Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
WIRELESS SYNERGIES, INC.,
2K SOUNDS MERGER CO., INC.
2K SOUNDS, INC.
AND
CERTAIN STOCKHOLDERS OF 2K SOUNDS, INC.
Dated February 12, 2001
AGREEMENT AND PLAN OF MERGER entered into on this 12th day of
February 2002 (this "AGREEMENT"), among WIRELESS SYNERGIES, INC., a Nevada
corporation ("Wireless"), 2K SOUNDS MERGERCO, INC., a California corporation
("MERGER SUB"), and 2K SOUNDS, INC., a California corporation (the "COMPANY").
WHEREAS, the parties hereto desire to cause the Merger Sub, a
wholly-owned subsidiary of the Wireless, upon the terms and subject to the
conditions of this Agreement and in accordance with the California Corporations
Code (the "CCC"), to merge with and into the Company , with the Company as the
surviving corporation in such merger (the "MERGER");
WHEREAS, the Board of Directors of the Company has (a) determined
that the Merger is advisable and is fair to and in the best interests of the
holders of (i) the Company's common stock, $0.001 par value per share (the
"COMPANY COMMON STOCK"), (ii) the Company's Series A convertible preferred
stock, $.001 par value per share (the "COMPANY SERIES A PREFERRED STOCK"), and
(iii) the Company's Series B convertible preferred stock, $.001 par value per
share (the "COMPANY SERIES B PREFERRED STOCK"), and (b) approved this Agreement,
the Merger and the transactions contemplated hereby and thereby, and recommended
that the holders of the Company's Common Stock, the Company Series A Preferred
Stock and the Company Series B Preferred Stock (collectively, the "COMPANY
CAPITAL STOCK") adopt this Agreement and approve the Merger;
WHEREAS, the Board of Directors of Wireless, as the sole stockholder
of Merger Sub, has determined that the Merger is advisable and in the best
interests of Wireless and its stockholders and has adopted this Agreement and
approved the Merger and the transactions contemplated hereby and thereby;
WHEREAS, certain of the Company's stockholders who are executing
this Agreement have agreed, upon the terms and subject to the conditions
contained herein, to vote all shares of the Company's Common Stock, then owned
by such stockholders in favor of the adoption of this Agreement and the approval
of the Merger;
WHEREAS, the Company, the Wireless and the Merger Sub desire to make
certain representations, warranties, covenants and agreements in respect of the
Merger and to prescribe various conditions thereto, all as hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions set
forth in Article VII, and in accordance with the CCC, at the Effective Time, the
Merger Sub shall be merged with and into the Company, whereupon the separate
corporate existence of the Merger Sub shall cease, and the Company shall
continue as the surviving corporation (the "SURVIVING CORPORATION").
SECTION 1.02. EFFECTIVE TIME; CLOSING. As promptly as practicable, and in
no event later than five Business Days after the satisfaction or (to the extent
permitted by applicable law), waiver of the conditions set forth in Article VII
(other than those conditions that only can be satisfied on the Closing Date),
the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger (the "CERTIFICATE OF MERGER") with the Secretary of State
of the State of California, in such form as is required by and executed in
accordance with the CCC. Immediately prior to the filing of the Certificate of
Merger, a closing will be held at 10:30 a.m., New York time, at the offices of
Greenberg Traurig, LLP, 2450 Colorado Avenue, Santa Monica, California 90404
(the "CLOSING") on or about February 28, 2002, or such other place, date and
time as the parties mutually may agree. The date on which such Closing occurs
being hereafter referred to as the "CLOSING Date".
SECTION 1.03. EFFECT OF THE MERGER. From and after the Effective Time, all
the property, rights, privileges, powers and franchises of the Company and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of each of the Company and
Merger Sub shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation. Without limitation of the
foregoing, the Merger shall have the effects specified in Section 1101 of the
CCC.
SECTION 1.04. CERTIFICATE OF INCORPORATION; BY-LAWS.
(a) At the Effective Time, the certificate of incorporation of the
Surviving Corporation shall be amended to read in its entirety in the form of
the certificate of incorporation of the Company and, as so amended, such
certificate of incorporation shall be the certificate of incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable Law.
(b) At the Effective Time the by-laws of the Company, as in effect
immediately prior to the Effective Time, shall be the by-laws of the Surviving
Corporation until thereafter amended as provided in the certificate of
incorporation of the Surviving Corporation and the CCC.
SECTION 1.05. DIRECTORS. The directors of the Company immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation
and of the Wireless, and such directors, together with any additional directors
as thereafter may be elected, shall hold office in accordance with the
certificate of incorporation and by-laws of the Surviving Corporation until
their respective successors are duly elected and qualified. At the Effective
Time, all members of the boards of directors of the Merger Sub and of the
Wireless shall tender their resignations and such vacancy(ies) shall be filled
solely by the members of the board of directors of the Company immediately prior
to the Effective Time of the Merger.
SECTION 1.06. OFFICERS. At the Closing, the Company shall designate all of
the officers of the Surviving Corporation and of the Wireless; and such
officers, together with any additional officers as thereafter may be appointed,
to hold office until the earlier of their resignation or removal or until their
respective successors are duly elected or appointed and qualified, as the case
may be. At the Effective Time, all officers of the Merger Sub and of the
Wireless shall tender their resignations and all officers of the Surviving
Corporation and of the Wireless shall be such persons who shall be designated
solely by the members of the board of directors of the Company immediately prior
to the Effective Time of the Merger.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. CAPITAL STOCK OF MERGER SUB. . At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Capital Stock, or Wireless or Merger Sub, each share of common
stock, $0.01 par value, of Merger Sub outstanding immediately prior to the
Effective Time shall remain outstanding and each certificate therefor shall
continue to evidence one fully paid and non-assessable share of common stock,
$0.01 par value, of the Surviving Corporation.
SECTION 2.02. CANCELLATION OF TREASURY STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Capital Stock, or Wireless or Merger Sub, each share of
Company Capital Stock issued and held immediately prior to the Effective Time in
the Company's treasury shall automatically be canceled and retired and shall
cease to exist, and no consideration shall be delivered in exchange therefore.
SECTION 2.03. CONVERSION OF COMPANY CAPITAL STOCK.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder of any shares of Company Capital Stock,
Wireless or Merger Sub (i) ALL shares of Company Common Stock which are issued
and outstanding immediately prior to the Effective Time, (ii) ALL shares of
Company Series A Preferred Stock and Company Series B Preferred Stock which are
issued and outstanding immediately prior to the Effective Time, and (iii) ALL
shares of Company Common Stock issuable under any "OUTSTANDING COMPANY STOCK
OPTIONS" (as defined below) which are issued and outstanding immediately prior
to the Effective Time, shall
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collectively be converted into that number of shares of common stock, $.001 par
value per share (the "WIRELESS COMMON STOCK") of Wireless (the "INITIAL WIRELESS
MERGER STOCK") as shall, in the aggregate, be equal to seventy-five (75%)
percent of the aggregate number of shares of "FULLY-DILUTED WIRELESS STOCK" (as
defined) to be issued and outstanding AFTER giving effect to the issuance of all
shares of such Initial Wireless Merger Stock. As used herein, the term
"FULLY-DILUTED WIRELESS STOCK" shall mean, as at the date in question (i) the
aggregate number of shares of Wireless Common Stock which are issued and
outstanding, plus (ii) such additional number of shares of Wireless Common Stock
that would be issued and outstanding, after giving effect to the exercise of all
the outstanding options, warrants or other stock purchase rights and the
conversion into Wireless Common Stock of all then outstanding convertible notes,
convertible preferred stock or other securities convertible into or exchangeable
for Wireless Common Stock.
Based on Wireless' representations and warranties contained herein that
immediately prior to the Closing Date the Fully-Diluted Wireless Stock shall
consist of 4,500,000 shares, on the Closing Date, Wireless shall issue a total
of 13,500,000 shares of Initial Wireless Merger Stock to the Company
Stockholders; at which time an aggregate of 18,000,000 shares of Fully-Diluted
Wireless Stock shall be issued and outstanding.
At the Effective Time, each share of Company Capital Stock no longer shall
be deemed outstanding and automatically shall be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such shares of
Company Capital Stock shall cease to have any rights with respect thereto,
except the right to receive the Initial Wireless Merger Stock and the
"Additional Wireless Merger Stock" (as hereinafter defined), without any
interest thereon.
(b) At the Effective Time, each full outstanding share of Company
Common Stock shall be converted into that number of shares of Initial Wireless
Merger Stock as shall be determined by multiplying the aggregate number of
shares of Initial Wireless Merger Stock (to represent 75% of the aggregate
number of shares of Fully-Diluted Wireless Stock) by a fraction (i) the
numerator of which shall be one, and (ii) the denominator of which shall be the
"FULLY-DILUTED COMPANY STOCK" (as defined).
As used herein, the term "FULLY-DILUTED COMPANY STOCK" shall mean,
immediately prior to the Effective Time the SUM of (x) the aggregate number of
shares of Company Common Stock which are issued and outstanding, plus (y) such
additional number of shares of Company Common Stock that would be issued and
outstanding, if all outstanding shares of Company Series A Preferred Stock and
Company Series B Preferred Stock had been converted into Company Common Stock
immediately prior to the Effective Time of the Merger, plus (z) such additional
number of shares of Company Common Stock that would be issued and outstanding if
all Outstanding Company Stock Options (as defined below) were fully exercised by
the holders thereof immediately prior to the Effective Time of the Merger.
SECTION 2.04. COMPANY SERIES A PREFERRED STOCK AND COMPANY SERIES B
PREFERRED STOCK.
(a) At the Effective Time, all issued and outstanding share of the
Company Series A Preferred Stock not theretofore converted into shares of
Company Common Stock and each issued and outstanding share of the Company Series
B Preferred Stock not theretofore converted into shares of Company Common Stock
shall, without any action on the part of the holder of any shares of Company
Series A Preferred Stock or Company Series B Preferred Stock, be converted into
their pro-rata portion of the Initial Wireless Merger Stock and any Additional
Wireless Merger Stock to be received following the Closing Date, as though each
such issued and outstanding share of Company Series A Preferred Stock and
Company Series B Preferred Stock had been voluntarily converted by the holder
thereof into Company Common Stock immediately prior to the Effective Time, at
the conversion price then in effect. Without limiting the generality of the
foregoing, the Company shall use its commercial best efforts to obtain all
amendments to the instruments governing the rights and preferences of the
Company Series A Stock and of the holders thereof, and consents of such holders
to convert, at or prior to the Effective Time, their shares of Company Series A
Stock in the first instance and otherwise to effectuate the transactions
contemplated by this Section 2.04(a).
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(b) At the Effective Time, each full outstanding share of Company
Series A Preferred Stock and Series B Preferred Stock shall be deemed to have
been fully converted into shares of Company Common Stock at the applicable
conversion price then in effect (the "CONVERTED STOCK"), and each share of such
deemed Converted Stock shall be converted into that number of shares of Initial
Wireless Merger Stock as shall be determined by multiplying the aggregate number
of shares of Initial Wireless Merger Stock (to represent 75% of the aggregate
number of shares of Fully-Diluted Wireless Stock) by a fraction, (i) the
numerator of which shall be one, and (ii) the denominator of which shall be the
Fully-Diluted Company Stock.
SECTION 2.05. STOCK OPTIONS AND WARRANTS.
(a) At the Effective Time, each outstanding employee or non-employee
stock option, right or warrant to purchase shares of Company Common Stock (each,
an "OUTSTANDING COMPANY STOCK OPTION") granted under any employee stock option,
compensation, stock purchase or other option plan, agreement or arrangement of
the Company (the "COMPANY STOCK PLANS"), whether or not then vested or
exercisable, shall, without any action on the part of the holder of any
Outstanding Company Stock Option, be converted into options to purchase (at the
same exercise price applicable to each such Outstanding Company Stock Option)
their pro-rata portion of the Initial Wireless Merger Stock and any Additional
Wireless Merger Stock to be received following the Closing Date, as though each
such Outstanding Company Stock Option had been voluntarily exercised by the
holder thereof for shares of Company Common Stock immediately prior to the
Effective Time, at the exercise price then in effect. Without limiting the
generality of the foregoing, the Company shall use its commercial best efforts
to obtain all amendments to the instruments governing the rights of the
Outstanding Company Stock Options and to obtain the consents of such holders to
exercise such Outstanding Company Stock Options, at or prior to the Effective
Time.
(b) At the Effective Time, each full Outstanding Company Stock
Option shall be deemed to entitle the holder thereof to an option (the "WIRELESS
OPTION") to purchase, upon the same terms and at the applicable exercise price
then in effect with respect to the Outstanding Company Stock Option, that number
of shares of Initial Wireless Merger Stock as shall be determined by multiplying
the aggregate number of shares of Initial Wireless Merger Stock (to represent
75% of the aggregate number of shares of Fully-Diluted Wireless Stock) by a
fraction, (i) the numerator of which shall be one, and (ii) the denominator of
which shall be the Fully-Diluted Company Stock.
SECTION 2.06 ADJUSTMENTS TO INITIAL WIRELESS MERGER STOCK.
Notwithstanding anything to the contrary, express or implied, contained in
this Agreement, it is expressly understood and agreed by and among all
parties hereto that
(a) the mutually agreed upon valuation of the Fully-Diluted Company
Stock is fixed as at the Closing Date at Ten Million ($10,000,000) dollars; and
(b) the aggregate number of shares of Wireless Common Stock to be
received and retained on and following the Closing Date by all holders of
Fully-Diluted Company Stock or options to purchase Fully-Diluted Company Stock
(collectively, the "COMPANY STOCKHOLDERS"), after giving effect to the
$3,000,000 of "FINANCING" (hereinafter defined) shall represent not less than
seventy (70%) percent of the Fully-Diluted Wireless Stock (the "WIRELESS MERGER
STOCK").
As set forth in this Agreement, following the Closing Date, Wireless
will undertake to consummate the Financing described therein, which Financing
shall dilute the ownership all stockholders of Wireless (including the former
Company Stockholders) in the Fully-Diluted Wireless Stock on a pro-rata basis.
Accordingly, it is expressly understood and agreed that:
(i) in the event and to the extent that the $3,000,000
Financing (or any portion thereof) when consummated, shall dilute the aggregate
equity interests of all Company Stockholders in the Fully-Diluted Wireless Stock
below seventy (70%) percent of such Fully-Diluted Wireless Stock, simultaneous
with consummation of such Financing, Wireless shall issue to the Company
Stockholders (pro-rata as their respective interests in the Fully-Diluted
Company Stock appear on SCHEDULE A annexed hereto) that number of additional
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shares of Wireless Common Stock (the "ADDITIONAL WIRELESS MERGER STOCK") as
shall be necessary to adjust to seventy (70%) percent the percentage by which
such Initial Wireless Merger Stock and Additional Wireless Merger Stock bears to
the total issued and outstanding Fully-Diluted Wireless Stock, after (A)
consummation of the Financing, and (B) issuance of the Additional Wireless
Merger Stock; and
(ii) in addition to and not in lieu of the provisions of
clause (i) above, in the event and to the extent that the entire $3,000,000
Financing shall, for any reason, not be consummated within ninety (90) days
following the Closing Date, Wireless shall issue to all of the Company
Stockholders (pro-rata as their respective interests in the Company Capital
Stock appear on SCHEDULE A annexed hereto) additional shares of Wireless Merger
Stock, so as to increase ABOVE seventy (70%) percent the percentage by which
such Initial Wireless Merger Stock and Additional Wireless Merger Stock bears to
the total issued and outstanding Fully-Diluted Wireless Stock, after (A)
consummation of the Financing, and (B) issuance of the Additional Wireless
Merger Stock, on the basis of a one (1%) percent increase for every $100,000
less than $3,000,000 of Financing provided.
Thus, by way of example only if:
(A) at the Closing Date (and after giving effect to the
10-for-1 stock split contemplated by Section 5.02 below) there are an aggregate
of 50,000,000 shares of Wireless Common Stock issued and outstanding, an
aggregate of 150,000,000 shares of Wireless Common Stock shall be issued to the
Company Stockholders as the Initial Wireless Common Stock; AND
(B) only $2,000,000 of Financing is provided to Wireless and
its Company subsidiary by the expiration of 90 days following the Closing Date,
and the aggregate number of shares of Fully-Diluted Wireless Stock issued or
issuable in connection with such Financing is 20,000,000 shares of Wireless
Common Stock, simultaneous with consummation of such Financing, Wireless shall
issue to the Company Stockholders (pro-rata as their respective interests in the
Fully-Diluted Company Stock appear on SCHEDULE A annexed hereto) an aggregate of
130,000,000 shares of Additional Wireless Merger Stock so as to increase their
ownership of the Fully-Diluted Wireless Stock to 280,000,000 shares of Wireless
Common Stock, or eighty (80%) percent of the 350,000,000 shares of Fully-Diluted
Wireless Stock to be outstanding, after giving effect to the 20,000,000 share
dilution resulting from such Financing and the issuance of such Additional
Wireless Merger Stock, or
(C) all $3,000,000 of Financing is provided to Wireless and
its Company subsidiary by the expiration of 90 days following the Closing Date,
and the aggregate number of shares of Fully-Diluted Wireless Stock issued or
issuable in connection with the Financing is 20,000,000 shares of Wireless
Common Stock, simultaneous with consummation of such Financing, Wireless shall
issue to the Company Stockholders (pro-rata as their respective interests in the
Fully-Diluted Company Stock appear on SCHEDULE A annexed hereto) an aggregate of
13,333,333 shares of Additional Wireless Merger Stock so as to increase their
ownership of the Fully-Diluted Wireless Stock to 163,333,333 shares of Wireless
Common Stock, or seventy (70%) percent of the 233,333,333 shares of
Fully-Diluted Wireless Stock to be outstanding, after giving effect to the
20,000,000 share dilution resulting from such Financing and the issuance of such
Additional Wireless Merger Stock; or
(D) all $3,000,000 of Financing is provided to Wireless and
its Company subsidiary by the expiration of 90 days following the Closing Date,
and the aggregate number of shares of Fully-Diluted Wireless Stock issued or
issuable in connection with the Financing is exactly 14,285,710 shares of
Wireless Common Stock, no shares of Additional Wireless Merger Stock shall be
issuable to the Company Stockholders; or
(E) all $3,000,000 of Financing is provided to Wireless and
its Company subsidiary by the expiration of 90 days following the Closing Date,
and the aggregate number of shares of Fully-Diluted Wireless Stock issued or
issuable in connection with the Financing is LESS than 14,285,710 shares of
Wireless Common Stock, simultaneous with the consummation of such Financing, the
Company Stockholders shall (pro-rata as their respective interests in the
Fully-Diluted Company Stock appear on SCHEDULE A annexed hereto) return to
Wireless for cancellation, such number of shares of their Initial Wireless
Merger Stock so that, after giving effect to the dilution resulting from such
Financing and the return of such portion of their Initial Wireless Merger Stock,
the Company Stockholders shall continue to own seventy (70%) percent of the
Fully-Diluted Wireless Stock then outstanding.
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SECTION 2.07 FINANCING DEPOSIT . On the Closing Date, the $250,000 paid by
2K Venture Partners to the Company pursuant to the letter agreement, dated
January 10, 2002 (the "FINANCING DEPOSIT"), shall be automatically converted
into the same Securities of Wireless as will be issued in the Financing.
SECTION 2.08 EXCHANGE OF CERTIFICATES.
(a) As soon as reasonably practicable after the Effective Time,
Wireless shall mail to each holder of record of a certificate or certificates
(the "Certificates") that immediately prior to the Effective Time evidenced
outstanding shares of Company Capital Stock which were converted into the right
to receive such holder's ratable portion of the Initial Wireless Merger Stock
instructions for use in effecting the surrender of the Certificates in exchange
for such holder's ratable portion of the Initial Wireless Merger Stock. Upon
surrender of a Certificate for cancellation to Wireless or to other agent or
agents as may be appointed by Wireless, together with such letter of
transmittal, duly executed, and such other documents as reasonably may be
required by Wireless, the holder of such Certificate shall be entitled to
receive in exchange therefore the ratable portion of the Initial Wireless Merger
Stock into which the shares of Company Capital Stock theretofore evidenced by
such Certificate shall have been converted pursuant to this Agreement, and the
Certificate so surrendered forthwith shall be canceled. In the event of a
transfer of ownership of Company Capital Stock that is not registered in the
transfer records of the Company, delivery may be made to a Person other than the
Person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the Person requesting such delivery shall pay all transfer and
other Taxes required by reason of the payment to a Person other than the
registered holder of such Certificate or establish to the satisfaction of
Wireless that such Tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.08, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the ratable portion of the Initial Wireless Merger Stock and any
Additional Wireless Merger Stock which may hereafter be issued purusant to
Section 2.06, without interest, into which the shares of Company Capital Stock
theretofore evidenced by such Certificate shall have been converted pursuant to
Section 2.03. No interest shall be paid or accrue on any Wireless Merger Stock
payable upon surrender of any Certificate.
(b) LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Wireless, the posting by such Person of an indemnity bond, in such reasonable
amount as the Surviving Corporation may direct, as collateral security against
any claim that may be made against it with respect to such Certificate, Wireless
shall issue in exchange for such lost, stolen or destroyed Certificate the
applicable number of shares of Initial Wireless Merger Stock.
(c) FURTHER ASSURANCES. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Merger Sub or the Company acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger or otherwise to carry out this Agreement, the officers of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of each of the Merger Sub and the Company or otherwise, all such
deeds, bills of sale, assignments and assurances and to take and do, in such
names and on such behalves or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this Agreement.
SECTION 2.09 STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. From and after the Effective Time, the holders of
Certificates shall cease to have any rights with respect to such shares of
Company Capital Stock, except as otherwise provided herein or by Law. At or
after the Effective Time, any Certificates presented to the Surviving
Corporation or Wireless, for any reason shall represent only the right to
receive the applicable Wireless Merger Stock, without any interest thereon.
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ARTICLE III
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF WIRELESS SYNERGIES, INC.
As an inducement to, and to obtain the reliance of the Company and the
Company Stockholders, Wireless represents and warrants as follows:
SECTION 3.01 ORGANIZATION. Wireless is a corporation duly organized,
validly existing, and in good standing under the laws of the state of Nevada.
Wireless has the corporate power and is duly authorized, qualified, franchised,
and licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business as it is now being conducted, including qualification to do business as
a foreign corporation in the states in which the character and location of the
assets owned by it or the nature of the business transacted by it requires
qualification, except where such failure would not have a material adverse
effect on business or financial condition of Wireless.
SECTION 3.02 CAPITALIZATION. As of the date hereof, the entire authorized
capitalization of Wireless consists of 25,000,000 shares of common stock, $.001
par value per share (the "WIRELESS COMMON STOCK"), of which 9,500,000 shares of
Wireless Common Stock are currently issued and outstanding. All of the issued
and outstanding shares of Wireless Common Stock are validly issued, fully paid,
and non-assessable. Prior to the Closing Date, Wireless shall cause a sufficient
number of shares of issued and outstanding Wireless Common Stock to be returned
to the treasury of Wireless and cancelled, so that at the Closing Date, not more
than 4,500,000 shares of Wireless Common Stock shall be issued and outstanding.
No shares of Wireless Common Stock are reserved for issuance upon exercise of
outstanding options and warrants, or upon conversion of any outstanding Wireless
convertible securities. Wireless Common Stock is not owned or held in violation
of any preemptive right of any other person or entity. Except as described
herein, there is no commitment, plan, subscription rights, or arrangement to
issue, no preemptive right to acquire, and no outstanding option, warrant, or
other right calling for the issuance of, any shares of Wireless Common Stock or
any security or other instrument convertible into, exercisable for, or
exchangeable for Wireless Common Stock. There is outstanding no right, security
or other instrument convertible into or exchangeable for Wireless Common Stock.
SECTION 3.03 SUBSIDIARIES AND PREDECESSOR CORPORATIONS. Except as provided
in SCHEDULE 3.03, Wireless does not have any subsidiaries and does not own,
beneficially or of record, any shares of any other corporation.
SECTION 3.04 FINANCIAL CONDITION. Wireless has delivered to Company and
the Company Stockholders, and Company and the Company Stockholders acknowledge
receipt of Wireless' Form 10-KSB for the fiscal year ended June 30, 2001 ("FORM
10-KSB"), its Form 10-QSB for the three months ended September 30, 2001 ("FORM
10-QSB") and its Form 8-K for the period ended December 15, 2001 (the "FORM
8-K"). The Form 10-KSB and Form 10-QSB present fairly the financial condition,
assets, liabilities, and stockholders' equity of Wireless as of its date; each
such statement of income and statement of retained earnings presents fairly and
accurately the results of operations of Wireless for the period indicated; and
each such statement of changes in financial position presents fairly and
accurately the information purported to be shown therein. The financial
statements (including the notes thereto) referred to in this Section 3.04 have
been prepared in accordance with GAAP consistently applied throughout the
periods involved are in compliance with all applicable rules and regulations
promulgated by the Securities and Exchange Commission (the "SEC"), are correct
and complete and are in accordance with the books and records of Wireless.
SECTION 3.05 REPORTS. Wireless has filed all forms, reports and documents
with the SEC required to be filed by it pursuant to the federal securities laws
and SEC rules and regulations thereunder, and all such forms, reports and
documents, as amended, filed with the SEC have complied with all applicable
requirements of the federal securities laws and the SEC rules and regulations
promulgated thereunder.
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SECTION 3.06 TAX AND OTHER LIABILITIES.
(a) Wireless has filed all Income Tax Returns that it was required
to file, and has paid all Income Taxes shown thereon as awing, except where the
failure to file Income Tax Returns or to pay Income Taxes would not have a
material adverse effect on the financial condition of Wireless and its
subsidiaries taken as a whole.
(b) Wireless has delivered to Company correct and complete copies of
all federal Income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by Wireless. None of such tax returns
are under audit.
(c) Wireless has not waived any statute of limitations in respect of
Income Taxes or agreed to any extension of time with respect to an Income Tax
assessment or deficiency.
(d) Wireless is not a party to any Income Tax allocation or
sharing agreement.
As used herein "Taxes" shall mean all federal, state, local or foreign
taxes, including but not limited to income, gross receipts, windfall profits,
goods and services, value added, severance, property, production, sales, use,
license, excise, franchise, employment, withholding or similar taxes, together
with any interest, additions or penalties with respect thereto and any interest
in respect of such additions or penalties.
SECTION 3.07 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
this Agreement or in the Form 10-QSB, since September 30, 2001:
(a) There has not been (i) any adverse change in the business,
operations, properties, assets, or condition of Wireless; or (ii) any damage,
destruction, or loss to Wireless (whether or not covered by insurance) adversely
affecting the business, operations, properties, assets, or condition of
Wireless;
(b) Wireless has not (i) amended its articles of incorporation or
bylaws; (ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to stockholders
or purchased or redeemed, or agreed to purchase or redeem, any of its capital
stock; (iii) waived any rights of value which in the aggregate are extraordinary
or material considering the business of Wireless; (iv) made any change in its
method of management, operation, or accounting; (v) entered into any other
transaction; (vi) made any accrual or arrangement for payment of bonuses or
special compensation of any kind or any severance or termination pay to any
present or former officer or employee; (vii) increased the rate of compensation
payable or to become payable by it to any of its officers or directors or any of
its employees whose monthly compensation exceeds $5,000; or (viii) made any
increase in any profit sharing, bonus, deferred compensation, insurance,
pension, retirement, or other employee benefit plan, payment, or arrangement
made to, for, or with its officers, directors, or employees; and
(c) Wireless has not (i) borrowed or agreed to borrow any funds or
incurred, or become subject to, any obligation or liability (absolute or
contingent); (ii) paid any obligation or liability (absolute or contingent)
other than current liabilities reflected in or shown on the most recent Wireless
balance sheet; (iii) sold or transferred, or agreed to sell or transfer, any of
its assets, properties, or rights (except assets, properties, or rights not used
or useful in its business which, in the aggregate have a value of less than
$1,000), or canceled, or agreed to cancel, any debts or claims (except debts or
claims which in the aggregate are of a value of less than $1,000); (iv) made or
permitted any amendment or termination of any contract, agreement, or license to
which it is a party if such amendment or termination is material, considering
the business of Wireless; or (v) issued, delivered, or agreed to issue or
deliver any stock, bonds or other corporate securities of whatever kind or
nature including without limitation debentures (whether authorized and unissued
or held as treasury stock), convertible securities, warrants, options, or
preferred stock).
SECTION 3.08 ISSUANCE. The shares of Wireless Common Stock issued as
consideration hereunder are duly authorized and, upon issuance in accordance
with the terms hereof, shall be validly issued, fully paid and non-assessable,
free from all taxes, liens and charges with respect to the issue thereof, and
shall not be subject to preemptive rights or other similar rights of
stockholders of Wireless.
8
SECTION 3.09 APPROVAL OF AGREEMENT. The board of directors of Wireless has
authorized the execution and delivery of this Agreement and has approved the
transactions contemplated hereby, and approved the submission of this Agreement
and the transactions contemplated hereby to the stockholders of Wireless for
their approval with the recommendation that the transaction be accepted if it
has been deemed necessary.
SECTION 3.10 WIRELESS SCHEDULES. Wireless has delivered to Company a copy
of all the board of directors' and stockholders' minutes of Wireless approving
this transaction.
SECTION 3.11 TITLE AND RELATED MATTERS.
Wireless has good and marketable title to all of its properties,
inventory, interests in properties, and assets, real and personal, which are
reflected in the most recent balance sheet on Form 10-QSB or acquired after that
date (except properties, interests in properties, and assets sold or otherwise
disposed of since such date in the ordinary course of business). Wireless owns,
free and clear of any liens, mortgages, security interests, claims,
encumbrances, royalty interests, or other restrictions or limitations of any
nature whatsoever ("LIENS"), any and all of its assets. Wireless has not
received any notice of infringement of or conflict with asserted rights of
others with respect to any product, technology, data, trade secrets, know-how,
proprietary techniques, trademarks, service marks, tradenames, or copyrights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling, or finding, would have a materially adverse effect on the business,
operations, financial condition, income, or business prospects of Wireless or
any portion of its properties, assets, or rights.
SECTION 3.12 LITIGATION AND PROCEEDINGS. There are no actions, suits,
proceedings, or investigations pending or, to the knowledge of Wireless,
threatened by or against Wireless or affecting Wireless or its properties, at
law or in equity, before any court or other governmental agency or
instrumentality, domestic or foreign, or before any arbitrator that would have a
material adverse effect on its business. Wireless does not have any knowledge of
any default on its part with respect to any judgment, order, writ, injunction,
decree, award, rule, or regulation of any court, arbitrator, or governmental
agency or instrumentality or of any circumstances which, after reasonable
investigation, would result in the discovery of such a default.
SECTION 3.13 CONTRACTS.
(a) There are no material contracts, agreements, franchises, license
agreements, or other commitments to which Wireless is a party or by which it or
any of its assets, products, or properties are bound outside of the ordinary
course of business;
(b) Wireless is not a party to any oral or written (i) contract for
the employment of any officer or employee which is not terminable on 30 days or
less notice; (ii) profit sharing, bonus, deferred compensation, stock option,
severance pay, pension benefit or retirement plan, agreement, or arrangement
covered by Title IV of the Employee Retirement Income Security Act, as amended;
(iii) agreement, contract, or indenture relating to the borrowing of money; (iv)
guaranty of any obligation, other than one on which Wireless is a primary
obligor, for the borrowing of money or otherwise, excluding endorsements made
for collection and other guaranties of obligations, which, in the aggregate do
not exceed more than one year or providing for payments in excess of $50,000 in
the aggregate; (vi) collective bargaining agreement; (vii) agreement with any
present or former officer or partner of Wireless or (viii) contract, agreement,
or other commitment involving payments by it of more than $50,000 in the
aggregate.
SECTION 3.14 MATERIAL CONTRACT DEFAULTS. Wireless is not in default under
the terms of any outstanding contract, agreement, lease, or other commitment
which is material to the business, operations, properties, assets, or condition
of Wireless and there is no event of default in any material respect under any
such contract, agreement, lease, or other commitment in respect of which
Wireless has not taken adequate steps to prevent such a default from occurring.
SECTION 3.15 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust, or other
9
material contract, agreement, or instrument to which Wireless is a party or to
which any of its properties or operations are subject.
SECTION 3.16 GOVERNMENTAL AUTHORIZATIONS. Wireless has all licenses,
franchises, permits, and other governmental authorizations that are legally
required to enable it to conduct its business in all material respects as
conducted on the date hereof. Except for compliance with federal and state
securities and corporation laws, as hereinafter provided, no authorization,
approval, consent, or order of, or registration, declaration, or filing with,
any court or other governmental body is required in connection with the
execution and delivery by Wireless of this Agreement and the consummation by
Wireless of the transactions contemplated hereby.
SECTION 3.17 COMPLIANCE WITH LAWS AND REGULATIONS. Wireless has complied
with all applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations, properties,
assets, or condition of Wireless or except to the extent that noncompliance
would not result in the incurrence of any material liability for Wireless.
SECTION 3.18 INSURANCE. All the insurable properties of Wireless are
insured in their full replacement value against all risks customarily insured
against by persons operating similar properties in localities where such
properties are located and under valid and enforceable policies by insurers of
recognized responsibility. Such policy or policies containing substantially
equivalent coverage will be outstanding on the date of consummation of the
transactions contemplated by this Agreement.
SECTION 3.19 APPROVAL OF AGREEMENT. All member(s) of the Board of
Directors of Wireless have authorized the execution and delivery of this
Agreement and have approved the transactions contemplated hereby. Wireless has
delivered to Company a copy of the resolution of the Board of Directors
approving this transaction.
SECTION 3.20 LABOR AND EMPLOYMENT MATTERS. SCHEDULE 3.20 contains a true
and complete list, by category, of all current full-time employees, current
part-time employees, other employees and consultants currently employees or
engaged by Wireless who render services with respect to the Wireless' business
and who are so engaged by Wireless as of the date hereof, including a
description of any and all written contracts, written agreements, written
commitments and written arrangements relating thereto, and a description of the
rate and nature of all compensation payable by Wireless to, and the amount of
vacation, sick days, personal days or other leave accrued by, each such person
or entity. Company has been provided with true, complete and correct (i) copies
of all such written contracts, written agreements, written commitments and
written arrangements, (ii) copies of all manuals and handbooks applicable to any
employee or consultant of Wireless who renders services with respect to the
Wireless' business, (iii) copies of all trade secret, non-compete,
non-disclosure and invention assignment agreements, and (iv) descriptions of all
existing severance, accrued vacation or other leave policies or retiree benefits
of any such employee or consultant.
Wireless is not a party to or bound by any collective bargaining agreement
or any other agreement with a labor union, and, to the Knowledge of Wireless,
there has been no effort by any labor union or any other person during the
twenty-four (24) months prior to the date hereof to organize any employees of
Wireless into one or more collective bargaining units, nor, to the Knowledge of
Wireless, are any such efforts being conducted. There is no pending or, to the
Knowledge of Wireless, threatened labor dispute, strike or work stoppage which
affects or which may affect the business of Wireless, or which may interfere
with its continued operations. Neither Wireless nor any agent, representative or
employee thereof has within the last twenty-four (24) months committed any
unfair labor practice as defined in the National Labor Relations Act, as
amended, and there is no pending or threatened charge or complaint against
Wireless by or with the National Labor Relations Board or any representative
thereof. There has been no strike, walkout or work stoppage involving any of the
employees or consultants of the Stockholders during the twenty-four (24) months
prior to the date hereof. Wireless has complied with applicable laws, rules and
regulations relating to employment, civil rights and equal employment
opportunities or other employment practices, including but not limited to, the
Civil Rights Act of 1964, the Fair Labor Standards Act, the Americans with
Disabilities Act, as amended and the Immigration Reform and Control Act of 1986,
as amended.
The employment of each employee of Wireless is "AT WILL", and may be
terminated at any time by Wireless, without the imposition of penalties or
damages. Wireless has received no notice of any
10
claim before any governmental body brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of employees or any governmental body or, to the Knowledge of
Wireless is any such claim threatened against Wireless. Wireless is not a party
to, or otherwise bound by, any order relating to its employees or employment
practices. Wireless has paid in full to all of its employees all wages,
salaries, commissions, bonuses, benefits and other compensation due and payable
to such employees. No current or former employee of Wireless is (i) absent on a
military leave of absence and/or eligible for rehire under the terms of the
Uniformed Services Employment and Reemployment Rights Act, or (ii) absent on a
leave of absence under the Family and Medical Leave Act.
SECTION 3.21 EMPLOYEE BENEFITS. There is no employee benefit plan which is
sponsored, maintained or contributed to by Wireless or to which Wireless has an
obligation to contribute, or otherwise affecting or involving Wireless or any of
the employees of or consultants to Wireless.
SECTION 3.22 ENVIRONMENTAL MATTERS.
(a) Wireless has no liability under, and each are presently in
compliance in all material respects with all Environmental Laws applicable to
Wireless, its assets or business.
(b) Wireless has no knowledge of the releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing, or dumping of Hazardous Substances into the soil, surface
waters, ground waters, land, stream sediments, surface of subsurface strata,
ambient air, sewer system, or any environmental medium at or from any property
or asset owned, used or occupied by Wireless ("ENVIRONMENTAL CONDITION") in
violation of any applicable Environmental Law.
(c) None of the following exists at any property owned, occupied or
controlled by Wireless: (1) underground storage tanks, (2) materials or
equipment containing polychlorinated biphenyls in concentrations greater than 50
parts per million, or (3) landfills or disposal areas.
SECTION 3.23 BANKS. Sets forth (i) the name of each bank, trust company or
other financial institution and stock or other broker with which Wireless has an
account, credit line or safe deposit box or vault, (ii) the names of all persons
authorized to draw thereon or to have access to any safe deposit box or vault,
(iii) the purpose of each such account, safe deposit box or vault, and (iv) the
names of all persons authorized by proxies, powers of attorney or other like
instrument to act on behalf of Wireless in matters concerning any of its
business or affairs. No such proxies, powers of attorney or other like
instruments are irrevocable.
SECTION 3.24 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Wireless, the
Wireless Group nor any other Affiliate or agent of Wireless, or any other person
acting on behalf of or associated with Wireless, acting alone or together, has
(a) received, directly or indirectly, any rebates, payments, commissions,
promotional allowances or any other economic benefits, regardless of their
nature or type, from any customer, supplier, employee or agent of any customer
or supplier; or (b) directly or indirectly given or agreed to give any money,
gift or similar benefit to any customer, supplier, employee or agent of any
customer or supplier, any official or employee of any government (domestic or
foreign), or any political party or candidate for office (domestic or foreign),
or other person who was, is or may be in a position to help or hinder the
business of Wireless (or assist Wireless in connection with any actual or
proposed transaction), in each case which (i) may subject Wireless to any damage
or penalty in any civil, criminal or governmental litigation or proceeding, (ii)
if not given in the past, may have had an adverse effect on the assets,
business, operations or prospects of Wireless, or (iii) if not continued in the
future, may adversely affect the assets, business, operations or prospects of
Wireless.
SECTION 3.25 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE
3.25, Wireless has not purchased, acquired or leased any property or services
from, or sold, transferred or leased any property or services to, or loaned or
advanced any money to, or borrowed any money from, or entered into or been
subject to any management, consulting or similar agreement with, or engaged in
any other significant transaction with Wireless or any other officer, director
or shareholder of Wireless or any of their respective Affiliates. Except as set
forth on SCHEDULE 3.25, neither the Wireless Group nor any other Affiliate of
Wireless is indebted to Wireless for money borrowed or other loans or advances,
and Wireless is not indebted to any such Affiliate.
11
SECTION 3.26 MATERIALITY. No representation or warranty in this Article
III contains any materially untrue statement of a material fact or omits to
state any material fact required to make the statements contained therein not
materially misleading or materially necessary in order to provide Company with
reasonably complete information as to Wireless' business or financial condition.
ARTICLE IV
REPRESENTATIONS, COVENANTS, AND
WARRANTIES OF SIGNING COMPANY STOCKHOLDERS
As an inducement to, and to obtain reliance of Wireless, the Company
Stockholders who have executed this Agreement (the "SIGNING COMPANY
STOCKHOLDERS"), do hereby severally (not jointly and severally) represent and
warrant as follows:
SECTION 4.01 OWNERSHIP OF THE SHARES OF COMPANY CAPITAL STOCK. Each
Signing Company Stockholder hereby represents and warrants with respect to
itself that he is the legal and beneficial owner of the number of shares of
Company Capital Stock set forth opposite its name on SCHEDULE A attached hereto,
free and clear of any claims, charges, equities, liens, security interests, and
encumbrances whatsoever, and each such Signing Company Stockholder has full
right, power, and authority to vote such shares of Company Capital Stock in
favor of the Merger contemplated by this Agreement. The Signing Company
Stockholders own of record a majority of the issued and outstanding shares of
Company Common Stock.
SECTION 4.02 VOTING IN FAVOR OF THE MERGER. Each Signing Company
Stockholder hereby represents and warrants that if and for so long as Wireless
shall comply with all of its representations, warranties, covenants and
agreements contained in this Agreement, and subject to the Company's right to
terminate this Agreement in accordance with the provisions of Section 7.09
hereof, such Signing Company Stockholders will vote their shares of Company
Capital Stock in favor of the Merger..
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
As an inducement to, and to obtain the reliance of Wireless, the Company
represents and warrants as follows:
SECTION 5.01 ORGANIZATION. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
California. The Company has no subsidiary corporations. The Company has the
power and is duly authorized, qualified, franchised, and licensed under all
applicable laws, regulations, ordinances, and orders of public authorities to
own all of its properties and assets and to carry on its business in all
material respects as it is now being conducted, including qualification to do
business as a foreign corporation in the countries, provinces, territories and
states in which the character and location of the assets owned by it or the
nature of the business transacted by it requires qualification. Company has
furnished to Wireless complete and correct copies of the certificate of
incorporation, as amended, and bylaws of Company as in effect on the date
hereof. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement in accordance
with the terms hereof will not, violate any provision of such certificates of
incorporation or bylaws. The Company has taken all action required by law, its
certificate of incorporation, bylaws, or otherwise to authorize the execution
and delivery of this Agreement. The Company has full power, authority, and legal
right and has taken all action required by law, its incorporation and bylaws,
and otherwise to consummate the transactions herein contemplated.
SECTION 5.02 CAPITALIZATION. As of the date hereof, the entire authorized
capitalization of the Company consists of (a) 60,000,000 shares of common stock,
$.001 par value per share (the "COMPANY COMMON STOCK"), of which 24,600,00
shares of Company Common Stock are currently issued and outstanding, (b)
10,000,000 shares of Series A preferred stock, $.001 par value, (the "COMPANY
SERIES A PREFERRED STOCK"), of which 3,258,000 shares of Company Series A
Preferred Stock are issued and outstanding, and (c) 2,000,000 shares of Series B
preferred stock, $.001 par value, (the "COMPANY SERIES B PREFERRED STOCK"), of
which _____ shares of Company Series B Preferred Stock are issued and
outstanding. The Company Common Stock, Company Series A Preferred Stock and
12
Company Series B Preferred Stock are hereinafter collectively referred to as the
"COMPANY CAPITAL STOCK. All of the issued and outstanding shares of Company
Capital Stock are validly issued, fully paid, and non-assessable. There are
currently 2,727,000 shares of Company Common Stock reserved for issuance upon
exercise of Outstanding Company Options and warrants, as listed in SCHEDULE A.
Company Common Stock is not owned or held in violation of any preemptive right
of any other person or entity. Except as described herein, there is no
commitment, plan, subscription rights, or arrangement to issue, no preemptive
right to acquire, and no outstanding option, warrant, or other right calling for
the issuance of, any shares of Company Capital Stock or any security or other
instrument convertible into, exercisable for, or exchangeable for Company
Capital Stock. There is outstanding no right, security or other instrument
convertible into or exchangeable for Company Capital Stock.
SECTION 5.03 SUBSIDIARIES AND PREDECESSOR ENTITIES. The Company does not
have any subsidiaries and does not own, beneficially or of record, any shares of
capital stock or ownership interests of any other corporation or entity.
SECTION 5.04 FINANCIAL STATEMENTS AND TAXES
(a) Prior to the Effective Time, the Company will furnish Wireless
with the unaudited balance sheets at December 31, 2000 and December 31, 2001 and
the related statements of income and statements of stockholders' equity of the
Company for each of the two fiscal years ended December 31, 2001 (the "ANNUAL
FINANCIAL STATEMENTS").
(b) Within sixty days following the Closing Date, the Company will
arrange for an independent auditor experienced in SEC accounting to complete an
audit of the Company balance sheets as at December 31, 2000 and December 31,
2001, and the related statements of income and retained earnings, statements of
cash flows and statements of stockholders equity of Company for each of the two
fiscal years ended December 31, 2001 (the "AUDITED FINANCIAL STATEMENTS"). Such
Audited Financial Statements shall be conducted in accordance with United States
generally accepted accounting principals ("GAAP") and shall be in compliance
with Regulation S-X, as promulgated under the Securities Act of 1933, as
amended. To the Knowledge of Company and the Company Stockholders, the Annual
Financial Statements are capable of being so audited in accordance with the
provisions of this Section 2.04(b).
(c) In each case, except for the absence of full footnote
disclosures and schedules required in accordance with GAAP, and year end audit
adjustments which are not individually or in the aggregate material (i) the
Annual Financial Statements have been prepared by management of Company, (ii)
the Annual Financial Statements present fairly as of their respective dates the
assets, liabilities, stockholders' equity and the financial condition of
Company, (iii) as of the date of such balance sheets, except as and to the
extent reflected or reserved against therein, Company did not have any
liabilities or obligations (absolute or contingent) which should be reflected in
a balance sheet or the notes thereto, prepared in accordance with GAAP, and all
assets reflected therein are properly reported and present fairly the value of
the assets of Company in accordance with GAAP, and (iv) the statements of
income, stockholders' equity, and changes in financial condition reflect fairly
the information required to be set forth therein by GAAP.
(d) The Company will, upon request, furnish to Wireless true and
correct copies of all income tax returns of Company filed with the Internal
Revenue Service and any State taxing authority since 1998. Except as separately
disclosed in writing by Company to Wireless (the "TAX DISCLOSURE MEMO")
(i) none of such federal income tax returns have been
examined by the Internal Revenue Service;
(ii) each of such income tax returns reflects the taxes due
for the period covered thereby, except for amounts which, in the aggregate, are
immaterial;
(iii) the Company does not owe any unpaid federal, state,
county, local, or other taxes (including any deficiencies, interest, or
penalties) through December 31, 2000, for which the Company may be liable in its
own right or as a transferee of the assets of, or as a successor to, any other
corporation or entity; and
13
(iv) except as accruing in the normal course of business, the
Company does not owe any accrued and unpaid taxes to date of this Agreement.
(e) The books and records, financial and otherwise, of the Company
are in all material respects complete and correct and have been maintained in
accordance with good business and accounting practices.
(f) The Company has good and marketable title to its assets and,
except as pledged in the ordinary course of business or as set forth in the
financial statements of the Company or the notes thereto, has no material
contingent liabilities, direct or indirect, matured or unmatured.
SECTION 5.05 OPTIONS OR RIGHTS. Except as noted in SCHEDULE A, there are
no existing options, rights, calls, or commitments of any character relating to
any Stockholders Interests.
SECTION 5.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
2001:
(a) there has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of the Company or (ii)
any damage, destruction, or loss to the Company (whether or not covered by
insurance) materially and adversely affecting the business, operations,
properties, assets, or condition of the Company;
(b) the Company has not (i) amended its certificate of incorporation
or bylaws; (ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to stockholders
or purchased or redeemed, or agreed to purchase or redeem, any outstanding
Capital Stock; (iii) waived any rights of value which in the aggregate are
extraordinary or material considering the business of the Company; (iv) made any
material change in its method of management, operation, or accounting; (v)
entered into any other material transaction; (vi) made any accrual or
arrangement for payment of bonuses or special compensation of any kind or any
severance or termination pay to any present or former officer or employee; (vii)
increased the rate of compensation payable or to become payable by it to any of
its officers or Stockholders or any of its employees whose monthly compensation
exceeds $5,000; or (viii) made any increase in any profit sharing, bonus,
deferred compensation, insurance, pension, retirement, or other employee benefit
plan, payment, or arrangement made to, for, or with its officers, directors, or
employees;
(c) the Company has not (i) borrowed or agreed to borrow any funds
or incurred, or become subject to, any material obligation or liability
(absolute or contingent) except liabilities incurred in the ordinary course of
business; (ii) paid any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown on the most
recent Company balance sheet, and current liabilities incurred since that date
in the ordinary course of business; (iii) sold or transferred, or agreed to sell
or transfer, any of its assets, properties, or rights (except assets,
properties, or rights not used or useful in its business which, in the aggregate
have a value of less than $50,000), or canceled, or agreed to cancel, any debts
or claims (except debts or claims which in the aggregate are of a value of less
than $50,000); (iv) made or permitted any amendment or termination of any
contract, agreement, or license to which it is a party if such amendment or
termination is material, considering the business of the Company; or (v) issued,
delivered, or agreed to issue or deliver any stock, bonds or other corporate
securities including debentures (whether authorized and unissued or held as
treasury stock); and
(d) to the best Knowledge of the Company, the Company has not become
subject to any law or regulation which materially and adversely affects, or in
the future may adversely affect, the business, operations, properties, assets,
or condition of the Company.
SECTION 5.07 TITLE AND RELATED MATTERS.
Except for the Permitted Encumbrances (as hereinafter defined), the
Company has good and marketable title to all of its properties, inventory,
interests in properties, and assets, real and personal, which are reflected in
the most recent balance sheet or acquired after that date (except properties,
interests in properties, and assets sold or otherwise disposed of since such
date in the ordinary course of business). Except for the Permitted Encumbrances
or as pledged in the ordinary course of business, the Company owns, free and
clear of any liens, claims, encumbrances, royalty interests, or other
restrictions or limitations of any nature whatsoever, any and all
14
assets, marketing plans, business plans, methods of management, or other
information utilized in connection with the Company's business. the Company has
not received any notice of infringement of or conflict with asserted rights of
others with respect to any product, technology, data, trade secrets, know-how,
proprietary techniques, trademarks, service marks, tradenames, or copyrights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling, or finding, would have a materially adverse effect on the business,
operations, financial condition, income, or business prospects of the Company or
any material portion of its properties, assets, or rights.
SECTION 5.08 LITIGATION AND PROCEEDINGS. There are no actions, suits,
proceedings, or investigations pending or, to the Knowledge of the Company,
threatened by or against the Company or affecting the Company or its properties,
at law or in equity, before any court or other governmental agency or
instrumentality, domestic or foreign, or before any arbitrator that would have a
material adverse effect on its business. the Company does not have any knowledge
of any default on its part with respect to any judgment, order, writ,
injunction, decree, award, rule, or regulation of any court, arbitrator, or
governmental agency or instrumentality or of any circumstances which, after
reasonable investigation, would result in the discovery of such a default. For
the purpose of this agreement, the "KNOWLEDGE OF THE COMPANY" shall be limited
to the actual knowledge of the executives listed on SCHEDULE 5.08 hereto.
SECTION 5.09 CONTRACTS
(a) Except as listed in SCHEDULE 5.09, there are no material
contracts, agreements, franchises, license agreements, or other commitments to
which the Company is a party or by which it or any of its assets, products, or
properties are bound outside of the ordinary course of business;
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which the Company is a party or by which its properties are
bound and which are material to the operations of the Company taken as a whole
are valid and enforceable by the Company in all respects, except as limited by
bankruptcy and insolvency laws, by other laws affecting the rights of creditors
generally and by the laws of foreign jurisdictions;
(c) Except as listed in SCHEDULE 5.09 and as incurred in the
ordinary course of business or reflected in the most recent Company balance
sheet, the Company is not a party to any oral or written (i) contract for the
employment of any officer or employee which is not terminable on 30 days or less
notice; (ii) profit sharing, bonus, deferred compensation, stock option,
severance pay, pension benefit or retirement plan, agreement, or arrangement
covered by Title IV of the Employee Retirement Income Security Act, as amended;
(iii) agreement, contract, or indenture relating to the borrowing of money; (iv)
guaranty of any obligation, other than one on which the Company is a primary
obligor, for the borrowing of money or otherwise, excluding endorsements made
for collection and other guaranties of obligations, which, in the aggregate do
not exceed more than one year or providing for payments in excess of $50,000 in
the aggregate; (vi) collective bargaining agreement; (vii) agreement with any
present or former officer or partner of the Company or (viii) contract,
agreement, or other commitment involving payments by it of more than $50,000 in
the aggregate.
SECTION 5.10 MATERIAL CONTRACT DEFAULTS. The Company is not in default in
any material respect under the terms of any outstanding contract, agreement,
lease, or other commitment which is material to the business, operations,
properties, assets, or condition of the Company, including, without limitation,
the recording agreement with Walt Disney Company, Inc. for "Cinderella II" and
the contracts and agreements relating to the masters and the rights to exploit
the albums for Brooke Allison, Maddwest and Sean McDuffy (Emackillent)
(collectively, the "MATERIAL CONTRACTS"), and there is no default or event of
default in any material respect under any such contract, agreement, lease, or
other commitment in respect of which the Company has not taken adequate steps to
prevent such a default from occurring.
SECTION 5.11 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust, or other material contract, agreement, or instrument to which the Company
is a party or to which any of its properties or operations are subject.
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SECTION 5.12 GOVERNMENTAL AUTHORIZATIONS. The Company has all licenses,
franchises, permits, and other governmental authorizations that are legally
required to enable it to conduct its business in all material respects as
conducted on the date hereof. Except for compliance with federal and state
securities and corporation laws, as hereinafter provided, no authorization,
approval, consent, or order of, or registration, declaration, or filing with,
any court or other governmental body is required in connection with the
execution and delivery by the Company of this Agreement and the consummation by
the Company of the transactions contemplated hereby.
SECTION 5.13 COMPLIANCE WITH LAWS AND REGULATIONS. The Company has
complied with all applicable statutes and regulations of any federal, state, or
other governmental entity or agency thereof, except to the extent that
noncompliance would not materially and adversely affect the business,
operations, properties, assets, or condition of the Company or except to the
extent that noncompliance would not result in the incurrence of any material
liability for the Company.
SECTION 5.14 INSURANCE. All the insurable properties of the Company are
insured in their full replacement value against all risks customarily insured
against by persons operating similar properties in localities where such
properties are located and under valid and enforceable policies by insurers of
recognized responsibility. Such policy or policies containing substantially
equivalent coverage will be outstanding on the date of consummation of the
transactions contemplated by this Agreement.
SECTION 5.15 APPROVAL OF AGREEMENT. The Board of Directors of the Company
have authorized the execution and delivery of this Agreement and have approved
the transactions contemplated hereby. The Company has delivered to Wireless a
copy of the resolution of the Board of Directors approving this transaction.
SECTION 5.16 INTELLECTUAL PROPERTY AND INTANGIBLE ASSETS. The Company has
full legal right, title and interest in and to all of the intellectual property
utilized in the operation of its business. No rights of any other person are
violated by the use by the Company of the intellectual property. None of the
intellectual property has ever been declared invalid or unenforceable, or is the
subject of any pending or, to the Knowledge of the Company, threatened action
for opposition, cancellation, declaration, infringement, or invalidity,
unenforceability or misappropriation or like claim, action or proceeding.
SECTION 5.17 LABOR AND EMPLOYMENT MATTERS. SCHEDULE 5.17 contains a true
and complete list, by category, of all current full-time employees, current
part-time employees, other employees and consultants currently employees or
engaged by the Company who render services with respect to the Company business
and who are so engaged by the Company as of the date hereof, including a
description of any and all written contracts, written agreements, written
commitments and written arrangements relating thereto, and a description of the
rate and nature of all compensation payable by the Company to, and the amount of
vacation, sick days, personal days or other leave accrued by, each such person
or entity. The Company has been provided with true, complete and correct (i)
copies of all such written contracts, written agreements, written commitments
and written arrangements, (ii) copies of all manuals and handbooks applicable to
any employee or consultant of the Company who renders services with respect to
the Company's business, (iii) copies of all trade secret, non-compete,
non-disclosure and invention assignment agreements, and (iv) descriptions of all
existing severance, accrued vacation or other leave policies or retiree benefits
of any such employee or consultant. the Company has provided to Wireless true,
complete and correct copies of all written employment, consulting and services
contracts, written commitments and written arrangements listed on SCHEDULE 5.17.
Except as set forth on SCHEDULE 5.17, the Company is not a party to or bound by
any collective bargaining agreement or any other agreement with a labor union,
and, to the Knowledge of the Company , there has been no effort by any labor
union or any other person during the twenty-four (24) months prior to the date
hereof to organize any employees or consultants of the Stockholders who are not
already members of a collective bargaining unit into one or more collective
bargaining units, nor, to the Knowledge of the Company , are any such efforts
being conducted. There is no pending or, to the Knowledge of the Company ,
threatened labor dispute, strike or work stoppage which affects or which may
affect the business of the Company , or which may interfere with its continued
operations. To the Knowledge of the Company , neither the Company nor any agent,
representative or employee thereof has within the last twenty-four (24) months
committed any unfair labor practice as defined in the National Labor Relations
Act, as amended, and there is no pending or threatened charge or complaint
against the Company by or with the National Labor Relations Board or any
representative thereof. There has been no strike, walkout or work stoppage
involving any of the employees or consultants of the Stockholders during the
twenty-four (24) months prior to the date hereof. the Company has complied, in
all material respects, with applicable laws, rules and regulations
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relating to employment, civil rights and equal employment opportunities or other
employment practices, including but not limited to, the Civil Rights Act of
1964, the Fair Labor Standards Act, the Americans with Disabilities Act, as
amended and the Immigration Reform and Control Act of 1986, as amended. Except
as otherwise expressly set forth in SCHEDULE 5.17, or as required by the WARN
Act or similar legislation, the employment of each employee of the Company is
"AT WILL", and may be terminated at any time by the Company , without the
imposition of penalties or damages. The Company has received no notice of any
claim before any governmental body brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of employees or any governmental body or, to the Knowledge of the
Company is any such claim threatened against the Company . The Company is not a
party to, or otherwise bound by, any order relating to its employees or
employment practices. The Company has paid in full to all of its employees all
wages, salaries, commissions, bonuses, benefits and other compensation due and
payable to such employees. No current or former employee of the Company is (i)
absent on a military leave of absence and/or eligible for rehire under the terms
of the Uniformed Services Employment and Reemployment Rights Act, or (ii) absent
on a leave of absence under the Family and Medical Leave Act.
SECTION 5.18 EMPLOYEE BENEFITS. There is no employee benefit plan (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), and (ii) no other benefit plan, program, contract or
arrangement of any kind whatsoever, covering the employees or consultants of the
Company or which is sponsored, maintained or contributed to by the Company or to
which the Company has an obligation to contribute (all such employee benefit
plans and other benefit plans, programs, contracts or arrangements hereinafter
individually and collectively called the "EMPLOYEE BENEFIT PLAN(S)"). A true,
complete and correct copy of each of the Employee Benefit Plans (and all
amendments thereto, whether currently effective or to become effective at a
later date) have been provided to the Company. In the case of any Employee
Benefit Plan which is not in written form, a materially true, materially
complete and materially correct description of such Employee Benefit Plan has
been provided to the Company. No Employee Benefit Plan is (i) subject to Section
412 of the Internal Revenue Code or Section 306 of ERISA, (ii) a "multiemployer
plan" within the meaning of Section 3(37) of ERISA, or (iii) a single employer
plan (within the meaning of Section 4001(a)(15) of ERISA) which has two or more
contributing sponsors at least two of whom are not under common control. Any and
all amounts which the Company is required to pay as contributions or otherwise,
or with respect to the Employee Benefit Plans have been timely paid.
SECTION 5.19 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Company,
the Company Stockholders nor any other Affiliate or agent of the Company , or
any other person acting on behalf of or associated with the Company , acting
alone or together, has (a) received, directly or indirectly, any rebates,
payments, commissions, promotional allowances or any other economic benefits,
regardless of their nature or type, from any customer, supplier, employee or
agent of any customer or supplier; or (b) directly or indirectly given or agreed
to give any money, gift or similar benefit to any customer, supplier, employee
or agent of any customer or supplier, any official or employee of any government
(domestic or foreign), or any political party or candidate for office (domestic
or foreign), or other person who was, is or may be in a position to help or
hinder the business of the Company (or assist the Company in connection with any
actual or proposed transaction), in each case which (i) may subject the Company
to any damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, may have had an adverse effect on the
assets, business, operations or prospects of the Company, or (iii) if not
continued in the future, may adversely affect the assets, business, operations
or prospects of the Company.
SECTION 5.20 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE
A and except for normal advances to employees consistent with past practices,
payment of compensation for employment to employees consistent with past
practices, and participation in scheduled Plans or Benefit Programs and
agreements by employees, the Company has not purchased, acquired or leased any
property or services from, or sold, transferred or leased any property or
services to, or loaned or advanced any money to, or borrowed any money from, or
entered into or been subject to any management, consulting or similar agreement
with, or engaged in any other significant transaction with the Company or any
other officer, director or shareholder of the Company or any of their respective
Affiliates. Except as set forth on SCHEDULE A, neither the Company nor any other
Affiliate of the Company is indebted to the Company for money borrowed or other
loans or advances, and the Company is not indebted to any such Affiliate.
SECTION 5.21 MATERIALITY. No representation or warranty in this Article V
contains any materially untrue statement of a material fact or omits to state
any material fact required to make the statements contained
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therein not materially misleading or materially necessary in order to provide
Wireless with reasonably complete information as to the Company's business or
financial condition.
ARTICLE VI
DELIVERIES AT CLOSING
SECTION 6.01 TAKING OF NECESSARY ACTION. Wireless, Company and the Company
Stockholders shall take all such actions as may be necessary or appropriate in
order to effectuate the transactions contemplated by this Agreement. If, at any
time after the execution hereof, any further action is necessary or desirable to
carry out the purposes of this Agreement, to (a) vest Wireless with title to
100% of the issued and outstanding shares of Company Capital Stock, and (b) vest
the Company Stockholders with title to 100% of the issued and outstanding shares
of Initial Wireless Merger Stock and any shares of Additional Wireless Merger
Stock. The officers and directors of Company or Wireless, as the case may be, at
their expense, shall take such necessary or desirable action in order to
effectuate the transactions contemplated by this Agreement.
SECTION 6.02 STOCK LEGENDS. Certificates representing all shares of the
Wireless Merger Stock shall bear a legend restricting transfer of the shares of
the Wireless Merger Stock represented by such certificate in substantially the
form set forth below:
"The shares evidenced by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and may not
be transferred, nor will any assignee or endorsee hereof be recognized as
an owner hereof by the issuer for any purpose, unless a registration
statement under the Securities Act with respect to such shares shall then
be in effect or unless the availability of an exemption from registration
with respect to any proposed transfer or disposition of such shares shall
be established to the satisfaction of counsel for the issuer."
Wireless shall, from time to time, make stop transfer notations in its
records to ensure compliance in connection with any proposed transfer of the
shares with the Securities Act, and all applicable state securities laws.
SECTION 6.03 FEES AND EXPENSES. Each of Company and Wireless shall be
responsible for all of their respective fees and expenses incurred in connection
with the negotiation, execution, delivery and performance of this Agreement and
the transactions contemplated hereby, including, without limitation, the
professional fees of counsel for the Company Stockholders and Wireless incurred
in connection with this Agreement.
SECTION 6.04 APPOINTMENT OF NEW DIRECTORS. Simultaneously, with the
Closing of the transactions contemplated by this Agreement, the existing
director(s) of Wireless and Merger Sub shall resign, and shall appoint five
persons designated by the Company or the Company Stockholders prior to the
Closing Date, to serve as the sole directors of Wireless and the Surviving
Corporation of the Merger from and after the Closing Date.
SECTION 6.05 CLOSING. The closing ("CLOSING") of the transactions
contemplated by this Agreement shall be on a date and at such time as the
parties may agree ("CLOSING DATE"), but not later than February 28, 2002
provided that the covenants and conditions set forth in Articles VII, VIII and
IX have been satisfied. Such Closing shall take place at a mutually agreeable
time and place.
SECTION 6.06 CLOSING EVENTS. At the Closing, each of the respective
parties hereto shall execute, acknowledge, and deliver (or shall cause to be
executed, acknowledged, and delivered) any and all certificates, opinions,
financial statements, schedules, agreements, resolutions, rulings, or other
instruments required by this Agreement to be so delivered at or prior to the
Closing, together with such other items as may be reasonably requested by the
parties hereto and their respective legal counsel in order to effectuate or
evidence the transactions contemplated hereby. Deliveries at Closing shall
include, without limitation, the following:
(a) Deliveries by Company and Company Stockholders. At or
prior to the Closing, Company or Company Stockholders, as appropriate, shall
deliver to Wireless:
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(i) resolutions or consents signed by each of the Signing
Company Stockholders who have executed this Agreement and the holders of a
majority of the shares of Company Series A Preferred Stock and a majority of the
shares of Company Series B Preferred Stock approving, adopting and ratifying
this Agreement, the Merger and the transactions contemplated hereby;
(ii) minute and record books of Company;
(iii) a certificate executed by Company to the effect that the
conditions set forth in Article VII and Article VIII have been satisfied; and
(iv) possession of all originals and copies of agreements,
instruments, documents, deeds, books, records, files and other data and
information within the possession of Company or any Affiliate of Company
pertaining to Company (collectively, the "RECORDS"); provided, however, that
Company may retain (1) copies of any tax returns and copies of Records relating
thereto; (2) copies of any Records that Company is reasonably likely to need for
complying with requirements of law; and (3) copies of any Records that in the
reasonable opinion of Company will be required in connection with the tax
obligations of the Company Stockholders.
(b) Deliveries by Wireless. At or prior to the Closing,
Wireless shall deliver to Company:
(i) the certificates representing the Initial Wireless
Merger Stock required to be delivered at Closing pursuant to Section 2.03
hereof;
(ii) a certificate executed by an authorized officer of
Wireless, on behalf of Wireless, to the effect that the conditions set forth in
ARTICLE VII and ARTICLE VIII have been satisfied;
(iii) the resignations of all the officers and directors of
Wireless and Merger Sub and a resolution of the Board of Directors of Wireless
electing the persons designated by Company or the Signing Company Stockholders
prior to such Closing as the sole directors of Wireless and the Surviving
Corporation of the Merger, and appointing persons designated by the Company
prior to such Closing as the sole senior executive officers of Wireless and the
Surviving Corporation of the Merger.
ARTICLE VII
SPECIAL COVENANTS AND AGREEMENTS OF THE PARTIES
SECTION 7.01 BOARD OF DIRECTORS ACTION BY WIRELESS. Prior to the Closing,
the Board of Directors of Wireless shall:
(a) effect the authorization and approval of this Agreement and
the transactions contemplated thereby;
(b) effect the action described in Article VI; and
(c) take such other actions as the directors may determine are
appropriate in furtherance of the consummation of this Agreement.
SECTION 7.02 WIRELESS STOCKHOLDERS MEETING.
(a) Not later than seventy-five (75) days following the Closing,
Wireless (in cooperation with the Company and the Signing Company Stockholders
and their legal counsel) shall have prepared and filed with the SEC a
preliminary proxy statement under Rule 14 of the Securities Exchange Act of
1934, as amended (the "PROXY STATEMENT") in connection with calling a special
meeting of the stockholders of Wireless (the "WIRELESS STOCKHOLDERS MEETING")
for the purpose of:
(i) approving an amended and restated certificate of
incorporation of Wireless which shall, among other things: (x) change the
Wireless corporate name to 2K SOUNDS CORPORATION (or such other
19
name as the Wireless board of directors shall approve); (y) increase the number
of shares of capital stock which Wireless shall be authorized to issue to
500,000,000 shares of Wireless Common Stock, and (z) authorize for issuance a
total of 10,000,000 shares of preferred stock, which may be issued in such
series or classes and with such rights, designations and privileges (including
conversion rights) as the board of directors of Wireless may, in their sole
discretion, from time to time determine;
(ii) ratifying this Agreement and the transactions
contemplated by this Agreement, including, without limitation, the proposed
Financing; and
(iii) approving, adopting and ratifying a 10-for-1 forward
split of the issued and outstanding Wireless Common Stock, after giving effect
to the issuance of the Initial Wireless Merger Stock.
(b) Wireless shall use its best efforts to cause such Proxy
Statement to be filed with the SEC as soon practicable following completion of
the Audited Financial Statements of Company, and to be declared effective by the
SEC as soon as practicable thereafter. The Proxy Statement shall be mailed to
the holders of Wireless Common Stock, as soon as declared effective by the SEC,
and the Wireless Stockholders Meeting shall be held at a location to be mutually
agreed upon as soon as permissible thereafter under applicable Nevada corporate
law.
SECTION 7.03 ACCESS TO PROPERTIES AND RECORDS. Wireless and the Company
will each afford to the officers and authorized representatives of the other
full access to the properties, books, and records of each other as the case may
be, in order that each may have full opportunity to make such reasonable
investigation as it shall desire to make of the affairs of the other, and each
will furnish the other with such additional financial and operating data and
other information as to the business and properties of each other, as the case
may be, as the other shall from time to time reasonably request.
SECTION 7.04 SPECIAL COVENANTS AND REPRESENTATIONS REGARDING ISSUANCE OF
WIRELESS MERGER STOCK. The consummation of this Agreement and the transactions
herein contemplated, including the issuance of the Wireless Merger Stock to the
Company Stockholders as contemplated hereby, constitutes the offer and sale of
securities under the Securities Act and applicable state statutes. Such
transaction shall be consummated in reliance on exemptions from the registration
and prospectus delivery requirements of such statutes which depend, inter alia,
upon the circumstances under which the Company Stockholders acquire such
securities. In connection with reliance upon exemptions from the registration
and prospectus delivery requirements for such transactions, at the Closing the
Company Stockholders shall deliver to customary Wireless investment letters of
representation.
SECTION 7.05 THIRD PARTY CONSENTS AND CERTIFICATES. Wireless and the
Company agree to cooperate with each other in order to obtain any required third
party consents to this Agreement and the transactions herein and therein
contemplated.
SECTION 7.06 ACTIONS PRIOR TO CLOSING.
(a) From and after the date of this Agreement until the Closing Date
and except as set forth in the Agreement or Schedules attached hereto or as
otherwise approved in writing by Wireless, the Company will:
(i) carry on its business in substantially the same
manner as it has heretofore;
(ii) maintain and keep its properties in states of good repair
and condition as at present, except for depreciation due to ordinary wear and
tear and damage due to casualty;
(iii) maintain in full force and effect insurance
comparable in amount and in scope of coverage to that now maintained by it;
(iv) perform in all material respects all of its obligation
under material contracts, leases, and instruments relating to or affecting its
assets, properties, and business;
20
(v) use its best efforts to maintain and preserve its business
organization intact, to retain its key employees, and to maintain its
relationship with its material suppliers and customers; and
(vi) fully comply with and perform in all material respects
all obligations and duties imposed on it by all federal and state laws and all
rules, regulations, and orders imposed by federal or state governmental
authorities.
(b) From and after the date of this Agreement until the Closing
Date, unless otherwise approved in advance by Company in writing, Wireless will
not:
(i) make any change in its articles of incorporation or
bylaws;
(ii) conduct any business or enter into any contract,
agreement or commitment of any kind, or amend any contact, agreement or
commitment currently in existence, other than as previously approved by the
Signing Company Stockholders and to further the transactions contemplated by
this Agreement; or
(iii) issue or commit to issue any shares of Wireless Common
Stock or other securities convertible into or exercisable for Wireless Common
Stock to any person, firm or corporation.
(c) Prior to the Closing Date, Wireless shall arrange for one or
more of its current stockholders owning of record and beneficially an aggregate
of 5,000,000 shares of the outstanding common stock of Wireless to return all of
such shares of Wireless Common Stock to Wireless for cancellation. As at the
Closing Date not more than 4,500,000 shares of Wireless Common Stock shall be
issued and outstanding.
SECTION 7.07 INDEMNIFICATION.
(a) By Signing Company Stockholders. The Signing Company
Stockholders hereby severally (not jointly and severally) agree to indemnify
and hold harmless Wireless against and in respect of:
(i) any loss, claim, liability, obligation, or damage suffered
or incurred by Wireless resulting from or arising in connection with any
material misrepresentation, breach of warranty, or non-fulfillment of any
material covenant or agreement on the part of Company or the Signing Company
Stockholders contained in this Agreement; and
(ii) all actions, suits, investigations, proceedings, demands,
assessments, judgments, reasonable attorneys' fees, costs and expenses incident
to the foregoing, including, but not limited to, any audit or investigation by
any governmental entity.
(b) By Wireless. Wireless hereby agrees to indemnify and hold
harmless the Company and the Signing Company Stockholders against and in
respect of:
(i) any loss, claim, liability, obligation or damage suffered
or incurred by the Company, the Signing Company Stockholders or Wireless (as it
exists subsequent to the Closing Date) resulting from or arising in connection
with any misrepresentation, breach of warranty, or non-fulfillment of any
covenant or agreement on the part of Wireless contained in this Agreement;
(ii) any liability or claim asserted against the Company, the
Signing Company Stockholders or Wireless (as it exists subsequent to the Closing
Date) arising in connection with Wireless' failure to perform its obligations
hereunder;
(iii) any liability or claim which may be asserted against the
Company, the Signing Company Stockholders or Wireless (as it exists subsequent
to the Closing Date) arising at any time after the Closing Date in connection
with Wireless' ownership of its assets or its business activities (including
without limitation the rescission of the August 20, 2001 Agreement and Plan of
Share Exchange between Wireless and Global-Vision.com, Inc.) for all periods up
to and including the Closing Date; and
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(iv) All actions, suits, investigations, proceedings, demands,
assessments, judgments, reasonable attorneys' fees, costs and expenses incident
to the foregoing, including, but not limited to, any audit or investigation by
any governmental entity.
(c) Survival of Obligation to Indemnify. The obligation of each
party hereto to indemnify the other party hereto shall survive the Closing and
the payment of the consideration therefore for a period of one year from the
Closing Date, and shall continue thereafter with respect to: (a) matters which
the party seeking indemnity hereunder shall have given the other party written
notice of as provided herein prior to one year from the Closing Date; and (b)
any claims, actions, suits, investigations or proceedings based on fraud or
willful misconduct, willful misrepresentation or willful breach of warranty.
(d) Notice and Procedure. Any party claiming indemnity hereunder
(hereinafter referred to as the "INDEMNIFIED PARTY") shall give the party
against whom indemnity is sought (hereinafter referred to as the "INDEMNIFYING
PARTY") prompt written notice after obtaining knowledge of any claim or the
existence of facts as to which recovery may be sought against it in respect of
which the Indemnifying Party may be liable because of the indemnity provisions
set forth in this Section 7.07. If such claim for indemnity arises in connection
with a legal action instituted by a third party (hereinafter a "THIRD PARTY
CLAIM"), the Indemnified Party hereby agrees that, within five (5) business days
after it is served with notice of the assertion of any Third Party Claim for
which it may seek indemnity hereunder, the Indemnified Party will notify the
Indemnifying Party in writing of such Third Party Claim.
The Indemnifying Party shall, within five (5) business days after
the date that the Indemnified Party gives notice of a claim (whether a Third
Party Claim or otherwise) as provided above, notify the Indemnified Party
whether it accepts or contests its obligation of indemnity hereunder as claimed
by the Indemnified Party.
If the claim for indemnity arises in connection with a Third Party
Claim and the Indemnifying Party accepts its indemnity obligation hereunder, the
Indemnifying Party shall have the right, after conceding in writing its
obligation of indemnity hereunder, to conduct the defense of such action at its
sole expense through counsel reasonably acceptable to the Indemnified Party. The
Indemnified Party shall cooperate in such defense as reasonably necessary to
enable the Indemnifying Party to conduct its defense, including providing the
Indemnifying Party with reasonable access to such records as may be relevant to
its defense. The Indemnifying Party shall be entitled to settle any such Third
Party Claim without the prior written consent of the Indemnified Party provided
that the Indemnifying Party provides the Indemnified Party with reasonable
assurances that the Indemnified Party will be fully indemnified by the
Indemnifying Party in connection with any such Third Party Claim. The
Indemnified Party shall be entitled to retain its own counsel at its own expense
in connection with any Third Party Claim that the Indemnifying Party has elected
to defend. If the Indemnifying Party accepts its indemnity obligations hereunder
in connection with a Third Party Claim but elects not to conduct the defense
thereof, the Indemnified Party may defend and/or settle such Third Party Claim
and shall be entitled to be indemnified for the full amount of such claim and
all costs and expenses, including attorneys' fees, incurred in connection
therewith pursuant to this Section 7.07.
If the claim for indemnity arises in connection with a Third Party
Claim and the Indemnifying Party contests or does not accept its indemnity
obligation hereunder, the Indemnified Party shall have the right to defend
and/or settle such Third Party Claim and thereafter seek indemnity from the
other party pursuant to this Section 7.07; provided, however, that the
Indemnified Party shall not settle any such claim without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld.
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If the claim for indemnity arises other than in connection with a
Third Party Claim and the Indemnifying Party accepts its indemnity obligation
hereunder, the Indemnifying Party shall, upon the request of the Indemnified
Party, pay the full amount of such claim to the Indemnified Party or to the
third party asserting such claim as directed by the Indemnified Party. If the
claim for indemnity arises other than in connection with a Third Party Claim and
the Indemnifying Party contests its indemnity obligation hereunder, the
Indemnified Party shall have the right to defend, settle or take any other
action with respect to such claim and thereafter seek indemnity pursuant to this
Section 5.07; provided, however, that the Indemnified Party shall not settle any
such claim without the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
(e) Limitation on Indemnification Obligations. An Indemnified Party
shall not be entitled to recover from an Indemnifying Party any amounts under
this Section 7.07 until the total amount under which the Indemnified Party would
seek a recovery exceeds the sum of $50,000 (the "THRESHOLD Amount"), and then
the Indemnified Party may recover the Threshold Amount and any sums which are in
excess of the Threshold Amount, but in no event may the Indemnified Party be
entitled to an amount in excess of the sum of the Purchase Price.
SECTION 7.08 THE FINANCING.
(a) Following the Wireless Stockholders Meeting and consummation of
the Closing on the Closing Date, Wireless shall undertake to consummate the sale
of not less than $2,750,000 of convertible notes, shares of convertible Wireless
Preferred Stock and/or shares of Wireless Common Stock (collectively, the
"WIRELESS SECURITIES") all upon such terms and conditions as shall be determined
prior to the Closing, disclosed in the Proxy Statement and otherwise reasonably
acceptable to the Company Stockholders. The $3,000,000 of gross proceeds
realized by Wireless and its Company subsidiary from (i) the $250,000 Financing
Deposit referred to in Section 2.07 above, and (ii) the sale of the Securities
is hereinafter referred to as the "FINANCING."
(b) The parties hereto shall, in good faith, undertake to consummate
the Financing by a date which shall be not later than ninety (90) days following
the Closing Date.
(c) The shares of Wireless Common Stock issued or issuable in
connection with the Financing shall be registered for resale under the
Securities Act of 1933, as amended, pursuant to an effective registration
statement on Form S-1 (separate from the Proxy Statement); provided, that such
registration statement shall not be filed with or declared effective by the SEC
unless and until all of the Securities relating to such Financing shall have
been sold and the proceeds thereof either received by Wireless or funded to an
escrow account on behalf of Wireless, pending the effectiveness of such
registration statement.
SECTION 7.09 TERMINATION This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by the mutual written consent of Wireless and the Signing
Company Stockholders; or
(b) by Wireless, or by the Signing Company Stockholders , if: (i)
a material breach shall exist with respect to the written representations and
warranties made by the other party; (ii) the other party shall take any action
prohibited by this Agreement, if such actions shall or may have a material
adverse effect on Company or on Wireless, and/or the transactions contemplated
hereby, and shall not fully remedy same within ten (10) days after written
notice thereof to such party; (iii) the other party shall not have furnished,
upon reasonable notice therefore, such certificates and documents required in
connection with the transactions contemplated hereby and matters incidental
thereto as it or he shall have agreed to furnish, and it is reasonably unlikely
that the other party will be able to furnish such item(s) prior to the Outside
Closing Date specified below; or (iv) any consent of any third party to the
transactions contemplated hereby (whether or not the necessity of which is
disclosed herein or in any Schedule hereto) is reasonably necessary to prevent a
default under any outstanding material obligation of either party hereto and
such consent is not obtainable without material cost or penalty (unless the
party not seeking to terminate this Agreement agrees or agree to pay such cost
or penalty); or
(c) by either Wireless or the Signing Company Stockholders, at any
time on or after March 15, 2002 (the "OUTSIDE CLOSING DATE"), if the
transactions contemplated hereby shall not have been consummated prior thereto;
provided, that the party seeking to effect such termination of this Agreement
shall not then be in breach or default of any material representation, warranty,
covenant, agreement or obligation imposed upon such party by this Agreement; or
(d) by the Signing Company Stockholders in the event that its due
diligence investigation of Wireless shall reveal that Wireless (i) owns or
leases any tangible assets in excess of $25,000 in the aggregate, or (ii) has
any business operations as at the Closing Date, or (iii) has any liabilities,
obligations, contracts, commitments or contingencies of any kind, which could
reasonable be expected to expose Wireless or Company to any cost, claim,
expense, damage or liability in excess of $100,000 in the aggregate from and
after the Closing Date, or (iv) is subject to any claim, deficiency, legal or
administrative proceeding or threats thereof which could reasonably be expected
to
23
result in litigation and liability to Wireless or Company from and after the
Closing Date of $100,000 or more (whether individually or in the aggregate); or
(e) by the Signing Stockholders or the Company in the event that
the holders of a majority of the outstanding shares of each of the Company
Series A Preferred Stock and the Company Series B Preferred Stock do not consent
in writing to this Agreement, the Merger and the transactions contemplated
hereby.
(f) In the event of termination of this Agreement pursuant to this
Section 7.09, prompt written notice shall be given by the terminating party to
the other party, and, unless the party seeking to terminate this Agreement shall
have no right to do so, neither party to this Agreement shall have any further
liability to the other. In the event that this Agreement is terminated prior to
March 15, 2002 for any reason, each party shall pay its own expenses incurred in
connection with this transaction.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF WIRELESS
The obligations of Wireless under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
SECTION 8.01 ACCURACY OF REPRESENTATIONS. The representations and
warranties made by the Company in this Agreement were true when made and shall
be true at the Closing Date with the same force and effect as if such
representations and warranties were made at and as of the Closing Date (except
for changes therein permitted by this Agreement), and the Company shall have
performed or complied with all covenants and conditions required by this
Agreement to be performed or complied with by the Company prior to or at the
Closing. Wireless shall be furnished with a certificate, signed by a duly
authorized officer of Company and dated the Closing Date, to the foregoing
effect.
SECTION 8.02 FURTHER ASSURANCES. From time to time from and after the date
hereof, the parties will execute and deliver to one another any and all further
agreements, instruments, certificates and other documents as may reasonably be
requested by any other party in order more fully to consummate the transactions
contemplated hereby.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
AND THE SIGNING COMPANY STOCKHOLDERS
The obligations of the Company and the Signing Company Stockholders under
this Agreement are subject to the satisfaction, at or before the Closing Date,
of the following conditions:
SECTION 9.01 ACCURACY OF REPRESENTATIONS. The representations and
warranties made by Wireless in this Agreement were true when made and shall be
true as of the Closing Date (except for changes therein permitted by this
Agreement) with the same force and effect as if such representations and
warranties were made at and as of the Closing Date, and Wireless shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed or complied with by Wireless prior to or at the
Closing. The Company shall have been furnished with a certificate, signed by a
duly authorized executive officer of Wireless and dated the Closing Date, to the
foregoing effect.
SECTION 9.02 FURTHER ASSURANCES. From time to time from and after the date
hereof, the parties will execute and deliver to one another any and all further
agreements, instruments, certificates and other documents as may reasonably be
requested by any other party in order more fully to consummate the transactions
contemplated hereby, and to effect an orderly transition of the Signing Company
Capital Stock being acquired by Wireless hereunder.
SECTION 9.03 APPROVAL BY HOLDING OF COMPANY SERIES A PREFERRED STOCK AND
COMPANY SERIES B PREFERRED STOCK. The holders of a majority of the outstanding
shares of each of the Company Series A Preferred
24
Stock and the Company Series B Preferred Stock shall have consented in writing
to this Agreement, the Merger and the transactions contemplated hereby.
ARTICLE X
RESOLUTION OF DISPUTES
SECTION 10.01 Each controversy, dispute or claim between the parties
arising cut of relating to this agreement, which controversy, dispute or claim
not settled in writing within thirty (30) days after the "Claim Date" (defined
as the date on which a party subject to the agreement gives written notice to
all other parties that: a controversy, dispute or claim exists), will be settled
by a reference proceeding in California in accordance with the provisions of
Section 638 et seq. of the California Code of Civil Procedure, or their
successor section ("CCP"), which shall constitute the exclusive remedy for the
settlement: of any controversy, dispute or claim concerning this agreement,
including whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings' against each of them in any court or
jurisdiction other than the Superior Court the County where the Company is
located or Los Angeles County if none (the "Court"). The referee shall be a
retired Judge of the Court selected by mutual agreement of the parties, and if
they cannot so agree within forty-five (45) days after the Claim Date, the
referee shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP ss. 170.6. The
referee shall (i) be requested to set the matter for hearing within sixty (60)
days after the Claim Date and (ii) try any and all issues of law or fact and
report a statement of decision upon them, if possible, within ninety (90) days
of the Claim Date. Any decision rendered by the referee will be final, binding
and conclusive and judgment shall be entered pursuant to CCP ss. 644 in any
court in the State of California having Jurisdiction. Any party may apply for a
reference proceeding at any time after thirty (30) days following notice to any
other party of the nature of the controversy, dispute or claim, by filing a
petition for a hearing and/or trial. All discovery permitted by this agreement
shall be completed no later than fifteen (15) days before the first hearing date
established by the referee. The referee may extend such period in the event of a
party's refusal to provide requested discovery for any reason whatsoever,
including, without limitation, legal objections raised to such discovery or
unavailability of a witness due to absence or illness. No party shall be
entitled to "priority" in conducting discovery. Depositions may be taken by
either party upon seven (7) days written notice, and request for production or
inspection of documents shall be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided herein,
the Superior Court is empowered to issue temporary and/or provisional remedies,
as appropriate.
SECTION 10.02 Except as expressly set forth in this agreement, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of all hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the referee,
except for trial, shall be conducted without a court reporter, except that when
any party so requests, a court reporter will be used at any hearing conducted
before the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties. .
SECTION 10.03 The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the reference proceeding which shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable Judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of law, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
25
SECTION 10.04 In the event that the enabling legislation, which provides
for appointment of a referee is repealed (and no successor statute is enacted),
any dispute between the parties that would otherwise be determined by the
reference procedure rein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the Court,
in accordance with the California Arbitration Act, ss.1280 through 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
SECTION 10.05 In connection with the defense of any third party claims for
which claims for indemnification have been made hereunder, each party will
provide reasonable access to its and the Company's books and records as and to
the extent required for the proper defense of such third party claim. Neither
party shall consent to any settlement or purport to bind any other party to any
settlement without the written consent of the other party.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 BROKERS. Wireless, Company and the Signing Company
Stockholders each agree that JP Turner & Co. was instrumental in introducing the
parties. Accordingly, upon consummation of the Financing, Wireless shall pay to
JP Turner & Company a cash commission equal to 9% of the total gross proceeds
received in connection with the Financing and shall issue to JP Turner & Company
five year warrants to purchase 10% of the amount of the same Securities of
Wireless as are issued in the Financing. However, J. P. Turner will not
participate in or receive compensation in connection with the $250,000 deposit
provided Company as described in Section 2.07 hereof.. Except as aforesaid,
Wireless, the Company and the Signing Company Stockholders each agree that there
are no other finders or brokers involved in bringing the parties together or who
were instrumental in the negotiation, execution, or consummation of this
Agreement. Wireless, Company and the Signing Company Stockholders each agree to
indemnify the other against any claim by any third person other than those
described above for any commission, brokerage, or finders' fee arising from the
transactions contemplated hereby based on any alleged agreement or understanding
between the indemnifying party and such third person, whether express or implied
from the actions of the indemnifying party.
SECTION 11.02 NOTICES. Any notice, demand, request, offer, consent,
approval or communications (collectively, a "NOTICE") to be provided under this
Agreement shall be in writing and sent by one of the following methods: (i)
postage prepaid, United States certified or registered mail with a return
receipt requested, addressed to Wireless, Company and the Signing Company
Stockholders, as appropriate, at the addresses set forth below; (ii) overnight
delivery with a nationally recognized and reputable air courier (with electronic
tracking requested) addressed to Wireless, Company and the Signing Company
Stockholders, as appropriate, at the addresses set forth below; (iii) personal
delivery to Wireless, Company and the Signing Company Stockholders, as
appropriate, at the addresses set forth below; or (iv) by confirmed facsimile or
telecopier transmission to Wireless or the Company or the Signing Company
Stockholders, as appropriate, at the facsimile numbers set forth below and in
such case of facsimile transmission, a copy must also be contemporaneously sent
by one of the methods described in the preceding clause (i), (ii) or (iii) of
this Section (it being understood and agreed, however, that such Notice shall be
deemed received upon receipt of electronic transmission). Any such Notice shall
be deemed given upon receipt thereof, or, in case of any Notice sent pursuant to
clause (i), (ii) or (iii) above, the refusal thereof by the intended receipt.
Notwithstanding the foregoing, in the event any Notice is sent by overnight
delivery or personal delivery and it is received (or delivery is attempted)
during non-business hours (i.e., other than during 8:30 a.m. to 5:30 p.m. PST,
Monday through Friday, excluding holidays), then such Notice shall not be deemed
to have been received until the next business day. Either party may designate a
different address for receiving Notices hereunder by notice to the other party
in accordance with the provisions of this Section. Further notwithstanding the
foregoing, if any Notice is sent by either party hereto to the other and such
Notice has not been sent in compliance with this Section but has in fact
actually been received by the other party, then such Notice shall be deemed to
have been duly given by the sending party and received by the recipient party
effective as of such date of actual receipt.
26
If to Wireless: Benjamin Hansel, President
Wireless Synergies, Inc.
2001 Potomac
Houston, Texas 77057
Telephone: (713) 785-6809
If to Company or the Company Stockholders: John Guidon, CEO
2K Sounds, Inc.
21700 Oxnard Street, Suite 1030
Woodland Hills, California 91367
Facsimile: (818) 593-2230
With copies to: Stephen A. Weiss, Esq.
Greenberg Traurig, LLP.
200 Park Avenue
New York, New York 10166
Facsimile: (212) 801-6400
Notwithstanding anything in this Section to the contrary, any Notice delivered
in accordance herewith to the last designated address of any person or party to
which a Notice may be or is required to be delivered pursuant to this Agreement
shall not be deemed ineffective if actual delivery cannot be made due to a
change of address of the person or party to which the Notice is directed or the
failure or refusal of such person or party to accept delivery of the Notice.
SECTION 11.03 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement (including the exhibits and schedules attached hereto) and other
documents delivered at the Closing pursuant hereto, contains the entire
understanding of the parties in respect of its subject matter and supersedes all
prior agreements and understandings (oral or written) between or among the
parties with respect to such subject matter. The parties agree that prior drafts
of this Agreement shall not be deemed to provide any evidence as to the meaning
of any provision hereof or the intent of the parties with respect thereto. The
exhibits and schedules constitute a part hereof as though set forth in full
above. This Agreement is not intended to confer upon any person, other than the
parties hereto, any rights or remedies hereunder.
SECTION 11.04 EXPENSES. Except as otherwise provided herein, the parties
shall pay their own fees and expenses, including their own counsel fees,
incurred in connection with this Agreement or any transaction contemplated
hereby.
SECTION 11.05 ATTORNEYS' FEES. Notwithstanding the foregoing, in the event
either party employs an attorney or brings an action against the other arising
out of the terms of this Agreement, the prevailing party (whether such
prevailing party has been awarded a money judgment or not) shall receive from
the other party (and the other party shall be obligated to pay) the prevailing
party's reasonable legal fees and expenses (including the fees and expenses of
experts and para-professionals), whether such fees and expenses are incurred
before, during or after any trial, re-trial, re-hearing, mediation or
arbitration, administrative proceedings, appeals or bankruptcy or insolvency
proceedings, and irrespective of whether the prevailing party would have been
entitled to such fees and expenses under applicable law in the absence of this
Section. Without limiting the generality of the foregoing, the term "EXPENSES"
shall include expert witness fees, bonds, filing fees, administrative fees,
transcriptions, depositions or proceedings, costs of discovery and travel costs.
The term "PREVAILING PARTY" as used in this Section shall mean that party whose
positions substantially prevail in such action or proceeding, and any action or
proceeding brought by either party against the other as contemplated in this
Section may include a plea or request for judicial determination of the
"PREVAILING PARTY" within the meaning of this Section. In the event neither
party substantially prevails in its positions in such action or proceeding, the
court may rule that neither party has so substantially prevailed, in which event
each party shall be responsible for its own fees and expenses in connection
therewith. In addition, the fees and expenses for the services of "in-house"
counsel (if any) shall be included within the prevailing party's fees and
expenses as fully as if such in-house legal services were provided by an
"outside" attorney or law
27
firm as contemplated within this Section, irrespective of whether "outside"
legal services are obtained in connection with such matter. The fees and
expenses on the part of in-house counsel as aforesaid shall be determined based
upon the prevailing hourly rates, fees and expenses for an attorney(s) of
comparable experience in the Orlando, Florida area.
SECTION 11.06 AMENDMENT; WAIVER. This Agreement may not be modified,
amended, supplemented, canceled or discharged, except by written instrument
executed by all parties. No failure to exercise, and no delay in exercising, any
right, power or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude the exercise of any other right, power or privilege. No waiver of any
breach of any provision shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision, nor shall any waiver be
implied from any course of dealing between the parties. No extension of time for
performance of any obligations or other acts hereunder or under any other
agreement shall be deemed to be an extension of the time for performance of any
other obligations or any other acts. The rights and remedies of the parties
under this Agreement are in addition to all other rights and remedies, at law or
equity, that they may have against each other except as may be specifically
limited herein.
SECTION 11.07 BINDING EFFECT; ASSIGNMENT. The rights and obligations of
this Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder. The
rights and obligations of this Agreement may not be assigned without the prior
written consent of the other party which may be granted or withheld in such
parties sole and absolute discretion.
SECTION 11.08 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one and the same instrument. A telecopy signature of any party
shall be considered to have the same binding legal effect as an original
signature.
SECTION 11.09 RULES OF INTERPRETATION. Except as otherwise expressly
provided in this Agreement, the following rules shall apply hereto: (i) the
singular includes the plural and plural includes the singular; (ii) "or" is not
exclusive and "include" and "including" are not limiting; (iii) a reference to
any agreement or other contract includes any permitted supplements and
amendments; (iv) a reference in this Agreement to a section or exhibit is a
reference to a section or exhibit within or attached to this Agreement unless
otherwise expressly provided; (v) a reference to a section or paragraph in this
Agreement shall, unless the context clearly indicates to the contrary, refer to
all sub-parts or sub-components of any said section or paragraph; (vi) words
such as "hereunder", "hereto", "hereof", and "herein", and other words of like
import shall, unless the context clearly indicates to the contrary, refer to the
whole of this Agreement and not to any particular clause hereof; (vii) the
headings of the articles or sections and the ordering or position thereof are
for convenience only and shall not in any way be deemed to affect the meaning of
this Agreement; (viii) a reference in this Agreement to a "person" or "party"
(whether in the singular or the plural) shall (unless otherwise indicated
herein) include both natural persons and unnatural persons (including, but not
limited to, corporations, partnerships, limited liability companies or
partnerships, trusts, etc.); (ix) all accounting terms not otherwise defined
herein shall have the meanings assigned to them in accordance with GAAP; and (x)
any reference in this Agreement to a "BUSINESS DAY" shall include each Monday,
Tuesday, Wednesday, Thursday and Friday that is not a day on which national
banks in Miami, Florida are closed.
SECTION 11.10 CONSTRUCTION. The parties agree and acknowledge that they
have jointly participated in the negotiation and drafting of this Agreement and
that this Agreement has been fully reviewed and negotiated by the parties and
their respective counsel. In the event of an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumptions or burdens of proof shall arise favoring any
party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. If any party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant. The mere
listing (or inclusion of copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty relates solely to the existence of the
document or other items itself).
28
SECTION 11.11 GOVERNING LAW AND WAIVER OF JURY TRIAL. THIS AGREEMENT IS
MADE IN AND SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA, AND ANY
LEGAL ACTION RELATING TO OR ARISING OUT OF THIS AGREEMENT SHALL BE RESOLVED ONLY
IN FEDERAL OR STATE COURT LOCATED IN DADE COUNTY, IN THE STATE OF CALIFORNIA.
THE PARTIES HERETO EXPRESSLY WAIVE ANY CLAIM OR DEFENSE THEREIN THAT SUCH COURTS
CONSTITUTE AN INCONVENIENT FORUM. THE PARTIES HERETO EXPRESSLY WAIVE ALL RIGHTS
TO TRIAL BY JURY REGARDING ALL MATTERS OR DISPUTES ARISING OUT OF OR RELATED TO
THIS AGREEMENT. IN NO EVENT SHALL ANY PARTY BE LIABLE FOR ANY INDIRECT, SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
SECTION 11.12 SEVERABILITY. If any clause or provision of this Agreement
is illegal, invalid or unenforceable under applicable present or future laws
effective during the term of this Agreement, the remainder of this Agreement
shall not be affected. In lieu of each clause or provision of this Agreement
that is illegal, invalid or unenforceable, there shall be added as a part of
this Agreement a clause or provision as nearly identical as may be possible and
as may be legal, valid and enforceable. In the event any clause or provision of
this Agreement is illegal, invalid or unenforceable as aforesaid and the effect
of such illegality, invalidity or unenforceability is that either party no
longer has the substantial benefit of its bargain under this Agreement and a
clause or provision as nearly identical as may be possible cannot be added,
then, in such event, such party may in its discretion cancel and terminate this
Agreement provided such party exercises such right within a reasonable time
after such occurrence.
SECTION 11.13 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly
represents and warrants to all other parties hereto that (a) before executing
this Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
SECTION 11.14 PUBLIC DISCLOSURE. Notwithstanding anything herein to the
contrary, each of the Parties to this Agreement hereby agrees with the other
Party or Parties hereto that, except as may be required to comply with the
requirements of any applicable Laws and the rules and regulations of each stock
exchange upon which the securities of one of the Parties (or its Affiliates) is
listed (in which case the disclosing Party shall use its commercially reasonable
efforts to advise the other Party, or Parties prior to making such disclosure),
no press release or similar public announcement or communication shall, whether
prior to or subsequent to the Closing, be made or cause to be made concerning
the execution or performance of this Agreement, unless specifically approved in
advance in writing by all Parties hereto. Subject to the prior sentence,
Wireless and Company shall reasonably cooperate with each other in the
development and distribution of all news releases and other public announcements
of this Agreement, or any of the transactions contemplated hereby.
SECTION 11.15 CONFIDENTIALITY. Prior to the Closing, Wireless shall, and
shall cause its affiliates and its and their employees, agents, accountants,
legal counsel and other representatives and advisers to, hold in strict
confidence all, and not divulge or disclose any, information of any kind
concerning Company and its business; provided, however, that the foregoing
obligation of confidence shall not apply to (i) information that is or becomes
generally available to the public other than as a result of a disclosure by
Wireless or its affiliates or any of its or their employees, agents,
accountants, legal counsel or other representatives or advisers, (ii)
information that is or becomes available to Wireless or its Affiliates or any of
its or their employees, agents, accountants, legal counsel or other
representatives or advisers on a non-confidential basis prior to its disclosure
by Wireless or its affiliates or any of its or their employees, agents,
accountants, legal counsel or other representatives or advisers and (iii)
information that is required to be disclosed by Wireless or its affiliates or
any of its or their employees, agents, accountants, legal counsel or other
representatives or advisers as a result of any applicable law, rule or
regulation of any governmental authority; and provided further that Wireless
promptly shall notify Company of any disclosure pursuant to clause (iii) of this
Section and cooperate fully with Company if Company attempts to obtain a
protective order baring such disclosure.
29
IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto duly authorized,
as of the date first above-written.
WIRELESS SYNERGIES, INC.
By:____________________________________
Benjamin Hansel, President
2K SOUNDS, INC.
By:______________________________________
Michael Blakey, President
30
SIGNING COMPANY STOCKHOLDERS:
_________________________________________
Print Name: John Guidon
Number of Shares of Common Stock: 10,600,000
Address:_________________________________
_________________________________________
_________________________________________
Print Name: Michael Blakey
Number of Shares of Common Stock: 10,000,000
Address:_________________________________
_________________________________________
_________________________________________
Print Name: Bruce Gladstone
Number of Shares of Common Stock: 2,200,000
Address:_________________________________
_________________________________________
31
SCHEDULE A
NO. OF SHARES OF 2K % OF NO. OF SHARES OF 2K % OF
NAME OF 2K SOUND STOCKHOLDER SOUND COMMON STOCK CLASS SOUND REFERRED STOCK CLASS
---------------------------- ------------------ ----- -------------------- -----
John Guidon 10,600,000
Michael Blakey 10,000,000
Bruce Gladstone 2,200,000
EMI 1,500,000
__________ Sternberg 60,000
William Fairchild 20,000
Russell Harris 20,000
Startup Academy 200,000
----------
TOTAL 24,600,000 100% 100%
32