EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
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AMONG
SECTOR COMMUNICATIONS, INC.
SECTOR COMMUNICATIONS DELAWARE, INC.,
EMODEL, INC.,
AND
XXXXXXX XXXXX
JANUARY 14, 2002
#98786v5
Page 5 of 148
TABLE OF CONTENTS
PAGE
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ARTICLE I. - THE MERGER AND ISSUANCE OF STOCK. . . . . . . . . . . . .1
1.01 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03 Effects of the Merger. . . . . . . . . . . . . . . . . . . . . . .1
1.04 Certificate of Incorporation and Bylaws. . . . . . . . . . . . . 1
1.05 Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.06 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.07 Effect on Capital Stock and Other Securities. . . . . . . . . .2
1.08 Exchange of Certificates. . . . . . . . . . . . . . . . . . . . . .3
1.09 Issuance of Stock to Hadid. . . . . . . . . . . . . . . . . . . .3
1.10 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II. - CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.01 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.02 Deliveries by the Company. . . . . . . . . . . . . . . . . . . . .4
2.03 Deliveries by Buyer, Acquisition Sub and Hadid. . . . . . . . .4
2.04 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III. - REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . 5
3.01 Corporate Existence and Qualification. . . . . . . . . . . . . . .5
3.02 Authority, Approval and Enforceability. . . . . . . . . . . . . . 5
3.03 Capitalization and Corporate Records. . . . . . . . . . . . . . . 5
ARTICLE IV. - REPRESENTATIONS AND WARRANTIES OF BUYER, ACQUISITION SUB AND
HADID. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
4.01 Corporate Existence and Qualification. . . . . . . . . . . . . . .6
4.02 Authority, Approval and Enforceability. . . . . . . . . . . . . . 6
4.03 No Default or Consents. . . . . . . . . . . . . . . . . . . . . . 7
4.04 No Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.05 Capitalization and Corporate Records. . . . . . . . . . . . . . . 7
4.06 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . .8
4.07 Employee Benefit Matters. . . . . . . . . . . . . . . . . . . . . .8
4.08 Financial Statements; Liabilities. . . . . . . . . . . . . . . . . 8
4.09 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . 9
4.10 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . .9
4.11 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
4.12 Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
4.13 Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.14 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 Buyer SEC Filings. . . . . . . . . . . . . . . . . . . . . . . . . 11
4.17 Issuance of Merger Consideration. . . . . . . . . . . . . . . . . 11
4.18 Compliance with Rule 144. . . . . . . . . . . . . . . . . . . . . 11
4.19 Other Information. . . . . . . . . . . . . . . . . . . . . . . . . .11
4.20 Investment Company. . . . . . . . . . . . . . . . . . . . . . . . . 12
4.21 Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE V. - OBLIGATIONS PRIOR TO CLOSING. . . . . . . . . . . . . . . .12
5.01 Disposal of Buyer Businesses/Divisions; Form 8-K. . . . . . . . 12
5.02 Conduct of Business and Operations. . . . . . . . . . . . . . . .12
5.03 General Restrictions. . . . . . . . . . . . . . . . . . . . . . . . 12
5.04 Notice Regarding Changes. . . . . . . . . . . . . . . . . . . . . .13
5.05 No Shop. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.06 Ensure Conditions Met. . . . . . . . . . . . . . . . . . . . . . . 13
(i)
Page 6 of 148
ARTICLE VI. - CONDITIONS TO COMPANY'S AND BUYER'S OBLIGATIONS. . . . .13
6.01 Conditions to Obligations of the Company. . . . . . . . . . . . 13
6.02 Conditions to Obligations of Buyer. . . . . . . . . . . . . . . .15
ARTICLE VII. - POST-CLOSING OBLIGATIONS. . . . . . . . . . . . . . . . . .15
7.01 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 15
7.02 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.03 Forms 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
7.04 Change of Buyer's Name and Ticker Symbol. . . . . . . . . . . .16
7.05 Director and Officer Insurance. . . . . . . . . . . . . . . . . . 16
7.06 Tax-Free Reorganization. . . . . . . . . . . . . . . . . . . . . . .16
ARTICLE VIII. - INDEMNIFICATION BY HADID. . . . . . . . . . . . . . . . .16
8.01 Post-Closing Indemnity by Hadid. . . . . . . . . . . . . . . . . .16
8.02 Procedure for Indemnification. . . . . . . . . . . . . . . . . . . 16
8.03 Limitations on Indemnification. . . . . . . . . . . . . . . . . . .17
8.04 Intended Third Party Beneficiaries. . . . . . . . . . . . . . . . 17
8.05 Guaranty and Pledge. . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IX. - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 18
9.01 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
9.02 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.03 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.04 Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . . .18
9.05 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.06 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
9.07 Representations and Warranties. . . . . . . . . . . . . . . . . . .20
9.08 Entire Agreement; Amendments and Waivers. . . . . . . . . . . . .20
9.09 Binding Effect and Assignment. . . . . . . . . . . . . . . . . . .20
9.10 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
9.11 Exhibits and Schedules. . . . . . . . . . . . . . . . . . . . . . .20
9.12 Multiple Counterparts. . . . . . . . . . . . . . . . . . . . . . . .21
9.13 References and Construction. . . . . . . . . . . . . . . . . . . . 21
9.14 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . .21
9.15 Risk of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . .21
ARTICLE X. - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . .21
10.01 Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
10.02 Collateral Agreements. . . . . . . . . . . . . . . . . . . . . . . 21
10.03 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
10.04 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.05 Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . . .22
10.06 Governmental Authorities. . . . . . . . . . . . . . . . . . . . . .22
10.07 Hazardous Material. . . . . . . . . . . . . . . . . . . . . . . . .22
10.08 Legal Requirements. . . . . . . . . . . . . . . . . . . . . . . . .22
10.09 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.10 Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.11 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
10.12 Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.13 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.14 Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(ii)
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LIST OF SCHEDULES
Schedule 3.01 Qualifications as Foreign Corporation
Schedule 3.03(a) Rights to Acquire Securities
Schedule 3.03(c) Subsidiaries
Schedule 4.03 Buyer Defaults or Consents
Schedule 4.05(a) Rights to Acquire Buyer Securities
Schedule 4.05(c) Subsidiaries of Buyer
Schedule 4.06(a) Intellectual Property of Buyer
Schedule 4.06(b) Buyer Intellectual Property Lawsuits
Schedule 4.07 Employee Claims Against Buyer
Schedule 4.08(b) Buyer Scheduled Liabilities
Schedule 4.08(c) Buyer Liens
Schedule 4.09 Buyer Certain Changes
Schedule 4.10 Buyer Non-Compliance with Laws
Schedule 4.11 Buyer Litigation
Schedule 4.12(a) Real Property Owned by Buyer
Schedule 4.12(b) Leases of Buyer
Schedule 4.13 Commitments and Contracts of Buyer
Schedule 4.14 Buyer Insurance Policies
Schedule 4.16(b) Income Tax Returns of Buyer
LIST OF EXHIBITS
Exhibit A - Shareholders and Outstanding Shares of the Company
Exhibit B - Consulting Agreement between Buyer and the Madison
Consulting Firm, Inc.
Exhibit C - Consulting Agreement between Buyer and General Services
Corporation
Exhibit D - Consulting Agreement between Buyer and Corporate Media
Services, Inc.
Exhibit E - Guaranty Agreement
Exhibit F - Form of Certificate of Designation
Exhibit G - Form of Opinion of Buyer's Counsel
Exhibit H - Stockholders' Agreement
Exhibit I - Indemnification, Reimbursement and Security Agreement
Exhibit J - Instruction Letter to Transfer Agent
Exhibit K - Settlement and Release Agreement
(iii)
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AGREEMENT AND PLAN OF MERGER
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This AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") is made and entered into as
of the 14th day of January, 2002, by and among (i) Sector Communications, Inc.,
a Nevada corporation (the "BUYER"), (ii) Sector Communications Delaware, Inc., a
Delaware corporation and wholly owned subsidiary of Buyer ("ACQUISITION SUB"),
(iii) eModel, Inc., a Delaware corporation (individually and collectively with
its Subsidiaries, the "COMPANY"), and (iv) Xxxxxxx Xxxxx, a stockholder of Buyer
("HADID").
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RECITALS
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A. The parties hereto deem it in their respective best interests that
Acquisition Sub merge with and into the Company as provided herein
(the "MERGER").
B. Hadid is entering into this Agreement as an inducement to the Company.
AGREEMENT
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NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties agree as follows:
ARTICLE I. - THE MERGER AND ISSUANCE OF STOCK
1.01 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the General Corporation Law of the State
of Delaware (the "CORPORATION LAW"), Acquisition Sub shall be merged with and
into the Company at the Effective Time. Following the Effective Time, the
separate corporate existence of Acquisition Sub shall cease and the Company
shall continue as the surviving corporation (the "SURVIVING CORPORATION") and
shall succeed to and assume all the rights and obligations of Acquisition Sub in
accordance with the Corporation Law.
1.02 EFFECTIVE TIME. Subject to the provisions of this Agreement, as soon
as practicable on or after the Closing Date, the parties shall file a
certificate of merger or other appropriate documents (in any such case, the
"CERTIFICATE OF MERGER") executed in accordance with the relevant provisions of
the Corporation Law and shall make all other filings or recordings required
under the Corporation Law. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Delaware Secretary of State, or at
such other time as Acquisition Sub and the Company shall agree should be
specified in the Certificate of Merger (the time the Merger becomes effective
being referred to herein as the "EFFECTIVE TIME").
1.03 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in the applicable provisions of the Corporation Law.
1.04 CERTIFICATE OF INCOROPRATION AND BYLAWS.
(a) The Certificate of Incorporation of the Company as in effect
immediately prior to the Effective Time shall be the certificate of
Incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
(b) The bylaws of the Company as in effect immediately prior to the
Effective Time shall be the bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
1.05 DIRECTORS. The directors of the Company immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
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1.06 OFFICERS. The officers of the Company immediately prior to the
Effective Time and such other persons as Buyer shall designate shall be the
officers of the Surviving Corporation until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.
1.07 EFFECT ON CAPITAL STOCK AND OTHER SECURITIES. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of the outstanding capital of the Company or Acquisition Sub:
(a) Each issued and outstanding share of common stock of Acquisition Sub
shall be converted into and become one fully paid and nonassessable
share of Common Stock, par value $0.001 per share, of the Surviving
Corporation.
(b) Each share of the Company's common stock, par value $0.01 per share
("COMPANY COMMON STOCK"), that is held in the treasury of the Company
or By any wholly owned subsidiary of the Company shall automatically be
canceled and returned and shall cease to exist and no consideration
shall be delivered in exchange therefor.
(c) Each share of Company Common Stock that is owned by Buyer, Acquisition
Sub or any other subsidiary of Buyer shall automatically be canceled
and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor.
(d) Subject to Section1.07(f) hereof, each share of Company Common Stock
issued and outstanding (other than shares of Company Common Stock to be
canceled in accordance with Sections 1.07(b) and 1.07(c) hereof) shall
be converted into the right to receive from Buyer, 5.37879 shares of
the common stock, par value $0.001 per share ("BUYER COMMON STOCK"),
and 1.060606 shares of the Series C Convertible Preferred Stock, par
value $0.001 per share ("BUYER PREFERRED STOCK"), of Buyer
(collectively, the "MERGER CONSIDERATION"). As of the Effective Time,
all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such
shares of Company Common Stock shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration.
(e) Outstanding warrants of the Company as of the Closing Date shall be
assumed by Buyer, and such warrants shall be deemed to be amended such
that the rights therein to purchase shares of Company Common Stock
shall be converted into the right to purchase 5.37879 shares of
Buyer Common Stock and 1.060606 shares of Buyer Preferred Stock for
each share of Company Common Stock into which the warrants were
previously exercisable. The aggregate exercise price of each such
warrant shall not be amended hereby and shall remain the same.
(f) Notwithstanding anything in this Agreement to the contrary, any issued
and outstanding shares of Company Common Stock held by a person (a
"DISSENTING SHAREHOLDER") who objects to the Merger and complies with
all the provisions of Section 262 of the Corporation Law concerning
the right of holders of Company Common Stock to dissent from the
Merger and require appraisal of their Shares ("DISSENTING SHARES")
shall not be converted as described in Section 1.07(d) but shall
become the right to receive such consideration as may be determined to
be due to such Dissenting Shareholder pursuant to Section 262 of the
Corporation Law. If, after the Effective Time, such Dissenting
Shareholder withdraws his demand for appraisal or fails to perfect
or otherwise loses his right of appraisal, in any case pursuant to
the Corporation Law, his Shares shall be deemed to be converted as of
the Effective Time into the right to receive the Merger Consideration.
The Company shall give Buyer prompt notice of any demands for appraisal
of Shares received by the Company.
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1.08 EXCHANGE OF CERTIFICATES.
(a) Buyer designates Nevada Agency and Trust Company to act as transfer
agent in the Merger (the "TRANSFER AGENT"), and, from time to time on,
prior to or after the Effective Time, Buyer shall make available
securities in amounts and at the times necessary for the payment of the
Merger Consideration upon surrender of certificates representing the
shares of Company Common Stock (collectively the "SHARES") converted
into Merger Consideration pursuant to Section 1.07.
(b) At or prior to the Effective Time, Buyer shall instruct each holder of
record of a certificate or certificates which immediately prior to the
Effective Time represented Shares (the "CERTIFICATES") as to the
surrender of the Certificates in exchange for the Merger Consideration.
Upon surrender of a Certificate for cancellation to Buyer or to such
other agent or agents as may be appointed by Buyer, (i) Buyer shall
issue an irrevocable letter to the Transfer Agent instructing it to
issue the Merger Consideration required by this Agreement, which
letter shall be in the form attached hereto as Exhibit J, and(ii) the
holder of such Certificate shall be entitled to receive in exchange
therefor the amount of Merger Consideration which the Shares
theretofore represented by such Certificate shall have been converted
pursuant to Section 1.07, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership
of Shares that is not registered in the transfer records of the
Company, payment may be made to a person other than the person in whose
name the Certificate so surrendered is registered, if such Certificate
shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer
or other taxes required by reason of the payment to a person other
than the registered holder of such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid
or is not applicable. Until surrendered as contemplated by this
Section 1.08, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such
surrender the amount of Merger Consideration into which the Shares
theretofore represented by such Certificate shall have been converted
pursuant to Section 1.07 hereof. In the event any Certificate shall
have been lost, stolen or destroyed, Buyer may, in its discretion
and as a condition precedent to the payment of the Merger Consideration
in respect of the Shares represented by such Certificate, require the
owner of such lost, stolen or destroyed Certificate to deliver a bond
in such sum as it may reasonably direct as indemnity against any claim
that may be made against Buyer, the Surviving Corporation or the
Transfer Agent.
(c) All Merger Consideration paid upon the surrender of Certificates in
accordance with the terms of this Section 1.08 shall be deemed to have
been paid in full satisfaction of all rights pertaining to the
Shares theretofore represented by such Certificates. At the Effective
Time, the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the Shares that were
outstanding immediately prior o the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation
or the Transfer Agent for any reason, they shall be canceled and
exchanged as provided in this Section 1.08.
1.09 ISSUANCE OF STOCK TO HADID. Subject to the terms of this Agreement, as
an inducement for Hadid to enter into this Agreement, and in connection with the
Agreement and Plan of Reorganization among the Company, Packard Capital, Ltd.
and Slasher Productions, Inc. dba Xxxxxxx.xxx ("CASTNET AGREEMENT"), Buyer
agrees hereby to issue to Hadid (registered in the name or names as directed by
Hadid prior to the Closing) 7,250,000 shares of Buyer Common Stock and 1,500,000
shares of Buyer Preferred Stock (collectively, the "HADID SHARES") at the
Closing (defined below). Upon such issuance pursuant to the terms of this
Agreement, Hadid shall execute the Settlement and Release Agreement attached
hereto as Exhibit K.
1.10 LEGENDS. Depending upon the state of residence of the recipient, a
legend in substantially the following form will be placed on all certificates
evidencing the Buyer Common Stock and Buyer Preferred Stock comprising the
Merger Consideration and Hadid Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") NOR ANY APPLICABLE
STATE SECURITIES LAWS BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO
THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY
REGISTERED UNDER THE ACT AND THE [SPECIFIC STATE SECURITIES CODE], IF SUCH
REGISTRATION IS REQUIRED.
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ARTICLE II. - CLOSING
2.01 CLOSING.
a) Subject to the conditions stated in Article VI of this Agreement,
the closing of the transactions contemplated hereby (the "CLOSING") shall be
held at 2:00 p.m., Washington D.C. time, on January 14, 2002, or, if the
conditions set forth in Sections 6.01 and 6.02 have not been satisfied or waived
on such date, on the fifth (5th) business day after all such conditions shall
have been satisfied or waived, at the offices of Xxxxxxxxx Xxxxxxx, LLP, XxXxxx,
Virginia. The date upon which the Closing occurs is hereinafter referred to as
the "CLOSING DATE." The Closing shall be deemed completed as of 12:01 a.m.
Washington D.C. time on the morning of the Closing Date.
b) The parties hereto may execute a separate escrow agreement to
provide additional terms, conditions, covenants and agreements as to the
Closing, which agreement shall be deemed incorporated herein by reference.
2.02 DELIVERIES BY THE COMPANY. At or prior to the Closing, the Company
shall deliver to Buyer:
(i) the Certificate of Merger, duly executed by the Company;
(ii) a certificate of the President of the Company certifying
that (1) all representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing, and (2) the Company has performed and satisfied in all material
respects all covenants and agreements required by this Agreement to be performed
and satisfied by the Company at or prior to the Closing, unless waived by Buyer
in its discretion;
(iii) a certificate of the Secretary of the Company certifying
that attached thereto are (1) true and complete copies of the Company's
Certificate of Incorporation and Bylaws, each as amended to date, and (2) a
certified copy of all necessary corporate action on the Company's behalf
approving its execution, delivery and performance of this Agreement; and
(iv) an incumbency certificate with respect to the Company's
officers who have or will execute this Agreement and the Collateral Agreements.
2.03 DELIVERIES BY BUYER ACQUISITION SUB AND HADID At or prior to the
Closing, Buyer, Acquisition Sub and/or Hadid, as applicable, shall deliver:
(i) a certificate of the President of Buyer and Acquisition Sub,
and Hadid, to the Company certifying that (1) all representations and warranties
of Buyer, Acquisition Sub and Hadid contained in this Agreement shall be true
and correct in all material respects at and as of the Closing, (2) Buyer,
Acquisition Sub and Hadid have performed and satisfied in all material respects
all covenants and agreements required by this Agreement to be performed and
satisfied by each of them at or prior to the Closing, unless waived by the
Company in its discretion, and (3) Buyer's Net Worth is at least $500,000 as of
the Closing Date;
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Page 12 of 148
(ii) a certificate of the Secretary of Buyer and Acquisition Sub
to the Company certifying that attached thereto are (1) true and complete copies
of (A) Buyer's Articles of Incorporation and Bylaws, each as amended to date,
and (B) Acquisition Sub's Certificate of Incorporation and Bylaws, each as
amended to date, and (2) a certified copy of all necessary corporate action on
Buyer's and Acquisition Sub's behalf approving their respective execution,
delivery and performance of this Agreement;
(iii) an incumbency certificate to the Company with respect to
Buyer's and Acquisition Sub's respective officers who have or will execute this
Agreement and the Collateral Agreements;
(iv) $212,000.08 to The Jefferson Trust as full satisfaction of
that certain Promissory Note, dated January 2, 2002, issued by the Company to
The Jefferson Trust in respect of certain loans made by him to the Company;
(v) counterpart signatures to the Consulting Agreements
of the Madison Consulting Firm, Inc., General Services Corporation, and
Corporate Media Services, Inc. as attached hereto as Exhibits B, C and D; and
(vi) the Buyer Common Stock and Buyer Preferred Stock comprising
the Hadid Shares to [Xxxxxxxxx Xxxxxxx, LLP, XxXxxx, Virginia] pursuant to the
terms of the Guaranty Agreement attached hereto as Exhibit E ("GUARANTY
AGREEMENT").
2.04 TERMINATION At any time prior to the Closing, the Company may
terminate this Agreement for any reason without liability to any party.
ARTICLE III. - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer that:
3.01 CORPORTAE EXISTENCE AND QUALIFICATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware; the Company has the corporate power to own, manage, lease and
hold its Properties and to carry on its business as and where such Properties
are presently located and such business is presently conducted; and the Company
is qualified as a foreign corporation and in good standing in each jurisdiction
listed in Schedule 3.01.
3.02 AUTHORITY APPROVAL AND ENFORCEABILITY. This Agreement has been duly
executed and delivered by the Company, and the Company has all requisite power
and legal capacity to execute and deliver this Agreement and all Collateral
Agreements executed and delivered or to be executed and delivered in connection
with the transactions provided for hereby, to consummate the transactions
contemplated hereby and by the Collateral Agreements, and to perform its
obligations hereunder and under the Collateral Agreements. The execution,
delivery and performance of this Agreement and the consummation by the Company
of the Merger and of the other transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company
(including approval of the Company's Board of Directors and shareholders) and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement and each Collateral Agreement to which the Company is a party
constitutes, or upon execution and delivery will constitute, the legal, valid
and binding obligation of such party, enforceable in accordance with its terms,
except as such enforcement may be limited by general equitable principles or by
applicable bankruptcy, insolvency, moratorium, or similar laws and judicial
decisions from time to time in effect which effect creditors' rights generally.
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3.03 CAPITALIZATION AND COROPRATE RECORDS.
(a) The Company's authorized capital stock consists solely of
10,000,000 shares of common stock, par value $0.01 per share, of which 1,000,000
voting Shares are issued and outstanding, and 300,000 non-voting Shares are
issued and outstanding. All issued and outstanding shares of the Company's
capital stock are owned beneficially and of record by the shareholders in the
amounts indicated all as set forth on Exhibit A attached hereto, free and clear
of any and all liens, mortgages, adverse claims, charges, security interests,
encumbrances or other restrictions or limitations whatsoever, and no shares of
capital stock are held in the Company's treasury. All of the outstanding shares
of the Company are duly authorized, validly issued, fully paid and
non-assessable. Except as set forth on Schedule 3.03(a), there are no
outstanding subscriptions, options, convertible securities, rights (preemptive
or otherwise), warrants, calls or agreements relating to any shares of capital
stock of the Company. Upon filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, good and valid title to the Shares
will pass to Buyer, free and clear of all Liens of any kind, other than those
arising from acts of Buyer.
(b) The copies of the Certificate of Incorporation and Bylaws of the
Company provided to Buyer are true, accurate, and complete and reflect all
amendments made through the date of this Agreement. The Company's stock and
minute books made available to Buyer for review were correct and complete as of
the date of such review, no further entries have been made through the date of
this Agreement, and such minute books contain an accurate record of all
shareholder and corporate actions of the shareholders and directors (and any
committees thereof) of the Company taken by written consent or at a meeting
since January 1, 1996. All corporate actions taken by the Company have been duly
authorized or ratified. All accounts, books, ledgers and official and other
records of the Company fairly and accurately reflect all of the Company's
transactions, properties, assets and liabilities.
(c) Except for the subsidiaries of the Company listed on Schedule
3.03(c), the Company does not own, directly or indirectly, any outstanding
voting securities of or other interests in any other corporation, partnership,
joint venture or other business entity.
ARTICLE IV. - REPRESENTATIONS AND WARRANTIES OF BUYER, ACQUISITION SUB AND HADID
Buyer, Acquisition Sub and Hadid hereby jointly and severally represent and
warrant to the Company that:
4.01 CORPORATE EXISTENCE AND QUALIFICATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada; has the corporate power to own, manage, lease and hold its Properties
and to carry on its business as and where such Properties are presently located
and such business is presently conducted; and is duly qualified to do business
and is in good standing as a foreign corporation in each of the jurisdictions
where the character of its properties or the nature of its business requires it
to be so qualified. Acquisition Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
4.02 AUTHORITY APPROVAL AND ENFORCEABILITY. This Agreement has been duly
executed and delivered by each of Buyer and Acquisition Sub, and Buyer and
Acquisition Sub each have all requisite corporate power and legal capacity to
execute and deliver this Agreement and all Collateral Agreements executed and
delivered or to be executed and delivered by Buyer and Acquisition Sub in
connection with the transactions provided for hereby, to consummate the
transactions contemplated hereby and by the Collateral Agreements, and to
perform their respective obligations hereunder and under the Collateral
Agreements. The execution, delivery and performance of this Agreement and the
Collateral Agreements and the performance of the transactions contemplated
hereby and thereby have been duly and validly authorized and approved by all
corporate action necessary on behalf of Buyer and Acquisition Sub and no other
corporate proceeding on the part of Buyer or Acquisition Sub is necessary to
authorize this Agreement and the Collateral Agreement or to consummate the
transactions contemplated hereby and thereby. This Agreement and each Collateral
Agreement to which Buyer and/or Acquisition Sub is a party constitutes, or upon
execution and delivery will constitute, the legal, valid and binding obligation
of Buyer and/or Acquisition Sub, as applicable, enforceable in accordance with
its terms, except as such enforcement may be limited by general equitable
principles or by applicable bankruptcy, insolvency, moratorium, or similar laws
and judicial decisions from time to time in effect which effect creditors'
rights generally.
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4.03 NO DEFAULT OR CONSENTS. Except as otherwise set forth in Schedule
4.03, neither the execution and delivery of this Agreement nor the carrying out
of the transactions contemplated hereby will:
(i) violate or conflict with any of the terms, conditions or
provisions of Buyer's Articles of Incorporation or bylaws or Acquisitions Sub's
Certificate of Incorporation and bylaws;
(ii) violate any Legal Requirements applicable to Buyer or
Acquisition Sub;
(iii) violate, conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of time or both), or
accelerate or permit the acceleration of the performance required by, or give
any other party the right to terminate, any contract or Permit applicable to
Buyer or Acquisition Sub;
(iv) result in the creation of any lien, charge or other
encumbrance on any Property of Buyer or Acquisition Sub; or
(v) require Buyer or Acquisition Sub to obtain or make any
waiver, consent, action, approval or authorization of, or registration,
declaration, notice or filing with, any private non-governmental third party or
any Governmental Authority.
4.04 NO PROCEEDINGS. No suit, action or other proceeding is pending or, to
Buyer's or Acquisition Sub's knowledge, threatened before any Governmental
Authority seeking to restrain Buyer or Acquisition Sub or prohibit them from
entering into this Agreement or prohibit the Closing, or seeking Damages against
Buyer or Acquisition Sub or their respective Properties as a result of the
consummation of this Agreement.
4.05 CAPITALIZATION AND CORPORATE RECORDS.
(a) Buyer's authorized capital stock consists solely of 500,000,000
shares of common stock, par value $0.001 per share, of which 79,954,928 shares
are issued and outstanding, and 5,000,000 shares of preferred stock, of which
550 shares have been designated Series A 8% Convertible Preferred Stock, of
which no shares of Series A 8% Convertible Preferred Stock are issued and
outstanding, and 4,999,450 shares of preferred stock have not been designated
and are not issued and outstanding. No shares of capital stock are held in
Buyer's treasury. Prior to the Closing, the Board of Director's shall first (i)
take all necessary corporate proceedings and actions to cause the shares of
Buyer preferred stock currently designated Series A 8% Convertible Preferred
Stock to be undesignated and to resume that status that they had prior to their
designation as such Series A 8% Convertible Preferred Stock; and then (i)
provide for and fix the rights, powers, privileges, qualifications, limitations
and restrictions of 5,000,000 shares of the preferred stock of Buyer which shall
be deemed Series C Convertible Preferred Stock, which rights shall be as set
forth in the form of Certificate of Designation in Exhibit E attached hereto
("CERTIFICATE OF DESIGNATION"). All of the outstanding shares of the Company are
duly authorized, validly issued, fully paid and non-assessable and were not
issued in violation of (i) any preemptive or other rights of any Person to
acquire securities of Buyer, or (ii) any applicable federal or state securities
laws, and the rules and regulations promulgated thereunder (collectively,
"SECURITIES LAWS"). Except as set forth on Schedule 4.05(a), there are no
outstanding subscriptions, options, convertible securities, rights (preemptive
or otherwise), warrants, calls or agreements relating to any shares of capital
stock of Buyer. The authorized capital of Acquisition Sub consists solely of
1,000 shares of common stock, par value $0.001 per share, all of which are
issued and outstanding and owned and held by Buyer.
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(b) The copies of the Articles of Incorporation and Bylaws of Buyer
and the Certificate of Incorporation and Bylaws of Acquisition Sub provided to
the Company are true, accurate, and complete and reflect all amendments made
through the date of this Agreement. Buyer's and Acquisition Sub's stock and
minute books made available to the Company for review were correct and complete
as of the date of such review, no further entries have been made through the
date of this Agreement, and such minute books contain an accurate record of all
shareholder and corporate actions of the shareholders and directors (and any
committees thereof) of Buyer and Acquisition Sub taken by written consent or at
a meeting since January 1, 1996. All corporate actions taken by Buyer and
Acquisition Sub have been duly authorized or ratified. All accounts, books,
ledgers and official and other records of Buyer and Acquisition Sub fairly and
accurately reflect all of their respective transactions, properties, assets and
liabilities.
(c) Except for the subsidiaries of Buyer listed on Schedule 4.05(c)
(which describes the manner and form of ownership of such subsidiaries), Buyer
does not own, directly or indirectly, any outstanding voting securities of or
other interests in any other corporation, partnership, joint venture or other
business entity. Acquisition Sub has been formed for the purpose of effectuating
the Merger and has conducted no operations other than to hold an organizational
meeting and take those actions required and/or necessary to approve this
Agreement and give effect to the transactions contemplated hereby.
Acquisition Sub does not have any subsidiaries.
4.06 INTELLECTUAL PROPERTY.
(a) Schedule 4.06(a) attached hereto lists all Intellectual Property
owned by Buyer. Except as set forth on Schedule 4.06(a) hereto, Buyer does not
have any patents, trademarks, trade names, service marks, copyrights, or any
applications for such patents, trademarks, trade names, service marks and
copyrights. All patents, trademarks, trade names, service marks, copyrights,
trade secrets, schematics, technology, know-how, computer software programs or
applications and tangible or intangible proprietary information or material
shall be collectively referred to as "INTELLECTUAL PROPERTY."
(b) Except as set forth in Schedule 4.06(b) attached hereto, Buyer (i)
has not been named in any suit, action or proceeding which involves a claim of
infringement or misappropriation of any Intellectual Property right of any third
party and (ii) has not received any written notice alleging any such claim of
infringement or misappropriation.
4.07 EMPLOYEE BENEFIT MATTERS.
(a) Except as provided on Schedule 4.07, there are no claims, actions,
suits, investigations or proceedings against Buyer as of Closing Date concerning
any employee of Buyer, and Buyer has no liability to, or with respect to, any
such employee.
(b) Buyer is in compliance with all federal, state and local laws
prohibiting discrimination based on race, creed, color, sex, age, disability or
national origin.
4.08 FINANCIAL STATEMENTS LIABILITIES.
(a) Buyer's financial statements as set forth in its most recent Forms
10-QSB for the quarter ended August 31, 2001 and Form 10-KSB for the fiscal year
ended February 28, 2001, each as on file with the Securities and Exchange
Commission as of the date of this Agreement, are true and complete copies of
financial statements with respect to Buyer and its business as of and for the
periods indicated (collectively, the "BUYER'S FINANCIALS"). All of such Buyer's
Financials present fairly the financial condition and results of operations of
Buyer (including its subsidiaries) for the dates or periods indicated thereon.
All of such Buyer's Financials have been prepared in accordance with United
States generally accepted accounting principals ("GAAP") applied on a consistent
basis throughout the periods indicated.
(b) Except for (i) the liabilities reflected on Buyer's August 31,
2001 balance sheet included with the Buyer's Financials, (ii) trade payables and
accrued expenses incurred since August 31, 2001 in the ordinary course of
business, (iii) executory contract obligations under (A) Contracts listed on
Schedule 4.13, and/or (B) Contracts not required to be listed on Schedule 4.13,
and (iv) the liabilities set forth in Schedule 4.08(b) attached hereto, Buyer
does not have any liabilities or obligations (whether accrued, absolute,
contingent, known, unknown or otherwise, and whether or not of a nature required
to be reflected or reserved against in a balance sheet in accordance with GAAP).
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(c) Except as provided under the provisions of the agreements
described in Schedule 4.08(c), Buyer has and will have as of the Closing Date
legal and beneficial ownership of its Properties, free and clear of any and all
Liens.
4.09 ABSENCE OF CERTAIN CHANGES. Except as otherwise set forth in Schedule
4.09 attached hereto, since August 31, 2001, Buyer has conducted its business in
the ordinary and usual course and (ii) no event or events have occurred or
circumstances arisen that, individually or in the aggregate, has had or is
reasonably likely to have a material adverse effect on Buyer.
4.10 COMPLIANCE WITH LAWS. Except as otherwise set forth in Schedule 4.10,
Buyer is and has been in compliance in all respects with any and all Legal
Requirements (including all federal, state and local laws regulating Hazardous
Material, and atmospheric, water, and other pollution or damage to the
environment) applicable to Buyer, other than failures to so comply that would
not have a material adverse effect on the business, operations, prospects,
Properties or financial condition of Buyer.
4.11 LITIGATION. Except as otherwise set forth in Schedule 4.11, there are
no claims, actions, suits, investigations or proceedings against Buyer pending
or, to the knowledge of Buyer, threatened in any court or before or by any
Governmental Authority, or before any arbitrator, that might have a material
adverse effect (whether covered by insurance or not) on the business,
operations, prospects, Properties or financial condition of Buyer and, to the
knowledge of Buyer, there is no basis for any such claim, action, suit,
investigation or proceeding. Schedule 4.11 also includes a true and correct
listing of all material actions, suits, investigations, claims or proceedings
that were pending, settled or adjudicated since January 1, 1996.
4.12 PROPERTY.
(a) Schedule 4.12(a) sets forth a list of all real property or any
interest therein (including without limitation any option or other right or
obligation to purchase any real property or any interest therein) currently
owned by Buyer, in each case setting forth the street address and legal
description of each property covered thereby (the "BUYER OWNED PREMISES").
(b) Schedule 4.12(b) sets forth a list of all leases, licenses or
similar agreements relating to Buyer's use or occupancy of real estate owned by
a third party ("BUYER LEASES"), true and correct copies of which have previously
been furnished to the Company, in each case setting forth (i) the lessor and
lessee thereof and the commencement date, term and renewal rights under each of
the Buyer Leases, and (ii) the street address and legal description of each
property covered thereby (the "BUYER LEASED PREMISES"). The Buyer Leases and all
guaranties with respect thereto, are in full force and effect and no party
thereto is in default or breach under any such Lease. No event has occurred
which, with the passage of time or the giving of notice or both, would cause a
material breach of or default under any of such Buyer Leases. Neither Buyer nor
its agents or employees have received written notice of any claimed abatements,
offsets, defenses or other bases for relief or adjustment.
(c) Each Buyer Owned Premises and Buyer Leased Premises, and all
personal property owned by Buyer or presently used in its business, is in
condition, ordinary wear and tear excepted, sufficient to carry on the business
of Buyer in the ordinary course of business consistent with its past practices.
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4.13 COMMITMENTS.
(a) Except as otherwise set forth in Schedule 4.13, Buyer is not a
party to or bound by any of the following, whether written or oral:
(i) any Contract that cannot by its terms be terminated by Buyer
with 30 days' or less notice without penalty or whose term continues beyond one
year after the date of this Agreement;
(ii) contract or commitment for capital expenditures by Buyer
in excess of $5,000 per calendar quarter in the aggregate;
(iii) lease or license with respect to any Properties, real or
personal, whether as landlord, tenant, licensor or licensee;
(iv) agreement, contract, indenture or other instrument relating
to the borrowing of money or the guarantee of any obligation or the deferred
payment of the purchase price of any Properties;
(v) partnership agreement;
(vi) contract with any Affiliate of Buyer relating to the
provision of goods or services by or to Buyer;
(vii) agreement for the sale of any assets that in the aggregate
have a net book value on Buyer's books of greater than $5,000;
(viii) agreement that purports to limit Buyer's freedom to
compete freely in any line of business or in any geographic area;
(ix) preferential purchase right, right of first refusal, or
similar agreement; or
(x) other Contract that is material to the business of Buyer.
(b) All of the Contracts listed in Schedule 4.13 are valid, binding
and in full force and effect, and Buyer has not been notified or advised by any
party thereto of such party's intention or desire to terminate or modify any
such Contract in any respect, except as disclosed in Schedule 4.13. Neither
Buyer nor, to the knowledge of Buyer, any other party is in breach of any of the
terms or covenants of any Contract listed in Schedule 4.13. Following the
Closing, Buyer will continue to be entitled to all of the benefits currently
held by Buyer under each Contract listed in Schedule 4.13 (including the Stock
Purchase Agreement between Buyer and Brighton Opportunity Fund, L.P. dated July
24, 2001.)
4.14 INSURANCE. Schedule 4.14 attached hereto is a complete and correct
list of all insurance policies (including, without limitation, fire, liability,
product liability, workers' compensation and vehicular) presently in effect that
relate to Buyer or its Properties, including the amounts of such insurance and
annual premiums with respect thereto, all of which have been in full force and
effect from and after the date(s) set forth on Schedule 4.14. None of the
insurance carriers has indicated to Buyer an intention to cancel any such policy
or to materially increase any insurance premiums (including, without limitation,
workers' compensation premiums), or that any insurance listed on Schedule 4.14
will not be available in the future on substantially the same terms as currently
in effect.
4.15 TAXES.
(a) Buyer has timely filed all federal, state and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns required by applicable law to be filed by it
(including, without limitation, estimated tax returns, income tax returns,
information returns and withholding and employment tax returns), and have paid,
or where payment is not required to have been made, have set-up an adequate
reserve or accrual for the payment of, all taxes required to be paid in respect
of the periods covered by such returns and, as of the Effective Time, will have
paid, or where payment is not required to have been made, will have set-up an
adequate reserve or accrual for the payment of, all taxes for any subsequent
periods ending on or prior to the Effective Time. Buyer will not have any
material liability for any such taxes in excess of the amounts so paid or
reserves or accruals so established.
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(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by Buyer are complete and accurate in all material respects. Buyer is not
delinquent in the payment of any material tax, assessment or governmental
charge, and has not requested any extension of time within which to file any tax
returns in respect of any fiscal year or portion thereof which have not since
been filed. Except as set forth on Schedule 4.15(b), the federal, state and
local income tax returns of Buyer have been examined by the applicable tax
authorities (or are closed to examination due to the expiration of the
applicable statute of limitations) and no deficiencies for any tax, assessment
or governmental charge have been proposed, asserted or assessed (tentatively or
otherwise) against Buyer as a result of such examinations or otherwise which
have not been settled and paid. There are currently no agreements in effect with
respect to Buyer to extend the period of limitations for the assessment or
collection of any tax. Except as set forth on Schedule 4.15(b), as of the date
hereof, no audit, examination or deficiency or refund litigation with respect to
any such return is pending or, to Buyer's knowledge, threatened.
4.16 BUYER SEC FILINGS. None of the filings made by Buyer with the
Securities and Exchange Commission ("SEC") pursuant to the Exchange Act, as of
their respective filing dates, contained any untrue statement of a material fact
or omitted to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading. Except as disclosed to the Company in writing pursuant to this
Agreement, and in materials filed by Buyer with the SEC pursuant to the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (collectively, the "SECURITIES ACT"), or the Exchange Act, there has
been no material adverse change in the financial condition of Buyer since August
31, 2001.
4.17 ISSUANCE OF MERGER CONSIDERATION. The Buyer Common Stock and Buyer
Preferred Stock to be paid to the shareholders of the Company pursuant to this
Agreement have been duly authorized and, when issued and delivered in accordance
with the terms of this Agreement, will be validly issued, fully paid and
non-assessable and will not be issued in violation of any preemptive rights,
rights of first refusal or similar rights. The Buyer Common Stock issuable upon
conversion of the Buyer Preferred Stock has been duly and validly reserved for
issuance and, upon issuance in accordance with the terms of the Certificate of
Designation will be duly and validly issued, fully paid and nonassessable and
will be free of restrictions on transfer, other than restrictions under this
Agreement and the Stockholders' Agreement (as defined in Section 6.01(f)) and
under applicable Securities Laws.
4.18 COMPLIANCE WITH RULE 144. For so long as Buyer is subject to the
reporting requirements of Section 13 or 15 of the Exchange Act and any of the
Buyer Common Stock and Buyer Preferred Stock are not freely tradable, Buyer will
use its best efforts to file the reports required to be filed by it under the
Securities Act and Sections 13(a) or 15(d) of the Exchange Act, or, if it ceases
to be so required to file such reports, it will, upon the request of the
shareholders of the Company receiving Buyer Common Stock and Buyer Preferred
Stock pursuant to this Agreement, (i) make publicly available such information
as is necessary to permit sales of securities of Buyer pursuant to Rule 144
under the Securities Act and (ii) take such further action that is reasonable in
the circumstances, in each case, to the extent required from time to time to
enable such shareholders to sell their Buyer Common Stock or Buyer Preferred
Stock without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 under the Securities Act, as such rule may be
amended from time to time, or any similar rules or regulations hereinafter
adopted by the SEC.
4.19 OTHER INFORMATION. The information furnished by Buyer and/or
Acquisition Sub to the Company pursuant to this Agreement (including, without
limitation, information contained in the exhibits hereto, the Schedules
identified herein, the instruments referred to in such Schedules and the
certificates and other documents to be executed or delivered pursuant hereto by
Buyer and/or Acquisition Sub at or prior to the Closing) is not, nor at the
Closing will be, false or misleading in any material respect, or contains, or at
the Closing will contain, any misstatement of material fact, or omits, or at the
Closing will omit, to state any material fact required to be stated in order to
make the statements therein not misleading.
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4.20 INVESTMENT COMPANY. Buyer is not an "investment company" within the
meaning of, and is not registered or required to be registered under the
Investment Company Act of 1940, as amended.
4.21 COUNSEL. BUYER, ACQUISITION SUB AND HADID HEREBY ACKNOWLEDGE AND AGREE
THAT THEY HAVE BEEN ADVISED TO SEEK ADVICE OF LEGAL COUNSEL, AND THAT XXXXXXXXX
XXXXXXX, LLP SERVES AS LEGAL COUNSEL ONLY TO THE COMPANY. Each of Buyer,
Acquisition Sub and Hadid shall acknowledge the preceding sentence in a separate
writing.
ARTICLE V. - OBLIGATIONS PRIOR TO CLOSING
From the date of this Agreement through the Closing:
5.01 DISPOSAL OF BUYER BUSINESSES/DIVISIONS; FORM 8-K. Buyer shall dispose
of its following subsidiaries: EnterVision, Inc., a Nevada corporation; Sector
Bulgaria, plc, a Bulgaria company; Sector Development, Inc. (dba Global Tech
Expos), a California corporation; and Ideous Technologies, AG, a Swiss
corporation. Buyer shall keep the Company and its legal advisors advised as to
the progress of such disposals and shall provide all agreements and documents
relating thereto. Buyer shall timely file any reports on Form 8-K with respect
to the aforesaid disposals of said subsidiaries as required by the Exchange Act.
5.02 CONDUCT OF BUSINESS AND OPERATIONS The Company and the Buyer shall
keep each other advised as to all material operations and proposed material
operations relating to the Company or the Buyer, as applicable. Each of the
Company and the Buyer shall, except as otherwise provided in this Agreement, (a)
conduct its business in the ordinary course, (b) keep available the services of
present employees, (c) maintain and operate its Properties in a good and
workmanlike manner, (d) comply in all material respects with all applicable
Legal Requirements.
5.03 GENERAL RESTRICTIONS. Except as otherwise expressly permitted or
required in this Agreement, without the prior written consent of the Company,
which consent shall not be unreasonably withheld, Buyer shall not:
(i) engage in any material transaction not in the ordinary course
of its business, make or declare any dividends or distributions of its capital,
surplus, or profits, or redeem or issue any shares of its common stock or other
securities;
(ii) mortgage, pledge, or subject to lien or charge or any
other encumbrance any of its assets or Properties;
(iii) purchase any securities of any person;
(iv) amend its charter or bylaws;
(v) issue any capital stock or other securities, or grant, or
enter into any agreement to grant, any options, convertibility rights, other
rights, warrants, calls or agreements relating to its securities;
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(vi) create, incur, assume, guarantee or otherwise become liable
or obligated with respect to any indebtedness, or make any loan or advance to,
or any investment in, any person, except in each case in the ordinary course of
business;
(vii) enter into any transaction or make any commitment which
could result in any of the representations, warranties or covenants of the
Company or the Buyer, as applicable, contained in this Agreement not being true
and correct after the occurrence of such transaction or event;
(viii) enter into, amend or terminate any material agreement;
(ix) sell, transfer, lease, mortgage, encumber or otherwise
dispose of, or agree to sell, transfer, lease, mortgage, encumber or otherwise
dispose of, any Properties except (i) in the ordinary course of business, or
(ii) pursuant to any agreement specified in Schedule 4.13;
(x) settle any material claim or litigation, or file any material
motions, orders, briefs or settlement agreements in any proceeding before any
Governmental Authority or any arbitrator;
(xi) other than in the ordinary course of business consistent
with past practices, incur or approve, or enter into any agreement or commitment
to make, any expenditures in excess of $10,000 (other than those required
pursuant to any agreement specified in Schedule 4.13);
(xii) engage in any one or more activities or transactions
outside the ordinary course of business; or
(xiii) commit to do any of the foregoing.
5.04 NOTICE REGARDING CHANGES. Each of the Company and the Buyer shall
promptly inform the other in writing of any change in facts and circumstances
that could render any of the representations and warranties made herein by the
Company or the Buyer, as applicable, inaccurate or misleading if such
representations and warranties had been made upon the occurrence of the fact or
circumstance in question.
5.05 NO SHOP. Unless waived by The Jefferson Trust, from the date of this
Agreement until the earlier of (i) the Closing Date, or (ii) the termination of
this Agreement, Buyer, Acquisition Sub and Hadid shall not, and Buyer shall
cause Buyer's officers, directors, employees and other agents not to, directly
or indirectly, take any action to solicit, initiate or encourage any offer or
proposal or indication of interest in a merger, consolidation or other business
combination involving any equity interest in, or a substantial portion of the
assets of Buyer, other than in connection with the transaction contemplated by
this Agreement. Buyer shall immediately advise the Company of the terms of any
offer, proposal or indication of interest that it receives or otherwise becomes
aware of.
5.06 ENSURE CONDITIONS MET. Subject to the terms and conditions of this
Agreement, each party hereto shall use all reasonable commercial efforts to take
or cause to be taken all actions and do or cause to be done all things required
under applicable Legal Requirements in order to consummate the transactions
contemplated hereby, including, without limitation, (i) obtaining all Permits,
authorizations, consents and approvals of any Governmental Authority or other
person which are required for or in connection with the consummation of the
transactions contemplated hereby and by the Collateral Agreements, (ii) taking
any and all reasonable actions necessary to satisfy all of the conditions to
each party's obligations hereunder as set forth in Article VI, and (iii)
executing and delivering all agreements and documents required by the terms
hereof to be executed and delivered by such party on or prior to the Closing.
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ARTICLE VI. - CONDITIONS TO COMPANY'S AND BUYER'S OBLIGATIONS
6.01 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to carry out the transactions contemplated by this Agreement are
subject, at the option of the Company, to the satisfaction or waiver of the
following conditions:
(a) All representations and warranties of Buyer, Acquisition Sub and
Hadid contained in this Agreement shall be true and correct in all material
respects at and as of the Closing, and Buyer, Acquisition Sub and Hadid shall
have performed and satisfied in all material respects all covenants and
agreements required by this Agreement to be performed and satisfied by each of
them at or prior to the Closing.
(b) As of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by or on behalf of the Company) shall be
pending or threatened before any Governmental Authority seeking to restrain the
Company or prohibit the Closing or seeking Damages against the Company as a
result of the consummation of this Agreement.
(c) The Company shall have received the opinion of legal counsel to
Buyer, dated as of the Closing Date, in form and substance, and issued by a law
firm, satisfactory to the Company, to the effect set forth on Exhibit G, as well
as such other assurances as the Company may reasonably request of the Buyer to
establish that the transactions contemplated hereunder have been authorized and
will be consummated in a manner compliant with the laws of the State of Nevada.
(d) All proceedings to be taken by the Buyer and Acquisition Sub in
connection with the transactions contemplated hereby and all documents incident
thereto shall be satisfactory in form and substance to the Company and its
counsel, and the Company and said counsel shall have received all such
counterpart originals or certified or other copies of such documents as it or
they may reasonably request.
(e) The Company shall have received written evidence, in form and
substance satisfactory to the Company, of the consent to the transactions
contemplated by this Agreement of all governmental, quasi-governmental and
private third parties (including, without limitation, persons or other entities
leasing real or personal property to the Company) where the absence of any such
consent would result in a violation of law or a breach or default under any
agreement to which Buyer is subject.
(f) Effective as of the Closing Date, Buyer, The Jefferson Trust dated
December 19, 1974, Hadid, The Paramount Trust, The Xxxxxx Trust, Graye Capital,
Ltd., a British Virgin Islands corporation, Fortune Multimedia, Ltd., a British
Virgin Islands corporation, and Homesite Capital, Ltd., a British Virgin Islands
corporation, shall have entered into that certain Stockholders' Agreement of
Buyer in the form attached hereto as Exhibit H ("STOCKHOLDERS' AGREEMENT").
(g) Buyer shall have disposed of EnterVision, Inc., Sector Bulgaria,
plc, Sector Development, Inc. (dba Global Tech Expos), and Ideous Technologies,
AG to the satisfaction of the Company.
(h) Effective as of the Closing, Hadid shall have irrevocably
contributed in immediately available funds no less than U.S.$500,000 to Buyer.
(i) Buyer shall have taken all corporate action necessary under
applicable law such that the number of members of the Board of Directors of
Buyer shall be five (5), (A) two (2) of whom shall be elected by the
stockholders of Buyer, and (B) The Jefferson Trust dated December 19, 1974, The
Paramount Trust and The Xxxxxx Trust shall each designate one (1) of the
remaining three (3) Board of Directors' positions, whom shall initially be Xxxxx
Xxxx, Xxxx Xxxxxx and Rafiah Kashmiri.
(j) Any and all promissory and other notes issued by Buyer to Hadid
and his Affiliates shall have been terminated and canceled.
(k) All warrants and options to purchase securities of Buyer
outstanding immediately prior to the Closing shall have been terminated and
canceled.
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(l) Buyer shall have a Net Worth of at least U.S.$500,000 as of the
Closing Date.
(m) The Certificate of Designation shall have been approved and
adopted by Buyer's Board of Directors and filed, accepted and approved by the
Nevada Secretary of State.
(n) The Series A Convertible Preferred Stock of Buyer shall have been
undesignated and its status as "blank check" preferred stock shall have been
restored as set forth in Section 4.05(a).
(o) Company shall have received the consent of Brighton Opportunity
Fund, L.P. to the Merger and other transactions contemplated hereby and a waiver
of any defaults under the Stock Purchase Agreement between Buyer and Brighton
Opportunity Fund, L.P. dated July 24, 2001, all in form acceptable to the
Company.
(p) Effective as of the Closing Date, the parties may agree to enter
into a side letter restricting the persons authorized to sign or countersign
checks, drafts, or other orders for the payment of money issued in the name of
Buyer, which restriction would remain in effect until the payment of all tax
liabilities of Buyer due, owing and/or outstanding as of the Closing.
(q) Effective as of the Closing Date, Buyer and the Company shall have
executed and delivered that certain Security and Reimbursement Agreement,
attached hereto as Exhibit I.
(r) Hadid shall have executed as of the date hereof the Guaranty
Agreement as set forth in Section 8.05.
(s) Effective as of the Closing Date, Hadid shall execute and deliver
the Settlement and Release Agreement attached hereto as Exhibit K.
6.02 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to carry
out the transactions contemplated by this Agreement are subject, at the option
of Buyer, to the satisfaction, or waiver by Buyer, of the following conditions:
(a) All representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing, and the Company shall have performed and satisfied in all material
respects all agreements and covenants required by this Agreement to be performed
and satisfied by the Company at or prior to the Closing.
(b) As of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by or on behalf of Buyer) shall be pending
or threatened before any court or governmental agency seeking to restrain Buyer
or prohibit the Closing or seeking Damages against Buyer or the Company or its
Properties as a result of the consummation of this Agreement.
(c) All proceedings to be taken by the Company in connection with the
transactions contemplated hereby and all documents incident thereto shall be
satisfactory in form and substance to Buyer and its counsel, and Buyer and said
counsel shall have received all such counterpart originals or certified or other
copies of such documents as it or they may reasonably request.
(d) Buyer shall have received written evidence, in form and substance
satisfactory to Buyer, of the consent to the transactions contemplated by this
Agreement of all governmental, quasi-governmental and private third parties
(including, without limitation, persons or other entities leasing real or
personal property to the Company) where the absence of any such consent would
result in a violation of law or a breach or default under any agreement to which
the Company is subject.
ARTICLE VII. - POST-CLOSING OBLIGATIONS
7.01 FURTHER ASSURANCES. Following the Closing, the Company, Buyer,
Acquisition Sub and Hadid shall execute and deliver such documents, and take
such other action, as shall be reasonably requested by any other party hereto to
carry out the transactions contemplated by this Agreement.
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7.02 PUBLICITY. None of the parties hereto shall issue or make, or cause to
have issued or made, any public release or announcement concerning this
Agreement or the transactions contemplated hereby, without the advance approval
in writing of the form and substance thereof by each of the other parties,
except as required by law (in which case, so far as possible, there shall be
consultation among the parties prior to such announcement), and the parties
shall endeavor jointly to agree on the text of any announcement or circular so
approved or required.
7.03 FORMS 8-K.
(a) Buyer shall timely file any reports on Form 8-K as required under
the Exchange Act with respect to action taken by Buyer pursuant to Section 5.01
hereof.
(b) Buyer shall timely file all periodic reports with respect to the
Merger and the other transactions contemplated by this Agreement and the
Collateral Agreements (including Form 8-K) as required under the Exchange Act.
7.04 CHANGE OF BUYER'S NAME AND TICKER SYMBOL. Buyer shall take all
necessary corporate and other action to change Buyer's name to "Options Talent
Group" and Buyer's ticker symbol to "OPTA" each as soon as practicable following
the Closing.
7.05 DIRECTOR AND OFFICER INSURANCE Buyer shall use its best efforts to
obtain director and officer insurance within 60 days of Closing.
7.06 TAX-FREE REORGANIZATION. The parties intend that the Merger qualify as
a tax-free reorganization under Section 368(a) of the Internal Revenue Code of
the United States and shall use their best efforts to cause the Merger to so
qualify. All parties have taken the position that, for all purposes, the Merger
so qualifies and agree to report the Merger accordingly.
ARTICLE VIII. - INDEMNIFICATION BY HADID
8.01 POST CLOSING INDEMNITY BY HADID. Subject to Section 8.03, from and
after the date of this Agreement, Hadid shall indemnify and hold harmless Buyer
and its Affiliates, directors, officers and employees (excluding Hadid) and Xxxx
XxXxxxx, Xxxxxx Xxxx, Xxxxxxx X. Walk, The Jefferson Trust dated December 19,
1974 and its Affiliates, settlors, trustees and beneficiaries (the "JEFFERSON
GROUP"), The Paramount Trust, The Xxxxxx Trust and the Madison Consulting Firm,
Inc. and its officers, directors, employees and Affiliates, in their individual
capacities and as representatives of the Madison Consulting Firm, Inc. (the
"MADISON GROUP") (Messrs. DeFrawy, Bell, Walk and the Jefferson Group, The
Paramount Trust, The Xxxxxx Trust and the Madison Group, collectively, the
"INDEMNIFIED GROUP"), from and against any and all Damages (whether or not
involving a third-party claim) arising out of, resulting from or in any way
related to (i) a breach of, or the failure to perform or satisfy any of, the
representations, warranties, covenants and agreements made by any of Buyer,
Acquisition Sub or Hadid in this Agreement or in any document or certificate
delivered by any of Buyer, Acquisition Sub or Hadid at the Closing pursuant
hereto, (ii) the occurrence of any event on or prior to the date of Closing that
is (or would be, but for any deductible thereunder) covered by individual
policies of insurance, blanket insurance policies or self insurance programs
maintained by Buyer, (iii) the existence of any liabilities or obligations of
Buyer (whether accrued, absolute, contingent, known or unknown, or otherwise,
and whether or not of a nature appropriate for inclusion in a balance sheet in
accordance with GAAP), and/or (iv) known or unknown liabilities and/or Damages
as of the Closing Date in connection with, arising from or in any way related to
the disposal of Buyer's subsidiaries as set forth in Section 5.01.
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8.02 PROCEDURE FOR INDEMNIFICATION.
(a) For purposes of this Article VIII, a party making a claim for
indemnity hereunder is hereinafter referred to as an "INDEMNIFIED PARTY." All
claims by any Indemnified Party under Article VIII hereof shall be asserted and
resolved in accordance with the following provisions. If any claim or demand for
which Hadid would be liable to an Indemnified Party is asserted against or
sought to be collected from such Indemnified Party by a third party, said
Indemnified Party shall with reasonable promptness notify Hadid in writing of
such claim or demand stating with reasonable specificity the circumstances of
the Indemnified Party's claim for indemnification; provided, however, that any
failure to give such notice will not waive any rights of the Indemnified Party
except to the extent the rights of Hadid are actually prejudiced and then only
to such extent. After receipt by Hadid of such notice, then upon reasonable
notice from Hadid to the Indemnified Party, or upon the request of the
Indemnified Party, Hadid shall defend, manage and conduct any proceedings,
negotiations or communications involving any claimant whose claim is the subject
of the Indemnified Party's notice to Hadid as set forth above, and shall take
all actions necessary, including but not limited to the posting of such bond or
other security as may be required by any Governmental Authority, so as to enable
the claim to be defended against or resolved without expense or other action by
the Indemnified Party. Upon request of Hadid, the Indemnified Party shall, to
the extent it may legally do so and to the extent that it is compensated in
advance by Hadid for any costs and expenses thereby incurred:
(i) take such action as Hadid may reasonably request in
connection with such action,
(ii) allow Hadid to dispute such action in the name of the
Indemnified Party and to conduct a defense to such action on behalf of the
Indemnified Party, and
(iii) render to Hadid all such assistance as Hadid may reasonably
request in connection with such dispute and defense.
(b) Hadid shall be entitled to appoint counsel of his choice, which
counsel is satisfactory to the Indemnified Party, at Hadid's expense to
represent the Indemnified Party in any action for which indemnification is
sought (in which case Hadid shall not thereafter be responsible for the fees and
expense except as set forth below) so long as (A) the action involves only money
damages and does not seek an injunction or other equitable relief that, if
awarded, is reasonably likely to have an adverse effect on the Indemnified
Party, (B) settlement of, or an adverse judgment with respect to the action is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing business
interest of the Indemnified Party, and (C) Hadid conducts the defense reasonably
actively and diligently. Notwithstanding Hadid's election to appoint counsel to
represent the Indemnified Party in an action, the Indemnified Party shall have
the right to employ separate counsel (including local counsel), and Hadid shall
bear the reasonable fees, costs and expenses of such separate counsel if: (i)
the use of counsel chose by Hadid to represent the Indemnified Party would
present such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the Indemnified Party
and Hadid and the Indemnified Party shall have reasonably concluded that there
may be legal defense available to it and/or other Indemnified Parties that are
different from or additional to those available to Hadid, (iii) Hadid shall not
have employed counsel satisfactory to the Indemnified Party to represent the
Indemnified Party within a reasonable time after notice of the institution of
such action or (iv) Hadid shall authorize the Indemnified Party to employ
separate counsel at the expense of Hadid. Without the consent of the Indemnified
Party, which consent shall not be unreasonably withheld, Hadid shall not settle
any claim, litigation or proceeding in respect of which indemnity may be sought
hereunder if such settlement involves an admission of liability of wrongdoing on
the part of the Indemnified Party, or a restriction on the operation of the
Indemnified Party's business in the future or could have a material adverse
effect on the business reputation or tax liability of the Indemnified Party.
8.03 LIMITATIONS ON INDEMNIFICATION. No Indemnified Party shall be entitled
to indemnification pursuant to this Article VIII unless and until the aggregate
of all Damages incurred by all potential or actual Indemnified Parties exceeds
$50,000.
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8.04 INTENDED THIRD PARTY BENEFICIARIES. Each member of the Indemnified
Group is an intended third party beneficiary of the indemnification by Hadid
provided in this Article VIII.
8.05 GUARANTY AND PLEDGE. Hadid shall execute the Guaranty Agreement.
ARTICLE IX. - MISCELLANEOUS
9.01 SURVIVAL. Any provision of this Agreement which contemplates
performance or the existence of obligations after the Closing Date, and any and
all representations and warranties set forth in this Agreement, shall not be
deemed to be merged into or waived by the execution and delivery of the
instruments executed at the Closing, but shall expressly survive Closing and
shall be binding upon the party or parties obligated thereby in accordance with
the terms of this Agreement.
9.02 CONFIDENTIALITY.
(a) Prior to the Closing, Buyer shall, and shall cause its Affiliates
and its and their employees, agents, accountants, legal counsel and other
representatives and advisers to, hold in strict confidence all, and not divulge
or disclose any, information of any kind concerning the Company and its
business; provided, however, that the foregoing obligation of confidence shall
not apply to (i) information that is or becomes generally available to the
public other than as a result of a disclosure by Buyer or its Affiliates or any
of its or their employees, agents, accountants, legal counsel or other
representatives or advisers, (ii) information that is or becomes available to
Buyer or its Affiliates or any of its or their employees, agents, accountants,
legal counsel or other representatives or advisers on a nonconfidential basis
prior to its disclosure by Buyer or its Affiliates or any of its or their
employees, agents, accountants, legal counsel or other representatives or
advisers and (iii) information that is required to be disclosed by Buyer or its
Affiliates or any of its or their employees, agents, accountants, legal counsel
or other representatives or advisers as a result of any applicable law, rule or
regulation of any Governmental Authority; and provided further that Buyer
promptly shall notify the Company of any disclosure pursuant to clause (iii) of
this Section 9.02(a).
(b) The Company shall, and shall cause its Affiliates, employees,
agents, accountants, legal counsel and other representatives and advisers to,
hold in strict confidence all, and not divulge or disclose any, information of
any kind concerning the transactions contemplated by this Agreement, the
Company, Buyer or their respective businesses; provided, however, that the
foregoing obligation of confidence shall not apply to (i) information that is or
becomes generally available to the public other than as a result of a disclosure
by the Company or any of its Affiliates, employees, agents, accountants, legal
counsel or other representatives or advisers, (ii) information that is or
becomes available to the Company or any of its Affiliates, employees, agents,
accountants, legal counsel or other representatives or advisers after the
Closing on a nonconfidential basis prior to its disclosure by the Company or any
of its Affiliates, employees, agents, accountants, legal counsel or other
representatives or advisers and (iii) information that is required to be
disclosed by the Company or any of its Affiliates, employees, agents,
accountants, legal counsel or other representatives or advisers as a result of
any applicable law, rule or regulation of any Governmental Authority; and
provided further that the Company shall promptly shall notify Buyer of any
disclosure pursuant to clause (iii) of this Section 9.02(b).
9.03 BROKERS. Regardless of whether the Closing shall occur, (i) the
Company shall indemnify and hold harmless Buyer from and against any and all
liability for any brokers or finders' fees arising with respect to brokers or
finders retained or engaged by the Company in respect of the transactions
contemplated by this Agreement, and (ii) Buyer shall indemnify and hold harmless
the Company from and against any and all liability for any brokers' or finders'
fees arising with respect to brokers or finders retained or engaged by Buyer in
respect of the transactions contemplated by this Agreement.
9.04 COSTS AND EXPENSES. Each of the parties to this Agreement shall bear
its own expenses incurred in connection with the negotiation, preparation,
execution and closing of this Agreement and the transactions contemplated
hereby.
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9.05 NOTICES. Any notice, request, instruction, correspondence or other
document to be given hereunder by any party hereto to another (herein
collectively called "NOTICE") shall be in writing and delivered personally or
mailed by registered or certified mail, postage prepaid and return receipt
requested, or by telecopier, as follows:
Sector Communications, Inc.
0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
IF TO BUYER: Telecopy No. (000) 000-0000
WITH A COPY TO:
------------------------------------
Xxxx Xxxxxx
c/o Sector Communications, Inc.
0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
Telecopy No. (000) 000-0000
eModel, Inc.
0000 Xxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxx, Esq.
IF TO THE COMPANY: Telecopy No. (000) 000-0000
WITH A COPY TO:
------------------------------------
Xxxxxxxxx Traurig, LLP
0000 Xxxxxx Xxxxxxxxx, Xxxxx 0000
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopy No. (000) 000-0000
c/o Sector Communications, Inc.
0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
Telecopy No. (000) 000-0000
IF TO HADID:
WITH A COPY TO:
------------------------------------
Xxxx Xxxxxx
X.X. Xxx 00000
Xxxxxxx Xxxxx, XX 00000
Telecopy No. (000) 000-0000
Each of the above addresses for notice purposes may be changed by providing
appropriate notice hereunder. Notice given by personal delivery or registered
mail shall be effective upon actual receipt. Notice given by telecopier shall be
effective upon actual receipt if received during the recipient's normal business
hours, or at the beginning of the recipient's next normal business day after
receipt if not received during the recipient's normal business hours. All
Notices by telecopier shall be confirmed by the sender thereof promptly after
transmission in writing by registered mail or personal delivery. Anything to the
contrary contained herein notwithstanding, notices to any party hereto shall not
be deemed effective with respect to such party until such Notice would, but for
this sentence, be effective both as to such party and as to all other persons to
whom copies are provided above to be given.
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9.06 GOVERNING LAW. The provisions of this agreement and the documents
delivered pursuant hereto shall be governed by and construed in accordance with
the laws of the State of Florida (excluding any conflict of law rule or
principle that would refer to the laws of another jurisdiction). Each party
hereto irrevocably submits to the jurisdiction of the Circuit Court of the State
of Florida, Orange County, in any action or proceeding arising out of or
relating to this Agreement or any of the Collateral Agreements, and each party
hereby irrevocably agrees that all claims in respect of any such action or
proceeding must be brought and/or defended in such court; provided, however,
that matters which are under the exclusive jurisdiction of the Federal courts
shall be brought in the Federal District Court for the Middle District of
Florida. Each party hereto consents to service of process by any means
authorized by the applicable law of the forum in any action brought under or
arising out of this Agreement or any of the Collateral Agreements, and each
party irrevocably waives, to the fullest extent each may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY
JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.
9.07 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of each of the parties to this Agreement shall be deemed to have been
made, and the certificates delivered pursuant to clause (ii) of Section 2.02 and
clause (i) of Section 2.03 by a party are agreed to and shall be deemed to
constitute the making of such representations and warranties, again at and as of
the Closing by and on behalf of the party on behalf of whom such certificates
are delivered.
9.08 ENTIRE AGREEMENT AMENDMENTS AND WAIVERS. This Agreement, together with
all exhibits and schedules attached hereto, constitutes the entire agreement
between and among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein or contemplated
hereby. No supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (regardless of whether similar), nor shall any such
waiver constitute a continuing waiver unless otherwise expressly provided.
9.09 BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective permitted
successors and assigns; but neither this Agreement nor any of the rights,
benefits or obligations hereunder shall be assigned, by operation of law or
otherwise, by any party hereto without the prior written consent of the other
party, provided, however, that nothing herein shall prohibit the assignment of
Buyer's rights and obligations to any direct or indirect subsidiary or prohibit
the assignment of Buyer's rights (but not obligations) to any lender. Except as
expressly provided in this Agreement (including, without limitation, in Article
VIII), nothing in this Agreement is intended to confer upon any person or entity
other than the parties hereto and their respective permitted successors and
assigns, any rights, benefits or obligations hereunder.
9.10 REMEDIES. The rights and remedies provided by this Agreement are
cumulative, and the use of any one right or remedy by any party hereto shall not
preclude or constitute a waiver of its right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights and remedies
a party may have by law, statute or otherwise.
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9.11 EXHIBITS AND SCHEDULES. The exhibits and Schedules referred to herein
are attached hereto and incorporated herein by this reference. Disclosure of a
specific item in any one Schedule shall be deemed restricted only to the Section
to which such disclosure specifically relates except where (i) there is an
explicit cross-reference to another Schedule, and (ii) Buyer could reasonably be
expected to ascertain the scope of the modification to a representation intended
by such cross-reference.
9.12 MULTIPLE COUNTERPARTS. This Agreement may be executed 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.
9.13 REFERENCES AND CONSTRUCTION.
(a) Whenever required by the context, and is used in this Agreement,
the singular number shall include the plural and pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular or
plural, as the identification the person may require. References to monetary
amounts, specific named statutes and generally accepted accounting principles
are intended to be and shall be construed as references to United States
dollars, statutes of the United States of the stated name and United States
generally accepted accounting principles, respectively, unless the context
otherwise requires.
(b) The provisions of this Agreement shall be construed according to
their fair meaning and neither for nor against any party hereto irrespective of
which party caused such provisions to be drafted. Each of the parties
acknowledge that it has been represented by an attorney in connection with the
preparation and execution of this Agreement.
9.14 ATTORNEYS' FEES. In the event any suit or other legal proceeding is
brought for the enforcement of any of the provisions of this Agreement, the
parties hereto agree that the prevailing party or parties shall be entitled to
recover from the other party or parties upon final judgment on the merits
reasonable attorneys' fees (and sales taxes thereon, if any), including
attorneys' fees for any appeal, and costs incurred in bringing such suit or
proceeding.
9.15 RISK OF LOSS. Prior to the Closing, the risk of loss of damage to, or
destruction of, any and all of the Company's assets, including without
limitation the Properties, shall remain with the Company, and the legal doctrine
known as the "Doctrine of Equitable Conversion" shall not be applicable to this
Agreement or to any of the transactions contemplated hereby.
ARTICLE X. - DEFINITIONS
Capitalized terms used in this Agreement are used as defined in this Article X
or elsewhere in this Agreement.
10.01 AFFILIATE. The term "Affiliate" shall mean, with respect to any
Person, any other Person controlling, controlled by or under common control with
such Person. The term "Control" as used in the preceding sentence means, with
respect to a corporation, the right to exercise, directly or indirectly, more
than 50% of the voting rights attributable to the shares of the controlled
corporation and, with respect to any Person other than a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person.
10.02 COLLATERAL AGREEMENTS. The term "Collateral Agreements" shall mean
any or all of the exhibits to this Agreement and any and all other agreements,
instruments or documents required or expressly provided under this Agreement to
be executed and delivered in connection with the transactions contemplated by
this Agreement.
10.03 CONTRACTS The term "Contracts," when described as being those of or
applicable to any Person, shall mean any and all contracts, agreements,
franchises, understandings, arrangements, leases, licenses, registrations,
authorizations, easements, servitudes, rights of way, mortgages, bonds, notes,
guaranties, liens, indebtedness, approvals or other instruments or undertakings
to which such Person is a party or to which or by which such Person or the
property of such Person is subject or bound, excluding any Permits.
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10.04 DAMAGES The term "Damages" shall mean any and all damages,
liabilities (whether contingent, fixed or unfixed, liquidated or unliquidated,
or otherwise), obligations, penalties, fines, judgments, claims, deficiencies,
suits, actions or causes of actions, losses, costs, expenses and assessments
(including, without limitation, income and other taxes, interest, penalties,
attorneys' and accountants' fees and disbursements, and costs of investigation
and defense).
10.05 EXCHANGE ACT. The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
10.06 GOVERNMENTAL AUTHORITIES. The term "Governmental Authorities" shall
mean any nation or country (including but not limited to the United States) and
any commonwealth, territory or possession thereof and any political subdivision
of any of the foregoing, including but not limited to courts, departments,
commissions, boards, bureaus, agencies, ministries or other instrumentalities.
10.07 HAZARDOUS MATERIAL. The term "Hazardous Material" shall mean all or
any of the following: (a) substances that are defined or listed in, or otherwise
classified pursuant to, any applicable laws or regulations as "hazardous
substances," "hazardous materials," "Hazardous wastes," "toxic substances" or
any other formulation intended to define, list or classify substances by reason
of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity or "EP toxicity"; (b) oil, petroleum or
petroleum derived substances, natural gas, natural gas liquids or synthetic gas
and drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (c) any flammable substances or explosives or any radioactive
materials; and (d) asbestos in any form or electrical equipment which contains
any oil or dielectric fluid containing levels of polychlorinated biphenyls in
excess of fifty parts per million.
10.08 LEGAL REQUIREMENTS. The term "Legal Requirements," when described as
being applicable to any Person, shall mean any and all laws (statutory, judicial
or otherwise), ordinances, regulations, judgments, orders, directives,
injunctions, writs, decrees or awards of, and any Contracts with, any
Governmental Authority, in each case as and to the extent applicable to such
Person or such Person's business, operations or properties.
10.09 LIENS. The term "Liens" shall mean any and all liens, mortgages,
pledges, adverse claims, encumbrances or other restrictions or limitations.
10.10 NET WORTH. The term "Net Worth" shall mean the "stockholders' equity"
computed in accordance with GAAP except that no effect shall be given to any
purchase accounting or other similar adjustments resulting from the consummation
of the transaction contemplated herein.
10.11 PERMITS. The term "Permits" shall mean any and all permits, rights,
approvals, licenses, authorizations, legal status, orders or Contracts under any
Legal Requirement or otherwise granted by any Governmental Authority.
10.12 PERSON. The term "Person" shall mean any individual, partnership,
joint venture, firm, corporation, association, limited liability company, trust
or other enterprise or any governmental or political subdivision or any agency,
department or instrumentality thereof.
10.13 PROPERTIES. The term "Properties" shall mean any and all properties
and assets (real, personal or mixed, tangible or intangible) owned or used by a
Person.
-22-
Page 30 of 148
10.14 SUBSIDIARY. The term "Subsidiary" shall mean any Person of which at
least a majority of the outstanding voting securities or other voting equity
interests are owned, directly or indirectly, by the Company or Buyer, as
applicable.
[Signatures on next page]
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan of Merger
as of the date first above written.
-23-
Page 31 of 148
BUYER:
-----
SECTOR COMMUNICATIONS, INC.,
a Nevada corporation
By: /s/ Xxxxxxx Xxxxx
---------------------
Name: Xxxxxxx Xxxxx
Title: Chairman of the Board
COMPANY:
--------------------------------------
EMODEL, INC.,
a Delaware corporation
By:/s/ Xxxxxx Xxxxxxx
---------------------
Name: Xxxxxx Xxxxxxx
Title: Vice President
ACQUISITION SUB:
---------------------------------------
SECTOR COMMUNICATIONS DELAWARE, INC.,
a Delaware corporation
By:/s/ Xxxxxxx Xxxxx
--------------------
Name: Xxxxxxx Xxxxx
Title: President
HADID:
------
/s/ Xxxxxxx Xxxxx
-----------------
Xxxxxxx Xxxxx
Page 32 of 148
FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
AND COLLATERAL AGREEMENTS
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER AND COLLATERAL
AGREEMENTS (this "Amendment") is made and entered into this 31 day of January,
2002, by and among Options Talent Group, a Nevada corporation f/k/a Sector
Communications, Inc. (the "Buyer"), Sector Communications Delaware, Inc., a
Delaware corporation (the "Acquisition Sub"), eModel, Inc., a Delaware
corporation (the "Company"), Xxxxxxx Xxxxx, a stockholder of Buyer ("Hadid"),
and the other parties set forth on the signature pages hereto.
RECITALS
WHEREAS, Buyer, Acquisition Sub, the Company and Hadid entered into that
certain Agreement and Plan of Merger, dated January 14, 2002 (the "Merger
Agreement"), providing for the Merger of the Acquisition Sub with and into the
Company (the "Merger");
WHEREAS, pursuant to the Merger Agreement, one or more of the parties
hereto executed the Collateral Agreements, including but not limited to, that
certain (a) Guaranty Agreement, (b) Stockholders' Agreement, (c) Settlement and
Release Agreement, (d) Side Letter entered into pursuant to Section 6.01(p) of
the Merger Agreement, (e) Consulting Agreements referenced in Section 2.03(v) of
the Merger Agreement and (f) Escrow Agreement, dated January 14, 2002, by and
among Sector Communications, Inc., Hadid, Acquisition Sub, the Company,
Xxxxxxxxx Traurig, LLP and the other parties named therein (the "Escrow
Agreement");
WHEREAS, on December 31, 2001, Buyer filed an amendment to its Articles of
Incorporation with the Secretary of State for the State of Nevada changing its
name from "Sector Communications, Inc." to "Options Talent Group"; and
WHEREAS, in connection with the foregoing, the parties hereto desire to
make certain amendments to the Merger Agreement and the Collateral Agreements as
of the date hereof;
AGREEMENT
NOW THEREFORE, in consideration of the foregoing premises and the
agreements set forth below, the parties agree as follows:
1. AMENDMENT TO THE MERGER AGREEMENT AND THE COLLATERAL AGREEMENTS. All
references in the Merger Agreement and the Collateral Agreements to "Sector
Communications, Inc." shall be deleted and with "Options Talent Group (f/k/a
Sector Communications, Inc.)".
2. AMENDMENT TO SECTION 2.02(II) OF THE MERGER AGREEMENT. Section 2.02(ii)
of the Merger Agreement is hereby amended by deleting said section in its
entirety and inserting the following in lieu thereof:
"(ii) a certificate of the Vice President of the Company certifying
that (1) all representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects at and as
of the Closing, and (2) the Company has performed and satisfied in all
material respects all covenants and agreements required by this Agreement
to be performed and satisfied by the Company at or prior to the Closing,
unless waived by Buyer in its discretion;"
3. AMENDMENT TO SECTION 2.03(I) OF THE MERGER AGREEMENT. Section 2.03(i) of
the Merger Agreement is hereby amended by deleting said section in its entirety
and inserting the following in lieu thereof:
"(i) a certificate of the Chairman of Buyer, President of the
Acquisition Sub, and Hadid, to the Company certifying that (1) all
representations and warranties of Buyer, Acquisition Sub and Hadid
contained in this Agreement shall be true and correct in all material
respects at and as of the Closing, (2) Buyer, Acquisition Sub and Hadid
have performed and satisfied in all material respects all covenants and
agreements required by this Agreement to be performed and satisfied by each
of them at or prior to the Closing, unless waived by the Company in its
discretion, and (3) Buyer's Net Worth is at least $500,000 as of the
Closing Date;"
4. AMENDMENT TO SECTION 9.05 OF THE MERGER AGREEMENT. Section 9.05 of the
Merger Agreement is hereby amended to delete the following in its entirety: "IF
TO THE COMPANY:
eModel, Inc,
0000 Xxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxx, Esq.
Telecopy No. ___________________
WITH A COPY TO:
Xxxxxxxxx Traurig, LLP
0000 Xxxxxx Xxxxxxxxx, Xxxxx 0000
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopy No. (000) 000-0000"
And insert the following in lieu thereof:
"IF TO THE COMPANY:
eModel, Inc.
0000 Xxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Telecopy No. ____________"
5. AMENDMENT TO SCHEDULE 3.03(A) OF THE MERGER AGREEMENT. Schedule 3.03(a)
of the Merger Agreement is hereby amended and replaced in its entirety by
Schedule 3.03(a) set forth in Exhibit A attached hereto.
6. AMENDMENT TO THE ESCROW AGREEMENT. Section 2(b) of the Escrow Agreement
is hereby amended by deleting said section in its entirety and inserting the
following in lieu thereof:
"(b) Release of Escrow. Upon receipt by the Escrow Agent of a
Certificate of the Representative (the "REPRESENTATIVE CERTIFICATE") (i)
stating that Sector, Sector DE and Hadid have each performed and satisfied
all conditions, covenants and agreements required by the Merger Agreement
to be performed and satisfied by each of them at or prior to Closing, or
the waiver by eModel of any such conditions, covenants and agreements and
(ii) directing the Escrow Agent to release the Escrow Documents to the
parties contemplated in the Merger Agreement and deliver the Escrow Amount
as set forth in the next sentence, the Escrow Agent shall release and
deliver such Escrow Documents and Escrow Amount (including Interest
thereon) as aforesaid as soon as practicable following receipt of the
Representative Certificate. The Escrow Amount shall be apportioned and paid
by wire as follows: (1) to an account designated by The Jefferson Trust the
amount specified in and payable pursuant to Section 2.03(iv) of the Merger
Agreement; (2) to an account designated by the Escrow Agent the fees and
expenses of the Escrow Agent for legal services separately rendered to
eModel through the close of business on the Closing Date as defined in the
Merger Agreement and (3) the remainder of the Escrow Amount to an account
designated by eModel."
-2-
Page 33 of 148
7. RATIFICATION OF MERGER AGREEMENT AND THE COLLATERAL AGREEMENTS. Except
as modified by the terms of this Amendment, the Merger Agreement and the
Collateral Agreements are hereby ratified and confirmed in their entirety, and
shall remain in full force and effect in accordance with their terms.
8. GENERAL. This Amendment shall be governed by the laws of the State of
Florida (without reference to its rules as to conflicts of laws) Delaware and
shall bind and inure to the benefit of the heirs, personal representatives,
executors, administrators, successors and assigns of the parties. Capitalized
terms not defined herein shall have the meanings ascribed to them in the Merger
Agreement. Captions are for convenience only and are not deemed to be part of
this Amendment. This Amendment may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Amendment may be executed by facsimile.
[SIGNATURE PAGES FOLLOW]
-3-
Page 34 of 148
IN WITNESS WHEREOF, this First Amendment to Agreement and Plan of Merger
and Collateral Agreements has been executed by each of the parties hereto as of
the date first set forth above.
BUYER:
-----
OPTIONS TALENT GROUP,
a Nevada corporation f/k/a Sector Communications, Inc.
/S/ Xxxxxxx Xxxxx
-----------------
Name: Xxxxxxx Xxxxx
Title: Chairman of the Board
COMPANY:
-------
EMODEL, INC.,
a Delaware corporation
/S/ Xxxxxx Xxxxxxx
------------------
Name: Xxxxxx Xxxxxxx
Title: Vice President
ACQUISITION SUB:
---------------
SECTOR COMMUNICATIONS DELAWARE, INC.,
a Delaware corporation
/S/ Xxxxxxx Xxxxx
----------------
Name: Xxxxxxx Xxxxx
Title: President
HADID:
-----
/S/ Xxxxxxx Xxxxx
-----------------
Xxxxxxx Xxxxx
THE JEFFERSON TRUST
By: /S/ Xxxx X. Xxxxxxx
-----------------------
Xxxx X. Xxxxxxx
Trustee
THE PARAMOUNT TRUST
By: /S/ Rafiah Kashmiri
-----------------------
Rafiah Kashmiri
Trustee
Page 35 of 148
THE XXXXXX TRUST
By: /S/ Xxxxxx Xxxx
-------------------
Xxxxxx Xxxx
Trustee
MADISON CONSULTING COMPANY
By: /S/ X.X. Xxxxxxx
--------------------
Name: X.X. Xxxxxxx
Title: Principal
GENERAL SERVICES CORPORATION
By: /S/ Rafiah Kasmiri
----------------------
Name: Rafiah kasmiri
Title: Vice President
CORPORATE MEDIA SERVICES, INC.
By:/S/ R. Xxxxxx Xxxx
---------------------
Name: R. Xxxxxx Xxxx
Title: Manager
XXXXXXX X. WALK
/S/ Xxxxxxx X. Walk
-------------------
Xxxxxxx X. Walk
[Signature Page to the First Amendment to Agreement and Plan of Merger and
Collateral Agreements]
Page 36 of 148
EXHIBIT A
SCHEDULE 3.03(A) TO THE MERGER AGREEMENT
Page 37 of 148
SCHEDULE 3.01
QUALIFICATIONS AS FOREIGN CORPORATION
1. Florida
Page 38 of 148
SCHEDULE 3.03(A)
RIGHTS TO ACQUIRE SECURITIES
Warrants:
1. The Paramount Trust - warrant to purchase up to 1,000,000 shares of the
Company's non-voting common stock. The warrant expires December 29, 2004.
2. The Xxxxxx Trust - warrant to purchase up to 1,000,000 shares of the
Company's non-voting common stock. The warrant expires December 29, 2004.
Options:
NAME OPTIONS
Xxxxxxx Xxxxx 1,000
Taj Adejonwo 1,000
Xx Xxxxxxx 1,000
Xxxxxxxx Xxxx Xxxxxxxxx 250
Xxxxxx Xxxx 1,000
Xxxxx Xxxxxxxx 1,000
Xxxx Xxxxxx 3,000
Xxxx Xxxxxxxx 1,000
Xxxxxxx Xxxxxxx 1,500
Xxxxxxxxx Xxxxxxx 1,000
Xxxxxx Xxxxxx 1,000
Xxxxx Bears 12,500
Xxx Xxxxxxx 1,000
Xxxx Xxxxxxxxx 1,500
Xxxxx X. Xxxxx 1,000
Xxxxxx Xxxxxxxxxx 250
Xxxxxxxxxx Xxxxxxxx 500
Xxxxxxxxx Xxxxxx 1,500
Xxx Xxxxxx 1,000
Xxxx Xxxxxx 1,000
Xxxxxx Xxxxxxxxxxx 1,000
Xxxxxx Xxxxxxx 1,000
Xxxx Xxxxxxx 1,500
Xxxxxxxxx Xxxxxxxxxx 1,500
Xxx Xxxxx Casapu 1,000
Xxxxxxx Charleston 1,000
Xxxxx Xxxxxx 1,000
Xxxxxxxxxxx Xxxxx 500
Xxxxxxx Xxxxxxxx 1,000
Xxxxxxx Xxxxxxx 1,000
Xxxxx Xxxxxx 1,500
Xxxxxxxx Xxxxxxxx 1,000
Xxxxxxx Copa 1,000
Xxxx X. Xxxxxxxx 1,000
Page 39 of 148
Xxxxx Xxxxxxxxx 1,000
Xxxxx Xxxxxx-Xxxxx 5,000
Xxxxx Xxxxxxx 1,000
Xxxxx X'Xxxxxxxxxx 1,000
Xxxx Xxxxxx 1,000
Xxxxxxx Xxxxxxxxx 1,000
Xxxx Xxxxxxxxx 1,000
Xxxxxxxxx Xxxxxxxxxx 1,000
Xxxxxx XxXxxxxx 1,000
Xxxxxxx Xxxxxx 1,000
Xxxxxx Xxxxxxx 1,000
Xxxx Xxxxx 1,000
Xxxxx Xxxxxxx 50,000
Xxxx Eng 1,000
Xxxxxx Xxxxxxxx 250
Xxxxx(Xxxxxx) Xxxxxx 1,000
Xxxx Xxx 1,000
Xxxx X. Xxxxxxxxxxx 1,000
Xxxxxxxx Xxxxxxxx 1,000
Xxxx Xxxxxx 100,000
Xxxxx Xxxx 1,000
Xxxxxx Xxxxx 3,500
Xxxxxx Xxxxxxxx 1,500
Xxxx Xxxxxxx 500
Xxxxx Xxxxx 1,000
Xxxx Xxxxxx 1,000
Xxx Xxxxxxxx 1,000
Xxxxxx X. Xxxxxxx, Xx. 2,000
Xxxxx Xxxxxx 1,500
Xxxx Xxxxxx 1,000
Xxxx Xxxxxx 1,000
Xxxxxx Xxxxxxxxx 1,500
Xxxxx Xxxx 1,000
Xxxxx Xxxxxxx 40,000
Xxxxx Xxxxxx 1,000
Xxxx Xxxxxxx 2,000
Xxxx Xxxxxxx 8,500
Xxxx Xxxxxx 1,000
Xxxxx Xxx 1,000
Xxxxxxx Xxxxxxxx 1,000
Xxxxxx Xxxxxxx 2,000
Xxxxxxx Xxxxxxx 1,000
Xxxxxxx Xxxxxxx 1,500
Xxxxxx Xxxxx 2,000
Xxxxxxxx Xxxx 1,000
Xxxxx Xxxxxxxx 1,000
Xxx Xxxxxx 500
Page 40 of 148
Xxxxxx Xxxxxxxx 1,000
Xxxx Xxxx 1,000
Xxxxxx Xxxxx 1,000
Xxxx Xxxxxxxx 1,000
Xxxxx Xxxx 1,500
Xxxxx Xxxxx 1,000
Xxxxxx Xxxxxxxx 1,000
Xxxxxxxx Xxxxxxx 1,000
Xxxx Xxxx 1,000
Xxxxx Marseille 1,000
Xxxx Xxxxx 1,000
Xxxxx Xxxxxx 1,000
Xxxxxx Xxxxx 1,500
Xxxxxxx Xxxxxxxx 1,000
Xxxx Xxxxx 1,000
Xxxxxxxx Xxxxx 1,500
Xxxxxxx Xxxxxx 1,000
Xxxxx Xxxxxxx 1,000
Xxxxx Xxxxxx 1,000
Xxxxx Xxxxxx 1,000
Xxxxx Xxxxxx 1,000
Xxxxx Xxxxxxxx 1,000
Xxxx Xxxxxxx 1,000
Yoon (Jin) Nam 1,000
Xxxxxxxxx Xxxxxxx 1,000
Xxxxxxx Xxxxxx 1,500
Xxxxx (Xxxxxx) Xxxx 1,000
Xxxxx Xxxxxxx 1,000
Xxxxxx Xxxxx 1,000
Xxxxx Xxxxxxxxxxx 1,000
Xxxxxxxx Xxxxxx 2,000
Xxxxxxx Xxxxxx 5,000
Xxxx Xxxxxx 5,000
Xxxxxxxx Xxx 1,000
Xxxxxx Xxxxx 1,000
Xxxxxxxx Xxxx 1,000
Xxxxx Xxxx 1,000
Xxxxx Xxxxxx 1,000
Xxxxxxxxxxx Xxxxxxx 1,000
Xxxxxx Xxxx 1,000
Xxxxxxxxx X. Xxxxxx 20,000
Xxxxxxx Xxxx 2,000
Xxxxxxxx Xxxxxxx 1,000
Xxxxxx Xxxxxx 1,000
Xxxx Xxxxxx 1,000
Xxxx Xxxxxx 500
Xxxx Xxxxxxxx 1,000
Page 41 of 148
Xxxxxx Xxxxxxx 1,000
Xxxxx Xxxxxxxxx 1,000
Xxxxx Xxxxx 1,000
Xxxxxx Xxxxx 1,000
Xxxxx Xxxxxx 1,000
Xxxxx Xxxxxxx 1,000
Xxxxx Xxxxxxx 1,000
Xxxx Xxxxxxxx 1,000
Xxxxxxx X. Xxxxx 1,000
Xxxxxx Xxxxxxxxxx 1,000
Xxxxx Xxxxxxxxxx 1,000
Xxxxxx Xxxxxxx 1,000
Xxxxx Xxxxxxx 1,000
Xxxxxx Xxxx 2,000
Xxxxxxx Xxx Xxxx 1,000
Xxxxxx Xxxx 1,000
Xxxx Xxxx Xxxxxx 1,000
Vongdouane Xxx Xxxxxxxxxxx 250
Xxxxx Xxxxxxxx 2,500
Xxxxx Xxxxx 1,000
Xxxxxx Xxxxxxx 10,000
Xxx Xxxxxxxx 23,333
Xxxxxxx Xxxxxxxxx 1,000
Xxxxxx Xxxxxxxx 1,500
Xxxxxx Xxxxxx 500
Jolie Wilson 1,000
Brain Xxxxxxxx 1,000
Xxxxx Xxxxxx 1,000
Xxxxxxx Xxxxx 250
TOTAL 439,083
Page 42 of 148
SCHEDULE 3.03(C)
SUBSIDIARIES
1. Slasher Productions, Inc. dba Xxxxxxx.xxx
Page 43 of 148
EXHIBIT A
Shareholders and Outstanding Shares of the Company
NAME OF SHAREHOLDER NUMBER AND TYPE OF SHARES OWNED
------------------- -------------------------------
Jefferson Trust #2 1,000,000 shares of voting common stock
Xxxxxxx X. Walk 300,000 shares of non-voting stock
Page 44 of 148
EXHIBIT B
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is entered into this 14th day
of January, 2002, between SECTOR COMMUNICATIONS, INC., a Nevada corporation (the
"Employer"), and MADISON CONSULTING COMPANY, a Delaware corporation (the
"Consulting Firm").
BACKGROUND
The Employer desires to continue to obtain the benefit of Consulting Firm's
services and expertise, and the Consulting Firm desires to continue to render
services to the Employer.
The Employer's Board of Directors has determined that it is in the
Employer's best interest and that of its shareholders to recognize the
substantial contribution that the Consulting Firm has made to the Employer's
business, and to continue to retain the Consulting Firm's services in the
future.
The Employer and the Consulting Firm desire to set forth in this Agreement
the terms and conditions of the Consulting Firm's continued retention by the
Employer. Accordingly, in consideration of the mutual covenants and
representations contained set forth below, the Employer and the Consulting Firm
agree as follows:
TERMS
1. SERVICES RENDERED.
The Consulting Firm agrees to render services to the Employer and one or
more of the Employer's subsidiary corporations as specified in this Agreement
upon the terms and conditions and for the compensation provided in this
Agreement. All compensation paid to the Consulting Firm by the Employer or any
subsidiary of the Employer, and all benefits and perquisites received by the
Consulting Firm from the Employer or any of its subsidiaries, will be aggregated
in determining whether the Consulting Firm has received the compensation and
benefits provided for in this Agreement.
Page 45 of 148
2. TERM OF AGREEMENT.
(a) End of Term. The term of this Agreement will be for the period
commencing on the date of this Agreement and ending on the earliest of:
(i) five years after notice of termination is given by the Employer
to the Consulting Firm;
(ii) the date of termination of the Consulting Firm's employment by
the Consulting Firm at its election and without "Good Reason" (as defined in
Section 9 of this Agreement); or
(iii) the date of termination of the Consulting Firm's employment by
the Employer for "Cause" (as defined in Section 8 of this Agreement) or by the
Employer without Cause in accordance with Section 9 or by the Consulting Firm
for Good Reason pursuant to Section 9;
(b) Date of Termination. As used in this Agreement the term "Date of
Termination" means (i) if the Consulting Firm's employment is terminated by the
Employer pursuant to clause (i) of Section 2(a) above, the date that is five
years after the date of the Consulting Firm's receipt of the notice of
termination or any later date specified in such notice, as the case may be, (ii)
if the Consulting Firm terminates its employment at its election and without
Good Reason pursuant to clause (ii) of Section 2(a), the date of the Employer's
receipt of the notice of termination from the Consulting Firm or any later date
specified in such notice, as the case may be, and (iii) if the Consulting Firm's
employment is terminated by the Employer for Cause or by the Employer without
Cause pursuant to Section 9 of this Agreement, or by the Consulting Firm for
Good Reason, fifteen days after the date of receipt of the notice of termination
by the Consulting Firm or the Employer, respectively, or any later date
specified in such notice, as the case may be.
3. SERVICES TO BE RENDERED; NON-EXCLUSIVITY.
(a) Service. During the Consulting Firm's term of employment under this
Agreement, the Consulting Firm shall perform the duties assigned by the Employer
from time to time.
(b) Substantial Efforts. During the term of this Agreement, the Consulting
Firm and/or its associates shall devote sufficient business time and energy to
the business, affairs and interests of the Employer and its subsidiaries, and
matters related thereto, and shall use its reasonable commercial efforts and
ability to promote the interests of the Employer and its subsidiaries. The
Consulting Firm agrees that it will diligently endeavor to promote the business,
affairs and interests of the Employer and its subsidiaries and perform services
contemplated hereby in accordance with the policies established by the Board of
Directors of the Employer (the "Board") and more senior officers of the Employer
from time to time. The Consulting Firm shall serve without additional
remuneration in such Consulting Firm's capacities for one or more direct or
indirect subsidiaries of the Employer as the Employer may from time to time
request, subject to appropriate authorization by the subsidiary or subsidiaries
involved and any limitations under applicable law and indemnification on the
same terms as the Consulting Firm is indemnified by the Employer. The failure of
the Consulting Firm to discharge an order or perform a function because the
Consulting Firm reasonably and in good faith believes such would violate a law
or regulation or be dishonest shall not be deemed a breach by it of its
obligations or duties under this Agreement and shall not entitle the Employer to
terminate this Agreement pursuant to any of its provisions.
Page 46 of 148
(c) Certain Permissible Activities. The Consulting Firm and/or its
associates may serve as a director or in any other capacity of any business
enterprise, including an enterprise whose activities may involve or relate to
the business of the Employer or any of its subsidiaries but only if such service
is expressly approved by the Employer in writing. The Consulting Firm and/or its
associates may (i) make and manage personal business investments of their
choice, (ii) teach at educational institutions and deliver lectures, and (iii)
serve in any capacity with any civic, educational or charitable organization, or
any governmental entity or trade association, in each such case without seeking
or obtaining approval by the Employer so long as such activities and service do
not materially interfere or conflict with the performance of their duties under
this Agreement. It is agreed that to the extent that the Employer shall have
approved any service of the Consulting Firm and/or its associates pursuant to
the first sentence of this Section 3(c) prior to a Change in Control Date (as
defined in Section 10 below), or to the extent that the Consulting Firm and/or
its associates may have engaged in activities pursuant to the second sentence of
this Section 3(c) prior to such Change in Control Date, the continued conduct of
such activities or the conduct of activities similar in nature and scope thereto
during the two years subsequent to such Change in Control Date shall be
permissible and not in violation of any provisions of this Agreement and the
previously obtained Employer approval may not be revoked or limited in any
material respect during the two years following such Change in Control Date.
4. COMPENSATION.
(a) Annual Draw. Throughout the term of this Agreement, Employer will pay
the Consulting Firm an annual draw of at least One Hundred Fifty Thousand
Dollars ($150,000.00), payable in periodic installments no less frequently than
twice per month. Such draw is referred to in this Agreement as the Consulting
Firm's "Annual Draw."
Page 47 of 148
(b) Sales Performance Bonus. Throughout the term of this Agreement, in
addition to the Annual Draw, for each and every month that the Employer and or
its subsidiaries sell Two Thousand (2,000) enrollments or more from its Orlando,
Florida in-house sales group, the Employer shall pay the Consulting Firm a sales
performance bonus ("Sales Performance Bonus") of Ten Dollars ($10.00) per
enrollment for such month or months. For purposes of calculating the total
number of enrollments for any given month, in addition to the number of regular
individual enrollments, there shall be added to the number of regular individual
enrollments, a number equal to the gross amount of sales of cruises and trips
for that month divided by Five Hundred (500). For example, if in a particular
month the Employer sells 1,500 regular enrollments, and also sells a cruise for
two hundred fifty thousand dollars ($250,000), then the Consulting Firm will be
due a Sales Performance Bonus of Twenty Thousand Dollars ($20,000) for that
month.
(c) Asia and England Sales Commission. In addition to the Annual Draw and
the Sales Performance Bonus, as the Employer collects the outstanding fees
receivable as a result of earlier sales of certain rights regarding the Asian
and English sales territories, the Employer and or its subsidiaries shall
continue to pay the Consulting Firm an Asia and England sales commission ("Asia
and England Sales Commission") in an amount equal to Ten Percent (10%) of such
outstanding fees receivable. As of the time of executing this Agreement, there
is Eight Hundred Thousand ($800,000.00) of outstanding fees receivable by the
Employer from an earlier sale of the Asia rights, and there is One Hundred Fifty
Thousand Dollars ($150,000.00) of outstanding fees receivable by the Employer
from an earlier sale of English rights.
(d) Expense Reimbursement. The Employer agrees to reimburse the Consulting
Firm in full for all such reasonable and necessary business, entertainment and
travel expenses incurred or expended by it in connection with the performance of
its duties under this Agreement; provided the Consulting Firm submits to the
Employer vouchers or expense statements satisfactorily evidencing such expenses
as may be reasonably required by the Employer and such expenses are in
accordance with any applicable corporate policy.
5. NOT USED.
6. NOT USED.
Page 48 of 148
7. PAYMENTS AND BENEFITS UPON TERMINATION OF EMPLOYMENT FOR ANY REASON.
On the Date of Termination of the Consulting Firm's employment under this
Agreement for any reason whatsoever, the Consulting Firm's Annual Draw will
cease thereafter to accrue except as specifically provided in Section 9. In
addition, the Employer shall:
(a) pay and deliver to the Consulting Firm all amounts of money owed to it
by the Employer as of the Date of Termination, including all amounts payable to
it under any expense reimbursement plans or policies for expenses incurred
through the Date of Termination, and the amount of any bonus due under any
incentive plan to the Consulting Firm for any bonus period or performance
measurement cycle of the Employer that ended prior to the Date of Termination
which remained unpaid on the Date of Termination;
(b) continue to insure the Consulting Firm with respect to any activities
that Consulting Firm and/or its associates rendered hereunder as a director or
officer of the Employer or any of its subsidiaries, for a period of three years
after such Date of Termination, under such policies of director and officer
liability insurance as Employer shall provide for its senior officers generally;
provided, however, that if a Change in Control shall have occurred prior to such
Date of Termination or shall thereafter occur, such policies of insurance shall
be no less favorable to the Consulting Firm than such policies as may have been
in effect for the Consulting Firm at any time during the one hundred twenty day
period immediately preceding the Change in Control Date; and
(c) continue to honor such rights to indemnification as the Consulting Firm
and/or its associates may be entitled pursuant to any plan of indemnification or
indemnification agreement in effect at the Date of Termination.
(d) The Consulting Firm immediately waives any right or entitlement to the
payments and benefits described in Section 7(a) - (c) in the event that the
Consulting Firm breaches any term or provision of this Agreement.
8. TERMINATION OF EMPLOYMENT BY EMPLOYER FOR CAUSE.
(a) Definition of Cause. The Employer may terminate the Consulting Firm's
employment under this Agreement if the termination is for Cause. For purposes of
this Agreement, the Employer shall have "Cause" to terminate the Consulting
Firm's employment under this Agreement if, and only if, any of the following
shall occur:
(i) The Conviction by a court of competent jurisdiction or entry of a
guilty plea or a plea of nolo contendere for an act on the part of an associate
of the Consulting Firm actually rendering services to the Employer hereunder
constituting any felony; or
Page 49 of 148
(ii) a willful breach by the Consulting Firm of any provisions of this
Agreement if such breach results in demonstrably material injury to the
Employer.
(b) Procedural Requirements. The Consulting Firm's employment under this
Agreement shall not be subject to termination for Cause without: (i) reasonable
notice to the Consulting Firm setting forth the reasons for Employer's intention
to terminate and specifying the particulars thereof in detail, and (ii) an
opportunity for the Consulting Firm to cure any such breach, if possible, within
thirty days after receipt of such notice.
9. TERMINATION OF EMPLOYMENT BY THE CONSULTING FIRM FOR GOOD REASON OR BY
EMPLOYER WITHOUT CAUSE.
(a) Definition of Good Reason. The Consulting Firm may terminate its
employment under this Agreement and all of its obligations under this Agreement
to the Employer accruing after the date of such termination (other than his
obligations under Section 11, 12, 13, 18, and 26), if the termination is for
"Good Reason," which for purposes of this Agreement is defined as:
(i) failure by the Employer to perform any of its obligations
hereunder (including, but not limited to, Employer's obligations under Sections
3 and 4) other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Employer within 30 days
after receipt of notice thereof given by the Consulting Firm; or
(ii) the diminution of the Consulting Firm's draw, except in
connection with the termination of the Consulting Firm's employment for Cause,
or termination by the Consulting Firm other than for Good Reason;
(iii) any failure by the Employer to obtain the assumption of this
Agreement by any successor or assignee of the Employer;
(iv) any attempt by the Employer to terminate the Consulting Firm for
Cause which does not result in a valid termination for Cause; and
(v) a relocation of Employer's principal office to any place outside
Orange County, Florida.
Any such termination will be effective upon thirty days' prior written notice
from the Consulting Firm to the Employer.
Page 50 of 148
(b) Employer's Termination Without Cause. The Employer may terminate the
Consulting Firm's employment under this Agreement without Cause (as defined
above) by written notice to the Consulting Firm. Any such termination shall
become effective upon fifteen days prior written notice from the Employer to the
Consulting Firm.
(c) Compensation and Benefits Upon Section 9 Termination. In addition to
the payments specified in Section 7 of this Agreement, in the event of
termination of the Consulting Firm's employment pursuant to this Section 9, the
Employer shall continue to pay or provide to the Consulting Firm the following:
(i) Annual Draw through Date of Termination at the rate in effect just
prior to the time a Notice of Termination is given;
(ii) As severance pay, and in lieu of any further draw for any period
subsequent to the Date of Termination, an amount in cash equal to one times the
sum of the Annual Draw on the Date of Termination plus the average of the
Consulting Firm's last two years' bonuses and commissions (the "Severance
Payment"). For the purposes of the definition of "Severance Payment" the Company
shall compute the average of the Consulting Firm's last two years' bonuses and
commissions by including the greater of (A) the bonus and commission, if any,
already earned by the Consulting Firm at the time of termination related to the
calendar year of the termination, or (B) the bonus and commission, if any,
earned in the second full calendar year preceding the termination of the
Consulting Firm (e.g., if the Consulting Firm is terminated on August 1, 2002
(and this Section 9 is applicable), the Employer shall include in the bonus and
commission calculation the greater of (A) the bonus and commission, if any,
earned by the Consulting Firm through August 1, 2002, or (B) the bonus and
commission, if any, earned by the Consulting Firm in calendar year 2001).
Additionally, also for the purpose of the definition of "Severance Payment," in
the event the Consulting Firm participated in a Company program which replaces
an annual cash bonus with a grant of stock or stock options during any relevant
year (a "Company Program"), then the Company shall compute the average of the
Consulting Firm's last two years' bonuses by (i) in the case of a Company
Program consisting of a stock grant by including the amount reported by the
Company to the Internal Revenue Service relating to such stock grant for the
relevant year and (ii) in the case of a Company Program consisting of a stock
option grant the greater of (A) the imputed present value of such options at the
time of the grant or (B) the difference between the fair market value of the
underlying stock on the date of the termination (which shall be calculated on
the basis of the closing price per share on the principal trading market where
the Company's common stock is traded) and the exercise price of such options
(such greater amount shall be referred to as the "Option Value"). For example,
if the Consulting Firm is terminated on October 1, 2003 (and this Section 9 is
applicable) and the Consulting Firm received a bonus consisting of stock with a
value reported to the Internal Revenue Service of $200,000 in 2002, and a bonus
consisting of options with an Option Value of $225,000 in 2001, then the average
bonus for calculating the Severance Payment will be $212,500. For the purposes
of this Agreement, unless the relevant Company Program specifies otherwise, if
the Consulting Firm resigns for Good Reason or is terminated without Cause, it
shall be deemed vested in whatever stock or stock options it had earned as part
of the relevant Company Program (if any) through the date of termination.
Page 51 of 148
(iii) The Consulting Firm will have 90 days subsequent to the Date of
Termination to exercise all stock options and restricted stock awards that have
been granted and were vested at Date of Termination, if any; and
(iv) All draws, bonuses and commissions shall cease at the time of
such termination, subject to the terms of any benefit or compensation plan then
in force and applicable to the Consulting Firm. The Consulting Firm immediately
waives any right or entitlement to the Severance Payment in the event that the
Consulting Firm breaches any term or provision of this Agreement and in the
event of such breach the Consulting Firm will pay to the Employer an amount
equal to any portion of the Severance Payment paid to the Consulting Firm prior
the Consulting Firm's breach, in addition to any damages the Employer may be
able to recover. The Employer shall not have any additional liability or
obligation hereunder by reason of such termination.
10. CHANGE IN CONTROL.
(a) Effectiveness of Section. If at any time during the term of the
Consulting Firm's employment by the Employer pursuant to this Agreement, a
Change in Control of the Employer (as defined below) shall occur, the provisions
of this Section 10 shall become effective without any limitation on any other
rights the Consulting Firm may have under this Agreement. Sections (c) and (d)
of this Section 10 shall become ineffective with respect to such Change in
Control on the first anniversary of the date on which such Change in Control
occurs (the "Change in Control Date") unless the Consulting Firm's employment
has theretofore been terminated for any reason; provided, however, that if
another Change in Control occurs after such first anniversary, Sections 10(c)
and (d) shall become effective once again with respect to such subsequent Change
in Control. If the Consulting Firm's employment so terminates prior to such
first anniversary, the provisions of Sections 10(c) and (d) shall survive so
long as the Consulting Firm is entitled to any benefits under this Agreement.
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(b) Definition of Change in Control. For the purpose of this Agreement, a
"Change in Control" shall mean:
(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning o Rule 13d-3 promulgated under the Exchange Act) of twenty-five
percent (25%) or more of either (A) the then outstanding shares of common stock
of the Employer (the "Outstanding Employer Common Stock") or (B) the combined
voting power of the then outstanding voting securities of the Employer entitled
to vote generally in the election of directors (the "Outstanding Employer Voting
Securities"); provided, however, that for purposes of this clause (i), the
following acquisitions shall not constitute a Change in Control: (u) any
acquisition directly from the Employer, (w) any acquisition by the Employer, (x)
any acquisition by any Employee benefit plan (or related trust) sponsored or
maintained by the Employer or any corporation controlled by the Employer, (y)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of clause (iii) of this Section 10(b), or
(ii) individuals who, as of the date of this Agreement, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date of this Agreement whose election, or nomination
for election by the Employer's shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(iii) consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Employer (a "Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the Persons who were the
beneficial owners, respectively, of the Outstanding Employer Common Stock and
Outstanding Employer Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Employer or all or
substantially all of the Employer's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Employer
Common Stock and Outstanding Employer Voting Securities, as the case may be, (B)
no Person (excluding any corporation resulting from such Business Combination or
any Executive benefit plan (or related trust) of the Employer or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, twenty-five percent or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
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(iv) approval by the shareholders of the Employer of a complete
liquidation or dissolution of the Employer.
(c) Certain Restrictions Following Change in Control. If a Change in
Control of the Employer occurs, then the following provisions shall apply:
(i) the Employer shall not be entitled to reduce, terminate or
adversely (from the Consulting Firm's point of view) affect, pursuant to
Sections 4(b) and 4(c), any performance bonuses or sales commissions which are
described in Sections 4(b) or 4(c) to which the Consulting Firm shall thereafter
be entitled even in connection with a reduction in such benefits applicable to
all of the Employer's officers who are of a similar class and station as those
of the Consulting Firm. If the continuation of any benefit provided to the
Consulting Firm violates any law or statute the Employer shall pay to the
Consulting Firm the cash equivalent of any benefit lost by the Consulting Firm;
(ii) the Employer shall not be entitled to reduce, terminate, or
adversely (from the Consulting Firm's point of view) affect the Consulting
Firm's reimbursement of expenses as described in Section 4(d); and
(iii) all stock options, restricted stock awards, SERP and similar
grants theretofore or thereafter made, if any, which are unvested shall
immediately vest effective as of the Change in Control Date.
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(d) Provisions Applicable to Termination of Employment. If a Change in
Control shall occur and the Consulting Firm's employment is thereafter
terminated at any time prior to the first anniversary of the Change in Control
Date by the Employer other than for Cause or by the Consulting Firm for Good
Reason, then the Consulting Firm shall be entitled to receive the following:
(i) the Consulting Firm shall be entitled to all payments and
benefits provided in Section 7;
(ii) the payments required by the provisions of clause (i) of Section
9(c) shall be paid to the Consulting Firm in a lump sum in cash within ten days
after the Date of Termination (or such later date as the Consulting Firm may
elect); and
(iii) the Consulting Firm shall receive as severance pay, and in lieu
of any further draws subsequent to the Date of Termination and any Severance
Payment referenced in Section (c)(ii) above, an amount in cash equal to two
times the sum of the Annual Draw on the Date of Termination and all benefits
enjoyed by the Consulting Firm on the Date of Termination shall continue for a
period of three years after the Date of Termination. In addition, the Consulting
Firm will receive the average of the last three years' bonuses, which shall be
calculated as contemplated by Section 9(c)(ii) above. The severance sum shall be
paid to the Consulting Firm within 30 days of the Date of Termination. If the
continuation of any benefit provided to the Consulting Firm violates any law or
statute the Employer shall pay to the Consulting Firm the cash equivalent of any
benefit lost by the Consulting Firm.
11. LIMITATION ON PAYMENTS. Notwithstanding anything in this Agreement to the
contrary, in the case of a Change in Control of the Employer, in no event shall
the Consulting Firm be entitled to receive any amount which would result in the
imposition of tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended, or any similar state tax (collectively, "Excise Tax"). In such a
case, any payment due to the Consulting Firm shall automatically be reduced to
the maximum amount that may be received by the Consulting Firm that will not
trigger any Excise Tax.
12. PROPERTY.
(a) All right, title and interest in and to Intellectual Property (as
defined below) shall be and remain the sole and exclusive property of the
Employer. During the term of this Agreement, the Consulting Firm shall not
remove from the Employer's offices or premises any documents, records,
notebooks, files, correspondence, reports, memoranda or similar materials of or
containing proprietary information, or other materials or property of any kind
belonging to the Employer unless necessary or appropriate in accordance with the
duties and responsibilities required by or appropriate for his position and, in
the event that such materials or property are removed, all of the foregoing
shall be returned to their proper files or places of safekeeping as promptly as
possible after the removal shall serve its specific purpose. The Consulting Firm
shall not make, retain, remove and/or distribute any copies of any of the
foregoing for any reason whatsoever except as may be necessary in the discharge
of his assigned duties and shall not divulge to any third person the nature of
and/or contents of any of the foregoing or of any other oral or written
information to which it may have access or with which for any reason it may
become familiar, except as disclosure shall be necessary in the performance of
its duties. Upon the termination of the Consulting Firm's employment with the
Employer, it shall leave with or return to the Employer all originals and copies
of the foregoing then in its possession, whether prepared by the Consulting Firm
or by others.
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(b) The Consulting Firm agrees that all right, title and interest in and to
any innovations, designs, systems, analyses, ideas for marketing programs, and
all copyrights, patents, trademarks and trade names, or similar intangible
personal property which have been or are developed or created in whole or in
part by the Consulting Firm: (i) at any time and at any place while the
Consulting Firm is employed by the Employer and which, in the case of any or all
of the foregoing, are related to and used in connection with the business of the
Employer; (ii) as a result of tasks assigned to the Consulting Firm by the
Employer; or (iii) from the use of premises or personal property (whether
tangible or intangible) owned, leased or contracted for by the Employer
(collectively, the "Intellectual Property"), shall be and remain forever the
sole and exclusive property of the Employer. The Consulting Firm shall promptly
disclose to the Employer all Intellectual Property, and the Consulting Firm
shall have no claim for additional compensation for the Intellectual Property.
(c) The Consulting Firm acknowledges that all the Intellectual Property
that is copyrightable shall be considered a work made for hire under United
States Copyright Law. To the extent that any copyrightable Intellectual Property
may not be considered a work made for hire under the applicable provisions of
the United States Copyright Law, or to the extent that, notwithstanding the
foregoing provisions, the Consulting Firm may retain an interest in any
Intellectual Property that is not copyrightable, the Consulting Firm hereby
irrevocably assigns and transfers to the Employer any and all right, title, or
interest that the Consulting Firm may have in the Intellectual Property under
copyright, patent, trade secret and trademark law, in perpetuity or for the
longest period otherwise permitted by law, without the necessity of further
consideration. The Employer shall be entitled to obtain and hold in its own name
all copyrights, patents, trade secrets, and trademarks with respect thereto.
(d) The Consulting Firm further agrees to reveal promptly all information
relating to the Intellectual Property to appropriate officers of the Employer
and to cooperate with the Employer and execute such documents as may be
necessary or appropriate (i) in the event that the Employer desires to seek
copyright, patent or trademark protection, or other analogous protection
relating to the Intellectual Property, and when such protection is obtained, to
renew and restore the same, or (ii) to defend any opposition proceedings in
respect of obtaining and maintaining such copyright, patent or trademark
protection, or other analogous protection.
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(e) In the event the Employer is unable after reasonable effort to secure
the Consulting Firm's signature on any of the documents referenced in Section
12(d) above, for any reason whatsoever, the Consulting Firm hereby irrevocably
designates and appoints the Employer and its duly authorized officers and agents
as the Consulting Firm's agent and attorney-in-fact, to act for and in his
behalf and stead to execute and file any such documents and to do all other
lawfully permitted acts to further the prosecution and issuance of any such
copyright, patent or trademark protection, or other analogous protection, with
the same legal force and effect as if executed by the Consulting Firm.
13. CONFIDENTIAL INFORMATION.
Except for proper business purposes, at all times for the period of time
commencing as of the date of this Agreement and ending on the second anniversary
of the date of termination of the Consulting Firm's employment under this
Agreement, the Consulting Firm and its associates agree not to disclose or use
any confidential information, including without limitation, information
regarding research, developments, product designs or specifications, processes,
"know-how," prices, suppliers, customers, contractors, clients, costs or any
knowledge or information with respect to confidential or trade secrets of the
Employer, it being understood that such confidential information does not
include information that is publicly available unless such information became
publicly available as a result of a breach of this Agreement. The Consulting
Firm and its associates acknowledge and agrees that all notes, records, reports,
sketches, plans, unpublished memoranda or other documents belonging to the
Employer, but held by the Consulting Firm and/or its associates, concerning any
information relating to the Employer's business, whether confidential or not,
are the property of the Employer.
14. NO ASSIGNMENTS; ASSUMPTION BY SUCCESSOR.
This Agreement is personal to the Employer and to the Consulting Firm and
may not be assigned by either party without the written consent of the other.
The Employer will require any successor (whether direct or indirect by purchase,
merger, consolation or otherwise) to all or substantially all of the business
and/or assets of the Employer to (i) expressly assume and agree to perform this
Agreement in the same manner and the same extent the Employer would be required
to perform it as if no such succession had taken place; and (ii) notify the
Consulting Firm of the assumption of this Agreement within ten days of such
assumption. Failure of the Employer to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
agreement. As used in this Agreement, "Employer" shall mean Sector
Communications, Inc. and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of law
or otherwise. However, this agreement shall inure to the benefit of and be
enforceable by the Consulting Firm's successors or other legal representatives.
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15. NO SET-OFF.
The Employer's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right, or action which the Employer may have against the Consulting Firm or
others. In no event shall the Consulting Firm be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable,
or benefits to be provided, to the Consulting Firm under any of the provisions
of this Agreement, and, except as expressly provided in Section 9 hereof (as the
same may be modified by clause (iii) of Section 10(d)), such amounts shall not
be reduced whether or not the Consulting Firm obtains other employment.
16. INDEMNIFICATION.
The Employer and the Consulting Firm acknowledge that the Consulting Firm's
associates' service as an officer of the Employer exposes the Consulting Firm
and/or its associates to risks of personal liability arising from, and
pertaining to, the Consulting Firm's and/or its associates' participation in the
management of the Employer. The Employer shall defend, indemnify and hold
harmless the Consulting Firm and its associates from any actual cost, loss,
damages, attorneys fees, or liability suffered or incurred by the Consulting
Firm and its associates arising out of, or connected to, the Consulting Firm's
and/or its associates' services as an officer of the Employer. The Employer
shall not be obligated to indemnify the Consulting Firm or its associates if the
cost, loss, damage, or liability results from the Consulting Firm's violation of
the Securities Exchange Act of 1934, as amended, the Consulting Firm's
associates' violation of criminal law, a transaction from which the Consulting
Firm or its associates received an improper personal benefit, the Consulting
Firm's or its associates' violation of Section 607.0834 of the Florida Business
Corporation Act (or any similar state's corporate law, or successor law), or the
Consulting Firm's or its associates' willful misconduct or a conscious disregard
for the best interests of the Employer. The Employer will not have any
obligation to the Consulting Firm or its associates under this section for any
loss suffered if the Consulting Firm and/or its associates voluntarily pay,
settle, compromise, confesses judgment for, or admits liability with respect to
without the approval of the Employer. Within thirty days after the Consulting
Firm receives notice of any claim or action which may give rise to the
application of this section, the Consulting Firm shall notify the Employer in
writing of the claim or action. The Consulting Firm's failure to timely notify
the Employer of the claim or action will relieve the Employer from any
obligation to the Consulting Firm and/or its associates under this section.
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17. PRIOR EMPLOYMENT AGREEMENTS.
The Consulting Firm and its associates represent that they have not
executed any agreement with any previous employer which may impose restrictions
on his employment with the Employer.
18. TRANSFERABILITY, SUCCESSORS AND ASSIGNS.
The rights and benefits of the Employer under this Agreement shall be
transferable and all covenants and agreements hereunder shall inure to the
benefit of and be enforceable by or against its successors and assigns. No
rights or obligations of the Consulting Firm hereunder shall be transferable or
assignable by the Consulting Firm to any third party.
19. ATTORNEY'S FEES.
The prevailing party in any action brought to enforce the provisions of
this Agreement shall be entitled, in addition to such other relief that may be
granted, to a reasonable sum for attorney's fees and costs incurred by such
party in enforcing this Agreement (including fees incurred on any appeal).
20. NO ORAL MODIFICATIONS.
No modifications or waivers of any provision hereof will be binding or
valid unless in writing and executed by both parties.
21. WAIVER.
Either party's failure to enforce any provision or provisions of this
Agreement shall not in any way be construed as a waiver of any such provision or
provisions, or prevent that party thereafter from enforcing each and every other
provision of this Agreement. The rights granted the parties in this Agreement
are cumulative and shall not constitute a waiver of either party's right to
assert all other legal remedies available to it under the circumstances.
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22. SEVERABILITY.
The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provision were
omitted.
23. GOVERNING LAW AND BINDING EFFECT.
This Agreement shall be interpreted and construed in accordance with the
laws of Florida.
24. CAPTIONS.
Captions and section headings used herein are for convenience only, are not
of this Agreement, and shall not be used in construing this Agreement.
25. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
one and the same instrument.
26. NOTICE.
Any notice required or permitted to be given under this Agreement shall be
sufficient if it is in writing and sent by hand delivery or by United States
Express Mail service to the parties at the following addresses:
To the Employer:
Sector Communications, Inc
0000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxx, Officer
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To the Consulting Firm:
Xxxxxx X. Xxxxxxx
c/o Madison Consulting Company
000 Xxxxxxxx Xxxxx Xxxx., X.X.
Xxxxxxxxxx, XX 00000
27. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Orlando, Florida in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered in the arbitrator's award in any court having
jurisdiction. Such arbitration shall occur only after the parties have attempted
to resolve the dispute or controversy by mediation under mutually agreeable
terms.
28. ENTIRE AGREEMENT.
This Agreement comprises the entire agreement between the Consulting Firm
and the Employer. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the subject matter hereof and
may not be modified or terminated orally. No modification, termination, or
attempted waiver shall be valid unless it is in writing and is executed by each
of the parties.
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IN WITNESS WHEREOF, the parties have executed this Consulting Agreement as
of the date set forth above.
Witnesses: SECTOR COMMUNICATIONS, INC.:
/S/ Xxxxxx Xxxxxxx
--------------------------------
Signature By: /S/ Xxxx Xxxxxx
---------------------------
Xxxxxx Xxxxxxx Xxxx Xxxxxx
--------------------------------
Printed name Its President
/S/ Xxxxxxx X. Xxxx
--------------------------------
Signature
Xxxxxxx X. Xxxx
--------------------------------
Printed name
/S/ Xxxxxx Xxxxxxx
--------------------------------
Signature
Xxxxxx Xxxxxxx MADISION CONSULTING COMPANY:
--------------------------------
Printed name
/S/ Xxxxxxx X. Xxxx By: /S/Court Xxxxxxx
-------------------------------- --------------------
Signature Court Xxxxxxx
Xxxxxxx H. Xxxx Its President
--------------------------------
Printed name
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EXHIBIT C
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is entered into this 14th day
of January, 2002, between SECTOR COMMUNICATIONS, INC., a Nevada corporation (the
"Employer"), and GENERAL SERVICES CORP., a Delaware corporation (the "Consulting
Firm").
BACKGROUND
The Employer desires to continue to obtain the benefit of Consulting Firm's
services and expertise, and the Consulting Firm desires to continue to render
services to the Employer.
The Employer's Board of Directors has determined that it is in the
Employer's best interest and that of its shareholders to recognize the
substantial contribution that the Consulting Firm has made to the Employer's
business, and to continue to retain the Consulting Firm's services in the
future.
The Employer and the Consulting Firm desire to set forth in this Agreement
the terms and conditions of the Consulting Firm's continued retention by the
Employer. Accordingly, in consideration of the mutual covenants and
representations contained set forth below, the Employer and the Consulting Firm
agree as follows:
TERMS
1. SERVICES RENDERED.
The Consulting Firm agrees to render services to the Employer and one or
more of the Employer's subsidiary corporations as specified in this Agreement
upon the terms and conditions and for the compensation provided in this
Agreement. All compensation paid to the Consulting Firm by the Employer or any
subsidiary of the Employer, and all benefits and perquisites received by the
Consulting Firm from the Employer or any of its subsidiaries, will be aggregated
in determining whether the Consulting Firm has received the compensation and
benefits provided for in this Agreement.
2. TERM OF AGREEMENT.
(a) End of Term. The term of this Agreement will be for the period
commencing on the date of this Agreement and ending on the earliest of:
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(i) five years after notice of termination is given by the Employer
to the Consulting Firm;
(ii) the date of termination of the Consulting Firm's employment by
the Consulting Firm at its election and without "Good Reason" (as defined in
Section 9 of this Agreement); or
(iii) the date of termination of the Consulting Firm's employment by
the Employer for "Cause" (as defined in Section 8 of this Agreement) or by the
Employer without Cause in accordance with Section 9 or by the Consulting Firm
for Good Reason pursuant to Section 9;
(b) Date of Termination. As used in this Agreement the term "Date of
Termination" means (i) if the Consulting Firm's employment is terminated by the
Employer pursuant to clause (i) of Section 2(a) above, the date that is five
years after the date of the Consulting Firm's receipt of the notice of
termination or any later date specified in such notice, as the case may be, (ii)
if the Consulting Firm terminates its employment at its election and without
Good Reason pursuant to clause (ii) of Section 2(a), the date of the Employer's
receipt of the notice of termination from the Consulting Firm or any later date
specified in such notice, as the case may be, and (iii) if the Consulting Firm's
employment is terminated by the Employer for Cause or by the Employer without
Cause pursuant to Section 9 of this Agreement, or by the Consulting Firm for
Good Reason, fifteen days after the date of receipt of the notice of termination
by the Consulting Firm or the Employer, respectively, or any later date
specified in such notice, as the case may be.
3. SERVICES TO BE RENDERED; NON-EXCLUSIVITY.
(a) Service. During the Consulting Firm's term of employment under this
Agreement, the Consulting Firm shall perform the duties assigned by the Employer
from time to time.
(b) Substantial Efforts. During the term of this Agreement, the Consulting
Firm and/or its associates shall devote sufficient business time and energy to
the business, affairs and interests of the Employer and its subsidiaries, and
matters related thereto, and shall use its reasonable commercial efforts and
ability to promote the interests of the Employer and its subsidiaries. The
Consulting Firm agrees that it will diligently endeavor to promote the business,
affairs and interests of the Employer and its subsidiaries and perform services
contemplated hereby in accordance with the policies established by the Board of
Directors of the Employer (the "Board") and more senior officers of the Employer
from time to time. The Consulting Firm shall serve without additional
remuneration in such Consulting Firm's capacities for one or more direct or
indirect subsidiaries of the Employer as the Employer may from time to time
request, subject to appropriate authorization by the subsidiary or subsidiaries
involved and any limitations under applicable law and indemnification on the
same terms as the Consulting Firm is indemnified by the Employer. The failure of
the Consulting Firm to discharge an order or perform a function because the
Consulting Firm reasonably and in good faith believes such would violate a law
or regulation or be dishonest shall not be deemed a breach by it of its
obligations or duties under this Agreement and shall not entitle the Employer to
terminate this Agreement pursuant to any of its provisions.
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(c) Certain Permissible Activities. The Consulting Firm and/or its
associates may serve as a director or in any other capacity of any business
enterprise, including an enterprise whose activities may involve or relate to
the business of the Employer or any of its subsidiaries but only if such service
is expressly approved by the Employer in writing. The Consulting Firm and/or its
associates may (i) make and manage personal business investments of their
choice, (ii) teach at educational institutions and deliver lectures, and (iii)
serve in any capacity with any civic, educational or charitable organization, or
any governmental entity or trade association, in each such case without seeking
or obtaining approval by the Employer so long as such activities and service do
not materially interfere or conflict with the performance of their duties under
this Agreement. It is agreed that to the extent that the Employer shall have
approved any service of the Consulting Firm and/or its associates pursuant to
the first sentence of this Section 3(c) prior to a Change in Control Date (as
defined in Section 10 below), or to the extent that the Consulting Firm and/or
its associates may have engaged in activities pursuant to the second sentence of
this Section 3(c) prior to such Change in Control Date, the continued conduct of
such activities or the conduct of activities similar in nature and scope thereto
during the two years subsequent to such Change in Control Date shall be
permissible and not in violation of any provisions of this Agreement and the
previously obtained Employer approval may not be revoked or limited in any
material respect during the two years following such Change in Control Date.
4. COMPENSATION.
(a) Annual Draw. Throughout the term of this Agreement, Employer will pay
the Consulting Firm an annual draw of at least One Hundred Fifty Thousand
Dollars ($150,000.00), payable in periodic installments no less frequently than
twice per month. Such draw is referred to in this Agreement as the Consulting
Firm's "Annual Draw."
(b) Sales Performance Bonus. Throughout the term of this Agreement, in
addition to the Annual Draw, for each and every month that the Employer and or
its subsidiaries sells Two Thousand (2,000) enrollments or more from its
Orlando, Florida in-house sales group, the Employer shall pay the Consulting
Firm a sales performance bonus ("Sales Performance Bonus") of Ten Dollars
($10.00) per enrollment for such month or months. For purposes of calculating
the total number of enrollments for any given month, in addition to the number
of regular individual enrollments, there shall be added to the number of regular
individual enrollments, a number equal to the gross amount of sales of cruises
and trips for that month divided by Five Hundred (500). For example, if in a
particular month the Employer sells 1,500 regular enrollments, and also sells a
cruise for two hundred fifty thousand dollars ($250,000), then the Consulting
Firm will be due a Sales Performance Bonus of Twenty Thousand Dollars ($20,000)
for that month.
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(c) Asia and England Sales Commission. In addition to the Annual Draw and
the Sales Performance Bonus, as the Employer and or its subsidiaries collect the
outstanding fees receivable as a result of earlier sales of certain rights
regarding the Asian and English sales territories, the Employer and or its
subsidiaries shall continue to pay the Consulting Firm an Asia and England sales
commission ("Asia and England Sales Commission") in an amount equal to Ten
Percent (10%) of such outstanding fees receivable. As of the time of executing
this Agreement, there is Eight Hundred Thousand ($800,000.00) of outstanding
fees receivable by the Employer from an earlier sale of the Asia rights, and
there is One Hundred Fifty Thousand Dollars ($150,000.00) of outstanding fees
receivable by the Employer from an earlier sale of English rights.
(d) Expense Reimbursement. The Employer agrees to reimburse the Consulting
Firm in full for all such reasonable and necessary business, entertainment and
travel expenses incurred or expended by it in connection with the performance of
its duties under this Agreement; provided the Consulting Firm submits to the
Employer vouchers or expense statements satisfactorily evidencing such expenses
as may be reasonably required by the Employer and such expenses are in
accordance with any applicable corporate policy.
5. NOT USED.
6. NOT USED.
7. PAYMENTS AND BENEFITS UPON TERMINATION OF EMPLOYMENT FOR ANY REASON.
On the Date of Termination of the Consulting Firm's employment under this
Agreement for any reason whatsoever, the Consulting Firm's Annual Draw will
cease thereafter to accrue except as specifically provided in Section 9. In
addition, the Employer shall:
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(a) pay and deliver to the Consulting Firm all amounts of money owed to it
by the Employer as of the Date of Termination, including all amounts payable to
it under any expense reimbursement plans or policies for expenses incurred
through the Date of Termination, and the amount of any bonus due under any
incentive plan to the Consulting Firm for any bonus period or performance
measurement cycle of the Employer that ended prior to the Date of Termination
which remained unpaid on the Date of Termination;
(b) continue to insure the Consulting Firm with respect to any activities
that Consulting Firm and/or its associates rendered hereunder as a director or
officer of the Employer or any of its subsidiaries, for a period of three years
after such Date of Termination, under such policies of director and officer
liability insurance as Employer shall provide for its senior officers generally;
provided, however, that if a Change in Control shall have occurred prior to such
Date of Termination or shall thereafter occur, such policies of insurance shall
be no less favorable to the Consulting Firm than such policies as may have been
in effect for the Consulting Firm at any time during the one hundred twenty day
period immediately preceding the Change in Control Date; and
(c) continue to honor such rights to indemnification as the Consulting Firm
and/or its associates may be entitled pursuant to any plan of indemnification or
indemnification agreement in effect at the Date of Termination.
(d) The Consulting Firm immediately waives any right or entitlement to the
payments and benefits described in Section 7(a) - (c) in the event that the
Consulting Firm breaches any term or provision of this Agreement.
8. TERMINATION OF EMPLOYMENT BY EMPLOYER FOR CAUSE.
(a) Definition of Cause. The Employer may terminate the Consulting Firm's
employment under this Agreement if the termination is for Cause. For purposes of
this Agreement, the Employer shall have "Cause" to terminate the Consulting
Firm's employment under this Agreement if, and only if, any of the following
shall occur:
(i) The Conviction by a court of competent jurisdiction or entry of a
guilty plea or a plea of nolo contendere for an act on the part of an associate
of the Consulting Firm actually rendering services to the Employer hereunder
constituting any felony; or
(ii) a willful breach by the Consulting Firm of any provisions of this
Agreement if such breach results in demonstrably material injury to the
Employer.
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(b) Procedural Requirements. The Consulting Firm's employment under this
Agreement shall not be subject to termination for Cause without: (i) reasonable
notice to the Consulting Firm setting forth the reasons for Employer's intention
to terminate and specifying the particulars thereof in detail, and (ii) an
opportunity for the Consulting Firm to cure any such breach, if possible, within
thirty days after receipt of such notice.
9. TERMINATION OF EMPLOYMENT BY THE CONSULTING FIRM FOR GOOD REASON OR BY
EMPLOYER WITHOUT CAUSE.
(a) Definition of Good Reason. The Consulting Firm may terminate its
employment under this Agreement and all of its obligations under this Agreement
to the Employer accruing after the date of such termination (other than his
obligations under Section 11, 12, 13, 18, and 26), if the termination is for
"Good Reason," which for purposes of this Agreement is defined as:
(i) failure by the Employer to perform any of its obligations
hereunder (including, but not limited to, Employer's obligations under Sections
3 and 4) other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Employer within 30 days
after receipt of notice thereof given by the Consulting Firm; or
(ii) the diminution of the Consulting Firm's draw, except in
connection with the termination of the Consulting Firm's employment for Cause,
or termination by the Consulting Firm other than for Good Reason;
(iii) any failure by the Employer to obtain the assumption of this
Agreement by any successor or assignee of the Employer;
(iv) any attempt by the Employer to terminate the Consulting Firm for
Cause which does not result in a valid termination for Cause; and
(v) a relocation of Employer's principal office to any place outside
Orange County, Florida.
Any such termination will be effective upon thirty days' prior written notice
from the Consulting Firm to the Employer.
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(b) Employer's Termination Without Cause. The Employer may terminate the
Consulting Firm's employment under this Agreement without Cause (as defined
above) by written notice to the Consulting Firm. Any such termination shall
become effective upon fifteen days prior written notice from the Employer to the
Consulting Firm.
(c) Compensation and Benefits Upon Section 9 Termination. In addition to
the payments specified in Section 7 of this Agreement, in the event of
termination of the Consulting Firm's employment pursuant to this Section 9, the
Employer shall continue to pay or provide to the Consulting Firm the following:
(i) Annual Draw through Date of Termination at the rate in effect just
prior to the time a Notice of Termination is given;
(ii) As severance pay, and in lieu of any further draw for any period
subsequent to the Date of Termination, an amount in cash equal to one times the
sum of the Annual Draw on the Date of Termination plus the average of the
Consulting Firm's last two years' bonuses and commissions (the "Severance
Payment"). For the purposes of the definition of "Severance Payment" the Company
shall compute the average of the Consulting Firm's last two years' bonuses and
commissions by including the greater of (A) the bonus and commission, if any,
already earned by the Consulting Firm at the time of termination related to the
calendar year of the termination, or (B) the bonus and commission, if any,
earned in the second full calendar year preceding the termination of the
Consulting Firm (e.g., if the Consulting Firm is terminated on August 1, 2002
(and this Section 9 is applicable), the Employer shall include in the bonus and
commission calculation the greater of (A) the bonus and commission, if any,
earned by the Consulting Firm through August 1, 2002, or (B) the bonus and
commission, if any, earned by the Consulting Firm in calendar year 2001).
Additionally, also for the purpose of the definition of "Severance Payment," in
the event the Consulting Firm participated in a Company program which replaces
an annual cash bonus with a grant of stock or stock options during any relevant
year (a "Company Program"), then the Company shall compute the average of the
Consulting Firm's last two years' bonuses by (i) in the case of a Company
Program consisting of a stock grant by including the amount reported by the
Company to the Internal Revenue Service relating to such stock grant for the
relevant year and (ii) in the case of a Company Program consisting of a stock
option grant the greater of (A) the imputed present value of such options at the
time of the grant or (B) the difference between the fair market value of the
underlying stock on the date of the termination (which shall be calculated on
the basis of the closing price per share on the principal trading market where
the Company's common stock is traded) and the exercise price of such options
(such greater amount shall be referred to as the "Option Value"). For example,
if the Consulting Firm is terminated on October 1, 2003 (and this Section 9 is
applicable) and the Consulting Firm received a bonus consisting of stock with a
value reported to the Internal Revenue Service of $200,000 in 2002, and a bonus
consisting of options with an Option Value of $225,000 in 2001, then the average
bonus for calculating the Severance Payment will be $212,500. For the purposes
of this Agreement, unless the relevant Company Program specifies otherwise, if
the Consulting Firm resigns for Good Reason or is terminated without Cause, it
shall be deemed vested in whatever stock or stock options it had earned as part
of the relevant Company Program (if any) through the date of termination.
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(iii) The Consulting Firm will have 90 days subsequent to the Date of
Termination to exercise all stock options and restricted stock awards that have
been granted and were vested at Date of Termination, if any; and
(iv) All draws, bonuses and commissions shall cease at the time of
such termination, subject to the terms of any benefit or compensation plan then
in force and applicable to the Consulting Firm. The Consulting Firm immediately
waives any right or entitlement to the Severance Payment in the event that the
Consulting Firm breaches any term or provision of this Agreement and in the
event of such breach the Consulting Firm will pay to the Employer an amount
equal to any portion of the Severance Payment paid to the Consulting Firm prior
the Consulting Firm's breach, in addition to any damages the Employer may be
able to recover. The Employer shall not have any additional liability or
obligation hereunder by reason of such termination.
10. CHANGE IN CONTROL.
(a) Effectiveness of Section. If at any time during the term of the
Consulting Firm's employment by the Employer pursuant to this Agreement, a
Change in Control of the Employer (as defined below) shall occur, the provisions
of this Section 10 shall become effective without any limitation on any other
rights the Consulting Firm may have under this Agreement. Sections (c) and (d)
of this Section 10 shall become ineffective with respect to such Change in
Control on the first anniversary of the date on which such Change in Control
occurs (the "Change in Control Date") unless the Consulting Firm's employment
has theretofore been terminated for any reason; provided, however, that if
another Change in Control occurs after such first anniversary, Sections 10(c)
and (d) shall become effective once again with respect to such subsequent Change
in Control. If the Consulting Firm's employment so terminates prior to such
first anniversary, the provisions of Sections 10(c) and (d) shall survive so
long as the Consulting Firm is entitled to any benefits under this Agreement.
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(b) Definition of Change in Control. For the purpose of this Agreement, a
"Change in Control" shall mean:
(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning o Rule 13d-3 promulgated under the Exchange Act) of twenty-five
percent (25%) or more of either (A) the then outstanding shares of common stock
of the Employer (the "Outstanding Employer Common Stock") or (B) the combined
voting power of the then outstanding voting securities of the Employer entitled
to vote generally in the election of directors (the "Outstanding Employer Voting
Securities"); provided, however, that for purposes of this clause (i), the
following acquisitions shall not constitute a Change in Control: (u) any
acquisition directly from the Employer, (w) any acquisition by the Employer, (x)
any acquisition by any Employee benefit plan (or related trust) sponsored or
maintained by the Employer or any corporation controlled by the Employer, (y)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of clause (iii) of this Section 10(b), or
(ii) individuals who, as of the date of this Agreement, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date of this Agreement whose election, or nomination
for election by the Employer's shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(iii) consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Employer (a "Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the Persons who were the
beneficial owners, respectively, of the Outstanding Employer Common Stock and
Outstanding Employer Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Employer or all or
substantially all of the Employer's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Employer
Common Stock and Outstanding Employer Voting Securities, as the case may be, (B)
no Person (excluding any corporation resulting from such Business Combination or
any Executive benefit plan (or related trust) of the Employer or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, twenty-five percent or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
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(iv) approval by the shareholders of the Employer of a complete
liquidation or dissolution of the Employer.
(c) Certain Restrictions Following Change in Control. If a Change in
Control of the Employer occurs, then the following provisions shall apply:
(i) the Employer shall not be entitled to reduce, terminate or
adversely (from the Consulting Firm's point of view) affect, pursuant to
Sections 4(b) and 4(c), any performance bonuses or sales commissions which are
described in Sections 4(b) or 4(c) to which the Consulting Firm shall thereafter
be entitled even in connection with a reduction in such benefits applicable to
all of the Employer's officers who are of a similar class and station as those
of the Consulting Firm. If the continuation of any benefit provided to the
Consulting Firm violates any law or statute the Employer shall pay to the
Consulting Firm the cash equivalent of any benefit lost by the Consulting Firm;
(ii) the Employer shall not be entitled to reduce, terminate, or
adversely (from the Consulting Firm's point of view) affect the Consulting
Firm's reimbursement of expenses as described in Section 4(d); and
(iii) all stock options, restricted stock awards, SERP and similar
grants theretofore or thereafter made, if any, which are unvested shall
immediately vest effective as of the Change in Control Date.
(d) Provisions Applicable to Termination of Employment. If a Change in
Control shall occur and the Consulting Firm's employment is thereafter
terminated at any time prior to the first anniversary of the Change in Control
Date by the Employer other than for Cause or by the Consulting Firm for Good
Reason, then the Consulting Firm shall be entitled to receive the following:
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(i) the Consulting Firm shall be entitled to all payments and
benefits provided in Section 7;
(ii) the payments required by the provisions of clause (i) of Section
9(c) shall be paid to the Consulting Firm in a lump sum in cash within ten days
after the Date of Termination (or such later date as the Consulting Firm may
elect); and
(iii) the Consulting Firm shall receive as severance pay, and in lieu
of any further draws subsequent to the Date of Termination and any Severance
Payment referenced in Section (c)(ii) above, an amount in cash equal to two
times the sum of the Annual Draw on the Date of Termination and all benefits
enjoyed by the Consulting Firm on the Date of Termination shall continue for a
period of three years after the Date of Termination. In addition, the Consulting
Firm will receive the average of the last three years' bonuses, which shall be
calculated as contemplated by Section 9(c)(ii) above. The severance sum shall be
paid to the Consulting Firm within 30 days of the Date of Termination. If the
continuation of any benefit provided to the Consulting Firm violates any law or
statute the Employer shall pay to the Consulting Firm the cash equivalent of any
benefit lost by the Consulting Firm.
11. LIMITATION ON PAYMENTS. Notwithstanding anything in this Agreement to the
contrary, in the case of a Change in Control of the Employer, in no event shall
the Consulting Firm be entitled to receive any amount which would result in the
imposition of tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended, or any similar state tax (collectively, "Excise Tax"). In such a
case, any payment due to the Consulting Firm shall automatically be reduced to
the maximum amount that may be received by the Consulting Firm that will not
trigger any Excise Tax.
12. PROPERTY.
(a) All right, title and interest in and to Intellectual Property (as
defined below) shall be and remain the sole and exclusive property of the
Employer. During the term of this Agreement, the Consulting Firm shall not
remove from the Employer's offices or premises any documents, records,
notebooks, files, correspondence, reports, memoranda or similar materials of or
containing proprietary information, or other materials or property of any kind
belonging to the Employer unless necessary or appropriate in accordance with the
duties and responsibilities required by or appropriate for his position and, in
the event that such materials or property are removed, all of the foregoing
shall be returned to their proper files or places of safekeeping as promptly as
possible after the removal shall serve its specific purpose. The Consulting Firm
shall not make, retain, remove and/or distribute any copies of any of the
foregoing for any reason whatsoever except as may be necessary in the discharge
of his assigned duties and shall not divulge to any third person the nature of
and/or contents of any of the foregoing or of any other oral or written
information to which it may have access or with which for any reason it may
become familiar, except as disclosure shall be necessary in the performance of
its duties. Upon the termination of the Consulting Firm's employment with the
Employer, it shall leave with or return to the Employer all originals and copies
of the foregoing then in its possession, whether prepared by the Consulting Firm
or by others.
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(b) The Consulting Firm agrees that all right, title and interest in and to
any innovations, designs, systems, analyses, ideas for marketing programs, and
all copyrights, patents, trademarks and trade names, or similar intangible
personal property which have been or are developed or created in whole or in
part by the Consulting Firm: (i) at any time and at any place while the
Consulting Firm is employed by the Employer and which, in the case of any or all
of the foregoing, are related to and used in connection with the business of the
Employer; (ii) as a result of tasks assigned to the Consulting Firm by the
Employer; or (iii) from the use of premises or personal property (whether
tangible or intangible) owned, leased or contracted for by the Employer
(collectively, the "Intellectual Property"), shall be and remain forever the
sole and exclusive property of the Employer. The Consulting Firm shall promptly
disclose to the Employer all Intellectual Property, and the Consulting Firm
shall have no claim for additional compensation for the Intellectual Property.
(c) The Consulting Firm acknowledges that all the Intellectual Property
that is copyrightable shall be considered a work made for hire under United
States Copyright Law. To the extent that any copyrightable Intellectual Property
may not be considered a work made for hire under the applicable provisions of
the United States Copyright Law, or to the extent that, notwithstanding the
foregoing provisions, the Consulting Firm may retain an interest in any
Intellectual Property that is not copyrightable, the Consulting Firm hereby
irrevocably assigns and transfers to the Employer any and all right, title, or
interest that the Consulting Firm may have in the Intellectual Property under
copyright, patent, trade secret and trademark law, in perpetuity or for the
longest period otherwise permitted by law, without the necessity of further
consideration. The Employer shall be entitled to obtain and hold in its own name
all copyrights, patents, trade secrets, and trademarks with respect thereto.
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(d) The Consulting Firm further agrees to reveal promptly all information
relating to the Intellectual Property to appropriate officers of the Employer
and to cooperate with the Employer and execute such documents as may be
necessary or appropriate (i) in the event that the Employer desires to seek
copyright, patent or trademark protection, or other analogous protection
relating to the Intellectual Property, and when such protection is obtained, to
renew and restore the same, or (ii) to defend any opposition proceedings in
respect of obtaining and maintaining such copyright, patent or trademark
protection, or other analogous protection.
(e) In the event the Employer is unable after reasonable effort to secure
the Consulting Firm's signature on any of the documents referenced in Section
12(d) above, for any reason whatsoever, the Consulting Firm hereby irrevocably
designates and appoints the Employer and its duly authorized officers and agents
as the Consulting Firm's agent and attorney-in-fact, to act for and in his
behalf and stead to execute and file any such documents and to do all other
lawfully permitted acts to further the prosecution and issuance of any such
copyright, patent or trademark protection, or other analogous protection, with
the same legal force and effect as if executed by the Consulting Firm.
13. CONFIDENTIAL INFORMATION.
Except for proper business purposes, at all times for the period of time
commencing as of the date of this Agreement and ending on the second anniversary
of the date of termination of the Consulting Firm's employment under this
Agreement, the Consulting Firm and its associates agree not to disclose or use
any confidential information, including without limitation, information
regarding research, developments, product designs or specifications, processes,
"know-how," prices, suppliers, customers, contractors, clients, costs or any
knowledge or information with respect to confidential or trade secrets of the
Employer, it being understood that such confidential information does not
include information that is publicly available unless such information became
publicly available as a result of a breach of this Agreement. The Consulting
Firm and its associates acknowledge and agrees that all notes, records, reports,
sketches, plans, unpublished memoranda or other documents belonging to the
Employer, but held by the Consulting Firm and/or its associates, concerning any
information relating to the Employer's business, whether confidential or not,
are the property of the Employer.
14. NO ASSIGNMENTS; ASSUMPTION BY SUCCESSOR.
This Agreement is personal to the Employer and to the Consulting Firm and
may not be assigned by either party without the written consent of the other.
The Employer will require any successor (whether direct or indirect by purchase,
merger, consolation or otherwise) to all or substantially all of the business
and/or assets of the Employer to (i) expressly assume and agree to perform this
Agreement in the same manner and the same extent the Employer would be required
to perform it as if no such succession had taken place; and (ii) notify the
Consulting Firm of the assumption of this Agreement within ten days of such
assumption. Failure of the Employer to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
agreement. As used in this Agreement, "Employer" shall mean Sector
Communications, Inc. and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of law
or otherwise. However, this agreement shall inure to the benefit of and be
enforceable by the Consulting Firm's successors or other legal representatives.
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15. NO SET-OFF.
The Employer's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right, or action which the Employer may have against the Consulting Firm or
others. In no event shall the Consulting Firm be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable,
or benefits to be provided, to the Consulting Firm under any of the provisions
of this Agreement, and, except as expressly provided in Section 9 hereof (as the
same may be modified by clause (iii) of Section 10(d)), such amounts shall not
be reduced whether or not the Consulting Firm obtains other employment.
16. INDEMNIFICATION.
The Employer and the Consulting Firm acknowledge that the Consulting Firm's
associates' service as an officer of the Employer exposes the Consulting Firm
and/or its associates to risks of personal liability arising from, and
pertaining to, the Consulting Firm's and/or its associates' participation in the
management of the Employer. The Employer shall defend, indemnify and hold
harmless the Consulting Firm and its associates from any actual cost, loss,
damages, attorneys fees, or liability suffered or incurred by the Consulting
Firm and its associates arising out of, or connected to, the Consulting Firm's
and/or its associates' services as an officer of the Employer. The Employer
shall not be obligated to indemnify the Consulting Firm or its associates if the
cost, loss, damage, or liability results from the Consulting Firm's violation of
the Securities Exchange Act of 1934, as amended, the Consulting Firm's
associates' violation of criminal law, a transaction from which the Consulting
Firm or its associates received an improper personal benefit, the Consulting
Firm's or its associates' violation of Section 607.0834 of the Florida Business
Corporation Act (or any similar state's corporate law, or successor law), or the
Consulting Firm's or its associates' willful misconduct or a conscious disregard
for the best interests of the Employer. The Employer will not have any
obligation to the Consulting Firm or its associates under this section for any
loss suffered if the Consulting Firm and/or its associates voluntarily pay,
settle, compromise, confesses judgment for, or admits liability with respect to
without the approval of the Employer. Within thirty days after the Consulting
Firm receives notice of any claim or action which may give rise to the
application of this section, the Consulting Firm shall notify the Employer in
writing of the claim or action. The Consulting Firm's failure to timely notify
the Employer of the claim or action will relieve the Employer from any
obligation to the Consulting Firm and/or its associates under this section.
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17. PRIOR EMPLOYMENT AGREEMENTS.
The Consulting Firm and its associates represent that they have not
executed any agreement with any previous employer which may impose restrictions
on his employment with the Employer.
18. TRANSFERABILITY, SUCCESSORS AND ASSIGNS.
The rights and benefits of the Employer under this Agreement shall be
transferable and all covenants and agreements hereunder shall inure to the
benefit of and be enforceable by or against its successors and assigns. No
rights or obligations of the Consulting Firm hereunder shall be transferable or
assignable by the Consulting Firm to any third party.
19. ATTORNEY'S FEES.
The prevailing party in any action brought to enforce the provisions of
this Agreement shall be entitled, in addition to such other relief that may be
granted, to a reasonable sum for attorney's fees and costs incurred by such
party in enforcing this Agreement (including fees incurred on any appeal).
20. NO ORAL MODIFICATIONS.
No modifications or waivers of any provision hereof will be binding or
valid unless in writing and executed by both parties.
21. WAIVER.
Either party's failure to enforce any provision or provisions of this
Agreement shall not in any way be construed as a waiver of any such provision or
provisions, or prevent that party thereafter from enforcing each and every other
provision of this Agreement. The rights granted the parties in this Agreement
are cumulative and shall not constitute a waiver of either party's right to
assert all other legal remedies available to it under the circumstances.
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22. SEVERABILITY.
The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provision were
omitted.
23. GOVERNING LAW AND BINDING EFFECT.
This Agreement shall be interpreted and construed in accordance with the
laws of Florida.
24. CAPTIONS.
Captions and section headings used herein are for convenience only, are not
of this Agreement, and shall not be used in construing this Agreement.
25. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
one and the same instrument.
26. NOTICE.
Any notice required or permitted to be given under this Agreement shall be
sufficient if it is in writing and sent by hand delivery or by United States
Express Mail service to the parties at the following addresses:
To the Employer:
Sector Communications, Inc.
0000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxx, Officer
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To the Consulting Firm:
Xxxx Xxxxxxx
c/o General Services Corp.
0000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
27. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Orlando, Florida in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered in the arbitrator's award in any court having
jurisdiction. Such arbitration shall occur only after the parties have attempted
to resolve the dispute or controversy by mediation under mutually agreeable
terms.
28. ENTIRE AGREEMENT.
This Agreement comprises the entire agreement between the Consulting Firm
and the Employer. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the subject matter hereof and
may not be modified or terminated orally. No modification, termination, or
attempted waiver shall be valid unless it is in writing and is executed by each
of the parties.
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IN WITNESS WHEREOF, the parties have executed this Consulting Agreement as
of the date set forth above.
Witnesses: SECTOR COMMUNICATIONS, INC.:
/S/ Xxxxxx Xxxxxxx
--------------------------------
Signature By: /S/ Xxxx Xxxxxx
---------------------------
Xxxxxx Xxxxxxx Xxxx Xxxxxx
________________________________ Its President
Printed name
/S/ Xxxxxxx X. Xxxx
--------------------------------
Signature
------
Xxxxxxx X. Xxxx
--------------------------
Printed name
/S/ Xxxxxx Xxxxxxx
--------------------------------
Signature GENERAL SERVICES CORPORATION:
Xxxxxx Xxxxxxx
--------------------------------
Printed name
By: /S/ Xxxx Xxxxxxx
----------------------------
/S/ Xxxxxxx X. Xxxx Xxxx Xxxxxxx
________________________________ Its President
Signature
Xxxxxxx X. Xxxx
--------------------------------
Printed name
Page 80 of 148
EXHIBIT D
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is entered into this 14th day
of January, 2002, between SECTOR COMMUNICATIONS, INC., a Nevada corporation (the
"Employer"), and CORPORATE MEDIA SERVICES, INC., a Delaware corporation (the
"Consulting Firm").
BACKGROUND
The Employer desires to continue to obtain the benefit of Consulting Firm's
services and expertise, and the Consulting Firm desires to continue to render
services to the Employer.
The Employer's Board of Directors has determined that it is in the
Employer's best interest and that of its shareholders to recognize the
substantial contribution that the Consulting Firm has made to the Employer's
business, and to continue to retain the Consulting Firm's services in the
future.
The Employer and the Consulting Firm desire to set forth in this Agreement
the terms and conditions of the Consulting Firm's continued retention by the
Employer. Accordingly, in consideration of the mutual covenants and
representations contained set forth below, the Employer and the Consulting Firm
agree as follows:
TERMS
1. SERVICES RENDERED.
The Consulting Firm agrees to render services to the Employer and one or
more of the Employer's subsidiary corporations as specified in this Agreement
upon the terms and conditions and for the compensation provided in this
Agreement. All compensation paid to the Consulting Firm by the Employer or any
subsidiary of the Employer, and all benefits and perquisites received by the
Consulting Firm from the Employer or any of its subsidiaries, will be aggregated
in determining whether the Consulting Firm has received the compensation and
benefits provided for in this Agreement.
2. TERM OF AGREEMENT.
(a) End of Term. The term of this Agreement will be for the period
commencing on the date of this Agreement and ending on the earliest of:
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(i) five years after notice of termination is given by the Employer
to the Consulting Firm;
(ii) the date of termination of the Consulting Firm's employment by
the Consulting Firm at its election and without "Good Reason" (as defined in
Section 9 of this Agreement); or
(iii) the date of termination of the Consulting Firm's employment by
the Employer for "Cause" (as defined in Section 8 of this Agreement) or by the
Employer without Cause in accordance with Section 9 or by the Consulting Firm
for Good Reason pursuant to Section 9;
(b) Date of Termination. As used in this Agreement the term "Date of
Termination" means (i) if the Consulting Firm's employment is terminated by the
Employer pursuant to clause (i) of Section 2(a) above, the date that is five
years after the date of the Consulting Firm's receipt of the notice of
termination or any later date specified in such notice, as the case may be, (ii)
if the Consulting Firm terminates its employment at its election and without
Good Reason pursuant to clause (ii) of Section 2(a), the date of the Employer's
receipt of the notice of termination from the Consulting Firm or any later date
specified in such notice, as the case may be, and (iii) if the Consulting Firm's
employment is terminated by the Employer for Cause or by the Employer without
Cause pursuant to Section 9 of this Agreement, or by the Consulting Firm for
Good Reason, fifteen days after the date of receipt of the notice of termination
by the Consulting Firm or the Employer, respectively, or any later date
specified in such notice, as the case may be.
3. SERVICES TO BE RENDERED; NON-EXCLUSIVITY.
(a) Service. During the Consulting Firm's term of employment under this
Agreement, the Consulting Firm shall perform the duties assigned by the Employer
from time to time.
(b) Substantial Efforts. During the term of this Agreement, the Consulting
Firm and/or its associates shall devote sufficient business time and energy to
the business, affairs and interests of the Employer and its subsidiaries, and
matters related thereto, and shall use its reasonable commercial efforts and
ability to promote the interests of the Employer and its subsidiaries. The
Consulting Firm agrees that it will diligently endeavor to promote the business,
affairs and interests of the Employer and its subsidiaries and perform services
contemplated hereby in accordance with the policies established by the Board of
Directors of the Employer (the "Board") and more senior officers of the Employer
from time to time. The Consulting Firm shall serve without additional
remuneration in such Consulting Firm's capacities for one or more direct or
indirect subsidiaries of the Employer as the Employer may from time to time
request, subject to appropriate authorization by the subsidiary or subsidiaries
involved and any limitations under applicable law and indemnification on the
same terms as the Consulting Firm is indemnified by the Employer. The failure of
the Consulting Firm to discharge an order or perform a function because the
Consulting Firm reasonably and in good faith believes such would violate a law
or regulation or be dishonest shall not be deemed a breach by it of its
obligations or duties under this Agreement and shall not entitle the Employer to
terminate this Agreement pursuant to any of its provisions.
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(c) Certain Permissible Activities. The Consulting Firm and/or its
associates may serve as a director or in any other capacity of any business
enterprise, including an enterprise whose activities may involve or relate to
the business of the Employer or any of its subsidiaries but only if such service
is expressly approved by the Employer in writing. The Consulting Firm and/or its
associates may (i) make and manage personal business investments of their
choice, (ii) teach at educational institutions and deliver lectures, and (iii)
serve in any capacity with any civic, educational or charitable organization, or
any governmental entity or trade association, in each such case without seeking
or obtaining approval by the Employer so long as such activities and service do
not materially interfere or conflict with the performance of their duties under
this Agreement. It is agreed that to the extent that the Employer shall have
approved any service of the Consulting Firm and/or its associates pursuant to
the first sentence of this Section 3(c) prior to a Change in Control Date (as
defined in Section 10 below), or to the extent that the Consulting Firm and/or
its associates may have engaged in activities pursuant to the second sentence of
this Section 3(c) prior to such Change in Control Date, the continued conduct of
such activities or the conduct of activities similar in nature and scope thereto
during the two years subsequent to such Change in Control Date shall be
permissible and not in violation of any provisions of this Agreement and the
previously obtained Employer approval may not be revoked or limited in any
material respect during the two years following such Change in Control Date.
4. COMPENSATION.
(a) Annual Draw. Throughout the term of this Agreement, Employer will pay
the Consulting Firm an annual draw of at least One Hundred Fifty Thousand
Dollars ($150,000.00), payable in periodic installments no less frequently than
twice per month. Such draw is referred to in this Agreement as the Consulting
Firm's "Annual Draw."
(b) Sales Performance Bonus. Throughout the term of this Agreement, in
addition to the Annual Draw, for each and every month that the Employer and or
its subsidiaries sell Two Thousand (2,000) enrollments or more from its Orlando,
Florida in-house sales group, the Employer shall pay the Consulting Firm a sales
performance bonus ("Sales Performance Bonus") of Ten Dollars ($10.00) per
enrollment for such month or months. For purposes of calculating the total
number of enrollments for any given month, in addition to the number of regular
individual enrollments, there shall be added to the number of regular individual
enrollments, a number equal to the gross amount of sales of cruises and trips
for that month divided by Five Hundred (500). For example, if in a particular
month the Employer sells 1,500 regular enrollments, and also sells a cruise for
two hundred fifty thousand dollars ($250,000), then the Consulting Firm will be
due a Sales Performance Bonus of Twenty Thousand Dollars ($20,000) for that
month.
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(c) Asia and England Sales Commission. In addition to the Annual Draw and
the Sales Performance Bonus, as the Employer and or its subsidiaries collect the
outstanding fees receivable as a result of earlier sales of certain rights
regarding the Asian and English sales territories, the Employer shall continue
to pay the Consulting Firm an Asia and England sales commission ("Asia and
England Sales Commission") in an amount equal to Ten Percent (10%) of such
outstanding fees receivable. As of the time of executing this Agreement, there
is Eight Hundred Thousand ($800,000.00) of outstanding fees receivable by the
Employer from an earlier sale of the Asia rights, and there is One Hundred Fifty
Thousand Dollars ($150,000.00) of outstanding fees receivable by the Employer
from an earlier sale of English rights.
(d) Expense Reimbursement. The Employer agrees to reimburse the Consulting
Firm in full for all such reasonable and necessary business, entertainment and
travel expenses incurred or expended by it in connection with the performance of
its duties under this Agreement; provided the Consulting Firm submits to the
Employer vouchers or expense statements satisfactorily evidencing such expenses
as may be reasonably required by the Employer and such expenses are in
accordance with any applicable corporate policy.
5. NOT USED.
6. NOT USED.
7. PAYMENTS AND BENEFITS UPON TERMINATION OF EMPLOYMENT FOR ANY REASON.
On the Date of Termination of the Consulting Firm's employment under this
Agreement for any reason whatsoever, the Consulting Firm's Annual Draw will
cease thereafter to accrue except as specifically provided in Section 9. In
addition, the Employer shall:
(a) pay and deliver to the Consulting Firm all amounts of money owed to it
by the Employer as of the Date of Termination, including all amounts payable to
it under any expense reimbursement plans or policies for expenses incurred
through the Date of Termination, and the amount of any bonus due under any
incentive plan to the Consulting Firm for any bonus period or performance
measurement cycle of the Employer that ended prior to the Date of Termination
which remained unpaid on the Date of Termination;
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(b) continue to insure the Consulting Firm with respect to any activities
that Consulting Firm and/or its associates rendered hereunder as a director or
officer of the Employer or any of its subsidiaries, for a period of three years
after such Date of Termination, under such policies of director and officer
liability insurance as Employer shall provide for its senior officers generally;
provided, however, that if a Change in Control shall have occurred prior to such
Date of Termination or shall thereafter occur, such policies of insurance shall
be no less favorable to the Consulting Firm than such policies as may have been
in effect for the Consulting Firm at any time during the one hundred twenty day
period immediately preceding the Change in Control Date; and
(c) continue to honor such rights to indemnification as the Consulting Firm
and/or its associates may be entitled pursuant to any plan of indemnification or
indemnification agreement in effect at the Date of Termination.
(d) The Consulting Firm immediately waives any right or entitlement to the
payments and benefits described in Section 7(a) - (c) in the event that the
Consulting Firm breaches any term or provision of this Agreement.
8. TERMINATION OF EMPLOYMENT BY EMPLOYER FOR CAUSE.
(a) Definition of Cause. The Employer may terminate the Consulting Firm's
employment under this Agreement if the termination is for Cause. For purposes of
this Agreement, the Employer shall have "Cause" to terminate the Consulting
Firm's employment under this Agreement if, and only if, any of the following
shall occur:
(i) The Conviction by a court of competent jurisdiction or entry of a
guilty plea or a plea of nolo contendere for an act on the part of an associate
of the Consulting Firm actually rendering services to the Employer hereunder
constituting any felony; or
(ii) a willful breach by the Consulting Firm of any provisions of this
Agreement if such breach results in demonstrably material injury to the
Employer.
(b) Procedural Requirements. The Consulting Firm's employment under this
Agreement shall not be subject to termination for Cause without: (i) reasonable
notice to the Consulting Firm setting forth the reasons for Employer's intention
to terminate and specifying the particulars thereof in detail, and (ii) an
opportunity for the Consulting Firm to cure any such breach, if possible, within
thirty days after receipt of such notice.
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9. TERMINATION OF EMPLOYMENT BY THE CONSULTING FIRM FOR GOOD REASON OR BY
EMPLOYER WITHOUT CAUSE.
(a) Definition of Good Reason. The Consulting Firm may terminate its
employment under this Agreement and all of its obligations under this Agreement
to the Employer accruing after the date of such termination (other than his
obligations under Section 11, 12, 13, 18, and 26), if the termination is for
"Good Reason," which for purposes of this Agreement is defined as:
(i) failure by the Employer to perform any of its obligations
hereunder (including, but not limited to, Employer's obligations under Sections
3 and 4) other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Employer within 30 days
after receipt of notice thereof given by the Consulting Firm; or
(ii) the diminution of the Consulting Firm's draw, except in
connection with the termination of the Consulting Firm's employment for Cause,
or termination by the Consulting Firm other than for Good Reason;
(iii) any failure by the Employer to obtain the assumption of this
Agreement by any successor or assignee of the Employer;
(iv) any attempt by the Employer to terminate the Consulting Firm for
Cause which does not result in a valid termination for Cause; and
(v) a relocation of Employer's principal office to any place outside
Orange County, Florida.
Any such termination will be effective upon thirty days' prior written notice
from the Consulting Firm to the Employer.
(b) Employer's Termination Without Cause. The Employer may terminate the
Consulting Firm's employment under this Agreement without Cause (as defined
above) by written notice to the Consulting Firm. Any such termination shall
become effective upon fifteen days prior written notice from the Employer to the
Consulting Firm.
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(c) Compensation and Benefits Upon Section 9 Termination. In addition to
the payments specified in Section 7 of this Agreement, in the event of
termination of the Consulting Firm's employment pursuant to this Section 9, the
Employer shall continue to pay or provide to the Consulting Firm the following:
(i) Annual Draw through Date of Termination at the rate in effect just
prior to the time a Notice of Termination is given;
(ii) As severance pay, and in lieu of any further draw for any period
subsequent to the Date of Termination, an amount in cash equal to one times the
sum of the Annual Draw on the Date of Termination plus the average of the
Consulting Firm's last two years' bonuses and commissions (the "Severance
Payment"). For the purposes of the definition of "Severance Payment" the Company
shall compute the average of the Consulting Firm's last two years' bonuses and
commissions by including the greater of (A) the bonus and commission, if any,
already earned by the Consulting Firm at the time of termination related to the
calendar year of the termination, or (B) the bonus and commission, if any,
earned in the second full calendar year preceding the termination of the
Consulting Firm (e.g., if the Consulting Firm is terminated on August 1, 2002
(and this Section 9 is applicable), the Employer shall include in the bonus and
commission calculation the greater of (A) the bonus and commission, if any,
earned by the Consulting Firm through August 1, 2002, or (B) the bonus and
commission, if any, earned by the Consulting Firm in calendar year 2001).
Additionally, also for the purpose of the definition of "Severance Payment," in
the event the Consulting Firm participated in a Company program which replaces
an annual cash bonus with a grant of stock or stock options during any relevant
year (a "Company Program"), then the Company shall compute the average of the
Consulting Firm's last two years' bonuses by (i) in the case of a Company
Program consisting of a stock grant by including the amount reported by the
Company to the Internal Revenue Service relating to such stock grant for the
relevant year and (ii) in the case of a Company Program consisting of a stock
option grant the greater of (A) the imputed present value of such options at the
time of the grant or (B) the difference between the fair market value of the
underlying stock on the date of the termination (which shall be calculated on
the basis of the closing price per share on the principal trading market where
the Company's common stock is traded) and the exercise price of such options
(such greater amount shall be referred to as the "Option Value"). For example,
if the Consulting Firm is terminated on October 1, 2003 (and this Section 9 is
applicable) and the Consulting Firm received a bonus consisting of stock with a
value reported to the Internal Revenue Service of $200,000 in 2002, and a bonus
consisting of options with an Option Value of $225,000 in 2001, then the average
bonus for calculating the Severance Payment will be $212,500. For the purposes
of this Agreement, unless the relevant Company Program specifies otherwise, if
the Consulting Firm resigns for Good Reason or is terminated without Cause, it
shall be deemed vested in whatever stock or stock options it had earned as part
of the relevant Company Program (if any) through the date of termination.
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(iii) The Consulting Firm will have 90 days subsequent to the Date of
Termination to exercise all stock options and restricted stock awards that have
been granted and were vested at Date of Termination, if any; and
(iv) All draws, bonuses and commissions shall cease at the time of
such termination, subject to the terms of any benefit or compensation plan then
in force and applicable to the Consulting Firm. The Consulting Firm immediately
waives any right or entitlement to the Severance Payment in the event that the
Consulting Firm breaches any term or provision of this Agreement and in the
event of such breach the Consulting Firm will pay to the Employer an amount
equal to any portion of the Severance Payment paid to the Consulting Firm prior
the Consulting Firm's breach, in addition to any damages the Employer may be
able to recover. The Employer shall not have any additional liability or
obligation hereunder by reason of such termination.
10. CHANGE IN CONTROL.
(a) Effectiveness of Section. If at any time during the term of the
Consulting Firm's employment by the Employer pursuant to this Agreement, a
Change in Control of the Employer (as defined below) shall occur, the provisions
of this Section 10 shall become effective without any limitation on any other
rights the Consulting Firm may have under this Agreement. Sections (c) and (d)
of this Section 10 shall become ineffective with respect to such Change in
Control on the first anniversary of the date on which such Change in Control
occurs (the "Change in Control Date") unless the Consulting Firm's employment
has theretofore been terminated for any reason; provided, however, that if
another Change in Control occurs after such first anniversary, Sections 10(c)
and (d) shall become effective once again with respect to such subsequent Change
in Control. If the Consulting Firm's employment so terminates prior to such
first anniversary, the provisions of Sections 10(c) and (d) shall survive so
long as the Consulting Firm is entitled to any benefits under this Agreement.
(b) Definition of Change in Control. For the purpose of this Agreement, a
"Change in Control" shall mean:
(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning o Rule 13d-3 promulgated under the Exchange Act) of twenty-five
percent (25%) or more of either (A) the then outstanding shares of common stock
of the Employer (the "Outstanding Employer Common Stock") or (B) the combined
voting power of the then outstanding voting securities of the Employer entitled
to vote generally in the election of directors (the "Outstanding Employer Voting
Securities"); provided, however, that for purposes of this clause (i), the
following acquisitions shall not constitute a Change in Control: (u) any
acquisition directly from the Employer, (w) any acquisition by the Employer, (x)
any acquisition by any Employee benefit plan (or related trust) sponsored or
maintained by the Employer or any corporation controlled by the Employer, (y)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of clause (iii) of this Section 10(b), or
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(ii) individuals who, as of the date of this Agreement, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date of this Agreement whose election, or nomination
for election by the Employer's shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(iii) consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Employer (a "Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the Persons who were the
beneficial owners, respectively, of the Outstanding Employer Common Stock and
Outstanding Employer Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Employer or all or
substantially all of the Employer's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Employer
Common Stock and Outstanding Employer Voting Securities, as the case may be, (B)
no Person (excluding any corporation resulting from such Business Combination or
any Executive benefit plan (or related trust) of the Employer or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, twenty-five percent or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
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(iv) approval by the shareholders of the Employer of a complete
liquidation or dissolution of the Employer.
(c) Certain Restrictions Following Change in Control. If a Change in
Control of the Employer occurs, then the following provisions shall apply:
(i) the Employer shall not be entitled to reduce, terminate or
adversely (from the Consulting Firm's point of view) affect, pursuant to
Sections 4(b) and 4(c), any performance bonuses or sales commissions which are
described in Sections 4(b) or 4(c) to which the Consulting Firm shall thereafter
be entitled even in connection with a reduction in such benefits applicable to
all of the Employer's officers who are of a similar class and station as those
of the Consulting Firm. If the continuation of any benefit provided to the
Consulting Firm violates any law or statute the Employer shall pay to the
Consulting Firm the cash equivalent of any benefit lost by the Consulting Firm;
(ii) the Employer shall not be entitled to reduce, terminate, or
adversely (from the Consulting Firm's point of view) affect the Consulting
Firm's reimbursement of expenses as described in Section 4(d); and
(iii) all stock options, restricted stock awards, SERP and similar
grants theretofore or thereafter made, if any, which are unvested shall
immediately vest effective as of the Change in Control Date.
(d) Provisions Applicable to Termination of Employment. If a Change in
Control shall occur and the Consulting Firm's employment is thereafter
terminated at any time prior to the first anniversary of the Change in Control
Date by the Employer other than for Cause or by the Consulting Firm for Good
Reason, then the Consulting Firm shall be entitled to receive the following:
(i) the Consulting Firm shall be entitled to all payments and
benefits provided in Section 7;
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(ii) the payments required by the provisions of clause (i) of Section
9(c) shall be paid to the Consulting Firm in a lump sum in cash within ten days
after the Date of Termination (or such later date as the Consulting Firm may
elect); and
(iii) the Consulting Firm shall receive as severance pay, and in lieu
of any further draws subsequent to the Date of Termination and any Severance
Payment referenced in Section (c)(ii) above, an amount in cash equal to two
times the sum of the Annual Draw on the Date of Termination and all benefits
enjoyed by the Consulting Firm on the Date of Termination shall continue for a
period of three years after the Date of Termination. In addition, the Consulting
Firm will receive the average of the last three years' bonuses, which shall be
calculated as contemplated by Section 9(c)(ii) above. The severance sum shall be
paid to the Consulting Firm within 30 days of the Date of Termination. If the
continuation of any benefit provided to the Consulting Firm violates any law or
statute the Employer shall pay to the Consulting Firm the cash equivalent of any
benefit lost by the Consulting Firm.
11. LIMITATION ON PAYMENTS. Notwithstanding anything in this Agreement to the
contrary, in the case of a Change in Control of the Employer, in no event shall
the Consulting Firm be entitled to receive any amount which would result in the
imposition of tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended, or any similar state tax (collectively, "Excise Tax"). In such a
case, any payment due to the Consulting Firm shall automatically be reduced to
the maximum amount that may be received by the Consulting Firm that will not
trigger any Excise Tax.
12. PROPERTY.
(a) All right, title and interest in and to Intellectual Property (as
defined below) shall be and remain the sole and exclusive property of the
Employer. During the term of this Agreement, the Consulting Firm shall not
remove from the Employer's offices or premises any documents, records,
notebooks, files, correspondence, reports, memoranda or similar materials of or
containing proprietary information, or other materials or property of any kind
belonging to the Employer unless necessary or appropriate in accordance with the
duties and responsibilities required by or appropriate for his position and, in
the event that such materials or property are removed, all of the foregoing
shall be returned to their proper files or places of safekeeping as promptly as
possible after the removal shall serve its specific purpose. The Consulting Firm
shall not make, retain, remove and/or distribute any copies of any of the
foregoing for any reason whatsoever except as may be necessary in the discharge
of his assigned duties and shall not divulge to any third person the nature of
and/or contents of any of the foregoing or of any other oral or written
information to which it may have access or with which for any reason it may
become familiar, except as disclosure shall be necessary in the performance of
its duties. Upon the termination of the Consulting Firm's employment with the
Employer, it shall leave with or return to the Employer all originals and copies
of the foregoing then in its possession, whether prepared by the Consulting Firm
or by others.
Page 91 of 148
(b) The Consulting Firm agrees that all right, title and interest in and to
any innovations, designs, systems, analyses, ideas for marketing programs, and
all copyrights, patents, trademarks and trade names, or similar intangible
personal property which have been or are developed or created in whole or in
part by the Consulting Firm: (i) at any time and at any place while the
Consulting Firm is employed by the Employer and which, in the case of any or all
of the foregoing, are related to and used in connection with the business of the
Employer; (ii) as a result of tasks assigned to the Consulting Firm by the
Employer; or (iii) from the use of premises or personal property (whether
tangible or intangible) owned, leased or contracted for by the Employer
(collectively, the "Intellectual Property"), shall be and remain forever the
sole and exclusive property of the Employer. The Consulting Firm shall promptly
disclose to the Employer all Intellectual Property, and the Consulting Firm
shall have no claim for additional compensation for the Intellectual Property.
(c) The Consulting Firm acknowledges that all the Intellectual Property
that is copyrightable shall be considered a work made for hire under United
States Copyright Law. To the extent that any copyrightable Intellectual Property
may not be considered a work made for hire under the applicable provisions of
the United States Copyright Law, or to the extent that, notwithstanding the
foregoing provisions, the Consulting Firm may retain an interest in any
Intellectual Property that is not copyrightable, the Consulting Firm hereby
irrevocably assigns and transfers to the Employer any and all right, title, or
interest that the Consulting Firm may have in the Intellectual Property under
copyright, patent, trade secret and trademark law, in perpetuity or for the
longest period otherwise permitted by law, without the necessity of further
consideration. The Employer shall be entitled to obtain and hold in its own name
all copyrights, patents, trade secrets, and trademarks with respect thereto.
(d) The Consulting Firm further agrees to reveal promptly all information
relating to the Intellectual Property to appropriate officers of the Employer
and to cooperate with the Employer and execute such documents as may be
necessary or appropriate (i) in the event that the Employer desires to seek
copyright, patent or trademark protection, or other analogous protection
relating to the Intellectual Property, and when such protection is obtained, to
renew and restore the same, or (ii) to defend any opposition proceedings in
respect of obtaining and maintaining such copyright, patent or trademark
protection, or other analogous protection.
(e) In the event the Employer is unable after reasonable effort to secure
the Consulting Firm's signature on any of the documents referenced in Section
12(d) above, for any reason whatsoever, the Consulting Firm hereby irrevocably
designates and appoints the Employer and its duly authorized officers and agents
as the Consulting Firm's agent and attorney-in-fact, to act for and in his
behalf and stead to execute and file any such documents and to do all other
lawfully permitted acts to further the prosecution and issuance of any such
copyright, patent or trademark protection, or other analogous protection, with
the same legal force and effect as if executed by the Consulting Firm.
Page 92 of 148
13. CONFIDENTIAL INFORMATION.
Except for proper business purposes, at all times for the period of time
commencing as of the date of this Agreement and ending on the second anniversary
of the date of termination of the Consulting Firm's employment under this
Agreement, the Consulting Firm and its associates agree not to disclose or use
any confidential information, including without limitation, information
regarding research, developments, product designs or specifications, processes,
"know-how," prices, suppliers, customers, contractors, clients, costs or any
knowledge or information with respect to confidential or trade secrets of the
Employer, it being understood that such confidential information does not
include information that is publicly available unless such information became
publicly available as a result of a breach of this Agreement. The Consulting
Firm and its associates acknowledge and agrees that all notes, records, reports,
sketches, plans, unpublished memoranda or other documents belonging to the
Employer, but held by the Consulting Firm and/or its associates, concerning any
information relating to the Employer's business, whether confidential or not,
are the property of the Employer.
14. NO ASSIGNMENTS; ASSUMPTION BY SUCCESSOR.
This Agreement is personal to the Employer and to the Consulting Firm and
may not be assigned by either party without the written consent of the other.
The Employer will require any successor (whether direct or indirect by purchase,
merger, consolation or otherwise) to all or substantially all of the business
and/or assets of the Employer to (i) expressly assume and agree to perform this
Agreement in the same manner and the same extent the Employer would be required
to perform it as if no such succession had taken place; and (ii) notify the
Consulting Firm of the assumption of this Agreement within ten days of such
assumption. Failure of the Employer to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
agreement. As used in this Agreement, "Employer" shall mean Sector
Communications, Inc. and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of law
or otherwise. However, this agreement shall inure to the benefit of and be
enforceable by the Consulting Firm's successors or other legal representatives.
15. NO SET-OFF.
The Employer's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right, or action which the Employer may have against the Consulting Firm or
others. In no event shall the Consulting Firm be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable,
or benefits to be provided, to the Consulting Firm under any of the provisions
of this Agreement, and, except as expressly provided in Section 9 hereof (as the
same may be modified by clause (iii) of Section 10(d)), such amounts shall not
be reduced whether or not the Consulting Firm obtains other employment.
Page 93 of 148
16. INDEMNIFICATION.
The Employer and the Consulting Firm acknowledge that the Consulting Firm's
associates' service as an officer of the Employer exposes the Consulting Firm
and/or its associates to risks of personal liability arising from, and
pertaining to, the Consulting Firm's and/or its associates' participation in the
management of the Employer. The Employer shall defend, indemnify and hold
harmless the Consulting Firm and its associates from any actual cost, loss,
damages, attorneys fees, or liability suffered or incurred by the Consulting
Firm and its associates arising out of, or connected to, the Consulting Firm's
and/or its associates' services as an officer of the Employer. The Employer
shall not be obligated to indemnify the Consulting Firm or its associates if the
cost, loss, damage, or liability results from the Consulting Firm's violation of
the Securities Exchange Act of 1934, as amended, the Consulting Firm's
associates' violation of criminal law, a transaction from which the Consulting
Firm or its associates received an improper personal benefit, the Consulting
Firm's or its associates' violation of Section 607.0834 of the Florida Business
Corporation Act (or any similar state's corporate law, or successor law), or the
Consulting Firm's or its associates' willful misconduct or a conscious disregard
for the best interests of the Employer. The Employer will not have any
obligation to the Consulting Firm or its associates under this section for any
loss suffered if the Consulting Firm and/or its associates voluntarily pay,
settle, compromise, confesses judgment for, or admits liability with respect to
without the approval of the Employer. Within thirty days after the Consulting
Firm receives notice of any claim or action which may give rise to the
application of this section, the Consulting Firm shall notify the Employer in
writing of the claim or action. The Consulting Firm's failure to timely notify
the Employer of the claim or action will relieve the Employer from any
obligation to the Consulting Firm and/or its associates under this section.
17. PRIOR EMPLOYMENT AGREEMENTS.
The Consulting Firm and its associates represent that they have not
executed any agreement with any previous employer which may impose restrictions
on his employment with the Employer.
Page 94 of 148
18. TRANSFERABILITY, SUCCESSORS AND ASSIGNS.
The rights and benefits of the Employer under this Agreement shall be
transferable and all covenants and agreements hereunder shall inure to the
benefit of and be enforceable by or against its successors and assigns. No
rights or obligations of the Consulting Firm hereunder shall be transferable or
assignable by the Consulting Firm to any third party.
19. ATTORNEY'S FEES.
The prevailing party in any action brought to enforce the provisions of
this Agreement shall be entitled, in addition to such other relief that may be
granted, to a reasonable sum for attorney's fees and costs incurred by such
party in enforcing this Agreement (including fees incurred on any appeal).
20. NO ORAL MODIFICATIONS.
No modifications or waivers of any provision hereof will be binding or
valid unless in writing and executed by both parties.
21. WAIVER.
Either party's failure to enforce any provision or provisions of this
Agreement shall not in any way be construed as a waiver of any such provision or
provisions, or prevent that party thereafter from enforcing each and every other
provision of this Agreement. The rights granted the parties in this Agreement
are cumulative and shall not constitute a waiver of either party's right to
assert all other legal remedies available to it under the circumstances.
22. SEVERABILITY.
The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provision were
omitted.
23. GOVERNING LAW AND BINDING EFFECT.
This Agreement shall be interpreted and construed in accordance with the
laws of Florida.
Page 95 of 148
24. CAPTIONS.
Captions and section headings used herein are for convenience only, are not
of this Agreement, and shall not be used in construing this Agreement.
25. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
one and the same instrument.
26. NOTICE.
Any notice required or permitted to be given under this Agreement shall be
sufficient if it is in writing and sent by hand delivery or by United States
Express Mail service to the parties at the following addresses:
To the Employer:
Sector Communications, Inc
0000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxx, Officer
To the Consulting Firm:
Xxxxxx Xxxx
c/o Corporate Media Services, Inc.
000 Xxxxxxxx Xxxxx Xxxx., X.X.
Xxxxxxxxxx, XX 00000
27. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Orlando, Florida in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered in the arbitrator's award in any court having
jurisdiction. Such arbitration shall occur only after the parties have attempted
to resolve the dispute or controversy by mediation under mutually agreeable
terms.
28. ENTIRE AGREEMENT.
This Agreement comprises the entire agreement between the Consulting Firm
and the Employer. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the subject matter hereof and
may not be modified or terminated orally. No modification, termination, or
attempted waiver shall be valid unless it is in writing and is executed by each
of the parties.
Page 96 of 148
IN WITNESS WHEREOF, the parties have executed this Consulting Agreement as
of the date set forth above.
Witnesses: SECTOR COMMUNICATIONS, INC.:
/S/ Xxxxxx Xxxxxxx
--------------------------------
Signature By: /S/ Xxxx Xxxxxx
---------------------------
Xxxxxx Xxxxxxx Xxxx Xxxxxx
________________________________ Its President
Printed name
/S/ Xxxxxxx X. Xxxx
--------------------------------
Signature
Xxxxxxx X. Xxxx
--------------------------------
Printed name
/S/ Xxxxxx Xxxxxxx
--------------------------------
Signature
Xxxxxx Xxxxxxx CORPORATE MEDIA SERVICES, INC.:
--------------------------------
Printed name
/S/ Xxxxxxx X. Xxxx By: /S/ Ray Xxxxxx Xxxx
-------------------------------- ----------------------------
Signature Ray Xxxxxx Xxxx
Its President
Xxxxxxx X. Xxxx
--------------------------------
Printed name
Page 97 of 148
EXHIBIT E
January 14, 2001
Xxxxxxx X. Walk
The Jefferson Trust
The Paramount Trust
The Xxxxxx Trust
Re: GUARANTEE OF OBLIGATIONS AND LOSSES SUFFERED PURSUANT TO AGREEMENT AND PLAN
OF MERGER
Gentleman:
I have entered into that certain Agreement and Plan of Merger, dated
January 14, 2002 ("Merger Agreement") with Sector Communications, Inc., a Nevada
corporation ("Sector"), Sector Communications Delaware, Inc., a Delaware
corporation ("Sector DE"), and eModel, Inc., a Delaware corporation ("eModel"),
pursuant to which eModel is to become a wholly-owned subsidiary of Sector
following the merger of Sector DE with and into eModel (the "Merger"). Sector,
Sector DE and Guarantor have made representations, warranties, covenants and
agreements in the Merger Agreement, the breach, nonperformance or noncompliance
of which may expose you, directly or indirectly, to Losses (as defined below)
after the date hereof.
To induce you to vote your respective voting shares of eModel capital stock, if
any, in favor of the Merger and the Merger Agreement and to otherwise cooperate
with the transactions contemplated by the Merger Agreement, I hereby agree (i)
to absolutely and unconditionally guarantee the payment by Sector within 30 days
of any claim made by you or your Affiliates (as defined below) (including, with
respect to the trusts, their respective settlors, trustees and beneficiaries)
for Losses arising out of, resulting from or in any way related to a breach of,
or failure to perform or satisfy any of, the representations, warranties,
covenants and agreements made by Sector, Sector DE or Guarantor in the Merger
Agreement or in any document or certificate delivered by any of Sector, Sector
DE or Guarantor pursuant to the Merger Agreement and, (ii) with respect solely
to Losses suffered as a result of a failure to consummate the Merger as set
forth in the Merger Agreement, I hereby agree to absolutely and unconditionally
pay any obligation of Sector upon a claim from you or your Affiliates
(including, with respect to the trusts, their respective settlors, trustees and
beneficiaries) without the failure of Sector to so pay the claim ((i) and (ii)
collectively, the "Guarantee").
"Losses" shall mean any and all losses, damages, liabilities (whether
contingent, fixed or unfixed, liquidated or unliquidated, or otherwise),
obligations, penalties, fines, judgments, claims, deficiencies, suits, actions
or causes of action, costs, expenses and assessments (including, without
limitation, income and other taxes, interest, penalties, attorneys' and
accountants' fees and disbursements, and costs of investigation and defense).
"Affiliates" shall mean, with respect to a Person (as defined below), any other
Person(s) controlling, controlled by or under common control with such Person.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, association, limited liability company, trust or other enterprise.
In connection with the Guarantee, I hereby pledge all my interests, direct or
indirect, in the Hadid Shares, as defined in the Merger Agreement (the "Pledged
Shares"). Within five days of the date of this letter, I shall deliver to Xxxxxx
Xxxxxxx, as escrow agent, the Pledged Shares, endorsed in blank. Upon failure by
me to satisfy my Guarantee, you may, at your election, take any steps necessary
to complete the transfer of such Pledged Shares and upon such acts shall be the
lawful owner of such Pledged Shares, entitled to all rights of ownership
thereto, including the right to vote, obtain dividends and sell such Pledged
Shares. I hereby grant each of you a power of attorney for such actions with
power of attorney is coupled with an interest.
Sincerely,
/S/ Xxxxxxx Xxxxx
-----------------
Xxxxxxx Xxxxx
(Notary on Next Page)
Page 98 of 000
XXXXXXXXXXXX XX XXXXXXXX )
) ss.:
COUNTY OF FAIRFAX )
The foregoing instrument was acknowledged before me this 14th day of January in
the year 2002 by Xxxxxxx Xxxxx, who is personally known to me or who has
produced a driver's license for the State of California as identification
NOTARY SEAL Notary: /S/Xxxxxxxx X. Xxxxxxx
Notary Public, Commonwealth of Virginia
My commission expires: January 31, 2005
Page 99 of 148
EXHIBIT F
CERTIFICATE OF THE DESIGNATIONS, POWERS,
PREFERENCES AND RIGHTS
OF THE
SERIES C CONVERTIBLE PREFERRED STOCK
(PAR VALUE $0.001 PER SHARE)
OF
OPTIONS TALENT GROUP
------------------------------------------------
Pursuant to Section 78.1955 of the Nevada Revised Statutes
------------------------------------------------
FIRST: The name of the Corporation is Options Talent Group, a Nevada
corporation (the "Corporation").
SECOND: Pursuant to the authority expressly vested in the Corporation's Board of
Directors by its Articles of Incorporation and the provisions of Sections 78.195
and 78.1955 of the Nevada Revised Statutes, the Board of Directors of the
Corporation duly adopted the following resolution, by unanimous written consent,
providing for the designation and issuance of 5,000,000 shares of Series C
Convertible Preferred Stock, par value $0.001 per share:
RESOLVED, that this Board of Directors, pursuant to authority expressly
vested in it by its Articles of Incorporation and the provisions of Sections
78.195 and 78.1955 of the Nevada Revised Statutes, authorizes the issue from
time to time of a series of Preferred Stock of the Corporation and hereby fixes
the designation, preferences, and the relative, participating, optional or other
rights, and the qualifications, limitations or restrictions thereof, in addition
to those set forth in said Articles of Incorporation, to be in their entirety as
follows:
1. DESIGNATION. The Corporation hereby designates a series of Preferred
Stock known as "SERIES C CONVERTIBLE PREFERRED STOCK," par value $0.001 per
share. The Series C Convertible Preferred Stock is sometimes referred to herein
as the "PREFERRED STOCK."
2. AUTHORIZED NUMBER. The number of shares constituting the Preferred Stock
shall be 5,000,000 shares. The rights, preferences, restrictions and other
matters relating to the Preferred Stock set forth below are subject to the
issuance of any subsequent series of preferred stock. The Board of Directors of
the Corporation (the "BOARD OF DIRECTORS") is also authorized to decrease the
number of shares of any series of preferred stock prior or subsequent to the
issue of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
3. DIVIDEND RIGHTS. The holders of the Preferred Stock shall be entitled to
receive dividends on each such share of Preferred Stock at a rate of six percent
(6%) of the Issue Price (as defined below) per annum out of any assets of the
Corporation legally available therefor, when, if and as declared by the Board of
Directors. Such dividends shall be cumulative. The Board of Directors shall not
pay any dividend to the holders of the common stock of the Corporation ("COMMON
STOCK") unless and until it has paid (i) a cumulative dividend at a rate of six
percent (6%) to the holders of the Preferred Stock and (ii) an equivalent
dividend, on a pro rata per share basis, to the holders of the Preferred Stock.
Page 100 of 148
4. LIQUIDATION PREFERENCE.
a. In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets or surplus funds of the Corporation to the holders of the
Common Stock by reason of their ownership thereof, the amount of $5.00 per share
of Preferred Stock (as adjusted for any stock dividends, combinations or splits
with respect to such shares) plus all accrued but unpaid dividends on such share
for each share of Preferred Stock then held by such holder. If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Preferred Stock shall be insufficient to permit the payment to
such holders of the full aforesaid preferential amount, then the entire assets
and funds of the Corporation legally available for distribution shall be
distributed among the holders of the Preferred Stock on a pro rata basis.
b. After payment to the holders of the Preferred Stock of the amounts
set forth in Section 4(a) above, the entire remaining assets and funds of the
Corporation legally available for distribution, if any, shall be distributed to
the holders of Common Stock and the Preferred Stock in proportion to the shares
of Common Stock then held by them and the shares of Common Stock which they then
have the right to acquire upon conversion of the shares of Preferred Stock then
held by them.
c. For purposes of this Section 4, (i) any acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary (other than a transaction in which the stockholders of the
Corporation immediately prior to such event own a majority of the outstanding
shares of the surviving corporation) or (ii) a sale of all or substantially all
of the assets of the Corporation or (iii) any other transaction or series of
related transactions by the Corporation in which the stockholders of the
Corporation immediately prior to such transaction or series of transactions do
not own a majority of the outstanding shares of the Corporation immediately
following such transaction or series of transactions shall be treated as a
liquidation, dissolution or winding up of the Corporation and shall entitle the
holders of Preferred Stock to receive at the closing in cash, securities or
other property (valued as provided in Section 4(d) below) the amount as
specified in Sections 4(a) and 4(b) above.
d. Whenever the distribution provided for in this Section 4 shall be
payable in securities or property other than cash, the value of such
distribution shall be as follows:
(i) Securities not subject to investment letter or other similar
restrictions on free marketability:
(A) If traded on a securities exchange, the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the 30-day period ending three (3) days prior to the closing;
(B) If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices (whichever are
applicable) over the 30-day period ending three (3) days prior to the closing;
and
C) If there is no active public market, the value shall be
the fair market value thereof, as determined in good faith by the Board of
Directors of the Corporation.
(ii) The method of valuation of securities subject to investment
letter or other restrictions on free marketability (other than restrictions
arising solely by virtue of a stockholder's status as an affiliate or former
affiliate) shall be to make an appropriate discount from the market value
determined as above in Sections 4(d)(i)(A)-(C) to reflect the approximate fair
market value thereof, as determined in good faith by the Board of Directors of
the Corporation.
(iii) In the event of any bona-fide dispute between the
Corporation and one or more holders of the Preferred Stock as to any fair market
value determination under clauses Sections 4(d)(i)(C) or 4(d)(ii) above, such
dispute shall be resolved through binding arbitration under the rules of the
American Arbitration Association, with the arbitration panel consisting of
persons familiar with the valuation of public and private entities and such
panel being advised, as to such valuation issues, by an investment bank of
nationally recognized standing, the costs thereof to be borne by the
non-prevailing party.
Page 101 of 148
5. REDEMPTION. The Preferred Stock is not redeemable; provided, however, in
the event any subsequent class or series of capital stock of the Corporation is
redeemable, the Preferred Stock shall be redeemable at the same time, upon the
same terms and conditions and on a pari-passu basis along with such subsequent
class or series.
6. CONVERSION. The holders of the Preferred Stock shall have
conversion rights as follows (the "CONVERSION RIGHTS"):
a. RIGHT TO CONVERT. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing $5.00 ("ISSUE PRICE") by the
conversion price (the "CONVERSION PRICE"), determined as hereinafter provided,
in effect on the date the certificate is surrendered for conversion. The price
at which shares of Common Stock shall be deliverable upon conversion of shares
of the Preferred Stock shall initially equal $.0833333333 and shall be adjusted
as hereinafter provided.
b. [RESERVED].
c. MECHANICS OF CONVERSION PURSUANT TO SECTION 6(a) Before any holder
of Preferred Stock shall be entitled to convert the same into shares of Common
Stock pursuant to Section 6(a), such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Preferred Stock, and shall give written notice by mail,
postage prepaid, or by facsimile, confirmed by mail, to the Corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of the Preferred
Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date.
d. Adjustments to Conversion Price for Certain Diluting Issues.
(i) SPECIAL DEFINITIONS. For purposes of this Section 6(d)
the following definitions apply:
(A) "COMMON STOCK" shall mean the Common Stock of the
Corporation and any class or classes of stock of the Corporation that, as of the
first date of issuance of shares of Preferred Stock, have no preference or
priority in the payment of dividends or in the distribution of assets in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, and shares of the Corporation of any classes or series
resulting from any reclassification or reclassifications thereof.
(B) "OPTIONS" shall mean rights, options, or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities (defined below).
(C) "ORIGINAL ISSUE DATE" shall mean the date on which a
share of Preferred Stock was first issued.
Page 102 of 148
(D) "CONVERTIBLE SECURITIES" shall mean any evidences of
indebtedness, shares (other than Common Stock and Preferred Stock) or other
securities convertible into or exchangeable for Common Stock.
(E) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all
shares of Common Stock issued (or, pursuant to Section 6(d)(iii), deemed to be
issued) by the Corporation after the Original Issue Date, other than shares of
Common Stock issued or issuable:
(a) upon conversion of shares of Preferred Stock;
(b) to officers, directors or employees of, or
consultants to, the Corporation pursuant to stock option or stock incentive
plans or agreements as in effect on the Original Issue Date, but not exceeding
20,000,000 of shares of Common Stock (net repurchases of such shares), subject
to adjustment for all subdivisions and combinations;
(c) upon any acquisition, joint venture or
strategic alliance approved by the Board of Directors that is also approved by a
majority of the Series C Directors (as defined below) if there are 3 such
directors at the time, or all of such directors if there are only one or two
Series C Directors at the time;
(d) issued to equipment lessors, banks or other
institutional credit financing sources approved by the Board of Directors that
is also approved a majority of the Series C Directors if there are 3 such
directors at the time, or all of such directors if there are only one or two
Series C Directors at the time;
(e) as a dividend or distribution on Preferred
Stock;
(f) for which adjustment of the applicable
Conversion Price is made pursuant to Section 6(d); or
(g) shares issued to strategic partners or vendors
which are approved by the Board of Directors of the Corporation that is also
approved by a majority of the Series C Directors if there are 3 such directors
at the time, or all of such directors if there are only one or two Series C
Directors at the time.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. Any provision herein
to the contrary notwithstanding, no adjustment in the Conversion Price shall be
made in respect of the issuance of Additional Shares of Common Stock unless the
consideration per share (determined pursuant to Section 6(d)(v) hereof) for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the Conversion Price in effect on the date of, and
immediately prior to such issue.
(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities then
entitled to receive any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating thereto without regard
to any provisions contained therein designed to protect against dilution) of
Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided, however,
that in any such case in which Additional Shares of Common Stock are deemed to
be issued:
(A) no further adjustments in the Conversion Price
shall be made upon the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
Page 103 of 148
(B) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Corporation, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the original issue thereof (or upon
the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities (provided, however, that no such adjustment of the
Conversion Price shall affect Common Stock previously issued upon conversion of
the Preferred Stock);
(C) in the event such Options or Convertible
Securities expire or cease to be convertible or exchangeable before they are
exercised, converted, or exchanged (as the case may be), then the Conversion
Price shall again be adjusted to the Conversion Price that would then be in
effect if the issuance of such Options or Convertible Securities had not
occurred, but such subsequent adjustment shall not affect the shares of Common
Stock issued upon any conversion of the Preferred Stock prior to the date such
subsequent adjustment is made; and
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (a) the Conversion Price on the original adjustment
date, or (b) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event this Corporation, at any time
after the Original Issue Date, shall issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
Section 6(d)(iii)) without consideration or for a consideration per share less
than the Conversion Price, then and in such event, the Conversion Price shall be
reduced, concurrently with such issue, to a price equal to the price paid per
share for such Additional Shares of Common Stock.
(v) DETERMINATION OF CONSIDERATION. For purposes of Section
6(d)(iv), the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(A) CASH AND PROPERTY: Such consideration shall:
(i) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Corporation excluding
amounts paid or payable for accrued interest or accrued dividends;
(ii) insofar as it consists of property other
than cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board; and
(iii) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (i) and (ii) above,
as determined in good faith by the Board.
(B) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 6(d)(iii), relating
to Options and Convertible Securities, shall be determined by dividing:
(i) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein designed to protect against dilution) payable
to the Corporation upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities; by
Page 104 of 148
(ii) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto, without regard to any
provision contained therein designed to protect against the dilution) issuable
upon the exercise of such Options or conversion or exchange of such Convertible
Securities.
e. ADJUSTMENTS TO CONVERSION PRICE FOR STOCK DIVIDENDS AND FOR
COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. In the event that the Corporation
at any time or from time to time after the Original Issue Date shall declare or
pay, without consideration, any dividend on the Common Stock payable in Common
Stock or in any right to acquire Common Stock for no consideration, or shall
effect a subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock (by stock split, reclassification or otherwise
than by payment of a dividend in Common Stock or in any right to acquire Common
Stock), or in the event the outstanding shares of Common Stock shall be combined
or consolidated, by reclassification or otherwise, into a lesser number of
shares of Common Stock, then the number of shares of Common Stock into which the
Preferred Stock can be converted shall be proportionately decreased or
increased, as appropriate. In the event that this Corporation shall declare or
pay, without consideration, any dividend on the Common Stock payable in any
right to acquire Common Stock for no consideration then the Corporation shall be
deemed to have made a dividend payable in Common Stock in an amount of shares
equal to the maximum number of shares issuable upon exercise of such rights to
acquire Common Stock.
f. DISTRIBUTION OF STOCK OTHER THAN COMMON STOCK. In case the
Corporation pays a dividend or makes a distribution on its outstanding Common
Stock in, or issues by reclassification of its Common Stock (whether in a merger
or consolidation or otherwise), any shares of its capital stock other than
Common Stock, the holder of any shares of Preferred Stock surrendered for
conversion after the record date fixed by the Board of Directors for such
dividend, distribution or reclassification shall be entitled to receive the
aggregate number and kind of shares of capital stock of the Corporation that
such holder would have been entitled to receive by virtue of such dividend,
distribution or reclassification if such shares of Preferred Stock had been
converted immediately before such record date at the Conversion Price then in
effect; and the Conversion Price shall be deemed to have been adjusted after
such record date to apply to such aggregate number and kind of shares. Such
adjustment shall be made successively whenever any of the events listed above
shall occur.
g. ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If the
Common Stock issuable upon conversion of the Preferred Stock shall be changed
into the same or a different number of shares of any other class or classes of
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares provided for in Section 6(e) above
or a merger or other reorganization referred to in Section 4(c) above)
(collectively, a "REORGANIZATION"), the number of shares of such other class or
classes of stock into which the Preferred Stock shall be convertible shall,
concurrently with the effectiveness of such Reorganization, be proportionately
adjusted so that the Preferred Stock shall be convertible into, in lieu of the
number of shares of Common Stock which the holders would otherwise have been
entitled to receive, a number of shares of such other class or classes of stock
equivalent to the number of shares of Common Stock that would have been subject
to receipt by the holders upon conversion of the Preferred Stock immediately
before that change; provided, however, such Reorganization shall only be
effective upon the consent of the holders of a majority of the Preferred Stock
then outstanding.
h. NO IMPAIRMENT. This Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by this
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 6 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment.
Page 105 of 148
i. NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon conversion of
the Preferred Stock, and the number of shares of Common Stock to be issued shall
be rounded to the nearest whole share.
(ii) Upon the occurrence of each adjustment or readjustment
of the number of shares of Common Stock into which the Preferred Stock can be
converted pursuant to this Section 6, this Corporation, at its expense, shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. This Corporation shall,
upon the written request at any time of any holder of Preferred Stock, furnish
or cause to be furnished to such holder a like certificate setting forth (A)
such adjustment and readjustment, (B) the conversion price at the time in
effect, and (C) the number of shares of Common Stock and the amount, if any, of
other property which at the time would be received upon the conversion of the
Preferred Stock.
j. NOTICES OF RECORD DATE. In the event of the establishment by
this Corporation of a date of record for the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to receive
any dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Preferred Stock, at least ten (10) days prior to
the date specified therein, a notice specifying the date on which any such
record date is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
k. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
Preferred Stock such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of the
Preferred Stock; and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all the then
outstanding Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
l. UNPAID DIVIDENDS. Any dividends that are declared but unpaid
on the Preferred Stock immediately prior to conversion shall be paid upon such
conversion. Such payment shall be made in cash out of assets of the Corporation
legally available therefor.
m. NOTICES. Any notice required by the provisions of this Section
6 to be given to the holders of Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of the Corporation.
Page 106 of 148
7. VOTING RIGHTS.
a. VOTING. Each holder of shares of Preferred Stock shall be entitled
to the number of votes equal to the number of shares of Common Stock into which
such shares of Preferred Stock could then be converted and shall have voting
rights and powers equal to the voting rights and powers of the Common Stock
(except as otherwise expressly provided herein or as required by law, voting
together with the Common Stock as a single class) and shall be entitled to
notice of any stockholders' meeting in accordance with the Bylaws of the
Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward). Each holder of Common Stock shall be entitled to one (1) vote
for each share of Common Stock held.
b. BOARD SEATS. The Board of Directors shall be comprised of five (5)
directors, three (3) of which shall be elected by the holders of the Series C
Preferred Stock (the "SERIES C DIRECTORS"), and two (2) of which shall be
elected by the holders of Common Stock and Preferred Stock voting together as a
single class.
c. VACANCY. In the case of any vacancy in the office of the director
to be elected pursuant to Section 7(b) the holders of the class or series of
capital stock entitled to elect such director shall, by affirmative vote of the
holders of a majority of such class or series then outstanding, elect a
successor to hold the office for the unexpired term of the director whose place
shall be vacant. Any director who shall have been elected pursuant to Section
7(b) may be removed, whether with or without cause, only by the affirmative vote
of the holders of a majority of the class or series of capital stock entitled to
elect such director.
8. STATUS OF CONVERTED STOCK. If any Preferred Stock shall be converted
pursuant to Section 6 hereof, the shares so converted shall be promptly canceled
after the conversion thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
9. ADDITIONAL RIGHTS. In the event that any senior equity security is
granted rights which the Preferred Stock does not have, including, but not
limited to redemption rights, the Preferred Stock shall receive such rights;
provided; however, that such rights shall be pari-passu to those of such senior
security.
THIRD: The authorized number of shares of Preferred Stock of the Corporation
is 5,000,000 and the number of shares of the Series C Preferred, none of which
has been issued, is 5,000,000.
[Signatures on next page]
Page 107 of 148
IN WITNESS WHEREOF, Options Talent Group has caused executed this Certificate of
Designations, Powers, Preferences and Rights to be signed by Xxxx Xxxxxx and
Xxxxxxx Xxxxx, the President and Secretary, respectively, as of this 29 day of
January 2002.
OPTIONS TALENT GROUP,
a Nevada corporation
/S/ Xxxx Xxxxxx
---------------
Name: Xxxx Xxxxxx
Title: President
/S/ Xxxxxxx Xxxxx
-----------------
Name: Xxxxxxx Xxxxx
Title: Secretary
STATE OF California )
) ss.:
COUNTY OF Los Angeles )
The foregoing instrument was acknowledged before me this 29 day of January, in
the year 2002 by Xxxx Xxxxxx and Xxxxxxx Xxxxx, the President and Secretary,
respectively, of Options Talent Group, a Nevada corporation, on behalf of the
corporation. They are personally known to me or have produced a drivers license
as identification.
NOTARY SEAL Notary: /S/ Xxxxxxxxx Xxxxx
Print Name: Xxxxxxxxx Xxxxx
Notary Public, State of California
My commission expires: July 29, 2003
Page 108 of 148
CERTIFICATE OF WITHDRAWAL OF DESIGNATION
OF THE
SERIES A CONVERTIBLE PREFERRED STOCK
(PAR VALUE $0.001 PER SHARE)
OF
OPTIONS TALENT GROUP
------------------------------------------------
Pursuant to Section 78.1955 of the Nevada Revised Statutes
------------------------------------------------
FIRST: The name of the Corporation is Options Talent Group, a Nevada
corporation (the "Corporation").
SECOND: The Certificate of Designation for the Series A Convertible Preferred
Stock, par value $0.001 per share (the "Series A Preferred Stock"), of the
Corporation was originally filled with the Nevada Secretary of State on December
23, 1997, under the name Sector Communications, Inc., and amended on March 2,
1998, and further amended on August 15, 2000.
THIRD: There are currently Five Hundred and Fifty (550) shares of Series A
Preferred Stock authorized.
FOURTH: There are no shares of Series A Preferred Stock currently issued and
outstanding.
FIFTH: Pursuant to this Certificate of Withdrawal, the designation of the
Series A Preferred Stock is hereby withdrawn.
SIXTH: The foregoing withdrawal was effected pursuant to a resolution of the
Board of Directors of the Corporation, adopted by unanimous written consent.
SEVENTH: No approval of the aforesaid withdrawal by any of the stockholders
of the Corporation is required.
EIGHTH: There is no provision in the Articles of Incorporation of the
Corporation, as amended, prohibiting the procedure hereinbefore described.
NINTH: The withdrawal herein certified is effective on the filing of this
certificate in the Office of the Secretary of State of Nevada.
[SIGNATURES ON NEXT PAGE]
Page 109 of 148
IN WITNESS WHEREOF, Options Talent Group has caused this Certificate of
Withdrawal of Designation of the Series A Convertible Preferred Stock to be
signed by Xxxx Xxxxxx and Xxxxxxx Xxxxx, its President and Secretary,
respectively, as of this 6th day of February, 2002.
OPTIONS TALENT GROUP,
a Nevada corporation
/S/ Xxxx Xxxxxx
---------------
Name: Xxxx Xxxxxx
Title: President
/S/ Xxxxxxx Xxxxx
-----------------
Name: Xxxxxxx Xxxxx
Title: Secretary
STATE OF California )
) s.s:
COUNTY OF Los Angeles )
The foregoing instrument was acknowledged before me this 6th day of February, in
the year 2002 by Xxxx Xxxxxx and Xxxxxxx Xxxxx, the President and Secretary,
respectively, of Options Talent Group, a Nevada corporation, on behalf of the
corporation. They are personally known to me or have produced a drivers license
as identification.
NOTARY SEAL Notary: /S/ Xxxxxxxxx Xxxxx
Print Name: Xxxxxxxxx Xxxxx
Notary Public, State of California
My commission expires: July 29, 2003
Page 110 of 148
EXHIBIT G
[PRINCE, XXXXX & XXXXXXXXXX LETTERHEAD]
[FORM OF OPINION OF SECTOR LEGAL COUNSEL]
Definitions not defined herein shall have the meanings given to them in the
Agreement.
1. Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada and has all requisite corporate
power and authority to own, lease and operate its properties and to conduct its
business as presently being conducted. Buyer is duly qualified to transact
business and is in good standing as a foreign corporation in each jurisdiction
where the character of its properties or nature of its business requires it to
be so qualified. Acquisition Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
2. The authorized capital stock of Buyer consists solely of 500,000,000
shares of common stock, par value $0.001 per share and 5,000,000 shares of
preferred stock, par value $0.001 per share, of which 5,000,000 shares have been
designated Series C Convertible Preferred Stock. Immediately prior to the
Closing, there were 79,954,928 shares of common stock and no shares of preferred
stock issued and outstanding. The authorized capital of Acquisition Sub consists
solely of 1,000 shares of common stock, par value $0.001 per share, all of which
are issued and outstanding and owned and held by Buyer. Buyer has authorized and
reserved for issuance upon conversion of the Series C Convertible Preferred
Stock an adequate number of shares of its Common Stock, and the Common Stock
issuable upon such conversion will be, when issued in accordance with the
Articles of Incorporation, as amended (including the Certificate of Designation
with respect to the Series C Convertible Preferred Stock, duly authorized,
validly issued, fully paid and non-assessable. All of such outstanding shares of
Buyer's capital stock have been duly authorized, validly issued and are fully
paid and nonassessable, with no personal liability attaching to the ownership
thereof and have not been issued in violation of any preemptive rights arising
under law or pursuant to Buyer's Articles of Incorporation, or any applicable
Securities Laws. Except as set forth on Schedule 4.05(a), to the best our
knowledge, there are no outstanding subscriptions, options, convertible
securities, rights (preemptive or otherwise), warrants, calls or agreement
relating to any shares of capital stock of Buyer.
3. The shares of common stock and Series C Convertible Preferred Stock to
be issued by Buyer pursuant to the Agreement have been duly authorized and, when
issued and delivered in the manner contemplated by the Agreement, will be
validly issued, fully paid and non-assessable, and free of preemptive rights
arising under law or pursuant to Buyer's Articles of Incorporation, rights of
first refusal or similar rights.
4. Buyer and Acquisition Sub each have all requisite corporate power and
authority to execute and deliver the Agreement and the Collateral Agreements and
to perform their respective obligations thereunder. The execution, delivery and
performance of the Agreement and the Collateral Agreements by Buyer and
Acquisition Sub and the consummation by Buyer and Acquisition Sub of the
transactions contemplated thereby have been duly authorized by all requisite
corporate action on the part of Buyer and Acquisition Sub.
5. The Agreement has been duly and validly executed and delivered by Buyer
and Acquisition Sub and (assuming the due authorization, execution and delivery
thereof by the other parties thereto) constitutes the legal, valid and binding
obligation of Buyer and Acquisition Sub, enforceable against each of them in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, conservatorship, moratorium and similar
laws affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (irrespective of whether
enforcement is sought in a proceeding at law or in equity).
6. Except as set forth on Schedule 4.03 of the Agreement, the execution and
delivery by Buyer and Acquisition Sub of the Agreement, and the performance by
Buyer and Acquisition Sub of their respective obligations thereunder will not:
(i) violate or conflict with any of the terms, conditions or provisions of the
articles of incorporation or bylaws of Buyer or certificate of incorporation or
bylaws of Acquisition, each as presently in effect, (ii) violate any Legal
Requirements applicable to Buyer or Acquisition Sub, (iii) violate, conflict
with, result in a breach of, constitute a default under (whether with or without
notice or the lapse of time or both), or accelerate or permit the acceleration
of the performance required by, or give any other party the right to terminate,
any contract or Permit applicable to Buyer or Acquisition Sub, (iv) result in
the creation of any lien, charge or other encumbrance on any Property of Buyer
or Acquisition Sub, or (v) require Buyer or Acquisition Sub to obtain or make
any waiver, consent, action, approval or authorization of, or registration,
declaration, notice or filing with, any private non-governmental third party or
any Governmental Authority.
7. To our knowledge, there is no suit, action or other proceeding pending
or threatened before any Governmental Authority seeking to restrain Buyer or
Acquisition Sub or prohibit either of them from entering into the Agreement or
prohibit the Closing, or seeking Damages against Buyer or Acquisition Sub or
their respective Properties as a result of consummation of the Agreement.
8. The Merger will be a "reorganization" for federal income tax purposes
within the meaning of Section 368(a) of the Internal Revenue Code of the United
States.
9. Buyer, Acquisition Sub and the Company will each be a party to the
reorganization within the meaning of Section 368(b) of the Internal Revenue Code
of the United States.
10. No gain or loss will be recognized for federal income tax purposes by
the Company or by the stockholders of the Company to the extent they receive
Buyer stock in exchange for Company stock.
11. The opinions previously expressed are further subject to the following
limitations and qualifications:
a. I have assumed the authenticity of any documents and instruments
submitted to me as originals and conformity to the originals of any document or
instrument submitted to me as a copy and the genuineness of all signatures.
b. My opinion is based upon the current law as of the date hereof and
are subject to any change in such law, including judicial and administrative
interpretations which may be reported or occur subsequent to the date hereof.
c. The phrase "to my knowledge" contained herein means to my
actual knowledge.
d. No opinion is given as to any environmental, land use, or zoning
law, rule or regulation.
e. Except with regard to the transaction documents, no opinion is
given as to any of the company assets, liability or business contacts
notwithstanding anything to the contrary entered above in this opinion.
f. Other than where required by compulsory process, this opinion is
not to be filed with any governmental agency or other person without my prior
written consent. Other than the governmental agency or other person without my
prior written consent. Other than the addressee of this opinion letter, no one
is entitled to rely upon this opinion.
g. Definitions not defined herein shall have the meanings given to
them in the Agreement.
Sincerely,
/S/ Xxxx X. Xxx Xxxxxxx
---------------------------------
Xxxx X. Xxx Xxxxxxx
Page 111 of 148
EXHIBIT H
AGREEMENT AND PLAN OF MERGER
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (this "AGREEMENT") is made and entered into as
of January 14, 2002 by and among (i) Sector Communications, Inc., a Nevada
corporation (the "COMPANY"), and (ii) the stockholders of the Company identified
on the signature page hereto and any person who subsequently acquires Shares who
becomes a party to this Agreement (each a "STOCKHOLDER" and collectively the
"STOCKHOLDERS").
RECITALS
A. Pursuant to that certain Agreement and Plan of Merger, dated January 14,
2002, by and among the Company, eModel, Inc., a Delaware corporation ("EMODEL"),
and the other parties named therein (the "MERGER AGREEMENT"), the shareholders
of eModel have become stockholders of the Company.
B. This Agreement is being entered into as a condition of the Merger
Agreement.
C. In connection with the consummation of the Merger and the other
transactions contemplated by the Merger Agreement, the Stockholders have agreed
to provide for the future voting of their shares of the Common Stock and
Preferred Stock (each as defined in Section 1) and for the restrictions on such
shares.
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS.
(a) The term "COMMON STOCK" means the common stock, par value $0.001
per share of the Company.
(b) The term "PERSON" means an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization.
(c) The term "PREFERRED STOCK" means the Company's Series C
Convertible Preferred Stock issued pursuant to the Merger Agreement.
(d) The term "SHARES" means the Common Stock and Preferred Stock held
or beneficially owned by a Stockholder, and (i) any Shares resulting from any
subdivision of Shares, (ii) any Shares paid as a dividend with respect to
Shares, and (iii) any other securities issuable with respect to Shares without
consideration or into which Shares are transformed as the result of a merger,
consolidation, or recapitalization.
e) The term "TRANSFER" shall mean any sale, assignment, bequest,
donation, pledge, encumbrance, or other transfer of Shares, including any
transfer by operation of law, and "TRANSFEREE" shall mean a person who
subsequently acquires Shares from any Stockholder (excluding Jefferson Trust).
2. RESTRICTIONS ON TRANSFER OF HADID SHARES.
(a) Xxxxxxx Xxxxx, Xxxxx Capital, Ltd., a British Virgin Islands
corporation, Fortune Multimedia, Ltd., a British Virgin Islands corporation, and
Homesite Capital, Ltd., a British Virgin Islands corporation (collectively, the
"HADID GROUP") shall not Transfer any Shares except as permitted by this
Agreement, and any Transfer that does not comply with this Agreement shall be
void. The Company shall not recognize as a stockholder of the Company any person
who has acquired Shares from any of the Hadid Group other than as provided for
in this Agreement (including, without limitation, a pledgee or secured party),
shall not issue dividends to any such person, and shall not permit any such
person to vote any such Shares.
Page 112 of 148
(b) Any of the Hadid Group may Transfer Shares, subject to applicable
federal and state securities laws, at anytime if prior to such Transfer each of
The Jefferson Trust ("JEFFERSON TRUST"), The Paramount Trust ("PARAMOUNT
TRUST"), The Xxxxxx Trust ("XXXXXX TRUST") and Xxxxxxx X. Walk either (i) do not
hold or beneficially own any Shares or (ii) have sold some or their respective
Shares with gross individual proceeds of at least $5,000,000; provided, however,
for so long as Jefferson Trust holds or beneficially owns Shares, any person who
has acquired Shares from any of the Hadid Group shall be required to become a
party to this Agreement as a Stockholder and member of the Proxy Group (defined
below).
3. IRREVOCABLE PROXY; VOTING AGREEMENT OR TRUST; BOARD OF DIRECTORS.
(a) Proxy. Subject to Section 3(d), each of the Hadid Group and
the other stockholders of the Company who become a party hereto pursuant to
Section 3(c) (collectively, the "PROXY GROUP") hereby grant each of Jefferson
Trust, Paramount Trust and Xxxxxx Trust (each, a "TRUST" and collectively, the
"TRUSTS") a separate irrevocable proxy coupled with an interest with respect to
each of the Proxy Group's respective Shares, apportioned in whole shares as
equal as practicable among the Trusts, and do hereby constitute, appoint and
authorize each of the Trusts as proxy with full powers of substitution to act
with respect to such Shares (i) in connection with votes to be cast at any
annual or special meeting of the Company's stockholders and (ii) all consents to
be provided with respect to any action of the Company's stockholders by written
consent. Each of the Proxy Group hereby agree to execute such additional
instruments and take such other actions as Jefferson Trust may reasonably
request in order to affirm, perfect, or otherwise ensure the validity and
enforceability of the proxies granted hereby, including, without limitation, the
amendment of this Agreement and/or the execution of a new proxy in the event the
Company changes its jurisdiction of incorporation.
(b) VOTING TRUST OR AGREEMENT. Upon notice from any of the Trusts that
it has reasonably determined that the proxies granted in Section 3(a) are or
will be unenforceable or invalid in any respect for any reason, each of the
Proxy Group hereby agree to promptly enter into a voting agreement or voting
trust providing the Trusts with substantially the same degree of voting power or
control of the Shares as contemplated by the proxies granted in Section 3(a).
(c) TRANSFEREES OF SHARES. Any Transfer of Shares shall not be
effective until the Transferee thereof has become a party to this Agreement. The
term "Proxy Group" shall be deemed to include any Transferees who become a party
to this Agreement.
(d) TERMINATION OF PROXY. The proxies granted in Section 3(a) shall
terminate with respect to a Trust upon the earlier to occur of the date that
such Trust no longer holds or beneficially owns any Shares or seven (7) years
from the date hereof. Upon termination of proxies with respect to a Trust, the
proxies granted by Section 3(a) shall be apportioned among the remaining Trusts.
(e) BOARD OF DIRECTORS. The Certificate of Designation for the
Preferred Stock provides that the holders of the Preferred Stock shall be
entitled to elect three (3) (each a "SERIES C DIRECTOR") of the five (5) members
of the Company's Board of Directors. The Trusts agree hereby to each designate
one (1) Series C Director, and the Trusts agree to vote their Shares and the
proxies granted to them by the Proxy Group hereby for each Series C Director so
designated. From and after the time that a Trust shall dispose of or otherwise
sell of its Preferred Stock, such Trust shall no longer have the right to
designate a Series C Director and the remaining Trusts shall apportion the right
to designate a Series C Director as equal as possible.
Page 113 of 148
4. LEGEND.
(a) Concurrently with the execution of this Agreement, there shall be
imprinted or otherwise placed, on certificates representing Shares held or
beneficially owned by each of the Hadid Group (the "Hadid Group Legend"): "THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A STOCKHOLDERS' AGREEMENT WHICH PLACES CERTAIN RESTRICTIONS ON THE
TRANSFER AND VOTING OF THE SHARES REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY
INTEREST IN SUCH SHARES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY
ALL THE PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH VOTING AGREEMENT WILL BE
FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN
REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS."
(b) Concurrently with the execution of this Agreement, there shall be
imprinted or otherwise placed, on certificates representing Shares held or
beneficially owned by each of the Proxy Group but excluding the Hadid Group (the
"Proxy Group Legend"):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A STOCKHOLDERS' AGREEMENT WHICH PLACES CERTAIN RESTRICTIONS ON THE
VOTING OF THE SHARES REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN
SUCH SHARES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE
PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH VOTING AGREEMENT WILL BE FURNISHED
TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO
THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS."
(c) The Company agrees that, during the term of this Agreement, it
will not remove, and will not permit to be removed (upon registration of,
transfer, reissuance of otherwise), the Hadid Group Legend or the Proxy Group
Legend from any such certificate and will place or cause to be placed the Proxy
Group Legend on any new certificate issued to represent Shares theretofore
represented by a certificate carrying either the Hadid Group Legend or the Proxy
Group Legend.
5. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
(b) GOVERNING LAW; ARBITRATION.
(i) This Agreement shall be governed by and construed under the
laws of the State of Nevada without regard to conflict of law provisions
thereunder.
(ii) Subject to Section 5(b)(iii), each party hereby stipulates
and agrees that any and all disputes, controversies or claims arising out of or
relating to this Agreement shall be resolved exclusively and conclusively by
binding arbitration in accordance with the rules of the American Arbitration
Association. The parties stipulate and agree that such arbitration shall be held
in Orlando, Florida. Any award or decision as a result of such arbitration shall
be final and binding upon the parties, shall not be subject to appeal and shall
be enforceable by entry of a judgment by any court of competent jurisdiction.
Page 114 of 148
(iii) SPECIFIC PERFORMANCE. The parties hereto hereby declare
that it is impossible to measure in money the damages which will accrue to a
party hereto or to his or its successors or assigns by reason of a failure to
perform any of the obligations under this Agreement and agree that the terms of
this Agreement shall be specifically enforceable. If any party hereto or his or
its successors or assigns institutes any action or proceeding to specifically
enforce the provisions hereof, any person against whom such action or proceeding
is brought hereby waives the claim or defense therein that such party or such
personal representative has an adequate remedy at law, and such person shall not
offer in any such action or proceeding the claim or defense that such remedy at
law exists.
(c) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(d) TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(e) NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
delivery by recognized overnight courier service, or upon deposit with the
United States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature pages hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.
(f) EXPENSES. If any action at law or in equity or through arbitration
is necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
(g) AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of Jefferson Trust, Paramount Trust and Xxxxxx Trust
and, solely with respect to amendments or waivers affecting the terms and
conditions of Section 2, Xxxxxxx X. Walk, to the extent they hold or
beneficially own any Shares. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each party hereto.
(h) SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
(i) ENTIRE AGREEMENT. This Agreement (including the Exhibits hereto,
if any) constitutes the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
[Signatures on Following Pages]
Page 115 of 148
IN WITNESS WHEREOF, the parties have executed this Stockholders' Agreement
as of the date first above written.
COMPANY: SECTOR COMMUNICATIONS, INC.,
a Nevada corporation
By: /S/ Xxxxxxx Xxxxx
---------------------
Name: Xxxxxxx Xxxxx
Title: Chairman of the Board
0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Xxxx Xxxxxx
c/o Sector Communications, Inc.
0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
WITH COPY TO: Xxx Xxxxxxx, XX 00000
STOCKHOLDERS: THE JEFFERSON TRUST
By: /S/ Xxxx X. Xxxxxxx
-----------------------
Name: Xxxx X. Xxxxxxx
Title: Trustee
c/o Federal News Service
000 Xxxxxxxx Xxxxx Xxxxxxxx
Xxxxxxxxxx, X.X. 00000
XXXXXXX XXXXX
/S/ Xxxxxxx Xxxxx
-----------------
Xxxxxxx Xxxxx
c/o Sector Communications, Inc.
0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
THE PARAMOUNT TRUST
By: /S/ Rafiah Kashmiri
-----------------------
Name: Rafiah Kashmiri
Title: Trustee
00000 Xxxxx Xxxx Xxxxx
Xxxxxxxxx, Xxxxxxx 00000
Page 116 of 148
THE XXXXXX TRUST
By: /S/ Xxxxxx Xxxx
-------------------
Name: Xxxxxx Xxxx
Title: Trustee
c/o eModel, Inc.
0000 Xxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
GRAYE CAPITAL, LTD.,
a British Virgin Islands corporation
By: /S/ Xxxxxxx Xxxxx
---------------------
Name: Xxxxxxx Xxxxx
Title:
x/x Xxxxxx Xxxxxxxxxxxxxx, Inc.
0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
Xxx Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
FORTUNE MULTIMEDIA, LTD.,
a British Virgin Islands corporation
By: /S/ Xxxxxxx Xxxxx
---------------------
Name: Xxxxxxx Xxxxx
Title: As Authorized
c/o Sector Communications, Inc.
0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
Xxx Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
HOMESITE CAPITAL, LTD.,
a British Virgin Islands corporation
By: /S/ Xxxxxxx Xxxxx
---------------------
Name: Xxxxxxx Xxxxx
Title: As Authorized
c/o Sector Communications, Inc.
0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
Xxx Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Page 117 of 148
XXXXXXX X. WALK
By: /S/ Xxxxxxx X. Walk
-----------------------
0000 Xxxxxxxxxxx Xxxxx
Xxx. 0X
Xxxxxxxx Xxxx, XX 00000
EXHIBIT I
INDEMNIFICATION, REIMBURSEMENT
AND SECURITY AGREEMENT
THIS INDEMNIFICATION, REIMBURSEMENT AND SECURITY AGREEMENT (this
"Agreement"), dated as of January 14, 2002 between Sector Communications, Inc.,
a Nevada corporation (the "Company"), eModel, Inc., a Delaware corporation
(hereinafter together with any predecessor entities, the "Subsidiary" and
together with the Company, the "Debtors") and Xxxxxx X. Xxxxxxx, a resident of
the Commonwealth of Virginia (the " Secured Party").
WHEREAS, the Secured Party has previously executed and delivered those
certain guaranties listed on Exhibit A attached hereto (the "Guaranties")
pursuant to which the Secured Party has guaranteed the payment and/or
performance of certain obligations of the Debtors (the "Guaranteed Agreements")
to third party lenders, lessors and other creditors identified in the
Guaranties; and
WHEREAS, it is a condition precedent to the Secured Party's consenting to
that certain Agreement and Plan of Merger dated January 14, 2002, by and among
the Debtors, the Company, Sector Communications Delaware, Inc., a Delaware
corporation, and Xxxxxxx Xxxxx (the "Merger Agreement"), and in consideration of
Secured Party's relinquishing certain voting control of the Debtors, that the
Debtors agree to indemnify, hold harmless and reimburse the Secured Party with
respect to any amounts paid from time to time by the Secured Party under the
Guaranties, and that the Debtors secure their obligations to the Secured Party
by granting a security interest to the Secured Party in the collateral more
particularly described in this Agreement; and
WHEREAS, the Debtors have benefited and will continue to benefit from the
Guaranties by inducing third party lenders, lessors and other creditors to
extend credit to the Debtors as set forth in the Guaranteed Agreements in
reliance on the Guaranties, which extensions of credit would not have been
available to the Debtors if the Secured Party had not issued the Guaranties, and
the Debtors desire to induce the Secured Party to consent to the Merger
Agreement and relinquish voting control of the Debtors notwithstanding that the
Secured Party shall remain contingently liable under the Guaranties to said
creditors of the Debtors after consummation of the transaction contemplated in
the Merger Agreement.
NOW, THEREFORE, in consideration of the Guaranties and the promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Debtors hereby agree that the
foregoing recitals are true and correct, and the Debtors hereby jointly and
severally unconditionally and absolutely agree to INDEMNIFY, REIMBURSE,
EXONERATE, DEFEND AND HOLD THE SECURED PARTY HARMLESS from and against any and
all indebtedness, damages, costs, expenses, obligations and liabilities of every
kind and nature, whether now existing or hereunder created or arising, whether
direct or indirect, absolute or contingent, which Secured Party pays or incurs
under the Guaranties with respect to the Guaranteed Agreements, including court
costs and reasonable attorney's fees which Secured Party pays or incurs in
connection therewith, together with interest on any such amounts paid or
incurred by the Secured Party pursuant to the Guaranties as hereinafter
provided, all on the terms and conditions set forth in this Agreement.
Page 118 of 148
1. DEFINITIONS.
The term "State", as used herein, means the Commonwealth of Virginia. All terms
defined in the Uniform Commercial Code of the State and used herein shall have
the same definitions herein as specified therein. However, if a term is defined
in Article 9 of the Uniform Commercial Code of the State differently than in
another Article of the Uniform Commercial Code of the State, the term has the
meaning specified in Article 9. The term "Obligations", as used herein, means
all of the indebtedness, obligations and liabilities of the Debtors to the
Secured Party, individually or collectively, whether direct or indirect, joint
or several, absolute or contingent, due or to become due, now existing or
hereafter arising, under or in respect of this Agreement or at common law,
including without limitation the indemnity and reimbursement obligations of the
Debtors to the Secured Party described herein. The term "Default", as used
herein, means the failure of the Debtors to pay or perform any of the
Obligations as and when due to be paid or performed.
2. GRANT OF SECURITY INTEREST.
The Debtors hereby grant to the Secured Party, to secure the payment and
performance in full of all of the Obligations, a security interest in and so
pledges and assigns to the Secured Party the following properties, assets and
rights of the Debtor, wherever located, whether now owned or hereafter acquired
or arising, and all proceeds and products thereof (all of the same being
hereinafter called the "Collateral"): all personal and fixture property of every
kind and nature including without limitation all goods (including inventory,
equipment and any accessions thereto), instruments (including promissory notes),
documents, accounts (including health-care-insurance receivables), chattel paper
(whether tangible or electronic), deposit accounts, letter-of-credit rights
(whether or not the letter of credit is evidenced by a writing), commercial tort
claims, securities and all other investment property, supporting obligations,
any other contract rights or rights to the payment of money, insurance claims
and proceeds, and all general intangibles (including the Debtors' database of
models (the "Database") and all payment intangibles). The Secured Party
acknowledges that the attachment of its security interest in any commercial tort
claim as original collateral is subject to the Debtors' compliance with Sec.4.7.
3. AUTHORIZATION TO FILE FINANCING STATEMENTS.
The Debtors hereby irrevocably authorize the Secured Party at any time and from
time to time to file in any filing office in any Uniform Commercial Code
jurisdiction any initial financing statements and amendments thereto that (a)
indicate the Collateral (i) as all assets of the Debtors or words of similar
effect, regardless of whether any particular asset comprised in the Collateral
falls within the scope of Article 9 of the Uniform Commercial Code of the State
or such jurisdiction, or (ii) as being of an equal or lesser scope or with
greater detail, and (b) provide any other information required by part 5 of
Article 9 of the Uniform Commercial Code of the State, or such other
jurisdiction, for the sufficiency or filing office acceptance of any financing
statement or amendment, including (i) whether any of the Debtors is an
organization, the type of organization and any organizational identification
number issued to the Debtors and, (ii) in the case of a financing statement
filed as a fixture filing or indicating Collateral as as-extracted collateral or
timber to be cut, a sufficient description of real property to which the
Collateral relates. The Debtors agree to furnish any such information to the
Secured Party promptly upon the Secured Party's request.
Page 119 of 148
4. OTHER ACTIONS.
To further the attachment, perfection and first priority of, and the ability of
the Secured Party to enforce, the Secured Party's security interest in the
Collateral, and without limitation on the Debtors' other obligations in this
Agreement, the Debtors agree, in each case at the Debtors' expense, to take the
following actions with respect to the following Collateral:
4.1. PROMISSORY NOTES AND TANGIBLE CHATTEL PAPER. If the Debtors shall
at any time hold or acquire any promissory notes or tangible chattel paper, the
Debtors shall forthwith endorse, assign and deliver the same to the Secured
Party, accompanied by such instruments of transfer or assignment duly executed
in blank as the Secured Party may from time to time specify.
4.2. DEPOSIT ACCOUNTS. For each deposit account that the Debtors at
any time open or maintain, the Debtors shall, at the Secured Party's request and
option, pursuant to an agreement in form and substance satisfactory to the
Secured Party, cause the depositary bank to comply at any time with instructions
from the Secured Party to such depositary bank directing the disposition of
funds from time to time credited to such deposit account, without further
consent of the Debtors. The Secured Party agrees with the Debtors that the
Secured Party shall not give any such instructions or withhold any withdrawal
rights from the Debtors, unless Default has occurred. The provisions of this
paragraph shall not apply to (i) any deposit account for which the Debtors, the
depositary bank and the Secured Party have entered into a cash collateral
agreement specially negotiated among the Debtors, the depositary bank and the
Secured Party for the specific purpose set forth therein, (ii) a deposit account
for which the Secured Party is the depositary bank and is in automatic control,
and (iii) deposit accounts specially and exclusively used for payroll, payroll
taxes and other employee wage and benefit payments to or for the benefit of the
Debtors' salaried employees.
4.3. INVESTMENT PROPERTY. If the Debtors shall at any time hold or
acquire any certificated securities, the Debtors shall forthwith endorse, assign
and deliver the same to the Secured Party, accompanied by such instruments of
transfer or assignment duly executed in blank as the Secured Party may from time
to time specify. If any securities now or hereafter acquired by the Debtors are
uncertificated and are issued to the Debtors or their nominee directly by the
issuer thereof, the Debtors shall immediately notify the Secured Party thereof
and, at the Secured Party's request and option, pursuant to an agreement in form
and substance satisfactory to the Secured Party, either (a) cause the issuer to
agree to comply with instructions from the Secured Party as to such securities,
without further consent of the Debtors or such nominee, or (b) arrange for the
Secured Party to become the registered owner of the securities. If any
Page 120 of 148
securities, whether certificated or uncertificated, or other investment property
now or hereafter acquired by the Debtors are held by the Debtors or their
nominee through a securities intermediary or commodity intermediary, the Debtors
shall immediately notify the Secured Party thereof and, at the Secured Party's
request and option, pursuant to an agreement in form and substance satisfactory
to the Secured Party, either (i) cause such securities intermediary or (as the
case may be) commodity intermediary to agree to comply with entitlement orders
or other instructions from the Secured Party to such securities intermediary as
to such securities or other investment property, or (as the case may be) to
apply any value distributed on account of any commodity contract as directed by
the Secured Party to such commodity intermediary, in each case without further
consent of the Debtors or such nominee, or (ii) in the case of financial assets
or other investment property held through a securities intermediary, arrange for
the Secured Party to become the entitlement holder with respect to such
investment property, with the Debtors being permitted, only with the consent of
the Secured Party, to exercise rights to withdraw or otherwise deal with such
investment property. The Secured Party agrees with the Debtors that the Secured
Party shall not give any such entitlement orders or instructions or directions
to any such issuer, securities intermediary or commodity intermediary, and shall
not withhold its consent to the exercise of any withdrawal or dealing rights by
the Debtors, unless Default has occurred. The provisions of this paragraph shall
not apply to any financial assets credited to a securities account for which the
Secured Party is the securities intermediary.
4.4. COLLATERAL IN THE POSSESSION OF A BAILEE. If any Collateral is at
any time in the possession of a bailee, the Debtors shall promptly notify the
Secured Party thereof and, at the Secured Party's request and option, shall
promptly obtain an acknowledgement from the bailee, in form and substance
satisfactory to the Secured Party, that the bailee holds such Collateral for the
benefit of the Secured Party, and that such bailee agrees to comply, without
further consent of the Debtors, with instructions from the Secured Party as to
such Collateral. The Secured Party agrees with the Debtors that the Secured
Party shall not give any such instructions unless Default has occurred.
4.5. ELECTRONIC CHATTEL PAPER AND TRANSFERABLE RECORDS. If the Debtors
at any time hold or acquire an interest in any electronic chattel paper or any
"transferable record," as that term is defined in Section 201 of the federal
Electronic Signatures in Global and National Commerce Act, or in Sec.16 of the
Uniform Electronic Transactions Act as in effect in any relevant jurisdiction,
the Debtors shall promptly notify the Secured Party thereof and, at the request
and option of the Secured Party, shall take such action as the Secured Party may
reasonably request to vest in the Secured Party control, under Sec.9-105 of the
Uniform Commercial Code, of such electronic chattel paper or control under
Section 201 of the federal Electronic Signatures in Global and National Commerce
Act or, as the case may be, Sec.16 of the Uniform Electronic Transactions Act,
as so in effect in such jurisdiction, of such transferable record. The Secured
Party agrees with the Debtors that the Secured Party will arrange, pursuant to
procedures satisfactory to the Secured Party and so long as such procedures will
not result in the Secured Party's loss of control, for the Debtors to make
alterations to the electronic chattel paper or transferable record permitted
under XXX Xxx.0-000 or, as the case may be, Section 201 of the federal
Electronic Signatures in Global and National Commerce Act or Sec.16 of the
Uniform Electronic Transactions Act for a party in control to make without loss
of control, unless a Default has occurred.
4.6. LETTER-OF-CREDIT RIGHTS. If the Debtors are at any time
beneficiaries under a letter of credit, the Debtors shall promptly notify the
Secured Party thereof and, at the request and option of the Secured Party, the
Debtors shall, pursuant to an agreement in form and substance satisfactory to
the Secured Party, either (i) arrange for the issuer and any confirmer or other
nominated person of such letter of credit to consent to an assignment to the
Secured Party of the proceeds of the letter of credit or (ii) arrange for the
Secured Party to become the transferee beneficiary of the letter of credit, with
the Secured Party agreeing, in each case, that the proceeds of the letter to
credit are to be applied as provided herein.
Page 121 of 148
4.7. COMMERCIAL TORT CLAIMS. If the Debtors shall at any time hold or
acquire a commercial tort claim, the Debtors shall immediately notify the
Secured Party in a writing signed by the Debtors of the particulars thereof and
grant to the Secured Party in such writing a security interest therein and in
the proceeds thereof, all upon the terms of this Agreement, with such writing to
be in form and substance satisfactory to the Secured Party.
4.8. OTHER ACTIONS AS TO ANY AND ALL COLLATERAL. The Debtors further
agree, at the request and option of the Secured Party, to take any and all other
actions the Secured Party may determine to be necessary or useful for the
attachment, perfection and first priority of, and the ability of the Secured
Party to enforce, the Secured Party's security interest in any and all of the
Collateral, including, without limitation, (a) executing, delivering and, where
appropriate, filing financing statements and amendments relating thereto under
the Uniform Commercial Code, to the extent, if any, that the Debtors' signature
thereon is required therefor, (b) causing the Secured Party's name to be noted
as secured party on any certificate of title for a titled good if such notation
is a condition to attachment, perfection or priority of, or ability of the
Secured Party to enforce, the Secured Party's security interest in such
Collateral, (c) complying with any provision of any statute, regulation or
treaty of the United States as to any Collateral if compliance with such
provision is a condition to attachment, perfection or priority of, or ability of
the Secured Party to enforce, the Secured Party's security interest in such
Collateral, (d) obtaining governmental and other third party waivers, consents
and approvals in form and substance satisfactory to Secured Party, including,
without limitation, any consent of any licensor, lessor or other person
obligated on Collateral, (e) obtaining waivers from mortgagees and landlords in
form and substance satisfactory to the Secured Party and (f) taking all actions
under any earlier versions of the Uniform Commercial Code or under any other
law, as reasonably determined by the Secured Party to be applicable in any
relevant Uniform Commercial Code or other jurisdiction, including any foreign
jurisdiction.
5. INDEMNITY.
The Debtors hereby jointly and severally unconditionally and absolutely agree to
indemnify, reimburse, exonerate and hold the Secured Party harmless from and
against any and all indebtedness, damages, costs, expenses, obligations and
liabilities of every kind and nature, whether now existing or hereunder created
or arising, whether direct or indirect, absolute or contingent, which Secured
Party pays or incurs under the Guaranties with respect to the Guaranteed
Agreements, including court costs and reasonable attorney's fees which Secured
Party pays or incurs in connection therewith, together with interest on any such
amounts paid or incurred by the Secured Party pursuant to the Guaranties as
hereinafter provided.
Page 122 of 148
5.1. GUARANTEED AGREEMENTS. Debtors covenant and agree to pay and
perform their liabilities and obligations under the Guaranteed Agreements
promptly as and when the same shall become due thereunder, and Debtors shall not
commit nor permit to occur any default under the provisions of the Guaranteed
Agreements. The Secured Party shall notify the Debtors in writing of any notice
or demand for payment or performance received by the Secured Party under any of
the Guaranties from any creditor thereunder. Any such notice by the Secured
Party shall be given in accordance with Section 9.05 of the Merger Agreement,
and notice to either the Company or Subsidiary shall constitute notice to the
other. Debtors hereby jointly and severally agree that they shall promptly (and
in any event within ten (10) days after such notice from the Secured Party) pay
or perform their respective obligations under the Guaranteed Agreements as to
which payment or performance has been demanded from the Secured Party under the
respective Guaranty(ies). If the Debtors in good faith dispute whether such
payment or performance is in fact due under the Guaranteed Agreements, then the
Debtors may contest the same in accordance with any contest procedures set forth
in the Guaranteed Agreements or applicable law, provided that the Debtors shall
diligently and continuously pursue the contest to resolution, and provided
further that the Debtors shall deposit with the Secured Party within said
ten-day period immediately available funds, or other liquid collateral
acceptable to the Secured Party in his sole discretion, in an amount or having a
value equal to 150% of the amount or value of the disputed payment or
performance as additional security for the Debtors' Obligations hereunder. If
the Debtors' contested obligation is not resolved with the respective creditor
within sixty (60) days after such notice from the Secured Party, or if the
contest is resolved adversely to the Debtors, then the Secured Party shall have
the right to apply such deposited funds (and/or to sell the deposited collateral
and apply the proceeds thereof) against the payment and performance of the
Debtor's obligations under the Guaranteed Agreements that were demanded of the
Secured Party under the respective Guaranty(ies).
5.2. DEFENSE OF CLAIMS. The Debtors jointly and severally agree to
defend and hold the Secured Party harmless against any liability for the payment
or performance of any Guaranteed Agreements pursuant to any of the Guaranties,
including court costs and attorneys fees paid or incurred by the Secured Party
in defending against any claim against the Secured Party by any creditor for any
such payment or performance under any of the Guaranties. The Secured Party may
assent to be defended against any such claim by the Debtors' legal counsel, but
the Secured Party may at any time in his sole discretion engage separate legal
counsel of his own selection to defend the Secured Party against such claims,
but in any event the Secured Party shall have the right to direct the conduct of
his defense, and the payment of all costs of such defense by any counsel shall
be included in the Obligations of the Debtors under this Agreement and shall be
payable upon demand by the Secured Party from time to time.
5.3. REIMBURSEMENT. The Secured Party shall notify the Debtors in
writing of any payment or performance of any Guaranteed Agreement made by the
Secured Party under any of the Guaranties pursuant to any demand by any creditor
thereunder. Any such notice by the Secured Party shall be given in accordance
with Section 9.05 of the Merger Agreement, and notice to either the Company or
Subsidiary shall constitute notice to the other. Debtors hereby jointly and
severally agree that they shall promptly (and in any event within ten (10) days
after such notice from the Secured Party) reimburse the Secured Party for the
full amount of any such payment, or the full amount paid or incurred by the
Secured Party in performing the demanded obligations under the Guaranteed
Agreements, together with interest thereon from the date so paid or incurred by
the Secured Party until the date fully reimbursed by the Debtors at the rate of
seven percent (7%) per annum. All amounts payable hereunder (including such
interest) shall be payable by wire transfer of immediately available funds to an
account designated by the Secured Party or by certified or official bank check
payable to the Secured Party sent to the Secured Party by nationally recognized
overnight courier service at the address of the Secured Party as set forth on
the signature page hereto or such other address as shall be designated in
writing by the Secured Party to the Debtors. All payments shall be applied first
to unpaid interest, next to costs and expenses incurred by the Secured Party,
and thereafter to the principal amount of the Obligations.
Page 123 of 148
5.4. COSTS AND EXPENSES. Debtors agree to pay, upon Secured Party's
demand therefor, any and all costs, fees and expenses (including reasonable
attorney's fees, costs and expenses) incurred by Secured Party (i) in enforcing
any of Secured Party's rights hereunder, and (ii) in representing Secured Party
in any litigation, contest, suit or dispute, or to commence, defend or intervene
or to take any action with respect to any litigation, contest, suit or dispute
(whether instituted by Secured Party, Debtors or any other person) in any way
relating to the Guaranteed Agreements and to the extent not paid the same shall
become part of the Obligations hereunder. Enforcement costs and interest are
included in the "Obligations" and secured by the applicable provisions of this
Agreement.
5.5. UNCONDITIONAL OBLIGATIONS. Debtors' obligations hereunder shall
be unconditional and shall not subject to any defense, setoff, counterclaim or
recoupment whatsoever, irrespective of the genuineness, validity, regularity or
enforceability of the Guaranteed Agreements or the Guaranties or any conduct of
Debtors or the Secured Party which might constitute a legal or equitable
discharge of a surety, guarantor or guaranty.
5.6. RELIANCE. Secured Party may continue to act in reliance on
Debtors' indemnification and hold harmless provisions hereunder, and this
Agreement shall remain in full force and effect with respect to the Obligations
until all amounts to be paid and actions to be performed by Debtors under the
Guaranteed Agreements have been paid and performed in full, or all of the
Guaranties shall have been released in writing by the respective creditors
thereunder. Notwithstanding anything herein to the contrary, Debtors agree that
this Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time payment, or any part thereof, by the Debtors under this
Agreement is set aside, rescinded, or must otherwise be returned by Secured
Party for any reason, including the insolvency, bankruptcy or reorganization of
Debtors or any other person or entity, and this Agreement shall be binding and
enforceable as though such returned or rescinded payment had never been made.
5.7. NO IMPAIRMENT. The liability of Debtors hereunder shall not be
affected or impaired by, and Secured Party is hereby expressly authorized to
make from time to time, without notice to anyone, any sale, pledge, surrender,
compromise, release, renewal, extension, modification or other disposition of or
with respect to the Obligations or this Agreement or any security or collateral
therefor, and such liability shall not be affected or impaired by any acceptance
by Secured Party of any security for, or other guarantors of, the Obligations,
or by any forbearance or indulgence by Secured Party in the collection of or any
failure, neglect or omission on its part to realize upon any collateral or
security therefor, or to enforce any lien upon or right of appropriation of any
monies, credits or property of Debtors in the possession of Secured Party, or by
any application of payments or credits on the Obligations. Any and all monies,
credits or other property belongings to Debtors in the possession or under the
control of Secured Party from time to time may be appropriated and applied
against the liability of Debtors hereunder.
Page 124 of 148
5.8. WAIVERS. Each of the Debtors hereby severally waives presentment,
protest, demand, notice of dishonor or default, notice of acceptance of this
Agreement, notice of any extensions granted or other action taken in reliance
hereon and all demands and notices of any kind in connection with this Agreement
or the Obligations. No delay on the part of Secured Party in the exercise of any
right or remedy shall preclude other or further exercise thereof or the exercise
of any other right or remedy. No action by Secured Party permitted hereunder
shall in any way impair or affect this Agreement. As condition to payment or
performances by Debtors under this Agreement, Secured Party shall not be
required to, and Debtors hereby waive any rights to require Secured Party to,
prosecute or seek to enforce any remedies against any other party liable to
Secured Party on account of the Guaranties, the Guaranteed Agreements or the
Obligations or to require Secured Party to seek to enforce or resort to any
remedies with respect to any security interests, liens or encumbrances granted
to Secured Party by Debtors or any other party on account of the Obligations.
5.9. SUBROGATION. In addition to the other rights and remedies of the
Secured Party hereunder, to the extent that the Secured Party makes any payment
or renders any performance under a Guaranteed Agreement demanded by any creditor
of the Debtors pursuant to any of the Guaranties, the Secured Party shall be
subrogated to the fullest extent provided by applicable law to all claims,
rights and remedies of such creditor against the Debtors in respect of such
Guaranteed Agreement, including any liens or security interests in favor of such
creditor, and the Debtors shall not be released or discharged with respect to
any such claim, right, remedy, lien or security interest until the Debtors shall
have repaid and reimbursed the Secured Party in full for such payment or
performance by the Secured Party in accordance with the provisions of this
Agreement.
6. TERMINATION. Subject to Section 5.6, this Agreement shall terminate when
all amounts to be paid and actions to be performed by Debtors under the
Guaranteed Agreements have been paid and performed in full, or all of the
Guaranties shall have been released in writing by the respective creditors
Thereunder
7. COVENANTS CONCERNING DEBTORS' LEGAL STATUS.
The Debtors covenant with the Secured Party as follows: (a) without
providing at least 30 days prior written notice to the Secured Party, the
Debtors will not change their name, place of business or, if more than one,
chief executive office, or their mailing address or organizational
identification number if they have one, (b) if the Debtors do not have an
organizational identification number and later obtain one, the Debtors shall
forthwith notify the Secured Party of such organizational identification number,
and (c) the Debtors will not change their type of organization, jurisdiction of
organization or other legal structure.
8. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL, ETC.
The Debtors further represent and warrant to the Secured Party as follows:
(a) the Debtors are the owner of the Collateral, free from any right or claim or
any person or any adverse lien, security interest or other encumbrance, except
for the security interest created by this Agreement, (b) none of the Collateral
constitutes, or is the proceeds of, "farm products" as defined in
Sec.9-102(a)(34) of the Uniform Commercial Code of the State, (c) none of the
account debtors or other persons obligated on any of the Collateral is a
governmental authority covered by the Federal Assignment of Claims Act or like
federal, state or local statute or rule in respect of such Collateral, (d) the
Debtors hold no commercial tort claim except as indicated on the Perfection
Certificate, and (e) the Debtors have at all times operated its business in
compliance with all applicable provisions of the federal Fair Labor Standards
Act, as amended, and with all applicable provisions of federal, state and local
statutes and ordinances dealing with the control, shipment, storage or disposal
of hazardous materials or substances, (f) all other information set forth on the
Perfection Certificate pertaining to the Collateral is accurate and complete,
and (g) that there has been no change in any information provided in the
Perfection Certificate since the date on which it was executed by the Debtors.
Page 125 of 148
9. COVENANTS CONCERNING COLLATERAL, ETC.
THE Debtors further covenant with the Secured Party as follows: (a) the
Collateral, to the extent not delivered to the Secured Party pursuant to Sec.4,
will be kept at those locations listed on the Perfection Certificate and the
Debtors will not remove the Collateral from such locations, without providing at
least 30 days prior written notice to the Secured Party, (b) except for the
security interest herein granted, the Debtors shall be the owner of the
Collateral free from any right or claim of any other person, lien, security
interest or other encumbrance, and the Debtors shall defend the same against all
claims and demands of all persons at any time claiming the same or any interests
therein adverse to the Secured Party, (c) the Debtors shall not pledge, mortgage
or create, or suffer to exist any right of any person in or claim by any person
to the Collateral, or any security interest, lien or encumbrance in the
Collateral in favor of any person, other than the Secured Party, (d) the Debtors
will keep the Collateral in good order and repair and will not use the same in
violation of law or any policy of insurance thereon, (e) the Debtors will permit
the Secured Party, or its designee, to inspect the Collateral at any reasonable
time, wherever located, (f) the Debtors will pay promptly when due all taxes,
assessments, governmental charges and levies upon the Collateral or incurred in
connection with the use or operation of such Collateral or incurred in
connection with this Agreement, (g) the Debtors will continue to operate, its
business in compliance with all applicable provisions of the federal Fair Labor
Standards Act, as amended, and with all applicable provisions of federal, state
and local statutes and ordinances dealing with the control, shipment, storage or
disposal of hazardous materials or substances, and (h) the Debtors will not sell
or otherwise dispose, or offer to sell or otherwise dispose, of the Collateral
or any interest therein except for (i) sales of inventory and licenses of
general intangibles other than the Database in the ordinary course of business
and (ii) so long as no Default has occurred, sales or other dispositions of
obsolescent items of equipment consistent with past practices.
10. INSURANCE.
10.1. MAINTENANCE OF INSURANCE. The Debtors will maintain with
financially sound and reputable insurers insurance with respect to its
properties and business against such casualties and contingencies as shall be in
accordance with general practices of businesses engaged in similar activities in
similar geographic areas. Such insurance shall be in such minimum amounts that
the Debtors will not be deemed a co-insurer under applicable insurance laws,
regulations and policies and otherwise shall be in such amounts, contain such
terms, be in such forms and be for such periods as may be reasonably
satisfactory to the Secured Party. In addition, all such insurance shall be
payable to the Secured Party as loss payee. Without limiting the foregoing, the
Debtors will (i) keep all of its physical property insured with casualty or
physical hazard insurance on an "all risks" basis, with broad form flood and
earthquake coverages and electronic data processing coverage, with a full
replacement cost endorsement and an "agreed amount" clause in an amount equal to
100% of the full replacement cost of such property, (ii) maintain all such
workers' compensation or similar insurance as may be required by law and (iii)
maintain, in amounts and with deductibles equal to those generally maintained by
businesses engaged in similar activities in similar geographic areas, general
public liability insurance against claims of bodily injury, death or property
damage occurring, on, in or about the properties of the Debtors; business
interruption insurance; and product liability insurance.
Page 126 of 148
10.2. INSURANCE PROCEEDS. The proceeds of any casualty insurance in
respect of any casualty loss of any of the Collateral shall, subject to the
rights, if any, of other parties with an interest having priority in the
property covered thereby, (i) so long as no Default has occurred, be disbursed
to the Debtors for direct application by the Debtors solely to the repair or
replacement of the Debtors' property so damaged or destroyed and (ii) in all
other circumstances, be held by the Secured Party as cash collateral for the
Obligations. The Secured Party may, at its sole option, disburse from time to
time all or any part of such proceeds so held as cash collateral, upon such
terms and conditions as the Secured Party may reasonably prescribe, for direct
application by the Debtors solely to the repair or replacement of the Debtors'
property so damaged or destroyed, or the Secured Party may apply all or any part
of such proceeds to the Obligations.
10.3. CONTINUATION OF INSURANCE. All policies of insurance shall
provide for at least 60 days prior written cancellation notice to the Secured
Party. In the event of failure by the Debtors to provide and maintain insurance
as herein provided, the Secured Party may, at its option, provide such insurance
and charge the amount thereof to the Debtors. The Debtors shall furnish the
Secured Party with certificates of insurance and policies evidencing compliance
with the foregoing insurance provision.
11. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.
11.1. EXPENSES INCURRED BY SECURED PARTY. In the Secured Party's
discretion, if the Debtors fail to do so, the Secured Party may discharge taxes
and other encumbrances at any time levied or placed on any of the Collateral,
maintain any of the collateral, make repairs thereto and pay any necessary
filing fees or insurance premiums. The Debtors agrees to reimburse the Secured
Party on demand for all expenditures so made. The Secured Party shall have no
obligation to the Debtors to make any such expenditures, nor shall the making
thereof be construed as the waiver or cure of any Default.
11.2. SECURED PARTY'S OBLIGATIONS AND DUTIES. Anything herein to the
contrary notwithstanding, the Debtors shall remain obligated and liable under
each contract or agreement comprised in the Collateral to be observed or
performed by the Debtors thereunder. The Secured Party shall not have any
obligation or liability under any such contract or agreement by reason of or
arising out of this Agreement or the receipt by the Secured Party of any payment
relating to any of the Collateral, nor shall the Secured Party be obligated in
any manner to perform any of the obligations of the Debtors under or pursuant to
any such contract or agreement, to make inquiry as to the nature or sufficiency
of any payment received by the Secured Party in respect of the Collateral or as
to the sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Secured Party or to which the Secured Party may be entitled at
any time or times. The Secured Party's sole duty with respect to the custody,
safe keeping and physical preservation of the Collateral in its possession,
under Sec.9-207 of the Uniform Commercial Code of the State or otherwise, shall
be to deal with such Collateral in the same manner as the Secured Party deals
with similar property for its own account.
Page 127 of 148
12. SECURITIES AND DEPOSITS.
The Secured Party may at any time following a Default, at its option,
transfer to itself or any nominee any securities constituting Collateral,
receive any income thereon and hold such income as additional Collateral or
apply it to the Obligations. Whether or not any Obligations are due, the Secured
Party may following a Default demand, xxx for, collect, or make any settlement
or compromise which it deems desirable with respect to the Collateral.
Regardless of the adequacy of Collateral or any other security for the
Obligations, any deposits or other sums at any time credited by or due from the
Secured Party to the Debtors may at any time be applied to or set off against
any of the Obligations then due and owing.
13. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON
COLLATERAL.
If a Default shall have occurred, the Debtors shall, at the request and
option of the Secured Party, notify account debtors and other persons obligated
on any of the Collateral of the security interest of the Secured Party in any
account, chattel paper, general intangible, instrument or other Collateral and
that payment thereof is to be made directly to the Secured Party or to any
financial institution designated by the Secured Party as the Secured Party's
agent therefor, and the Secured Party may itself, if a Default shall have
occurred without notice to or demand upon the Debtors, so notify account debtors
and other persons obligated on Collateral. After the making of such a request or
the giving of any such notification, the Debtors shall hold any proceeds of
collection of accounts, chattel paper, general intangibles, instruments and
other Collateral received by the Debtors as trustee for the Secured Party
without commingling the same with other funds of the Debtors and shall turn the
same over to the Secured Party in the identical form received, together with any
necessary endorsements or assignments. The Secured Party shall apply the
proceeds of collection of accounts, chattel paper, general intangibles,
instruments and other Collateral received by the Secured Party to the
Obligations, such proceeds to be immediately credited after final payment in
cash or other immediately available funds of the items giving rise to them.
14. POWER OF ATTORNEY.
14.1. APPOINTMENT AND POWERS OF SECURED PARTY. The Debtors hereby
irrevocably constitute and appoint the Secured Party and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorneys-in-fact with full irrevocable power and authority in the place and
stead of the Debtors or in the Secured Party's own name, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and instruments that may be necessary or
useful to accomplish the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives said attorneys the power and right, on
behalf of the Debtors, without notice to or assent by the Debtors, to do the
following:
Page 128 of 148
(a) upon the occurrence of a Default, generally to sell,
transfer, pledge, make any agreement with respect to or otherwise dispose of or
deal with any of the Collateral in such manner as is consistent with the Uniform
Commercial Code of the State and as fully and completely as though the Secured
Party were the absolute owner thereof for all purposes, and to do, at the
Debtors' expense, at any time, or from time to time, all acts and things which
the Secured Party deems necessary or useful to protect, preserve or realize upon
the Collateral and the Secured Party's security interest therein, in order to
effect the intent of this Agreement, all at least as fully and effectively as
the Debtors might do, including, without limitation, (i) the filing and
prosecuting of registration and transfer applications with the appropriate
federal, state, local or other agencies or authorities with respect to
trademarks, copyrights and patentable inventions and processes, (ii) upon
written notice to the Debtors, the exercise of voting rights with respect to
voting securities, which rights may be exercised, if the Secured Party so
elects, with a view to causing the liquidation of assets of the issuer of any
such securities, and (iii) the execution, delivery and recording, in connection
with any sale or other disposition of any Collateral, of the endorsements,
assignments or other instruments of conveyance or transfer with respect to such
Collateral; and
(b) to the extent that the Debtors' authorization given in Sec.3
is not sufficient, to file such financing statements with respect hereto, with
or without the Debtors' signature, or a photocopy of this Agreement in
substitution for a financing statement, as the Secured Party may deem
appropriate and to execute in the Debtors' name such financing statements and
amendments thereto and continuation statements which may require the Debtors'
signature.
14.2. RATIFICATION BY DEBTORS. To the extent permitted by law, the
Debtors hereby ratify all that said attorneys shall lawfully do or cause to be
done by virtue hereof. This power of attorney is a power coupled with an
interest and is irrevocable.
14.3. NO DUTY ON SECURED PARTY. The powers conferred on the Secured
Party hereunder are solely to protect its interests in the Collateral and shall
not impose any duty upon it to exercise any such powers. The Secured Party shall
be accountable only for the amounts that it actually receives as a result of the
exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Debtors for any act or failure
to act, except for the Secured Party's own gross negligence or willful
misconduct.
15. RIGHTS AND REMEDIES.
If Default shall have occurred, the Secured Party, without any other notice
to or demand upon the Debtors have in any jurisdiction in which enforcement
hereof is sought, in addition to all other rights and remedies, the rights and
remedies of a secured party under the Uniform Commercial Code of the State and
any additional rights and remedies which may be provided to a secured party in
any jurisdiction in which Collateral is located, including, without limitation,
the right to take possession of the Collateral, and for that purpose the Secured
Party may, so far as the Debtors can give authority therefor, enter upon any
premises on which the Collateral may be situated and remove the same therefrom.
The Secured Party may in its discretion require the Debtors to assemble all or
any part of the Collateral at such location or locations within the
jurisdiction(s) of the Debtors' principal office(s) or at such other locations
as the Secured Party may reasonably designate. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, the Secured Party shall give to the Debtors at
least five Business Days prior written notice of the time and place of any
public sale of Collateral or of the time after which any private sale or any
other intended disposition is to be made. The Debtors hereby acknowledges that
five Business Days prior written notice of such sale or sales shall be
reasonable notice. In addition, the Debtors waive any and all rights that it may
have to a judicial hearing in advance of the enforcement of any of the Secured
Party's rights and remedies hereunder, including, without limitation, its right
following Default to take immediate possession of the Collateral and to exercise
its rights and remedies with respect thereto.
Page 129 of 148
16. STANDARDS FOR EXERCISING RIGHTS AND REMEDIES.
To the extent that applicable law imposes duties on the Secured Party to
exercise remedies in a commercially reasonable manner, the Debtors acknowledge
and agree that it is not commercially unreasonable for the Secured Party (a) to
fail to incur expenses reasonably deemed significant by the Secured Party to
prepare Collateral for disposition or otherwise to fail to complete raw material
or work in process into finished goods or other finished products for
disposition, (b) to fail to obtain third party consents for access to Collateral
to be disposed of, or to obtain or, if not required by other law, to fail to
obtain governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against account debtors or other persons obligated on Collateral or to
fail to remove liens or encumbrances on or any adverse claims against
Collateral, (d) to exercise collection remedies against account debtors and
other persons obligated on Collateral directly or through the use of collection
agencies and other collection specialists, (e) to advertise dispositions of
Collateral through publications or media of general circulation, whether or not
the Collateral is of a specialized nature, (f) to contact other persons, whether
or not in the same business as the Debtors, for expressions of interest in
acquiring all or any portion of the Collateral, (g) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the collateral is of a specialized nature, (h) to dispose of Collateral by
utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (i) to dispose of assets in
wholesale rather than retail markets, (j) to disclaim disposition warranties,
(k) to purchase insurance or credit enhancements to insure the Secured Party
against risks of loss, collection or disposition of Collateral or to provide to
the Secured Party a guaranteed return from the collection or disposition of
Collateral, or (l) to the extent deemed appropriate by the Secured Party, to
obtain the services of other brokers, investment bankers, consultants and other
professionals to assist the Secured Party in the collection or disposition of
any of the Collateral. The Debtors acknowledge that the purpose of this Sec. 16
is to provide non-exhaustive indications of what actions or omissions by the
Secured Party would fulfill the Secured Party's duties under the Uniform
Commercial Code or other law of the State or any other relevant jurisdiction in
the Secured Party's exercise of remedies against the Collateral and that other
actions or omissions by the Secured Party shall not be deemed to fail to fulfill
such duties solely on account of not being indicated in this Sec. 16. Without
limitation upon the foregoing, nothing contained in this Sec. 16 shall be
construed to grant any rights to the Debtors or to impose any duties on the
Secured Party that would not have been granted or imposed by this Agreement or
by applicable law in the absence of this Sec. 16.
Page 130 of 148
17. NO WAIVER BY SECURED PARTY, ETC.
The Secured Party shall not be deemed to have waived any of its rights or
remedies in respect of the Obligations or the Collateral unless such waiver
shall be in writing and signed by the Secured Party. No delay or omission on the
part of the Secured Party in exercising any right or remedy shall operate as a
waiver of such right or remedy or any other right or remedy. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right or remedy on
any future occasion. All rights and remedies of the Secured Party with respect
to the Obligations or the Collateral, whether evidenced hereby or by any other
instrument or papers, shall be cumulative and may be exercised singularly,
alternatively, successively or concurrently at such time or at such times as the
Secured Party deems expedient.
18. SURETYSHIP WAIVERS BY DEBTORS.
The Debtors waive demand, notice, protest, notice of acceptance of this
Agreement, notice of loans made, credit extended, Collateral received or
delivered or other action taken in reliance hereon and all other demands and
notices of any description. With respect to both the Obligations and the
Collateral, the Debtors assent to any extension or postponement of the time of
payment or any other indulgence, to any substitution, exchange or release of or
failure to perfect any security interest in any Collateral, to the addition or
release of any party or person primarily or secondarily liable, to the
acceptance of partial payment thereon and the settlement, compromising or
adjusting of any thereof, all in such manner and at such time or times as the
Secured Party may deem advisable. The Secured Party shall have no duty as to the
collection or protection of the Collateral or any income therefrom, the
preservation of rights against prior parties, or the preservation of any rights
pertaining thereto beyond the safe custody thereof as set forth in Sec. 11.2.
The Debtors further waive any and all other suretyship defenses.
19. MARSHALLING.
The Secured Party shall not be required to marshal any present or future
collateral security (including but not limited to the Collateral) for, or other
assurances of payment of, the Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular order, and
all of its rights and remedies hereunder and in respect of such collateral
security and other assurances of payment shall be cumulative and in addition to
all other rights and remedies, however existing or arising. To the extent that
it lawfully may, the Debtors hereby agree that it will not invoke any law
relating to the marshalling of collateral which might cause delay in or impede
the enforcement of the Secured Party's rights and remedies under this Agreement
or under any other instrument creating or evidencing any of the Obligations or
under which any of the Obligations is outstanding or by which any of the
Obligations is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, the Debtors hereby irrevocably waive the benefits
of all such laws.
20. PROCEEDS OF DISPOSITIONS; EXPENSES.
The Debtors shall pay to the Secured Party on demand any and all expenses,
including reasonable attorneys' fees and disbursements, incurred or paid by the
Secured Party in protecting, preserving or enforcing the Secured Party's rights
and remedies under or in respect of any of the Obligations or any of the
Collateral. After deducting all of said expenses, the residue of any proceeds of
collection or sale or other disposition of the Collateral shall, to the extent
actually received in cash, be applied to the payment of the Obligations in such
order or preference as the Secured Party may determine proper, allowance and
provision being made for any Obligations not then due. Upon the final payment
and satisfaction in full of all of the Obligations and after making any payments
required by Sections 9-608(a)(1)(C) or 9-615(a)(3) of the Uniform Commercial
Code of the State, any excess shall be returned to the Debtors. In the absence
of final payment and satisfaction in full of all of the Obligations, and the
Debtors shall remain liable for any deficiency.
Page 131 of 148
21. OVERDUE AMOUNTS.
Until paid, all amounts due and payable by the Debtors hereunder shall be a
debt secured by the Collateral and shall bear, whether before or after judgment,
interest at the rate of interest equal to 7% per annum.
22. GOVERNING LAW; CONSENT TO JURISDICTION.
THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE. The
Debtors agree that any action or claim arising out of, or any dispute in
connection with, this Agreement, any rights, remedies, obligations, or duties
hereunder, or the performance or enforcement hereof or thereof, may be brought
in the courts of the State or any federal court sitting therein and consents to
the non-exclusive jurisdiction of such court and to service of process in any
such suit being made upon the Debtors by mail at the address set forth on the
signature page hereto. The Debtors hereby waive any objection that it may now or
hereafter have to the venue of any such suit or any such court or that such suit
is brought in an inconvenient court.
23. WAIVER OF JURY TRIAL.
THE DEBTORS WAIVE THEIR RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR
CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS,
REMEDIES, OBLIGATIONS, OR DUTIES HEREUNDER, OR THE PERFORMANCE OR ENFORCEMENT
HEREOF OR THEREOF. Except as prohibited by law, the Debtors waive any right
which it may have to claim or recover in any litigation referred to in the
preceding sentence any special, exemplary, punitive or consequential damages or
any damages other than, or in addition to, actual damages. The Debtors (i)
certify that neither the Secured Party nor any representative, agent or attorney
of the Secured Party has represented, expressly or otherwise, that the Secured
Party would not, in the event of litigation, seek to enforce the foregoing
waivers or other waivers contained in this Agreement, and (ii) acknowledge that,
in entering into this Agreement, the Secured Party is relying upon, among other
things, the waivers and certifications contained in this Sec.23.
Page 132 of 148
24. MISCELLANEOUS.
The headings of each section of this Agreement are for convenience only and
shall not define or limit the provisions thereof. This Agreement and all rights
and obligations hereunder shall be binding upon the Debtors and their respective
successors and assigns, and shall inure to the benefit of the Secured Party and
its successors and assigns. If any term of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity of all other terms hereof shall
in no way be affected thereby, and this Agreement shall be construed and be
enforceable as if such invalid, illegal or unenforceable term had not been
included herein. The Debtors acknowledge receipt of a copy of this Agreement.
Page 133 of 148
IN WITNESS WHEREOF, intending to be legally bound, the Debtors have caused this
Agreement to be duly executed as of the date first above written.
SECTOR COMMUNICATIONS, INC.
By: /S/ Xxxxxxx Xxxxx
---------------------
Name: Xxxxxxx Xxxxx
Title: Chairman of the Board
Address: 0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
EMODEL, INC.
By:/S/ Xxxxxx Xxxxxxx
---------------------
Name: Xxxxxx Xxxxxxx
Title: Vice President
Accepted:
By:/S/ Xxxxxx X. Xxxxxxx
------------------------
Xxxxxx X. Xxxxxxx
c/o Federal News Service
000 Xxxxxxxx Xxxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
Page 134 of 148
CERTIFICATE OF ACKNOWLEDGMENT
COMMONWEALTH OF VIRGINIA )
) ss.
COUNTY OF FAIRFAX )
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 14 day of January, 2002, personally appeared Xxxxxxx Xxxxx to
me known personally, and who, being by me duly sworn, deposes and says that he
is the Chairman of Sector Communications, Inc., and that said instrument was
signed and sealed on behalf of said corporation by authority of its Board of
Directors, and said Chairman acknowledged said instrument to be the free act and
deed of said corporation.
/S/Xxxxxxxx X. Flammea
----------------------
Notary Public
My commission expires: January 31, 2005
Page 135 of 148
FIRST AMENDMENT TO
INDEMNIFICATION, REIMBURSEMENT
AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO INDEMNIFICATION, REIMBURSEMENT AND SECURITY AGREEMENT
(this "Amendment"), dated as of January 31, 2002 by and among Options Talent
Group, a Nevada corporation f/k/a Sector Communications, Inc. (the "Company"),
eModel, Inc., a Delaware corporation (hereinafter together with any predecessor
entities, the "Subsidiary" and together with the Company, the "Debtors") and
Xxxxxx X. Xxxxxxx, a resident of the Commonwealth of Virginia (the " Secured
Party").
WHEREAS, the parties hereto have entered into that certain Indemnification,
Reimbursement and Security Agreement, dated January 14, 2002 ("Agreement").
WHEREAS, the Agreement referred to the Company as "Sector Communications,
Inc., a Nevada corporation."
WHEREAS, the Company filed Articles of Amendment to its Articles of
Incorporation with the Nevada Secretary of State on December 31, 2001 changing
its name to "Options Talent Group."
WHEREAS, the parties desire hereby to amend the Agreement to reflect the
Company's name change.
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements set forth below, the parties agree as follows:
1. AMENDMENT TO AGREEMENT. All references in the Agreement and in any other
document, agreement or instrument executed in connection therewith, to "Sector
Communications, Inc." shall be deleted and replaced with "Options Talent Group
(f/k/a Sector Communications, Inc.)", except where such reference was made with
respect to a date prior to December 31, 2001.
2. RATIFICATION OF AGREEMENT. Except as modified by the terms of this
Amendment, the Agreement is hereby ratified and confirmed in its entirety, and
shall remain in full force and effect in accordance with its terms.
Page 136 of 148
3. GENERAL.
This Amendment shall be governed by the laws of the Commonwealth of
Virginia (without reference to its rules as to conflicts of law) and shall bind
and inure to the benefit of the heirs, personal representatives, executors,
administrators, successors and assigns of the parties. Capitalized terms not
defined herein shall have the meanings ascribed to them in the Agreement.
Captions are for convenience only and are not deemed to be part of this
Amendment. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Amendment may be executed by facsimile.
Page 137 of 148
IN WITNESS WHEREOF, this First Amendment to Indemnification, Reimbursement
and Security Agreement has been executed by each of the parties hereto as of the
date first set forth above.
OPTIONS TALENT GROUP,
a Nevada corporation
f/k/a Sector Communications, Inc.
By: /S/ Xxxxxxx Xxxxx
-----------------------------
Name: Xxxxxxx Xxxxx
Title: Chairman of the Board
Address: 0000 Xxxxxxx Xxxx Xxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
EMODEL, INC.
By: /S/ Xxxxxx Xxxxxxx
-------------------------
Name: Xxxxxx Xxxxxxx
Title: Vice President
Accepted:
By:/S/ Xxxxxx Xxxxxxx
---------------------
Xxxxxx X. Xxxxxxx
c/o Federal News Service
000 Xxxxxxxx Xxxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
Page 138 of 148
EXHIBIT J
OPTIONS TALENT GROUP
January 23, 2002
BY FACSIMILE AND VIA FEDERAL EXPRESS
-----------------------------------------
Nevada Agency and Trust Company
00 Xxxx Xxxxxxx Xxxxxx
Xxxxx 000
Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Facsimile No. (000) 000-0000
Re: OPTIONS TALENT GROUP - TRANSACTION WITH EMODEL, INC.; COMMON STOCK
------------------------------------------------------------------------
Dear Xxxxxx:
Please be advised that Options Talent Group (the "Company") intends to
issue a total of 25,000,000 shares of its common stock, $.001 par value per
share ("Common Stock"), to the individuals and entities listed below. With
regard to such issuance, we are requesting that Nevada Agency and Trust Company,
as transfer agent for the Common Stock of the Company, issue certificates for
shares of Common Stock in the names and amounts indicated below and forward such
certificates to the Company's escrow agent, Xxxxxxx X. Xxxxx, Esq., c/o
Greenberg Xxxxxxx, LLP, in accordance with the instructions set forth below:
Name and Address Number of Shares SSN/TIN
---------------- -----------
The Jefferson Trust dated December 19, 1974
c/o Federal News Service
000 Xxxxxxxx Xxxxx Xxxxxxxx
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxxx 5,378,788 00-0000000
------------------------------------------- ---------------- -----------
Xxxxxxx X. Walk 1,613,636 ###-##-####
0000 Xxxxxxxxxxx Xxxxx
Xxx. 0X
Xxxxxxxx Xxxx, XX 00000
The Paramount Trust 5,378,788 402.76.4934
00000 Xxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Raffiah Kashmiri
The Xxxxxx Trust 5,378,788 ###-##-####
c/o eModel, Inc.
0000 Xxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxx
Xxxxxxx Xxxxx 7,250,000 ###-##-####
c/o Sector Communications, Inc.
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
TOTAL: 25,000,000
------------------------------------------- ----------------
Page 139 of 148
1. All of the certificates should be dated ____________________ and must be
legended as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") NOR ANY APPLICABLE STATE
SECURITIES LAWS BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE
LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, IF SUCH
REGISTRATION IS REQUIRED.
2. The certificate(s) to be issued to Xx. Xxxxx must also be legended as
follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A STOCKHOLDERS' AGREEMENT WHICH PLACES CERTAIN RESTRICTIONS ON THE
VOTING OF THE SHARES REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN
SUCH SHARES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE
PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH VOTING AGREEMENT WILL BE FURNISHED
TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO
THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS."
These shares represent a new issuance of Common Stock and do not come from
any existing reserve. Consequently, I have enclosed for your records a
secretary's certificate certifying as to the board resolutions authorizing the
issuance of these shares.
These certificates will need to be delivered by Federal Express to the
office of Xxxxxxxxx Xxxxxxx, LLP, 0000 Xxxxxx Xxxxxxxxx., Xxxxx 0000, XxXxxx,
XX 00000 Attention: Xxxxxxx X. Xxxxx, Esq. as soon as possible.
Please call me at __________________ if you have any questions regarding
this request or the shares to be issued. This instruction letter is hereby
irrevocable.
Thank you for your assistance in this matter.
Very truly yours,
cc: Xxxxxxx X. Xxxxx, Esq.
Page 140 of 148
SECTOR COMMUNICATIONS, INC.
SECRETARY'S CERTIFICATE
I, Xxxxxxx Xxxxx, do hereby certify that I am the duly elected, qualified
and acting Secretary of Sector Communications, Inc., a Nevada corporation (the
"Corporation).
I further certify that attached hereto as Exhibit A is a true, correct and
complete copy of the resolutions adopted by the Board of Directors of the
Corporation on _________________, approving the Corporation's issuance of shares
of the Corporation's common stock, $.001 par value per share, all of which
resolutions were duly adopted in accordance with the Corporation's Articles of
Incorporation and Bylaws, each as heretofore amended, and which resolutions have
not in any way been modified or rescinded, but are in full force and effect on
the date hereof.
IN WITNESS WHEREOF, I have hereunto subscribed my name as of this _______
day of ________________, 2002.
------------------------------
Name: Xxxxxxx Xxxxx
Secretary
Page 141 of 148
EXHIBIT J1
OPTIONS TALENT GROUP
January 22, 2002
BY FACSIMILE AND VIA FEDERAL EXPRESS
-----------------------------------------
Nevada Agency and Trust Company
00 Xxxx Xxxxxxx Xxxxxx
Xxxxx 000
Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Facsimile No. (000) 000-0000
Re: OPTIONS TALENT GROUP - TRANSACTION WITH EMODEL, INC.; COMMON STOCK
------------------------------------------------------------------------
Dear Xxxxxx:
Please be advised that Options Talent Group (the "Company") intends to
issue a total of 5,000,000 shares of its Series C Convertible Preferred Stock,
$.001 par value per share ("Preferred Stock"), to the individuals and entities
listed below. With regard to such issuance, we are requesting that Nevada Agency
and Trust Company, as transfer agent for the Preferred Stock of the Company,
issue certificates for shares of Preferred Stock in the names and amounts
indicated below and forward such certificates to the Company's escrow agent,
Xxxxxxx X. Xxxxx, Esq., c/o Greenberg Traurig, LLP, in accordance with the
instructions set forth below:
Name and Address Number of Shares SSN/TIN
---------------- -----------
The Jefferson Trust dated December 19, 1974
c/o Federal News Service
000 Xxxxxxxx Xxxxx Xxxxxxxx
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxxx 1,060,606 00-0000000
------------------------------------------- ---------------- -----------
Xxxxxxx X. Walk 318,182 ###-##-####
0000 Xxxxxxxxxxx Xxxxx
Xxx. 0X
Xxxxxxxx Xxxx, XX 00000
The Paramount Trust 1,060,606 402.76.4934
00000 Xxxxx Xxxx Xxxxx
Xxxxxxxxx, Xxxxxxx 00000
Attention: Raffiah Kashmiri
The Xxxxxx Trust 1,060,606 ###-##-####
c/o eModel, Inc.
0000 Xxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxx
Xxxxxxx Xxxxx 1,500,000 ###-##-####
c/o Sector Communications, Inc.
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
TOTAL: 5,000,000
------------------------------------------- ----------------
Page 142 of 148
1. All of the certificates should be dated ________________ and must be legended
as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") NOR ANY APPLICABLE STATE
SECURITIES LAWS BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE
LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, IF SUCH
REGISTRATION IS REQUIRED.
2. The certificate(s) to be issued to Xx. Xxxxx must also be legended as
follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A STOCKHOLDERS' AGREEMENT WHICH PLACES CERTAIN RESTRICTIONS ON THE
VOTING OF THE SHARES REPRESENTED HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN
SUCH SHARES SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE
PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH VOTING AGREEMENT WILL BE FURNISHED
TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO
THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS."
These shares represent a new issuance of Common Stock and do not come from
any existing reserve. Consequently, I have enclosed for your records a
secretary's certificate certifying as to the board resolutions authorizing the
issuance of these shares.
These certificates will need to be delivered by Federal Express to the
office of Xxxxxxxxx Xxxxxxx, LLP, 0000 Xxxxxx Xxxxxxxxx., Xxxxx 0000, XxXxxx,
XX 00000 Attention: Xxxxxxx X. Xxxxx, Esq. as soon as possible.
Please call me at __________________ if you have any questions regarding
this request or the shares to be issued. This instruction letter is hereby
irrevocable.
Thank you for your assistance in this matter.
Very truly yours,
cc: Xxxxxxx X. Xxxxx, Esq.
Page 143 of 148
SECTOR COMMUNICATIONS, INC.
SECRETARY'S CERTIFICATE
I, Xxxxxxx Xxxxx, do hereby certify that I am the duly elected, qualified
and acting Secretary of Sector Communications, Inc., a Nevada corporation (the
"Corporation).
I further certify that attached hereto as Exhibit A is a true, correct and
complete copy of the resolutions adopted by the Board of Directors of the
Corporation on _________________, approving the Corporation's issuance of shares
of the Corporation's Series C Convertible Preferred Stock, $.001 par value per
share, all of which resolutions were duly adopted in accordance with the
Corporation's Articles of Incorporation and Bylaws, each as heretofore amended,
and which resolutions have not in any way been modified or rescinded, but are in
full force and effect on the date hereof.
IN WITNESS WHEREOF, I have hereunto subscribed my name as of this ____ day
of ________________, 2002.
------------------------------
Name: Xxxxxxx Xxxxx
Secretary
Page 144 of 148
EXHIBIT K
SETTLEMENT AGREEMENT AND RELEASE
--------------------------------
This Settlement Agreement and Release ("SETTLEMENT AGREEMENT") is made this
14th day of January, 2002 by and among Xxxxxxx Xxxxx ("Hadid"), Sector
Communications, Inc., a Nevada corporation ("Sector") and eModel, Inc., a
Delaware corporation ("Buyer").
WHEREAS, Buyer, Packard Capital, Ltd. ("Packard") and Slasher Productions,
Inc. d/b/a Xxxxxxx.xxx ("Castnet") are parties to that certain Agreement dated
October 18, 2001 (the "Acquisition Agreement");
WHEREAS, pursuant to the Acquisition Agreement, Buyer was required to
deliver the Consideration Shares (as defined therein) to Packard;
WHEREAS, the parties hereto desire to settle any and all matters with
respect to the Acquisition Agreement;
WHEREAS, Hadid, Buyer, Sector and Sector Communications Delaware, Inc. are
parties to that certain Agreement and Plan of Merger dated January 14, 2002 (the
"Merger Agreement");
WHEREAS, pursuant to Section 1.09 of the Merger Agreement, Buyer has agreed
to deliver to Hadid and or his designees, 7,250,000 shares of Buyer Common Stock
(as defined therein) and 1,500,000 shares of Buyer Preferred Stock (as defined
therein and together with the "Buyer Common Stock", the "Buyer Shares") at the
Closing (as defined therein) in exchange for a full and final release of all
claims related to or arising out of the Acquisition Agreement, including, but
not limited to, non-delivery of the Consideration Shares; and
WHEREAS, subject to the terms and conditions set forth herein, the parties
now undertake to settle, release and extinguish on a full and final basis any
and all claims the Releasing Parties (as defined below) may have against Sector
or Buyer (collectively, the "Released Parties") relating to or arising out of
the Acquisition Agreement.
Therefore, in consideration of the above recitals and the mutual covenants
herein contained, the parties agree as follows:
Page 145 of 148
1. RELEASE. Hadid hereby covenants and agrees, on behalf of himself,
Castnet and Packard and his and their past and present affiliates, parents and
subsidiaries, and the past and present directors, officers, employees, partners,
principals, agents, servants, representatives, attorneys, successors, assigns
and insurers of each of them (the "Releasing Parties"), hereby release and
discharge the Released Parties and their past and present affiliates, parents
and subsidiaries, and the past and present directors, officers, employees,
partners, principals, agents, servants, representatives, attorneys, successors,
assigns and insurers of each of them (collectively referred to as "Released
Parties and their Affiliates"), of and from any and all claims, demands,
liabilities or causes of actions which directly or indirectly relate to or arise
out of any of the facts, transactions, occurrences or events related to the
Acquisition Agreement, which the Releasing Parties may now have against the
Released Parties and their Affiliates, whether or not now known, suspected,
contingent or claimed. The aforementioned release shall include, but not be
limited to, claims, demands, liabilities or causes of action which relate to or
arise out of the failure of Buyer to deliver the Consideration Shares to Packard
in accordance with the Acquisition Agreement and any claims the Releasing
Parties may have with respect to their ownership or purported ownership of the
Consideration Shares and/or the Buyer Shares.
2. CONSIDERATION.
(a) Hadid shall (i) deliver to the Released Parties a signed original
of this Settlement Agreement, and (ii) take such other action as may be
necessary to effectuate the purposes of this Settlement Agreement.
(b) The Released Parties shall each deliver to Hadid a signed original
of this Settlement Agreement and Buyer shall deliver the Buyer Shares to Hadid
or his designees.
3. EFFECTIVE TIME. This Settlement Agreement shall be effective upon
the full execution hereof.
4. WAIVER OF UNKNOWN CLAIMS. The releases set forth above are intended to
cover all claims demands, liabilities or causes of action arising out of or
related, directly or indirectly, to the Acquisition Agreement or the ownership
or purported ownership of the Consideration Shares and/or the Buyer Shares,
whether the same are known, unknown, or hereafter discovered or ascertained. The
Releasing Parties, being aware of said rights, hereby expressly, knowingly and
intentionally waive any rights they may have to any and all unknown claims.
5. COVENANT NOT TO XXX. The Releasing Parties covenant and agree never to
commence, prosecute or file, or cause, permit, assist or advise to be commenced,
prosecuted, or filed, or advise or assist in the prosecution of, any lawsuit,
action or other legal proceeding against the Released Parties and their
Affiliates involving the matters released by Section 1 above and waived pursuant
to Section 4 above.
6. CONFIDENTIALITY. The parties agree that, except as required by federal,
state, local or foreign governmental agencies or regulatory bodies, the contents
and terms of this Settlement Agreement shall be maintained in strict confidence.
7. ARBITRATION. The parties agree that any and all disputes arising out of
the terms of this Settlement Agreement, their interpretation, and any of the
matters herein released, shall be settled by arbitration held in Fairfax County,
Virginia, under the Arbitration Rules set forth by the American Arbitration
Association. Judgment upon the award rendered by the arbitrator(s) may be
entered in the United States District Court for the Eastern District of Virginia
under the Federal Arbitration Act, 9 U.S.C. Sec. 9 (1998)
Page 146 of 148
8. INTEGRATION; AMENDMENT. This Settlement Agreement represents the entire
agreement and understanding between the parties concerning the subject matter
hereof and supersedes, to the extent inconsistent herewith, any and all prior
agreements between the parties concerning the subject matter hereof. This
Settlement Agreement may only be amended in writing signed by Hadid, Buyer and
Sector.
9. SEVERABILITY. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Settlement Agreement shall continue in full force and effect without
said provision, to the extent such provision is not material to the
consideration exchanged pursuant to this Settlement Agreement.
10. GOVERNING LAW. This Settlement Agreement shall be governed by the
laws of the Commonwealth of Virginia.
11. VOLUNTARY EXECUTION OF SETTLEMENT AGREEMENT. This Settlement Agreement
is executed voluntarily and without any duress or undue influence on the part of
or on behalf of the parties hereto, with the full intent of releasing all
claims. The parties acknowledge that:
(a) They have read this Settlement Agreement;
(b) They have been represented in the preparation, negotiation, and
execution of this Settlement Agreement by legal counsel of their own choice;
(c) They understand the terms and consequences of this Settlement
Agreement and of the agreements it contains; and
(d) They are fully aware of the legal and binding effect of this
Settlement Agreement.
12. SUCCESSORS. This Settlement Agreement shall be binding on, and
inure to the benefit of, the successors and assigns of the parties hereto.
13. AUTHORITY. Each person executing this Settlement Agreement on behalf of
any other person or persons hereby warrants that they have full authority to do
so.
14. FURTHER ASSURANCEs. Hadid, the Buyer and Sector each agree, at the
expense of the requesting party hereto (including reasonable attorneys fees),
promptly to execute and deliver such further agreements, documents and
instruments as the requesting party hereto reasonably may request in order to
effect or evidence the releases contemplated hereby.
15. COUNTERPARTS. This Settlement Agreement may be executed in
counterparts, and each counterpart shall have the same force and effect as an
original and shall constitute an effective, binding Settlement Agreement on the
part of each of the undersigned.
Page 147 of 148
16. SURVIVAL. The provisions of Sections 1, 4, 5, 6, 7, 8, 9, 10, 12 and 14
shall survive the termination of this Settlement Agreement.
IN WITNESS WHEREOF, the parties have executed this Settlement Agreement
effective as of the date first set forth below.
DATE: EMODEL, INC.
A Delaware corporation
By:/S/ Xxxxxx Xxxxxxx
---------------------
Name: Xxxxxx Xxxxxxx
Title: Vice President
DATE: SECTOR COMMUNICATIONS, INC.
A Nevada Corporation
By:/S/ Xxxxxxx Xxxxx
---------------------
Name: Xxxxxxx Xxxxx
Title: Chairman of the Board
RELEASING PARTIES
DATE: __________________ By:/S/ Xxxxxxx Xxxxx
------------------
Xxxxxxx Xxxxx
Page 148 of 148
