EXHIBIT 2.1
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement ("Agreement") is entered into as of June ___, 2003
(the "Effective Date"), by Donobi, Inc., a Washington corporation ("Donobi"),
the shareholders of Donobi listed on the attached Schedule 1 (individually, a
"Donobi Shareholder" and collectively, the "Donobi Shareholders") and Reality
Wireless Networks, Inc., a Nevada corporation ("Reality").
RECITALS
A. Reality wishes to acquire from the Donobi Shareholders, on the terms and
conditions set forth in this Agreement, all of the issued and outstanding shares
of Donobi.
B. Together, the Donobi Shareholders are the owners of
_____________________________ shares of common stock and
__________________________ shares of preferred stock of Donobi as shown on
Schedule 1 (the "Donobi Shares"), which Donobi Shares represent all issued and
outstanding capital stock of Donobi.
C. The Donobi Shareholders desire to exchange the Donobi Shares for a total of
approximately 47,336,016 shares of the common stock of Reality (the "Reality
Shares"), so as to accomplish and effect a share exchange under the Nevada
Revised Statutes (the "NRS") and Revised Code of Washington (the "RCW"), such
that upon the effectiveness of the share exchange, the Donobi Shareholders shall
be deemed to be the holders of record of approximately eighty percent (80%) of
the issued and outstanding stock of Reality.
D. It is the intent of the parties that, subsequent to the share exchange,
Donobi remain in existence as a wholly-owned subsidiary of Reality.
E. It is the intent of the parties that the share exchange qualify as a
corporate reorganization under Section 368(a)(1)(B) of the Internal Revenue Code
of 1986, as amended (the "Code"). Accordingly, the parties agree as follows:
1.1 1. SHARE EXCHANGE.
1.1 Exchange of Donobi Shares. Subject to the terms and conditions of this
Agreement, on the Closing Date (as defined below), the Donobi Shares owned by
each Donobi Shareholder shown on Schedule 1 shall automatically be exchanged for
the right to receive the Reality Shares as described in Section 1.3 (the "Share
Exchange"). On the Closing Date (as defined below) and upon the effectiveness of
the Share Exchange, Reality shall be deemed to the holder of record of all the
Donobi Shares, and Donobi shall continue to be governed by the laws of the State
of Washington.
1.2 Article of Exchange. The Share Exchange shall be effectuated on the Closing
Date (as defined below) pursuant to Articles of Exchange ("Articles of
Exchange") filed in accordance with applicable provisions of the NRS and RCW.
The Articles of Exchange shall be filed with the Nevada and Washington Secretary
of State together with any other filings or recordings required by the NRS and
RCW in connection with the Share Exchange as soon as practicable after the
Closing (as defined below).
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1.3 Exchange Ratio. At the Closing Date (as defined below), each of the Donobi
Shares issued and outstanding immediately prior to the Effective Date shall, by
virtue of the Share Exchange and without any action on the part of the Donobi
Shareholders, automatically be exchanged for ______________________________
Reality Shares (the "Exchange Ratio"). Each certificate evidencing ownership of
the Donobi Shares outstanding immediately prior to the Closing Date shall,
immediately after the Closing Date, be exchanged for a certificate or
certificates evidencing ownership of the applicable number of the Reality
Shares. At the Closing, the Reality Shares shall be delivered to the Donobi
Shareholders.
1.2 2. CLOSING AND CLOSING DOCUMENTS.
2.1 Date, Time and Place of Closing. The Share Exchange contemplated by this
Agreement shall take place at a closing (the "Closing") to be held at the
offices of The Xxxx Law Group, PLLC, 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxxxx 00000, on _____________ __, 2003. The date on which the Closing
occurs is referred to in this Agreement as the "Closing Date." 2.2 Donobi
Shareholders Closing Documents. At the Closing, the Donobi Shareholders shall
deliver or cause to be delivered to or at the direction of Reality the following
documents (collectively, the "Donobi Shareholders Closing Documents"):
2.2.1 Articles of Exchange. The Articles of Exchange, executed
by Donobi;
2.2.2 Donobi Share Certificates. Certificates, executed in
blank by the Donobi Shareholders, or accompanied by assignments separate from
certificate executed by the Donobi Shareholders, representing all of the Donobi
Shares;
2.2.3 Employment Agreements. Employment Agreements in a form
mutually acceptable to Reality and each of ___________________________and
executed by ________________________, respectively (the "Reality Senior Manager
Employment Agreements");
2.2.4 Termination of Existing Agreements. Terminations of the
existing employment and consulting agreements listed on Schedule 2, executed by
___________________________________ and Donobi;
2.2.5 Good Standing Certificates. (a) A certificate issued by
the Washington Secretary of State indicating that Donobi is qualified and in
good standing within such jurisdiction; and
2.2.6 Liability Summary. A list of the liabilities of Donobi
evidencing that Donobi's debts and/or payables are not greater than One Million
Dollars ($1,000,000) (the "Donobi Liabilities").
2.2.7 Financials. The financial statements of Donobi for the
years ______________ (the "Donobi Financial Statements").
2.2.8 Donobi Contracts. A list of all pending, existing or
previous joint ventures, partnerships, license agreements and contract involving
Donobi (the "Donobi Contracts").
2.2.9 Other Documents and Instruments. Such other documents and
instruments as Reality's counsel may deem to be necessary or advisable to effect
the transactions contemplated by this Agreement.
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2.3 Reality Closing Documents. At the Closing, Reality shall deliver or cause to
be delivered to the Donobi Shareholders the following documents (collectively,
the "Reality Closing Documents"):
2.3.1 Articles of Exchange. The Articles of Exchange, executed
by Reality;
2.3.2 Reality Share Certificates. One or more stock
certificates in the name of each of the Donobi Shareholders representing such
Donobi Shareholder's ownership of the Reality Shares;
2.3.3 Employment Agreements. Employment Agreements in a form
mutually acceptable to Donobi and each of _________________________ and executed
by ________________________, respectively (the "Donobi Senior Manager Employment
Agreements");
2.3.4 Good Standing Certificate. A certificate issued by the
Nevada Secretary of State indicating that Reality is qualified and in good
standing within such jurisdiction;
2.3.5 Reality Officer's Certificate. A certificate dated as of
the Closing Date executed by a duly authorized officer of Reality certifying
that all necessary actions have been taken by Reality's shareholders and
directors to authorize the transactions contemplated by this Agreement and that
all representations and warranties made by Reality in this Agreement are
complete and correct in all material respects as of the Closing Date as if made
on the Closing Date; and
2.3.6 Liability Summary. A list of the liabilities of Reality,
including a list of any of Reality's debts and/or payables that have been (i)
paid off, or (ii) converted to equity (the "Reality Liabilities").
2.3.7 Financials. The financial statements of Reality for the
years ______________ (the "Reality Financial Statements").
2.3.8 Reality Contracts. A list of all pending, existing or
previous joint ventures, partnerships, license agreements and contract involving
Reality (the "Donobi Contracts").
2.3.9 Other Documents and Instruments. Such other documents and
instruments as Donobi's counsel may deem to be necessary or advisable to effect
the transactions contemplated by this Agreement.
1.3 3. REPRESENTATIONS AND WARRANTIES OF REALITY.
Reality represents and warrants to each of the Donobi Shareholders that the
statements contained in this Section 3 are correct and complete as of the date
of this Agreement.
3.1 Organization of Reality. Reality is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada. Reality
has all the requisite power and authority to own, lease and operate all of its
properties and assets and to carry on its business as currently conducted and as
proposed to be conducted. Reality is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which the nature of the business
conducted by it makes such licensing or qualification necessary and where the
failure to be so qualified would, individually or in the aggregate, have a
Material Adverse Effect upon it. As used in this Agreement, the term "Material
Adverse Effect" with respect to any party, shall mean any change or effect that
is reasonably likely to be materially adverse to the business, operations,
properties, condition (financial or otherwise), assets or liabilities of such
party and such party's subsidiaries taken as a whole.
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3.2 Authorization. Subject to the approval of its shareholders, Reality has full
power and authority (including full corporate power and authority) to execute
and deliver this Agreement and the Reality Closing Documents and to perform its
obligations hereunder and thereunder. This Agreement constitutes, and the
Reality Closing Documents will constitute, valid and legally binding obligations
of Reality, enforceable in accordance with their respective terms and
conditions.
3.3 Noncontravention. Neither the execution and the delivery of this Agreement
or the Reality Closing Documents, nor the consummation of the transactions
contemplated hereby or thereby by Reality, will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
Reality is subject or any provision of its articles of incorporation or bylaws,
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which Reality is a party or by
which it is bound or to which any of its assets is subject. Reality does not
need to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
parties to consummate the transactions contemplated by this Agreement.
3.4 Limited Representations and Warranties. Except for the representations and
warranties of the Warranting Shareholders expressly set forth in Section 4,
below, Reality has not relied upon any representation and warranty made by
Donobi or the Donobi Shareholders in making its determination to enter into this
Agreement and consummate the transactions contemplated by this Agreement.
3.5 Disclosure. The representations and warranties contained in this Section 3
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this Section 3 not misleading.
3.6 Capitalization. The authorized capital stock of Reality consists of
____________________ shares of $0.001 par value common stock, of which
11,000,000 shares are issued and outstanding, and _____________ shares of _____
par value preferred stock, none of which is issued and outstanding. All issued
and outstanding shares have been duly authorized and validly issued, and are
fully paid and nonassessable. All of the outstanding shares of Common Stock (and
options to purchase Common Stock) and other outstanding securities of Reality
have been, and the Reality Shares will be, duly and validly issued in compliance
with federal and state securities laws. Except for this Agreement and as
contemplated by this Agreement and as shown on Schedule 3, there are no
outstanding or authorized subscriptions, options, warrants, plans or, other
agreements or rights of any kind to purchase or otherwise receive or be issued,
or securities or obligations of any kind convertible into, any shares of capital
stock or other securities of Reality, and there are no dividends which have
accrued or been declared but are unpaid on the capital stock of Reality. There
are no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to Reality. Reality does not own, directly or indirectly,
any capital stock or other equity interest in any corporation, partnership or
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other entity. The Reality Shares are duly authorized and, when issued in
accordance with the terms and conditions of this Agreement, shall be validly
issued, fully paid and nonassessable. Prior to the Closing, the Reality Shares
will be duly authorized and, when issued in accordance with this Agreement,
shall be validly issued, fully paid and nonassessable. Except as contemplated by
this Agreement, the Reality Shares are not subject to any preemptive rights or
other similar restrictions.
3.7 SEC Reports and Financial Statements. Reality has filed with the SEC, and
has heretofore made available to the Donobi Shareholders, complete and correct
copies of all forms, reports, schedules, statements and other documents required
to be filed by Reality under the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act (as such documents have been amended or
supplemented since the time of their filing, collectively, the "SEC Reports").
As of their respective dates, the SEC Reports (including without limitation, any
financial statements or schedules included therein) (a) did not contain any
untrue statement of a material fact required to be stated therein or necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading, and (b) complied in all material
respects with the applicable requirements of the Securities Act and Exchange Act
(as the case may be) and all applicable rules and regulations of the SEC
promulgated thereunder. Each of the financial statements included in the SEC
Reports has been prepared from, and is in accordance with, the books and records
of Reality, complies in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, has been prepared in accordance with U.S. generally accepted
accounting principles ("U.S. GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presents in all material respects the consolidated results of operations and
cash flows (and changes in financial position, if any) of Reality, as at the
date(s) thereof or for the period(s) presented therein.
3.8 No Undisclosed Liabilities. Except as described in the SEC Reports and the
Reality Liabilities, Reality has no debts, liabilities or obligations of any
kind, whether accrued, absolute, contingent or other, whether due or to become
due, except as incurred in the ordinary course of business, that could have a
Material Adverse Effect on Reality.
3.9 Legal Proceedings, Claims, etc. There is no legal, administrative,
arbitration or other action or proceeding pending against Reality or any of its
directors, officers, or employees. Reality has not been informed of any
violation or default under any laws, ordinances, regulations, judgments,
injunctions, orders or decrees of any governmental authority. Except as set
forth in the SEC Reports, Reality is not subject to any judgment, order,
injunction or decree of any court, arbitral authority or governmental authority
that could have a Material Adverse Effect on Reality.
3.10 Tax Treatment. As of the date of this Agreement, Reality has no reason to
believe that the Share Exchange will not qualify as a "reorganization" within
the meaning of Section 368(a) of the Code.
3.11 No Distributions. Reality has not made any distributions to its
stockholders subsequent to its entering into that certain terms sheet with
Donobi on April 30, 2003.
3.12 Financial Statements and Financial Condition. Attached as Schedule 4 are
the Financial Statements: (a) for Reality (i) its audited consolidated balance
sheet as of ______________, and the related audited consolidated statements of
income and retained earnings and of cash flows, and (ii) its audited
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consolidated balance sheet as of _________________ and the related audited
consolidated statements of income and retained earnings and of cash flows for
the period ended _______________. The Financial Statements, including any
related notes and schedules, have been prepared in accordance with U.S. GAAP
consistently applied, are based on the books, records and work papers of Reality
and present fairly the financial position of Reality as of the dates of such
statements and the results of operations for the periods covered by such
statements, subject to normal year-end adjustments and the absence of footnotes.
3.13 Reality Contracts. Except as disclosed on Schedule 5, (i) Reality is not a
party to or bound by any commitment, contract, agreement or other instrument
which involves or could involve aggregate future payments by Reality of more
than $25,000 U.S., (ii) Reality is not a party to or bound by any commitment,
contract, agreement or other instrument which is material to the business,
operations, properties, assets or financial condition of Reality, and (iii) no
commitment, contract, agreement or other instrument, other than charter
documents, to which Reality is a party or by which Reality is bound, limits the
freedom of Reality to compete in any line of business or with any person. The
commitments, contracts, agreements or other instruments listed on Schedule 5 are
valid and binding obligations and Reality is not in default therewith, except as
listed on Schedule 5 and except where any such defaults are not reasonably
likely to have in the aggregate a Material Adverse Effect on Reality.
3.14 Indemnification. From and at all times after the date of this Agreement,
Reality shall, to the fullest extent permitted by law, indemnify and hold
harmless Donobi, each Donobi Shareholder and each director, officer, employee,
attorney, agent and affiliate of Donobi (collectively, the "Indemnified
Parties") against any and all actions, claims (whether or not valid), losses,
damages, liabilities, costs and expenses of any kind or nature whatsoever
(including without limitation reasonable attorneys' fees, costs and expenses)
incurred by or asserted against any of the Indemnified Parties from and after
the date hereof, whether direct, indirect or consequential, as a result of or
arising from or in any way relating to any claim, demand, suit, action or
proceeding (including any inquiry or investigation) by any person, whether
threatened or initiated, asserting a claim for any legal or equitable remedy
against any person under any statute or regulation, including, but not limited
to, any federal or state securities laws, or under any common law or equitable
cause or otherwise, arising from or in connection with liabilities of Reality
not disclosed in this Agreement and/or the Schedules attached hereto, or any
transactions contemplated herein, whether or not any such Indemnified Party is a
party to any such action, proceeding, suit or the target of any such inquiry or
investigation. If any such action or claim shall be brought or asserted against
any Indemnified Party, such Indemnified Party shall promptly notify Reality in
writing, and Reality shall assume the defense thereof, including the employment
of counsel and the payment of all expenses, provided Reality shall be liable for
all such expenses. Such Indemnified Party shall, in its sole discretion, have
the right to employ separate counsel (who may be selected by such Indemnified
Party in its sole discretion) in any such action and to participate in the
defense thereof, and the fees and expenses of such counsel shall be paid by such
Indemnified Party, except that Reality shall be required to pay such fees and
expenses if (a) Reality agrees to pay such fees and expenses, or (b) Reality
fails to assume the defense of such action or proceeding or shall fail, in the
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reasonable discretion of such Indemnified Party, to employ counsel satisfactory
to the Indemnified Party in any such action or proceeding, (c) Reality is the
plaintiff in any such action or proceeding or (d) the named parties to any such
action or proceeding (including any impleaded parties) include both Indemnified
Party and Reality, and Indemnified Party shall have been advised by counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to any such other party. All such fees and
expenses payable by Reality pursuant to the foregoing sentence shall be paid
promptly as incurred, both in advance of and after the final disposition of such
action or claim. All of the foregoing losses, damages, costs and expenses of the
Indemnified Parties shall be payable by Reality upon demand by such Indemnified
Party. The obligations of Reality under this Section shall survive any
termination of this Agreement.
1.4 4. REPRESENTATIONS AND WARRANTIES OF WARRANTING SHAREHOLDERS.
The Donobi Shareholders (each a "Warranting Shareholder" and together the
"Warranting Shareholders"), jointly and severally represent and warrant to
Reality that the statements contained in this Section 4 are correct and complete
as of the date of this Agreement.
4.1 Organization. Donobi is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Washington. Donobi has all the
requisite power and authority to own, lease and operate all of its properties
and assets and to carry on its business as currently conducted and as proposed
to be conducted. Donobi is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the nature of the business conducted
by it makes such licensing or qualification necessary and where the failure to
be so qualified would, individually or in the aggregate, have a Material Adverse
Effect upon it.
4.2 Authorization of Transaction. All Donobi Shareholders have full power and
authority to execute and deliver this Agreement and the Donobi Shareholders'
Closing Documents to which any Donobi Shareholder is a party and to perform the
Donobi Shareholders' obligations hereunder and thereunder. This Agreement
constitutes, and the Donobi Shareholders' Closing Documents will constitute, the
valid and legally binding obligation of the Donobi Shareholders, enforceable in
accordance with their respective terms and conditions. Each Donobi Shareholder
severally makes the representations and warranties set forth in this Section 4.2
to Reality.
4.3 Capitalization. The authorized capital stock of Donobi consists of
_______________ shares of common stock, of which ________________ shares are
issued and outstanding, and ________________ shares of preferred stock, of which
_________________ shares are issued and outstanding. All issued and outstanding
shares of Donobi stock have been duly authorized and validly issued, and are
fully paid and nonassessable. All of the outstanding shares of common stock (and
options to purchase common stock) and other outstanding securities of Donobi
have been duly and validly issued in compliance with federal and state
securities laws. Except as set forth in Schedule 6, there are no outstanding or
authorized subscriptions, options, warrants, plans or, except for this Agreement
and as contemplated by this Agreement, other agreements or rights of any kind to
purchase or otherwise receive or be issued, or securities or obligations of any
kind convertible into, any shares of capital stock or other securities of
Donobi, and there are no dividends which have accrued or been declared but are
unpaid on the capital stock of Donobi. There are no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to Donobi. The
Donobi Shares are duly authorized and validly issued, fully paid and
nonassessable. The Donobi Shares are not subject to any preemptive rights or
other similar restrictions.
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4.4 Subsidiaries. Except as described on Schedule 7, Donobi does not own,
directly or indirectly, any capital stock or other equity interest in any
corporation, partnership or other entity.
4.5 Ownership of Donobi Shares. Each of the Donobi Shareholders owns and holds
of record that number of Donobi Shares shown on Schedule 1. Each Donobi
Shareholder has good title to such Donobi Shareholder's Donobi Shares, free and
clear of all claims, charges, liens and other encumbrances.
4.6 Noncontravention. Neither the execution and the delivery of this Agreement
or the Donobi Shareholders' Closing Documents, nor the consummation of the
transactions contemplated hereby or thereby, by Donobi or such Donobi
Shareholder will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Donobi or such Donobi
Shareholder is subject, or (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Donobi or such Donobi Shareholder is a party or by which Donobi or such Donobi
Shareholder is bound or to which Donobi or any of such Donobi Shareholder's
assets is subject. Neither Donobi nor such Donobi Shareholder needs to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the parties to
consummate the transactions contemplated by this Agreement.
4.7 Financial Statements and Financial Condition. Attached as Schedule 8 are the
following Financial Statements: (a) for Donobi (i) its unaudited consolidated
balance sheet as of ______________, and the related unaudited consolidated
statements of income and retained earnings and of cash flows, and (ii) its
unaudited consolidated balance sheet as of _________________ and the related
unaudited consolidated statements of income and retained earnings and of cash
flows for the period ended _______________. The Financial Statements, including
any related notes and schedules, have been prepared in accordance with U.S. GAAP
consistently applied, are based on the books, records and work papers of Donobi
and present fairly the financial position of Donobi as of the dates of such
statements and the results of operations for the periods covered by such
statements, subject to normal year-end adjustments and the absence of footnotes.
4.8 Absence of Material Change. Since April 30, 2003, there has been no change
in the business, operations, financial condition or liabilities of Donobi that
would result in a Material Adverse Effect on Donobi.
4.9 Litigation. There are no actions, suits, claims, inquiries, proceedings or
investigations before any court, tribunal, commission, bureau, regulatory,
administrative or governmental agency, arbitrator, body or authority pending or,
to the knowledge of such Warranting Shareholders, threatened against Donobi
which would reasonably be expected to result in any liabilities, including
defense costs, in excess of $50,000 U.S. in the aggregate. Donobi is not the
named subject of any order, judgment or decree and is not in default with
respect to any order, judgment or decree.
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4.10 Taxes and Tax Returns. Donobi has timely and correctly filed tax returns
and reports (collectively, "Returns") required by applicable law to be filed
(including, without limitation, estimated tax returns, income tax returns,
excise tax returns, sales tax returns, use tax returns, property tax returns,
franchise tax returns, information returns and withholding, employment and
payroll tax returns) and all such returns were (at the time they were filed)
correct in all material respects, and have paid all taxes, levies, license and
registration fees, charges or withholdings of any nature whatsoever reflected on
such Returns to be owed and which have become due and payable except for any
that is being contested in good faith. The unpaid U.S. Federal income taxes,
interest and penalties of Donobi do not exceed $50,000 U.S. in the aggregate.
4.11 Employees. Schedule 9 is a list of all salaried persons employed by Donobi
and a description of their salaries and deferred compensation.
4.11.1 Except as set forth on Schedule 9, no officer or
employee of Donobi is receiving aggregate remuneration (bonus, salary, deferred
compensation and commissions) at a rate, which if annualized, would exceed
$75,000 U.S. in the year 2003.
4.11.2 Except as set forth on Schedule 9, Donobi is not a
party to, or bound by, any contract, arrangement or understanding (whether
written or oral) with respect to the employment or compensation of any officers,
employees or consultants and except as provided in this Agreement. Further,
consummation of the transactions contemplated by this Agreement will not result
in any payment (whether of severance pay or otherwise) becoming due from Donobi
to any officer or employee thereof. Donobi has previously delivered or made
available to Reality true and complete copies of all written employment,
consulting and deferred compensation agreements to which Donobi is a party.
4.11.3 There are not, and have not been at any time in the
past three years, any actions, suits, claims or proceedings before any court
tribunal, commission, bureau, regulatory, administrative or governmental agency,
arbitrator, body or authority pending or, to such Warranting Shareholders'
knowledge, threatened, by any employees, former employees or other persons
relating to the employment practices or activities of Donobi (except for actions
which have subsequently been resolved). Donobi is not a party to any collective
bargaining agreement, and no union organization efforts with respect to Donobi
are pending or, to such Warranting Shareholders' knowledge, threatened nor have
any occurred during the last three years.
4.11.4 Donobi has made available to Reality true and complete
copies of all personnel codes, practices, procedures, policies, manuals,
affirmative action programs and similar materials of Donobi.
4.12 Compliance with Applicable Law.
4.12.1 Donobi holds all licenses, certificates, franchises,
permits and other governmental authorizations ("Permits") necessary for the
lawful conduct of its business and such Permits are in full force and effect,
and Donobi is in all material respects complying therewith, except where the
failure to possess or comply with such Permits would not have, in the aggregate,
a Material Adverse Effect on Donobi.
4.12.2 Donobi is and for the past three years has been in
compliance with all foreign, federal, state and local laws, statutes,
ordinances, rules, regulations and orders applicable to the operation, conduct
or ownership of its business or properties except for any noncompliance which is
not reasonably likely to have, in the aggregate, a Material Adverse Effect on
Donobi.
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4.13 Donobi Contracts. Except as disclosed on Schedule 10, (i) Donobi is not a
party to or bound by any commitment, contract, agreement or other instrument
which involves or could involve aggregate future payments by Donobi of more than
$25,000 U.S., (ii) Donobi is not a party to or bound by any commitment,
contract, agreement or other instrument which is material to the business,
operations, properties, assets or financial condition of Donobi, and (iii) no
commitment, contract, agreement or other instrument, other than charter
documents, to which Donobi is a party or by which Donobi is bound, limits the
freedom of Donobi to compete in any line of business or with any person. The
Donobi Contracts are valid and binding obligations and Donobi is not in default
therewith except where any such defaults are not reasonably likely to have in
the aggregate a Material Adverse Effect on Donobi.
4.14 Limited Representations and Warranties. Except for the representations and
warranties of Reality expressly set forth in Section 3, neither Donobi nor the
Donobi Shareholders have relied upon any representation and warranty made by or
on behalf of Reality in making its determination to enter into this Agreement
and consummate the transactions contemplated by this Agreement.
4.15 Disclosure. No representation or warranty made by a Donobi Shareholder
contained in this Agreement, and no statement contained in the Schedules
delivered by Donobi and the Donobi Shareholders hereunder, contain any untrue
statement of a material fact or omit any material fact necessary in order to
make a statement herein or therein, in light of the circumstances under which it
is made, not misleading.
4.16 Title to Property.
4.16.1 Real Property. Schedule 11 is a true and complete
description of all interests in real property (other than real property security
interests received in the ordinary course of business), whether owned, leased or
otherwise claimed, including a list of all leases of real property, in which
Donobi has or claims an interest and any guarantees of any such leases by
Donobi. True and complete copies of such leases have previously been delivered
or made available to Reality, together with all amendments, modifications,
agreements or other writings related thereto. Each such lease is legal, valid
and binding as between Donobi and the other party or parties thereto, and the
occupant is a tenant or possessor in good standing thereunder, free of any
default or breach whatsoever and quietly enjoys the premises provided for
therein. Donobi has good, valid and marketable title to all real property owned
by it, free and clear of all mortgages, liens, pledges, charges or encumbrances
of any nature whatsoever, except liens for current taxes not yet due and
payable, and such encumbrances and imperfections of title, if any, as do not
materially detract from the value of the properties and do not materially
interfere with the present or proposed use of such properties or otherwise
materially impair such operations. All real property and fixtures material to
the business, operations or financial condition of Donobi in substantially good
condition and repair.
4.16.2 Environmental Matters. The real property owned or
leased by Donobi is not in a condition that may give rise to financial liability
under any environmental laws applicable to Donobi such property.
13
4.17 Personal Property. Schedule 12 is a true and complete list of (i) each item
of machinery, equipment, or furniture, including without limitation computers
and vehicles, of Donobi and (ii) each lease or other agreement under which any
such item of personal property is leased, rented, held or operated where the
current fair market value of such item is more than $1,000 U.S. Donobi has good,
valid and marketable title to all personal property owned by them, free and
clear of all liens, pledges, charges or encumbrances of any nature whatsoever.
4.18 Intellectual Property. Schedule 13 is a true and complete list of:
4.18.1 All patents, patent applications, trademarks, trademark
registrations, applications for trademark registration, trade names, service
marks, registered Internet domain names, and other intangible property currently
used, owned, or registered for use by Donobi where the current fair market value
of such item is more than $1,000 U.S.; and
4.18.2 All license and other agreements with respect to any of
the foregoing as to which Donobi is licensor or licensee.
4.18.3 There are no pending or, to such Warranting
Shareholders' knowledge, threatened, claims against Donobi by any person as to
any of the items, or their use, listed in Schedule 13 or claims of infringement
by Donobi on the rights of any person and no valid basis exists for any such
claims.
4.19 Powers of Attorney. Donobi does not have any powers of attorney outstanding
other than those in the ordinary course of business with respect to routine
matters.
4.20 Bank Accounts. Schedule 15 is a true and complete list of all bank
accounts, safe deposit boxes and lock boxes of Donobi, including, with respect
to each such account and lock box: (a) identification of all authorized
signatories; (b) identification of the business purpose of such account or lock
box, including identification of any accounts or lock boxes representing escrow
funds or otherwise subject to restriction; and (c) identification of the amount
on deposit on the date indicated.
4.21 Product Claims. No product or service liability claim is pending against
Donobi or against any other party with respect to the products or services of
Donobi.
4.22 No Distributions. Donobi has not made any distributions to its stockholders
subsequent to its entering into that certain terms sheet with Donobi on April
30, 2003.
4.23 Donobi Liabilities. At the Closing Date of this Agreement, the Donobi
Liabilities do not exceed One Million Dollars ($1,000,000).
1.5 5. COVENANTS OF THE PARTIES.
5.1 Conduct of the Business of Donobi. During the period from the date of this
Agreement to the Closing Date, Donobi will conduct, its business and engage in
transactions only in the ordinary course consistent with past practice. During
such period, Donobi will use its best efforts to (a) preserve its business
organization intact, (b) keep available the present services of its employees,
and (c) preserve the goodwill of its customers and others with whom business
relationships exist. In addition, without limiting the generality of the
foregoing, Donobi agrees that from the date of this Agreement to the Closing
Date, except as otherwise consented to or approved by Reality in writing (which
consent or approval shall not be unreasonably withheld, delayed or conditioned)
or as permitted or required by this Agreement or as required by law, Donobi will
not:
14
5.1.1 grant any severance or termination pay to or enter into
or amend any employment agreement with, or increase the amount of payments or
fees to, any of its employees, officers or directors other than salary increases
to employees consistent with past increases;
5.1.2 make any capital expenditures in excess of (i) $5,000
U.S. (per project or related series of projects) or (ii) $20,000 U.S. in the
aggregate, other than pursuant to binding commitments existing on the date of
this Agreement and expenditures necessary to maintain existing assets in good
repair;
5.1.3 change in any material manner pricing policies or any
other material business or customer policies;
5.1.4 guarantee the obligations of any other person except in
the ordinary course of business consistent with past practice;
5.1.5 acquire assets other than those necessary in the conduct
of its business in the ordinary course;
5.1.6 sell, transfer, assign, encumber or otherwise dispose of
assets with a value in excess of $10,000 U.S.;
5.1.7 enter into or amend or terminate any long term (one year
or more) contract (including real property leases) except in the ordinary course
of business consistent with past practice;
5.1.8 enter into or amend any contract that calls for the
payment by Donobi of $10,000 U.S. or more after the date of this Agreement or
for a term exceeding two years that cannot be terminated on not more than 30
days' notice without cause and without payment or loss of any material amount as
a penalty, bonus, premium or other compensation for termination;
5.1.9 engage or participate in any material transaction or
incur or sustain any material obligation otherwise than in the ordinary course
of business or consistent with past practice;
5.1.10 contribute to any benefit plans except in such amounts
and at such times as consistent with past practice;
5.1.11 increase the number of full-time equivalent employees
other than in the ordinary course of business consistent with past practice;
5.1.12 acquire any real property except after having followed
reasonable procedures with respect to the investigation of potential
environmental problems, which procedures have been approved in writing by
Reality (which approval shall not be unreasonably withheld, delayed or
conditioned); or
5.1.13 agree to do any of the foregoing.
5.2 No Solicitation and Liquidated Damages. During the period beginning on the
date of this Agreement and ending on the Closing Date, neither Donobi nor any of
its directors, officers, shareholders, representatives, agents or other persons
controlled by any of them, shall, directly or indirectly, encourage or solicit,
or hold discussions or negotiations with, or provide any information to, any
persons, entity or group other than Reality concerning any merger, sale of
substantial assets not in the ordinary course of business, sale of shares of
capital stock or similar transactions involving Donobi. Donobi will promptly
communicate to Reality the identity of any interested or inquiring party, all
relevant information surrounding the interest or inquiry, as well as the terms
of any proposal that it may receive in respect of any such transaction. If this
Agreement is terminated by Reality due to uncured breach of this Section 5.2,
then Reality shall be entitled to $50,000 U.S. from Donobi as liquidated
damages. Such liquidated damages shall constitute full payment and the exclusive
remedy for any damages suffered by Reality by reason of such breach and the
terms of this Agreement. Reality, Donobi and the Donobi Shareholders agree that
actual damages would be difficult to ascertain and that $50,000 U.S. is a fair
and equitable amount to reimburse Reality for such damages and the termination
of this Agreement.
15
5.3 Access to Properties and Records; Confidentiality.
5.3.1 Donobi shall permit Reality and its representatives
reasonable access to its properties and shall disclose and make available to
Reality all books, papers and records relating to the assets, stock, ownership,
properties, obligations, operations and liabilities of Donobi, including but not
limited to, all books of account (including the general ledger), tax records,
minute books of directors and stockholders meetings, organizational documents,
bylaws, material contracts and agreements, filings with any regulatory
authority, accountant(s) work papers, litigation files, plans affecting
employees, and any other business activities or prospects in which Reality may
have a reasonable interest, in each case during normal business hours and upon
reasonable notice. Donobi shall not be required to provide access to or disclose
information where such access or disclosure would jeopardize the attorney-client
privilege or would contravene any law, rule, regulation, order, judgment, decree
or binding agreement entered into prior to the date of this Agreement. The
parties will use all reasonable efforts to make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply.
5.3.2 All information furnished by Donobi to Reality or the
representatives or affiliates of Reality pursuant to, or in any negotiation in
connection with, this Agreement, shall be treated as the sole property of Donobi
until consummation of this Agreement and if consummation of this Agreement shall
not occur Reality and its affiliates, agents and advisors shall upon written
request return to Donobi all documents or other materials containing,
reflecting, and/or referring to such information, and shall keep confidential
all such information and shall not disclose or use such information for
competitive purposes. The obligation to keep such information confidential shall
not apply to (i) any information which (w) Reality can establish by evidence was
in its possession (subject to no obligation of confidentiality) prior to the
disclosure thereof by Donobi; (x) was generally known to the public; (y) becomes
known to the public other than as a result of actions by Reality or by the
directors, officers, employees, agents or representatives of Reality; or (z) was
disclosed to Reality, or to the directors, officers, employees or
representatives of Reality, solely by a third party not bound by any obligation
of confidentiality; or (ii) disclosure necessary to comply with federal
securities laws, federal banking laws, or pursuant to an order of a court or
agency of competent jurisdiction.
16
5.4 Regulatory Matters.
5.4.1 The parties will cooperate with each other and use all
reasonable efforts to prepare all necessary documentation, to effect all
necessary filings and to obtain all necessary permits, consents, approvals, and
authorizations of all third parties and governmental bodies necessary to
consummate the transactions contemplated by this Agreement including, without
limitation, those that may be required from the SEC, other regulatory
authorities, or Reality's shareholders. Donobi and Reality shall each have the
right to review reasonably in advance all information relating to Donobi or
Reality, as the case may be, and any of their respective subsidiaries, together
with any other information reasonably requested, which appears in any filing
made with or written material submitted to any governmental body in connection
with the transactions contemplated by this Agreement. Reality shall bear all
expenses associated with SEC filings.
5.4.2 Donobi and Reality will promptly furnish each other with
copies of written communications received by Donobi or Reality or any of their
respective subsidiaries from, or delivered by any of the foregoing to, any
governmental body with respect to the transactions contemplated by this
Agreement.
5.5 Further Assurances. Subject to the terms and conditions of this Agreement,
each of the parties agrees to use all commercially reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
5.6 Public Announcements. No party will issue or distribute any information to
its shareholders or employees, any news releases or any other public information
disclosures with respect to this Agreement or any of the transactions
contemplated by this Agreement without the written consent of the other party or
their designated representative, except as may be otherwise required by law.
5.7 Post-Closing Appointments. As soon as reasonable after the Closing, the
Reality Board of Directors shall take all actions necessary to nominate, vote,
appoint or elect _____________________________ and
_________________________________, such nominee of the Donobi Shareholders being
acceptable to Reality to the Board of Directors of Reality; and
___________________________ shall be appointed or elected to serve as a member
of the Board of Directors of Reality, unless __________ is already serving as a
member, in which case _____________shall remain as a director subsequent to the
Closing of the Agreement until he resigns or is replaced in accordance with
Nevada law.
5.8 Legal Fees in Connection with the Consummation of this Agreement. Donobi and
Reality shall each pay fifty percent (50%) of all the legal fees incurred in
connection with the consummation of this Agreement.
5.9 Management Employment Contracts. Upon the consummation of this Agreement,
Donobi and Reality shall take all necessary steps to ensure that the remaining
senior managers/executive officers of Donobi and Reality execute employment
contacts, such employment contacts to include new option and employment bonus
plans which shall include operational, transactional and growth benchmarks.
5.10 Assumption by Reality of the Donobi Liabilities. By virtue of this
Agreement, Reality agrees to assume all the Donobi Liabilities as listed on
Schedule 16.
1.6 6. CONDITIONS PRECEDENT TO DONOBI SHAREHOLDERS' OBLIGATIONS.
The obligations of the Donobi Shareholders to consummate the transactions
contemplated by this Agreement are subject to satisfaction of the following
conditions at or before the Closing Date and may be waived only in writing by
the Donobi Shareholders:
17
6.1 Reality Covenants, Representations and Warranties. All the covenants, terms
and conditions of this Agreement to be complied with or performed by Reality at
or before the Closing Date shall have been complied with and performed in all
material respects. The representations and warranties made by Reality in this
Agreement shall be complete and correct at and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made at and as of the Closing Date.
6.2 Reality's Delivery of Documents. Reality shall have duly executed and
delivered, or caused to be executed and delivered, to or at the direction of the
Donobi Shareholders, this Agreement and the Reality Closing Documents.
6.3 Reality Shareholder Approval. This Agreement shall have been approved and
adopted by the affirmative votes of the holders of at least a majority of each
class of Reality's outstanding capital stock.
6.4 Other Approvals. All authorizations, consents, orders or approvals of United
States federal or state governmental agency necessary for the consummation of
the transactions contemplated by this Agreement (other than such actions,
approvals or filings which, pursuant to the terms of this Agreement, are to take
place on or after the Closing) shall have been filed, occurred or been obtained.
6.5 No Litigation. No administrative investigation, action, suit or proceeding
seeking to enjoin the consummation of the transactions contemplated by this
Agreement shall be pending or threatened.
6.6 Filing of Proxy Statement by Reality. Prior to the Closing Date of this
Agreement, Reality shall file a proxy statement with the Securities and Exchange
Commission and said proxy statement shall be approved by more than fifty percent
(50%) of Reality's shareholders.
6.7 Bridge Funding to Donobi. Within fifteen (15) days after the Effective Date
of this Agreement, Reality shall provide bridge funding to Donobi as provided in
Appendix A.
6.8 $3 Million Equity Offering by Reality. Prior to the Closing Date of this
Agreement, Reality shall have completed an offering of the equity securities of
Reality (the "Offering") pursuant to which Reality raised no less than Three
Million Dollars ($3,000,000). Provided, however, that up to Seven Hundred
Thousand Dollars ($700,000) of the proceeds from the Offering may be used to pay
fees associated with conducting the Offering (the "Fees") and to satisfy certain
debts of Reality (the "Debts"). The Debts to be paid with a portion of the Seven
Hundred Thousand Dollars ($700,000) raised pursuant to the Offering shall be
determined pursuant to the mutual written agreement of Reality and Donobi prior
to and as a condition of the Offering.
6.9 Assumption by Reality of the Donobi Liabilities. Reality shall have assumed
all the Donobi Liabilities as listed in Schedule 16.
6.10 Reality Liabilities. At or before the Closing Date, the Reality Liabilities
listed in Schedule 17 shall (i) have been paid in full, (ii) converted to
equity, and/or (iii) be acceptable to Donobi.
1.7 7. CONDITIONS PRECEDENT TO REALITY'S OBLIGATIONS.
The obligations of Reality to consummate the transactions contemplated by this
Agreement are subject to satisfaction of the following conditions at or before
the Closing Date and may be waived only in writing by Reality:
18
7.1 Donobi Shareholders' Covenants, Representations and Warranties. All the
covenants, terms and conditions of this Agreement to be complied with or
performed by Donobi or the Donobi Shareholders on or before the Closing Date
shall have been complied with and performed in all material respects. The
representations and warranties made by the Warranting Shareholders in this
Agreement shall be complete and correct at and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made at and as of the Closing Date.
7.2 Donobi Shareholders' Delivery of Documents. The Donobi Shareholders shall
have duly executed and delivered, or caused to be executed and delivered, to
Reality, or at its direction, this Agreement and the Donobi Shareholders'
Closing Documents.
7.3 Other Approvals. All authorizations, consents, orders or approvals of United
States federal or state governmental agency necessary for the consummation of
the transactions contemplated by this Agreement (other than such actions,
approvals or filings which, pursuant to the terms of this Agreement, are to take
place on or after the Closing) shall have been filed, occurred or been obtained.
7.4 Donobi Shareholder Approval. This Agreement shall have been approved and
adopted by the affirmative votes of the holders of at least two thirds of each
class of Donobi's outstanding capital stock.
7.5 No Litigation. No administrative investigation, action, suit or proceeding
seeking to enjoin the consummation of the transactions contemplated by this
Agreement shall be pending or threatened.
1.8 8. TERMINATION.
8.1 Termination of Agreement. This Agreement shall terminate as follows:
(a) at any time prior to the Closing Date by the mutual written
agreement of all parties;
(b) by (i) the Donobi Shareholders if the conditions set forth
in Section 6 have not been satisfied or waived by the Upset Date (defined
below); or (ii) Reality if the conditions set forth in Section 7 have not been
satisfied or waived by the Upset Date (defined below);
(c) by Reality, in the event of a breach of any of the
representations or warranties made by the Warranting Shareholders, or covenants
made by the Donobi Shareholders, in this Agreement that has not been cured
within 30 days after notice of such breach is delivered to Donobi and the Donobi
Shareholders by Reality or its representative;
(d) by Donobi and the Donobi Shareholders in the event of any
of the representations or warranties made by Reality in this Agreement that has
not been cured within 30 days after notice of such breach is delivered to
Reality by Donobi, the Donobi Shareholders or their representative; or
(e) by either the Donobi Shareholders or Reality if the
Closing shall have not occurred by _______________ (the "Upset Date") provided,
however, that the right to terminate this Agreement pursuant to this clause
shall not be available to any party whose failure to fulfill any obligation of
this Agreement has been the cause of, or resulted in, the failure of the Closing
to have been effected on or prior to such date.
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1.9 9. MISCELLANEOUS.
9.1 Tax Treatment by the Parties. Unless otherwise required by law, the parties
shall treat the Share Exchange as a reorganization under Section 368 of the Code
for all tax reporting purposes; furthermore, the parties shall not take, and
have not taken, any action that is inconsistent with reorganization treatment
under Section 368 of the Code.
9.2 No Third Party Beneficiaries. This Agreement shall not confer any rights or
remedies upon any person or entity other than the parties and their respective
successors and assigns.
9.3 Successors and Assigns. No party may assign this Agreement or any of their
rights, interests, or obligations under this Agreement without the prior written
consent of all other parties. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties and their respective
permitted successors and assigns.
9.4 Notices. All notices, requests, demands, claims, consents and other
communications required or permitted under this Agreement shall be in writing.
Any notice, request, demand, claim, communication or consent under this
Agreement shall be deemed duly given if (and shall be effective two business
days after) it is sent by certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:
If to Reality: Reality Wireless Networks, Inc.
000 X. Xxxxxxxx Xxxxxx, Xxxxx X
Xxxxxxxx, XX 00000
With a copy (which shall not The Xxxx Law Group, PLLC
constitute notice) to: 000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx
If to Donobi:
Donobi, Inc.
0000 Xxxxx Xxx XX
Xxxxxxxxx, XX 00000
With a copy (which shall not The Xxxx Law Group, PLLC
constitute notice) to: 000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx
To the addresses set forth on Schedule 1
If to the Donobi Shareholders:
9.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Washington, without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Washington or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Washington.
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9.6 Amendments and Waivers.
9.6.1 This Agreement may be amended and/or provisions of this
Agreement may be waived only in writing signed by the party against which
enforcement of the amendment or waiver is sought.
9.7 Survival of Representations and Warranties. The representations and
warranties set forth in Sections 3 and 4 of this Agreement shall survive the
Closing and continue in full force and effect for a period of two years after
the Closing.
9.8 Severability. If any provision of this Agreement shall be invalid or
unenforceable under applicable law, such provision shall be ineffective to the
extent of such invalidity or unenforceability only, without it affecting the
remaining provisions of this Agreement.
9.9 Headings. The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
9.10 Construction. The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, or local or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word "including" shall mean including
without limitation.
9.11 Incorporation of Schedules. The Schedules referred to in and/or attached to
this Agreement are incorporated in this Agreement by this reference.
9.12 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original but all of which together will
constitute one and the same document. This Agreement may be executed by
facsimile.
9.13 Entire Agreement. This Agreement (including the Schedules referred to in
and/or attached to this Agreement) constitutes the entire agreement among the
parties and supersedes any prior understandings, agreements, or representations
by or among the parties, written or oral (including but not limited to that
certain term sheet dated April 30, 2003) to the extent they relate in any way to
the subject matter of this Agreement.
9.14 Arbitration. Any controversies or claims arising out of or relating to this
Agreement shall be fully and finally settled by arbitration in Kitsap County,
Washington, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA Rules"), conducted by a single arbitrator
either mutually agreed upon by Reality and the Donobi Shareholder(s) requesting
arbitration or chosen in accordance with the AAA Rules, except that the parties
shall have any right to discovery as would be permitted by the Federal Rules of
Civil Procedure for a period of 90 days following the commencement of such
arbitration, and the arbitrator shall resolve any dispute which arises in
connection with such discovery. The prevailing party or parties shall be
entitled to costs, expenses and attorneys' fees from the non-prevailing party or
parties, and judgment upon the award rendered by the arbitrator may be entered
in any court of competent jurisdiction presiding in Kitsap County, Washington.
21
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of this
_____ day of June, 2003.
DONOBI, INC.
By: /s/ Xxxxxxx X. Xxxxxx
________________________________
Xxxxxxx X. Xxxxxx, III
Its: President and CEO
DONOBI SHAREHOLDERS
------------------------------------
------------------------------------
------------------------------------
REALITY WIRELESS NETWORKS, INC.
By: /s/ Xxxxxx Xxxxxx
________________________________
Name: Xxxxxx Xxxxxx
Its: President
APPENDIX A
----------
BRIDGE FINANCING TERMS
Terms of $200,000 USD Bridge Financing
Principal Amount: $200,000
Type: Senior Subordinate Note
Term: 360 Days
Coupon: 5% annual
Conversion Feature: Automatic conversion upon completion
of Merger into common stock of
surviving public entity.
Default: Failure to repay with interest on
due date (assumes no merger).
Default provisions: Upon Default,
privately held DNOBi, Inc.
allows Note Holder to elect
2 members to its Board of
Directors, coupon moves to
10%, term moves to 720 days
from Date of Note.
Pre-payment provision: No Pre payment penalties in default
of otherwise.
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SCHEDULE 1-17
1. List of Donobi Shareholders
2. Employment and Consulting Agreements Terminated by Donobi
3. List of Outstanding or Authorized Subscriptions, Options, Warrants or other
Agreements for Capital Stock of Reality
4. List of Outstanding or Authorized Subscriptions, Options, Warrants or other
Agreements for Capital Stock of Donobi
5. Reality Financials
6. Reality Contracts
7. List of Donobi Subsidiaries
8. Donobi Financials
9. List of Donobi Employees and Salaries
10. Donobi Contracts
11. Real Property of Donobi
12. Personal Property of Donobi
13. Intellectual Property of Donobi
14. Insurance Policies of Donobi
15. Bank Accounts of Donobi
16. Donobi Liabilities
17. Reality Liabilities