SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
x Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
o Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Under Rule 14a-12
ARC COMMUNICATIONS INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
o No fee required.
x Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)Title of each class of securities to which transaction
applies:
common stock, par value $.001 per share
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(2)Aggregate number of securities to which transaction applies:
65,053,347
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(3)Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
$.20
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(4)Proposed maximum aggregate value of transaction:
$13,010,669.94
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(5)Total fee paid:
$2,602.13 (merger) + $14.00 (sale of assets) = $2,612.13
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o Fee paid previously with preliminary materials.
o Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1)Amount previously paid:
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(2)Form, Schedule or Registration Statement No.:
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(3)Filing Party:
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(4)Date Filed:
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February __, 2004
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders
of ARC Communications Inc. ("ARC") to be held on March __, 2004, at the offices
of Westerman Ball Ederer Miller and Sharfstein, LLP located at 170 Old Country
Road, Mineola, New York 11501. The meeting will begin promptly at 10:00 a.m.,
local time.
At the special meeting, you will be asked to consider and approve a
series of transactions involving the reorganization of ARC as follows: (i) the
merger of ARC with RoomLinX, Inc., a Nevada corporation ("RoomLinX") pursuant to
an Agreement and Plan of Merger (the "Merger Agreement") by and among RoomLinX,
ARC and RL Acquisition, Inc., a Nevada corporation and wholly-owned subsidiary
of ARC ("RL"), whereby RoomLinX will be merged with and into RL (the "Merger"),
with RL continuing as the surviving corporation; (ii) the sale of substantially
all of ARC's existing assets comprising the "graphic design and interactive
multi-media" business to an entity to be formed by Mr. Michael Rubel, Mr. Thomas
Rittenhouse and Mr. Alan Sheinwald (the "ARC Sale"); (iii) an amendment to ARC's
Certificate of Incorporation (the "Amendment"): (i) changing its name to
"RoomLinX, Inc." and (ii) increasing the number of authorized shares of capital
stock of ARC from 50,000,000 to 155,000,000 by increasing the number of shares
of common stock, par value $.001 per share, of ARC from 45,000,000 to
150,000,000; (iv) the reincorporation of ARC from a New Jersey corporation to a
Nevada corporation (the "Reincorporation") by means of a merger of ARC with and
into its wholly-owned subsidiary RL, with RL continuing as the surviving
corporation under the name "RoomLinX, Inc."; and (v) the adoption of a stock
option plan for the grant of options to purchase an aggregate of ________ shares
of common stock, after giving effect to the Merger and the Reincorporation (the
"2003 Plan").
I have enclosed with this letter a Notice of Special Meeting, Proxy
Statement, proxy card and return envelope.
Under New Jersey law, the affirmative vote of at least a majority of
the votes cast by the holders of common stock entitled to vote at the special
meeting is required to approve each of the Merger, the ARC Sale, the Amendment,
the Reincorporation and the 2003 Plan. Our Board of Directors carefully
considered the proposed Merger, the ARC Sale, the Amendment, the Reincorporation
and the 2003 Plan and recommends that you vote in favor of these transactions,
as well as the other matters to be voted upon at the special meeting. The
accompanying Proxy Statement provides detailed information about the
transactions and the other matters to be voted upon at the special meeting.
Whether or not you plan to attend the special meeting in person, it is
important that your shares be represented and voted at the meeting. Please date,
sign, and return your appropriate proxy card(s) promptly in the enclosed
envelope to assure that your shares will be represented and voted at the special
meeting, even if you cannot attend. You can change your vote at any time before
the meeting by returning a new proxy card or revoking a previously mailed proxy
card by notice to Peter A. Bordes, ARC's chief executive officer. If you attend
the special meeting, you may vote your shares in person even though you have
previously signed and returned your proxy card.
On behalf of your Board of Directors, thank you for your continued
support of and interest in ARC Communications Inc.
Sincerely,
{-s- Peter A. Bordes}
Peter A. Bordes
Chairman and Chief Executive Officer
ARC COMMUNICATIONS INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held March __, 2004
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of ARC
Communications Inc. ("ARC") will be held at the offices of Westerman Ball Ederer
Miller and Sharfstein, LLP located at 170 Old Country Road, Mineola, New York
11501, on March __, 2004, at 10:00 a.m., local time, for the following purposes:
(1) To approve the merger of ARC with RoomLinX, Inc., a Nevada
corporation ("RoomLinX"), pursuant to an Agreement and Plan of Merger (the
"Merger Agreement") by and among RoomLinX, ARC and RL Acquisition, Inc., a
Nevada corporation and wholly-owned subsidiary of ARC ("RL"), whereby RoomLinX
will be merged with and into RL (the "Merger"), with RL continuing as the
surviving corporation;
(2) To approve the sale of substantially all of ARC's existing assets
comprising the "graphic design and interactive multi-media" business to an
entity to be formed by Mr. Michael Rubel, Mr. Thomas Rittenhouse and Mr. Alan
Sheinwald (the "ARC Sale");
(3) To approve an amendment to ARC's Certificate of Incorporation to
(i) increase the number of authorized shares of our capital stock from
50,000,000 to 155,000,000 by increasing the number of shares of common stock,
par value $.001 per share, from 45,000,000 to 150,000,000 and (ii) change our
name to "RoomLinX, Inc.";
(4) To approve the reincorporation of ARC from a New Jersey corporation
to a Nevada corporation (the "Reincorporation") by means of a merger of ARC with
and into its wholly-owned subsidiary RL, with RL continuing as the surviving
corporation under the name "RoomLinX, Inc.";
(5) To approve and adopt a stock option plan for the grant of options
to purchase an aggregate of ________ shares of common stock, after giving effect
to the Merger and the Reincorporation (the "2003 Plan"); and
(6) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only the holders of record of our common stock at the close of business
on February __, 2004, are entitled to notice of and to vote at the special
meeting and any adjournment thereof. Each share outstanding on such date is
entitled to one vote at the special meeting. A list of stockholders as of the
close of business on February __, 2004, will be available at the special meeting
for examination by any stockholder, stockholder's agent, or stockholder's
attorney.
Under New Jersey law, the affirmative vote of at least a majority of
the votes cast by the holders of our common stock entitled to vote at the
special meeting is required to approve each of Proposals 1, 2, 3, 4 and 5 as
described in the attached proxy statement in order for ARC to consummate and
complete the Merger, the ARC Sale, the Amendment, the Reincorporation and the
2003 Plan.
Pursuant to Section 14A:11-1 of the New Jersey Permanent Statutes
("NJPS"), stockholders who object to the Merger, the ARC Sale or the
Reincorporation shall have the right to dissent to such transactions and to
demand to be paid in cash the fair value of their shares of ARC capital stock
("Dissenters' Rights"). Attached to this notice is a copy of Sections 14A:11-1
through 14A:11-11 of the NJPS dealing with Dissenters' Rights.
Whether or not you plan to attend the special meeting in person, it is
important that your shares be represented and voted at the meeting. Please date,
sign, and return your appropriate proxy card(s) promptly in the enclosed
envelope to assure that your shares will be represented and voted at the special
meeting, even if you cannot attend. Any proxy given by a stockholder may be
revoked at any time before it is exercised by returning a new proxy card or
revoking a previously mailed proxy card by notice to Peter A. Bordes, chief
executive officer. If you attend the special meeting, you may vote your shares
in person even though you have previously signed and returned your proxy card.
By Order of the Board of Directors,
{-s- Peter A. Bordes}
PETER A. BORDES
Chairman and Chief Executive Officer
Tinton Falls, New Jersey
February __, 2004
TABLE OF CONTENTS
[To be inserted]
INCORPORATION OF INFORMATION BY
REFERENCE
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS FIN-1
Annex A Agreement and Plan of Merger, dated December 8, 2003,
by and among RoomLinX, ARC and RL A-1
Annex B Asset Purchase Agreement between ARC and ______________ B-1
Annex C Form of Certificate of Amendment to Certificate of
Incorporation of ARC C-1
Annex D Article 14-A:11 of the New Jersey Permanent Statutes D-1
Annex E 2003 Stock Option Plan E-1
Annex F Letter of Intent F-1
Except as otherwise specifically noted, references to "ARC," "we,"
"our," "us" and similar words in this proxy statement refer to ARC
Communications Inc. References to "RL" are to RL Acquisition, Inc., our
wholly-owned subsidiary. References to "RoomLinX" are to RoomLinX, Inx.
References to the "transactions" refer to the transactions contemplated by the
Merger, the ARC Sale, the Amendment, the Reincorporation and the 2003 Plan.
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FORWARD-LOOKING STATEMENTS
The information in this proxy statement contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Statements that are not historical in
nature, including statements about beliefs and expectations, are forward-looking
statements. Forward-looking statements include statements preceded by, followed
by or that include the words "may," "will", "should", "estimates", "predicts",
"potential", "continue", "strategy", "believes", "anticipates", "plans",
"expects", "intends" and similar expressions. The forward-looking statements
regarding RoomLinX and ARC, including the surviving corporation following the
Merger pursuant to the Merger Agreement, in this proxy statement include
information relating to:
. financial condition and results of operations of the applicable company,
including revenue and revenue visibility;
. RoomLinX's technology;
. the market for RoomLinX's products and services, including selling
opportunities to potential and existing customers;
. business strategies, operating efficiencies or synergies, competitive
positions, growth opportunities for existing services and products and plans
and objectives of management including growth and other business plans;
. the market for our securities;
. use of third-party marketing sources; and
. the financial and regulatory environment in which RoomLinX and ARC operate.
1
You should not place undue reliance on forward-looking statements, which
speak only as of the date of this proxy statement. These statements are based
upon current expectations. We undertake no obligation to publicly update or
revise any forward-looking statement, whether as a result of future events, new
information or otherwise. All forward-looking statements are subject to risks
and uncertainties that could cause actual events to differ materially from those
projected. Important factors that might cause or contribute to such a
discrepancy include, but are not limited to:
. the risk of whether the transactions close;
. the effect of the transactions on the market price of our common stock;
. the ability of RoomLinX to continue as a going concern, including the
ability to continue as a going concern following the transactions;
. the fact that neither RoomLinX nor ARC has achieved profitability on a
quarterly basis;
. our ability to retain RoomLinX's customers, customers, after the
transactions and our ability to increase revenues after the transactions;
. the effects of vigorous competition with larger and better-established
companies in the markets in which RoomLinX operates;
. the market position and financial condition and resources of RoomLinX's
customers and potential customers;
. the impact of technological change on the business of RoomLinX, and new
entrants and alternative technologies in RoooLinX's market and business;
. the low price and volatility of our common stock;
. the impact of the change in our management following the closing of the
transactions; and
. the factors discussed under "Risk Factors," beginning on page __.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information that we file at the SEC's public reference room at 450 Fifth Street,
Washington, D.C., 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. You also may obtain copies of this
information by mail from the Public Reference Section of the SEC, 450 Fifth
Street, N.W., Room 1024, at prescribed rates. Our public filings with the SEC
also are available from commercial document retrieval services and at the web
site maintained by the SEC at http://www.sec.gov.
We have supplied all information in this proxy statement relating to ARC
and RL. RoomLinX has supplied all information in this proxy statement relating
to RoomLinX.
2
ARC COMMUNICATIONS INC.
733 Shrewsbury Avenue
Tinton Falls, New Jersey 07724
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
To Be Held March __, 2004
This proxy statement is being furnished to stockholders of ARC
Communications Inc. ("ARC") in connection with the solicitation of proxies by
the board of directors of ARC from the holders of outstanding shares of common
stock, par value $.001 per share, of ARC, for use at a Special Meeting of
Stockholders of ARC to be held on March __, 2004, at the offices of Westerman
Ball Ederer Miller and Sharfstein, LLP located at 170 Old Country Road, Mineola,
New York 11501, beginning at 10:00 a.m., local time, and at any adjournments or
postponements thereof. This proxy statement and the accompanying proxy card(s)
are being mailed to holders of our common stock on or about February __, 2004.
Matters to be Considered at the Special Meeting
At the special meeting, our stockholders will be asked to consider and
approve a series of transactions involving the reorganization of ARC as follows:
(i) the merger of ARC with RoomLinX, Inc., a Nevada corporation ("RoomLinX")
pursuant to an Agreement and Plan of Merger (the "Merger Agreement") by and
among RoomLinX, ARC and RL Acquisition, Inc., a Nevada corporation and
wholly-owned subsidiary of ARC ("RL"), whereby RoomLinX will be merged with and
into RL (the "Merger"), with RL continuing as the surviving corporation; (ii)
the sale of substantially all of ARC's existing assets comprising the "graphic
design and interactive multi-media" business to an entity to be formed by Mr.
Michael Rubel, Mr. Thomas Rittenhouse and Mr. Alan Sheinwald (the "ARC Sale");
(iii) an amendment to ARC's Certificate of Incorporation (the "Amendment"): (i)
changing its name to "RoomLinX, Inc." and (ii) increasing the number of
authorized shares of capital stock of ARC from 50,000,000 to 155,000,000 by
increasing the number of shares of common stock, par value $.001 per share, of
ARC from 45,000,000 to 150,000,000; (iv) the reincorporation of ARC from a New
Jersey corporation to a Nevada corporation (the "Reincorporation") by means of a
merger of ARC with and into its wholly-owned subsidiary RL, with RL continuing
as the surviving corporation under the name "RoomLinX, Inc."; and (v) the
adoption of a stock option plan for the grant of options to purchase an
aggregate of ________ shares of common stock, after giving effect to the Merger
and the Reincorporation (the "2003 Plan").
Our board of directors has fixed the close of business on February __,
2004, as the record date for the special meeting. Only persons who are holders
of record of our outstanding common stock as of the record date are entitled to
vote. As of the record date, 21,684,449 shares of common stock were issued,
outstanding, and entitled to vote at the special meeting (such number assumes
the completion of a $500,000 private placement of ARC securities prior to the
special meeting resulting in the issuance of 6,700,000 shares of common stock of
ARC and 3,350,000 warrants to purchase shares of common stock of ARC (the
"Private Placement")). Each holder of record of common stock on the record date
will be entitled to one vote for each share held on all matters to be voted upon
at the special meeting. Accordingly, assuming the completion of the Private
Placement, an aggregate of 21,684,449 votes are eligible to be cast on each of
the proposals at the special meeting.
Quorum, Abstentions and Broker Non-Votes
To hold the special meeting, we need a quorum, which means a majority
of our outstanding shares of common stock as of the record date must be present
at the meeting either in person or by proxy in order to hold the meeting and
conduct business. Abstentions and broker non-votes (meaning proxies submitted by
brokers as holders of record on behalf of their customers that do not indicate
how to vote on the proposal) are also considered part of the quorum. With
respect to each proposal, abstentions and broker non-votes will have the same
effect as a vote AGAINST the proposal.
Votes Required for Approval
Under New Jersey law, the affirmative vote of at least a majority of
the votes cast by the holders of our common stock entitled to vote at the
special meeting is required to approve and adopt each of Proposals 1, 2, 3, 4
and 5.
3
How to Vote
You may vote your proxy by mail, or by attending the special meeting in
person. You may vote by mail by signing the enclosed proxy card(s) that
represent your shares and mailing it in the enclosed, prepaid and addressed
envelope. If you mark your voting instructions on the proxy card, your shares
will be voted as you instruct. You may vote "FOR," "AGAINST" or "ABSTAIN" for
Proposals 1, 2, 3, 4 and 5. A properly executed proxy card marked "ABSTAIN" as
to any proposal will not be voted with respect to that proposal, although it
will be counted for purposes of determining whether there is a quorum. If you
just sign your proxy card with no further instructions, your shares will be
counted as a vote "FOR" all of the proposals. You may vote in person at the
meeting by written ballot which will be passed out to stockholders at the
meeting.
We request that our stockholders complete, date and sign the
accompanying proxy card(s) and promptly return it in the accompanying envelope.
If you receive more than one proxy card, it means that you have multiple
accounts at the transfer agent and/or with brokers. Please sign and return all
proxy cards to ensure that all your shares are voted.
If your shares are held in street name, your brokerage firm may vote
your shares under certain circumstances. These circumstances include certain
"routine" matters, such as the election of directors, but do not include other
matters, including approval of the Merger, the ARC Sale, the Amendment, the
Reincorporation and the 2003 Plan. Brokers will provide instructions to
beneficial owners on how to direct the broker to vote the shares. Broker
non-votes (meaning proxies submitted by brokers as holders of record on behalf
of their customers that do not indicate how to vote on the proposal) are counted
only for purposes of establishing a quorum.
All properly executed proxies that we receive prior to the vote at the
special meeting, and that are not revoked, will be voted in accordance with the
instructions indicated on the proxies. If no direction is indicated (other than
broker non-votes), your proxy will be voted FOR each of the proposals described
in this proxy statement. Our board of directors does not currently intend to
bring any other business before the special meeting and our board of directors
is not aware of any other matters to be brought before the special meeting. If
other business properly comes before the special meeting, the proxies will be
voted in accordance with the judgment of the proxy holders.
You may revoke your proxy and change your vote at any time before the
polls close at the special meeting. You may do this by: (i) sending written
notice to our corporate secretary at 733 Shrewsbury Avenue, Tinton Falls, New
Jersey 07724; (ii) signing another proxy with a later date and delivering the
proxy to our corporate secretary; or (iii) voting again at the special meeting.
Dissenters' Rights
Pursuant to Section 14A:11-1 of the New Jersey Permanent Statutes
("NJPS"), stockholders who object to the Merger, the ARC Sale or the
Reincorporation shall have the right to dissent to such transactions and to
demand to be paid in cash the fair value of their shares by following the
procedures prescribed in the NJPS. This proxy statement and Annex D attached to
this proxy statement set forth the rights of dissenting stockholders and provide
a description of the procedures required to be followed by dissenting
stockholders to obtain such fair value for their shares.
4
SUMMARY TERM SHEET
The following points highlight what we believe are the most material
terms and features of the proposals that are set forth in this proxy statement.
The points are provided only as an introduction to the more detailed discussions
in the cross referenced sections of this proxy statement.
The Merger, the Amendment, the Reincorporation and the 2003 Plan
o Parties to the Merger: ARC Communications Inc. ("ARC"), RL Acquisition, Inc.,
a wholly-owned subsidiary of ARC ("RL") and RoomLinX, Inc. ("RoomLinX").
o The Merger: RoomLinX will be merged with and into RL, with RL continuing as
the surviving corporation.
o Merger Consideration: RoomLinX stockholders receive (i) three shares of common
stock of ARC for each one share of common stock outstanding at the effective
time of the Merger (excluding certain shares of common stock of ARC and options
to purchase common stock of ARC to be issued to consultants as part of the
Merger) and (ii) options and/or warrants to purchase the greater of (a)
8,000,000 shares of common stock of ARC or (b) three shares of common stock of
ARC for each one option or warrant outstanding to purchase common stock at the
effective time of the Merger. See "Proposal 1 - The Merger" and "- Terms of the
Merger Agreement."
o The Amendment: A certificate of amendment to ARC's certificate of
incorporation will be filed to increase the number of authorized shares of
common stock of ARC to 150,000,000 and change ARC's name to "RoomLinX, Inc." See
"Proposal 3 - Description of Amendment."
o Reincorproation: ARC will be reincorporated from a New Jersey corporation to a
Nevada corporation by means of a merger of ARC with and into RL, with RL
continuing as the surviving corporation under the name "RoomLinX, Inc." See
"Proposal 4 - Terms of Reincorporation" and "Comparison between New Jersey and
Nevada Law."
o The 2003 Plan: ARC shall authorize a stock option plan for the grant of
options to purchase an aggregate of ________ shares of common stock. See
"Proposal 5 - Terms of the 2003 Plan."
The ARC Sale
o The ARC Sale: Mr. Michael Rubel, Mr. Thomas Rittenhouse and Mr. Alan
Sheinwald, through a to be formed entity to be owned by them collectively, will
purchase substantially all of ARC's existing assets comprising the "graphic
design and interactive multi-media" business.
o Purchase Price: The purchase price shall be (i) $70,000 payable in cash at the
closing plus (ii) two additional payments, the first of which will be payable
within 45 days after the end of the 12-month period following the closing and
the second of which will be payable within 45 days after the end of the 24-month
period following the closing. "See Proposal 2 - Terms of the Letter of Intent."
o Deferred Payments: The first deferred payment shall be an amount equal to 50%
of the earnings before taxes, depreciation and amortization ("EBTDA") of the ARC
business for the 12-month period beginning on the date of the closing and ending
on the 12-month anniversary of the closing. The second deferred payment shall be
50% of the EBTDA of the business for the 12-month period beginning on the date
following the 12-month anniversary of the closing and ending on the 24-month
anniversary of the closing. "See Proposal 2 - Terms of the Letter of Intent."
Recommendation of the Board of Directors
Our board of directors has determined that the terms of the Merger, the
ARC Sale, the Amendment, the Reincorporation and the 2003 Plan, including the
issuance of shares of our common stock and options and/or warrants to purchase
shares of our common stock as consideration in the Merger as described in
Proposal 1, and the consideration received by us in the ARC Sale as described in
Proposal 2, are fair to, and in the best interests of, ARC and our stockholders,
and recommends that our stockholders vote FOR the Merger, the ARC Sale and the
transactions contemplated thereby, and FOR the Amendment described in Proposal
3, the Reincorporation described in Proposal 4 and the adoption of the 2003 Plan
described in Proposal 5.
5
QUESTIONS AND ANSWERS ABOUT THE ARC SALE AND THE MERGER
Why am I receiving this proxy statement and proxy card(s)?
You are receiving a proxy statement and proxy card(s) because you own
shares of common stock of ARC Communications Inc. This proxy statement describes
the issues on which we would like you, as a stockholder, to vote. It also gives
you information on these issues so that you can make an informed decision.
What am I voting on?
You are being asked to vote on the following matters:
Proposal 1 - To approve the merger of ARC with RoomLinX, Inc., a Nevada
corporation ("RoomLinX") pursuant to an Agreement and Plan of Merger (the
"Merger Agreement") by and among RoomLinX, ARC and RL Acquisition, Inc., a
Nevada corporation and wholly-owned subsidiary of ARC ("RL"), whereby RoomLinX
will be merged with and into RL (the "Merger"), with RL continuing as the
surviving corporation and wholly-owned subsidiary of ARC;
Proposal 2 -- To approve the sale of substantially all of ARC's
existing assets comprising the "graphic design and interactive multi-media"
business to an entity to be formed by Mr. Michael Rubel, Mr. Thomas Rittenhouse
and Mr. Alan Sheinwald (the "ARC Sale");
Proposal 3 -- To approve an amendment to ARC's Certificate of
Incorporation to (i) increase the number of authorized shares of our capital
stock from 50,000,000 to 155,000,000 shares by increasing the number of shares
of common stock, par value $.001 per share, of ARC from 45,000,000 to
150,000,000 shares and (ii) change our name to "RoomLinX, Inc.";
Proposal 4 -- To approve the reincorporation of ARC from a New Jersey
corporation to a Nevada corporation (the "Reincorporation") by means of a merger
of ARC with and into its wholly-owned subsidiary RL, with RL continuing as the
surviving corporation under the name "RoomLinX, Inc."
Proposal 5 - To approve and adopt a stock option plan for the grant of
options to purchase an aggregate of ________ shares of common stock, after
giving effect to the Merger and the Reincorporation (the "2003 Plan").
Each of the Merger, the ARC Sale, the Amendment, the Reincorporation
and the 2003 Plan is conditioned upon our receipt of stockholder approval of
each of Proposals 1, 2, 3 , 4 and 5. If we do not obtain stockholder approval of
each of these proposals, we will not be able to consummate the Merger, the ARC
Sale, the Amendment, the Reincorporation or the 2003 Plan.
What will happen in the Merger?
In the Merger, RoomLinX will be merged with and into RL, with RL as the
surviving corporation of such merger. As a result of the Merger, the outstanding
shares of common stock of RoomLinX shall be canceled and converted in the manner
provided in the Merger Agreement, and the outstanding options, convertible
debentures and warrants of RoomLinX, other than up to $30,000 of convertible
debentures which shall be converted into indebtedness of ARC, shall be canceled
or converted in the manner provided by the Merger Agreement, the separate
corporate existence of RoomLinX shall cease, and RL shall continue unimpaired as
the surviving corporation in the and as a wholly-owned subsidiary of the ARC.
In consideration for the Merger of RoomLinX with and into RL, ARC will
issue to the current shareholders of RoomLinX (the "RoomLinX Shareholders") (i)
three (3) shares of common stock of ARC for each one (1) share of common stock
outstanding at the effective time of the Merger (excluding certain shares of
common stock of ARC and options to purchase shares of common stock of ARC to be
issued to consultants as part of the Merger (the "Advisor Shares")) and (ii)
options and/or warrants to purchase the greater of (a) 8,000,000 shares of
common stock of ARC or (b) three (3) shares of common stock of ARC for each one
(1) option or warrant outstanding to purchase common stock of ARC at the
effective time of the Merger.
6
There are currently 21,684,449 shares of common stock of ARC issued and
outstanding (such number assumes the completion of a $500,000 private placement
of ARC securities prior to the special meeting resulting in the issuance of
6,700,000 shares of common stock of ARC and warrants to purchase 3,350,000
shares of common stock of ARC (the "Private Placement")). Accordingly, as a
result of the Merger, the RoomLinX Shareholders shall be entitled to receive an
aggregate of 65,053,347 shares of common stock of ARC (the "Common Stock
Consideration"). In addition, 500,000 shares of common stock of ARC are issuable
upon exercise of certain outstanding options and 3,350,000 shares of common
stock of ARC are issuable upon exercise of outstanding warrants issued in the
Private Placement. Since the total amount of outstanding options and warrants to
purchase common stock of ARC is 3,850,000 and the RoomLinX Shareholders are
entitled to receive options and/or warrants to purchase the greater of (a)
8,000,000 shares of common stock of ARC or (b) three (3) shares of common stock
of ARC for each one (1) option or warrant outstanding to purchase common stock
of ARC at the effective time of the Merger, the RoomLinX Shareholders shall be
entitled to receive options and/or warrants to purchase an aggregate of
11,550,000 shares of common stock of ARC (the "Other Consideration"). As a
result of the Merger, the RoomLinX Shareholders shall acquire voting and
dispositive control of ARC's shares of common stock.
As a condition to consummating the transactions contemplated by the
Merger Agreement, simultaneously with the filing of the certificate of merger
with the Secretary of State of the State of Nevada to effect the Merger, ARC is
required file the Amendment increasing the number of authorized shares of its
common stock to 150,000,000 and changing its name to "RoomLinX, Inc." In
addition, following the Merger, ARC will be reincorporated from a New Jersey
corporation to a Nevada corporation by means of a merger of ARC with and into
its wholly-owned subsidiary RL, with RL continuing as the surviving corporation
under the name "RoomLinX, Inc.", and the Surviving Corporation shall have in
place a stock option plan for the grant of options to purchase an aggregate of
________ shares of common stock of the Surviving Corporation.
What will happen in the ARC Sale?
Pursuant to an asset purchase agreement, Michael Rubel, Thomas
Rittenhouse and Alan Sheinwald, through a to be formed entity to be owned by
them collectively (the "Purchaser"), will purchase substantially all of ARC's
existing assets comprising the "graphic design and interactive multi-media"
business (the "ARC Business"). The purchase price for the ARC Business shall be
(i) $70,000 payable in cash at the closing plus (ii) two additional payments
(each a "Deferred Payment"), the first of which will be payable within 45 days
after the end of the 12-month period following the closing and the second of
which will be payable within 45 days after the end of the 24-month period
following the closing. The first Deferred Payment shall be an amount equal to
50% of the earnings before taxes, depreciation and amortization ("EBTDA") of the
ARC Business for the 12-month period beginning on the date of the closing and
ending on the 12-month anniversary of the closing. The second Deferred Payment
shall be 50% of the EBTDA of the Business for the 12-month period beginning on
the date following the 12-month anniversary of the closing and ending on the
24-month anniversary of the closing.
When do you expect the transactions to be completed?
We plan to complete the transactions as soon as possible after the
special meeting, subject to the approval of our stockholders.
What risks should I consider in evaluating the transactions?
You should consider the risks described under the heading "Risk
Factors" beginning on page ___.
What are the U.S. federal income tax consequences of the transactions to us and
our stockholders?
With respect to the Merger, for federal income tax purposes, we intend
that neither we nor our stockholders will recognize any gain or loss as a result
of the Merger. No formal request for a ruling or other determination was or will
be obtained. Each stockholder should consult with his or her own tax advisor.
7
With respect to the ARC Sale, for federal income tax purposes, we
intend that ______________________. No formal request for a ruling or other
determination was or will be obtained. Each stockholder should consult with his
or her own tax advisor.
How many votes are required to approve the transactions and the other proposals
to be considered at the special meeting?
Proposals 1, 2, 3, 4 and 5 require the affirmative vote of at least a
majority of the votes cast by the holders of common stock entitled to vote at
the special meeting. Only holders of our common stock who are stockholders of
record on February __, 2004, the record date for the special meeting, are
entitled to vote.
Who will be our management following completion of the transactions?
In view of the controlling interest in ARC to be acquired by the
RoomLinX Shareholders, the Merger Agreement provides for the current members the
board of directors of ARC and RL to resign at the time of the Merger and appoint
five designees (the "Board Designees"), of whom two were selected by of the
board of directors of RoomLinX (the "RoomLinX Designees"), one was selected by
the board of directors of ARC (the "ARC Designee") and two were selected by the
RoomLinX Designees and the ARC Designee (the "Joint Designees"). The RoomLinX
Designees are Mr. Robert P. Lunde and Mr. Herbert I. Hunt, III. The ARC Designee
is Mr. Peter A. Bordes. The Joint Designees are __________ and __________. The
officers of the Surviving Corporation will consist of ------------.
Does the board of directors recommend approval of the transactions and the other
proposals to be considered at the special meeting?
Yes. After careful consideration, our board of directors recommends
that our stockholders vote FOR each of the matters presented in Proposals 1, 2,
3, 4 and 5.
Who can help answer my questions about the transactions?
If you have additional questions about these transactions, you should
contact Mr. Peter A. Bordes, our Chief Executive Officer, at 733 Shrewsbury
Avenue, Tinton Falls, New Jersey 07724.
RISK FACTORS
In addition to the other information included and incorporated by
reference in this proxy statement, our stockholders should carefully consider
the matters described below in voting on the proposals to be voted on at the
special meeting.
Risk Factors Relating to the Transactions
If we are unable to complete the transactions, our business will be
adversely affected.
If the ARC Sale and the Merger are not completed, our business and,
likely, our stock price, will be adversely affected. We currently anticipate
that our cash and cash equivalents may be sufficient to fund our operations
through ________, 2004. If we are unable to complete the transactions, we may be
unable to continue to operate our business. Costs related to the transactions,
such as legal and accounting, must be paid even if the transactions are not
completed. In addition, even if we have sufficient funds to continue to operate
our business but the transactions are not completed, the current market price of
our common stock may decline.
The transactions will result in substantial dilution to our current
stockholders.
8
The issuance of shares of our capital stock and options and/or warrants
to purchase shares of our common stock in the Merger will significantly dilute
the voting power and ownership percentage of our existing stockholders. We
expect to issue in the transactions in excess of 65,053,347,shares of our common
stock, plus options and warrants to purchase 11,550,000 shares of our common
stock. In addition, we will issue the following Advisor Shares: (i) 2,000,000
shares of common stock to Alliance Advisors and Roccus Capital, (ii) options to
purchase 500,000 shares of common stock at an exercise price of $.08 per share
to Mr. Peter A. Bordes and (iii) 250,000 shares of common stock and options to
purchase 250,000 shares of common stock at an exercise price of $.20 per share
to Rodman and Renshaw. Accordingly, immediately following completion of the
Merger, the RoomLinX Shareholders are expected to represent in excess of 72.9%
of our equity on a fully-diluted basis, assuming the exercise by the RoomLinX
Shareholders of all options and warrants constituting the Other Consideration
issued to the RoomLinX Shareholders in the Merger.
The RoomLinX Shareholders have voting power of the capital stock of the
Surviving Corporation sufficient to control or significantly influence all major
corporate decisions.
Upon the closing of the Merger and the Reincorporation, the Surviving
Corporation will have outstanding an aggregate of approximately 88,987,796
shares of common stock (excluding shares issued or issuable upon exercise of
outstanding options and warrants to purchase common stock). Accordingly, the
voting rights of the RoomLinX Shareholders will represent approximately 73.1% of
the voting power of the Surviving Corporation.
Risk Factors Relating to the Surviving Corporation After the Transactions
If the Surviving Corporation continues to experience losses after the
transactions are completed, we could experience difficulty meeting our business
plan, and our stock price could be negatively affected.
After the transactions, we expect to continue to experience operating
losses and negative cash flow from operations. Any failure to achieve or
maintain profitability and positive cash flow could negatively impact the market
price of our common stock and our ability to continue as a going concern.
Neither RoomLinX nor we has been profitable or cash flow positive on a quarterly
or annual basis, and we anticipate that after completion of the transactions, we
will incur net losses and negative cash flow for the foreseeable future. As a
result, we will need to generate significant quarterly revenues if we are to
achieve and maintain profitability and positive cash flow. A failure to achieve
profitability or positive cash flow in the near term could make it difficult or
impossible for us to grow our business. If our business strategy is not
successful, we may not generate significant revenues or achieve profitability.
Future sales of substantial amounts of the Surviving Corporation's
common stock could cause the market price for such common stock to significantly
decline.
After the transactions, sales of substantial amounts of the Surviving
Corporation's common stock in the public market (or the public perception that
such sales might occur) could cause the market price of such common stock to
fall, and could make it more difficult for us to raise capital through public
offerings or other sales of capital stock.
RoomLinX has not achieved profitability on a quarterly basis, and its
business may incur net losses for the next several quarters.
RoomLinX incurred net losses of $__________ and $_________ for the
fiscal years ending December 31, 2001 and 2002, respectively, and incurred a net
loss of approximately $_________ for the nine months ending September 30, 2003.
RoomLinX has not realized any profit on a quarterly basis since _____, and its
business may not achieve profitability in the near future. RoomLinX has
undertaken cost reduction measures, but there can be no guarantee that further
cost reductions or reductions in operations will not be required, nor that any
such reductions will result in RoomLinX's business achieving profitability. If
RoomLinX's operations achieve profitability, there can be no guarantee that such
profitability could be sustained or increased on a quarterly or annual basis in
the future.
RoomLinX faces significant competition from companies that have greater
resources than RoomLinX possesses, and the markets in which RoomLinX competes
are relatively new, intensely competitive, highly fragmented and rapidly
changing.
9
The markets in which RoomLinX competes are relatively new, intensely
competitive, highly fragmented and rapidly changing. RoomLinX's principal
competitors include other wireless high-speed Internet access providers and the
internal information technology departments of larger companies that may elect
to develop functionalities similar to those provided by RoomLinX's products and
services rather than buy them from RoomLinX. Many of RoomLinX's current and
future competitors may have advantages over RoomLinX, including:
. longer operating histories;
. larger customer bases;
. substantially greater financial, technical, research and development and
sales and marketing resources;
. a lead in expanding their business internationally;
. greater name recognition; and
. the ability to more easily provide a comprehensive hardware and software
solution.
The current and potential competitors of RoomLinX have established, and
may continue to establish in the future, cooperative relationships among
themselves or with third parties that would increase their ability to compete
with RoomLinX. In addition, competitors may be able to adapt more quickly than
RoomLinX to new or emerging technologies and changes in customer needs, or to
devote more resources to promoting and selling their products and services. If
RoomLinX fails to adapt to market demands and to compete successfully with its
existing and new competitors, its business and financial performance would
suffer.
The success of RoomLin'x products and services will depend in part upon
its ability to continually enhance those offerings to meet the changing needs of
customers, and if RoomLinX is not able to do so it will lose future business to
its competitors.
We believe that the future success of the products and services of
RoomLinX will depend to a significant extent upon its ability to enhance these
offerings and to introduce new products, features and services to meet the
requirements of its customers in a rapidly developing and evolving market. The
requirements of the current and prospective customers for RoomLinX's products
and services may change and these or its future products or services may not
satisfy the evolving needs of its target markets. If RoomLinX is unable to
anticipate or respond adequately to customer needs, it may lose business and its
financial performance may suffer.
RoomLinX may be unable to protect its proprietary technology, and its
competitors may infringe on this technology, or develop competitive technology,
any one of which could harm the value of this proprietary technology.
Any misappropriation of RoomLinX's technology or the development of
competitive technology could seriously harm its business. Other companies could
independently develop similar or superior technology without violating
RoomLinX's proprietary rights. If RoomLinX has to resort to legal proceedings to
enforce its intellectual property rights, the proceedings could be burdensome
and expensive and could involve a high degree of risk.
Claims by others that RoomLinX's products or services infringe their
proprietary technology could be costly and harm its business.
Third parties could claim that the products, technology or services
that RoomLi8nX offers infringe their proprietary rights. An infringement claim
against RoomLinX could be costly even if the claim is invalid, and could
distract its management from the operation of its business. Furthermore, a
judgment against RoomLinX could require RoomLinX to pay substantial damages and
could also include an injunction or other court order that could prevent
RoomLinX from selling these or other offerings. If RoomLinX faced a claim
relating to proprietary technology or information, it might seek to license
technology or information, or modify its own, but it might not be able to do so.
RoomLinX's failure to obtain the necessary licenses or other rights or to
develop non-infringing technology could prevent it from selling these or other
products or services and could seriously harm its business.
10
THE COMPANIES
ARC Communications Inc.
ARC is an interactive design firm specializing in websites and CD-ROMs.
ARC focuses its efforts in the healthcare, pharmaceutical and technology
industries. ARC's graphic design and interactive multi-media products use
advanced technologies to create media for corporate communications. ARC has
attempted to expand its business through existing products such as a 3-D
animation design and multimedia presentations.
Interactive Multi-media Programs have been a growing area of ARC's
business. ARC has formed strategic alliances with large advertising agencies
that have major pharmaceutical companies as their clients. By forming these
alliances, ARC's clients are able to use ARC's expertise in a variety of
interactive multimedia areas. Further, such strategic alliances enable ARC's
clients to use leading edge technologies without having to incur substantial
development costs. ARC earns revenues from the Interactive Programs from billing
for the creative development. The expenses are principally payroll related,
purchase costs are insignificant.
ARC has the ability to design and create specific websites for a client
and may operate such a site if so desired. ARC also designs and develops
interactive kiosks and advertising and promotional materials, including
packaging for retail products. ARC's has attempted to position itself to
effectively transition into a full service integrated, interactive marketing and
communication company. ARC's services are used by its clients to create a new
medium for advertisement, promotion and technical support of such customer's
products and services. Web sites can provide commercial organizations benefits
in addition to those available through conventional media, including the ability
to enhance a corporate brand, engage and entertain consumers, provide in-depth
information, reduce selling and operating costs, generate leads and build retail
traffic, expand distribution channels (otherwise known as e-commerce), promote
major sporting and entertainment events and monitor popularity of content,
conduct research, and build databases for on-going marketing efforts.
ARC partners with clients to focus on how new and emerging technologies
can enable them to build one-on-one customer relationships. Tapping into
strategic expertise, media know-how, creative talent and technical excellence,
ARC guides clients to achieving a favorable return on investment from Web-based
marketing.
ARC's services range from consulting services to complete
marketing-driven design and construction of multi-level Web sites. ARC also
offers numerous integrated services in addition to those discussed above,
particularly offline media planning and buying related to identification,
negotiation for and purchase of banners, sponsorship and proprietary
partnerships on Web sites.
ARC markets its services directly and seeks to form strategic marketing
relationships with third parties. Presently, ARC has 3 employees dedicated to
business development. Additionally, 2 of ARC's executive officers spend a
portion of their time marketing ARC's services. ARC also seeks to attract new
clients through other methods, including referrals from existing clients. ARC
seeks to cross-sell its various services to its clients and prospective clients
through sales presentations that encourage clients to utilize all of ARC's
services.
The markets for ARC's services are highly competitive and are
characterized by pressures to incorporate new technologies, accelerate
completion schedules and reduce prices. ARC expects competition for its services
to intensify in the future, partly because there are no substantial barriers to
entry into ARC's business. ARC faces competition from a number of sources,
including potential customers that perform interactive marketing and
communications services and Web site development services in-house. These
sources also include other Web site service boutique firms, communications,
telephone and telecommunications companies, computer hardware and software
companies such as Microsoft Corporation and Adobe Systems Incorporated,
established online service companies, advertising agencies, internet-services
and access providers as well as specialized and integrated marketing
communication firms. Many of ARC's competitors or potential competitors have
longer operating histories, more substantial customer relationships and
significantly greater financial, managerial, technological, sales, marketing and
other resources than the Company. ARC also competes on the basis of creative
reputation, price, reliability of services and responsiveness. There can be no
assurance that ARC will be able to compete and its inability to do so would have
a material adverse impact on ARC's business, financial condition and operating
results.
11
There are numerous competitors which have longer operating histories,
more substantial customer relationships and significantly greater financial,
managerial, technological, sales, marketing and other resources than the
Company.
At December 31, 2002, ARC had 12 employees, all of which are full-time
employees. Full-time employees include 3 in strategic planning, executive
management, business development; 1 account manager; 4 creative, production and
programming personnel; and 4 administrative staff. Subsequent to December 31,
2002, ARC reduced its staff even further to keep its overhead in line with
decreasing revenues.
RL Acquisition, Inc.
RL is our wholly-owned subsidiary. It was formed for the purpose of the
Merger pursuant to the Merger Agreement.
RoomLinX, Inc.
Founded in 1999, RoomLinX specializes in providing advanced 802.11b
WI-FI wireless and wired networking solutions for high speed internet access to
hotel guests, convention center exhibitors, corporate apartments, and special
event participants. RoomLinX has built a pipeline, currently consisting of over
400 hotels. RoomLinX has corporate offices in Vancouver, British Columbia,
Canada and Sacramento, California.
RoomLinX delivers wireless high-speed Internet access solutions.
RoomLinX specializes in deploying full hotel-wide networks. Hotel customers sign
long-term service agreements. Hotels pay a fixed monthly service fee during
contracts. Most contracts are for five years and are renewable.
Solutions
RoomLinX's wireless network delivers "plug and play" high-speed
Internet access to hotels and convention centers at speeds of up to 11 Mbps or
up to 300 times faster than a standard dial-up modem. This speed can supply the
hotel with all of the requirements to supply the hotel's back office, guest
rooms, restaurants, lobbies, convention center and meeting rooms over the
internal local area network (LAN). For convention centers requiring a high-speed
connection for their booths and meeting areas, the companies wireless local area
network (WLAN) product enables portable and mobile PC users to seamlessly access
the Internet from anywhere within the convention center. Users access the
Internet at up to 11 Mbps without any modification to their PC and can roam
freely about the premises and still are connected to the resources of a wired
network.
Services
RoomLinX offers: easy "plug and play" access providing instant and
seamless connections for laptop users from anywhere throughout a property,
including guest rooms, meeting rooms, back office and public areas; high-speed
connection up to 300 times faster than a standard dial-up modem; access to home
and corporate email accounts and VPN's; unlimited and flexible billing options
for free, flat rate, or time based usage; pand otential to provide value-added
services such as wireless POS, maintenance, check-in, and IP telephony.
RoomLinX offers the following services: site-specific determination of
needs and requirements; design and installation of the wireless network; full
maintenance and support of the network; technical support to assist guests and
hotel staff 24 hours a day, 7 days a week, 365 days a year; hotel staff and
management training, and marketing assistance and continuous network monitoring
to ensure high quality of service.
Structural Model
RoomLinX has built a foundation on which to achieve growth with minimal
fixed expenditures. RoomLinX has achieved this by building the infrastructure
and quality controls to outsource the following functions: sales and marketing,
system integration, bandwidth provisioning, system deployment, and technical
support and service. RoomLinX acts as a pure service provider that aggregates
the products and services required to install wireless high-speed networks and
deploys them through its delivery infrastructure that combines in-house
technical and RF (radio frequency) experts with select system integrators in the
customer's area. RoomLinX then runs and manages the network under a long-term
contract.
12
Sales and Marketing
RoomLinX gives the client hotel property two financial options in
acquiring our high-speed Internet services: the hotel can buy the system and pay
RoomLinX a monthly service fee to maintain technical support, or the hotel can
lease-to-own the system and pay RoomLinX a monthly service fee. RoomLinX, as
provided in its contracts with the hotels, has the first right of refusal to
provide all wireless services to the hotel. There are many other products that
RoomLinX can potentially sell to the hotels to increase its revenues and profit
margins. The majority of these services would be outsourced to third parties
that have expertise with the particular service. The third party service
provider would then pay RoomLinX a fee for access to the hotel and an ongoing
commission related to their revenues.
RoomLinX has established a series of strategic alliances with
communication marketing companies and communication providers throughout the
U.S. These organizations already have preferred access to the customer, which
may give RoomLinX an advantage in the market place. These sales representatives
are paid on a commission basis. RoomLinX provides comprehensive sales training
and packaged marketing materials to its independent representatives in order to
obtain optimum installation contracts. RoomLinX currently employs six in-house
technical sales and marketing personnel that support the representatives in the
field and effectively close the contracts.
There are three succinct areas of outsource marketing in the
hospitality sector that RoomLinX concentrates on:
Independent Communication Sales Representatives, and Representative
Organizations
This group sells local and long distance communication products into
the hotel industry. For the most part, they have long-term contract commitments
with the hotels to provide these services. Because they sell multiple lines of
communication services to hotels, they have direct contact with the MIS
director. Since these services provide income to the hotel, they have good
access to the decision-maker in this market.
Wholesale Equipment Suppliers, Equipment Installers in the Hospitality
Market
This group sells and installs PBX systems, voice mail systems, property
management systems and software related services directly into the hotel market.
Since these services are directly related to both the income and marketing sides
of the hospitality area, their access to this clientele is very good, and since
these items are considered a cost item for the hotel, they are generally well
acquainted with the industry.
The Hotel Interconnect Individual or Companies
This group handles the installation of Groups 1 and 2, and the
maintenance issues related to these Groups.
In all cases, at least one and generally all three of the above groups
interact with the hotel industry at all levels on a daily basis. This provides
RoomLinX with a valuable source of sales and marketing personnel with direct
contact into the industry.
RoomLinX has an experienced team in the area of agent-based sales to
the hospitality industry that provides them with the ability to build and
execute on an outsourced sales model that is highly competitive in the industry.
RoomLinX will continue to build on this model and add other sales teams as part
of its growth strategy.
Sales Process - The Convention Center Market
The other major business focus for RoomLinX is the convention center
and meeting space business. Conventions and trade shows now regularly require
the ability to quickly deploy high-speed Internet access. However, convention
centers have had difficulty supporting the growth of high technology through
conventional means and normally supply high-speed Internet access by providing
Ethernet T1 lines which are hard wired to the exhibit booths; an expensive and
time-consuming process. Working on a revenue sharing partnership, RoomLinX
deploys a wireless network into the convention center, and in return for new
revenues and offering a new amenity to event organizers, the convention center
provides RoomLinX with full access to the contact information for all of the
presenters in upcoming events. In addition to revenues generated from
pre-selling Internet access, RoomLinX is able to offer same day Internet access
by renting wireless cards and other wireless access devices to booth presenters
and convention center visitors.
13
SPECIAL FACTORS
Background of the Transactions
In the past several years, ARC has incurred net losses and had a
working capital deficit and capital deficiency. ARC's net sales since the year
ended 2000 have continued to decline due to decreases in web site development,
full interactive multi-media development and production/print services. During
2001, ARC lost three major customers and decreased sales volume from three other
customers. The loss of the three customers was due to the merger of two
customers into larger organizations and the closing down of one customer. During
2002, ARC's revenue decline was due to the continued slow down in the economy in
ARC's primary markets, technology and healthcare.
On April 1, 2003, ARC sold its continuing professional education
business Arcmesa Educators, Inc. ("Arcmesa") to Belcan Corporation of
Cincinnati, Ohio. This area of ARC's business had sustained continued losses
culminating in the closing of ARC's educational seminar programs which generated
a substantial portion of the educational divisions revenue. ARC management
determined that it was in the best interests of ARC and its stockholders to sell
Arcmesa to allow ARC to concentrate on its core business and provide ARC with
sufficient revenue to maintain an appropriate level of liquidity for the near
term. During 2003, ARC also reduced its number of employees and other overhead
to bring it in line with its revenue.
Although ARC reduced overhead to bring it in line with its revenue, ARC
has been unable to eliminate its pattern of losses. During 2003, ARC's
management determined that due to ARC's continuing losses in its current line of
business and the increasing cost and expense of continuing ARC as a public
company, ARC could no longer stay a public company unless it went into another
line of business. As a result of such determination, management began an initial
search for a merger candidate with the ultimate intention of spinning-off the
existing ARC business.
Mr. Peter Bordes, Chairman and Chief Executive Officer of ARC, was
introduced to Mr. Robert Lunde, President and Chief Executive Officer of
RoomLinx, by Rodman and Renshaw, financial advisors to RoomLinx. Following the
introduction, a meeting was set up among, Mr. Bordes, Mr. Lunde and several
corporate financial advisors of ARC at the offices of Rodman and Renshaw in late
May 2003. Following several weeks of negotiations, on July 21, 2003, the parties
entered into a Letter of Intent to merge. The Letter of Intent was amended on
September 19, 2003. The definitive merger agreement was subsequently signed on
December 9, 2003.
Recommendation of the Special Committee and our Board of Directors
On _________, 2003, __________, acting as the Special Committee (the
"Special Committee") determined (1) that the Merger, the ARC Sale, the
Amendment, the Reincorporation, the 2003 Plan and the transactions contemplated
thereby are fair to and in the best interests of us and our stockholders and (2)
to recommend that our stockholders approve the proposals related to the Merger,
the ARC Sale, the Amendment and the Reincorporation. Accordingly, the Special
Committee determined to recommend that our stockholders vote FOR the Merger, the
ARC Sale, the issuance of shares of our capital stock to RoomLinX Shareholders
in connection with the Merger, the Amendment, the Reincorporation and the other
transactions contemplated thereby.
At its meeting held on _________, 2003, our board of directors adopted
the recommendation of the Special Committee and determined (1) that the Merger,
the ARC Sale, the Amendment, the Reincorporation, the 2003 Plan and the
transactions contemplated thereby are fair to and in the best interests of us
and our stockholders and (2) determined to recommend that our stockholders
approve the proposals related to the transactions. Accordingly, our board of
directors recommends that our stockholders vote FOR the Merger, the ARC Sale,
the issuance of shares of our capital stock to RoomLinX Shareholders in
connection with the Merger, the Amendment, the Reincorporation and the other
transactions contemplated thereby.
14
Factors Relevant to the Transactions
In reaching its decision to approve the Merger, the ARC Sale, the
Amendment, the Reincorporation, the 2003 Plan and to recommend approval of the
transactions and the proposals, including the issuance of shares of our capital
stock in connection with the Merger, each of the Special Committee and our board
of directors consulted with our president, chief executive officer and advisors,
and considered information provided by the other members of our management team
and independently considered the proposed Asset Purchase Agreement, the Merger
Agreement and the transactions contemplated by such agreements.
Special Committee Considerations
The Special Committee considered the following factors as reasons that
the Merger, the ARC Sale, the Amendment, the Reincorporation and the 2003 Plan
will be beneficial to us and our stockholders:
1. alternatives to the transactions;
2. the lack of other suitable strategic business combination partners
for us;
3. the substantial compliance costs of being a public company;
4. the inability of ARC to earn sufficient revenues from its existing
business to cover the cost and expense of being a public company;
5. the lack of alternative financing sources;
6. the impact on our stockholders of the issuance of additional shares
of capital stock;
7. discussions with our management team, including our president, chief
executive officer, and representatives of our counsel regarding the terms and
conditions of the Merger and the ARC Sale;
8. that we would not be cash flow or EBITDA positive immediately after
the transactions;
9. the risk that the benefits sought in the transaction might not be
fully achieved; and
10. the interests that our executive officers and directors may have
with respect to the transactions in addition to their interests as our
stockholders generally.
Board of Directors Considerations
In the course of its deliberations, our board of directors reviewed
with our management and our advisors a number of other factors relevant to the
transactions. In particular, our board of directors considered, among other
things:
1. information relating to the business, assets, management, financial
condition, customers, competitive position and operating performance of us and
RoomLinX, including the prospects of us and RoomLinX if either of us were to
continue business as independent companies;
2. the terms of the transactions; and
3. the opinion of the Special Committee that the consideration to be
paid by us in connection with the Merger and the consideration to be paid to us
in connection with the ARC Sale are fair to our stockholders, from a financial
point of view.
In addition, our board of directors discussed the terms of the
transactions and information relating to the transactions with members of our
management team, including our president and chief executive officer, as well as
the Special Committee and legal counsel. The board of directors considered all
the factors described above as "Special Committee Considerations" as well as the
judgment, advice and analyses of the Special Committee, including the favorable
recommendation of the transactions;
15
Our board of directors, including the member of the Special Committee,
did not find it useful to, and did not attempt to, quantify, rank or otherwise
assign relative weights to these factors. Our board of directors, including the
member of the Special Committee, considered, among other things, the analysis,
experience, expertise and recommendation of our president and chief executive
officer and information from certain members of our management team, of the
fairness to our stockholders from a financial point of view, of the
consideration to be paid by us in connection with the Merger and the
consideration to be paid to us in connection with the ARC Sale.
In addition, our board of directors, including the member of the
Special Committee, did not undertake to make any specific determination as to
whether any particular factor, or any aspect of any particular factor, was
favorable or unfavorable to its ultimate determination, but rather our board of
directors, including the member of the Special Committee, conducted an overall
analysis of the factors described above, including discussions with our
management team and legal and accounting advisors. In considering the factors
described above, individual members of our board of directors, including the
member of the Special Committee, may have given different weight to different
factors.
Our board of directors, including the member of the Special Committee,
considered all factors as a whole, and overall considered the factors to be
favorable and to support their determinations. However, the general view of our
board of directors, including the member of the Special Committee, was that
factors 4, 7 and 8 described above under "Special Committee Considerations" were
uncertainties, risks or drawbacks relating to the transactions, but that the
other reasons and factors described above were generally considered favorable.
Regulatory Approvals Relating to the Transactions
We are not aware of any federal or state regulatory requirements that
must be complied with or approvals that must be obtained to consummate the
transactions, other than (1) filing of certificates of merger with the Secretary
of State of the State of Nevada to effect the Merger and with the Secretary of
State of the State of Nevada and the Secretary of State of the State of New
Jersey to effect the Reincorporation, (2) filing of the certificate of amendment
to our Certificate of Incorporation with the Secretary of State of the State of
New Jersey increasing our authorized common stock and changing our name from ARC
Communications Inc. to "RoomLinX, Inc." and (3) filing of this proxy statement
with the SEC. If any additional approvals or filings are required, we will use
our commercially reasonable efforts to obtain those approvals and make any
required filings before completing the transactions.
Interests of ARC Management and Directors Persons in the Transactions
In considering the recommendations of our board of directors with
respect to the transactions, our stockholders should be aware that certain
members of our board of directors and executive officers may have interests in
the transactions that are in addition to the interests of our stockholders
generally. These interests include the following:
(i) The purchaser under the asset purchase agreement for the ARC Sale
shall be an entity owned by Mr. Michael Rubel, former director and chief
operating officer of ARC, Mr. Thomas Rittenhouse, creative director of ARC's New
Media Services and Mr. Alan Sheinwald, principal of Alliance Advisors, ARC's
financial advisor.
(ii) Under the Merger Agreement, Mr. Peter Bordes, director and chief
executive officer of ARC, shall be issued options to purchase 500,000 shares of
common stock of the Surviving Corporation at an exercise price of $.08 per
share.
(iii) Mr. Peter Bordes shall continue as a member of the board of
directors of the Surviving Corporation after giving effect to the Merger and the
Reincorporation.
16
Interests of RoomLinX's Management and Directors in the Transactions
Certain members of RoomLinX's board of directors and management may
have interests in the transactions that are different from or in addition to the
interests of our and RoomLinX's stockholders generally. These interests include
the following:
(i) Mr. Robert P. Lunde, chairman and chief executive officer of
RoomLinX, and Mr. Herbert I. Hunt, III, director of RoomLinX, shall continue as
members of the board of directors of the Surviving Corporation after giving
effect to the Merger and the Reincorporation.
(ii) Under the Merger Agreement, each of Mr. Robert Killian and Mr. Richard
Peacey shall receive one-year extensions on their employment agreements.
PROPOSAL 1 -- APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER AND
THE ISSUANCE OF SHARES OF CAPITAL STOCK
We have entered into an Agreement and Plan of Merger, dated as of
December 8, 2003, by and among RoomLinX, ARC and RL. The Merger Agreement is the
agreement that governs the terms of the Merger. A copy of the Merger Agreement
is attached as Annex A to this proxy statement. You should read the Merger
Agreement carefully.
The Merger
On December 8, 2003, RoomLinX, ARC and RL entered into the Merger
Agreement. The Merger Agreement was approved by the board of directors of each
of ARC and RL on December 5, 2003 and will become effective within ten (10) days
after the satisfaction or waiver of the conditions to closing set forth in the
Merger Agreement, but no later than March 31, 2004, or at such other date as ARC
and RoomLinX shall agree (the "Closing").
Upon the terms and subject to the conditions set forth in the Merger
Agreement and in accordance with Nevada Law, RoomLinX will be merged with and
into RL, with RL as the surviving corporation of such merger. As a result of the
Merger, the outstanding shares of common stock of RoomLinX shall be canceled and
converted in the manner provided in the Merger Agreement, and the outstanding
options, convertible debentures and warrants of RoomLinX, other than up to
$30,000 of convertible debentures which shall be converted into indebtedness of
ARC (the "Permitted Debt"), shall be canceled or converted in the manner
provided by the Merger Agreement, the separate corporate existence of RoomLinX
shall cease, and RL shall continue unimpaired as the surviving corporation in
the Merger.
In consideration for the Merger, ARC will issue to the RoomLinX
Shareholders three shares of common stock of ARC for each one share of common
stock outstanding at the effective time of the Merger (excluding certain shares
of common stock of ARC and options to purchase shares of common stock of ARC
being issued to consultants as part of the Merger). Ten Million of the shares
payable to the RoomLinX Shareholders shall immediately be deposited in escrow
for a period of six (6) months from the Closing to secure the indemnification
obligations of RoomLinX set forth in the Merger Agreement, in accordance with
the terms of an escrow agreement to be executed by the parties on the Closing
Date (the "Escrow Agreement"). In addition, in consideration for the Merger, ARC
will issue to the RoomLinX Shareholders options and/or warrants to purchase the
greater of (a) 8,000,000 shares of common stock of ARC or (b) three (3) shares
of common stock for each one (1) option or warrant outstanding to purchase
common stock of ARC at the effective time of the Merger. The shares of common
stock and options to purchase shares of common stock being issued to consultants
as part of the Merger are as follows: (i) 2,000,000 shares of common stock to
Alliance Advisors and Roccus Capital Partners or their designees, (ii) options
to purchase 500,000 shares of common stock at an exercise price of $0.08 per
share to Mr. Peter Borders (who shall continue as a director of ARC) and (iii)
options to purchase 250,000 shares of common stock at an exercise price of $0.20
per share having a three (3) year term and "cashless exercise" provision and
250,000 shares of common stock to Rodman and Renshaw.
There are currently 21,684,449 shares of common stock of ARC issued and
outstanding (such number assumes the completion of a $500,000 private placement
of ARC securities prior to the special meeting resulting in the issuance of
6,700,000 shares of common stock of ARC and warrants to purchase 3,350,000
shares of common stock of ARC). Accordingly, as a result of the Merger, the
RoomLinX Shareholders shall be entitled to receive an aggregate of 65,053,347
shares of common stock of ARC. In addition, 500,000 shares of common stock of
ARC are issuable upon exercise of certain outstanding options and 3,350,000
shares of common stock of ARC are issuable upon exercise of outstanding warrants
issued in the Private Placement. Since the total amount of outstanding options
and warrants to purchase common stock of ARC is 3,850,000 and the RoomLinX
Shareholders are entitled to receive options and/or warrants to purchase the
greater of (a) 8,000,000 shares of common stock of ARC or (b) three (3) shares
of common stock of ARC for each one (1) option or warrant outstanding to
purchase common stock of ARC at the effective time of the Merger, the RoomLinX
Shareholders shall be entitled to receive options and/or warrants to purchase an
aggregate of 11,550,000 shares of common stock of ARC. As a result of the
Merger, the RoomLinX Shareholders shall acquire voting and dispositive control
of ARC's shares of common stock.
17
As a condition to consummating the transactions contemplated by the
Merger Agreement, simultaneously with the filing of the certificate of merger
with the Secretary of State of the State of Nevada to effect the Merger, ARC is
required file the Amendment increasing the number of authorized shares of its
common stock to 150,000,000 and changing its name to "RoomLinX, Inc." In
addition, following the Merger, ARC will be reincorporated from a New Jersey
corporation to a Nevada corporation by means of a merger of ARC with and into
its wholly-owned subsidiary RL, with RL continuing as the surviving corporation
under the name "RoomLinX, Inc.", and the Surviving Corporation shall have in
place a stock option plan for the grant of options to purchase an aggregate of
________ shares of common stock of the Surviving Corporation.
Terms of the Merger Agreement
The following discussion summarizes the material terms of the Merger
Agreement, a copy of which is attached to this proxy statement as Appendix B and
incorporated herein by reference and made an integral part hereof. Stockholders
are urged to read the Merger Agreement carefully as it is the legal document
that governs the Merger.
The Merger. Subject to the terms and conditions of the Merger
Agreement, as a result of the Merger, the outstanding shares of capital stock of
RoomLinX held by RoomLinX Shareholders will be converted or canceled in the
manner provided by the Merger Agreement, the separate corporate existence of RL
shall cease, and RL (a wholly owned subsidiary of ARC) shall continue unimpaired
as the surviving corporation in the Merger as a wholly owned subsidiary of the
Company. In consideration for the Merger, RoomLinX Shareholders will receive the
Merger Shares.
Simultaneously with the Merger, ARC is required to file the Amendment
to: (i) change its corporate name to "RoomLinX, Inc.", and (ii) increase its
number of authorized shares of common stock to 150,000,000 shares. In addition,
immediately following the Merger, ARC will complete the Reincorporation.
Closing. The Closing will take place ten (10) days after the
satisfaction or waiver of the conditions to closing set forth in the Merger
Agreement, but no later than March 31, 2004, or at such other date as ARC and
RoomLinX shall agree.
Effective Date. The Merger shall become effective upon the filing of
certificates of Merger in the State of Nevada.
Certificate of Incorporation and Bylaws of Surviving Corporation
Following the Merger. The Certificate of Incorporation and Bylaws of ARC, as in
effect at the effective time and except as amended as described in this proxy
statement (name change, increase in authorized shares of common stock and
reincorporation in the State of Nevada), will be the Certificate of
Incorporation and Bylaws, respectively, of the Surviving Corporation following
the Merger.
Board Reconstitution. In view of the controlling interest in ARC to be
acquired by the RoomLinX Shareholders, the Merger Agreement provides for the
current members the board of directors of ARC and RL to resign at the time of
the Merger and appoint five designees (the "Board Designees"), of whom two were
selected by of the board of directors of RoomLinX (the "RoomLinX Designees"),
one was selected by the board of directors of ARC (the "ARC Designee") and two
were selected by the RoomLinX Designees and the ARC Designee (the "Joint
Designees"). Although stockholder approval of the Board Reconstitution is not
among the Proposals, the following summary of the business experience and
background of the Board Designees is provided in accordance with Rule 14f-1
under the Exchange Act.
18
ARC DESIGNEE
Peter Bordes, age __, was appointed to our board of directors in
September 2002 and was appointed our Chief Executive Officer in _____ 2003. Mr.
Bordes is an owner of Greater Media, Inc., a privately owned media conglomerate
with leading radio and publishing properties in Boston, Philadelphia, Detroit
and New Jersey. He is also Chairman of the board of directors of Empire Media, a
diversified media group with a focus on publishing, broadcasting and interactive
media.
ROOMLINX DESIGNEES
Robert P. Lunde, age __,
Herbert I. Hunt III, age __,
JOINT DESIGNEES
Representations and Warranties. The Merger Agreement contains various
representations and warranties of ARC, RL and RoomLinX. ARC and RL represent and
warrant to RoomLinX as to, among other things: (i) organization; (ii)
litigation; (iii) authority and enforceability; (iv) capital structure; (v)
financial statements; (vi) transactions with affiliates; (vii) liabilities or
claims; (viii) ) absence of certain adverse changes; and (ix) SEC filings.
RoomLinX represents and warrants to ARC and RL as to, among other things: (i)
organization; (ii) litigation; (iii) authority and enforceability; (iv) capital
structure; (v) financial statements; (vi) transactions with affiliates; (vii)
liabilities or claims; and (viii) absence of certain adverse changes.
Conduct Prior to Effective Time. Pursuant to the Merger Agreement, the
parties have agreed, among other things, that each of RoomLinX and ARC shall
carry on its business in the usual, regular and ordinary course and use all
commercially reasonable efforts to preserve intact its present business
organization and preserve its relationships with third parties and others having
business dealings with it, with the objective that its goodwill and ongoing
business shall be unimpaired at the Effective Time. ARC has agreed to continue
to make all required filings in accordance with the Securities Act and the
Exchange Act. Each party shall promptly notify the other parties of any event or
occurrence not in the ordinary course of business which comes to its attention
and which has caused, or could reasonably be expected to cause, a material
adverse change.
The parties have also agreed that they shall not take certain acts
without the prior written consent of the other parties. Each of ARC, RL and
RoomLinX have agreed not to, among other things (i) issue any shares of its
capital stock or change its capitalization; (ii) amendment its articles of
incorporation or bylaws; (iii) acquire or agree to acquire any business or any
corporation or the assets thereof; (iv) sell, lease or otherwise dispose of or
encumber any of its properties or assets except in the ordinary course of
business; (v) incur any indebtedness other than in the ordinary course of
business; (vi) enter into or amend any employment or severance agreement, or pay
any bonus or remuneration, or increase the salaries of its directors, officers,
employees, or consultants; or(vii) engage in any activities or transactions that
are outside the ordinary course of its business.
Pursuant to the Merger Agreement, each party shall give each other
party, and its accountants, counsel and other representatives, reasonable access
to (i) all of its respective properties, books, contracts, commitments and
records, and (ii) all other information concerning its business, properties and
personnel as such party may reasonably request.
Indemnification. Each of ARC and RL has agreed to indemnify, defend and
hold RoomLinX and its officers and directors, employees and agents, harmless
from and against any and all claims, actions, causes of action, suits or other
proceedings, losses, liabilities and damages, and expenses in connection
therewith, including, without limitations, reasonable fees and disbursements of
counsel incurred by any of them as a result of, or arising out of, or relating
to, any failure of any representation or warranty set forth in Section 3 of the
Merger Agreement to be true and correct when made or any failure by ARC or RL to
comply with its covenants or agreements set forth in the Merger Agreement.
RoomLinX has agreed to indemnify, defend and hold each of ARC and RL and their
respective officers and directors, employees and agents, harmless from and
against any and all claims, actions, causes of action, suits or other
proceedings, losses, liabilities and damages, and expenses in connection
therewith, including, without limitation, reasonable fees and disbursements of
counsel incurred by any of them (i) as a result of, or arising out of, or
relating to any failure of any representation or warranty set forth in Section 2
of the Merger Agreement to be true and correct when made or any failure by
RoomLinX to comply in any material respect with any of its covenants or
agreements set forth in this Agreement or (ii) any claim by LeaseTek or its
successors against any of them.
19
In addition, subject to the terms and conditions of the Merger
Agreement, each of the parties has agreed (i) to keep confidential all
information furnished in connection with the Merger, and (ii) to use reasonable
best efforts to effectuate the Merger.
Conditions to the Merger. The obligations of each party to effect the
Merger are subject to the satisfaction or waiver on or prior to the Closing of a
number of conditions, including but not limited to the following:
(i) ARC shall have obtained the approval of the holders of the
requisite number of shares of its common stock to effect the Merger, the ARC
Sale, the Amendment and the Reincorporation;
(ii) RoomLinX, ARC and RL shall have received all requisite approvals
by government agencies and authorities and all consents and approvals of third
parties as are required for the consummation of the Merger;
(iii) An audit of RoomLinX performed by Deloitte & Touche LLP shall
have been completed and the Audited RoomLinX Financials Statements delivered to
ARC;
(iv) RoomLinX will certify that (i) all issued and outstanding options,
convertible debentures and warrants of RoomLinX have been converted into
RoomLinX Shares, other than the Permitted Debt, and (ii) RoomLinX has a positive
net worth.
(v) The executive offices of the Surviving Corporation shall be
relocated to the New York metropolitan area or as otherwise determined by the
board of directors of the Surviving Corporation;
(vi) Effective as of the Effective Time, the Board of Directors of the
Surviving Corporation shall be comprised of the RoomLinX Designees, the ARC
Designee and the Joint Designees;
(vii) The ARC Sale shall have closed;
(viii) ARC shall have raised $500,000 in a private placement of ARC
securities;
(ix) RoomLinX shall have raised $400,000 in a private placement of
RoomLinX securities;
(x) The holders of less than ten (10%) percent of the issued and
outstanding shares of capital stock of RoomLinX will have exercised appraisal
rights under Nevada Law as dissenting stockholders and RoomLinX and ARC will
have resolved all matters of appraisal and payment under Nevada Law for each
dissenting stockholder;
(xi) Robert Killian and Richard Peacey shall have received one year
extensions on their employment agreements from the Closing;
(xii) The Escrow Agreement shall have been duly executed and delivered
by all parties thereto; and
(xiii) ARC shall have issued the Advisor Shares.
Termination. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, notwithstanding any requisite
approval and adoption of the Merger Agreement and the transactions contemplated
thereby, as follows:
(i) by the parties, following mutual written consent duly authorized by
the boards of directors of each of the parties hereto;
(ii) by RoomLinX or ARC (on behalf of RL), if the Effective Time shall
not have occurred as soon as reasonably practicable but no later than March 31,
2004; provided that the reason the Effective Time has not occurred is not the
result of the intentional failure by the party seeking termination to fulfill
any obligation under this Agreement;
20
(iii) by RoomLinX, following discovery of: (i) information that, in the
reasonable discretion of RoomLinX, may be material and adverse to either ARC or
RL or their respective businesses, or constitutes a material adverse change on a
going forward basis; or (ii) a breach of any representation or warranty made by
ARC or RL contained in Article 3 of the Merger Agreement; or
(iv) by ARC (on its own behalf and on behalf of RL), following
discovery of: (i) information that, in the reasonable discretion of ARC, may be
material and adverse to RoomLinX or the RoomLinX business, or constitutes a
material adverse change on a going forward basis; or (ii) a breach of any
representation or warranty made by RoomLinX contained in Article 2 of the Merger
Agreement.
In the event of termination of the Merger Agreement, the Merger Agreement shall
become void and there shall be no liability under the Merger Agreement on the
part of any party, or any of their respective officers or directors; provided,
however, that nothing shall relieve any party from liability for the willful
breach of any of its representations, warranties, covenants or agreements set
forth in the Merger Agreement.
Accounting Treatment
[The Merger will be accounted for under the "purchase" method of
accounting.]
Dissenters' Rights
Section 14A:-11-1 of the NJPS provides that stockholders may have
dissenters' rights in connection with any plan of merger or consolidation to
which the corporation is a party in which the approval of the corporation's
stockholders is required. However, Section 14A:11-1 of the NJPS provides that
there is no right of dissent with respect to a merger or consolidation in favor
of holders of any class or series which, at the record date for the
stockholders' meeting to approve the merger, were either: (i) listed on a
national securities exchange or (ii) held by at least 1,000 stockholders of
record. ARC's common stock is not listed for trading on a national market system
and, as of February __, 2004, ARC had approximately __ stockholders of record.
ARC does not qualify for the exemption from dissenters' rights pursuant
to Section 14A:11-1 of the NJPS. Therefore, ARC's stockholders are entitled to
dissenters' rights in connection with the Merger. If the Merger is approved,
dissenting stockholders of ARC are entitled to assert dissenters' rights under
the NJPS. A brief summary of dissenter's rights is provided below. However, any
stockholder considering the use of dissenters' rights should not rely only on
the following, which is only a partial summary. Sections 14A:11-1 through
14A:11-11 of the NJPS dealing with dissenters' rights are attached to this proxy
state as Appendix D.
To exercise dissenters' rights, a dissenting stockholder must file with
us, in time to be received before the special meeting, a written notice of
dissent (a "Notice of Intent") indicating an intent to demand payment for his
shares if the Merger is consummated. The Notice of Intent must either be
submitted to us at the special meeting or mailed to us not less than three
business days before the special meeting, at our current offices located at 733
Shrewsbury Avenue, Tinton Falls, New Jersey 07724, to the attention of Peter A.
Bordes, Chief Executive Officer. A dissenting stockholder must also vote against
the Merger or abstain from voting, and the dissent must apply to all the shares
of our common stock owned by the dissenting stockholder.
If the Merger is approved and consummated, the Surviving Corporation
must send each dissenting stockholder, within 10 days after the effective date
of the Merger, a written notice (a "Dissenters' Notice") confirming the
effective date. Within 20 days after the Dissenters' Notice is mailed, a
dissenting stockholder must respond by sending us a written demand for payment
of the fair value of his shares (the "Payment Demand"). The Payment Demand
should be sent to us at the address set forth above.
Within 20 days after making a Payment Demand, a dissenting stockholder
must submit to us all stock certificates representing his shares. Upon receipt,
we will mark the certificates to reflect the demand and return them to the
dissenting stockholder. A dissenting stockholder who has made a Payment Demand
will thereafter be entitled only to payment for his shares and will not be
entitled to vote or exercise any other stockholder rights. A dissenting
stockholder may not withdraw a Payment Demand without our written consent. When
we communicate with any dissenting stockholders, we must inform them of the
deadlines for any actions they are required to take in order to perfect their
dissenters' rights. Merely voting against the Merger or abstaining from voting
will not satisfy the procedural requirements for perfecting dissenters' rights.
21
Within 10 days after the deadline for submitting Payment Demands, the
Surviving Corporation will mail to each dissenting stockholder its financial
statements at and for a twelve-month period ended on the latest practicable
date. The transmittal letter must indicate whether we have elected to pay
dissenting stockholders the fair value of their shares. If so, it must specify
the price we have determined as the fair value of those shares. Within 30 days
after the deadline for submitting Payment Demands (the "Settlement Window"), we
must make payment of that fair value for all the shares of each dissenting
stockholder who accepts our valuation and submits his stock certificates for
cancellation.
If a dissenting stockholder does not accept our valuation within the
Settlement Window, he may serve us with a written demand to commence an action
in the New Jersey Superior Court for the court's determination of the fair value
of his shares. The demand must be served within 30 days after the expiration of
the Settlement Window. Not later than 30 days after our receipt of the demand,
we must commence the requested action. If we fail to do so, a dissenting
stockholder may commence the action in our name not later than 60 days after the
expiration of the time allotted for us to commence the action.
In any action to determine the fair value of our common stock, all
dissenting stockholders who have not accepted our valuation within the
Settlement Window will be parties to the action. The court may appoint an
appraiser to receive evidence and report to the court on its evaluation of fair
value. The court will determine the appraiser's powers and, based on its
evaluation, will render a judgment against the Surviving Corporation in favor of
each stockholder in the action for the fair value of his shares, as determined
by the court, together with an allowance for interest at a rate set by the court
from the applicable Payment Demand to the day of payment. The judgment will be
payable to a dissenting stockholder upon surrender to the Surviving Corporation
of the certificates representing his shares.
The costs and expenses of any action for determining the fair value of
dissenters' shares, including reasonable compensation for and expenses of any
appraiser, will be determined by the court and apportioned and assessed as the
court determines. Fees and expenses of counsel and of experts for the parties to
the action may be assessed against the Surviving Corporation if the court deems
an assessment to be equitable, but only if the court finds that our offer of
payment was not made in good faith or if we failed to make a payment offer.
The right of any dissenting stockholder to be paid the fair value of
his shares will terminate if (1) he fails to present the certificates
representing his shares for notation, unless a court directs otherwise, (2) the
Payment Demand is withdrawn by the dissenting stockholder with our written
consent, (3) we come to an agreement with the dissenting stockholder on the fair
value of his shares, (4) the New Jersey Superior Court determines that the
stockholder is not entitled to payment for his shares, (5) the Share Combination
is abandoned or rescinded or (6) a court having jurisdiction permanently enjoins
or sets aside the Merger. In any of those events, a dissenting stockholder's
rights as a stockholder will be reinstated as of the date of his Payment Demand
without prejudice to any corporate action that has taken place in the interim,
and the stockholder will be entitled to receive any intervening preemptive
rights and payment of any intervening dividend or other distribution.
Material Federal Income Tax Consequences of the Asset Purchase
[The Merger is intended to result in the recognition of no gain or loss
by us for federal income tax purposes. ___________ is intended to recognize no
gain or loss for federal income tax purposes upon its acquisition of
substantially all of our assets. No formal request for a ruling or other
determination was or will be obtained. Each stockholder should consult with his
or her own tax advisor.
22
Subject to the limitations, qualifications and exceptions described in
this section, it is expected that, for federal income tax purposes, no gain or
loss will be recognized by the holders of shares of ARC as a result of the
consummation of the Merger, and no gain or loss will be recognized by ARC or
RoomLinX. ARC has not requested a ruling from the Internal Revenue Service or an
opinion of counsel with respect to the federal income tax consequences of the
Merger under the Internal Revenue Code. State, local, or foreign income tax
consequences to stockholders may vary from the federal tax consequences
described above. Stockholders should consult their own tax advisors as to the
effect of the Proposed Reincorporation under applicable federal, state, local,
or foreign income tax laws.]
Recommendation of our Board of Directors
Our board of directors recommends that our stockholders vote FOR the
Merger, Merger Agreement and the transactions contemplated thereby, including
the issuance of shares of our common stock and options and/or warrants to
purchase shares of our common stock as consideration for the Merger.
PROPOSAL 2 -- APPROVAL OF THE ARC SALE AND THE
TRANSACTIONS CONTEMPLATED THEREBY
We have entered into a letter of intent, dated as of ___________, with
Mr. Michael Rubel, Mr. Thomas Rittenhouse and Mr. Alan Sheinwald setting forth
the proposed terms of the ARC Sale (the "Letter of Intent"). The Letter of
Intent sets forth the terms pursuant to which we intend to consummate the ARC
Sale. The Asset Purchase Agreement will be the agreement that governs the terms
of the ARC Sale. A copy of the Letter of Intent is attached as Annex F to this
proxy statement and a copy of the Asset Purchase Agreement is attached as Annex
B to this proxy statement. You should read the Letter of Intent and the Asset
Purchase Agreement carefully. [NOTE TO SEC - THE ASSET PURCHASE AGREEMENT IS
BEING DRAFT AT THIS TIME; IT WILL BE ATTACHED TO THE NEXT FILING]
Terms of the Letter of Intent
Pursuant to the Letter of Intent, Mr. Rubel, Mr. Rittenhouse and Mr.
Sheinwald, through a to be formed entity to be owned by them collectively, will
purchase substantially all of ARC's existing assets comprising the "graphic
design and interactive multi-media" business. The purchase price for the ARC
Business shall be (i) $70,000 payable in cash at the closing plus (ii) two
additional payments (each a "Deferred Payment"), the first of which will be
payable within 45 days after the end of the 12-month period following the
closing and the second of which will be payable within 45 days after the end of
the 24-month period following the closing. The first Deferred Payment shall be
an amount equal to 50% of the earnings before taxes, depreciation and
amortization ("EBTDA") of the ARC Business for the 12-month period beginning on
the date of the closing and ending on the 12-month anniversary of the closing.
The second Deferred Payment shall be 50% of the EBTDA of the Business for the
12-month period beginning on the date following the 12-month anniversary of the
closing and ending on the 24-month anniversary of the closing.
Dissenters' Rights
Under New Jersey law, stockholders may have dissenters' rights in
connection with a sale or other disposition of all or substantially all of the
assets of a corporation in which the approval of the corporation's stockholders
is required. Under New Jersey law, stockholders who object to the ARC Sale are
entitled to dissenters' rights. For a description of those rights, see "Proposal
1 - Dissenters' Rights.
Past Contacts, Transactions or Negotiations
Accounting Treatment
Material Federal Income Tax Consequences of the Asset Purchase
[The ARC Sale is intended to result in the recognition of
______________ by us for federal income tax purposes. ___________ is intended to
recognize _____________ for federal income tax purposes upon its acquisition of
substantially all of our assets. No formal request for a ruling or other
determination was or will be obtained. Each stockholder should consult with his
or her own tax advisor.]
23
Recommendation of our Board of Directors
Our board of directors recommends that our stockholders vote FOR the
ARC Sale.
PROPOSAL 3 -- AMENDMENTS
TO OUR CERTIFICATE OF INCORPORATION
Our board of directors has approved, subject to stockholder approval,
amendments to our Certificate of Incorporation to (i) increase our authorized
shares of capital stock from 50,000,000 to 155,000,000 by increasing the number
of authorized shares of common stock from 45,000,000 to 150,000,000 and (ii)
change our name to "RoomLinX, Inc." In addition, our board of directors has
approved our reincorporation in the State of Nevada.
Approval of this proposal, in addition to the approval of Proposals 1,
2, 4 and 5 (the ARC Sale, Merger Agreement, the Reincorporation and the 2003
Plan, and the transactions contemplated thereby, including the Merger and the
issuance of shares of our common stock and options and/or warrants to purchase
shares of our common stock) is required to consummate the transactions. Although
we are asking for stockholder approval of this proposal, if for any reason the
transactions are not consummated, this proposal will not be implemented.
The text of the proposed amendments to our Certificate of Incorporation
is set forth in the form of Certificate of Amendment to the Certificate of
Incorporation included in Annex C hereto. You should read the proposed
amendments to the Certificate of Incorporation carefully.
Description of Amendment
Pursuant to our Certificate of Incorporation, we currently are
authorized to issue up to 50,000,000 shares of capital stock, including up to
45,000,000 shares of common stock, par value $.001 per share, and 5,000,000 of
preferred stock, par value $.20 per share,. The preferred stock consists of
1,500,000 shares designated as Class A Preferred Stock (the "Class A
Preferred"), with the remaining 3,500,000 shares consisting of "blank check"
preferred stock that have not yet been designated.
There are currently 18,984,449 shares of common stock of ARC issued and
outstanding (such number assumes the completion of the Private Placement prior
to the special meeting resulting in the issuance of 6,700,000 shares of common
stock of ARC), and 3,850,000 shares are reserved for issuance upon exercise of
outstanding options and warrants to purchase common stock (such number assumes
the completion of the Private Placement and the issuance of warrants to purchase
3,350,000 shares of common stock of ARC). In addition, there are an aggregate of
720,000 shares of series A preferred stock issued and outstanding. No other
shares of preferred stock are issued and outstanding.
The Merger Agreement provides that we will issue an aggregate of
65,053,347 shares of common stock and 11,550,000 options and/or warrants to
purchase shares of common stock to the RoomLinX Shareholders. In addition, the
Merger Agreement provides that we will issue shares of common stock and options
to purchase shares of common stock to consultants as follows: (i) 2,000,000
shares of common stock to Alliance Advisors and Roccus Capital Partners or their
designees, (ii) options to purchase 500,000 shares of common stock at an
exercise price of $0.08 per share to Mr. Peter Borders (who shall continue as a
director of ARC) and (iii) options to purchase 250,000 shares of common stock at
an exercise price of $0.20 per share having a three (3) year term and "cashless
exercise" provision and 250,000 shares of common stock to Rodman and Renshaw.
The proposed amendment to the Certificate of Incorporation will
authorize us to issue up to an additional 105,000,000 shares of common stock.
This will provide a sufficient number of authorized shares of common stock for
issuance in the transactions.
24
Reasons for the Amendments; Effect of the Amendment
The amendments to our Certificate of Incorporation described in this
proposal are required to consummate the transactions contemplated by the Merger
Agreement. In the opinion of our board of directors, the amendments are
advisable and in the best interests of our stockholders. If the amendments are
not approved, we will not be able to complete the Merger and the other
transactions contemplated by the Merger Agreement, which will materially
adversely effect our business and ability to operate going forward.
Recommendation of our Board of Directors
Our board of directors recommends a vote FOR the approval of the
amendment of the Certificate of Incorporation to (i) increase the number of
authorized shares of common stock and (ii) change our name to "RoomLinX, Inc."
PROPOSAL 4 - APPROVAL AND ADOPTION OF THE MERGER OF ARC
INTO ITS WHOLLY-OWNED SUBSIDIARY RL FOR THE PURPOSE OF CHANGING
ARC'S STATE OF INCORPORATION FROM NEW JERSEY TO NEVADA
Terms of the Reincorporation
Our Board has adopted a resolution authorizing the Reincorporation on
the following terms:
o Prior to the signing of the Merger Agreement, we formed RL Acquisition,
Inc., a wholly-owned subsidiary under the laws of the State of Nevada (the
"Nevada Sub"), for the purpose of consummating the Merger.
o Immediately following the Merger, we will merge (the "Reincorporating
Merger") into the Nevada Sub, which will be the surviving corporation after the
Merger.
o The certificate of incorporation of the Nevada Sub will be the same as our
charter after giving effect to the Amendment.
o In the Reincorporating Merger, each whole share of our common stock
outstanding after giving effect to the Merger will be converted into a whole
share of common stock of the Nevada Sub.
Comparison between New Jersey and Nevada Law
The rights of continuing stockholders after the Reincorporating Merger
will be governed by Nevada rather than New Jersey corporate law. The corporate
laws in these states are substantially alike. Areas where there are substantive
or procedural differences that could affect our stockholders after the Merger
are summarized below.
- ----------------------------------------------------------------------------------------------------------------------
Action Nevada Law New Jersey Law
------ ---------- --------------
- ----------------------------------------------------------------------------------------------------------------------
Removal of Directors can be removed by shareholders Directors may be removed for cause or, unless
Directors: representing at least two-thirds of the otherwise provided in the charter, without cause by
voting power of the outstanding stock shareholders representing at least a majority of
entitled to vote on the matter, or any the outstanding stock entitled to vote in the
larger percentage specified in the charter. election of directors.
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Merger or Sale: Unless otherwise provided in the charter, a A merger, consolidation or a sale of all or
merger, consolidation or a sale of all or substantially all of a corporation's assets
substantially all of a corporation's assets requires approval by shareholders representing at
requires approval by the shareholders least a majority of the outstanding stock entitled
representing at least a majority of the to vote on the matter (two-thirds for corporations
voting power of the outstanding stock formed before 1969), or any larger percentage
entitled to vote on the matter. specified in the matter.
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Shareholder Action Unless otherwise provided in the charter, Except as otherwise provided in the charter,
by Written Consent: shareholders may act without a meeting by shareholders may act without a meeting by written
written consent of a majority (or any consent of the minimum percentage of the voting
required supermajority) of the voting power power of the outstanding common stock that
of the outstanding common stock entitled to would be required to approve the matter at a
vote on the matter, and notice need not be meeting, except for the annual election of
given to shareholders. directors which may be by written consent only
if unanimous.
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
25
- ----------------------------------------------------------------------------------------------------------------------
Action Nevada Law New Jersey Law
------ ---------- --------------
- ----------------------------------------------------------------------------------------------------------------------
Amendment of A charter or bylaw amendment requires A charter amendment requires approval by vote
Charter and approval by vote of the holders of a of a majority of the votes cast at the meeting
By-laws: majority of the outstanding stock entitled by the holders of shares entitled to vote on
to vote on the matter and by the holders of the matter. Bylaws may also be amended by
a majority of the outstanding stock of each plurality vote
class entitled to vote thereon as a class.
- ----------------------------------------------------------------------------------------------------------------------
Exculpation of Directors may not be exculpated from Directors may not be exculpated from liability
Directors and liability for (1) acts or omissions for (1) a breach of their duty of loyalty to
Officers: involving either intentional misconduct, the corporation or its shareholders, (2) acts
fraud or a knowing violation of the law or or omissions not in good faith or involving
(2) the payment of improper distributions. intentional misconduct or a knowing violation
of law or (3) any act or omission from which
they derived an improper personal benefit.
- ----------------------------------------------------------------------------------------------------------------------
Stand Stills: Unless waived in the charter, there is a There is a five-year restriction on any
three-year restriction on transactions business combination between a publicly held
between public corporations and the holder New Jersey corporation and an Interested
of 10% or more of the corporation's Shareholder unless the business combination was
outstanding capital stock (an "Interested approved by the corporation's board of
Shareholder") unless the transaction was directors before the shareholder's interest
approved before the shareholder's interest exceeded 10% or more of the corporation's
exceeded 10% or more of the corporation's outstanding stock. After the expiration of the
outstanding stock. Even after the expiration five-year period, covered New Jersey
of the three-year period, the transaction corporations may not engage at any time in a
will remain prohibited unless (1) the board covered business combination with any
of directors approved the transaction before Interested Shareholder other than a business
the shareholder became "interested" or (2) combination (1) approved by the holders of
the transaction is approved by a majority of two-thirds of the voting stock not beneficially
disinterested shareholders. owned by the Interested Shareholder, (2) with
an Interested Shareholder who inadvertently
exceeded the 10% threshold and promptly reduced
his holdings below 10% or (3) in which the
Interested Shareholder pays a formula price
designed to ensure that all other shareholders
receive at least the highest price per share
paid by the Interested Shareholder. A New
Jersey corporation may not opt out of these
provisions.
- ----------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Dissenters' Rights
Under New Jersey law, stockholders who object to the Reincorporating
Merger are entitled to dissenters' rights. For a description of those rights,
see "Proposal 1 - Dissenters' Rights.
PROPOSAL 5
APPROVAL AND ADOPTION OF THE 2003 STOCK OPTION PLAN
General
The parties to the Merger have determined that the Surviving
Corporation should have an option pool for future grants covering __% of the
Surviving Corporation's common stock to be outstanding after giving effect to
the issuance of the Merger Shares. In accordance with those terms, the Board of
Directors adopted a 2003 Stock Option Plan, subject to approval by our
stockholders at the special meeting. Our Board of Directors recommends approval
of the 2003 Plan to offer eligible employees of the Surviving Corporation an
opportunity to acquire or increase their proprietary interests in the Surviving
Corporation, adding to their incentive to contribute to the performance and
growth of the consolidated enterprise.
26
Terms of the 2003 Plan
Subject to completion of the Merger, the 2003 Plan authorizes the grant
of options to purchase an aggregate of _________ shares of the Surviving
Corporation's common stock, after giving effect to the Merger and the
Reincorporating Merger. Options may be granted under the 2003 Plan either as
incentive stock options ("ISOs") or nonqualified stock options ("NSOs") within
the meaning of the Internal Revenue Code. Shares covered by the 2003 Plan may be
either previously unissued or reacquired shares. Shares that cease to be subject
to an option because of its expiration or termination will again be available
for the grant of options until termination of the 2003 Plan.
The 2003 Plan will be administered by the Compensation Committee of the
Surviving Corporation's reconstituted board of directors. The Compensation
Committee will have sole discretion to select optionees, determine the number of
shares subject to each grant and prescribe the other terms and conditions of
each award. All officers and other employees of the Surviving Corporation as
well as its consultants will be eligible to receive options under the 2003 Plan,
except that any consultant or any person who owns more than 10% of the
outstanding common stock may only receive options in the form of NSOs.
The exercise price of each option granted under the 2003 Plan must be
equal to the fair market value of the common stock, as determined by the
Compensation Committee, at the time the option is granted. Payment in full of
the exercise price must be made upon the exercise of each option either in cash,
shares of common stock with a fair market value equal to the exercise price or
by a combination of cash and shares equal to the exercise price. The proceeds
received upon the exercise of options granted under the 2003 Plan will be used
for general corporate purposes.
Options granted under the 2003 Plan may not be transferred except to
the personal representative of a deceased employee. The 2003 Plan provides for a
period of 90 days during which an option, to the extent vested, may be exercised
after the termination of an optionee's employment or consultancy for any reason
other than cause, as defined in the 2003 Plan. No options may be granted under
the 2003 Plan after _________, 2004, although the expiration date of previously
granted options may extend beyond that date. The maximum term of any option is
ten years.
The number of shares covered by the 2003 Plan and the exercise price of
outstanding options are subject to customary antidilution adjustments in the
event of any recapitalization or similar change affecting the common stock. In
the event the Surviving Corporation sells all or substantially all its
consolidated assets, dissolves, merges or consolidates with another company or
is involved in a tender offer for all or a substantial portion of its common
stock, the Compensation Committee may amend all outstanding options to (1)
permit their exercise prior to the effective date of the transaction or
terminate unexercised options as of that date, (2) require the forfeiture of all
options, provided the Surviving Corporation pays each grantee the excess of the
fair market value of the common stock on that date over the option exercise
price, or (3) make other provisions that it deems equitable.
The board of directors may amend the 2003 Plan without further
stockholder action, except for a modification that would (1) increase the number
of covered shares, (2) extend the maximum option term or the expiration date of
the 2003 Plan, (3) permit grants below the fair market value of the common stock
on the date of grant or (4) materially increase the benefits or modify the
eligibility requirements under the 2003 Plan. No amendment may adversely affect
any then outstanding option without the consent of the optionee.
No options will be granted under the 2003 Plan prior to the Merger.
Federal Income Tax Matters
An employee receiving an ISO under the 2003 Plan will not be in receipt
of taxable income upon the grant of the ISO or upon its timely exercise except
under alternative minimum tax rules. Generally, exercise of an ISO will be
timely if made during its term and if the optionee remains an employee of the
Surviving Corporation at all times from the date of grant until three months
before the date of exercise. Upon sale of the stock received upon exercise, the
employee will generally recognize long term capital gain or loss equal to the
difference between the sale proceeds and the option exercise price. The
Surviving Corporation, under these circumstances, will not be entitled to any
federal income tax deduction in connection with either the exercise of the ISO
or the sale of the underlying stock by the employee.
27
For purposes of the alternative minimum tax, an employee exercising an
ISO will have alternative minimum taxable income resulting from the exercise.
The amount of the alternative minimum taxable income and the tax basis in the
shares received upon exercise of an ISO will be determined in the year of
exercise unless the shares received upon exercise are sold to an unrelated party
in the same tax year. In that event, there will generally be no adverse effect
because the alternative minimum taxable income will then be limited to the
taxable gain on the sale as determined for regular tax purposes
An employee or consultant receiving an NSO or electing to sell option
shares from an ISO exercise prior to the expiration of two years from the grant
date or within one year from the exercise date (a "Disqualified ISO") will not
recognize taxable income upon the grant of the NSO or ISO. Upon exercise of the
NSO or Disqualified ISO, an optionee will recognize ordinary income to the
extent of the difference between the option exercise price and the fair market
value of the stock on the date the option is exercised (the "Compensation
Element"). Upon sale of the stock received upon exercise, the optionee will
generally recognize capital gain or loss equal to the difference between the
sale proceeds and the fair market value of the common stock on the date of
exercise. The Company will be entitled to a federal income tax deduction equal
to the Compensation Element upon the exercise of an NSO or Disqualified ISO. If
an ISO is exercised by a former employee more than three months after his
termination of employment, the ISO will be treated as a Disqualified ISO for
federal income tax purposes.
If an optionee uses previously owned shares of common stock to exercise
an ISO or NSO, the transaction will generally not be considered to be a taxable
disposition of the previously owned shares. However, if the previously owned
shares had been acquired upon exercise of a prior tax qualified stock option and
the holding period requirement for those tendered shares was not satisfied at
the time they were used to exercise an ISO, the use of the tendered shares would
cause the ISO to be treaded as a Disqualified ISO for federal income tax
purposes.
STOCK OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of December 19,
2003 concerning the beneficial ownership of our common stock by each stockholder
known by us to be the beneficial owner of more than 5% of the outstanding shares
of common stock, each current member of the board of directors, each executive
officer named in the Summary Compensation Table, and all directors and executive
officers as a group. owned by each officer and director of ARC and each
stockholder who holds more than 5% of the outstanding common stock of as of
December 19, 2003. At such date
Shares Beneficially Owned (1)
-----------------------------
Name and Address** Number Percent
- ------------------ ------ -------
Peter A. Bordes, Jr. (8) 3,724,148 24.05%
62 White Street
Suite 3 East
New York, New York 10013
Steven H. Meyer (1)(5) 2,302,020 14.86%
26 Oxford Drive
Wayside, New Jersey 07712
Kenneth P. Meyer (2)(5) 2,300,687 14.86%
7 Wemrock Drive
Wayside New Jersey 07712
Michael Rubel (3)(6) 842,500 5.44%
3 Aspen Court
Wayside, New Jersey 07712
Thom Rittenhouse (4)(7) 783,200 5.06%
26 Jacob Drive
Howell, New Jersey 07731
All directors and current executive officers
as a group (5 persons).......................... __________ __%
28
- -----------
(1) Steven Meyer is a director and the former President of ARC.
(2) Kenneth Meyer is a former director and former vice president of ARC.
(3) Michael Rubel is a former director and former chief operating officer of
ARC.
(4) Thom Rittenhouse is creative director of New Media Services.
(5) Kenneth Meyer and Steven Meyer are brothers.
(6) Includes the option to purchase 250,000 shares of common stock pursuant to
Mr. Rubel's Stock Option Agreement, 250,000 shares are currently vested or will
vest within 60 days.
(7) Includes the option to purchase 250,000 shares of common stock pursuant to
Mr. Rittenhouse's Stock Option Agreement, 250,000 shares are currently vested or
will vest within 60 days.
(8) Peter A. Bordes, Jr. is a director and the chief executive officer of ARC.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table sets forth summary information
as to compensation received by our chief executive officer and each of the four
other most highly compensated executive officers who were employed by ARC at the
end of December 31, 2002 (collectively, the "named executive officers") for
services rendered to ARC in all capacities during the three fiscal years ended
December 31, 2002.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------- ----------------------
Other Annual Securities All
Compensation Underlying Other
Name Year Salary ($) Bonus ($) Options Compensation
- --------------- ---- ---------- ------------------ ---------- ------------
Steven H. Meyer 2001 111,142 none 1,800 none
2002 97,199 none 1,400 75,000(1) none
Michael Rubel 2001 125,000 none 2,520 none
2002 117,132 none 2,520 400,000(2) none
Kenneth P. Meyer 2001 107,744 none 3,706 none
2002 96,162 none 3,750 75,000(1) none
Thom Rittenhouse 2001 120,000 none none
2002 120,000 none 250,000(3) none
Option Grants in Last Fiscal Year
The following table sets forth information regarding each stock option
granted during fiscal year 2002 to each of the named executive officers.
29
Individual Grants
---------------------------------------------------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration
Name Granted Fiscal Year ($/Share) Date
- ------------- --------------- ------------- --------- ----------
NONE
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table provides information regarding the exercises of
options by each of the named executive officers during the 2002 fiscal year. In
addition, this table includes the number of shares covered by both exercisable
and unexercisable stock options as of December 31, 2002 and the values of
"in-the-money" options, which values represent the positive spread between the
exercise price of any such option and the fiscal year-end value of the common
stock.
Number of Securities Underlying Value of the Unexercised
Shares Unexercised Options In-The-Money Options
Acquired at Fiscal Year-End at Fiscal Year-End
on Value -------------------------------- --------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- -------------------- -------- --------- ------------- ------------- ----------- -------------
NONE
Equity Compensation Plan Information
The following table provides information about shares of our common
stock that may be issued upon the exercise of options. We have no stockholder
approved equity compensation plans. We have a number of options which were
granted pursuant to equity compensation plans not approved by security holders
and such securities are aggregated in the table below.
Number of securities
remaining available for
Number of securities to be future issuance under equity
issued upon exercise of Weighted-average exercise ompensation plans (excluding
outstanding options, warrants price of outstanding securities reflected in
and rights options, warrants and rights first column
Equity
compensation plans
not approved by
security holders 540,000 ? 960,000
-----------------------------------------------------------------------------------------
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
30
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the SEC thereunder requires our
directors, executive officers and persons who own beneficially more than 10% of
our common stock to file reports of ownership and changes in ownership of such
stock with the SEC. Based solely upon a review of such reports, we believe that
all our directors, executive officers and 10% stockholders complied with all
applicable Section 16(a) filing requirements during the last fiscal year.
SELECTED FINANCIAL DATA OF ROOMLINX
You should read the following selected financial data in conjunction
with RoomLinX's financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of RoomLinX" included elsewhere in this proxy statement. The
following selected financial data concerning RoomLinX for and as of the end of
each of the years in the two-year period ended December 31, 2002, are derived
from the audited financial statements of RoomLinX. The selected financial data
as of September 30, 2002 and 2003 and for the nine months ended September 30,
2002 and 2003 are derived from RoomLinX's unaudited financial statements. The
selected financial data is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, included
elsewhere in this proxy statement. The audited financial statements of RoomLinX
as of December 31, 2001 and 2002 and for each of the years in the two-year
period ended December 31, 2002 are included elsewhere in this proxy statement.
ROOMLINX, INC.
SELECTED FINANCIAL DATA
31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF ROOMLINX
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations of RoomLinX should be read in conjunction
with RoomLinX's financial statements for the years ended December 31, 2001 and
2002 and the related notes included elsewhere in this proxy statement.
32
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF ARC COMMUNICATIONS INC.
The following unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 2002 and for the nine months ended
September 30, 2003 give effect to (1) the ARC Sale and (2) the Merger, as if
these transactions had all occurred on January 1, 2002 and January 1, 2003,
respectively. The following unaudited pro forma condensed consolidated balance
sheet as of September 30, 2003, gives effect to these transactions as if they
had occurred on September 30, 2003.
The pro forma adjustments are based upon available information and
certain assumptions that our management believes are reasonable under the
circumstances. The pro forma financial information is not necessarily indicative
of operating results or financial position that would have been achieved had the
transactions been consummated on the dates indicated and should not be construed
as representative of future operating results or financial position. The pro
forma financial information should be read in conjunction with our annual report
on Form 10-K for the fiscal year ended December 31, 2002 and our quarterly
report on Form 10-Q for the quarter ended September 30, 2003, copies of which
accompany this proxy statement, as well as, RoomLinX's audited financial
statement for the three years ended December 31, 2002, management's discussion
and analysis of financial condition and results of operations and selected
financial data of RoomLinX included elsewhere in this proxy statement.
The pro forma adjustments were applied to the respective historical
financial statements to reflect and account for the ARC Sale and the Merger
using the purchase method of accounting. Accordingly, __________________.
ARC COMMUNICATIONS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30, 2003
----------------------------------------------------------
Pro Forma Pro Forma
Adjustments Adjustments
to reflect to reflect
Asset Private Adjusted
Daleen Abiliti Sale Merger Pro Forma
---------- --------- -------------- ----------- ----------
(In thousands)
ASSETS
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
33
ARC COMMUNICATIONS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2003
------------------------------------------------
Pro forma Adjusted
ARC RoomLinX adjustments Pro forma
----------- ---------- ----------- ------------
(In thousands, except per share data)
34
ARC COMMUNICATIONS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2002
-----------------------------------------------
Pro forma Adjusted
ARC RoomLinX adjustments Pro forma
----------- --------- ------------ ------------
(In thousands, except per share data)
35
ARC COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
As of September 30, 2003, for the Nine Month Period then Ended,
And for the Year Ended December 31, 2003
(All dollar amounts in thousands unless otherwise indicated)
36
COMPARATIVE PER SHARE DATA AND DIVIDEND INFORMATION
The following table sets forth the historical per share information of
us and RoomLinX and combined per share data on an unaudited, pro forma basis
after giving effect to the Merger and the ARC Sale. You should read this
information in conjunction with the selected historical financial data, audited
financial statements for the years ended December 31, 2001, and 2002 and the
unaudited interim financial statements of RoomLinX, which are included in this
proxy statement with respect to RoomLinX. Our audited financial statements for
the years ended December 31, 2001 and 2002, and our unaudited interim financial
statements for the nine months ended September 30, 2003 are included in our
Annual Report on Form 10-K for the year ended December 31, 2002 and our
Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 which
accompany this proxy statement. You should also read this information in
conjunction with the unaudited pro forma condensed consolidated financial
statements, including the notes thereto, which are included elsewhere in this
proxy statement. The pro forma information is presented for illustrative
purposes only. You should not rely on the pro forma financial information as an
indication of the combined financial position or results of operations of future
periods or the results that actually would have been realized had the entities
been a single entity during the periods presented.
The unaudited pro forma per share information combines the financial
information of us with the financial information of RoomLinX for the nine month
period ended September 30, 2003 and the year ended December 31, 2002, assuming
the Merger and the ARC Sale occurred on the first day of the respective periods.
Historical book value per common share for both companies is computed
by dividing stockholders' equity (deficit) attributable to common stockholders
by the number of shares of common stock outstanding at __________. Historical
book value per preferred share for both companies is computed by dividing the
recorded balance attributable to preferred stock by the number of shares of
preferred stock outstanding at the end of the period. Our unaudited pro forma
combined per share data is derived from the unaudited pro forma condensed
consolidated financial statements that are included elsewhere in this proxy
statement.
Nine Month Year Ended
Period Ended December 31,
September 30, 2003 2002
------------------------------------
(Unaudited)
ARC Historical Per Share
Data:
Basic and diluted net loss
per common share
Book value (deficiency)
per common share
Book value (deficiency)
per preferred share
RoomLinX Historical Per Share
Data:
Basic and diluted net loss
per common share
Book value (deficiency)
per common share
Book value (deficiency)
per preferred share
ARC Pro Forma Combined:
Basic and diluted net loss
per common share
Book value per
Our common stock trades on the OTC-Bulletin Board under the symbol
"ACOC". Our Class A Preferred Stock trades on the OTC-Bulletin Board under the
symbol "ACOCP". For the periods indicated, the following table sets forth the
high and low bid quotations for our common stock and Class A Preferred Stock as
reported by the National Quotation Bureau, Inc. The quotations represent
inter-dealer quotations without retail mark-up, mark-down or commission and may
not necessarily represent actual transactions.
37
High and Low Stock Prices
ACOC
High Bid Low Bid
-------- -------
Fiscal 2001
First Quarter
(ended MARCh 31, 2001)
Second Quarter
(ended June 30, 2001)
Third Quarter
(ended September 30, 2001)
Fourth Quarter
(ended December 31, 2001)
Fiscal 2002
First Quarter
(ended MARCh 31, 2002)
Second Quarter
(ended June 30, 2002)
Third Quarter
(ended September 30, 2002)
Fourth Quarter
(ended December 31, 2002)
Fiscal 2003
First Quarter
(ended MARCh 31, 2003)
Second Quarter
(ended June 30, 2003)
Third Quarter
(ended September 30, 2003)
Fourth Quarter
(through December __, 2003)
ACOCP
High Bid Low Bid
-------- -------
Fiscal 2001
First Quarter
(ended MARCh 31, 2001)
Second Quarter
(ended June 30, 2001)
Third Quarter
(ended September 30, 2001)
Fourth Quarter
(ended December 31, 2001)
Fiscal 2002
First Quarter
(ended MARCh 31, 2002)
Second Quarter
(ended June 30, 2002)
Third Quarter
(ended September 30, 2002)
Fourth Quarter
(ended December 31, 2002)
Fiscal 2003
First Quarter
(ended MARCh 31, 2003)
Second Quarter
(ended June 30, 2003)
Third Quarter
(ended September 30, 2003)
Fourth Quarter
(through December __, 2003)
38
The closing bid for our common stock on OTB-Bulletin Board on ________,
2003, the last trading day prior to the public announcement of the Merger and
the ARC Sale, was $___ per share, and on December __, 2003, was $___. The
closing bid for our Class A Preferred Stock on OTB-Bulletin Board on ________,
2003, the last trading day prior to the public announcement of the Merger and
the ARC Sale, was $___ per share, and on December __, 2003, was $___. As of
February __, 2004, the record date, there were ___ stockholders of record who
held shares of our common stock and 6 stockholders of record who owned shares of
our Class A Preferred Stock. Since our inception, we have not paid any cash
dividends on our stock. There are no restrictions currently in effect which
preclude us from declaring dividends. However, dividends may not be paid on our
common stock while there are accrued but unpaid dividends on the Class A
Preferred Stock (9% Cumulative, Convertible, Redeemable Preferred Stock). As of
December 31, 2002 accrued but unpaid preferred stock dividends aggregated
$30,000.00. We intend to retain all available funds and any future earnings for
use in the operation and expansion of our business and do not anticipate
declaring or paying any cash dividends on our stock in the foreseeable future.
No active trading or public market exists for RoomLinX common stock. The
shares of RoomLinX common stock are not listed on any exchange and are not
traded in the over-the-counter market. As of February __, 2004, the record date,
there were __ stockholders of record who held shares of RoomLinX common stock.
RoomLinX has never paid any cash dividends on its common stock, and anticipates
that for the foreseeable future it will continue to retain any earnings for use
in the operation of its business.
OTHER MATTERS
Annual Report on Form 10-K and Quarterly Report on Form 10-Q
Our annual report on Form 10-K for the fiscal year ended December 31,
2002, and our quarterly report on Form 10-Q for the quarter ended September 30,
2003, as filed with the SEC, except exhibits thereto, accompanies this proxy
statement. Our annual and quarterly reports, and the information contained
therein, are incorporated herein by reference. These documents contain important
business and financial information about ARC, including the audited financial
statements contained in our annual report. We will provide copies of the
exhibits, should they be requested by eligible stockholders, and we may impose a
reasonable fee for providing such exhibits. Request for additional copies of our
annual report on Form 10-K or our quarterly report on Form 10-Q should be mailed
to:
ARC Communications Inc.
733 Shrewsbury Avenue
Tinton Falls, New Jersey 07724
Attention: Peter A. Bordes, Chief Executive Officer
Proposals Intended to be Presented at the Next Annual Meeting
Rules of the SEC and our bylaws require that any proposal by a
stockholder for consideration at the 2004 Annual Meeting of Stockholders must be
received by us no later than ________, if any such proposal is to be eligible
for inclusion in our proxy materials for, and to be presented for consideration
at, our 2004 Annual Meeting. Under such rules, we are not required to include
stockholder proposals in our proxy materials unless certain other conditions
specified in such rules are met.
Other Matters
Our board of directors knows of no other matters to be brought before
the special meeting. However, if any other matters arise, your signed proxy card
gives authority to __________________ to vote on those matters at their
discretion. If you decide to attend the special meeting, you may revoke your
proxy at any time before it is voted.
39
Expenses of Solicitation
We will bear the cost of solicitation of proxies. In an effort to have
as large a representation at the meeting as possible, special solicitation of
proxies may, in certain instances, be made personally or by telephone, telegraph
or mail by one or more of our employees. We also will reimburse brokers, banks,
nominees and other fiduciaries for postage and reasonable clerical expenses of
forwarding the proxy material to their principals who are beneficial owners of
our series F preferred stock and our common stock.
INCORPORATION OF INFORMATION BY REFERENCE
This proxy statement is accompanied by our annual report on Form 10-K
for the year ended December 31, 2002 and quarterly report on Form 10-Q for the
period ended September 30, 2003. The annual report on Form 10-K and quarterly
report on Form 10-Q are incorporated by reference into this proxy statement and
considered a part of this document.
By Order of the Board of Directors,
{-s- Peter Bordes}
Peter Bordes
Chairman and Chief Executive Officer
Tinton Falls, New Jersey
February __, 2004
40
Annex A
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ROOMLINX, INC.,
ARC COMMUNICATIONS INC.
AND
RL ACQUISITION, INC.
DATED: DECEMBER 8, 2003
================================================================================
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "AGREEMENT"), dated as of
December 8, 2003, is made and entered into by and among ROOMLINX, INC., a Nevada
corporation ("ROOMLINX"), ARC COMMUNICATIONS INC., a New Jersey corporation
("ARC"), and RL ACQUISITION, INC., a Nevada corporation and wholly-owned
subsidiary of ARC ("RL").
BACKGROUND
WHEREAS, RoomLinX is engaged in the business of providing wireless
high-speed Internet network solutions to the hospitality industry, including,
without limitation, conference centers and hotels (the "BUSINESS");
WHEREAS, the parties hereto desire to effect the merger of RoomLinX
with and into RL, with RL as the surviving entity, which shall be wholly-owned
by ARC (the "INITIAL MERGER"), and, immediately thereafter, to effect the merger
of RL with and into ARC or ARC with and into RL (the "MERGER"); and
WHEREAS, the respective Boards of Directors of RoomLinX, ARC and RL
have determined that the Initial Merger and the Merger is fair to, and in the
best interests of, their respective stockholders, have approved and adopted this
Agreement and each of the Related Agreements (as hereinafter defined) to which
it is a party and each of the transactions contemplated hereby and thereby and,
in the case of ARC and RL, have resolved to declare this Agreement and the
Related Agreements advisable and to recommend to their respective stockholders
that they approve this Agreement and the Related Agreements and the transactions
contemplated hereby and thereby, including the Initial Merger and the Merger,
upon the terms and subject to the conditions more fully set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE 1
THE MERGER AND RELATED MATTERS
SECTION 1.1 THE MERGER. Subject to the terms and conditions of this
Agreement, Articles of Merger (each a "CERTIFICATE OF MERGER") duly executed and
acknowledged shall be filed in the offices of the Secretary of State of the
States of Nevada and New Jersey, as necessary, on the Closing Date (as defined
in Article 5) or as soon as practicable thereafter. The Initial Merger shall
become effective upon the filing of a Certificate of Merger in the State of
Nevada (the "INITIAL EFFECTIVE TIME"). At the Initial Effective Time, RoomLinX
shall be merged with and into RL, and, RL shall continue as the surviving
corporation under the laws of the State of Nevada. The Merger shall become
effective upon the filing of a Certificate of Merger in the States of Nevada and
New Jersey (the "EFFECTIVE TIME"). At the Effective Time, RL shall be merger
with and into ARC or ARC shall be merged with and into RL and, RL or ARC, as the
case may be, shall continue as the surviving corporation under the laws of the
State of Nevada, in the case of RL as the surviving corporation, or the State of
New Jersey, in the case of ARC as the surviving corporation (such continuing
corporation sometimes hereinafter referred to as the "SURVIVING CORPORATION").
For federal income tax purposes, each of the Initial Merger and the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended. The parties to this Agreement hereby
adopt this Agreement as a "plan of reorganization" within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
SECTION 1.2 EFFECT OF MERGER.
(a) At the Initial Effective Time, the effect of the Initial
Merger shall be as provided in the applicable provisions of the laws of the
State of Nevada. Except as herein specifically set forth, the identity,
existence, purposes, powers, objects, franchises, privileges, rights and
immunities of RL shall continue unaffected and unimpaired by the Initial Merger
and the corporate franchises, existence and rights of RoomLinX shall be merged
with and into RL, and RL, as the surviving corporation, shall be fully vested
therewith. At the Effective Time, the separate existence of RoomLinX shall cease
and, in accordance with the terms of this Agreement, RL shall possess all the
rights, privileges, immunities and franchises, of a public, as well as of a
private, nature, and all property, real, personal and mixed, and all debts due
on whatever account, and all taxes, including those due and owing and those
accrued, and all other choses in action, and all and every other interest of or
belonging to or due to RoomLinX and RL shall be taken and deemed to be
transferred to, and vested in, RL without further act or deed; and all property,
rights, privileges, powers and franchises and all and every other interest shall
be thereafter effectually the property of RL as they were of RoomLinX and RL.
Except as otherwise provided herein, RL shall thenceforth be responsible and
liable for all the liabilities and obligations of RoomLinX and RL and any claim
existing, or action or proceeding pending, by or against RoomLinX or RL may be
prosecuted as if the Initial Merger had not taken place, and RL may be
substituted in their place. Except as set forth herein, neither the rights of
creditors nor any liens upon the property of RoomLinX or RL shall be impaired by
the Initial Merger, and all debts, liabilities and duties of RoomLinX and RL
shall attach to RL, and may be enforced against RL to the same extent as if said
debts, liabilities and duties had been incurred or contracted by RL.
(b) At the Effective Time, the effect of the Merger shall be
as provided in the applicable provisions of the laws of the States of Nevada and
New Jersey, as applicable. Except as herein specifically set forth, the
identity, existence, purposes, powers, objects, franchises, privileges, rights
and immunities of ARC or RL, as the case may be, shall continue unaffected and
unimpaired by the Merger and the corporate franchises, existence and rights of
ARC or RL, as the case may be, shall be merged with and into the Surviving
Corporation and the Surviving Corporation shall be fully vested therewith. At
the Effective Time, the separate existence of ARC or RL, as the case may be,
shall cease and, in accordance with the terms of this Agreement, the Surviving
Corporation shall possess all the rights, privileges, immunities and franchises,
of a public, as well as of a private, nature, and all property, real, personal
and mixed, and all debts due on whatever account, and all taxes, including those
due and owing and those accrued, and all other choses in action, and all and
every other interest of or belonging to or due to ARC or RL shall be taken and
deemed to be transferred to, and vested in, the Surviving Corporation without
further act or deed; and all property, rights, privileges, powers and franchises
and all and every other interest shall be thereafter effectually the property of
the Surviving Corporation as they were of ARC and RL. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all the liabilities and obligations of ARC and RL and any claim
existing, or action or proceeding pending, by or against ARC or RL may be
prosecuted as if the Merger had not taken place, and the Surviving Corporation
may be substituted in their place. Except as set forth herein, neither the
rights of creditors nor any liens upon the property of ARC or RL shall be
impaired by the Merger, and all debts, liabilities and duties of ARC and RL
shall attach to the Surviving Corporation, and may be enforced against the
Surviving Corporation to the same extent as if said debts, liabilities and
duties had been incurred or contracted by the Surviving Corporation.
2
SECTION 1.3 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION. The
articles of incorporation of ARC, as amended immediately prior to the Closing,
shall be the articles of incorporation of the Surviving Corporation.
SECTION 1.4 BY-LAWS OF THE SURVIVING CORPORATION. The bylaws of ARC, as
in effect immediately prior to the Closing, shall be the bylaws of the Surviving
Corporation until thereafter amended as provided by law.
SECTION 1.5 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. At the
Effective Time, each of the directors and officers of RL and ARC immediately
prior to the Effective Time shall resign or be removed from office and
concurrently therewith the directors of the Surviving Corporation shall be
comprised of two directors designated by RoomLinX (the "ROOMLINX DESIGNEES"),
one director designated by ARC (the "ARC DESIGNEE") and two directors designated
by the RoomLinX Designees and the ARC Designee, such directors to hold office,
subject to the applicable provisions of the articles of incorporation and bylaws
of the Surviving Corporation, until the next annual stockholders' meeting of the
Surviving Corporation and until their respective successors shall be duly
elected or appointed and qualified. Within twelve (12) months of the execution
of this Agreement, Mr. Peter Bordes or his designee and Mr. Herbert Hunt or his
designee shall have the right to mutually designate the Chief Executive Officer
of the Surviving Corporation. At the Effective Time, the other officers of the
Surviving Corporation, subject to the applicable provisions of the articles of
incorporation and bylaws of the Surviving Corporation, shall be as designated by
the Board of Directors of the Surviving Corporation until their respective
successors shall be duly elected or appointed and qualified.
SECTION 1.6 MANNER OF CONVERSION. As of the Effective Time:
(a) all of the shares of common stock, par value $.001 per share, of
RoomLinX which are issued and outstanding immediately prior to the Initial
Effective Time (the "ROOMLINX SHARES"), by virtue of the Initial Merger and the
Merger and without any action on the part of the holder thereof, automatically
shall be deemed to represent the right to receive the merger consideration, as
provided in Section 1.7 hereof, and all of the outstanding options, convertible
debentures and warrants of RoomLinX shall be canceled, extinguished or converted
into the right to receive ARC Common Stock as provided in Section 1.7, other
than up to $30,000 of convertible debentures of RoomLinX (the "PERMITTED DEBT")
which shall be converted into indebtedness of ARC, the principal amount of which
shall be convertible into shares of common stock, par value $.001 per share, of
ARC (the "ARC COMMON STOCK") at a conversion price of $.20 per share, with such
indebtedness having a maturity date of not less than eighteen (18) months from
the Closing Date;
3
(b) all RoomLinX Shares which are held by RoomLinX as treasury stock
shall be canceled and retired and no consideration shall be delivered or paid in
exchange therefore; and
(c) each share of the capital stock of RL shall be canceled and in
exchange therefore, one (1) share of RoomLinX shall be issued to ARC, which
share of RoomLinX shall constitute all of the issued and outstanding shares of
capital stock of RoomLinX.
SECTION 1.7 MERGER CONSIDERATION. At the Effective Time, RoomLinX
Shares, other than RoomLinX Shares held in treasury (which shall be canceled
pursuant to Section 1.6(b) above), by virtue of the Merger and without any
action on the part of the holders thereof (the "ROOMLINX STOCKHOLDERS"),
automatically shall be canceled and extinguished and converted into the right to
receive (a) three (3) shares of ARC Common Stock for each one (1) share of ARC
Common Stock outstanding at the Effective Time (the "ARC MERGER SHARES";
provided that 10,000,000 ARC Merger Shares shall immediately be deposited in
escrow for a period of six (6) months from the Closing Date to secure the
indemnification obligations of RoomLinX set forth herein, in accordance with the
terms of an escrow agreement to be executed by the parties on the Closing Date
(the "ESCROW AGREEMENT"), and (b) options and/or warrants to purchase the
greater of (A) 8,000,000 shares of ARC Common Stock or (B) three (3) shares of
ARC Common Stock for each (1) option or warrant outstanding to purchase ARC
Common Stock at the Effective Time provided that such options and/or warrants
shall have an exercise price of not less than $.20 per share, shall not be
entitled to "cashless" exercise provisions and shall be exercised within two (2)
years of the Closing Date. At the Effective Time, the RoomLinX Stockholders
shall deliver stock certificates representing all of the issued and outstanding
RoomLinX Shares to ARC and ARC shall (x) issue to the RoomLinX Stockholders in
exchange therefor stock certificates representing the ARC Merger Shares,
10,000,000 of which shall be delivered to the escrow agent in accordance with
the Escrow Agreement, and (y) authorize the issuance of the options and/or
warrants referred to above. In determining the number of shares of ARC Common
Stock or the number of options or warrants to purchase ARC Common Stock to be
issued pursuant to this Section 1.7, the shares of ARC Common Stock and options
to purchase shares of ARC Common Stock to be issued to Alliance Advisors, Roccus
Capital Partners, Mr. Peter Bordes and Rodman and Renshaw, or their designees,
as provided in Section 6(n) hereof, shall not be deemed to be outstanding on the
Effective Date.
4
SECTION 1.8 ADJUSTMENTS TO MERGER CONSIDERATION.
(a) If, prior to the Effective Time, the outstanding shares of
ARC Common Stock shall be changed into a greater number of shares or a different
class of stock by reason of any reclassification, recapitalization, exchange of
shares, stock split, or otherwise, the number of ARC Merger Shares to be
received by the RoomLinX Stockholders hereunder shall be likewise adjusted to
reflect the changed number or classification of ARC Merger Shares.
(b) If, prior to the Effective Time, ARC raises greater than
$500,000 in a private placement of ARC securities, the parties agree that the
merger consideration shall be adjusted to reflect the additional issued and
outstanding ARC securities.
(c) If, prior to the Effective Time, RoomLinX raises in excess
of $400,000 in a private placement of RoomLinX securities, the parties agree
that the merger consideration shall be adjusted to reflect the additional number
of issued and outstanding RoomLinX securities.
SECTION 1.9 RESTRICTIONS ON TRANSFERS. RoomLinX acknowledges that: (a)
the ARC Merger Shares to be issued to the RoomLinX Stockholders hereunder are
unregistered and may be required to be held indefinitely unless they are
subsequently registered under the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereto (the "SECURITIES ACT"), or an
exemption from such registration is available; (b) the ARC Merger Shares may not
be offered, sold, pledged, hypothecated or otherwise disposed of unless such
offer, sale pledge, hypothecation or other disposition (i) is registered under
the Securities Act, or (ii) does not violate the Securities Act, and (c) the
certificates representing the ARC Merger Shares shall bear a legend to the
effect of (a) and (b) above.
SECTION 1.10 APPRAISAL RIGHTS. Notwithstanding any provision of this
Agreement to the contrary, the RoomLinX Shares (the "DISSENTING SHARES") that
are issued and outstanding immediately prior to the Effective Time and held by
stockholders who did not vote in favor of the Merger and who comply with all of
the relevant provisions of Sections 92A.300 to 92A.500 of Nevada Law (the
"DISSENTING STOCKHOLDERS") will not be converted into or be exchangeable for the
right to receive ARC Merger Shares, unless and until such holders have failed to
perfect or have effectively withdrawn or lost their rights to appraisal under
Nevada Law. RoomLinX will give ARC (i) immediate oral notice followed by prompt
written notice of any written demands for appraisal of any RoomLinX Shares,
attempted withdrawals of any such demands and any other instruments served
pursuant to Nevada Law and received by RoomLinX relating to stockholders' rights
of appraisal, and (ii) will keep ARC informed of the status of all negotiations
and proceedings with respect to demands for appraisal under Nevada Law. If any
Dissenting Stockholder fails to perfect or will have effectively withdrawn or
lost the right to appraisal, the RoomLinX Shares held by such Dissenting
Stockholder will thereupon be treated as though such shares had been converted
into the right to receive ARC Merger Shares pursuant to Section 1.7 of this
Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ROOMLINX
RoomLinX represents and warrants to RL and ARC that:
SECTION 2.1 ORGANIZATION. RoomLinX is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada with
all requisite legal right, power and authority (corporate or other) to own or
hold under lease the property it purports to own or hold under lease and to
carry on the Business. RoomLinX is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of the Business or its
ownership or leasing of property requires such qualification.
5
SECTION 2.2 SUBSIDIARIES. RoomLinX has no subsidiaries and RoomLinX
does not own of record or beneficially, directly or indirectly, (i) any share of
capital stock or securities convertible into capital stock of any other
corporation, (ii) any participating interest or equity interest in any
partnership, joint venture, limited liability company or other non-corporate
business enterprise, or (iii) control, directly or indirectly, any other entity.
SECTION 2.3 PENDING CLAIMS.
(a) There is no litigation, suit, action, claim, arbitration, administrative or
legal or other proceeding, or governmental investigation pending or, to
RoomLinX's knowledge threatened, against RoomLinX and there are no unasserted
claims possible of assertion of which RoomLinX has notice or knowledge;
(b) There are no audits by a governmental authority, claims for unpaid taxes of
any kind, or other similar actions, proceedings or disputes pending or, to
RoomLinX's knowledge, threatened against or affecting RoomLinX or the Business;
(c) There are no unpaid judgments of any kind against RoomLinX relating to
RoomLinX or the Business; and
(d) RoomLinX has not been charged with or, to its knowledge threatened, with a
charge or violation or, to its knowledge, is it under investigation with respect
to any alleged violation of any provision of any federal, state, local or
foreign law or administrative ruling or regulation relating to RoomLinX or any
aspect of the Business.
SECTION 2.4 TITLE TO ASSETS. RoomLinX is the sole and exclusive owner
of, and has good and marketable title to, all of its assets, rights, properties,
claims, contracts and businesses of every kind, nature, character and
description, tangible and intangible, personal, real or mixed, wherever located
(collectively, "ASSETS"), free and clear of all liens, mortgages, pledges,
claims, encumbrances, security interests, covenants, easements, rights of way,
equities, options, rights of first refusal, assessments, defects in title,
encroachments, charges or any other burden or restriction of any kind or nature
(collectively, "LIENS"); and no other person, firm or corporation has or will
have on the Closing Date (as hereinafter defined) any interest whatsoever in any
of its Assets.
SECTION 2.5 AUTHORITY AND ENFORCEABILITY. Except for the approval of
the RoomLinX Stockholders, which shall be sought promptly after execution and
delivery of this Agreement, RoomLinX has the full right, power, legal capacity
and authority to enter into and perform its obligations under this Agreement and
each of the other agreements to be entered into in connection with the
transactions contemplated herein (the "RELATED Agreements"). The execution,
delivery and performance by RoomLinX of this Agreement, the Related Agreements
and any other agreements contemplated hereby and thereby and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
the Board of Directors of RoomLinX. No other corporate or stockholder action is
necessary for the authorization, execution, delivery and performance by RoomLinX
of this Agreement, the Related Agreements and any other agreements between the
parties contemplated hereby and the consummation by RoomLinX of the transactions
contemplated hereby or thereby, including the Merger. This Agreement and each
Related Agreement have been duly executed and delivered by RoomLinX and
constitute the legal, valid and binding obligations of RoomLinX, enforceable
against it in accordance with its terms.
6
SECTION 2.6 NO BREACH OR VIOLATION. The execution, delivery and
performance of this Agreement, the Related Agreements and any other agreements
contemplated hereby and thereby between the parties hereto by RoomLinX and the
consummation of the transactions contemplated hereby and thereby will not (a)
result in or constitute a breach or an event that, with or without notice or the
passing of time or both, would be a default, breach or other violation of the
articles of incorporation or bylaws of RoomLinX; (b) violate (with or without
the giving of notice or the passing of time or both), or require any consent,
approval, filing or notice under, any provision of any law, rule or regulation,
court or administrative order, writ, judgment or decree applicable to RoomLinX,
the Business or any of its Assets; and (c) with or without the giving of notice
or the passing of time or both (i) violate or conflict with, or result in the
breach, suspension or termination of any provision of, or constitute a default
under, or result in the acceleration of the performance of the obligations of
RoomLinX under, or (ii) result in the creation of any Liens upon all or any
portion of the properties or the Assets of RoomLinX or the Business pursuant to,
the articles of incorporation or bylaws of RoomLinX, or any indenture, mortgage,
deed of trust, lease, agreement, contract or instrument to which RoomLinX is a
party or by which RoomLinX, its Assets or the Business is bound.
SECTION 2.7 CORPORATE DOCUMENTS. RoomLinX has furnished to ARC for its
examination true and correct copies of the articles of incorporation, bylaws and
minute books of RoomLinX.
SECTION 2.8 CAPITALIZATION. As of the date hereof, the authorized
capital stock of RoomLinX consists of 200,000,000 shares of common stock, par
value $.001 per share, of which 14,426,963 shares are validly issued and
outstanding, fully paid and non-assessable. Except as set forth on Schedule 2.8,
RoomLinX has no options, warrants, equity securities, calls, rights (including
preemptive rights), commitments or agreements of any character to which it is a
party or by which it is bound, obligating it to issue, deliver or sell, or cause
to be issued, delivered or sold, or to repurchase, redeem or otherwise acquire,
or to cause the repurchase, redemption or acquisition, of any shares of capital
stock of RoomLinX or obligating it to grant, extend, accelerate the vesting of
or enter into any such option, warrant, equity security, call, right, commitment
or agreement, or any other obligation to make any other distribution in respect
thereof. All of the outstanding securities of RoomLinX were issued in compliance
with all applicable Federal and state securities laws. There are no voting
trusts or agreements, shareholder agreements, buy-sell agreements, rights of
first refusal, preemptive rights or proxies relating to any securities of
RoomLinX (whether or not RoomLinX is a party thereto). RoomLinX does not hold
any shares of capital stock in its treasury.
7
SECTION 2.9 CONDUCT OF BUSINESS. From the date of this Agreement until
the Closing, RoomLinX shall operate the Business in the ordinary course and in a
commercially reasonable manner and will make all reasonably necessary efforts to
preserve intact the Business, its relationships with third parties, the goodwill
it has accrued and the services of its existing officers, employees, and
directors.
SECTION 2.10 FINANCIAL STATEMENTS. RoomLinX has previously furnished to
ARC the following financial statements of RoomLinX, copies of which are attached
on Schedule 2.10: (a) audited financial statements consisting of balance sheets,
statements of income, statements of retained earnings and statements of cash
flows for each of the two most recently completed fiscal years (the "AUDITED
ROOMLINX FINANCIALS") and (b) unaudited financial statements consisting of a
balance sheet (the "INTERIM ROOMLINX BALANCE SHEET") and income statement as of
and for the nine (9) months ended September 30, 2003 (the "UNAUDITED ROOMLINX
FINANCIALS" and together with the Audited RoomLinX Financials, the "ROOMLINX
FINANCIAL STATEMENTS"). All RoomLinX Financial Statements (a) have been prepared
from the books and records of RoomLinX and its subsidiaries, if any, (b) have
been prepared in accordance with GAAP, consistently applied, throughout the
periods involved (except as disclosed therein and other adjustments disclosed
therein, and, in the case of the Unaudited RoomLinX Financials, the absence of
footnotes and subject to normal year-end adjustments which will not be material)
and (c) present fairly in all material respects the financial condition of
RoomLinX as of such date and the results of its operations for the calendar year
or nine-month period then ended.
SECTION 2.11 NO UNDISCLOSED LIABILITIES. Except as specifically
described in the RoomLinX Financial Statements or as set forth on Schedule 2.11,
RoomLinx has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the RoomLinX
Financial Statements. RoomLinX does not know of any material liability of any
nature, direct or indirect, contingent or otherwise, or in any amount, not
adequately reflected or reserved against in the Interim RoomLinX Balance Sheet.
SECTION 2.12 TRANSACTIONS WITH AFFILIATES. Except as set forth on
Schedule 2.12, no current holder of ten (10%) percent or more of any class of
capital stock of RoomLinX nor any director, officer or employee of RoomLinX, or
member of the family of any such person, or any corporation, partnership, trust
or other entity in which any such person, or any member of the family of any
such person, has an interest or is an officer, director, trustee, partner or
holder of any equity interest (each, an "AFFILIATE"), is a party to any
transaction with RoomLinX, including any contract, agreement or other
arrangement providing for the employment of, furnishing of services by, loaning
of money to, rental of real or personal property from or otherwise requiring
payments to any such person or firm. None of the officers, directors or key
employees of RoomLinX or their Affiliates owns, directly or indirectly,
individually or collectively, a material interest in any entity which is a
competitor, customer or supplier of RoomLinX.
8
SECTION 2.13 SECURITIES AND EXCHANGE COMMISSION FILINGS. The RoomLinX
Financial Statements and other information relating to RoomLinX furnished in
writing by RoomLinX to ARC for inclusion in the Proxy Statement or Information
Statement (each as hereinafter defined) at the time of the mailing of the Proxy
Statement or Information Statement to ARC's stockholders will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements contained
therein, in light of the circumstances under which they are made, not
misleading.
SECTION 2.14 NO MATERIAL MISSTATEMENT OR OMISSION OF MATERIAL FACT.
This Agreement (including the Schedules and Exhibits to this Agreement), the
Related Agreements and all other certificates, instruments and documents
executed in connection herewith and therewith are true, complete and correct in
all material respects. Neither this Agreement nor any Schedule or Exhibit to
this Agreement contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements contained therein, in the light of the circumstances under which they
are made, not misleading.
SECTION 2.15 NO MATERIAL ADVERSE CHANGE. Since September 30, 2003,
there has not occurred any material adverse change, event or effect in the
financial condition, results of operation, assets (including, without
limitation, intangible assets), liabilities or business of RoomLinX and its
subsidiaries, if any, taken as a whole, or any change that would prevent or
materially delay consummation of the transactions contemplated under this
Agreement, including, the Merger, or otherwise prevent RoomLinX from performing
its obligations under this Agreement and the Related Agreements ("ROOMLINX
MATERIAL ADVERSE CHANGE").
ARTICLE 3
ARC'S AND RL'S REPRESENTATIONS AND WARRANTIES
ARC and RL each represent and warrant to RoomLinX that:
SECTION 3.1 ORGANIZATION. ARC is a corporation duly organized, existing
and in good standing under the laws of the State of New Jersey, with all
requisite legal right, power and authority (corporate or other) to own or hold
under lease the property it purports to own or hold under lease and to carry on
its business. ARC is duly qualified to transact business and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification. RL is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada.
SECTION 3.2 SUBSIDIARIES. Other than RL, ARC has no subsidiaries and
ARC does not own of record or beneficially, directly or indirectly, (i) any
share of capital stock or securities convertible into capital stock of any other
corporation, (ii) any participating interest or equity interest in any
partnership, joint venture, limited liability company or other non-corporate
business enterprise, or (iii) control, directly or indirectly, any other entity.
RL has no subsidiaries and RL does not own of record or beneficially, directly
or indirectly, (i) any share of capital stock or securities convertible into
capital stock of any other corporation, (ii) any participating interest or
equity interest in any partnership, joint venture, limited liability company or
other non-corporate business enterprise, or (iii) control, directly or
indirectly, any other entity.
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SECTION 3.3 PENDING CLAIMS.
(a) There is no litigation, suit, action, claim, arbitration,
administrative or legal or other proceeding, or governmental investigation
pending or, to ARC's or RL's knowledge threatened, against ARC or RL,
respectively, and there are no unasserted claims possible of assertion of which
ARC or RL has notice or knowledge;
(b) There are no audits by a governmental authority, claims for unpaid
taxes of any kind, or other similar actions, proceedings or disputes pending or,
to ARC's or RL's knowledge, threatened against or affecting either of them or
their respective businesses;
(c) There are no unpaid judgments of any kind against ARC or RL
relating to either of them or their respective businesses; and
(d) Neither ARC nor RL has been charged with or, to the knowledge of
either of them threatened, with a charge or violation or, to the knowledge of
either of them, is either under investigation with respect to any alleged
violation of any provision of any federal, state, local or foreign law or
administrative ruling or regulation relating to any aspect of either of them or
their respective businesses.
SECTION 3.4 TITLE TO ASSETS. Each of ARC and RL is the sole and
exclusive owner of, and has good and marketable title to, all of its respective
Assets, free and clear of all Liens; and no other person, firm or corporation
has or will have on the Closing Date any interest whatsoever in any of such
Assets.
SECTION 3.5 AUTHORIZATION AND ENFORCEABILITY. Except for the approval
of the stockholders of ARC, which shall be sought promptly after the execution
and delivery of this Agreement, each of ARC and RL has the full right, power,
legal capacity and authority to enter into and perform its obligations under
this Agreement and the Related Agreements, and no other corporate or stockholder
action is necessary for the authorization, execution, delivery and performance
by each of ARC and RL of this Agreement, the Related Agreements and any other
agreements between the parties contemplated hereby and the consummation by each
of ARC and RL of the transactions contemplated hereby or thereby, including the
Merger. The execution, delivery and performance by each of ARC and RL of this
Agreement, the Related Agreements and any other agreements contemplated hereby
and thereby and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the Board of Directors of each of ARC and
RL, and ARC as the sole stockholder of RL. This Agreement and each Related
Agreement have been duly executed and delivered by each of ARC and RL and
constitute the legal, valid and binding obligations of each of ARC and RL,
enforceable against each of ARC and RL in accordance with its respective terms.
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SECTION 3.6 NO BREACH OR VIOLATION. The execution, delivery and
performance of this Agreement, the Related Agreements and any other agreements
contemplated hereby and thereby between the parties hereto by each of ARC and RL
and the consummation of the transactions contemplated hereby and thereby will
not (a) result in or constitute a breach or an event that, with or without
notice or the passing of time or both, would be a default, breach or other
violation of the articles of incorporation or bylaws of ARC or RL; (b) violate
(with or without the giving of notice or the passing of time or both), or
require any consent, approval, filing or notice under, any provision of any law,
rule or regulation, court or administrative order, writ, judgment or decree
applicable to ARC or RL, their respective businesses or their respective Assets;
and (c) with or without the giving of notice or the passing of time or both (i)
violate or conflict with, or result in the breach, suspension or termination of
any provision of, or constitute a default under, or result in the acceleration
of the performance of the obligations of ARC or RL under, or (ii) result in the
creation of any Liens upon all or any portion of the properties or Assets of ARC
or RL or their respective businesses pursuant to, the articles of incorporation
or bylaws of ARC or RL, or any indenture, mortgage, deed of trust, lease,
agreement, contract or instrument to which ARC or RL is a party or by which ARC
or RL, their respective Assets or their respective businesses is bound.
SECTION 3.7 CORPORATE DOCUMENTS. ARC and RL have furnished to RoomLinX
for its examination true and correct copies of their articles of incorporation,
bylaws and minute books.
SECTION 3.8 SEC FILINGS. Each of the documents filed by ARC with the
Securities and Exchange Commission ("SEC") (including all financial statements
included therein) (the "SEC FILINGS") at the time of filing thereof conformed
with the requirements of the Securities Act, and none of the SEC Filings at the
time of filing thereof contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances under which
they were made, not misleading.
SECTION 3.9 CAPITALIZATION.
(a) As of the date hereof, the authorized capital stock of ARC consists
of 5,000,000 shares of preferred stock, par value $.20 per share, of which
720,000 shares are validly issued and outstanding, fully paid and
non-assessable, and 45,000,000 shares of ARC Common Stock, of which 14,984,459
shares were validly issued and outstanding, fully paid and non-assessable on
November 12, 2003. Except as set forth in the SEC Filings, ARC has no options,
warrants, equity securities, calls, rights (including preemptive rights),
commitments or agreements of any character to which ARC is a party or by which
it is bound, obligating it to issue, deliver or sell, or cause to be issued,
delivered or sold, or to repurchase, redeem or otherwise acquire, or to cause
the repurchase, redemption or acquisition, of any shares of capital stock of ARC
or obligating it to grant, extend, accelerate the vesting of or enter into any
such option, warrant, equity security, call, right, commitment or agreement, or
any other obligation to make any other distribution in respect thereof. All of
the outstanding securities of ARC were issued in compliance with all applicable
Federal and state securities laws. There are no voting trusts or agreements,
shareholder agreements, buy-sell agreements, rights of first refusal, preemptive
rights or proxies relating to any securities of ARC (whether or not ARC is a
party thereto). The ARC Merger Shares, when issued and delivered to the RoomLinX
Stockholders in accordance with the terms of this Agreement, will be duly and
validly issued, fully paid and non-assessable, and issued in compliance with all
applicable Federal and state securities laws, including compliance with
Regulation S promulgated under the Securities Act with respect to the non-U.S.
RoomLinX Stockholders.
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(b) As of the date hereof, the authorized capital stock of RL consists
of 100 shares of common stock, par value $.01 per share, of which 100 shares are
validly issued and outstanding, fully paid and non-assessable, all of which are
owned by ARC.
SECTION 3.10 CONDUCT OF BUSINESS. Except as expressly contemplated by
this Agreement, from the date of this Agreement until the Closing, ARC shall
operate its business in the ordinary course and in a commercially reasonable
manner and will make all reasonably necessary efforts to preserve intact its
business and its relationships with third parties, the goodwill it has accrued
and the services of its existing officers, employees and directors.
Notwithstanding the foregoing, the parties acknowledge that it is the intention
of ARC to transfer the existing ARC business model and any and all Assets of
ARC, including any intangible assets associated with the existing ARC business
model, either by a sale of stock or sale of assets, in accordance with a
transaction approved by the ARC Board of Directors (the "ARC SALE").
SECTION 3.11 FINANCIAL STATEMENTS. ARC has previously filed with the
SEC: (a) audited financial statements consisting of balance sheets, statements
of income, statements of retained earnings and statements of cash flows for each
of the two most recently completed fiscal years (the "AUDITED ARC FINANCIALS")
and (b) unaudited financial statements consisting of a balance sheet (the
"INTERIM ARC BALANCE SHEET") and income statement as of and for the nine (9)
months ended September 30, 2003 (the "UNAUDITED ARC FINANCIALS" and together
with the Audited ARC Financials, the "ARC FINANCIAL STATEMENTS"). All ARC
Financial Statements (a) have been prepared from the books and records of ARC
(b) have been prepared in accordance with GAAP, consistently applied, throughout
the periods involved (except as disclosed therein and other adjustments
disclosed therein, and, in the case of the Unaudited ARC Financials, the absence
of footnotes and subject to normal year-end adjustments which will not be
material) and (c) present fairly in all material respects the financial
condition of ARC as of such date and the results of its operations for the
calendar year or nine-month period then ended.
SECTION 3.12 NO UNDISCLOSED LIABILITIES. Except as specifically
described in the ARC Financial Statements or as set forth on Schedule 3.11, each
of ARC and RL has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the ARC Financial
Statements. Neither ARC nor RL knows of any material liability of any nature,
direct or indirect, contingent or otherwise, or in any amount, not adequately
reflected or reserved against in the Interim ARC Balance Sheet.
SECTION 3.13 TRANSACTIONS WITH AFFILIATES. Except as set forth in the
SEC Filings, no Affiliate of ARC or RL, is a party to any transaction with ARC
or RL, including any contract, agreement or other arrangement providing for the
employment of, furnishing of services by, loaning of money to, rental of real or
personal property from or otherwise requiring payments to any such person or
firm. None of the officers, directors or key employees of ARC or RL or their
Affiliates owns, directly or indirectly, individually or collectively, a
material interest in any entity which is a competitor, customer or supplier of
ARC or RL.
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SECTION 3.14 SECURITIES AND EXCHANGE COMMISSION FILINGS. The ARC
Financial Statements and other information relating to ARC and RL in the Proxy
Statement or Information Statement (other than the RoomLinX Financial Statements
and other information related to RoomLinX furnished to ARC for inclusion
therein) at the time of the mailing of the Proxy Statement or Information
Statement to ARC's stockholders will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements contained therein, in light of the
circumstances under which they are made, not misleading.
SECTION 3.15 NO MATERIAL MISSTATEMENT OR OMISSION OF MATERIAL FACT.
This Agreement (including the Schedules and Exhibits to this Agreement), the
Related Agreements and all other certificates, instruments and documents
executed in connection herewith and therewith are true, complete and correct in
all material respects. Neither this Agreement nor any Schedule or Exhibit to
this Agreement contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements contained therein, in the light of the circumstances under which they
are made, not misleading.
SECTION 3.16 NO MATERIAL ADVERSE CHANGE. Since September 30, 2003,
there has not occurred any material adverse change, event or effect in the
financial condition, results of operation, assets (including, without
limitation, intangible assets), liabilities or business of ARC or RL, taken as a
whole, or any change that would prevent or materially delay consummation of the
transactions contemplated under this Agreement, including, the Merger, or
otherwise prevent ARC or RL from performing its obligations under this Agreement
and the Related Agreements ("ARC-RL MATERIAL ADVERSE CHANGE")
ARTICLE 4
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME
(a) As soon as practicable after the execution and delivery of
this Agreement, ARC and RoomLinX, in conjunction with their respective counsel,
shall prepare and file with the SEC, either (i) a Proxy Statement pursuant to
Regulation 14A ("PROXY STATEMENT") under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), or (ii) in the event that ARC obtains the
requisite approval from its stockholders without the necessity of a special
meeting of stockholders, an Information Statement pursuant to Regulation 14C
("INFORMATION STATEMENT") under the Exchange Act, and shall use their
commercially reasonable best efforts to cause the Proxy Statement to be
"cleared" by the SEC, and to cause the Proxy Statement or the Information
Statement to be mailed to all holders of ARC Common Stock.
(b) RoomLinX shall (i) cooperate in the preparation and filing
of the Proxy Statement, Information Statement or other filing required to be
made with the SEC under the Securities Act or the Exchange Act in connection
with the transactions contemplated in this Agreement and the Related Agreements,
including the Merger, and (ii) provide all material reasonably requested by ARC
(including all financial statements of RoomLinX, financial information and other
information) for inclusion in the Proxy Statement, Information Statement or
other required SEC filing.
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(c) During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, except as expressly contemplated by this Agreement, each of
RoomLinX and ARC shall carry on its business in the usual, regular and ordinary
course and use all commercially reasonable efforts to preserve intact its
present business organization and preserve its relationships with third parties
and others having business dealings with it, with the objective that its
goodwill and ongoing business shall be unimpaired at the Effective Time. ARC
shall continue to make all required filings in accordance with the Securities
Act and the Exchange Act. Each party shall promptly notify the other parties of
any event or occurrence not in the ordinary course of business which comes to
its attention and which has caused, or could reasonably be expected to cause, an
ARC-RL Material Adverse Change or a RoomLinX Material Adverse Change.
(d) Except as expressly contemplated by this Agreement, each
of ARC and RL shall not, without the prior written consent of RoomLinX, and
RoomLinX shall not, without the prior written consent of ARC:
(i) Intentionally omitted;
(ii) Issue, deliver or sell, authorize or propose the issuance, delivery or sale
of, or purchase or propose the purchase of, any shares of its capital stock or
securities convertible into, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities or authorize or propose
any change in its equity capitalization;
(iii) Solicit approval for or effect any amendments to its articles of
incorporation or bylaws;
(iv) Acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to such party;
(v) Sell, lease, license, pledge or otherwise dispose of or encumber any of its
properties or assets except in the ordinary course of business consistent with
past practice (including without limitation any indebtedness owed to it or any
claims held by it);
(vi) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee, endorse or
otherwise become responsible for the obligations of others, or make loans or
advances, other than in the ordinary course of business consistent with past
practice;
(vii) Pay, discharge or satisfy any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business consistent
with past practice of liabilities reflected or reserved against in its financial
statements;
14
(viii) Enter into or amend any employment, severance, termination contract or
other agreement or arrangement with, or pay any bonus or remuneration, including
without limitation, any severance or termination pay to, any director, employee
or consultant, or increase the salaries, wage rates, or other payments or
benefits of its directors, officers, employees, or consultants;
(ix) Transfer, assign or otherwise grant or convey to any person or entity any
rights in, to or under its intellectual property;
(x) Engage in any activities or transactions that are outside the ordinary
course of its business; or
(xi) Take, or agree (in writing or otherwise) to take, any of the actions
described in this Section, or any action which would make any of the
representations or warranties contained in this Agreement untrue or inaccurate
or result in any of the conditions to the Merger set forth herein not being
satisfied.
(e) Each party shall give each other party, and its
accountants, counsel and other representatives, reasonable access during normal
business hours and upon reasonable prior notice during the period from the date
of this Agreement until the earlier of the Effective Time or the termination of
this Agreement to (i) all of its respective properties, books, contracts,
commitments and records, and (ii) all other information concerning its business,
properties and personnel as such party may reasonably request. No information or
knowledge obtained in any investigation pursuant to this Section shall affect or
be deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger.
ARTICLE 5
THE CLOSING
The closing ("CLOSING") of the Merger and any other transactions
contemplated by this Agreement shall take place at the law offices of Westerman
Ball Ederer Miller & Sharfstein, LLP, 170 Old Country Road, Mineola, New York
11501 within ten (10) days after satisfaction of the conditions set forth in
Article 6 hereof, but no later than March 31, 2004, or at such other place and
time and on such other date, as the parties may agree upon in writing ("CLOSING
DATE").
ARTICLE 6
CONDITIONS TO CLOSING
The obligations of each party to engage in the transactions
contemplated by this Agreement are subject to the fulfillment, prior to or on
the Closing Date, of the following conditions:
15
(a) ARC shall have complied with Regulation 14A or Regulation 14C, as the case
may be, under the Exchange Act and shall have obtained the approval of the
holders of the requisite number of shares of ARC Common Stock to (i) an
amendment to the articles of incorporation of ARC to (A) increase the number of
authorized shares of ARC Common Stock to 150,000,000 shares and (B) change the
name of ARC to RoomLinX, Inc., or such other name as RoomLinX may direct (the
"AMENDED CERTIFICATE"), (ii) the Merger, and (iii) the ARC Sale;
(b) RoomLinX, ARC and RL shall have received all requisite approvals by
government agencies and authorities and all consents and approvals of third
parties as are required for the consummation of the Merger;
(c) This Agreement, the Related Agreements and the transactions contemplated
herein and therein, including the Merger, shall have been approved by (i) the
Boards of Directors of each of RoomLinX, ARC and RL, (ii) the RoomLinX
Stockholders and (iii) ARC as the sole stockholder of RL;
(d) The Amended Certificate shall have been filed;
(e) An audit of RoomLinX performed by Deloitte & Touche LLP shall have been
completed and the Audited RoomLinX Financials Statements delivered to ARC for
inclusion in the Proxy Statement or Information Statement;
(f) RoomLinX will certify that (i) all issued and outstanding options,
convertible debentures and warrants of RoomLinX have been converted into
RoomLinX Shares, other than the Permitted Debt, and (ii) RoomLinX has a positive
net worth.
(g) The executive offices of the Surviving Corporation shall be relocated to the
New York metropolitan area or as otherwise determined by the Board of Directors
of the Surviving Corporation;
(h) Effective as of the Effective Time, the Board of Directors of the Surviving
Corporation shall be comprised of the RoomLinX Designees, the ARC Designee and
two directors designated by the RoomLinX Designees and the ARC Designee;
(i) The ARC Sale shall have closed prior to the Closing;
(j) ARC shall have raised $500,000 in a private placement of ARC securities;
(k) RoomLinX shall have raised $400,000 in a private placement of RoomLinX
securities;
(l) The holders of less than ten (10%) percent of the issued and outstanding
RoomLinX Shares will have exercised appraisal rights under Nevada Law as
Dissenting Stockholders. RoomLinX and ARC will have resolved all matters of
appraisal and payment under Nevada Law for each Dissenting Stockholder;
(m) Robert Killian and Richard Peacey shall have received one
year extensions on their employment agreements from the Closing Date;
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(n) The Escrow Agreement shall have been duly executed and
delivered by all parties thereto; and
(o) ARC shall have issued to (1) Alliance Advisors and Roccus
Capital Partners or their designees an aggregate of 2,000,000 shares of ARC
Common Stock, (2) Mr. Peter Bordes (who shall continue as a director of ARC)
options to purchase 500,000 shares of ARC Common Stock at an exercise price of
$0.08 per share and (3) Rodman and Renshaw, options to purchase 250,000 shares
of ARC Common Stock at an exercise price of $0.20 per share having a three (3)
year term and "cashless exercise" provisions, and 250,000 shares of ARC Common
Stock. All shares and options to purchase ARC Common Stock referred to in this
Section 6(n) shall be registered on Form S-8 promptly after the Effective Date.
ARTICLE 7
OBLIGATIONS OF ROOMLINX AT CLOSING
At the Closing, RoomLinX or the RoomLinX Stockholders (as the case may
be) shall have delivered to ARC all of the resolutions, certificates, documents
and instruments required by this Agreement, including, without limitation:
(a) Stock certificates for all of the RoomLinX Shares duly
endorsed for transfer or accompanied by duly executed stock powers executed in
blank;
(b) Certificate of Merger;
(c) Certificate of Good Standing from the Secretary of State
of the State of Nevada;
(d) Resolutions of the Board of Directors of RoomLinX and the
RoomLinX Stockholders approving the execution and delivery of this Agreement and
the Related Agreements, the consummation of the transactions contemplated hereby
and thereby, the consummation of the Merger and the filing of the Certificate of
Merger, and certified copies of the articles of incorporation, as amended, and
bylaws, as amended, of RoomLinX, all certificated by the Secretary of RoomLinX;
and
(e) Officer's certificate signed by the Chief Executive
Officer of RoomLinX to the effect that (i) the representations and warranties of
RoomLinX set forth in this Agreement are true and correct in all material
respects on and as of the Closing Date; (ii) there shall have been no RoomLinX
Material Adverse Change from the date of this Agreement through the Closing
Date; and (iii) all covenants requiring pre-Closing performance have been
performed.
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ARTICLE 8
OBLIGATIONS OF ARC AND RL AT CLOSING
At the Closing, ARC or RL (as the case may be) shall have delivered to
RoomLinX all of the resolutions, certificates, documents and instruments
required by this Agreement, including, without limitation:
(a) Stock certificates representing the ARC Merger Shares to
the RoomLinX Stockholders;
(b) Amended Certificate;
(c) Certificate of Merger;
(d) Certificate of Good Standing from the Secretary of State
of the State of New Jersey for ARC and the Secretary of State of the State of
Nevada for RL;
(e) Resolutions of the Board of Directors and stockholders of
ARC and RL approving the execution and delivery of this Agreement and the
Related Agreements, the consummation of the transactions contemplated hereby and
thereby, the consummation of the Merger, the filing of the Certificate of Merger
and the filing of the Amended Certificate, and certified copies of each
corporation's articles of incorporation, as amended, and bylaws, as amended, all
certificated by the Secretary of ARC and RL;
(f) Resignations of all officers and directors of ARC and RL,
effective as of the Effective Date; and
(g) Officer's certificate signed by the Chief Executive
Officer of each of ARC and RL to the effect that (i) the representations and
warranties of ARC and RL set forth in this Agreement are true and correct in all
material respects on and as of the Closing Date; (ii) there shall have been no
ARC-RL Material Adverse Change from the date of this Agreement through the
Closing Date; and (iii) all covenants requiring pre-Closing performance have
been performed.
ARTICLE 9
TERMINATION
This Agreement may be terminated and the merger and the other
transactions contemplated by this Agreement may be abandoned at any time prior
to the Effective Time, notwithstanding any requisite approval and adoption of
this Agreement and the transactions contemplated by this Agreement, as follows:
(a) by the parties, following mutual written consent duly
authorized by the Boards of Directors of each of the parties hereto;
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(b) by RoomLinX or ARC (on behalf of RL), if the Effective
Time shall not have occurred as soon as reasonably practicable but no later than
March 31, 2004; provided, however, that the right to terminate this Agreement
under this Section 9(b) shall not be available if the reason the Effective Time
has not occurred is the intentional failure by the party seeking termination to
fulfill any obligation under this Agreement;
(c) by RoomLinX, following discovery of: (i) information that,
in the reasonable discretion of RoomLinX, may be material and adverse to either
ARC or RL or their respective businesses, or constitutes an ARC-RL Material
Adverse Change on a going forward basis; or (ii) a breach of any representation
or warranty made by ARC or RL contained in Article 3 hereof; or
(d) by ARC (on its own behalf and on behalf of RL), following
discovery of: (i) information that, in the reasonable discretion of ARC, may be
material and adverse to RoomLinX or the Business, or constitutes a RoomLinX
Material Adverse Change on a going forward basis; or (ii) a breach of any
representation or warranty made by RoomLinX contained in Article 2 hereof.
In the event of termination of this Agreement pursuant to this Article
9, this Agreement shall forthwith become void and there shall be no liability
under this Agreement on the part of any party, or any of their respective
officers or directors; provided, however, that nothing herein shall relieve any
party from liability for the willful breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 EXPENSES. Each party shall bear its own expenses in
connection with this Agreement and the transactions contemplated hereby.
SECTION 10.2 INDEMNIFICATION. In consideration of the execution and
delivery of this Agreement by ARC and RL, RoomLinX agrees to indemnify, defend
and hold each of ARC and RL and their respective officers and directors,
employees and agents (herein called the "ARC-RL INDEMNITEES"), harmless from and
against any and all claims, actions, causes of action, suits or other
proceedings (whether or not such ARC-RL Indemnitee is a party thereto), losses,
liabilities and damages, and expenses in connection therewith, including,
without limitation, reasonable fees and disbursements of counsel (herein called
the "ARC-RL INDEMNIFIED LIABILITIES," which term shall not include, however,
liabilities incurred by reason of the gross negligence or willful misconduct of
an ARC-RL Indemnitee) incurred by the ARC-RL Indemnitees or any of them (i) as a
result of, or arising out of, or relating to any failure of any representation
or warranty set forth in Section 2 to be true and correct when made or any
failure by RoomLinX to comply in any material respect with any of its covenants
or agreements set forth in this Agreement or (ii) any claim by LeaseTek or its
successors against the ARC-RL Indemnitees. In consideration of the execution and
delivery of this Agreement by RoomLinX, each of ARC and RL agrees to indemnify,
defend and hold RoomLinX and its officers and directors, employees and agents
(collectively, the "ROOMLINX INDEMNITEES"), harmless from and against any and
all claims, actions, causes of action, suits or other proceedings (whether or
not such RoomLinX Indemnitee is a party thereto), losses, liabilities and
damages, and expenses in connection therewith, including, without limitations,
reasonable fees and disbursements of counsel (herein called the "ROOMLINX
INDEMNIFIED LIABILITIES," which term shall not include, however, liabilities
incurred by reason of the gross negligence or willful misconduct of a RoomLinX
Indemnitee) incurred by the RoomLinX Indemnitees or any of them as a result of,
or arising out of, or relating to, any failure of any representation or warranty
set forth in Section 3 to be true and correct when made or any failure by ARC or
RL to comply with its covenants or agreements set forth in this Agreement. The
provisions of, and obligations of RoomLinX, ARC and RL under, this Section shall
be enforceable by each ARC-RL Indemnitee or RoomLinX Indemnitee separately or
together with other ARC-RL Indemnitees or RoomLinX Indemnitees, as the case may
be, and any such ARC-RL Indemnitee or RoomLinX Indemnitee seeking to enforce the
indemnification provided for hereunder may initially proceed directly against
RoomLinX, ARC or RL, as the case may be, without first resorting to any other
rights of indemnification or otherwise that it may have.
19
SECTION 10.3 HEADINGS. The subject headings of this Agreement are
included for purposes of convenience only, and shall not affect the construction
or interpretation of any of its provisions.
SECTION 10.4 CONFIDENTIALITY. The parties to this Agreement shall hold,
and shall cause their representatives to hold, all negotiations, information and
documents delivered pursuant to this Agreement confidential and shall not
disclose for any reason, except as provided below, any such information without
the prior written consent of the party to whom such information relates. If the
transactions contemplated by this Agreement are not consummated for any reason,
each party shall destroy or return to the other party all such information and
documents and any copies as soon as practicable and not disclose any such
information (that has not previously been disclosed by a party other than the
relevant party) to any third party unless required to do so pursuant to a
requirement or order under applicable laws and regulations or pursuant to a
subpoena or other legal process.
SECTION 10.5 ENTIRE AGREEMENT, MODIFICATION AND WAIVER. This Agreement,
together with the agreements referenced herein or contemplated hereby,
constitutes the entire agreement between the parties pertaining to its subject
matter and supersede all prior and contemporaneous agreements, representations
and understandings of the parties. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by all the parties.
No waiver of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not similar, nor shall
any waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
SECTION 10.6 FURTHER ACTION. Each of the parties hereto shall use its
reasonable best efforts to (i) take, or cause to be taken, all appropriate
action and do, or cause to be done, all things necessary, proper or advisable
under applicable law or otherwise to consummate and make effective the
transactions contemplated by the Agreement, and (ii) make all necessary filings,
and thereafter make any other required submissions, with respect to the
Agreement and the transactions contemplated hereby. The parties hereto shall
cooperate with each other in connection with the timely making of all such
filings, including by providing copies of all such documents to the other party
and its advisors prior to filing and, if requested, by accepting all reasonable
additions, deletions or changes suggested in connection therewith.
20
SECTION 10.7 PUBLICITY. No party to this Agreement shall issue any
press release or other public statement relating to this Agreement or the
transactions contemplated hereby without the prior written approval of the other
parties.
SECTION 10.8 COUNTERPARTS. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
SECTION 10.9 RIGHTS OF PARTIES. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties hereto and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third persons to any
party to this Agreement, nor shall any provision give any third persons any
right of subrogation or action over or against any party to this Agreement.
SECTION 10.10 ASSIGNMENT. Neither RL nor ARC shall assign this
Agreement to any person or entity without the prior written consent of RoomLinX.
RoomLinX shall not assign this Agreement to any person or entity without the
prior written consent of ARC. Subject to the previous sentence, this Agreement
shall be binding on, and shall inure to the benefit of, the parties hereto and
their respective heirs, legal representatives, successors and permitted assigns.
Any assignment or attempted assignment in violation of the provisions of this
Section shall be void.
SECTION 10.11 REMEDIES. Each party's obligation under this Agreement is
unique. If any party should default in its obligations under this Agreement, the
parties each acknowledge that it would be extremely impracticable to measure the
resulting damages; accordingly, the nondefaulting party, in addition to any
other available rights or remedies, may sue in equity for specific performance,
and the parties each expressly waive the defense that a remedy in damages will
be adequate.
SECTION 10.12 EFFECT OF CERTAIN ACTIONS. No action taken pursuant to or
related to this Agreement, including without limitation any investigation by or
on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representation, warranty, condition or
agreement contained herein.
SECTION 10.13 NOTICES. All notices, requests and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party (including
without limitation service by overnight courier service) to whom notice is to be
given, or on the third day after mailing if mailed to the party to whom notice
is to be given, by first class mail, registered or certified, postage prepaid,
at the address set forth below, or on the date of service if delivered by
electronic mail or facsimile to the facsimile number set forth below which
facsimile is confirmed. Any party may change its address for purposes of this
paragraph by giving the other parties written notice of the new address in the
manner set forth above.
21
If to RoomLinX: RoomLinX, Inc.
1111 West Hastings Street
Suite 701
Vancouver, BC V6E 2J3
Attn: Mr. Robert P. Lunde
Facsimile:
With a copy to: Clark, Wilson Barristers & Solicitors
800-885 West Georgia Street
Vancouver, British Columbia 604
Attn: William L. Macdonald
Facsimile: (732) 219-5456
If to ARC or to RL: Arc Communications Inc.
788 Shrewsbury Avenue
Tinton Falls, New Jersey 07724
Attn: Mr. Peter Bordes
Facsimile: (732) 219-5456
With a copy to: Westerman Ball Ederer Miller & Sharfstein, LLP
170 Old Country Road
Mineola, NY 11501
Attn: Alan C. Ederer, Esq.
Facsimile: (516) 977-3056
SECTION 10.14 SEVERABILITY. If any provision of this Agreement shall be
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be affected and
shall remain in full force and effect.
SECTION 10.15 GOVERNING LAW; VENUE. This Agreement shall be construed
in accordance with, and governed by, the law of the State of New York without
regard to any principles of conflicts of law. The parties hereby agree that any
action, suit, arbitration or other proceeding arising out of or related to this
Agreement shall be brought, maintained and conducted only in New York, and each
party hereby irrevocably consents and submits to the personal jurisdiction of
and venue in the United States District Court for the Eastern District of New
York and the New York State Courts in any such proceeding.
SECTION 10.16 LEGAL FEES. In the event any legal action or proceeding
is instituted to enforce or interpret any of the provisions of this Agreement,
the prevailing party shall be entitled to reasonable attorneys' fees and
disbursements.
22
SECTION 10.17 SCHEDULES AND EXHIBITS. The Schedules and Exhibits
attached to this Agreement are a part hereof as if fully set forth herein.
SECTION 10.18 TIME OF ESSENCE. Time is of the essence for each and
every provision of this Agreement where time is a factor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
23
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it
as of the day and year first set forth above.
ROOMLIINX, INC.
By:
--------------------------------
Name: ______________________________
Title:
-----------------------------
ARC COMMUNICATIONS INC.
By:
--------------------------------
Name: ______________________________
Title:
-----------------------------
RL ACQUISITION, INC.
By:
--------------------------------
Name: ______________________________
Title:
-----------------------------
24
ANNEX D
14A:11-1 RIGHT OF SHAREHOLDERS TO DISSENT.
14A:11-1. Right of shareholders to dissent.
(1) Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions
(a) Any plan of merger or consolidation to which the corporation is a
party, provided that, unless the certificate of incorporation otherwise provides
(i) a shareholder shall not have the right to dissent from any plan of
merger or consolidation with respect to shares
(A) of a class or series which is listed on a national securities exchange
or is held of record by not less than 1,000 holders on the record date fixed to
determine the shareholders entitled to vote upon the plan of merger or
consolidation; or
(B) for which, pursuant to the plan of merger or consolidation, he will
receive (x) cash, (y) shares, obligations or other securities which, upon
consummation of the merger or consolidation, will either be listed on a national
securities exchange or held of record by not less than 1,000 holders, or (z)
cash and such securities;
(ii) a shareholder of a surviving corporation shall not have the right to
dissent from a plan of merger, if the merger did not require for its approval
the vote of such shareholders as provided in section 14A:10-5.1 or in subsection
14A:10-3(4), 14A:10-7(2) or 14A:10-7(4);
(iii) a shareholder of a corporation shall not have the right to dissent
from a plan of merger, if the merger did not require, for its approval, the vote
of the shareholders as provided in subsection (6) of N.J.S.14A:10-3; or
(b) Any sale, lease, exchange or other disposition of all or substantially
all of the assets of a corporation not in the usual or regular course of
business as conducted by such corporation, other than a transfer pursuant to
subsection (4) of N.J.S.14A:10-11, provided that, unless the certificate of
incorporation otherwise provides, the shareholder shall not have the right to
dissent
(i) with respect to shares of a class or series which, at the record date
fixed to determine the shareholders entitled to vote upon such transaction, is
listed on a national securities exchange or is held of record by not less than
1,000 holders; or
(ii) from a transaction pursuant to a plan of dissolution of the
corporation which provides for distribution of substantially all of its net
assets to shareholders in accordance with their respective interests within one
year after the date of such transaction, where such transaction is wholly for
1
(A) cash; or
(B) shares, obligations or other securities which, upon consummation of the
plan of dissolution will either be listed on a national securities exchange or
held of record by not less than 1,000 holders; or
(C) cash and such securities; or
(iii) from a sale pursuant to an order of a court having jurisdiction.
(2) Any shareholder of a domestic corporation shall have the right to
dissent with respect to any shares owned by him which are to be acquired
pursuant to section 14A:10-9.
(3) A shareholder may not dissent as to less than all of the shares owned
beneficially by him and with respect to which a right of dissent exists. A
nominee or fiduciary may not dissent on behalf of any beneficial owner as to
less than all of the shares of such owner with respect to which the right of
dissent exists.
(4) A corporation may provide in its certificate of incorporation that
holders of all its shares, or of a particular class or series thereof, shall
have the right to dissent from specified corporate actions in addition to those
enumerated in subsection 14A:11-1(1), in which case the exercise of such right
of dissent shall be governed by the provisions of this Chapter.
Amended 1973, c.366, s.60; 1988, c.94, s.64; 1995, c.279, s.21; 2001,
c.193, s.3.
14A:11-2. NOTICE OF DISSENT; DEMAND FOR PAYMENT; ENDORSEMENT OF CERTIFICATES
(1) Whenever a vote is to be taken, either at a meeting of shareholders or
upon written consents in lieu of a meeting pursuant to section 14A:5-6, upon a
proposed corporate action from which a shareholder may dissent under section
14A:11-1, any shareholder electing to dissent from such action shall file with
the corporation before the taking of the vote of the shareholders on such
corporate action, or within the time specified in paragraph 14A:5-6(2)(b) or
14A:5-6(2)(c), as the case may be, if no meeting of shareholders is to be held,
a written notice of such dissent stating that he intends to demand payment for
his shares if the action is taken.
(2) Within 10 days after the date on which such corporate action takes
effect, the corporation, or, in the case of a merger or consolidation, the
surviving or new corporation, shall give written notice of the effective date of
such corporate action, by certified mail to each shareholder who filed written
notice of dissent pursuant to subsection 14A:11-2(1), except any who voted for
or consented in writing to the proposed action.
2
(3) Within 20 days after the mailing of such notice, any shareholder to
whom the corporation was required to give such notice and who has filed a
written notice of dissent pursuant to this section may make written demand on
the corporation, or, in the case of a merger or consolidation, on the surviving
or new corporation, for the payment of the fair value of his shares.
(4) Whenever a corporation is to be merged pursuant to section 14A:10-5.1
or subsection 14A:10-7(4) and shareholder approval is not required under
subsections 14A:10-5.1(5) and 14A:10-5.1(6), a shareholder who has the right to
dissent pursuant to section 14A:11-1 may, not later than 20 days after a copy or
summary of the plan of such merger and the statement required by subsection
14A:10-5.1(2) is mailed to such shareholder, make written demand on the
corporation or on the surviving corporation, for the payment of the fair value
of his shares.
(5) Whenever all the shares, or all the shares of a class or series, are to
be acquired by another corporation pursuant to section 14A:10-9, a shareholder
of the corporation whose shares are to be acquired may, not later than 20 days
after the mailing of notice by the acquiring corporation pursuant to paragraph
14A:10-9(3)(b), make written demand on the acquiring corporation for the payment
of the fair value of his shares.
(6) Not later than 20 days after demanding payment for his shares pursuant
to this section, the shareholder shall submit the certificate or certificates
representing his shares to the corporation upon which such demand has been made
for notation thereon that such demand has been made, whereupon such certificate
or certificates shall be returned to him. If shares represented by a certificate
on which notation has been made shall be transferred, each new certificate
issued therefor shall bear similar notation, together with the name of the
original dissenting holder of such shares, and a transferee of such shares shall
acquire by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making a demand for payment of the
fair value thereof.
(7) Every notice or other communication required to be given or made by a
corporation to any shareholder pursuant to this Chapter shall inform such
shareholder of all dates prior to which action must be taken by such shareholder
in order to perfect his rights as a dissenting shareholder under this Chapter.
Amended 1973,c.366,s.61; 1988,c.94,s.65.
14A:11-3. "DISSENTING SHAREHOLDER" DEFINED; DATE FOR DETERMINATION OF FAIR VALUE
(1) A shareholder who has made demand for the payment of his shares in the
manner prescribed by subsection 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) is
hereafter in this Chapter referred to as a "dissenting shareholder."
3
(2) Upon making such demand, the dissenting shareholder shall cease to have
any of the rights of a shareholder except the right to be paid the fair value of
his shares and any other rights of a dissenting shareholder under this Chapter.
(3) "Fair value" as used in this Chapter shall be determined
(a) As of the day prior to the day of the meeting of shareholders at which
the proposed action was approved or as of the day prior to the day specified by
the corporation for the tabulation of consents to such action if no meeting of
shareholders was held; or
(b) In the case of a merger pursuant to section 14A:10-5.1 or subsection
14A:10-7(4) in which shareholder approval is not required, as of the day prior
to the day on which the board of directors approved the plan of merger; or
(c) In the case of an acquisition of all the shares or all the shares of a
class or series by another corporation pursuant to section 14A:10-9, as of the
day prior to the day on which the board of directors of the acquiring
corporation authorized the acquisition, or, if a shareholder vote was taken
pursuant to section 14A:10-12, as of the day provided in paragraph
14A:11-3(3)(a).
In all cases, "fair value" shall exclude any appreciation or depreciation
resulting from the proposed action.
Amended 1973,c.366,s.62; 1988,c.94,s.66.
14A:11-4. TERMINATION OF RIGHT OF SHAREHOLDER TO BE PAID THE FAIR VALUE OF HIS
SHARES
(1) The right of a dissenting shareholder to be paid the fair value of his
shares under this Chapter shall cease if
(a) he has failed to present his certificates for notation as provided by
subsection 14A:11-2(6), unless a court having jurisdiction, for good and
sufficient cause shown, shall otherwise direct;
(b) his demand for payment is withdrawn with the written consent of the
corporation;
(c) the fair value of the shares is not agreed upon as provided in this
Chapter and no action for the determination of fair value by the Superior Court
is commenced within the time provided in this Chapter;
(d) the Superior Court determines that the shareholder is not entitled to
payment for his shares;
(e) the proposed corporate action is abandoned or rescinded; or
4
(f) a court having jurisdiction permanently enjoins or sets aside the
corporate action.
(2) In any case provided for in subsection 14A:11-4(1), the rights of the
dissenting shareholder as a shareholder shall be reinstated as of the date of
the making of a demand for payment pursuant to subsections 14A:11-2(3),
14A:11-2(4) or 14A:11-2(5) without prejudice to any corporate action which has
taken place during the interim period. In such event, he shall be entitled to
any intervening preemptive rights and the right to payment of any intervening
dividend or other distribution, or, if any such rights have expired or any such
dividend or distribution other than in cash has been completed, in lieu thereof,
at the election of the board, the fair value thereof in cash as of the time of
such expiration or completion.
14A:11-5. RIGHTS OF DISSENTING SHAREHOLDER
(1) A dissenting shareholder may not withdraw his demand for payment of the
fair value of his shares without the written consent of the corporation.
(2) The enforcement by a dissenting shareholder of his right to receive
payment for his shares shall exclude the enforcement by such dissenting
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in subsection 14A:11-4(2) and except that
this subsection shall not exclude the right of such dissenting shareholder to
bring or maintain an appropriate action to obtain relief on the ground that such
corporate action will be or is ultra vires, unlawful or fraudulent as to such
dissenting shareholder.
14A:11-6. DETERMINATION OF FAIR VALUE BY AGREEMENT
(1) Not later than 10 days after the expiration of the period within which
shareholders may make written demand to be paid the fair value of their shares,
the corporation upon which such demand has been made pursuant to subsections
14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) shall mail to each dissenting
shareholder the balance sheet and the surplus statement of the corporation whose
shares he holds, as of the latest available date which shall not be earlier than
12 months prior to the making of such offer and a profit and loss statement or
statements for not less than a 12-month period ended on the date of such balance
sheet or, if the corporation was not in existence for such 12-month period, for
the portion thereof during which it was in existence. The corporation may
accompany such mailing with a written offer to pay each dissenting shareholder
for his shares at a specified price deemed by such corporation to be the fair
value thereof. Such offer shall be made at the same price per share to all
dissenting shareholders of the same class, or, if divided into series, of the
same series.
(2) If, not later than 30 days after the expiration of the 10-day period
limited by subsection 14A:11-6(1), the fair value of the shares is agreed upon
between any dissenting shareholder and the corporation, payment therefor shall
be made upon surrender of the certificate or certificates representing such
shares.
5
Amended by L.1973, c. 366, s. 63, eff. May 1, 1974.
14A:11-7. PROCEDURE ON FAILURE TO AGREE UPON FAIR VALUE; COMMENCEMENT OF ACTION
TO DETERMINE FAIR VALUE
(1) If the fair value of the shares is not agreed upon within the 30-day
period limited by subsection 14A:11-6(2), the dissenting shareholder may serve
upon the corporation upon which such demand has been made pursuant to
subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) a written demand that it
commence an action in the Superior Court for the determination of the fair value
of the shares. Such demand shall be served not later than 30 days after the
expiration of the 30-day period so limited and such action shall be commenced by
the corporation not later than 30 days after receipt by the corporation of such
demand, but nothing herein shall prevent the corporation from commencing such
action at any earlier time.
(2) If a corporation fails to commence the action as provided in subsection
14A:11-7(1), a dissenting shareholder may do so in the name of the corporation,
not later than 60 days after the expiration of the time limited by subsection
14A:11-7(1) in which the corporation may commence such an action.
14A:11-8. ACTION TO DETERMINE FAIR VALUE; JURISDICTION OF COURT; APPOINTMENT OF
APPRAISER
In any action to determine the fair value of shares pursuant to this
Chapter:
(a) The Superior Court shall have jurisdiction and may proceed in the
action in a summary manner or otherwise;
(b) All dissenting shareholders, wherever residing, except those who have
agreed with the corporation upon the price to be paid for their shares, shall be
made parties thereto as an action against their shares quasi in rem;
(c) The court in its discretion may appoint an appraiser to receive
evidence and report to the court on the question of fair value, who shall have
such power and authority as shall be specified in the order of his appointment;
and
(d) The court shall render judgment against the corporation and in favor of
each shareholder who is a party to the action for the amount of the fair value
of his shares.
14A:11-9. JUDGMENT IN ACTION TO DETERMINE FAIR VALUE
(1) A judgment for the payment of the fair value of shares shall be payable
upon surrender to the corporation of the certificate or certificates
representing such shares.
(2) The judgment shall include an allowance for interest at such rate as
the court finds to be equitable, from the date of the dissenting shareholder's
demand for payment under subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) to
the day of payment. If the court finds that the refusal of any dissenting
shareholder to accept any offer of payment, made by the corporation under
section 14A:11-6, was arbitrary, vexatious or otherwise not in good faith, no
interest shall be allowed to him.
6
14A:11-10. COSTS AND EXPENSES OF ACTION
The costs and expenses of bringing an action pursuant to section 14A:11-8
shall be determined by the court and shall be apportioned and assessed as the
court may find equitable upon the parties or any of them. Such expenses shall
include reasonable compensation for and reasonable expenses of the appraiser, if
any, but shall exclude the fees and expenses of counsel for and experts employed
by any party; but if the court finds that the offer of payment made by the
corporation under section 14A:11-6 was not made in good faith, or if no such
offer was made, the court in its discretion may award to any dissenting
shareholder who is a party to the action reasonable fees and expenses of his
counsel and of any experts employed by the dissenting shareholder.
7
ANNEX F
_________, 2004
Mr. Peter A. Bordes
Chief Executive Officer
Arc Communications Inc. 733
Shrewsbury Avenue
Tinton Falls, New Jersey 07724
Dear Mr. Bordes:
This letter outlines the basis upon which Michael Rubel, Thomas
Rittenhouse and Alan Sheinwald, through a to be formed entity to be owned by
them collectively (the "Purchaser"), would be willing to enter into an agreement
with ARC Communications Inc. ("ARC") to purchase substantially all of ARC's
existing assets comprising the "graphic design and interactive multi-media"
business (the "Business"). The transaction would be consummated by the execution
of a definitive asset purchase agreement (the "Asset Purchase Agreement") by the
parties. The contemplated definitive Asset Purchase Agreement will provide the
following terms:
1. The purchase price for the Business will be (i) $70,000, payable
in cash at the closing (the "Closing") of the transactions
contemplated by the Asset Purchase Agreement, plus (ii) two
deferred payments (each a "Deferred Payment"), the first of which
will be payable within 45 days after the end of the 12-month
period following the Closing and the second of which will be
payable within 45 days after the end of the 24-month period
following the Closing. The first Deferred Payment shall be an
amount equal to fifty (50%) percent of the EBTDA (defined below)
of the Business for the 12-month period beginning on the date of
the Closing and ending on the 12-month anniversary of the
Closing. The second Deferred Payment shall be fifty (50%) percent
of the EBTDA of the Business for the 12-month period beginning on
the date following the 12-month anniversary of the Closing and
ending on the 24-month anniversary of the Closing. The term
"EBTDA" shall mean earnings before taxes, depreciation and
amortization.
2. It is the intention of the Purchaser and ARC to enter into a
definitive Asset Purchase Agreement as soon as practicable
following of the execution of this letter of intent, and close
this transaction between the Purchaser and ARC as timely as
possible based on Securities and Exchange Commission review, and
shareholder approval by both the Purchaser and ARC.
This letter of intent does not constitute any form of binding contract and
creates no obligations or the basis of any claims against any party but rather
is being executed solely for the purpose of entering into negotiations pursuant
to which a definitive Asset Purchase Agreement may ultimately be entered into.
The consummation of the transactions contemplated herein by the Purchase and ARC
is in all respects contingent upon and subject to, among other things, each
party's completion of due diligence and satisfaction with the results thereof
and the negotiation and execution of a satisfactory definitive Asset Purchaser
Agreement (containing, among other things, mutually agreeable closing
conditions, covenants and representations and warranties).
Sincerely yours,
------------------------
Michael Rubel
------------------------
Thomas Rittenhouse
------------------------
Alan Sheinwald
Agreed and accepted"
ARC Communications Inc.
By:
-----------------------------------
Peter A. Bordes
Chief Executive Officer