not covered by insurance, materially adversely affecting the business or
property of the Parent; and
d) The Parent has not sold, mortgaged, pledged or subjected to
any lien or other encumbrance or otherwise transferred any material assets or
properties used in the conduct of its business.
5.08 FULL DISCLOSURE. No representation, warranty or covenant made by
the Parent in this Agreement contains any untrue statement of a material fact,
or omits to state a material fact necessary to make the statements contained in
this Agreement not misleading.
5.09 SEC REPORTS AND FINANCIAL STATEMENTS. Parent has delivered or made
available to the Company Shareholder a true and complete copy of each form,
report, schedule, registration statement, definitive proxy statement and other
document (together with all amendments thereof and supplements thereto) filed by
the Parent with the SEC (the "Parent SEC Reports"), which constitute all of the
documents that the Parent has been required to file with the SEC. As of their
respective dates, the Parent SEC Reports (i) complied in all material respects
with the requirements of the Act or the Exchange Act of 1934, as amended, as the
case may be, and (ii) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The audited consolidated financial statements
and unaudited interim consolidated financial statements (including, in each
case, the notes, if any, thereto) included in the Parent SEC Reports complied in
all material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with generally accepted accounting
principles in the United States applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes thereto and except
with respect to unaudited statements) and fairly present (subject, in the case
of the unaudited interim, financial statements, to normal, recurring year-end
audit adjustments (which are not expected to be, individually or in the
aggregate, materially adverse to Parent)) the consolidated financial position of
the Parent and its consolidated subsidiaries as at the respective dates thereof
and the consolidated results of operations and cash flows for the respective
periods then ended.
ARTICLE VI
COVENANTS
6.01 BEST EFFORTS. Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use its best efforts to take, or cause to
be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. In case at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement, the
proper officers and directors of each party to this Agreement shall take all
such necessary action.
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6.02 ADDITIONAL COVENANTS.
a) Employees. Except as indicated on Schedule 6.02, the
Company has terminated all of its employees immediately prior to the Closing.
The Company expressly acknowledges that except as expressly set forth in this
Agreement and on Schedule 6.02, the Purchaser is not hiring any of the Company's
employees (contract or otherwise), and the Company Shareholder is retaining all
obligations, responsibility and liability for any and all fees, commissions,
bonuses, vacation and benefits (including under health and other benefit plans)
accrued or owing to any of the Company's employees (contract or otherwise)
and/or agents or contractors as of the date hereof.
b) Check Endorsements. The Company hereby appoints the
Purchaser and its employees and representatives, effective as of the Closing
Date, as the Company's attorneys-in-fact, with full power of substitution to
endorse the Company's name on any checks payable to the Company or its order
with respect to any of the Company's accounts receivable or any of its assets.
Said appointment, being coupled with an interest, is irrevocable. At Purchaser's
request the Company shall execute and deliver any other agreement or other
instrument requested by the Purchaser to effect or perfect said
power-of-attorney.
ARTICLE VII
DELIVERIES AT THE CLOSING
7.01 MUTUAL DELIVERIES. Each party is delivering to the other herewith,
as applicable, the following:
a) A certificate of an officer certifying that (i) each of the
representations and warranties made by such party in this Agreement is true and
accurate as of the Closing Date, with a representation or warranty being true
and accurate to the extent that the aggregate effect of any inaccuracies as of
the applicable date does not constitute a material adverse effect on the
Business or the Assets; and (ii) such party has performed all covenants and
agreements set forth in this Agreement to be performed by it prior to or as of
such date;
b) An opinion of counsel dated as of the Closing Date, such
opinion to be delivered by the Company and Company Shareholder to be
substantially in the form of Exhibit F hereto, and the opinion to be delivered
by Purchaser and Parent to be substantially in the form of Exhibit G hereto;
c) A certificate of such party's secretary or assistant
secretary certifying that attached thereto is a list of all officers authorized
to sign any documents in connection herewith and genuine specimen signatures
thereof and that attached thereto is a true and complete copy of resolutions
duly adopted by the directors and shareholders, as appropriate, authorizing the
transactions contemplated by this Agreement;
d) An executed copy of the Employment Agreement with the
Purchaser, to be effective as of the Closing Date; and
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e) An executed copy of the Lock-up Agreement, as set forth in
Section 2.02(b) hereof.
7.02 ADDITIONAL DELIVERIES BY THE COMPANY. In addition to the items set
forth in Section 7.01 hereof, the Company is delivering herewith the following
items to the Purchaser:
a) Such other instruments or documents as the Purchaser has
reasonably requested in accordance with the terms and provisions hereof;
b) Financial statements, audited by a certified public
accountant acceptable to the Purchaser, consisting of Statements of Cash Flows
and Income Statements for at least the last three (3) year period and Balance
Sheets for at least the last two (2) year period;
c) A true and complete accounts receivable aging report and
inventory list, updated no later than one (1) day prior to the Closing Date;
d) Stock certificates representing all of the issued and
outstanding shares of common stock of the Company.
7.03 ADDITIONAL DELIVERIES BY THE PURCHASER AND PARENT. In addition to
the items set forth in Section 7.01 hereof, the Purchaser and the Parent are
delivering herewith to the Company Shareholder, the Merger Consideration, as
applicable, in accordance with the provisions of Section 1.07 above.
ARTICLE VIII
INDEMNITY
8.01 INDEMNITY. The Company Shareholder shall indemnify and hold the
Purchaser and Parent harmless from and against any demand, claim, action, damage
or liability, exceeding, in the aggregate, the sum of $25,000 (including without
limitation reasonable attorney's fees) ("Purchaser and Parent's Damages"), which
are asserted against or imposed upon or incurred by the Purchaser or Parent, to
the extent resulting from (a) a breach of any representation, warranty or
covenant of the Company or Company Shareholder set forth herein, (b) any
undisclosed litigation, legal proceeding or claim against the Purchaser or
Parent relating to the Company, the Business or the Assets and relating to the
period prior to the Closing Date, or (c) any undisclosed liability or obligation
relating to the period prior to the Closing Date; provided, however, that the
Company Shareholder shall indemnify and hold harmless the Purchaser and Parent
for unpaid income tax obligations of the Company for the period between January
1, 2000 and the Closing Date, only to the extent such claims exceed $450,000.
8.02 INDEMNIFICATION PERIOD. Such indemnification shall continue for a
period of one (1) year from the Closing Date, except with respect to (i) tax
matters, for which the indemnification period shall be governed by the
applicable statute of limitations, and (ii) securities matters regarding any
information furnished by the Company Shareholder in writing specifically for use
in the preparation of a Registration Statement, as set forth in Section 2.06
hereof.
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8.03 INDEMNIFICATION PROCEDURE. The Purchaser or Parent shall promptly
notify the Company Shareholder of any such claim; provided, however, that the
failure to give such notice shall not affect the Purchaser's and/or Parent's
right to indemnification, unless the Company or Company Shareholder shall have
been actually prejudiced as a result of such failure. If the claim is as a
result of a third party matter, the Company Shareholder shall be entitled to
participate in the defense thereof, and, if it so chooses, to assume the defense
thereof with counsel that the Company Shareholder selects, subject to the
Purchaser or Parent's reasonable approval, and subject to Purchaser or Parent's
right to participate in such defense and to employ its own counsel, at its own
expense, separate and apart from the Company Shareholder's counsel. The
Purchaser and/or Parent shall have the right to withhold any payment of the
Deferred Cash Payment or of obligations under the Notes pending final
resolutions of any claim for indemnity hereunder and to offset any such claim
against obligations to pay the Cash Consideration. To the extent that an
adjustment to the Merger Consideration has been made pursuant to Section 1.08
hereof, the Purchaser or Parent shall not be entitled to indemnification under
this section for such amounts.
ARTICLE IX
RESTRICTIVE COVENANT AND CONFIDENTIALITY
9.01 RESTRICTIVE COVENANT. Except as otherwise set forth in Section
10.01 hereof:
a) The parties confirm that it is reasonably necessary for the
protection of the Purchaser and Parent that the Company and the Company
Shareholder agree, and accordingly, the Company and the Company Shareholder
hereby agree, that none of them will, directly or indirectly, within the United
States of America, except for the benefit of the Purchaser and Parent, for a
period beginning on the date hereof and ending two (2) years after the end of
the period during which the Company Shareholder receives any compensation
pursuant to the Employment Agreement:
(i) become an officer, director, stockholder,
partner, associate, employee, owner, agent,
creditor, independent contractor,
co-venturer or otherwise, or (except for up
to a 5% interest in a company whose shares
are publicly traded) be interested in or
associated with any other corporation, firm
or business engaged in the same or any
similar business competitive with the
Purchaser's or Parent's business; or
(ii) solicit, cause or authorize, directly or
indirectly, to be solicited for or on behalf
of the Company or the Company Shareholder
from persons who were customers of the
Purchaser, Parent or the Company, or an
affiliate of each of them at any time within
one year prior to the date hereof, business
similar to the business transacted by the
Purchaser or Parent; or
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(iii) solicit, entice, persuade or induce,
directly or indirectly, any employee of the
Purchaser, Parent or the Company or any
affiliate thereof, or any other person, who
was at any time, within one (1) year prior
to the date thereof, then under contract
with or rendering services to the Purchaser,
Parent or any affiliate thereof, to
terminate his or her employment, or
contractual relationship with, the Purchaser
or Parent or any affiliate thereof, or to
refrain from extending or renewing the same
(upon the same or new terms) or to refrain
from rendering services to the Purchaser,
Parent, or any affiliate thereof, or to
become employed by or to enter into
contractual relations with persons other
than the Purchaser, Parent or any affiliate
thereof.
b) The Purchaser and Parent shall be entitled, in addition to
any other right and remedy it may have, at law or in equity, to apply for an
injunction, enjoining or restraining the Company or the Company Shareholder from
any violation or threatened violation of this Section 9.01.
c) The Purchaser, Parent, Company and Company Shareholder
acknowledge that the foregoing is reasonable in scope, necessary for the success
of the business of the Purchaser and Parent and forms an essential part of the
consideration for which the Purchaser and Parent are willing to enter into this
Agreement and the Employment Agreement entered into on even date herewith with
the Company Shareholder. If any of the restrictions contained herein shall be
deemed to be unenforceable by reason of the extent, duration or geographical
scope thereof, or otherwise, then the court making such determination shall have
the right to reduce such extent, duration, geographical scope, or other
provision hereof, and in its reduced form this Section 9.01 shall be enforceable
in the manner contemplated hereby.
9.02 CONFIDENTIALITY. The parties hereby agree that any party hereto
receiving Confidential Information (as defined hereunder) (the "Recipient
Party"), relating to another party hereto (the "Disclosing Party"), will not at
any time hereafter divulge to any third party, or use for its, his or her, as
the case may be, own benefit or for the benefit of any third party, any
knowledge or information concerning the business, accounts or finances of the
Disclosing Party or concerning any of the materials, drawings, sketches,
secrets, dealings, transactions, techniques, products, reports, developments or
affairs of the Disclosing Party (the "Confidential Information"). Confidential
Information shall not include any information: (i) that was available to the
Recipient Party on a non-confidential basis prior or to contemporaneously with
its disclosure by the Disclosing Party; or (ii) that becomes generally available
to the public after its disclosure to the Recipient Party, other than as a
result of a disclosure by such Recipient Party; or (iii) that becomes available
to the Recipient Party from a source other than the Disclosing Party hereto
after its disclosure to such Recipient Party; provided, however, that such
source is not prohibited from so disclosing such information by a contractual,
legal or fiduciary obligation.
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a) In the event that a Recipient Party becomes legally
compelled (by oral questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process) to disclose
any of the Confidential Information, such party will use its, his or her, as the
case may be, best efforts to provide the Disclosing Party with prompt written
notice so that the Disclosing Party may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this Section
9.02. In the event that such protective order or other remedy is not obtained,
or that the Disclosing Party does not waive compliance with the provisions of
this Section 9.02, the Recipient Party, will furnish only that portion of the
Confidential Information which is legally required and the compelled party will
exercise its, his or her, as the case may be, best efforts to obtain reliable
assurances that confidential treatment will be accorded to the Confidential
Information.
b) The Disclosing Party shall be entitled, in addition to any
other right and remedy it may have, at law or in equity, to apply for an
injunction, enjoining or restraining the Recipient Party from any violation or
threatened violation of this Section 9.02.
c) The Purchaser, Parent, Company and Company Shareholder
acknowledge that the foregoing is reasonable in scope, necessary for the success
of the Business and forms an essential part of the consideration for which the
Purchaser and Parent are willing to enter into this Agreement and the Employment
Agreement entered into on even date herewith with the Company Shareholder. If
any of the restrictions contained herein shall be deemed to be unenforceable by
reason of the extent, duration or geographical scope thereof, or otherwise, then
the court making such determination shall have the right to reduce such extent,
duration, geographical scope, or other provision hereof, and in its reduced form
this Section 9.02 shall enforceable in the manner contemplated hereby.
ARTICLE X
TERMINATION
10.01 TERMINATION OF EMPLOYMENT AGREEMENT AFTER EFFECTIVE TIME, DUE TO
DEFAULT IN PAYMENT. In the event that after the Closing payment in full of the
principal and any accrued interest of the Deferred Cash Payment or the Notes has
not been received by the Company Shareholder by either of their respective
"Maturity Dates", as defined therein, or the payment of any Excess (as defined
in Section 1.09 hereof) has not been made by the Parent when due, the Company
Shareholder may at any time thereafter, until such payment is received, in
addition to any other rights the Company Shareholder may have, give a thirty
(30) day written notice to cure to the Parent (the "Cure Period"). If the Parent
does not cure such payment default within the Cure Period, by paying all of the
outstanding principal and accrued interest then due, or the payment of the
Excess, if any, then the Company Shareholder shall have the option to give
written notice of termination of the Employment Agreement to the Purchaser and
Parent, as per Section 11.08 hereof. Upon receipt of such notice by the
Purchaser and Parent, the Purchaser and the Company Shareholder shall have no
further obligation under the Employment Agreement, other then (i) the
Purchaser's and Parent's obligations regarding compensation after termination,
as set forth in Section 7(a) thereof; (ii) the restrictions on the Company
Shareholder, set forth in Section 5(a) thereof, which shall continue for one
hundred twenty (120) days after the date of termination; (iii) the restrictions
on the Company Shareholder, set forth in Section 5(b) thereof, regarding
Confidential Information (as defined therein) of the Company and/or Purchaser,
which shall continue for one hundred twenty (120) days after the
24
date of termination; and (iv) the restrictions on the Company Shareholder, set
forth in Section 5(b) thereof, regarding Confidential Information (as defined
therein) of the Parent. After the expiration of the one hundred twenty (120) day
period set forth in this Section 10.01 the Company Shareholder's obligations
under Section 9.01 hereof shall also cease. In the event of termination pursuant
to this Section 10.01, upon expiration of such one hundred twenty (120) day
period, the Company Shareholder shall regain the exclusive right to utilize the
brand names listed on Schedule 10.01 attached hereto; provided, however, that
the Parent and Purchaser shall have the right to continue to sell any and all
then existing inventory of products utilizing such brand names.
10.02 TERMINATION AFTER EFFECTIVE TIME DUE TO TERMINATION OF
EMPLOYMENT. If the employment of the Company Shareholder is terminated by (i)
the Purchaser for "Cause", pursuant to either Section 6(c)(i) or 6(c)(ii) of the
Employment Agreement, or (ii) voluntarily by the Company Shareholder, without
"Good Reason", as defined in Subsection 7(c) of the Employment Agreement, then:
a) If such termination occurs prior to the twentieth (20th)
day after the Closing Date, then (i) other than as set forth in Sections 5 and 7
of the Employment Agreement, the parties thereto shall have no further
obligation thereunder, (ii) the obligations of the Purchaser and Parent to make
payments pursuant to both the Deferred Cash Payment and the Notes shall
terminate, and the parties thereto shall have no further obligation thereunder,
(iii) the Company Shareholder shall have the right to retain all payments
previously made by the Parent or Purchaser pursuant to Section 1.07(a) hereof;
and (iv) the Parent may, at its sole discretion, within thirty (30) days after
such termination, repurchase all of the Merger Shares at a purchase price of
$.001 per share;
b) If such termination occurs on or after the twentieth (20th)
day after the Closing Date, but prior to the ninetieth (90th) day after the
Closing Date, then (i) other than as set forth in Sections 5 and 7 of the
Employment Agreement, the parties thereto shall have no further obligation
thereunder, (ii) the obligations of the Purchaser and Parent to make payments
pursuant to the Notes shall terminate, and the parties thereto shall have no
further obligation thereunder, (iii) the Company Shareholder shall have the
right to retain all payments previously made by the Parent or Purchaser pursuant
to Sections 1.07(a) and (b) hereof; and (iv) the Parent may, at its sole
discretion, within thirty (30) days after such termination, repurchase all of
the Merger Shares at a purchase price of $.001 per share;
c) If such termination occurs on or after the ninetieth (90th)
day after the Closing Date, but prior to the six (6) month anniversary of the
Closing Date, then (i) other than as set forth in Sections 5 and 7 of the
Employment Agreement, the parties thereto shall have no further obligation
thereunder, (ii) the obligations of the Purchaser and Parent to make payments
pursuant to $500,000 Note shall terminate, and the parties thereto shall have no
further obligation thereunder, (iii) the Company Shareholder shall have the
right to retain all payments previously made by the Parent or Purchaser pursuant
to Section 1.07(a), (b) and (c) hereof; and
25
(iv) the Parent may, at its sole discretion, within thirty (30) days after such
termination, repurchase all of the Merger Shares at a purchase price of $.001
per share;
d) If such termination occurs on or after the six (6) month
anniversary of the Closing Date, but prior to Appraisal Date, then (i) other
than as set forth in Sections 5 and 7 of the Employment Agreement, the parties
thereto shall have no further obligation thereunder, (ii) the Company
Shareholder shall have the right to retain all payments previously made by the
Parent or Purchaser pursuant to Section 1.07(a), (b), (c) and (d) hereof; and
(iii) the Parent may, at its sole discretion, within thirty (30) days after such
termination, repurchase all of the Merger Shares at a purchase price of $.001
per share;
e) If such termination occurs on or after the Appraisal Date,
but prior to the eighteen (18) month anniversary of the Closing Date, then (i)
other than as set forth in Sections 5 and 7 of the Employment Agreement, the
parties thereto shall have no further obligation thereunder, (ii) the Company
Shareholder shall have the right to retain all payments previously made by the
Parent or Purchaser pursuant to Section 1.07(a), (b), (c), (d) and (e) hereof;
and (iii) the Parent may, at its sole discretion, within thirty (30) days after
such termination, repurchase all of the Additional Shares, if any, at a purchase
price of $.001 per share.
ARTICLE XI
MISCELLANEOUS
11.01 SURVIVAL. Except as otherwise indicated in this Agreement, the
representations, warranties, covenants and agreements made herein or in any
certificate or document executed in connection herewith shall survive for a
period of one (1) year after the execution and delivery of this Agreement.
11.02 BROKERAGE FEES AND COMMISSIONS. The Purchaser and Parent hereby
represent and warrant to the Company with respect to the Purchaser and Parent,
and the Company and the Company Shareholder hereby represent and warrant to the
Purchaser and Parent with respect to the Company, that no person or entity is
entitled to receive from the Purchaser or Parent or the Company, respectively,
any investment banking, brokerage or finder's fee or fees for financial
consulting or advisory services in connection with this Agreement or the
transactions contemplated hereby.
11.03 EXPENSES. The Company shall be responsible for all of the
Purchaser's, Parent's, Company's and Company Shareholder's legal and accounting
expenses incurred in preparing for, entering into and carrying out this
Agreement, and the Purchaser shall cause said legal and accounting expenses to
be paid within ten (10) days after the Closing Date.
11.04 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including any other
agreements referred to herein) (a) constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof, and (b) shall not be assigned by operation
of law or otherwise, provided that the Purchaser may assign its rights
26
and obligations to Parent or any subsidiary of the Purchaser, but no such
assignment shall relieve the Purchaser of its obligations hereunder if such
assignee does not perform such obligations.
11.05 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the parties.
11.06 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11.07 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram or telex, or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties as follows:
If to the Purchaser and/ 9278 Communications, Inc.
or the Parent: 0000 Xxxxxxxxxxxxxx Xxxx
Xxxxx, Xxx Xxxx 00000
Attn.: Xxxxx Xxxxxxx
With a copy to: Xxxx Marks & Xxxxx LLP
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
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If to the Company Shareholder: Xxxxx Xxxxxxx
00-00 Xxxxxx Xxxxxxxxx, Xxx. 00X
Xxxx Xxxx, Xxx Xxxx 00000
With a copy to: Todtman, Nachamie, Spizz & Xxxxx, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxx, Esq.
If to the Company: Reliable Networks, Inc.
00-00 Xxxxxx Xxxxxxxxx, XX#00
Xxxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxx
With a copy to: Todtman, Nachamie, Spizz & Xxxxx, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxx, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
11.08 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York as they are applied to
contracts to be performed entirely within such state, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws.
11.09 DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
11.10 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement
11.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute one and the same agreement.
11.12 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any of the provisions of this Agreement were not
to be performed in accordance with the terms hereto and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
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IN WITNESS WHEREOF, the undersigned has executed this Agreement and
Plan of Merger as of the date first set forth above.
RELIABLE NETWORKS, INC.
By: /s/ Xxxxx Xxxxxxx
------------------------------------------------
Name: Xxxxx Xxxxxxx
Title: President
/s/ Xxxxx Xxxxxxx
------------------------------------------------
Xxxxx Xxxxxxx
9278 COMMUNICATIONS, INC.
By: /s/ Xxxxx Xxxxxxx
------------------------------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Executive Officer
RELIABLE ACQUISITION CORP.
By: /s/ Xxxxx Xxxxxxx
------------------------------------------------
Name: Xxxxx Xxxxxxx
Title: President
29
