AGREEMENT AND PLAN OF MERGER
among
BALTIC INTERNATIONAL USA, INC.,
X-X MERGER SUB, INC.
and
LYNKTEL, INC.
Dated as of November 6, 2001
TABLE OF CONTENTS
ARTICLE 1: GENERAL DEFINITIONS 1
1.1 Affiliate 1
1.2 Best Knowledge 1
1.3 Control 1
1.4 Exchange Act 2
1.5 Governmental Authority 2
1.6 Governmental Requirement 2
1.7 Legal Requirements 2
1.8 Person 2
1.9 Exhibit 2
1.10 Section 2
1.11 Securities Act 2
1.12 Taxes 2
ARTICLE 2: THE MERGER 3
2.1 The Merger 3
2.2 Closing and Closing Date 3
2.3 Effective Time of the Merger 3
ARTICLE 3: APPROVALS 3
3.1 Baltic Board of Director Approvals 3
3.2 Baltic Shareholder Approval 3
3.3 Baltic Shareholders Meeting 4
3.4 LynkTel Approvals 4
3.5 Dissenter Rights 4
ARTICLE 4: CONVERSION OR CANCELLATION OF SHARES 4
4.1 Conversion or Cancellation of Shares 4
4.2 Stock Options 5
4.3 Surrender and Payment 5
4.4 No Further Transfers 5
4.5 Compliance with Securities Laws 5
ARTICLE 5: CERTAIN EFFECTS OF MERGER 6
5.1 Effect of Merger 6
5.2 Further Assurances 6
ARTICLE 6: POST-MERGER GOVERNANCE 6
6.1 Amendment to Baltic Articles of Incorporation and Bylaws 6
6.2 Amendment to LynkTel Articles of Incorporation and Bylaws 7
6.3 Directors, Officers and Employees 7
6.4 Reverse Stock Split of Baltic Shares 7
ARTICLE 7: ADDITIONAL AGREEMENTS 8
7.1 LynkTel Bridge Financing 8
7.2 Baltic Private Placement 8
7.3 LynkTel Recapitalization and Debt Restructure 8
7.4 Baltic Registration Statement 9
7.5 Notification of Certain Matters 9
7.6 Further Action 9
7.7 Public Announcements 9
7.8 Cooperation in Securities Filings 9
7.9 Additional Documents 9
ARTICLE 8: COVENANTS AND CONDITIONS OF CLOSING 10
8.1 Covenants Regarding the Closing 10
8.2 Conditions to Obligation of Baltic 10
8.3 Conditions to Obligation of LynkTel 13
8.4 Specific Items to be Delivered at the Closing 15
ARTICLE 9: REPRESENTATIONS AND WARRANTIES BY LYNKTEL 17
9.1 Organization and Standing 17
9.2 Subsidiaries, etc. 17
9.3 Qualification 17
9.4 Corporate Authority 17
9.5 Financial Statements 18
9.6 Financial Information 18
9.7 Capitalization of LynkTel 18
9.8 Taxes 19
9.9 No Actions, Proceedings, etc. 19
9.10 Post Balance Sheet Changes 19
9.11 No Breaches 20
9.12 Condition of LynkTel's Assets 20
9.13 Inventory 20
9.14 Accounts Receivable 20
9.15 Corporate Acts and Proceedings 20
9.16 Registered Rights and Proprietary Information 21
9.17 Changes in Suppliers and Customers 22
9.18 No Liens or Encumbrances 22
9.19 Employee Benefits 22
9.20 Legal Proceedings and Compliance with Law 22
9.21 Labor Matters 23
9.22 Insurance 23
9.23 Environmental 24
9.24 Disclosure of Information 24
9.25 Representation and Warranties 24
ARTICLE 10: COVENANTS OF LYNKTEL 25
10.1 Preservation of Business 25
10.2 Ordinary Course 25
10.3 Negative Covenants 25
10.4 Additional Covenants 26
10.5 Access to Books and Records, Premises, etc. 27
10.6 Compensation 27
10.7 No Solicitation 27
ARTICLE 11: REPRESENTATIONS AND WARRANTIES OF BALTIC 28
11.1 Organization and Standing 28
11.2 Subsidiaries, etc. 28
11.3 Qualification 28
11.4 Corporate Authority 28
11.5 Financial Statements 29
11.6 Financial Information 29
11.7 Capitalization of Baltic 29
11.8 No Actions, Proceedings, etc. 30
11.9 Post Balance Sheet Changes 30
11.10 No Breaches 31
11.11 Corporate Acts and Proceedings 31
11.12 Legal Proceedings and Compliance with Law 31
11.13 Representation and Warranties 31
ARTICLE 12: COVENANTS OF BALTIC 32
12.1 Preservation of Business 32
12.2 Ordinary Course 32
12.3 Negative Covenants 32
12.4 Additional Covenants 33
12.5 Access to Books and Records, Premises, etc. 34
12.6 Delivery of Additional Filings 34
ARTICLE 13: TERMINATION 34
13.1 Termination 34
13.2 Effect of Termination 35
13.3 LynkTel Termination Fee 35
ARTICLE 14: INDEMNIFICATION AND REMEDIES FOR BREACH 36
14.1 Indemnification by Baltic 36
14.2 Indemnification by LynkTel 36
14.3 Additional Notice 37
14.4 Determination of Damages and Related Matters 37
14.5 Remedies for Breach 38
ARTICLE 15: NONDISCLOSURE OF CONFIDENTIAL INFORMATION 38
15.1 Nondisclosure of Confidential Information 38
15.2 No Publicity 39
ARTICLE 16: EXPENSES 39
ARTICLE 17: MISCELLANEOUS 40
17.1 Attorney's Fees 40
17.2 Survival and Incorporation of Representations 40
17.3 Incorporation by Reference 40
17.4 Parties in Interest 40
17.5 Amendments and Waivers 40
17.6 Waiver 40
17.7 Governing Law - Construction 41
17.8 Representations and Warranties 41
17.9 Notices 41
17.10 Fax/Counterparts 42
17.11 Captions 42
17.12 Severability 42
17.13 Good Faith Cooperation and Additional Documents 42
17.14 Specific Performance 42
17.15 Assignment 42
17.16 Time 43
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of November 6, 2001 by and among BALTIC INTERNATIONAL USA, INC., a
Texas corporation ("Baltic"), X-X MERGER SUB, INC., a Texas corporation and
wholly owned subsidiary of Baltic ("Sub"), and LYNKTEL, INC., a Texas
corporation ("LynkTel").
WITNESETH:
WHEREAS, the Boards of Directors of Baltic and LynkTel deem it advisable
and in the best interests of each corporation and its respective shareholders
that Baltic and LynkTel engage in a business combination through a merger in
order to advance the long-term business interests of Baltic and LynkTel; and
WHEREAS, the combination of Baltic and LynkTel shall be effected under
the terms of this Agreement through a transaction (the "Merger") in which Sub
will merge with and into LynkTel, LynkTel will become a wholly owned
subsidiary of Baltic and the shareholders of LynkTel will become shareholders
of Baltic;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization with the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, for and in consideration of the premises, the mutual
representations, warranties and covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE 1: GENERAL DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 Affiliate. "Affiliate" of any Person shall mean any Person
Controlling, controlled by or under common Control with such Person.
1.2 Best Knowledge. "Best Knowledge" shall mean both what a Person
knew as well as what the Person should have known had the Person exercised
reasonable diligence. When used with respect to a Person other than a natural
person, the term "Best Knowledge" shall include matters that are known to the
directors, officers, partners, trustees, administrators, executors, managers,
employees, consultants and agents of the Person.
1.3 Control. "Control" and all derivations thereof shall mean the
ability to either (i) vote (or direct the vote of) 50% or more of the voting
interests in any Person or (ii) direct the affairs of another, whether through
voting power, contract or otherwise.
1.4 Exchange Act. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.5 Governmental Authority. "Governmental Authority" shall mean any
and all foreign, federal, state or local governments, governmental
institutions, public authorities and governmental entities of any nature
whatsoever, and any subdivisions or instrumentalities thereof, including, but
not limited to, departments, boards, bureaus, commissions, agencies, courts,
administrations and panels, and any division or instrumentalities thereof,
whether permanent or ad hoc and whether now or hereafter constituted or
existing.
1.6 Governmental Requirement. "Governmental Requirement" shall mean
any and all laws (including, but not limited to, applicable common law
principles), statutes, ordinances, codes, rules regulations, interpretations,
guidelines, directions, orders, judgments, writs, injunctions, decrees,
decisions or similar items or pronouncements, promulgated, issued, passed or
set forth by any Governmental Authority.
1.7 Legal Requirements. "Legal Requirements" means applicable common
law and any statute, ordinance, code or other laws, rule, regulation, order,
technical or other standard, requirement, judgment, or procedure enacted,
adopted, promulgated, applied or followed by any governmental authority,
including, without limitation, any order, decree, award, verdict, findings of
fact, conclusions of law, decision or judgment, whether or not final or
appealable, of any court, arbitrator, arbitration board or administrative
agency.
1.8 Person. "Person" shall mean any natural person, any Governmental
Authority and any entity the separate existence of which is recognized by any
Governmental Authority or Governmental Requirement, including, but not limited
to, corporations, partnerships, joint ventures, joint stock companies, trusts,
estates, companies and associations, whether organized for profit or
otherwise.
1.9 Exhibit. Unless otherwise stated herein, the term "Exhibit" when
used in this Agreement shall refer to the Exhibits to this Agreement. The
Exhibits to this Agreement may be attached to this Agreement or may be set
forth in a separate document denoted as the Exhibits to this Agreement, or
both.
1.10 Section. Unless otherwise stated herein, the term "Section" when
used in this Agreement shall refer to the Sections of this Agreement.
1.11 Securities Act. "Securities Act" shall mean the Securities Act of
1933, as amended.
1.12 Taxes. "Tax" and "Taxes" shall mean any and all income, excise,
franchise or other taxes and all other charges or fees imposed or collected by
any Governmental Authority or pursuant to any Governmental Requirement, and
shall also include any and all penalties, interest, deficiencies, assessments
and other charges with respect thereto.
ARTICLE 2: THE MERGER
2.1 The Merger. Subject to the terms and conditions of this Agreement
and in accordance with the Texas Business Corporation Act ("TBCA"), Sub shall
be merged with and into LynkTel. Thereupon, the separate existence of Sub
shall cease, and LynkTel shall continue as the surviving corporation in the
Merger (the "Surviving Corporation"). The name of the Surviving Corporation
shall be "LynkTel Communications, Inc."
2.2 Closing and Closing Date. Subject to the terms and conditions set
forth herein, the consummation of the transactions referenced above (the
"Closing") shall take place five (5) business days following the satisfaction
or waiver of all conditions precedent to the obligations of the parties
hereunder, or such other date as the parties shall mutually agree, at the
offices of Xxxxxxx Xxxxxx L.L.P., 0000 Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx
00000, or at such other time, date and place as Baltic and LynkTel shall
designate (the "Closing Date").
2.3 Effective Time of the Merger. As soon as practicable following
fulfillment or waiver of the conditions specified herein, LynkTel and Baltic
shall file Articles of Merger with the Secretary of State of Texas as provided
in the TBCA and make other filings or recordings required under the TBCA. The
Merger shall become effective immediately upon the filing of the Articles of
Merger with the Secretary of State of Texas. The date and time of the
completion of such filings is herein sometimes referred to as the "Effective
Time".
ARTICLE 3: APPROVALS
3.1 Baltic Board of Director Approvals. Subject to the provisions
hereof, the Board of Directors of Baltic shall, by written unanimous consent
approve the transactions contemplated by this Agreement in its capacity as the
sole shareholder of Sub; provided, however, that such approval shall be
subject to their satisfaction that the issuance of the common stock of Baltic,
par value $0.01 per share (the "Baltic Stock") to the LynkTel shareholders
shall be and is exempt from the registration requirements of the Securities
Act, is undertaken without violation of the anti-fraud provisions of the
Securities Act and has been consummated in conformity with all other
applicable Legal Requirements.
3.2 Baltic Shareholder Approval. As promptly as practicable following
the execution of this Agreement, Baltic shall prepare and file with the
Securities and Exchange Commission (the "Commission") a preliminary form of
proxy statement and other proxy materials related thereto ("Proxy Statement")
for use in connection with a special meeting of the shareholders of Baltic to
be scheduled and held to obtain shareholder approval of the Merger and the
other transactions provided for herein. Baltic and LynkTel agree to use all
reasonable efforts, after consulting with the other party, to respond promptly
to any comments made by the Commission with respect to the Proxy Statement;
and each shall cause its respective representatives to fully cooperate with
the other party and its respective representatives in the preparation of the
Proxy Statement and shall, upon request, furnish the other party with all
information concerning it and its affiliates, directors, officers and
stockholders as the party may reasonably request in connection with the
preparation of the Proxy Statement. As promptly as practicable after the
Proxy Statement shall have been cleared by the Commission, Baltic shall cause
such Proxy Statement to be mailed to its shareholders. Thereafter, LynkTel
shall notify Baltic as promptly as practicable upon becoming aware of any
event or circumstance that should be described in an amendment to or
supplement to the Proxy Statement.
3.3 Baltic Shareholders Meeting. Baltic shall call and hold a
shareholders meeting as promptly as practicable for the purpose of voting upon
the approval of the Merger. Baltic shall use reasonable effort to solicit
from its shareholders proxies in favor of the approval of the Merger and,
subject to applicable fiduciary duties of the Board of Directors, as
determined in the good faith by the Board of Directors after consultation with
and based upon the advice of legal counsel, shall take all other action
necessary or advisable to secure the vote and consent of the shareholders
required by the TBCA and the NASD Stock Market Rules of Governance.
3.4 LynkTel Approvals. As promptly as practicable after the date
hereof, LynkTel shall take all action necessary or appropriate under the TBCA,
and the Articles of Incorporation and Bylaws of LynkTel, to convene a meeting
of its shareholders as promptly as practicable for the purpose of considering
and voting upon appropriate resolutions approving the transactions
contemplated by this Agreement.
3.5 Dissenter Rights. At all times, and as applicable, LynkTel shall
comply with applicable Legal Requirements including, without limitation, the
payment of cash for dissenting shares related to the Merger.
ARTICLE 4: CONVERSION OR CANCELLATION OF SHARES
4.1 Conversion or Cancellation of Shares. At the Effective Time, the
issued and outstanding shares of common stock of LynkTel, no par value per
share (the "LynkTel Common Stock") and the issued and outstanding shares of
preferred stock of LynkTel, no par value per share (the "LynkTel Preferred
Stock") (the LynkTel Common and Preferred Stock may collectively be referred
to as the "LynkTel Stock") shall, by virtue of the Merger, be cancelled and
converted into shares of the capital stock of Baltic, as follows:
(a) Subject to compliance with Sections 5 and 17(a) of the
Securities Act, the shares of LynkTel Common Stock and Preferred Stock issued
and outstanding immediately prior to the Effective Time, excluding any such
shares held in the treasury of LynkTel, shall be converted into the right to
receive a number of shares of the Baltic Stock. Such right may be exercised
by the surrender of the certificates representing such shares of LynkTel
Common and Preferred Stock in accordance with Section 4.2 hereof. The number
of shares of Baltic Stock issued upon surrender shall be calculated as 3.25
shares of Baltic Stock in exchange for each share of LynkTel Common Stock.
(b) Each share of Baltic Stock, issued under paragraph (a) above
shall be Restricted Stock pursuant to Rule 144 promulgated under the
Securities Act.
(c) Each share of LynkTel Common Stock, if any, held in
LynkTel's treasury immediately prior to the Effective Time shall be canceled
and retired and no payment shall be made in respect thereof.
4.2 Stock Options.
(a) At the Effective Time, the obligation, if any, to issue
shares under each outstanding option to purchase LynkTel Stock shall be deemed
assumed by Baltic and each such option shall be deemed to constitute an option
to acquire, on the same terms and conditions as were applicable under such
stock option prior to the Effective Time, the whole number (disregarding any
fractional shares) of Baltic Stock as the holder of such stock option would
have been entitled to receive pursuant to the Merger had such holder exercised
such option in full immediately prior to the Effective Time, at a price per
share equal to the exercise price of the stock option; provided, however, that
the exercisability or other vesting of the assumed stock options and the
underlying stock shall continue to be determined by reference to the stock
option agreements executed between the holder thereof and LynkTel.
(b) As soon as practicable after the Effective Time, Baltic
shall deliver to each holder of an outstanding stock option an appropriate
notice setting forth such holder's rights pursuant thereto and such stock
option shall continue in effect on the same terms and conditions.
4.3 Surrender and Payment. Promptly after the Effective Time, each
holder of a certificate representing an issued and outstanding share of
LynkTel Stock shall be entitled upon surrender of such certificate along with
a fully executed letter of transmittal, in such form as Baltic may reasonably
specify, to Baltic, to receive the Baltic stock as set forth in Section 4.1
above. Until so surrendered, each certificate which immediately prior to the
Effective Time represented an issued and outstanding share of LynkTel Stock
shall, upon and after the Effective Time, be deemed for all purposes to
represent and evidence only the right to receive Baltic Stock as set forth in
Section 4.1. If any exchange for shares of LynkTel Stock is to be made in a
name other than that in which the certificate therefor surrendered for
exchange is registered, it shall be a condition of such payment that the
certificate so surrendered be properly endorsed or otherwise in proper form
for transfer and that the person requesting such payment either pay to Baltic
any transfer or other similar taxes required by reason of the payment to a
person other than the registered holder of the certificate surrendered or
establish to the satisfaction of Baltic that such tax has been paid or is not
payable.
4.4 No Further Transfers. On and after the Effective Time, no
transfer of the shares of LynkTel Stock issued and outstanding immediately
prior to the Effective Time shall be made on the stock transfer books of
LynkTel.
4.5 Compliance with Securities Laws. The Merger provided for in this
Agreement shall be undertaken in reliance upon an exemption from the
registration requirements contained in Section 5 of the Securities Act set
forth in Section 4(2) and Rule 506 of Regulation D thereunder. Baltic shall
take such actions as may be necessary or advisable in order to consummate the
Merger in conformity with applicable laws, including, without limitation,
federal and state securities laws; and LynkTel, together with its directors
and officers, agrees to take such actions as may be necessary or advisable
upon the reasonable request of Baltic to consummate the Merger in conformity
with such Legal Requirements.
ARTICLE 5: CERTAIN EFFECTS OF MERGER
5.1 Effect of Merger. On and after the Effective Time, the separate
existence of Sub shall cease and Sub shall be merged with and into LynkTel,
which as the Surviving Corporation shall, consistently with its Articles of
Incorporation succeed to, and without other transfer, possess all the rights,
privileges, immunities, powers and franchises of public as well as private
nature, and be subject to all restrictions, disabilities and duties of Sub;
and all rights, privileges, immunities, powers and franchises of Sub, and all
property, real, personal and mixed, causes of action and every other asset of,
and all debts due to Sub on whatever account as well as stock subscriptions
and all other things in action or belonging to Sub shall vest in the Surviving
Corporation; and all property, rights, privileges, immunities, powers and
franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as they were of Sub, and
the title to any real estate vested by deed or otherwise in Sub, shall not
revert or be in any way impaired but all rights of creditors and all liens
upon any property of Sub shall be preserved unimpaired, and all debts,
liabilities and duties of Sub shall thenceforth attach to the Surviving
Corporation, and may be enforced against it to the same extent as if such
debts, liabilities and duties had been incurred or contracted by it. Any
action or proceeding pending by or against Sub may be prosecuted to judgment,
which shall bind the Surviving Corporation, or the Surviving Corporation may
be proceeded against or substituted in its place.
5.2 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider any further deeds, assignments or
assurances in law or any other action necessary, desirable or proper (a) to
vest, perfect or confirm, of record or otherwise, in the Surviving Corporation
the title to any property or rights of Sub acquired or to be acquired by
reason of, or as a result of, the Merger, or (b) otherwise to carry out the
purposes of this Agreement, Sub agrees that it and its proper officers and
directors shall and will execute and deliver all such property, deeds,
assignments and assurances in law and take all other action necessary,
desirable or proper to vest, perfect or confirm title to such property or
right in the Surviving Corporation and otherwise to carry out the purposes of
this Agreement.
ARTICLE 6: POST-MERGER GOVERNANCE
6.1 Amendment to Baltic Articles of Incorporation and Bylaws. At the
Effective Time, the Articles of Incorporation of Baltic as in effect
immediately prior to the Effective Time, shall be amended to provide for the
following:
(a) At the Effective Time, the name of Baltic shall be changed
to "LynkTel, Inc." or some other name approved by the Baltic Board of
Directors with the consent of the Baltic shareholders.
(b) The authorized capital stock of Baltic shall be increased to
consist of (i) 100 million shares of common stock, $0.01 par value per share
and (ii) 500,000 shares of preferred stock, $10.00 par value per share. The
Bylaws of Baltic as in effect immediately prior to the Effective Time shall be
and continue to be the Bylaws of Baltic at the Effective Time.
6.2 Amendment to LynkTel Articles of Incorporation and Bylaws. At the
Effective Time, the Articles of Incorporation of LynkTel as in effect
immediately prior to the Effective Time shall be amended to provide for at the
Effective Time, the name of LynkTel shall be changed to "LynkTel
Communications, Inc." or some other name approved by the LynkTel Board of
Directors with the consent of the LynkTel shareholders.
6.3 Directors, Officers and Employees.
(a) Directors of Baltic. On Closing, the current members of the
Board of Directors of Baltic (to be renamed LynkTel, Inc. as provided for in
Section 6.1(a) above) shall, in accordance with the TBCA and the Articles of
Incorporation and Bylaws of Baltic, cause the Board of Directors of Baltic to
be reconstituted to consist of a total of five (5) persons. LynkTel shall
have the right to designate three (3) persons and Baltic shall have the right
to designate two (2) persons. The current members of the Baltic Board of
Directors shall resign their respective board memberships.
(b) Executive Officers of Baltic. Immediately after the
Effective Time, the newly constituted Board of Directors of Baltic shall elect
persons to serve as Executive Officers of Baltic. Any persons serving as
Executive Officers of Baltic immediately prior to the Effective Time who will
not continue in such capacity immediately after the Effective Time shall
tender their resignations in accordance with applicable Legal Requirements.
(c) Directors of LynkTel. Immediately after the Effective Time,
the Board of Directors of LynkTel (to be renamed LynkTel Communications, Inc.
as provided for in Section 6.2 above) shall be reconstituted to consist of one
(1) or more persons as shall be appointed by a majority vote of the newly
constituted Board of Directors of Baltic.
(d) Executive Officers of LynkTel. Immediately after the
Effective Time, any person serving as an executive officer of LynkTel
immediately prior to the Effective Time who will not continue in such capacity
immediately after the Effective Time shall tender his resignation in
accordance with applicable legal requirements. The executive officers of
LynkTel immediately after the Effective Time shall be persons duly appointed
by the newly constituted directors of LynkTel.
(e) Managers, Directors and Executive Officers of Advanced
Reclamation Company, L.L.C. ("ARC"), LynkTel Global Holdings, Inc. ("LGH"),
LynkTel Canada, Inc. ("LC") and LynkTel Florida, Inc. ("LF"). Immediately
after the Effective Time, the Board of Managers and executive officers of ARC
and the Board of Directors and executive officers of LGH, LC and LF
immediately prior to the Effective Time shall continue in their respective
capacities until such time as they are replaced by the Board of Baltic or ARC,
LGH, LC and/or LF is either sold, liquidated or distributed to the
shareholders of Baltic immediately prior to the Effective Time as provided for
in Section 7.5 below.
6.4 Reverse Stock Split of the Baltic Stock. Immediately after the
Effective Time, Baltic shall effect a reverse split of the Baltic Stock using
a ratio to be agreed upon by LynkTel and Baltic and approved by the Baltic
shareholders.
ARTICLE 7: ADDITIONAL AGREEMENTS
7.1 LynkTel Bridge Financing. LynkTel currently has a private
placement offering of 3,000,000 shares of its common stock at a price of $1.00
per share (the "LynkTel Bridge"). As of the date of this Agreement, LynkTel
has raised gross proceeds of $1,680,309 through the LynkTel Bridge. The
LynkTel Bridge shall raise additional gross proceeds of up to $1,319,691 from
the date of this Agreement through the Effective Time. Investors in the
LynkTel Bridge, and their shares of equity securities, shall be included in
the LynkTel Stock outstanding at the Effective Time for purposes of the
conversion provisions of Section 4.1 of this Agreement. The LynkTel Bridge
shall be undertaken without registration under the Securities Act in reliance
upon an exemption from such registration requirements contained in Rule 506,
Regulation D thereunder. LynkTel agrees to undertake the LynkTel Bridge in
conformity with all applicable legal requirements including, without
limitation, applicable federal and state securities laws. The completion of
the LynkTel Bridge shall be a condition precedent to the obligations of the
parties to consummate the Merger.
7.2 Baltic Private Placement. Baltic shall undertake a private
offering of its equity securities exclusively to persons who qualify as
"accredited investors" within the meaning of 501(a) of Regulation D under the
Securities Act. The private offering shall be calculated to result in Baltic
realizing net proceeds of the offering, after deducting expenses of the
offering and placement agent fees, of an amount to be agreed upon by LynkTel
and Baltic (the "Baltic Private Offering"). The Baltic Private Offering shall
be undertaken for the purpose of providing working capital following the
Effective Time. The Baltic Private Offering shall be undertaken without
registration under the Securities Act in reliance upon an exemption from such
registration requirements contained in Rule 506, Regulation D thereunder.
Baltic agrees to undertake the Baltic Private Placement in conformity with all
applicable legal requirements including, without limitation, applicable
federal and state securities laws. The completion of raising at least
$4,000,000 of the Baltic Private Placement shall be a condition precedent to
the obligations of the parties to consummate the Merger.
7.3 LynkTel Recapitalization and Debt Restructure. Prior to the
Effective Time of the Merger, LynkTel shall effect a recapitalization and debt
restructure to include the following:
(a) The convertible debt of LynkTel shall be restructured and
modified upon terms and conditions satisfactory to LynkTel and Baltic.
(b) All outstanding options and other securities exercisable to
purchase or convertible into shares of LynkTel Common Stock shall be either
surrendered for cancellation, converted into shares of LynkTel Common Stock or
otherwise included in the options outstanding and to be assumed by Baltic
pursuant to the provisions of Section 4.2 hereof.
(c) All securities issued by LynkTel pursuant to the
undertakings set forth in this Section shall be included in the LynkTel Stock
outstanding immediately prior to the Effective Time for the purposes of
Section 4.1 and 4.2 hereof.
7.4 Baltic Registration Statement. As soon as practicable following
the Effective Time of the Merger, Baltic shall prepare and file a registration
statement with the Commission (the "Registration Statement"), registering for
resale under the Securities Act shares of the Baltic Stock held by certain
selling shareholders or which may be acquired by such selling shareholders
pursuant to the exercise of outstanding options and warrants. Baltic agrees
to take all action necessary or advisable to prepare and file such
Registration Statement, and have same declared effective and to maintain the
effectiveness of such Registration Statement.
7.5 Notification of Certain Matters. LynkTel shall give prompt notice
to Baltic and Baltic shall give prompt notice to LynkTel of (i) the occurrence
or non-occurrence of any event which would cause any representation or
warranty made by the respective parties in this Agreement to be materially
untrue or inaccurate and (ii) any failure of Baltic or LynkTel, as the case
may be, to materially comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice and, provided further, that the failure to give such notice shall not
be treated as a breach of covenant for the purposes of this Agreement unless
the failure to give such notice results in material prejudice to the other
party.
7.6 Further Action. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall use reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all other
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement, to
obtain in a timely manner all necessary waivers, consents and approvals and to
effect all necessary registrations and filings, and to otherwise satisfy or
cause to be satisfied all conditions precedent to its obligations under this
Agreement.
7.7 Public Announcements. LynkTel and Baltic shall consult with each
other before issuing any press release or other public statement with respect
to the Merger or this Agreement and shall not issue any such press release or
make any such public statement without the prior consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that a
party may, without the prior consent of the other party, issue such press
release or make such public statement as may, upon the advice of counsel, be
required by law if it has used reasonable efforts to first consult with the
other party.
7.8 Cooperation in Securities Filings. LynkTel shall provide such
information regarding LynkTel, its business, its officers, directors and
affiliates, as is reasonably required by Baltic for purposes of preparing any
notices, reports and other filings with the Commission.
7.9 Additional Documents. The parties shall deliver or cause to be
delivered such documents or certificates as may be necessary, in the
reasonable opinion of counsel for either of the parties, to effectuate the
transactions provided for in this Agreement. If at any time the parties or
any of their respective successors or assigns shall determine that any further
conveyance, assignment or other document or any further action is necessary
desirable to further effectuate the transactions set forth herein or
contemplated hereby, the parties and their officers, directors and agents
shall execute and deliver, or cause to be executed and delivered, all such
documents as may be reasonably required to effectuate such transactions.
ARTICLE 8: COVENANTS AND CONDITIONS OF CLOSING
8.1 Covenants Regarding the Closing. The parties hereto hereby
covenant and agree that they shall (i) use reasonable efforts to cause all of
their respective representations and warranties set forth in this Agreement to
be true on and as of the Closing Date, (ii) use reasonable efforts to cause
all of their respective obligations that are to be fulfilled on or prior to
the Closing Date to be so fulfilled, (iii) use reasonable efforts to cause all
conditions to the Closing set forth in this Agreement to be satisfied on or
prior to the Closing Date, and (iv) deliver to each other at the Closing the
certificates, updated lists, opinion of counsel, notices, consents,
authorizations, approvals, agreements, transfer documents, receipts and
amendments contemplated by Articles 8, 9 and 11 (with such additions or
exceptions to such items as are necessary to make the statements set forth in
such items accurate, provided that if any such additions or exceptions cause
any of the conditions to the parties' obligations hereunder as set forth in
Articles 8, 9 and 11 below not to be fulfilled, such additions and exceptions
shall in no way limit the rights of the parties to terminate this Agreement or
refuse to consummate the transactions contemplated hereby.) All
indemnifications, guarantees, covenants, agreements, representations and
warranties made by the parties hereunder or pursuant hereto or in connection
with the transactions contemplated hereby shall survive the Closing regardless
of any investigation at any time made by or on behalf of the parties.
8.2 Conditions to Obligation of Baltic. The obligation of Baltic to
complete the Merger on the Closing Date on the terms set forth in this
Agreement is, at the option of Baltic, subject to the satisfaction or written
waiver by Baltic of each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties made by LynkTel in this Agreement shall be true
and correct in all material respects on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on the Closing Date, except to the extent that such representations and
warranties expressly relate to an earlier date in which case they shall have
been true and correct as of such earlier date.
(b) Compliance with Covenants. All covenants that LynkTel is
required to perform, satisfy or comply with on or before the Closing Date
shall have been fully complied with or performed in all material respects.
(c) Corporate Approvals. Any action required to be taken by the
Board of Directors or shareholders of Baltic and LynkTel to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby shall have been duly and validly taken.
(d) Consents and Approvals. To the extent that any material
lease, mortgage, deed of trust, contract or agreement to which LynkTel is a
party shall require the consent of any person to the Merger or any other
transaction provided for herein, such consent shall have been obtained and
Baltic shall have received reasonably satisfactory evidence thereof; provided,
however, that LynkTel shall not make, as a condition for the obtaining of any
such consent, any agreements or undertakings not approved in writing by Baltic
to the extent that such condition otherwise has an effect on Baltic. Baltic
shall have been furnished with evidence satisfactory to it of the timely
consent or approval of, filing with or notice to, each Governmental Authority
or Person which in the good faith judgment of Baltic is necessary or required
with respect to the execution and delivery by LynkTel and the consummation by
LynkTel of the transactions contemplated hereby.
(e) Review and Due Diligence. Baltic, its investment bankers,
legal counsel and/or auditors shall have had the opportunity to complete, and
shall have completed, a satisfactory due diligence investigation of LynkTel,
together with a satisfactory review of LynkTel's corporate status and
LynkTel's property, all of which shall be satisfactory in form and substance
to Baltic in its sole discretion.
(f) No Litigation, Etc. No action, investigation, litigation or
arbitration or proceeding by or before any Governmental Authority, or before
any arbitral, mediation panel or tribunal of any kind shall have been
instituted or threatened (i) to restrain or prohibit the transactions
contemplated by this Agreement, or (ii) to claim that the consummation of any
such transaction is illegal, or (iii) which, if determined adversely, would
effect adversely Baltic or LynkTel following consummation of the transactions
contemplated hereby and LynkTel shall have delivered to Baltic a certificate
dated as of the Closing Date and executed by LynkTel, stating that to its Best
Knowledge, no such items exist. No Governmental Authority or arbitral,
mediation panel or tribunal of any kind shall have taken any other action as a
result of which the management of Baltic, in its sole discretion, reasonably
deems it inadvisable to proceed with the transactions contemplated by this
Agreement.
(g) No Material Adverse Change. No material adverse change in
the business, property or assets of LynkTel shall have occurred, and no loss
or damage to any of the assets, whether or not covered by insurance, with
respect to LynkTel hereto has occurred, and LynkTel shall have delivered to
Baltic a certificate dated as of the Closing Date to such effect.
(h) Update of Contracts. LynkTel shall have delivered to Baltic
an accurate list, as of the Closing Date, showing (i) all agreements,
contracts and commitments entered into since the date of this Agreement; and
(ii) all other agreements, contracts and commitments related to the businesses
or the assets of LynkTel entered into since the date of this Agreement,
together with true, complete and accurate copies of all such documents (the
"LynkTel New Contracts"). Baltic shall have had the opportunity to review and
approve the LynkTel New Contracts, and shall have the right to delay the
Closing for up to ten (10) days if it in its sole discretion deems such delay
necessary to enable it to adequately review the LynkTel New Contracts.
(i) No Adverse Information. The investigations with respect to
LynkTel, the assets and the respective businesses performed by Baltic's
respective professional advisors and other representatives shall not have
revealed any information concerning LynkTel, its assets, liabilities or its
business that has not been made known to Baltic, in writing prior to the date
of this Agreement and that, in the opinion of such party and its advisors,
materially and adversely affects the business or assets of the other party or
the viability of the transaction contemplated by this Agreement.
(j) Ordinary Course of Business. During the period from the
date of this Agreement until the Closing Date, LynkTel shall have carried on
its business in the ordinary and usual course, and shall have delivered to
Baltic a certificate to that effect.
(k) Liens. LynkTel shall have delivered to Baltic a reasonably
current lien and judgment search (both state and county levels in each
jurisdiction where the party is qualified to or is doing business or owns
material assets) confirming the absence of any judicial liens, security
interests, tax liens and similar such liens ("Liens") affecting any of its
business or assets, except for liens acceptable to Baltic.
(l) Approval of Counsel. All actions, proceedings, instruments
and documents required or incidental to carry out this Agreement, including
all schedules and exhibits thereto, and all other related legal matters shall
have been approved by Xxxxxxx Xxxxxx L.L.P., counsel to Baltic.
(m) Other Documents. LynkTel shall have delivered or caused to
be delivered all other documents, agreements, resolutions, certificates or
declarations as Baltic or its attorneys may have reasonably requested.
(n) Compliance with Securities Laws. Baltic shall have
undertaken all actions necessary or advisable to consummate the Merger in
conformity with all Governmental and Legal Requirements including, without
limitation, applicable federal and state securities laws.
(o) Appraisal Rights and/or Dissenters' Rights. At or prior to
Closing, no beneficial or record owner of any outstanding shares of LynkTel
Common Stock shall have exercised or shall have given notice to Baltic or
LynkTel of their intent to exercise any rights under applicable state law, if
any, to dissent from the Merger or obtain the payment of the fair market value
of such shares of LynkTel Common Stock in lieu of participating in the Merger
in accordance with the terms and subject to the conditions set forth herein.
(p) Non-Disclosure. On or prior to Closing, all current
directors, officers and other personnel of Baltic and all agents, advisors and
consultants to Baltic with access to the Baltic Registered Rights and the
Baltic Proprietary Information and/or the LynkTel Registered Rights and the
LynkTel Proprietary Information, shall have executed and delivered to Baltic a
confidential information agreement restricting such person's right to disclose
any confidential or proprietary information of Baltic or of LynkTel.
(q) Financial Advisory Fees. At or prior to Closing, all
obligations or commitments of Baltic and LynkTel to their respective financial
advisors and investment bankers shall have been paid or otherwise satisfied
upon terms satisfactory to the parties, and Baltic and LynkTel shall each have
been delivered and received such written consents, approvals, estoppel
certificates or other instruments or undertakings from its advisors or other
third parties as each may deem reasonable, necessary or advisable.
(r) LynkTel Recapitalization and Debt Restructure. The LynkTel
recapitalization and debt restructure provided for in Section 7.4 above shall
have been successfully completed upon terms and conditions satisfactory to
Baltic.
(s) Compliance with Sections 5 and 17 of the Securities Act.
The Board of Directors of Baltic shall be satisfied that consummation of the
Merger and the issuance of Baltic Stock to the LynkTel securityholders are in
compliance with the provisions of Sections 5 and 17 of the Securities Act.
8.3 Conditions to Obligation of LynkTel. The obligations of LynkTel
on the Closing Date under the terms set forth in this Agreement are, at the
option of LynkTel, subject to the satisfaction or written waiver by LynkTel of
each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties made by Baltic in this Agreement shall be true
and correct in all material respects on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on the Closing Date, except to the extent that such representations and
warranties expressly relate to an earlier date in which case they shall have
been true and correct as of such earlier date.
(b) Compliance with Covenants. All covenants which Baltic are
required to perform, satisfy or comply with on or before the Closing Date
shall have been fully complied with or performed in all material respects.
(c) Corporate Approvals. Any action required to be taken by the
Board of Directors or shareholders of Baltic and LynkTel to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby shall have been duly and validly taken.
(d) Consents and Approvals. To the extent that any material
lease, mortgage, deed of trust, contract or agreement to which Baltic is a
party shall require the consent of any person to the exchange of the Baltic
Stock or any other transaction provided for herein, such consent shall have
been obtained and LynkTel shall have received reasonably satisfactory evidence
thereof; provided, however, that Baltic shall not make, as a condition for the
obtaining of any such consent, any agreements or undertakings not approved in
writing by LynkTel to the extent that such condition otherwise has an effect
on LynkTel or Baltic. LynkTel shall have been furnished with evidence
satisfactory to it of the timely consent or approval of, filing with or notice
to, each Governmental Authority or Person which in the good faith judgment of
LynkTel is necessary or required with respect to the execution and delivery by
Baltic and the consummation by Baltic of the transactions contemplated hereby.
(e) Review and Due Diligence. LynkTel, its investment bankers,
legal counsel and/or auditors shall have had the opportunity to complete, and
shall have completed, a satisfactory due diligence investigation of Baltic,
its assets and liabilities, together with a satisfactory review of Baltic's
corporate status and the marketability of title to Baltic's property, all of
which shall be satisfactory in form and substance to LynkTel in its sole
discretion.
(f) No Litigation, Etc. No action, investigation, litigation or
arbitration or proceeding by or before any Governmental Authority, or before
any arbitral, mediation panel or tribunal of any kind shall have been
instituted or threatened (i) to restrain or prohibit the transactions
contemplated by this Agreement or (ii) to claim that the consummation of any
such transaction is illegal or (iii) which, if determined adversely, would
effect adversely Baltic or LynkTel following consummation of the transactions
contemplated hereby and the parties shall have delivered to each other
certificates dated as of the Closing Date and executed by such parties,
stating that to their Best Knowledge, no such items exist. No Governmental
Authority or arbitral or mediation panel or tribunal of any kind shall have
taken any other action as a result of which the management of LynkTel, in its
sole discretion, reasonably deems it inadvisable to proceed with the
transactions contemplated by this Agreement.
(g) No Material Adverse Change. No material adverse change in
the business, property, assets or liabilities of Baltic or any of its
subsidiaries shall have occurred, and no loss or damage to any of the assets,
whether or not covered by insurance, with respect to Baltic hereto has
occurred, and Baltic shall have delivered to LynkTel a certificate dated as of
the Closing Date to such effect.
(h) No Adverse Information. The investigations with respect to
Baltic, the assets, liabilities and their respective businesses performed by
LynkTel's respective professional advisors and other representatives shall not
have revealed any information concerning Baltic, its assets, liabilities or
business that has not been made known to LynkTel, in writing prior to the date
of this Agreement and that, in the opinion of LynkTel and its advisors,
materially and adversely affects the business, liabilities or assets of Baltic
or the viability of the transactions contemplated by this Agreement.
(i) Ordinary Course of Business. During the period from the
date of this Agreement until the Closing Date, Baltic shall have undertaken no
material business operations and shall have delivered to LynkTel a certificate
to that effect.
(j) Approval of Counsel. All actions, proceedings, instruments
and documents required or incidental to carry out this Agreement, including
all schedules and exhibits thereto, and all other related legal matters shall
have been approved as to substance and form by counsel to LynkTel.
(k) Other Documents. Baltic shall have delivered or caused to
be delivered all other documents, agreements, resolutions, certificates or
declarations as LynkTel or its attorneys may have reasonably requested.
(l) Compliance with Securities Laws. Baltic shall otherwise
have undertaken all actions necessary or advisable to consummate the Private
Offering in conformity with all Governmental Requirements, including, without
limitation, applicable federal and state securities laws.
(m) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect.
(n) Financial Advisory Fees. At or prior to Closing, all
obligations or commitments of Baltic and LynkTel to their respective financial
advisors and investment bankers shall have been paid or otherwise satisfied on
terms satisfactory to the parties, and Baltic and LynkTel shall each have been
delivered and received such written consents, approvals, estoppel certificates
or other instruments or undertakings from its advisors or other third parties
as each may deem reasonable, necessary or advisable.
(o) Baltic Capitalization. On the Effective Time of the Merger,
but excluding shares issued in the Baltic Private Offering, Baltic shall have
no more than 9,975,760 shares of common stock issued and outstanding. In
addition, Baltic shall have outstanding (i) 123,000 shares of its Convertible
Redeemable Series A Preferred Stock, (ii) 14 shares of its Series B
Convertible Redeemable Preferred Stock and (ii) warrants and options
exercisable to purchase no more than an additional 4,276,631 shares of common
stock. To the extent options and warrants are exercised prior to the Merger,
the number of outstanding shares of common stock shall be increased and the
number of outstanding options and warrants shall be decreased by the same
amount.
(p) LynkTel Recapitalization and Debt Restructure. The LynkTel
recapitalization and debt restructure for in Section 7.4 above shall have been
successfully completed upon terms and conditions satisfactory to LynkTel.
(q) Compliance with Sections 5 and 17 of the Securities Act.
The Board of Directors of LynkTel shall be satisfied that consummation of the
Merger and the issuance of the Baltic Stock to the LynkTel securityholders are
in compliance with the provisions of Sections 5 and 17 of the Securities Act.
8.4 Specific Items to be Delivered at the Closing. The parties shall
deliver the following items to the appropriate party at the Closing of the
transactions contemplated by this Agreement.
(a) To be delivered by LynkTel:
(i) Copy of corporate resolutions authorizing the
execution of this Agreement, and the consummation by LynkTel of the
transactions contemplated by this Agreement.
(ii) A certificate of the Chief Executive Officer of
LynkTel stating that the representations and warranties of LynkTel set forth
in this Agreement are true and correct. Said certificate shall further verify
and affirm that all consents or waivers, if any, which may be necessary to
execute and deliver this Agreement have been obtained and are in full force
and effect.
(iii) A certificate dated the Closing Date, signed by the
Chief Executive Officer of LynkTel, in form and substance satisfactory to the
other party and its legal counsel, certifying that all conditions precedent
set forth in this Agreement to the obligations of LynkTel to close, have been
fulfilled, and that no event of default hereunder and no event which, with the
giving of notice or passage of time, or both, would be an event of default,
has occurred as of such date.
(iv) Certificates dated the Closing Date, signed by the
Secretary of LynkTel, (i) certifying resolutions duly adopted by the Board of
Directors and shareholders of LynkTel, authorizing the execution of this
Agreement and all of the other transactions to be consummated pursuant
thereto; (ii) certifying the names and incumbency of the officers of LynkTel
who are empowered to execute the foregoing documents for and on behalf of such
company; (iii) certifying the authenticity of copies of the Articles of
Incorporation and Bylaws of LynkTel; and (iv) certifying the authenticity of a
reasonably current Certificate of Good Standing, from all jurisdictions in
which the company is qualified to conduct business.
(b) To be delivered by shareholders of LynkTel:
(i) Certificate or certificates representing 100% of the
issued and outstanding equity securities of LynkTel, which stock certificates
shall be endorsed in favor of Baltic.
(ii) Fully executed letters of transmittal from all
securityholders of record of LynkTel.
(c) To be delivered by Baltic:
(i) Certificate or certificates representing the shares of
Baltic Stock, as adjusted pursuant to Section 4.2(c) which stock certificates
shall be issued in the names of each shareholder;
(ii) Copy of corporate resolution authorizing the execution
of this Agreement and the consummation by Baltic and Sub of the transactions
contemplated by this Agreement, including, but not limited to, the issuance of
Baltic Stock in the amounts and manner set forth in Section 4.1 above;
(iii) A certificate dated the Closing Date, signed by the
Chief Executive Officer of Baltic and Sub, in form and substance satisfactory
to the other party and its legal counsel, certifying that all conditions
precedent set forth in this Agreement to the obligations of Baltic and Sub to
close, have been fulfilled, and that no event of default hereunder and no
event which, with the giving of notice or passage of time, or both, would be
an event of default, has occurred as of such date.
(iv) Certificates dated the Closing Date, signed by the
Secretary of Baltic and Sub, (i) certifying resolutions duly adopted by the
Board of Directors of Baltic and Sub, authorizing the execution of this
Agreement and all of the other transactions to be consummated pursuant
thereto; (ii) certifying the names and incumbency of the officers of Baltic
and Sub who are empowered to execute the foregoing documents for and on behalf
of such company; (iii) certifying the authenticity of copies of the Articles
of Incorporation and Bylaws of Baltic and Sub; and (iv) certifying the
authenticity of a reasonably current Certificate of Good Standing, from all
jurisdictions in which Baltic and Sub are qualified to conduct business.
ARTICLE 9: REPRESENTATIONS AND WARRANTIES BY LYNKTEL
As a material inducement to Baltic to enter into this Agreement and with
the understanding and expectation that Baltic will be relying thereon in
consummating the Merger contemplated hereunder, LynkTel represents and
warrants as follows:
9.1 Organization and Standing. LynkTel is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Texas and has all requisite corporate power and authority to own its assets
and properties and to carry on its business as it is now being conducted.
9.2 Subsidiaries, etc. LynkTel has a direct or indirect ownership
interest in the following entities:
Total
Name Type of entity Ownership Interest
---- -------------- ------------------
(direct and indirect)
LynkTel Global Holdings, Inc. Texas corporation 100%
LynkTel Advertising, L.P. Texas limited partnership 100%
LynkTel Opportunities, Inc. Texas corporation 100%
LynkTel Canada, Inc. Canada corporation 100%
LynkTel Florida, Inc. Florida corporation 100%
9.3 Qualification. LynkTel is duly qualified to do business in each
jurisdiction in which the nature of its business or the ownership or leasing
of its properties makes such qualification necessary other than in such
jurisdictions where the failure to be qualified to engage in business as a
foreign corporation would not have a material adverse affect on LynkTel.
9.4 Corporate Authority. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby nor
compliance by LynkTel with any on the provisions hereof will:
(a) Conflict with or result in a breach of any provision of its
Articles of Incorporation or Bylaws;
(b) Result in 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, agreement or
other instrument or obligation to which LynkTel is a party, or by which any of
its properties or assets may be bound except for such default (or right of
termination, cancellation, or acceleration) as to which requisite waivers or
consents shall either have been obtained by LynkTel prior to the Closing Date
or the obtaining of which shall have been waived by Baltic; or
(c) Violate any order, writ, injunction, decree or, to LynkTel's
Best Knowledge, any statute, rule or regulation applicable to LynkTel or any
of its properties or assets. No consent or approval by any Governmental
Authority is required in connection with the execution and delivery by LynkTel
of this Agreement or the consummation by LynkTel of the transactions
contemplated hereby.
9.5 Financial Statements. LynkTel has furnished Baltic with a true
and complete copy of its unaudited financial statements containing balance
sheets, together with statements of operation, statements of cash flows, and
statements of stockholders' equity as of and for the period from inception
(February 11, 2000) to December 31, 2000 and as of and for the six months
ended June 30, 2001 (the "LynkTel Financials"). Such financial statements,
together with and subject to the disclosures and notes thereto: (i) are in
accordance with the books and records of LynkTel; (ii) present fairly and
accurately the financial condition of LynkTel as of the dates of the balance
sheets; (iii) present fairly and accurately the results of operations for the
periods covered by such statements; (iv) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis; and
(v) include all adjustments (consisting of only normal recurring accruals)
which are necessary for a fair presentation of the financial condition of
LynkTel, and of the results of operations of LynkTel for the periods covered
by such statements. As of the date hereof and as of the Closing Date, LynkTel
does not have any liabilities or payables (absolute or contingent, known or
unknown), except for liabilities or payables set forth in the LynkTel
Financials or otherwise disclosed in writing to Baltic.
9.6 Financial Information. In connection with the investigations
performed by and due diligence to be undertaken by Baltic of LynkTel, LynkTel
has furnished and will furnish certain financial information and data
including, without limitation, tax and accounting records, financial records,
statements, worksheets and other information requested by Baltic and its
agents necessary to undertake the complete the examinations. LynkTel and its
shareholders jointly and severally represent and warrant that any and all such
information furnished in connection with the conduct of such investigations
shall be true, accurate and complete in all material respects and shall not
contain any material misstatements nor any material omissions of fact or
information respecting the financial condition or results of operation of the
business for the respective periods.
9.7 Capitalization of LynkTel. The authorized capital stock of
LynkTel consists of 30,000,000 shares of the LynkTel Common Stock and
20,000,000 shares of the LynkTel Preferred Stock. As of the date of this
Agreement, there are 16,885,409 shares of the LynkTel Common Stock issued and
outstanding. All issued and outstanding shares of LynkTel Common Stock have
been duly authorized and validly issued and are fully paid and non-assessable.
As of the date of this Agreement, LynkTel has options outstanding to purchase
2,771,000 shares of LynkTel Common Stock and a convertible debt instrument
with a principal balance of $507,500. In connection with LynkTel's purchase
of the operation that is now LynkTel Florida, Inc., LynkTel has an agreement
to issue up to 400,000 additional shares of the LynkTel Common Stock that may
be paid contingent upon the earnings of LynkTel Florida, Inc. There are no
other outstanding rights, options, warrants, subscriptions, calls, convertible
securities or agreement of any character or nature under which LynkTel is or
may become obligated to issue any shares of its capital stock of any kind,
other than those shares indicated in this Section as presently outstanding and
shares issuable in accordance with the terms of this Agreement.
9.8 Taxes. Except as set forth in Exhibit 9.8:
(a) LynkTel has filed (or has obtained extensions for filing)
all income, excise, sales, corporate franchise, property, payroll and other
tax returns or reports required to be filed by it, as of the date hereof by
the United States of America, any state or other political subdivision thereof
or any foreign country and has paid all Taxes or assessments relating to the
time periods covered by such returns or reports; and
(b) LynkTel has paid all tax liabilities imposed or assessed by
any governmental authority for all periods prior to the Closing Date for which
such taxes have become due and payable and has received no notice from any
such governmental authority of any deficiency or delinquency with respect to
such obligation. LynkTel is not currently undergoing any audit conducted by
any taxing authority and has received no notice of audit covering any prior
period for which taxes have been paid or are or will be due and payable prior
to the Closing Date. There are no present disputes as to taxes of any nature
payable by LynkTel.
9.9 No Actions, Proceedings, etc. There is no action or proceeding
(whether or not purportedly on behalf of LynkTel) pending or to its knowledge
threatened by or against LynkTel that might result in any material adverse
change in the condition, financial or otherwise, of LynkTel's business or
assets. No order, writ or injunction or decree has been issued by, or
requested of any court or Governmental Agency that does or may result in any
material adverse change in LynkTel's assets or properties or in the financial
condition or the business of LynkTel. LynkTel is not liable for damages to
any employee or former employee as a result of any violation of any state,
federal or foreign laws directly or indirectly relating to such employee or
former employee.
9.10 Post Balance Sheet Changes. Except as contemplated by this
Agreement, since June 30, 2001, LynkTel has not (a) issued, bought, redeemed
or entered into any agreements, commitments or obligations to sell, buy or
redeem any shares of its capital stock; (b) incurred any obligation or
liability (absolute or contingent), other than current liabilities incurred,
and obligations under contracts entered into, in the ordinary course of
business; (c) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current
liabilities incurred in the ordinary course of business; (d) mortgaged,
pledged or subjected to lien charges, or other encumbrance any of its assets,
other than the lien of current or real property taxes not yet due and payable;
(e) waived any rights of substantial value, whether or not in the ordinary
course of business; (f) suffered any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting its assets or its
business; (g) made or suffered any amendment or termination of any material
contract or any agreement which adversely affects its business; (h) received
notice or had knowledge of any labor trouble other than routine grievance
matters, none of which is material; (i) increased the salaries or other
compensation of any of its directors, officers or employees or made any
increase in other benefits to which employees may be entitled, other than
employee salary increases made in the ordinary course of business and
reflected on an exhibit hereto; (j) sold, transferred or otherwise disposed of
any of its assets, other than in the ordinary course of business; (k) declared
or made any distribution or payments to any of its shareholders, officers or
employees, other than wages and salaries made to employees in the ordinary
course of business; (l) revalued any of its assets; or (m) entered into any
transactions not in the ordinary course of business.
9.11 No Breaches. LynkTel is not in violation of, and the consummation
of the transactions contemplated hereby do not and will not result in any
material breach of, any of the terms or conditions of any mortgage, bond,
indenture, agreement, contract, license or other instrument or obligation to
which LynkTel is a party or by which its assets are bound; nor will the
consummation of the transactions contemplated hereby cause LynkTel to violate
any statute, regulation, judgment, writ, injunction or decree of any court,
threatened or entered in a proceeding or action in which LynkTel is, was or
may be bound or to which any of LynkTel's assets are subject.
9.12 Condition of LynkTel's Assets. LynkTel's assets are currently in
good and usable condition and there are no defects or other conditions which,
in the aggregate, materially and adversely affect the operation or values of
such assets taken as a whole. No person other than LynkTel (including any
officer or employee of LynkTel) has any proprietary interest in any know-how
or other intangible assets used by LynkTel in the conduct of its business.
9.13 Inventory. All inventories reflected in the Financial Statements
in excess of the reserves for excess or obsolete inventories are stated at the
lowest of cost, replacement cost or market and, as so stated, are in good
condition and usable or salable in the category in which they are inventoried,
in the ordinary course of business of LynkTel, without discounts other than
normal trade discounts regularly offered by LynkTel, for prompt payment or
quantity purchase.
9.14 Accounts Receivable. The accounts receivable of LynkTel represent
valid and enforceable obligations due to LynkTel and, except to the extent of
the reserve reflected in the latest financial statements, shall be collectible
by LynkTel in the ordinary course of business. LynkTel has not received any
notice of any material counterclaim or set-off with respect to such accounts
receivable.
9.15 Corporate Acts and Proceedings. Subject to the approval of the
LynkTel shareholders, this Agreement has been duly authorized by all necessary
corporate action on behalf of LynkTel, has been duly executed and delivered by
an authorized officer of LynkTel, and is a valid and binding Agreement on the
part of LynkTel that is enforceable against LynkTel in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, fraudulent transfers, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and to judicial
limitations on the enforcement of the remedy of specific performance and other
equitable remedies.
9.16 Registered Rights and Proprietary Information.
(a) LynkTel has patents, letters patent and patent applications,
service marks, trademark and service xxxx registrations and applications,
copyright, copyright registrations and applications, grants of licenses and
rights to LynkTel with respect to the foregoing, both domestic and foreign,
claimed by LynkTel or used or proposed to be used by LynkTel in the conduct of
its business (collectively herein, "LynkTel Registered Rights").
Additionally, LynkTel has trade secrets, know-how, processes, formulas,
discovery, development, research, design, technique, customer and supplier
lists, contracts, product development plans, product development concepts,
author contracts, marketing and purchasing strategies, inventions, and other
matters required for, incident to, or related to the conduct of its business
(hereafter collectively the "LynkTel Proprietary Information"). LynkTel is
not obligated or under any liability whatever to make any payments by way of
royalties, fees or otherwise to any owner or licensor of, or other claimant
to, any LynkTel Registered Right or LynkTel Proprietary Information with
respect to the use thereof in the conduct of its business or otherwise.
(b) To LynkTel's Best Knowledge, LynkTel owns and has the
unrestricted right to use the LynkTel Registered Rights and LynkTel
Proprietary Information required for or incident to the design, development,
manufacture, operation, sale and use of all products and services sold or
rendered or proposed to be sold or rendered by LynkTel or relating to the
conduct or proposed conduct of its business free and clear of any right,
title, interest, equity or claim of others. As soon as practicable following
the execution of this Agreement, and LynkTel agrees to take all necessary
steps (including without limitation entering into appropriate confidentiality,
assignment of rights and non-competition agreements with all officers,
directors, employees and consultants of LynkTel and others with access to or
knowledge of the LynkTel Proprietary Information) to safeguard and maintain
the secrecy and confidentiality of, and its proprietary rights in, the LynkTel
Proprietary Information and all related documentation and intellectual
property rights therein necessary for the conduct or proposed conduct of its
business.
(c) LynkTel has not sold, transferred, assigned, licensed or
subjected to any right, lien, encumbrance or claim of others, any LynkTel
Proprietary Information, including without limitation any LynkTel Registered
Right, or any interest therein, related to or required for the design,
development, manufacture, operation, sale or use of any product or service
currently under development or manufactured, or proposed to be developed, sold
or manufactured, by it except for licensing the use of its products and use of
the "LynkTel" name to LynkTel Atlantic, a third party located in Canada.
There are no claims or demands of any person pertaining to, or any proceedings
that are pending or threatened, which challenge the rights of LynkTel in
respect of any LynkTel Proprietary Information used in the conduct of its
business.
(d) LynkTel owns and on the Closing Date shall own, has and
shall have, holds and shall hold, exclusively all right, title and interest in
the LynkTel Registered Rights, free and clear of all liens, encumbrances,
restrictions, claims and equities of any kind whatsoever, has and shall have
the exclusive right to use, sell, license or dispose of, and has and shall
have the exclusive right to bring action for the infringement of the LynkTel
Registered Rights and the LynkTel Proprietary Information. To the Best
Knowledge of LynkTel, the marketing, promotion, distribution or sale by
LynkTel of any products or interests subject to the LynkTel Registered Rights
or making use of LynkTel Proprietary Information shall not constitute an
infringement of any patent, copyright, trademark, service xxxx or
misappropriation or violation of any other party's proprietary rights or a
violation of any license or agreement by LynkTel. To the knowledge of LynkTel
after due inquiry no facts or circumstances exist that could result in the
invalidation of any of the LynkTel Registered Rights.
9.17 Changes in Suppliers and Customers. LynkTel is not aware of any
fact which indicates that any of the suppliers supplying products, components
or materials to LynkTel intends to cease selling such products to LynkTel nor
is LynkTel aware of any fact which indicates that any major customer of
LynkTel intends to terminate its business relations with LynkTel.
9.18 No Liens or Encumbrances. LynkTel has good and marketable title
to all of the property and assets, tangible and intangible, employed in the
operations of its business, free of any material mortgages, security
interests, pledges, easements or encumbrances of any kind whatsoever except
for such property and assets as may be leased by LynkTel.
9.19 Employee Benefits. LynkTel has no employee benefit plans
(including, but not limited to, pension plans and health or welfare plans),
arrangements or understandings, whether formal or informal. LynkTel does not
now and has never contributed to a "multi-employer plan" as defined in Section
400(a)(3) of ERISA. LynkTel has complied with all applicable provisions of
ERISA and all rules and regulations promulgated thereunder, and neither
LynkTel nor any trustee, administrator, fiduciary, agent or employee thereof
has at any time been involved in a transaction that would constitute a
"prohibited transaction" within the meaning of Section 406 of ERISA as to any
covered plan of LynkTel. LynkTel is not a party to any collective bargaining
or other union agreement. LynkTel has not, within the past five (5) years
had, or been threatened with, any union activities, work stoppages or other
labor trouble with respect to its employees which had a material adverse
effect on LynkTel, its business or assets. LynkTel has not made any
commitment or agreements to increase the wages or modify the conditions or
terms of employment of any of the employees of LynkTel used in connection with
its business, and between the date of this Agreement and the Closing Date,
LynkTel will not make any agreement to increase the wages or modify the
conditions or terms of employment of any of the employees of LynkTel used in
the conduct of its business, without the prior written consent of all parties
hereto.
9.20 Legal Proceedings and Compliance with Law. LynkTel has not
received notice of any legal, administrative, arbitration or other proceeding
or governmental investigation pending or threatened (including those relating
to the health, safety, employment of labor, or protection of the environment)
pertaining to LynkTel which might result in the aggregate in money damages
payable by LynkTel in excess of insurance coverage or which might result in a
permanent injunction against LynkTel. LynkTel has substantially complied
with, and is not in default in any respect under any laws, ordinances,
requirements, regulations, or orders applicable to the business of LynkTel,
the violation of which might materially and adversely affect it. LynkTel is
not a party to any agreement or instrument, nor is it subject to any charter
or other corporate restriction or any judgment, order, writ, injunction,
decree, rule, regulation, code or ordinance which materially and adversely
affects, or might reasonably be expected materially and adversely to affect
the business, operations, prospects, property, assets or condition, financial
or otherwise, of LynkTel.
9.21 Labor Matters. There are no strikes, slowdowns, stoppages,
organizational efforts, discrimination charges or other labor disputes pending
or, to the knowledge of LynkTel or any of its agent or employees, threatened
against LynkTel.
9.22 Insurance. LynkTel maintains in full force and effect insurance
coverage on its assets and business that LynkTel deems adequate for the
conduct of its business.
9.23 Environmental. LynkTel has never owned or operated any real
property except for leased office space:
(a) To the Best Knowledge of LynkTel, no real property (or the
subsurface soil and the ground water thereunder) now or previously leased by
LynkTel (the "Leased Premises") either contains any Hazardous Substance (as
hereinafter defined) or has underneath it any underground fuel or liquid
storage tanks;
(b) To the Best Knowledge of LynkTel, there has been no
generation, transportation, storage, treatment or disposal of any Hazardous
Substance on or beneath the Leased Premises, now or in the past;
(c) LynkTel is not aware of any pending or threatened litigation
or proceedings before any court or administrative agency in which any person
alleges, or threatens to allege, the presence, release, threat of release,
placement on or in the Leased Premises, or the generation, transportation,
storage, treatment or disposal at the Leased Premises, of any Hazardous
Substance;
(d) LynkTel has not received any written notice and has no
knowledge that any Governmental Authority or any employee or agent thereof has
determined or alleged, or is investigating the possibility, that there is or
has been any presence, release, threat of release, placement on or in the
Leased Premises, or any generation, transportation, storage, treatment or
disposal at the Leased Premises, of any Hazardous Substance;
(e) To the Best Knowledge of LynkTel, there have been no
communications or agreements with any Governmental Authority or agency
(federal, state, or local) or any private person or entity (including, without
limitation, any prior owner of the Leased Premises and any present or former
occupant or tenant of the Leased Premises) relating in any way to the
presence, release, threat of release, placement on or in the Leased Premises,
or any generation, transportation, storage, treatment or disposal at the
Leased Premises, of any Hazardous Substance. LynkTel further agrees and
covenants that LynkTel will not store or deposit on, otherwise release or
bring onto or beneath, the Leased Premises any Hazardous Substance prior to
the Closing Date; and
(f) There is no litigation, proceeding, citizen's suit or
governmental or other investigation pending, or, to LynkTel's Best Knowledge,
threatened, against LynkTel, and LynkTel knows of no facts or circumstances
which might give rise to any future litigation, proceeding, citizen's suit or
governmental or other investigation, which relate to LynkTel's compliance with
environmental laws, regulations, rules, guidelines and ordinances.
For purposes of this Section, "Hazardous Substance" shall mean and
include (i) a hazardous substance as defined in 42 U.S.C. Section 9601(14),
the Regulations at 40 C.F.R. Part 302, (ii) any substance regulated under the
Emergency Planning and Community Right to Know Act (including without
limitation any extremely hazardous substances listed at 40 C.F.R. Part 355 and
any toxic chemical listed at 40 C.F.R. Part 372), (iii) hazardous wastes and
hazardous substances as specified under any California state or local
Governmental Requirement governing water pollution, groundwater protection,
air pollution, solid wastes, hazardous wastes, spills and other releases of
toxic or hazardous substances, transportation of hazardous substances,
materials and wastes and occupational or employee health and safety, and
(iv) any other material, gas or substance known or suspected to be toxic or
hazardous (including, without limitation, any radioactive substance, methane
gas, volatile hydrocarbon, industrial solvent, and asbestos) or which could
cause a material detriment to, or materially impair the beneficial use of, the
Leased Premises, or constitute a material health, safety or environmental risk
to any person exposed thereto or in contact therewith. For purposes of this
Section, "Hazardous Substance" shall not mean and shall not include the
following, to the extent used normally and required for everyday uses or
normal housekeeping or maintenance: (a) fuel oil and natural gas for heating,
(b) lubricating, cleaning, coolant and other compounds customarily used in
building maintenance, (c) materials routinely used in the day-to-day
operations of an office, such as copier toner, (d) consumer products, (e)
material reasonably necessary and customarily used in construction and repair
of an office project, and (f) fertilizers, pesticides and herbicides commonly
used for routine office landscaping.
9.24 Disclosure of Information. LynkTel represents and warrants that
all statements, data and other written information provided by it to any party
hereto as well as their respective consultants and representatives have been
accurate copies or true originals. LynkTel represents and warrants that, to
its Best Knowledge, (i) there exists no material information concerning
LynkTel which has been requested but not been disclosed to or made available
to the other parties and their representatives or consultants and which would
be material to a decision to consummate the transactions provided for in this
Agreement and (ii) in the aggregate, such information does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made in them, in light of the circumstances
under which they are made, not misleading.
9.25 Representation and Warranties. The representations and warranties
contained in this Agreement shall be true on and as of the Closing Date with
the same force and effect as though such representations and warranties had
been made on and as of the Closing Date. Such representations and warranties
shall survive the Closing Date and shall remain operative in full force and
effect for the period of time set forth in Section 17.8(a) hereof regardless
of any investigation at any time made by or on behalf of Baltic and shall not
be deemed merged in any document or instruction so executed and/or delivered
by LynkTel.
ARTICLE 10: COVENANTS OF LYNKTEL
10.1 Preservation of Business. Until Closing, LynkTel shall use its
best efforts to:
(a) Preserve intact the present business organization of
LynkTel;
(b) Maintain its property and assets in its present state of
repair, order and condition, reasonable wear and tear excepted;
(c) Preserve and protect the goodwill and advantageous
relationships of LynkTel with its customers and all other persons having
business dealings with LynkTel;
(d) Preserve and maintain in force all licenses, permits,
registrations, franchises, patents, trademarks, tradenames, trade secrets,
service marks, copyrights, bonds and other similar rights of LynkTel; and
(e) Comply with all laws applicable to the conduct of its
business
10.2 Ordinary Course. Until Closing, LynkTel shall conduct its
business only in the usual, regular and ordinary course, in substantially the
same manner as previously, and shall not make any substantial change to its
methods of management or operation in respect of such business or property.
Without limiting the foregoing, LynkTel shall not, with respect to LynkTel:
(a) Sell, mortgage, pledge or encumber or agree to sell,
mortgage, pledge or encumber, any of its property or assets, other than in the
ordinary course of business;
(b) Incur any obligation (contingent or otherwise) or purchase,
acquire, transfer, or convey, any material assets or property or enter into
any contract or commitment, except in the ordinary course of business.
10.3 Negative Covenants. Until Closing, except as contemplated by this
Agreement or disclosed in exhibits to this Agreement, from the date hereof
until the Closing Date, unless and until Baltic otherwise consents in writing,
LynkTel will not (a) change or alter the physical contents or character of the
tangible and intangible assets so as to materially affect the nature of
LynkTel's business; (b) incur any obligations or liabilities (absolute or
contingent) other than current liabilities incurred and obligations under
contracts entered into in the ordinary course of business; (c) mortgage,
pledge or voluntarily subject to lien, charge or other encumbrance any assets,
tangible or intangible, other than the lien of current property taxes not due
and payable; (d) sell, assign or transfer any of its assets or cancel any
debts or claims, other than in the ordinary course of business; (e) waive any
right of any substantial value; (f) declare or make any payment or
distribution to shareholders or issue, purchase or redeem any shares of its
capital stock or other equity securities or issue or sell any rights to
acquire the same; (g) grant any increase in the salary or other compensation
of any of its directors, officers, or employees or make any increase in any
benefits to which such employees might be entitled; (h) institute any bonus,
benefit, profit sharing, stock option, pension, retirement plan or similar
arrangement, or make any changes in any such plans or arrangements presently
existing; or (i) enter into any material transactions or series of
transactions other than in the ordinary course of business.
10.4 Additional Covenants.
(a) LynkTel will promptly pay and discharge, or cause to be paid
and discharged, when due and payable, all lawful taxes, assessments, and
governmental charges or levies imposed upon the income, profits, property or
business of LynkTel or any subsidiary; provided, however, that any such tax,
assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if LynkTel
shall have set aside on its books adequate reserves therefor; and provided,
further, that LynkTel will pay all such taxes, assessments, charges or levies
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor. LynkTel will promptly pay or cause to be
paid when due, or in conformance with customary trade terms, all other
indebtedness incident to the operations of LynkTel;
(b) LynkTel will keep its properties and those of its
subsidiaries in good repair, working order and condition, reasonable wear and
tear excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions and improvements thereto; and LynkTel will
at all times comply with the provisions of all material leases to which any of
them is a party or under which any of them occupies property so as to prevent
any loss or forfeiture thereof or thereunder;
(c) LynkTel will keep its assets that are of an insurable
character insured by financially sound and reputable insurers against loss or
damage by fire, extended coverage and explosion insurance in amounts customary
for companies in similar businesses similarly situated; and LynkTel will
maintain, with financially sound and reputable insurers, insurance against
other hazards, risks and liabilities to persons and property to the extent and
in the manner customary for companies in similar businesses similarly
situated;
(d) LynkTel will keep true records and books of account in which
full, true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with its past practices
consistently applied;
(e) LynkTel will comply with the requirements of all applicable
laws, rules, regulations and orders of any governmental authority, a breach of
which could have a material adverse effect on its business or credit;
(f) LynkTel shall maintain in full force and effect its
corporate existence, rights and franchises and all licenses and other rights
to use patents, processes, licenses, trademarks, trade names or copyrights
owned or possessed by it or any subsidiary and deemed by LynkTel to be
necessary to the conduct of its business;
(g) LynkTel will, consistent with its practices in the ordinary
course of business, endeavor to retain its business relationships with its
customers and suppliers that it believes to be advantageous; and
(h) LynkTel shall deliver to Baltic copies of its statements of
operation and financial condition and similar statements as and when prepared
(if at all) in the ordinary course of its business.
10.5 Access to Books and Records, Premises, etc. From the date of this
Agreement through the Closing Date, LynkTel will grant Baltic and its
authorized representatives reasonable access to its books and records,
premises, products, employees and customers and other parties with whom it has
contractual relations during reasonable business hours and in a manner not to
disrupt or interfere with LynkTel's business relationships for purposes of
enabling Baltic to fully investigate the business of LynkTel. LynkTel will
also deliver copies of its monthly statements of operations and financial
condition for the period subsequent to its financial statements referred to in
Section 5.5 to Baltic within a reasonable time of such statements becoming
available.
10.6 Compensation. Except as contemplated by this Agreement, LynkTel
shall not enter into or agree to enter into any employment contract or
agreement for consulting, professional, or other services which will adversely
and materially affect the operation of LynkTel prior to the Closing Date,
except for any extensions of said contracts or agreements on substantially the
same terms and conditions as were previously in effect.
10.7 No Solicitation.
(a) Except in connection with the transactions contemplated by
this Agreement, LynkTel shall not, nor shall it permit any of its subsidiaries
to, nor shall it authorize or permit any officer, director or employee of or
any investment banker, attorney or other advisor or representative of, LynkTel
or any of its subsidiaries to, (i) solicit, initiate or encourage the
submission of, any takeover proposal, (ii) enter into any agreement with
respect to any takeover proposal or (iii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
takeover proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
executive officer of LynkTel or any of its subsidiaries or any investment
banker, attorney or other advisor or representatives of LynkTel or any of its
subsidiaries or otherwise, shall be deemed to be a breach of this Section by
LynkTel. For purposes of this Agreement, "takeover proposal" means any
proposal for a merger, consolidation or reorganization or other business
combination involving LynkTel or any of its subsidiaries or any proposal or
offer to acquire in any manner, directly or indirectly, an equity interest in,
any voting securities of, or options, rights, warrants or other interests
convertible or exercisable for or into such voting securities, or a
substantial or material portion of the assets or business of LynkTel or any of
its subsidiaries, other than the transactions contemplated by this Agreement.
(b) Except upon a material breach of this Agreement by Baltic or
following termination hereof, except for action permitted or contemplated by
this Agreement, including a party's right to terminate this Agreement under
certain circumstances, neither the Board of Directors of LynkTel nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Baltic, the approval or recommendation by such
Board of Directors of any such committee of this Agreement or the Merger or
(ii) approve or recommend, or propose to approve or recommend, any takeover
proposal.
(c) LynkTel promptly shall advise Baltic orally and in writing
of any takeover proposal or any inquiry with respect to or which could lead to
any takeover proposal and the identity of the person making any such takeover
proposal or inquiry. LynkTel will keep Baltic fully informed of the status
and details of any such takeover proposal or inquiry.
(d) The provisions of this Section shall not be construed to
prevent any investment banker, attorney or other advisor or representative of
LynkTel to engage in discussions with third parties in the ordinary course of
business with respect to transactions not involving the parties to this
Agreement.
ARTICLE 11: REPRESENTATIONS AND WARRANTIES OF BALTIC
As a material inducement to LynkTel to enter into this Agreement and with
the understanding and expectations that LynkTel will be relying thereon in
consummating the Merger contemplated hereunder, Baltic hereby represents and
warrants as follows:
11.1 Organization and Standing. Baltic is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Texas, and has all requisite corporate power and authority to own its
assets and properties and to carry on its business as it is now being
conducted.
11.2 Subsidiaries, etc. Baltic has a direct or indirect ownership
interest in the following entities:
Total
Name Type of entity Ownership Interest
---- -------------- ------------------
(direct and indirect)
Advanced Reclamation
Company, L.L.C. Texas limited liability company 100%
Baltic World Holdings British Virgin Islands company 100%
Baltic International Airlines Latvian limited liability company 89%
American Distributing Company Latvian limited liability company 100%
Baltic World Air Freight Latvian limited liability company 100%
X-X Merger Sub, Inc. Texas corporation 100%
11.3 Qualification. Baltic is duly qualified to do business in each
jurisdiction in which the nature of its business or the ownership or leasing
of its properties makes such qualification necessary other than in such
jurisdictions where the failure to be qualified to engage in business as a
foreign corporation would not have a material adverse effect on Baltic.
11.4 Corporate Authority. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby nor
compliance by Baltic with any on the provisions hereof will:
(a) Conflict with or result in a breach of any provision of its
Articles of Incorporation or Bylaws or similar documents of any of its
subsidiaries;
(b) Result in 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, agreement or
other instrument or obligation to which Baltic is a party, or by which any of
its properties or assets may be bound except for such default (or right of
termination, cancellation, or acceleration) as to which requisite waivers or
consents shall either have been obtained by Baltic prior to the Closing Date
or the obtaining of which shall have been waived by LynkTel; or
(c) Violate any order, writ, injunction, decree or, to Baltic's
Best Knowledge, any statute, rule or regulation applicable to Baltic or any of
its properties or assets. No consent or approval by any Governmental
Authority is required in connection with the execution and delivery by Baltic
of this Agreement or the consummation by Baltic of the transactions
contemplated hereby, except for possible notice under plant closing laws.
11.5 Financial Statements. Baltic has furnished LynkTel with a true
and complete copy of its audited financial statements containing balance
sheets, together with statements of operation, statements of cash flows, and
statements of stockholders' equity as of and for the years ended December 31,
2000 and 1999 and its unaudited financial statements as of and for the six
months ended June 30, 2001 (the "Baltic Financials"). Such financial
statements, together with and subject to the disclosures and notes thereto:
(i) are in accordance with the books and records of Baltic; (ii) present
fairly and accurately the financial condition of Baltic as of the dates of the
balance sheets; (iii) present fairly and accurately the results of operations
for the periods covered by such statements; (iv) have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis; and (v) include all adjustments (consisting of only normal
recurring accruals) which are necessary for a fair presentation of the
financial condition of Baltic, and of the results of operations of Baltic for
the periods covered by such statements. As of the date hereof and as of the
Closing Date, Baltic does not have any liabilities or payables (absolute or
contingent, known or unknown), except for liabilities or payables set forth in
the Baltic Financials or otherwise disclosed in writing to LynkTel.
11.6 Financial Information. In connection with the investigations
performed by and due diligence to be undertaken by LynkTel of Baltic, Baltic
has furnished and will furnish certain financial information and data
including, without limitation, tax and accounting records, financial records,
statements, worksheets and other information requested by LynkTel and its
agents necessary to undertake the complete the examinations. Baltic
represents and warrants that any and all such information furnished in
connection with the conduct of such investigations shall be true, accurate and
complete in all material respects and shall not contain any material
misstatements nor any material omissions of fact or information respecting the
financial condition or results of operation of the business for the respective
periods.
11.7 Capitalization of Baltic. The authorized capital stock of Baltic
consists entirely of 40,000,000 shares of common stock having a par value of
$0.01 per share, and 500,000 shares of preferred stock having a par value of
$10.00 per share. As of the Effective Time, there will be no more than
9,975,760 shares of the Baltic Stock issued and outstanding, 123,000 shares of
Convertible Redeemable Series A Preferred Stock issued and outstanding and 14
shares of Series B Convertible Redeemable Preferred Stock issued and
outstanding. All outstanding shares of Baltic's capital stock have been
validly issued, are fully paid and non-assessable, and are not subject to pre-
emptive rights. The shares of the Baltic Stock to be issued on the Effective
Time of the Merger in accordance with Sections 2.1 hereof have been duly
approved by the Directors of Baltic and will, upon their issuance, have been
validly issued and will be fully paid and non-assessable. As of the Effective
Time, there will be no more than 10,756,128 shares of the Baltic Stock
reserved for issuance pursuant to the exercise of issued and outstanding
options, warrants, contracts, calls, commitments, convertible securities or
other purchase rights. Except as described in Baltic's reports filed with the
Commission under Section 13(a) of the Exchange Act, there are no equity
securities of Baltic authorized, issued or outstanding, and there are no
authorized, issued or outstanding subscriptions, options, warrants, contracts,
calls, commitments or other purchase rights of any nature or character
relating to any of Baltic's capital stock, equity securities, debt or other
securities convertible into stock or equity securities of Baltic. As of the
date of this Agreement, there are no outstanding contractual obligations of
Baltic to repurchase, redeem or otherwise acquire any shares of capital stock
of Baltic.
11.8 No Actions, Proceedings, etc. There is no action or proceeding
(whether or not purportedly on behalf of Baltic) pending or to its knowledge
threatened by or against Baltic, which might result in any material adverse
change in the condition, financial or otherwise, of Baltic's business or
assets. No order, writ or injunction or decree has been issued by, or
requested of any court or Governmental Agency that does nor may result in any
material adverse change in Baltic's assets or properties or in the financial
condition or the business of Baltic. Baltic is not liable for damages to any
employee or former employee as a result of any violation of any state, federal
or foreign laws directly or indirectly relating to such employee or former
employee.
11.9 Post Balance Sheet Changes. Except as contemplated by this
Agreement, since June 30, 2001, Baltic has not (a) issued, bought, redeemed or
entered into any agreements, commitments or obligations to sell, buy or redeem
any shares of its capital stock; (b) incurred any obligation or liability
(absolute or contingent), other than current liabilities incurred, and
obligations under contracts entered into, in the ordinary course of business;
(c) discharged or satisfied any lien or encumbrance or paid any obligation or
liability (absolute or contingent), other than current liabilities incurred in
the ordinary course of business; (d) mortgaged, pledged or subjected to lien
charges, or other encumbrance any of its assets, other than the lien of
current or real property taxes not yet due and payable; (e) waived any rights
of substantial value, whether or not in the ordinary course of business; (f)
suffered any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting its assets or its business; (g) made or
suffered any amendment or termination of any material contract or any
agreement which adversely affects its business; (h) received notice or had
knowledge of any labor trouble other than routine grievance matters, none of
which is material; (i) increased the salaries or other compensation of any of
its directors, officers or employees or made any increase in other benefits to
which employees may be entitled, other than employee salary increases made in
the ordinary course of business and reflected on an exhibit hereto; (j) sold,
transferred or otherwise disposed of any of its assets, other than in the
ordinary course of business; (k) declared or made any distribution or payments
to any of its shareholders, officers or employees, other than wages and
salaries made to employees in the ordinary course of business; (l) revalued
any of its assets; or (m) entered into any transactions not in the ordinary
course of business.
11.10 No Breaches. Baltic is not in violation of, and the consummation
of the transactions contemplated hereby do not and will not result in any
material breach of, any of the terms or conditions of any mortgage, bond,
indenture, agreement, contract, license or other instrument or obligation to
which Baltic is a party or by which its assets are bound; nor will the
consummation of the transactions contemplated hereby cause Baltic or any of
its subsidiaries to violate any statute, regulation, judgment, writ,
injunction or decree of any court, threatened or entered in a proceeding or
action in which Baltic is, was or may be bound or to which any of Baltic's
assets are subject.
11.11 Corporate Acts and Proceedings. Subject to the approval of the
Baltic shareholders, this Agreement has been duly authorized by all necessary
corporate action on behalf of Baltic, has been duly executed and delivered by
authorized officers of Baltic, and is a valid and binding Agreement on the
part of Baltic that is enforceable against Baltic in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, fraudulent transfers, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and to judicial
limitations on the enforcement of the remedy of specific performance and other
equitable remedies. Subject to the approval of the Baltic shareholders, all
corporate action necessary to issue and deliver to the LynkTel shareholders
and employees the Baltic Stock and stock options will be taken by Baltic.
11.12 Legal Proceedings and Compliance with Law. Baltic has not
received notice of any legal, administrative, arbitration or other proceeding
or governmental investigation pending or threatened (including those relating
to the health, safety, employment of labor, or protection of the environment)
pertaining to Baltic which might result in the aggregate in money damages
payable by Baltic in excess of insurance coverage or which might result in a
permanent injunction against Baltic. Baltic has substantially complied with,
and is not in default in any respect under any laws, ordinances, requirements,
regulations, or orders applicable to the business of Baltic, the violation of
which might materially and adversely affect it. Baltic is not a party to any
agreement or instrument, nor is it subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree, rule,
regulation, code or ordinance which materially and adversely affects, or might
reasonably be expected materially and adversely to affect the businesses,
operations, prospects, property, assets or condition, financial or otherwise,
of Baltic.
11.13 Representations and Warranties. The representations and
warranties contained in this Agreement shall be true on and as of the Closing
Date with the same force and effect as though such representations and
warranties had been made on and as of the Closing Date. Such representations
and warranties shall survive the Closing Date and shall remain operative in
full force and effect for the period of time set forth in Section 15.5(a)
hereof regardless of any investigation at any time made by or on behalf of
LynkTel and shall not be deemed merged in any document or instruction so
executed and/or delivered by Baltic.
ARTICLE 12: COVENANTS OF BALTIC
12.1 Preservation of Business. Until Closing, Baltic shall use its
best efforts to:
(a) Preserve intact its present business organization;
(b) Maintain its property and assets in its present state of
repair, order and condition, reasonable wear and tear excepted;
(c) Preserve and protect the goodwill and advantageous
relationships with its customers and all other persons having business
dealings with it;
(d) Preserve and maintain in force all licenses, permits,
registrations, franchises, patents, trademarks, tradenames, trade secrets,
service marks, copyrights, bonds and other similar rights belonging to it; and
(e) Comply with all laws applicable to the conduct of its
business.
12.2 Ordinary Course. Until Closing, Baltic shall not, without the
prior written consent of LynkTel:
(a) Sell, mortgage, pledge or encumber or agree to sell,
mortgage, pledge or encumber, any of the property or assets of Baltic or any
of its subsidiaries; and
(b) Incur any obligation (contingent or otherwise) or purchase,
acquire, transfer, or convey, any material assets or property or enter into
any contract or commitment.
12.3 Negative Covenants. Until Closing, except as contemplated by this
Agreement or as disclosed in Exhibits to this Agreement, from the date hereof
until the Closing Date, unless and until LynkTel otherwise consents in
writing, Baltic and any of its subsidiaries will not (a) change or alter the
physical contents or character of the inventories of its business, so as to
materially affect the nature of Baltic's business or materially and adversely
change the total dollar valuation of such inventories from that reflected on
the financial statements referred to in Section 11.5 other than in the
ordinary course of business; (b) incur any obligations or liabilities
(absolute or contingent) other than current liabilities incurred and
obligations under contracts entered into in the ordinary course of business;
(c) mortgage, pledge or voluntarily subject to lien, charge or other
encumbrance any assets, tangible or intangible, other than the lien of current
property taxes not due and payable; (d) sell, assign or transfer any of its
assets or cancel any debts or claims, other than in the ordinary course of
business; (e) waive any right of any substantial value; (f) declare or make
any payment or distribution to shareholders or issue, purchase or redeem any
shares of its capital stock or other equity securities or issue or sell any
rights to acquire the same; (g) grant any increase in the salary or other
compensation of any of its directors, officers, or employees or make any
increase in any benefits to which such employees might be entitled; (h)
institute any bonus, benefit, profit sharing, stock option, pension,
retirement plan or similar arrangement, or make any changes in any such plans
or arrangements presently existing; or (i) enter into any transactions or
series of transactions other than in the ordinary course of business.
12.4 Additional Covenants.
(a) Baltic will promptly pay and discharge, or cause to be paid
and discharged, when due and payable, all lawful taxes, assessments, and
governmental charges or levies imposed upon the income, profits, property or
business of Baltic or any subsidiary; provided, however, that any such tax,
assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if Baltic
shall have set aside on its books adequate reserves therefor; and provided,
further, that Baltic will pay all such taxes, assessments, charges or levies
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor. Baltic will promptly pay or cause to be
paid when due, or in conformance with customary trade terms, all other
indebtedness incident to the operations of Baltic;
(b) Baltic will keep its properties and those of its
subsidiaries in good repair, working order and condition, reasonable wear and
tear excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions and improvements thereto; and Baltic will at
all times comply with the provisions of all material leases to which any of
them is a party or under which any of them occupies property so as to prevent
any loss or forfeiture thereof or thereunder;
(c) Baltic will keep its assets that are of an insurable
character insured by financially sound and reputable insurers against loss or
damage by fire, extended coverage and explosion insurance in amounts customary
for companies in similar businesses similarly situated; and Baltic will
maintain, with financially sound and reputable insurers, insurance against
other hazards, risks and liabilities to persons and property to the extent and
in the manner customary for companies in similar businesses similarly
situated;
(d) Baltic will keep true records and books of account in which
full, true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with its past practices
consistently applied;
(e) Baltic will comply with the requirements of all applicable
laws, rules, regulations and orders of any governmental authority, a breach of
which could have a material adverse effect on its business or credit;
(f) Baltic shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses and other rights to use
patents, processes, licenses, trademarks, trade names or copyrights owned or
possessed by it or any subsidiary and deemed by Baltic to be necessary to the
conduct of its business;
(g) Baltic will, consistent with its practices in the ordinary
course of business, endeavor to retain its business relationships with its
customers and suppliers that it believes to be advantageous; and
(h) Baltic shall deliver to LynkTel copies of its statements of
operation and financial condition and similar statements as and when prepared
(if at all) in the ordinary course of its business.
12.5 Access to Books and Records, Premises, etc. From the date of this
Agreement through the Closing Date, Baltic will grant LynkTel and its
authorized representatives reasonable access to its and its subsidiaries'
books and records, premises, products, employees and customers and other
parties with whom it has contractual relations during reasonable business
hours for purposes of enabling LynkTel to fully investigate the business of
Baltic and its subsidiaries. Baltic will also deliver copies of the monthly
statements of operations and financial condition for the period subsequent to
the latest financial statements to LynkTel within a reasonable time of such
statements becoming available.
12.6 Delivery of Additional Filings. Following the execution of this
Agreement and until the Closing Date, Baltic shall provide LynkTel with copies
of any and all reports, filings, notices or other information which Baltic may
prepare and file with or receive from the Commission, NASD or any other
regulatory authority, (and shall give LynkTel an opportunity to review and
comment on any such filings) as well as copies of any pleadings, notices or
other filings made in connection with any pending litigation, arbitration,
investigation or proceeding in which Baltic or any of its subsidiaries is
party or otherwise involved.
ARTICLE 13: TERMINATION
13.1 Termination. This Agreement may be terminated and abandoned
solely as follows:
(a) At any time until the Closing Date by the mutual agreement
of Baltic and LynkTel.
(b) By any party hereto, if for any reason the parties have
failed to close this Agreement on or before February 28, 2002, provided that
the party requesting termination is not then in default thereunder.
(c) By any party hereto, if the other party shall have breached
any representation, warranty or covenant contained in this Agreement and shall
have failed to cure such breach within ten (10) days following written notice
thereof by the party seeking termination.
(d) By any party hereto, in the event any of the conditions
precedent, as set forth in this Agreement, to such terminating party's
obligations under this Agreement are not fulfilled on or prior to the
Effective Time; provided that any such termination shall not limit the
remedies otherwise available to such party as a result of misrepresentations
of or breaches by the other party.
In the event of any termination pursuant to this Section 13.1(b) or (c),
written notice setting forth the reasons therefor shall forthwith be given by
the terminating party to all of the other parties hereto.
13.2 Effect of Termination. If the Merger is terminated and abandoned
as provided for in this Article 13, this Agreement shall forthwith become
wholly void and of no effect without liability to any party to this Agreement
except with respect to Section 13.3 below. No termination shall terminate or
limit the rights of any such terminating party to enforce any remedy otherwise
available for any breach hereof.
13.3 LynkTel Termination Fee. LynkTel agrees to pay Baltic a
termination fee equal to $100,000 if LynkTel terminates its intent to merge
with Baltic under one of the following circumstances:
(a) LynkTel terminates this Agreement because LynkTel's Board of
Directors has authorized LynkTel to enter into a written agreement for a
superior proposal unless at the time of termination Baltic is in breach of any
of its representations, warranties, covenants or obligations under this
Agreement and such breach would otherwise permit LynkTel to terminate this
Agreement for failure by Baltic to satisfy a condition of Closing relating to
Baltic's representations, warranties or covenants.
(b) LynkTel terminates this Agreement because LynkTel's
shareholders have failed to approve and adopt this Agreement and the Merger,
unless:
(i) at the time of the vote, a material adverse effect
with respect to Baltic has occurred;
(ii) at the time of the vote, the Board of Directors of
Baltic has changed its recommendation of the share issuance proposal;
(iii) Baltic's shareholders have failed to approve the
Merger; or
(iv) at the time of termination, Baltic is in breach of any
of its representations, warranties, covenants or obligations under this
Agreement and such breach would otherwise permit LynkTel to terminate this
Agreement for failure by Baltic to satisfy a closing condition relating to
Baltic's representations, warranties or covenants.
(c) Baltic terminates this Agreement because LynkTel's Board of
Directors has changed its recommendation of this Agreement and the Merger by
reason of a superior proposal, unless:
(i) at the time of the change in recommendation, a
material adverse effect with respect to Baltic has occurred;
(ii) at the time of the change in recommendation, the Board
of Directors of Baltic has changed its recommendation of the share issuance
proposal;
(iii) Baltic's shareholders have failed to approve the
Merger at the Baltic special meeting of its shareholders; or
(iv) at the time of termination, Baltic is in breach of any
of its representations, warranties, covenants or obligations under this
Agreement and such breach would otherwise permit LynkTel to terminate this
Agreement for failure by Baltic to satisfy a closing condition relating to
Baltic's representations, warranties or covenants.
ARTICLE 14: INDEMNIFICATION AND REMEDIES FOR BREACH
14.1 Indemnification by Baltic.
(a) Baltic shall defend, indemnify and hold LynkTel harmless
against and in respect of any damage, loss, liability, cost or expense,
including expert witness fees and reasonable attorneys' fees, whether or not
recoverable under applicable state law, resulting or arising from or incurred
in connection with:
(i) Any misrepresentation, breach of warranty, or
nonfulfillment or nonperformance of any agreement on the part of Baltic under
this Agreement, or any misrepresentation or omission from any Exhibit,
schedule, list, certificate or other instrument furnished or to be furnished
by it under this Agreement, or any noncompliance on the part of Baltic with
applicable law.
(ii) Any and all liabilities of Baltic of any nature
whatsoever, whether accrued, absolute, contingent or otherwise and whether
known or unknown, except to the extent that any such liability arises from
LynkTel's failure to perform or discharge, when due, LynkTel's future
obligations; and
(iii) Any actions, suits, proceedings, damages, assessments,
judgments, costs or expenses incident to any of the foregoing.
(b) Promptly after the receipt by LynkTel of notice of any claim
asserted by a third party that may give rise to Baltic's liability to LynkTel
under this Section, LynkTel shall give to Baltic written notice of such claim,
and Baltic shall be entitled to participate at its own expense in the defense
of any such claim. LynkTel shall not pay, acknowledge, compromise or settle
any such claim without the written consent of Baltic, unless such payment,
acknowledgment, compromise or settlement results in a full and complete
release and discharge of Baltic from any liability.
14.2 Indemnification by LynkTel.
(a) LynkTel shall defend, indemnify and hold Baltic harmless
against and in respect of any damage, loss, liability, cost or expense,
including expert witness fees and reasonable attorneys' fees, whether or not
recoverable under applicable state law, resulting or arising from or incurred
in connection with:
(i) Any misrepresentation, breach of warranty, or
nonfulfillment or nonperformance of any agreement on the part of LynkTel under
this Agreement, or any misrepresentation or omission from any Exhibit,
schedule, list, certificate or other instrument furnished or to be furnished
by it under this Agreement.
(ii) Any and all liabilities of LynkTel of any nature
whatsoever, whether accrued, absolute, contingent or otherwise and whether
known or unknown, except to the extent that any such liability arises from
Baltic's failure to perform or discharge, when due, Baltic's future
obligations;
(iii) Any actions, suits, proceedings, damages, assessments,
judgments, costs or expenses incident to any of the foregoing.
(b) Promptly after the receipt by Baltic of notice of any claim
asserted by a third party that may give rise to LynkTel's liability to Baltic
under this Section, Baltic shall give to LynkTel written notice of such claim
and LynkTel shall be entitled to participate at its own expense in the defense
of any such claim. Baltic shall not pay, acknowledge, compromise or settle
any such claim without the written consent of LynkTel, unless such payment,
acknowledgment, compromise or settlement results in a full and complete
release and discharge of LynkTel from any liability.
14.3 Additional Notice. Notwithstanding the provisions of Sections
14.1 or 14.2 above, promptly after the receipt by any party hereto of notice
of any claim asserted by a third party that may give rise to the liability of
any party for which the right to indemnification may be claimed under this
Section, such party shall give to each other party written notice of such
claim as soon as practicable. The provisions of this Section in addition to
and not in lieu of the covenants of the parties contained in Sections 14.1 or
14.2 above.
14.4 Determination of Damages and Related Matters.
(a) Upon the occurrence of any event which would give rise to a
claim by Baltic against, or to a right of defense and indemnity against
LynkTel pursuant to this Section, or in the event that any suit, action,
investigation, claim or proceeding is begun, made or instituted as a result of
which LynkTel may become obligated to Baltic hereunder, Baltic shall give
notice to LynkTel of the occurrence of such event and shall identify Baltic's
choice of counsel to represent such investigation, claim or proceedings,
provided that the failure of Baltic to give notice shall not affect the
indemnification obligations of LynkTel hereunder. Baltic shall have the
exclusive right to so defend, contest or protect against such matter utilizing
the counsel of Baltic's choice (who shall be reasonably acceptable to a
representative of LynkTel). LynkTel shall have the right, but not the
obligation, to participate, at its own expense, in the defense thereof by
counsel of their choice.
(b) As Baltic incurs expenses for which indemnification
hereunder is provided and after any final judgment or award shall have been
rendered by a court, arbitration board or administrative agency of competent
jurisdiction, and the expiration of the time in which to appeal therefrom, or
a settlement shall have been consummated, Baltic shall forward to LynkTel
notice of any sums due and owing by them pursuant to this Agreement with
respect to such matter and they shall be required to pay all of the sums so
due and owing to Baltic within ten (10) days of such notice.
(c) Upon the occurrence of any event which would give rise to a
claim by LynkTel against, or to a right of defense and indemnity against
Baltic pursuant to this Section 14.4, or in the event that any suit, action,
investigation, claim or proceeding is begun, made or instituted as a result of
which Baltic may become obligated to LynkTel hereunder, LynkTel shall give
notice to Baltic of the occurrence of such event and shall identify their
choice of counsel to represent such investigation, claim or proceedings,
provided that the failure of either or both of them to give notice shall not
affect the indemnification obligations of Baltic hereunder. LynkTel shall
have the exclusive right to so defend, contest or protect against such matter
utilizing the counsel of their choice (who shall be reasonably acceptable to a
representative of Baltic). Baltic shall have the right, but not the
obligation, to participate, at its own expense, in the defense thereof by
counsel of its choice.
(d) As LynkTel incurs expenses for which indemnification
hereunder is provided and after any final judgment or award shall have been
rendered by a court, arbitration board or administrative agency of competent
jurisdiction, and the expiration of the time in which to appeal therefrom, or
a settlement shall have been consummated, LynkTel shall forward to Baltic
notice of any sums due and owing by it pursuant to this Agreement with respect
to such matter and shall be required to pay all of the sums so due and owing
to LynkTel by certified or bank cashier's check within ten (10) days of such
notice.
14.5 Remedies for Breach. In the event of any breach of any of the
provisions of this Agreement, including but not limited to any breach of any
covenant, warranty or representation made by any party hereto, the breaching
or defaulting party shall be liable pursuant to the provisions hereof. In the
event of any material breach by any party of any provision under this
Agreement, either party may file suit. Nothing contained in this Agreement
shall be deemed to preclude a party to xxx for or seek specific performance of
the provisions of this Agreement in the appropriate circumstance.
ARTICLE 15: NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 Nondisclosure of Confidential Information. Each of the parties
hereto recognizes and acknowledges that it has and will have access to certain
nonpublic information of the others which shall be deemed the confidential
information of the other party (including, but not limited to, business plans,
costs, trade secrets, licenses, research projects, profits, markets, sales,
customer lists, strategies, plans for future development, financial
information and any other information of a similar nature) that after the
consummation of the transactions contemplated hereby will be valuable, special
and unique property of the parties. Information received by one party or its
representatives shall not be deemed Confidential Information and afforded the
protections of this Section if, on the Closing Date, such information has been
(i) developed by the receiving party independently of the disclosing party,
(ii) rightfully obtained without restriction by the receiving party from a
third party, provided that the third party had full legal authority to possess
and disclose such information, (iii) publicly available other than through the
fault or negligence of the receiving party, (iv) released without restriction
by the disclosing party to anyone, including the United States government, or
(v) properly and lawfully known to the receiving party at the time of its
disclosure, as evidenced by written documentation conclusively established to
have been in the possession of the receiving party on the date of such
disclosure. Each of the parties hereto agrees that it shall not disclose, and
that it shall use its best efforts to prevent disclosure by any other Person
of, any such confidential information to any Person for any purpose or reason
whatsoever, except to authorized representatives of the party who agree to be
bound by this confidentiality agreement. Notwithstanding, a party may use and
disclose any such confidential information to the extent that a party may
become compelled by Legal Requirements to disclose any such information;
provided, however, that such party shall use all reasonable efforts and shall
have afforded the other party the opportunity to obtain an appropriate
protective order or other satisfactory assurance of confidential treatment for
any such information compelled to be disclosed. In the event of termination
of this Agreement, each party shall use all reasonable efforts to cause to be
delivered to the other parties, and to retain no copies of, any documents,
work papers and other materials obtained by such party or on such party's
behalf during the conduct of the matters provided for in this Agreement,
whether so obtained before or after the execution hereof. Each of the parties
recognizes and agrees that violation of any of the agreements contained in
this Section will cause irreparable damage or injury to the non-defaulting
party, the exact amount of which may be impossible to ascertain, and that, for
such reason, among others, the non-defaulting party shall be entitled to an
injunction, without the necessity of posting bond therefor, restraining any
further violation of such agreements. Such rights to any injunction shall be
in addition to, and not in limitation of, any other rights and remedies the
parties may have against each other. The provisions of this Section shall
survive any termination of this Agreement.
15.2 No Publicity. Until the Closing or the termination of this
Agreement in accordance with its terms, neither Baltic nor LynkTel shall,
directly or indirectly, issue any press release, or make any public statement,
concerning the transactions contemplated by this Agreement without the prior
written consent of Baltic (in the case of such a release or statement by
LynkTel) or of LynkTel (in the case of such a release or statement by Baltic).
This Section shall not, however, preclude any party from making any disclosure
required by applicable law, and in the event any party, or any officer,
director, employee, agent or representative of a party, believes that any
press release, public statement or other disclosure is so required, such party
will notify and consult with the other parties with respect thereto as
promptly as is practicable under the circumstances.
ARTICLE 16: EXPENSES
Each of the parties will pay all costs and expenses of its performance
and compliance with this Agreement. Notwithstanding the foregoing, if the
Agreement is not consummated by reason of a default of one of the parties,
then the expenses of the non-defaulting party in connection with the
transaction contemplated herein shall be paid by the defaulting party. In no
event will any party to this Agreement be liable to any other party for
incidental damages, lost profits, income tax consequences, lost savings or any
other consequential damages, even if such party has been advised of the
possibility of such damages, or for punitive damages, resulting from the
breach of any obligation under this Agreement. The provisions of this Section
shall survive any termination hereof.
ARTICLE 17: MISCELLANEOUS
17.1 Attorney's Fees. In any action at law or in equity or in any
arbitration proceeding, for declaratory relief or to enforce any of the
provisions or rights or obligations under this Agreement, the unsuccessful
party to such proceeding, shall pay the successful party or parties all
statutorily recoverable costs, expenses and reasonable attorneys' fees
incurred by the successful party or parties including without limitation
costs, expenses, and fees on any appeals and the enforcement of any award,
judgment or settlement obtained, such costs, expenses and attorneys' fees
shall be included as part of the judgment. The successful party shall be that
party who obtained substantially the relief or remedy sought, whether by
judgment, compromise, settlement or otherwise.
17.2 Survival and Incorporation of Representations. The
representations, warranties, covenants and agreements made herein or in any
certificates or documents executed in connection herewith shall survive the
execution and delivery thereof, and all statements contained in any
certificate or other document delivered by any party hereunder or in
connection herewith shall be deemed to constitute representations and
warranties made by that party to this Agreement.
17.3 Incorporation by Reference. All Exhibits to this Agreement and
all documents delivered pursuant to or referred to in this Agreement are
herein incorporated by reference and made a part hereof.
17.4 Parties in Interest. Nothing in this Agreement, whether express
or implied, is intended to, or shall, confer any rights or remedies under, or
by reason of, this Agreement, on any person other than the parties hereto and
their respective and proper successors and assigns and indemnitees. Nothing
in this Agreement shall act to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement.
17.5 Amendments and Waivers. This Agreement may not be amended, nor
may compliance with any term, covenant, agreement, condition or provision set
forth herein be waived (either generally or in a particular instance and
either retroactively or prospectively) unless such amendment or waiver is
agreed to in writing by all parties hereto.
17.6 Waiver. No waiver of any breach of any one of the agreements,
terms, conditions, or covenants of this Agreement by the parties shall be
deemed to imply or constitute a waiver of any other agreement, term,
condition, or covenant of this Agreement. The failure of any party to insist
on strict performance of any agreement, term, condition, or covenant, herein
set forth, shall not constitute or be construed as a waiver of the rights of
either or the other thereafter to enforce any other default of such agreement,
term, condition, or covenant; neither shall such failure to insist upon strict
performance be deemed sufficient grounds to enable either party hereto to
forego or subvert or otherwise disregard any other agreement, term, condition,
or covenants of this Agreement.
17.7 Governing Law - Construction. This Agreement, and the rights and
obligations of the respective parties, shall be governed by and construed in
accordance with the laws of the State of Texas. Notwithstanding the preceding
sentence, it is acknowledged that each party hereto is being represented by,
or has waived the right to be represented by, independent counsel.
Accordingly, the parties expressly agree that no provision of this Agreement
shall be construed against any party on the ground that the party or its
counsel drafted the provision. Nor may any provision of this Agreement be
construed against any party on the grounds that party caused the provision to
be present.
17.8 Representations and Warranties. The representations and
warranties contained in Sections 9 and 11 of this Agreement shall survive the
Closing Date and shall remain operative in full force and effect for the
period of one (1) year regardless of any investigation at any time made by or
on behalf of either Baltic or LynkTel and shall not be deemed merged in any
document or instrument so executed or delivered by either Baltic or LynkTel.
17.9 Notices. Any notice, communication, offer, acceptance, request,
consent, reply, or advice (herein severally and collectively, for convenience,
called "Notice"), in this Agreement provided or permitted to be given, served,
made, or accepted by any party or person to any other party or parties, person
or persons, hereunder must be in writing, addressed to the party to be
notified at the address set forth below, or such other address as to which one
party notifies the other in writing pursuant to the terms of this Section, and
must be served by (i) telefax or other similar electronic method, or
(ii) depositing the same in the United States mail, certified, return receipt
requested and postage paid to the party or parties, person or persons to be
notified or entitled to receive same, or (iii) delivering the same in person
to such party.
Notice shall be deemed to have been given immediately when sent by
telefax and confirmed received or other electronic method and seventy-two
hours after being deposited in the United States mail, or when personally
delivered in the manner herein above described. Notice provided in any manner
not specified above shall be effective only if and when received by the party
or parties, person or persons to be, or provided to be notified.
All notices, requests, demands and other communications required or
permitted under this Agreement shall be addressed as set forth below:
If Baltic, to: BALTIC INTERNATIONAL USA, INC.
ATTN: Xxxxxx X. Xxxxxx, Chief Executive Officer
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
If LynkTel, to: LYNKTEL, INC.
ATTN: Xxxxx X. XxXxxx, Xx., Chief Executive Officer
000 Xxxxx Xxx Xxxxxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Any party receiving a facsimile transmission shall be entitled to rely
upon a facsimile transmission to the same extent as if it were an original.
Any party may alter the address to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this Section for the giving of notice.
17.10 Fax/Counterparts. This Agreement may be executed by telex,
telecopy or other facsimile transmission, and such facsimile transmission
shall be valid and binding to the same extent as if it were an original.
Further, this Agreement may be signed in one or more counterparts, all of
which when taken together shall constitute the same documents. For all
evidentiary purposes, any one complete counter set of this Agreement shall be
considered an original.
17.11 Captions. The caption and heading of various articles, sections
and paragraphs of this Agreement are for convenience only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
17.12 Severability. Wherever there is any conflict between any
provision of this Agreement and any Governmental Requirement or judicial
precedent, the latter shall prevail, but in such event the provisions of this
Agreement thus affected shall be curtailed and limited only to the extent
necessary to bring it within the requirement of the law. In the event that
any part, article, section, paragraph or clause of this Agreement shall be
held by a court of proper jurisdiction to be invalid or unenforceable, the
entire Agreement shall not fail on account thereof, but the balance of the
Agreement shall continue in full force and effect unless such construction
would clearly be contrary to the intention of the parties or would result in
unconscionable injustice.
17.13 Good Faith Cooperation and Additional Documents. The parties
shall use their best good faith efforts to fulfill all of the conditions set
forth in this Agreement over which it has control or influence. Each party
covenants and agrees to cooperate in good faith and to enter into and deliver
such other documents and papers as the other party reasonably shall require in
order to consummate the transactions contemplated hereby, provided in each
instance, any such document is in form and substance approved by the parties
and their respective legal counsel.
17.14 Specific Performance. The obligations of the parties under
Articles 2 and 3 are unique. If either party should default in its
obligations under said Article, the parties each acknowledge that it would be
extremely difficult and impracticable to measure the resulting damages;
accordingly, the non-defaulting party, in addition to any other available
rights and remedies, may xxx in equity for injunction (mandatory or
prohibitive) or specific performance (all without the need to post a bond or
undertaking of any nature), and the parties each expressly waive the defense
that a remedy at law in damages is adequate.
17.15 Assignment. Neither party may directly or indirectly assign or
delegate, by operation of law or otherwise, all or any portion of
its/their/his rights, obligations or liabilities under this Agreement without
the prior written consent of all other parties, which consent may be withheld
in their respective sole and absolute discretion. Any purported assignment or
delegation without such consent shall be null and void.
For purposes of this Section, the term "Agreement" shall include this
Agreement and the Exhibits and other documents attached hereto or described in
this Section. This Agreement, and other documents delivered pursuant to this
Agreement, contain all of the terms and conditions agreed upon by the parties
relating to the subject matter of this Agreement and supersede all prior and
contemporaneous agreements, letters of intent, representations, warranties,
disclosures, negotiations, correspondence, undertakings and communications of
the parties, oral or written, respecting that subject matter.
17.16 Time. Time is of the essence of this Agreement and each of its
provisions.
IN WITNESS WHEREOF, the parties have signed the Agreement the date and
year first above written.
BALTIC INTERNATIONAL USA, INC.
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
X-X MERGER SUB, INC.
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
LYNKTEL, INC.
By: /s/ Xxxxx X. XxXxxx, Xx.
Name: Xxxxx X. XxXxxx, Xx.
Title: Chief Executive Officer
