SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 4, 2000
INTERNET CABLE CORPORATION
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(Exact name of registrant as specified in its charter)
NEVADA 000-26011 87-0540291
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
263 KING STREET
CHARLESTON, SOUTH CAROLINA 29401
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(Address of principal executive offices, including zip code)
(843) 722-8007
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
THE ACQUISITION OF CABLE SYSTEMS TECHNICAL SERVICES INC.:
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On January 4, 2000, Internet Cable Corporation (the "Company")
completed the acquisition of Cable Systems Technical Services Inc., a
corporation formed under the laws of the Province of Ontario ("Cable Systems")
which resulted in Cable Systems becoming a wholly-owned subsidiary of the
Company. The Company purchased one hundred percent (100%) of the issued and
outstanding common stock of Cable Systems in consideration of: (i) Three Million
Nine Hundred Thousand United States dollars (US$3,900,000.00) in cash; (ii)
warrants to purchase one hundred thousand (100,000) shares of the Company's
common stock at a price of Two United States dollars and Fifty Cents (US$2.50)
per share for a period of two (2) years; and (iii) the Company exercised it
option to extend the Closing Date by payment of an option fee which increased
the purchase price by One Hundred Twenty Thousand dollars (US$120,000.00). In
addition, the Company caused Cable Systems to: (i) satisfy an outstanding loan
to a shareholder of Cable Systems in the amount of Three Hundred Ninety Six
Thousand Seven Hundred Eighty Five United States dollars (US$396,785.00); (ii)
redeem all of its issued and outstanding shares of Series A Preferred Stock; and
(iii) satisfy the discharge of all personal guarantees of debts and other
obligations of Cable Systems, its subsidiaries and its shareholders made to
vendors and lending institutions.
The acquisition was pursuant to the Share Purchase Agreement
dated July 8, 1999, between 1291973 Ontario Limited, Eugene Harbin, Joseph M.
Melanson, Ontario Cable and Contracting Incorporated, Rupel Holdings Inc., Ryon
Future Inc., Vonda Thompson (being all of the stockholders of Cable Systems),
and the Company (the "Share Purchase Agreement").
On January 18, 2000, Joseph M. Melanson and the Company
entered into a three (3) year employment agreement effective as of November 11,
1999 for Mr. Melanson will serve as the Chief Executive Officer and President of
Cable Systems TSi at an annual salary of Two Hundred Fifty Thousand United
States dollars (US$250,000). Pursuant to the employment agreement, Mr. Melanson
will receive a yearly performance bonus in the form of stock and cash based on
the Company's pre-tax earnings reaching a mutually agreed upon target. In
addition, the Company has granted to Mr. Melanson an option to purchase one
million two hundred thousand (1,200,000) shares of its common stock at an
exercise price of Six United States dollars and Twelve and One Half Cents
(US$6.125) per share for a period of five (5) years. Such option shall vest
according to the following schedule: (i) three hundred thousand (300,000) shares
on November 11, 1999, (ii) three hundred thousand (300,000) shares on November
11, 2000, (iii) three hundred thousand (300,000) shares on November 11, 2001,
and (iv) three hundred thousand (300,000) shares on November 11, 2002. The
employment agreement provides that one hundred percent (100%) of the option
shall immediately vest upon the occurrence of certain events, including, but not
limited to, a stock split or the sale of forty five percent (45%) or more of the
Company's assets. The employment agreement also contains a one-year
non-competition provision pursuant to which Mr. Melanson will be prohibited from
engaging in, as owner, stockholder, employee, partner, agent, representative or
otherwise, any business, firm, corporation, or other entity in direct
competition with the business of the Company.
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In addition, Mr. Melanson has been nominated to serve on the
Board of Directors of the Company. The Company's Annual Meeting of Stockholders,
pursuant to which the Stockholders will vote to elect directors, will be held on
January 25, 2000.
The Company has also entered into three (3) year employment
agreements with several of the key employees of Cable Systems.
Prior to the date of the Share Purchase Agreement, there was
no material relationship between the Company, Cable Systems or any of its
shareholders.
Cable Systems provides sophisticated engineering, testing,
maintenance and other services to the cable television industry throughout the
United States and Canada. Cable Systems maintains offices in Chicago, Illinois,
Jacksonville, Florida and Richmond, Virginia, in the United States and in the
cities of Toronto, London and Cambridge in Canada.
THE ACQUISITION OF CAD CONSULTANTS, INC.:
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On January 11, 2000, the Company completed the acquisition of
CAD Consultants, Inc., a New Jersey corporation ("CAD"). The acquisition was
completed by a merger of ICC Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of the Company, into CAD, with CAD, being the surviving
entity. As consideration for the merger, the Company: (i) issued four hundred
fifty thousand shares of it common stock to Craig Lerman, the sole shareholder
of CAD; and (ii) paid to Mr. Lerman Six Hundred Eighty Two Thousand Three
Hundred Seventy Three United States dollars (US$682,373.00) in cash to satisfy
certain liabilities and debts incurred by Mr. Lerman on behalf of CAD.
The acquisition was pursuant to an Agreement and Plan of
Merger dated October 8, 1999, between the Company, ICC Acquisition Corp., CAD
and Mr. Lerman (the "Agreement and Plan of Merger").
On December 20, 1999, Craig Lerman and the Company entered
into a three (3) year employment agreement effective as of October 8, 1999 for
Mr. Lerman to serve as the President of CAD Consultants at an annual salary of
Two Hundred Thousand United States dollars (US$200,000.00). Pursuant to the
employment agreement, the Company granted Mr. Lerman an option to purchase two
hundred thousand (200,0000) shares of its common stock at an exercise price of
Five United States dollars and Fifty Cents ($5.50) per share for a period of
five (5) years. Such option shall vest according to the following schedule: (i)
fifty thousand (50,000 shares on October 8, 1999, (ii) fifty thousand (50,000)
shares on October 8, 2000, (iii) fifty thousand (50,000) shares on October 8,
2001, and (iv) fifty thousand (50,000) shares on October 8, 2002. The employment
agreement also provides that one hundred percent (100%) of the option shall
immediately vest upon the occurrence of certain events, including, but not
limited to, a stock split or the sale of forty five percent (45%) or more of the
Company's assets. The employment agreement also contains a one (1) year
non-competition provision pursuant to which Mr. Lerman is prohibited from
engaging in, as owner, stockholder, employee, partner, agent, representative or
otherwise, any business, firm, corporation, or other entity in direct
competition with the business of the Company.
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The Company has also entered into three (3) year employment
agreements with several of the key employees of CAD.
Prior to the date of the Agreement and Plan of Merger, there
was no material relationship between the Company, Cable Systems or any of its
shareholders.
CAD is a wireless design and installation company that
provides data and voice communication systems solutions to universities,
hospitals and office buildings. CAD's solutions are unique in that CAD allows
its customers to control LAN through wireless connections enabling the users
avoid using outside telephone lines resulting lower Internet access fees. CAD
currently provides services to such companies as Lucent, ATT, Exxon and Mercedes
Benz. CAD has been approached by unsolicited customers and has a large backlog
for wireless design and installations.
ITEM 5. OTHER EVENTS
Effective December 20, 1999 (the "Effective Date"), Timothy R.
Karnes resigned as the Company's President and Chief Executive Officer. On the
Effective Date, the Company's Board of Directors appointed Michael F. Mulholland
to serve as the Company's Chief Executive Officer and President.
On the Effective Date, Michael F. Mulholland and the Company
entered into a three (3) year employment agreement effective as of August 31,
1999 for Mr. Mulholland to serve as the Chief Executive Officer and President at
an annual salary of Three Hundred Thousand United States dollar (US$$300,000).
Pursuant to the employment agreement, Mr. Mulholland will receive a yearly
performance bonus in the form of stock and cash based on the Company's pre-tax
earnings reaching a mutually agreed upon target. In addition, the Company
granted Mr. Mulholland an option to purchase one million five hundred thousand
(1,500,000) shares of its common stock at an exercise price of Four United
States dollars and Sixty Two and One Half Cents (US$4.625) per share for a
period of five (5) years. Such option shall vest according to the following
schedule: (i) three hundred seventy five thousand (375,000) shares on August 31,
1999, (ii) three hundred seventy five thousand (375,000) shares on August 31,
2000, (iii) three hundred seventy five thousand (375,000) shares on August 31,
2001, and (iv) three hundred seventy five thousand (375,000) shares on August
31, 2002. The employment agreement also provides that one hundred percent (100%)
of the option shall immediately vest upon the occurrence of certain events,
including, but not limited to, a stock split or the sale of forty five percent
(45%) or more of the Company's assets. The employment agreement also contains a
one-year non-competition provision pursuant to which Mr. Mulholland is
prohibited from engaging in, as owner, stockholder, employee, partner, agent,
representative or otherwise, any business, firm, corporation, or other entity in
direct competition with the business of the Company.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a),(b) Financial Statements. The financial statements required under Item 7 of
Form 8-K for both of the transactions described in Item 2 are not included in
this initial report on Form 8-K. The Company shall provide such financial
statements by amendment within Sixty (60) days from the date that this initial
Form 8-K is filed with the Securities and Exchange Commission.
(c) Exhibits.
2.1 Share Purchase Agreement dated July 8, 1999, by and between 1291973
Ontario Limited, Eugene Harbin, Joseph Melanson, Ontario Cable and
Contracting Incorporated, Rupel Holdings Inc., Ryon Future Inc., Vonda
Thompson and Internet Cable Corporation.
2.2 Agreement and Plan of Merger dated October 8, 1999 by and between
Internet Cable Corporation, ICC Acquisition Corp., CAD Consultants,
Inc. and Craig Lerman.
99.1 Form of Employment Agreement between Joseph M. Melanson and Internet
Cable Corporation.
99.2 Form of Employment Agreement between Craig Lerman and Internet Cable
Corporation.
99.3 Form of Employment Agreement between Michael F. Mulholland and Internet
Cable Corporation.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERNET CABLE CORPORATION
By: /S/ WILLIAM F. WALSH
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William F. Walsh
Chief Financial Officer
Dated: January 19, 2000
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SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT made the 8th day of July, 1999 BY and
AMONG;
INTERNET CABLE CORPORATION, a corporation incorporated under the
laws of the State of Nevada (hereinafter referred to as
"Purchaser")
OF THE FIRST PART
1291973 ONTARIO LIMITED, a corporation incorporated under the laws
of the Province of Ontario (hereinafter referred to as "1291973")
OF THE SECOND PART
EUGENE HARBIN, of the Town of Whitchurch-Stouffville in the
Regional Municipality of York, Province of Ontario (hereinafter
referred to as "Eugene")
OF THE THIRD PART
JOSEPH MELANSON, of the Town of Markham in the Regional
Municipality of York, Province of Ontario (hereinafter referred to
as "Joseph")
OF THE FOURTH PART
ONTARIO CABLE AND CONTRACTING INCORPORATED, a corporation
incorporated under the laws of the Province of Ontario
(hereinafter referred to as "Ontario Cable")
OF THE FIFTH PART
RUPEL HOLDINGS INC., a corporation incorporated under the laws of
the Province of Ontario (hereinafter referred to as "Rupel")
OF THE SIXTH PART
RYVON FUTURE INC., a corporation incorporated under the laws of
the Province of Ontario (hereinafter referred to as "Ryvon")
OF THE SEVENTH PART
VONDA THOMPSON, of the Town of Markham in the Regional
Municipality of York, Province of Ontario (hereinafter referred to
as "Vonda")
OF THE EIGHTH PART
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JOSEPH MELANSON, IN TRUST, of the Province of Ontario (hereinafter
referred to as "the Trustee")
OF THE NINTH PART
CABLE SYSTEMS TECHNICAL SERVICES INC., a corporation incorporated
under the laws of the Province of Ontario (hereinafter referred to
as "Cable Systems")
OF THE TENTH PART
WHEREAS the Purchaser desires to purchase all of the issued and
outstanding shares in the capital of Cable Systems;
NOW THEREFORE in consideration of the premises and the respective
covenants and agreements of the Parties herein contained, the sum of one dollar
now paid by each Party hereto to each of the other Parties hereto and other good
and valuable consideration (the receipt and sufficiency of which is hereby
acknowledged by all of the Parties hereto), the Parties hereto covenant and
agree as follows:
ARTICLE 1
1.1 DEFINITIONS
Whenever used in this Agreement, unless there is something in the
subject matter or context inconsistent therewith, the following words and terms
shall have the respective meanings ascribed to them as follows:
"Accounts Receivable" mean any and all accounts receivable, trade
receivables, notes receivable and other receivables arising out of
the Business and operations of Cable Systems.
"Affiliate" of any Person means any corporation, proprietorship,
partnership or business entity which directly or indirectly owns
or controls, is under common ownership or control with, or is
owned or controlled by, such Person.
"Agreement" means this share purchase agreement, including all
Schedules and Exhibits hereto and all instruments supplemental
hereto or in amendment or confirmation hereof or thereof.
"Applicable Law" means any domestic or foreign law, statute,
regulation, rule, policy, guideline, ordinance, by-law (including,
without limitation, any Environmental Law)
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applicable to the Purchaser, the Vendors, the Business or
operation of Cable Systems, the Assets of Cable Systems or the
Purchased Shares.
"Assets of Cable Systems" means all of the assets of Cable Systems
used in the Business of Cable Systems and the Subsidiaries of
Cable Systems and shall have the same meaning as "Cable Systems
Assets".
"Business" means the engineering, planning, construction and
installation services in connection with the building, maintaining
and upgrading of cable telecommunications systems presently
carried on by Cable Systems and the Subsidiaries of Cable Systems.
"Business Day" means any day other than a Saturday, Sunday or
holiday on which the Canadian chartered banks located at Markham,
Ontario are open for business.
"Cable Systems" means Cable Systems Technical Services Inc., a
corporation incorporated under the laws of the Province of
Ontario.
"Cable Systems USA" means Cable Systems Technical Services, Inc. a
corporation incorporated under the laws of the State of Delaware.
"Canadian Tax Act" shall mean the Income Tax Act (Canada) as
amended and the Regulations made pursuant thereto.
"Closing" means the completion of the sale to and purchase by the
Purchaser of the Purchased Shares hereunder by the transfer and
delivery of documents of title thereto and the payment of the
Purchase Price therefor as contemplated herein.
"Closing Date" means the 19th day of September, 1999, or such
other date as the Parties may agree or as may be extended by the
Purchaser as the date upon which the Closing shall take place.
"Closing Time" means 1:00 o'clock p.m. Eastern Standard time, on
the Closing Date or such other time on such date as the Parties
may agree as the time at which the Closing shall take place.
"Deposit" has the meaning ascribed in Section 2.2 hereof.
"Dollar" and "$" means lawful money of the United States of
America.
"Effective Date" means the date of execution of this Agreement.
"Encumbrance" means any encumbrance of any kind, including,
without limitation, any option, pledge, security interest, lien,
hypothec, charge, encumbrance, mortgage,
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hypothecation, trust, deemed trust, trust deed, easement, lease,
sub-lease, claim, right of way, covenant, condition or restriction
(whether on sale, transfer or disposition or otherwise), whether
imposed by agreement, law or otherwise, whether of record or
otherwise.
"Environmental Law" means any law, statute, regulation, rule,
policy, guideline, order, consent decree, settlement agreement or
governmental requirement of Canada or any province, territory or
local government or any agency thereof, which relates to or
otherwise imposes liability or standards of conduct concerning
discharges, releases or threatened releases of noises, odours or
any pollutants, contaminants or hazardous or toxic wastes,
substances or materials into ambient air, water or land, or
otherwise relating to the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, clean-up,
transport or handling of pollutants, contaminants or hazardous or
toxic wastes, substances or materials.
"Environmental Permit" shall mean any Permit required by or
pursuant to any applicable Environmental Law.
"Financial Statements of Cable Systems" means the audited
financial statements of Cable Systems for the fiscal year ended
December 31, 1998, consisting of a balance sheet and the
statements of income, retained earnings, source and application of
funds and changes in financial position and all notes thereto as
reported upon by Ernst & Young.
"Financial Statements of Cable Systems USA" means the audited
financial statements for Cable Systems USA for the fiscal year
ended December 31, 1998 consisting of a balance sheet and the
statements of income, retained earnings, source and application of
funds and changes in financial position and all notes thereto as
reported upon by Ernst & Young.
"GAAP" shall mean generally accepted accounting principles from
time to time approved by the Canadian Institute of Chartered
Accountants or any successor Institute applicable as of the date
on which any calculation or determination is required to be made
in accordance with generally accepted accounting principles, and
where the Canadian Institute of Chartered Accountants includes a
recommendation in its Handbook concerning the treatment of any
accounting matter, such recommendation shall be regarded as the
only generally accepted accounting principle applicable to the
circumstance that it covers.
"Governmental Authority" means the government of Canada or the
government of the United States of America or any province, state,
territory, region, municipality, locality or other political
sub-division thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of
or pertaining to government, as the case may be.
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"Interim Financial Statements" means the interim unaudited
financial statements of Cable Systems and Cable Systems USA for
the Period ended March 31, 1999, consisting of a balance sheet and
the statements of income, retained earnings, source and
application of funds and changes in financial position and all
notes thereto as reported upon by Jill MacDonald, C.A.
"Key Employees" means the senior employees and officers of Cable
Systems and the Subsidiaries of Cable Systems as set out in this
Agreement and the Schedules attached hereto.
"Leased Properties" means all of the lands, buildings, facilities,
installations, fixtures, structures and improvements leased to
Cable Systems.
"Losses" means all liabilities (including, without limitation, all
liabilities relating to Taxes), losses, costs, damages,
deficiencies, penalties or expenses (including, without
limitation, solicitors' and accountants' fees and expenses in
costs of investigation and litigation and any judgement,
settlement or compromise relating thereto and interest, penalties
or other amounts paid in respect of judgements, settlements or
compromises).
"Material Adverse Effect" means a negative change in, or effect on
the operations, affairs, financial condition, results of
operations assets, liabilities, reserves or any other aspect of
the corporation of the business of the corporation that results in
a negative adverse effect on or a negative adverse change in any
such aspect of the corporation or the business of the corporation.
"Material Contract" means any contract entered into by Cable
Systems or a Subsidiary of Cable Systems having an annual Dollar
value greater than twenty-five thousand Dollars ($25,000.00) or a
term in excess of twenty-four months, excepting therefrom all
financing agreements and Encumbrances.
"Parties" means the Purchaser, 1291973, Eugene, Joseph, Ontario
Cable, Rupel, Ryvon, Vonda, The Trustee and Cable Systems
collectively, and "Party" means any one of them.
"Permits" means all of the permits, licenses, consents, approval,
certificates, variances, interim permits, permit applications or
other authorization required by or pursuant to Applicable Law.
"Permitted Assignee" shall mean Genesis Construction &
Developments Corp. or its successor.
"Person" means any individual, corporation, partnership, trustee
or trust or unincorporated association, and pronouns have a
similarly extended meaning.
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"Purchaser's Counsel" means Gersten, Savage & Kaplowitz, LLP, 101
East 52nd Street, New York, New York 10022-6018, Attention Jay
Kaplowitz (212) 752-9700, fax (212) 980-5192.
"Purchase Price" means the purchase price to be paid by the
Purchaser for the Purchased Shares as provided in Article 2
hereof.
"Purchased Shares" means 692 issued and outstanding common shares
in the capital of Cable Systems.
"Subsidiaries of Cable Systems" means the corporations listed in
Schedule 3.5 attached hereto, the majority of which issued and
outstanding securities of which, as shown on the said Schedule,
are beneficially owned and controlled directly by Cable Systems or
indirectly by a Subsidiary of Cable Systems.
"Taxes" means all taxes, charges, fees, duties, levies or other
assessments, including (without limitation) income, gross
receipts, net proceeds, ad valorem, turnover, real and personal
(tangible and intangible), sales, use, franchise, excise, value
added, goods and services, stamp, leasing, lease, user, transfer,
fuel, excess profits, payroll, occupation, interest, equalization,
windfall profits, severance and employees' withholding,
unemployment, employer health and social security taxes which are
imposed by Canada or any province, state, territory, region,
municipality or local or foreign government or any agency thereof,
and such term shall include any interest, penalties or additions
to tax attributable to such Taxes.
"Vendors' Counsel" means the law firm of Nichols & Associate, of
51 Main Street Markham North, Markham, Ontario L3P 1X7, counsel to
Cable Systems.
"Vendors" means 1291973, Eugene, Joseph, Ontario Cable, Rupel,
Ryvon, Vonda and the Trustee and "Vendor" means any one of them.
"Stock Options" means stock options in the capital of the
Purchaser or its successor; provided that in the event this
Agreement is assigned by the Purchaser to the Permitted Assignee
that "Stock Options" shall mean stock options in the capital of
the Permitted Assignee or its successor.
Terms defined in the preamble to this Agreement shall have the same meanings
herein as are ascribed thereto in the preamble.
1.2 GENDER AND NUMBER
Words importing the singular include the plural and vice versa;
words importing gender include all genders.
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1.3 ENTIRE AGREEMENT
This Agreement, including the Schedules and Exhibits hereto,
together with the agreements and other documents to be delivered pursuant
hereto, constitute the entire agreement between the Parties pertaining to the
subject matter hereof and supersede 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 specifically set forth
herein and therein.
1.4 WAIVERS, ETC.
No supplement, modification, waiver or termination 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, in whole or in
part, shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
1.5 OTHER WORDS AND PHRASES
In this Agreement, unless otherwise expressly provided (i) the
words "hereof", "herein", "hereto" and "hereunder" and words of similar import
refer to this Agreement as a whole and not to any particular Article, Section,
Subsection, paragraph or other subdivision, and (ii) all references to
designated "Articles", "Sections", Subsections", "paragraphs" or other
subdivisions are to the designated Articles, Sections, Subsections, paragraphs
and other subdivisions of this Agreement.
1.6 HEADINGS
The Article and Sections headings contained herein are included
solely for convenience of reference, are not intended to be full or accurate
descriptions of the content thereof and shall not be considered part of this
Agreement.
1.7 GOVERNING LAW
This Agreement and the rights, obligations and relations of the
Parties shall be governed by and construed in accordance with the laws of the
Province of Ontario and the federal laws of Canada applicable therein, and the
courts of Ontario shall have exclusive jurisdiction to entertain any action in
connection with this Agreement.
1.8 CURRENCY
Unless otherwise specified, all reference to currency herein are
deemed to mean lawful money of the United States of America, and all amounts to
be paid or calculated pursuant to this
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Agreement are to be paid or calculated in lawful money of the United States of
America.
ARTICLE 2
PURCHASE AND SALE
2.1 PURCHASE PRICE
Subject to the terms and conditions set forth in this Agreement,
at the Closing, the Vendors shall sell, assign and transfer to the Purchaser and
the Purchaser shall purchase, accept and acquire the Purchased Shares listed
opposite the Vendors' names on Schedule 2.1 attached hereto. The Purchase Price
for the Purchased Shares shall be three million, nine hundred thousand Dollars
($3,900,000.00) together with seventy five thousand (75,000) two year Stock
Options exercisable at $2.50 per option from the Closing Date, to be in the form
attached hereto as Schedule 2.1.
2.2 DEPOSIT
The Purchaser shall immediately upon execution of this Agreement
deliver to the Vendors' Counsel a Deposit in the amount of one hundred thousand
Dollars, together with the Stock Options. The Deposit shall be held in trust by
the Vendors' Counsel, pending the completion or termination of the transactions
contemplated herein. The Deposit may be invested by the Vendor's Counsel in an
interest bearing account, any such interest accruing shall be for the account
and benefit of the party entitled to the deposit upon the Closing or otherwise
termination of this Agreement. The parties acknowledge receipt of TWENTY-FIVE
THOUSAND ($25,000.00) Dollars prior to the execution of this Agreement. A
further deposit of SEVENTY-FIVE THOUSAND ($75,000.00) Dollars shall be made upon
execution. Should the Purchaser fail to close the purchase for any reason other
than the vendors and Cable Systems failing to meet their obligations under this
agreement, then the Deposit held by the vendors counsel in trust, will be
considered liquidated damages and the deposit will be forfeited. Should the
representations and warranties on the part of the vendors and Cable Systems not
be fulfilled prior to the Closing Date, then the transaction shall be at an end
and the deposit returned to the Purchaser with interest and without deduction
except for the cost incurred by Cable Systems to prepare audited financial
statements for the fiscal year ended December 31, 1998, to a maximum of
$6,000.00 (six thousand dollars).
2.3 ACTION BY VENDORS AND PURCHASER AT THE CLOSING TIME
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At the Closing, each of the Vendors and the Purchaser shall take
the following action:
(a) DELIVERY OF CERTIFICATES, ETC. - The Vendors shall
transfer and deliver to the Purchaser at the Closing share
certificates representing the Purchased Shares duly
endorsed in blank for transfer or accompanied by
irrevocable security transfer powers of attorney duly
executed in blank, in either case by the holders of
records
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thereof. The Vendors shall take such steps as shall be
necessary to cause Cable Systems to, and Cable Systems
shall, enter the Purchaser or its nominee upon the books
of Cable Systems as the holder of the Purchased Shares and
to issue one or more share certificate to the Purchaser or
its nominee representing the Purchased Shares;
(b) PAYMENT TO THE VENDORS - The Purchaser shall pay the sum
of three million, eight hundred thousand Dollars
($3,800,000.00) to or to the order of the Vendors as
follows:
(i) by certified cheque or bank draft in accordance
with the direction of the Vendors in the amount
of two million, eight hundred thousand Dollars
($2,800,000.00);
(ii) by certified cheque or bank draft in the
principal amount of one million dollars
($1,000,000.00) (the "2nd Instalment") made
payable to Nichols & Associate, in trust, which
shall be held in accordance with the terms of
paragraph 2.4.
(c) PAYMENT OF SHAREHOLDER LOANS - The Purchaser shall cause Cable
Systems to discharge all outstanding shareholder loans to Cable
Systems and the Subsidiaries of Cable Systems listed on Schedule
2.3(c) attached hereto.
(d) REMOVAL OF PERSONAL GUARANTEES - The Purchaser shall cause to
be discharged all personal guarantees of the debts and other
obligations of Cable Systems and the Subsidiaries of Cable Systems
made by any of the Vendors and listed on Schedule 2.3(d) attached
hereto, on or before the Closing Date.
(e) REDEMPTION OF CLASS A PREFERENCE SHARE - The Purchaser shall
cause Cable Systems to redeem and retract on the Closing Date all
issued and outstanding Class A Preference Shares.
(f) INDEMNITY TO JOSEPH MELANSON - The Purchaser shall deliver to
Joseph Melanson, a Vendor herein, an agreement to indemnify him
for all acts done on behalf of Cable Systems and the Subsidiaries
of Cable Systems to secure the financial obligations of Cable
Systems and the Subsidiaries of Cable Systems prior to the Closing
Date.
2.4 PAYMENT OF THE 2ND INSTALLMENT
The 2nd Installment shall be held in trust by the Vendors' Counsel
after Closing, and shall be released to the Vendors at the expiry of six weeks
from the Closing Date; provided the Purchaser cannot demonstrate the following:
<PAGE>
-10-
(a) any warranty, representation or covenant of the Vendors is
found to be materially incorrect on Closing;
(b) any warranty, representation or covenant of Cable Systems is
found to be materially incorrect as of the Closing Date; and
(c) Cable Systems, the Cable Systems Business or the Assets of
Cable Systems are affected by a Material Adverse Effect;
in which case the 2nd Installment will be released in part in accordance with
the following procedure. Written notice of any material issue which arises shall
be given to Joseph Melanson and the Vendors' Counsel. After discussion of the
issue, a reasonable reserve shall be decided on by the parties. If the parties
cannot agree upon the amount of the reserve, then Ernst & Young, as auditors of
Cable Systems, shall be requested to determine the amount of the reserve and
their decision shall bind all parties. In the event that more than one material
issue arises, the above procedure shall apply to each instance. At the end of
six weeks from the Closing Date the total of all reserves so determined shall be
deducted from the 2nd Installment, and the balance of the 2nd Installment shall
be paid to the Vendors. The reserve, or total reserves, shall be held in trust
by the Vendors' Counsel until the material issue or issues are resolved to the
satisfaction of the parties, at which time the reserve or reserves shall be paid
out as appropriate.
2.5 PLACE OF CLOSING
The Closing shall take place at the Closing Time at a location in
Markham, Ontario as may be agreed upon by the Vendors and the Purchaser.
2.6 EXTENSION OF CLOSING
The Purchaser may extend the Closing by 30 days up to three times,
for a maximum extension of 90 days. The Purchaser Price shall be increased by
Forty Thousand U.S. Dollars ($40,000.00) for each extension of the Closing
required by the Purchaser. The Purchaser shall give the Vendors at least
fourteen (14) days prior written notice in the case of the first extension and
at least five (5) days prior written notice in the case of the second and third
extension, should they be required. Upon each such notice being given, the
Purchaser shall deliver to the Vendors, together with the notice, a cheque in
the amount of forty thousand Dollars ($40,000.00) being the increase to the
Purchase Price, which shall be held in trust by the Vendors' Counsel, pending
the completion of the transactions contemplated herein. This increase to the
Purchase Price shall be an increase to the Deposit and shall be treated in a
like manner with respect to the provisions of Section 2.2 herein.
2.7 TENDER
Any tender of documents or money hereunder may be made upon the
Parties or their
<PAGE>
-11-
respective counsel, and money may be tendered by official bank draft drawn upon
a Canadian chartered bank or by negotiable cheque and certified by a Canadian
chartered bank.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE VENDORS, CABLE SYSTEMS
AND CABLE SYSTEMS USA
The Vendors and Cable Systems jointly and severally represent to
the Purchaser as follows:
3.1 ORGANIZATION AND VALID EXISTENCE: CABLE SYSTEMS AND CABLE SYSTEMS USA
---------------------------------------------------------------------
Cable Systems is a corporation duly incorporated, organized and
validly existing under the laws of the Province of Ontario. Cable Systems USA is
a corporation duly incorporated, organized and validly existing under the law of
the State of Delaware. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereunder have been or shall by
the Closing Date be duly authorized by all necessary corporate action on the
part of Cable Systems. Attached herewith as Schedule 3.1 is a copy of the
articles of incorporation of each of Cable Systems and the Subsidiaries of Cable
Systems.
3.2 ENFORCEABILITY OF OBLIGATIONS
This Agreement constitutes a valid and binding obligation of each
of the Vendors and Cable Systems enforceable against each of them in accordance
with its terms, subject to limitations with respect to enforcement imposed by
law in connection with bankruptcy or similar proceedings and to the extent that
equitable remedies such as specific performance and injunction are in the
discretion of the court from which they are sought. The execution, delivery and
performance of this Agreement and all other agreements, instruments,
certificates and documents contemplated hereby by each of the Vendors and Cable
Systems do not, on the date hereof, and will not, on the Closing Date:
(i) violate any Applicable Laws;
(ii) except as set forth on Schedule 3.2 attached hereto, violate
or conflict, or result in a breach of, or constitute a
default (or event, which with or without notice or lapse of
time or both, would constitute a default) under, or permit
cancellation of, or result in the creation of any
Encumbrance upon any of the Cable Systems Assets, the assets
used by Cable Systems in the Business, any requisite
licenses, permits or authorizations held by Cable Systems to
conduct its Business or own its Assets, or the Purchased
Shares under any of the terms, conditions or provisions of
any contract or agreement to which any of the Vendors is a
party
<PAGE>
-12-
or by which any of them or any of the Cable Systems
Assets, the assets used in the Cable Systems Business or
the Purchased Shares are bound, or would result in a
breach of, or default under any order of any court,
Governmental Authority or regulatory body;
(iii) cause the acceleration of the maturity of any indebtedness
of Cable Systems or any indebtedness secured by the Cable
Systems Assets or the assets of the Cable Systems Business
of the Purchased Shares, save and except a small business
loan (SBL), the total of which is less than $100,000.00;
(iv) violate or conflict with any provisions of the articles of
by-laws of Cable Systems or Cable Systems USA or any
director's or shareholder's resolutions of either Cable
Systems or Cable Systems USA.
3.3 RIGHT TO SELL - THE VENDORS
-------------
(i) are the sole and beneficial owner of the Purchased Shares as
set out in Schedule 2.1, which shares constitute all the
issued and outstanding shares in the capital of Cable
Systems;
(ii) has the exclusive right to dispose of the Purchased Shares
as herein provide and such disposition will not violate,
contravene, breach or offend against o result in any default
under any indenture, mortgage, lease, agreement, instrument
charter or by-law provision or Applicable Law to which any
of the Vendors or by which any of the Vendors is bound o
affected;
(iii) is the holder of record of all the Purchased Shares, free
and clear of Encumbrances or rights of others (othe than the
rights of the Purchaser hereunder) and no person (other than
the Purchaser hereunder) has any agreement, option or any
rights capabl of becoming an agreement or option for the
acquisition of the Purchased Shares;
(iv) upon transfer to the Purchaser at Closing of certificates
representing such Purchased Shares, the Purchaser shall
receive full title to the Purchased Shares free and clear of
all Encumbrances;
(v) has been duly authorized by all requisite action of the
shareholders and directors of any Vendor which is a
corporation.
3.4 LICENSES, REGISTRATIONS AND COMPLIANCE
Cable Systems and the Subsidiaries of Cable Systems are
registered, licensed or otherwise qualified as corporations to do business in
each jurisdiction in which the nature of their
<PAGE>
-13-
businesses or the property owned or leased by them makes such registrations,
licensing or other qualification necessary, and such registrations, licenses or
qualifications (as the case may be) are in good standing. Neither Cable Systems
nor the Subsidiaries of Cable systems are in violation of any Applicable Law,
which violation could have a Material Adverse Effect, and, without limiting the
generality of the foregoing, neither Cable Systems of the Subsidiaries of Cable
Systems are in breach of any Environmental Law. Each jurisdiction in which Cable
Systems or a subsidiary of Cable Systems carries on business and a brief
description of the nature of such operations and each jurisdiction in which
tangible assets owned or used by Cable Systems or the Subsidiaries of Cable
Systems are located is set forth in Schedule 3.4 attached hereto opposite the
name of the relevant corporation.
3.5 SUBSIDIARIES OF CABLE SYSTEMS
Save as set forth in Schedule 3.5 attached hereto, Cable Systems
has no other subsidiaries. Each such Subsidiary of Cable Systems is duly
incorporated or continued and organized and validly exists under the laws of its
jurisdiction of incorporation or continuance, as the case may be. The respective
jurisdictions of incorporation or continuance, as the case may be, and the
shares in the capital of such Subsidiaries of Cable Systems issued, optioned or
otherwise agreed to be issued to or in favour of Cable Systems are as set out in
Schedule 3.5. All such shares have been duly and validly issued, are outstanding
as fully paid and non-assessable in the capital of the respective Subsidiaries
of Cable Systems and are owned and beneficially owned and of record by Cable
Systems, free and clear of any Encumbrances or rights of others. No options,
warrants or other rights to purchase shares or other securities of any of the
Subsidiaries of Cable Systems have been authorized or agreed to be issued or are
outstanding.
3.6 CAPITALIZATION
The authorized and issued share capital of each of Cable Systems
and the Subsidiaries of Cable Systems is set forth in Schedule 3.6 attached
hereto. All such issued share capital has been duly and validly issued and is
outstanding as fully paid and non-assessable shares in the capital of Cable
Systems and Cable Systems USA. Save and except as set out in Schedule 3.6
herein, no options, warrants or other rights to purchase shares or other
securities of either Cable Systems or Cable Systems USA or other rights to
purchase shares or other securities of either Cable Systems or Cable Systems USA
have been authorized or agreed to be issued or are outstanding. Neither Cable
Systems nor Cable Systems USA is subject to any obligations (contingent or
otherwise) to re- purchase or other wise retire or acquire any of its shares.
3.7 FINANCIAL STATEMENTS
(a) The Financial Statements of Cable Systems prepared by Ernst
& Young, are true and correct and have been prepared in
accordance with GAAP applied on a basis consistent with that
of the preceding period. The Financial Statements of Cable
Systems present a true and complete statement of the
consolidated financial
<PAGE>
-14-
condition and assets and liabilities of Cable Systems as
at December 31, 1998 and the other statements comprising
the Financial Statements of Cable Systems accurately set
forth the results of the operations of Cable Systems on a
consolidated basis and the source and application of the
funds thereof throughout the period covered thereby.
(b) The Financial Statements of Cable Systems USA prepared by
Ernst & Young, are true and correct and have been prepared
in accordance with GAAP applied on a basis consistent with
that of the preceding period. The Financial Statements of
Cable Systems USA present a true and complete statement of
the consolidated financial condition and assets and
liabilities of Cable Systems USA as at December 31, 1998 and
the other statements comprising the Financial Statements of
Cable Systems USA accurately set forth the results of the
operations of Cable Systems USA on a consolidated basis and
the source and application of the funds thereof throughout
the period covered thereby.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES
(a) Cable Systems: Except to the extent reflected or reserved
against in the Financial Statements of Cable Systems
(including the notes thereto) or incurred subsequent to the
date thereof and disclosed either in this Agreement or in
Schedule 3.8 and except as incurred in the ordinary and
usual course of business or insured against, Cable Systems
has no outstanding indebtedness or any liabilities or
obligations (whether known or unknown, accrued, absolute,
contingent or otherwise) of a nature customarily reflected
or reserved against in a balance sheet (including the notes
thereto) prepared in accordance with GAAP.
(b) Cable Systems USA: Except to the exten reflected or reserved
against in the Financial Statements of Cable Systems USA
(including the notes thereto) or incurred subsequent to the
date thereof and disclosed in Schedule 3.8 and except as
incurred in the ordinary and usual course of business or
insured against, Cable Systems USA has no outstanding
indebtedness or any liabilities or obligations (whether
known or unknown, accrued, absolute, contingent or
otherwise) of a nature customarily reflected or reserved
against in a balance sheet (including the notes thereto)
prepared in accordance with GAAP.
3.9 TAX MATTERS
(a) Cable Systems has duly and timely file all federal,
provincial and local income, franchise, capital, sales or
use, goods and services, excise, fuel, payroll, property or
other tax returns required by any Applicable Law to be filed
by it and all liabilities required to be paid by Cable
Systems on account of Taxes prior to the date hereof have
been duly paid.
<PAGE>
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(b) Cable Systems USA has duly and timely filed all federal,
state and local income, franchise, capital, sales or use,
goods and services, excise, fuel, payroll, property or other
tax returns required by any Applicable Law to be filed by it
and all liabilities required to be paid by Cable Systems USA
on account of Taxes prior to the date hereof have been duly
paid.
(c) Neither Cable Systems nor Cable System USA have received
from any Governmental Authority any assessment,
re-assessment or notice of underpayment of any Taxes or
other charges and no such notice is reasonably expected.
(d) There are no actions, suits, proceedings, investigations or
claims now threatened or pending against Cable Systems or
Cable Systems USA in respect of Taxes, governmental charges
or assessments, or any matters under discussion with any
Governmental Authority relating to Taxes, governmental
charges or assessments asserted by such authority.
(e) No agreements, consent or other arrangements extending or
waiving the time limited for the filing of any tax return
by, or the payment of any Taxes, governmental charge or
deficiency against Cable Systems or Cable Systems USA or the
re-assessment of any Taxes, or any statutes of limitations
related thereto have been filed with respect to Cable
Systems for any fiscal year.
(f) Cable Systems and Cable Systems USA ha withheld from each
payment made to any of its officers, directors, former
directors and employees, the full amount of all Taxes and
other deductions (including without limitation, income
taxes, unemployment, disability, and other required taxes
and contributions) required to be withheld and has paid the
same together with the employer's share of same, if any (to
the extent required to be paid so no such amount is past
due), to the proper tax or other receiving officers within
the prescribed times and has filed, in complete and accurate
form, all information and other returns required pursuant to
any applicable legislation within the prescribed times.
(g) None of Cable Systems or any of the Subsidiaries of Cable
Systems has been and is currently required to file any
returns, elections or designations with any tax authority of
any jurisdiction outside Canada or outside the Province of
Ontario. Cable Systems and the Subsidiaries of Cable Systems
are not required to pay and owe no Taxes or any other like
amount to any Governmental Authority located in any
jurisdiction outside Canada.
(h) Cable Systems has paid, collected and remitted all Taxes
which are due and payable, collectible or remittable, as
applicable, by it on or before the date hereof. Adequate
provision has been made in the Financial Statements of Cable
Systems
<PAGE>
-16-
and Interim Financial Statements for all Taxes for the
periods covered by the Financial Statements of Cable
Systems and Interim Financial Statements, respectively.
Cable Systems has no liability for Taxes other than those
provided for in the Financial Statements of Cable Systems
and those arising in the ordinary course of business since
December 31, 1998.
(i) Canadian federal and provincial income tax assessments have
been issued to Cable Systems covering all past periods up to
and including December 31, 1998. There are no actions,
suits, proceedings, investigations, enquiries or claims now
pending or made or, to the best of the Vendors' knowledge,
threatened against Cable Systems in respect of taxes.
(j) Cable Systems is a Canadian-controlled private corporation,
as defined in the Canadian Tax Act, and has been one since
its incorporation.
(k) No debt or other obligation of Cable Systems has been or
will be settled or extinguished on or prior to the Closing
Date such that the provisions of Section 80 of the Canadian
Tax Act applies or would apply thereto.
3.10 ABSENCE OF CHANGES
Since the respective dates of the Interim Financial Statements of
Cable Systems and Cable Systems USA there has not been:
(a) any material changes in the condition or operations of the
Cable Systems Business, the Cable Systems Assets or the
financial condition of Cable Systems other than changes in
the ordinary and normal course of business, none of which
has or would be expected to have a Material Adverse Effect;
or
(b) any damage, destruction or loss, labou troubles or other
event, development or condition of any character (whether or
not covered by insurance) affecting the Cable Systems
Business, the Cable Systems Assets or the properties or
future prospects of Cable Systems which has or would be
expected to have a Material Adverse Effect.
3.11 ABSENCE OF UNUSUAL TRANSACTIONS
(a) Since the date of the Interim Financia Statements of Cable
Systems, Cable Systems has not:
(i) transferred, assigned, sold, leased or otherwise disposed of
any of the Cable Systems Assets or canceled any debts or
claims except in the ordinary and usual course of business;
<PAGE>
-17-
(ii) incurred or assumed any obligation or liability (fixed or
contingent), except those listed in Schedule 3.11(a)
attached hereto and except unsecured current obligations and
liabilities incurred in the ordinary and normal course of
business and consistent with past practice;
(iii) except as disclosed in Schedule 3.11(a), issued or sold any
shares in its capital or any warrants, bonds, debentures or
other securities of Cable Systems or issued, granted or
delivered and right, option or other commitment for the
issuance of any such or other securities;
(iv) discharged or paid any Encumbrance, or paid any obligation
or liability (fixed or contingent) other than liabilities
incurred since the date of the Financial Statements of Cable
Systems in the ordinary and normal course of business;
(v) declared or made any payment of any dividend or other
distribution in respect of any shares in its capital or
purchased or redeemed any such shares thereof or effected
any subdivision, consolidation or reclassification of any
such shares;
(vi) suffered any damage, destruction, operating loss or any
extraordinary loss, or waived, cancelled or written off any
rights of substantial value, or entered into any commitment
or transaction not in the ordinary and usual course of
business where such loss, rights, commitment or transaction
is or would have a Material Adverse Effect on Cable Systems;
(vii) except those listed in Schedule 3.11(a), amended or changed
or taken any action to amend or change its articles or
by-laws;
(viii) made any general wage or salary increases in respect of
personnel which it employs, other than increases in the
ordinary and normal course of business or as provided for in
the collective labour agreements referred to in Schedule
3.18 attached hereto;
(ix) mortgaged, pledged, subjected to Encumbrance or otherwise
encumbered any of the Cable Systems Assets or property,
whether tangible or intangible except in the ordinary and
normal course of business; or
(x) authorized or agreed or otherwise become committed to do any
of the foregoing.
(b) Since the date of the Interim Financia Statements of Cable
Systems USA, Cable
<PAGE>
-18-
Systems USA has not:
(i) transferred, assigned, sold, leased or otherwise disposed of
any of the Cable Systems USA Assets or cancelled any debts
or claims except in the ordinary and usual course of
business;
(ii) incurred or assumed any obligation or liability (fixed or
contingent), except those listed in Schedule 3.11(b)
attached hereto and except unsecured current obligations and
liabilities incurred in the ordinary and normal course of
business and consistent with past practice;
(iii) except as disclosed in Schedule 3.11(b), issued or sold any
shares in its capital or any warrants, bonds, debentures or
other securities of Cable Systems USA or issued, granted or
delivered and right, option or other commitment for the
issuance of any such or other securities;
(iv) discharged or paid any Encumbrance, or paid any obligation
or liability (fixed or contingent) other than liabilities
incurred since the date of the Interim Financial Statements
of Cable Systems USA in the ordinary and normal course of
business;
(v) declared or made any payment of any dividend or other
distribution in respect of any shares in its capital or
purchased or redeemed any such shares thereof or effected
any subdivision, consolidation or reclassification of any
such shares;
(vi) suffered any damage, destruction, operating loss or any
extraordinary loss, or waived, cancelled or written off any
rights of substantial value, or entered into any commitment
or transaction not in the ordinary and usual course of
business where such loss, rights, commitment or transaction
is or would have a Material Adverse Effect on Cable Systems
USA;
(vii) except those listed in Schedule 3.11(b), amended or changed
or taken any action to amend or change its articles or
by-laws;
(viii) made any general wage or salary increases in respect of
personnel which it employs, other than increases in the
ordinary and normal course of business or as provided for in
the collective labour agreements referred to in Schedule
3.18 attached hereto;
(ix) mortgaged, pledged, subjected to Encumbrance or otherwise
encumbered any of the Cable Systems USA Assets or property,
whether tangible or
<PAGE>
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intangible except in the ordinary and normal course of
business; or
(x) authorized or agreed or otherwise become committed to do any
of the foregoing.
3.12 LEASED EQUIPMENT
Schedule 3.12 attached hereto sets forth a true and substantially
complete list of all equipment, other personal property and fixtures in the
possession or custody of Cable Systems and/or the Subsidiaries of Cable Systems,
which, as of May 15, 1999, is leased or held under license or similar
arrangement and of the leases, licenses, agreements and other documentation
relating thereto. Additional equipment has been or may be leased in the ordinary
course of business after May 15, 1999.
3.13 COLLECTABILITY OF ACCOUNTS RECEIVABLE
The accounts receivable as shown on the Financial Statements and
Interim Financial Statements of Cable Systems and Cable Systems USA are
collectible to within the full amount less the reserve shown on the Financial
Statements and Interim Financial Statements..
3.14 LEASES OF REAL PROPERTY
All leases of real property and all interests held by Cable
Systems and the Subsidiaries of Cable Systems as lessees under real property
leases are reduced to writing and are recorded on the books of Cable Systems
and/or the Subsidiaries of Cable Systems.
All rental and other payments required to be paid by Cable Systems
or any Subsidiaries of Cable Systems as lessees are paid on a timely basis.
Such leases are in full force and effect without amendment thereto
and neither Cable Systems nor any Subsidiary of Cable Systems, nor the other
party thereto, is otherwise in default in meeting its obligations contained in
any such lease.
3.15 REAL PROPERTY
Neither Cable Systems nor the Subsidiaries of Cable Systems own
any real property in fee simple.
3.16 USE
The use by Cable Systems and the Subsidiaries of Cable Systems of
the buildings and improvements located on the leased real property referred to
in Section 3.14, the operation and maintenance thereof as now operated and
maintained by Cable Systems and the Subsidiaries of
<PAGE>
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Cable Systems, and the purposes for which they are presently being used, are not
in breach in any material respect of any Applicable Law and there are no
restrictive covenants or Applicable Laws which in any way restrict or prohibit
the use of the said buildings, improvements and real property for the purposes
for which they are presently being used.
Cable Systems and the Subsidiaries of Cable Systems are not aware
of any buildings and other structures located on the leased real property
referred to in Section 3.14 being or ever having been insulated with urea
formaldehyde foam insulation, nor are they aware of such buildings or structures
contain any aluminum wiring or friable asbestos or any other substance
containing a type of asbestos or asbestos product which is a hazardous product,
toxic or priority substance or any other substance deemed hazardous or regulated
by any laws or regulations of Canada or the Province of Ontario in force at the
date hereof.
3.17 CONDITION OF ASSETS
All Cable Systems Assets and all material tangible assets of the
Subsidiaries of Cable Systems used in or in connection with the Cable Systems
Business are in good condition, repair and (where applicable) proper working
order, reasonable wear and tear excepted.
3.18 EMPLOYMENT CONTRACTS
Except as set out in Schedule 3.18 attached hereto, neither Cable
Systems nor the Subsidiaries of Cable Systems have any union or collective
labour, pension, deferred profit sharing, stock option or other similar
agreement nor do they have any written contracts of employment with any
employees or any oral contracts of employment which are not terminable on the
giving of reasonable notice in accordance with applicable law. There is not now
any circumstances or conduct which could result in the filing of an unfair
labour practice complaint, and there exists no event or condition which with the
giving of notice or the passage of time would constitute a breach or default
thereunder by any party thereto.
3.19 MATERIAL CONTRACTS
All Material Contracts of Cable Systems and the Subsidiaries of
Cable Systems have been reduced to writing and are recorded on the books of
Cable Systems and/or the Subsidiaries of Cable Systems. The Material Contracts
are all in full force and effect without amendment thereto and no material
default exists in respect thereof on the part of any of the parties thereto.
Such contracts and agreements include all the presently outstanding material
contracts entered into by Cable Systems and the Subsidiaries of Cable Systems in
the course of carrying on their respective businesses and all quotations, orders
or tenders for such contracts which remain open for acceptance. To the best of
the knowledge, information and belief of the Vendors, Cable Systems and the
Subsidiaries of Cable Systems have the capacity, including the necessary
personnel, equipment and supplies, to perform all their obligations thereunder.
<PAGE>
-21-
3.20 PENSION PLANS
There are no pension plans established by or for Cable Systems or
the Subsidiaries of Cable Systems for its or their employees.
3.21 ABSENCE OF GUARANTEES
Except as disclosed in Schedule 3.21 attached hereto, neither
Cable Systems nor any Subsidiary of Cable Systems has given or agreed to give,
or is a party or bound by, any guarantee of indebtedness or other obligations of
third parties or any other commitment by which Cable Systems or such Subsidiary
of Cable Systems is, or is contingently, responsible for such indebtedness or
other obligation.
3.22 LITIGATION
Except as disclosed in Schedule 3.22 attached hereto, there is no
suit, action, litigation, arbitration proceeding or governmental proceeding,
hearing before an administrative tribunal, including appeals and applications
for review, in progress, pending or, to the best of the knowledge, information
and belief (after due enquiry) of the senior officers of Cable Systems and the
Subsidiaries of Cable Systems, threatened against or relating to Cable Systems
or the Subsidiaries of Cable Systems or affecting its or their properties or
business which, if determined adversely to Cable Systems or the Subsidiaries of
Cable Systems, individually or in the aggregate, might have a Material Adverse
Effect on the properties, business, future prospects or financial condition of
Cable Systems or the Subsidiaries of Cable Systems. Except as shown in the said
Schedule, there is not presently outstanding against Cable Systems or any
Subsidiary of Cable Systems, any judgment, decree, injunction, rule or order of
any court, governmental department, commission, agency, instrumentality or
arbitrator.
3.23 EMPLOYEES
Cable Systems and each Subsidiary of Cable Systems shall after the
execution of this Agreement deliver to the Purchaser a list of all personnel
employed or engaged thereby whose annual rate of remuneration exceeds
$50,000.00.
3.24 RESIDENCE OF VENDORS, ETC.
The Vendors are not non-residents of Canada for the purposes of
the Canadian Tax Act. Cable Systems is a Canadian-controlled private corporation
for the purposes of the Canadian Tax Act.
3.25 INSURANCE
Cable Systems and each Subsidiary of Cable Systems has, since
their incorporation,
<PAGE>
-22-
maintained and currently maintains such policies of insurance, issued by
responsible insurers, as are appropriate to the Cable Systems Business, the
Cable Systems USA business, the property and Cable Systems Assets and the
property and assets of the Subsidiaries of Cable Systems, in such amounts and
against such risks as are customarily carried and insured against by owners of
comparable businesses, properties and assets; all such policies of insurance are
in full force and effect and neither Cable Systems nor any Subsidiary of Cable
Systems is in default, whether as to the payment of premium or otherwise, under
the terms of any such policy.
3.26 VEHICULAR EQUIPMENT
Schedule 3.26 attached hereto contains a list of all vehicular
equipment owned or leased by Cable Systems and the Subsidiaries of Cable Systems
as of May 15, 1999. Such vehicular equipment is in roadworthy condition and is
capable of satisfying the inspection requirements and performance standards
prescribed by the Highway Traffic Act (Ontario) and the Regulations thereto, as
may be amended from time to time, for its particular type or class. Additional
vehicles have been or may be leased in the ordinary course of business after May
15, 1999.
3.27 COPIES OF AGREEMENTS, ETC.
True, correct and complete copies of all mortgages, leases,
agreements, instruments and other documents listed in Schedules hereto, and of
the policies of insurance referred to herein are located at the head office
location of Cable Systems and full and complete copies of which shall be made
available to the Purchaser after the execution of this Agreement.
3.28 CORPORATE RECORDS
Other than as set out in Schedule 3.28 attached hereto, the
corporate records and minute books of Cable Systems and each of the Subsidiaries
of Cable Systems contain complete and accurate copies of all by-laws of Cable
Systems, and the Subsidiaries of Cable Systems respectively, minutes of all
meetings and resolutions of the directors and shareholders of such corporations;
all such meetings were duly called and held, all such by-laws and resolutions
were duly passed and the share certificate books, registers of shareholders,
registers of transfers and registers of directors of Cable Systems and each of
the Subsidiaries of Cable Systems are complete and accurate in all material
respects.
3.29 BOOKS OF ACCOUNT
The books and records of account of Cable Systems and the
Subsidiaries of Cable Systems, fairly and correctly set out and disclose in all
material respects and in accordance with generally accepted accounting
principals, consistently applied, the financial positions of Cable Systems and
the Subsidiaries of Cable Systems as of the date hereof and all material
financial transactions of Cable Systems and the Subsidiaries of Cable Systems
respectively have been accurately recorded in such books and records.
<PAGE>
-23-
3.30 COMPLIANCE WITH ENVIRONMENTAL LAWS
With respect to the properties leased by Cable Systems or the
Subsidiaries of Cable Systems, since the commencement date of these leases,
Cable Systems, the Subsidiaries of Cable Systems and the Cable Systems Business
are in compliance with and have always been in compliance with all Environmental
Laws.
3.31 EMPLOYMENT EQUITY
None of Cable Systems or the Subsidiaries of Cable Systems have
received notice of any proposed or pending compliance review in respect of
employment equity, know of the basis for the assertion of the same and no
sanctions have been imposed on any of them for failing to honour their
commitment to employment equity.
3.32 FAMILY LAW ACT
No order has been given under the Family Law Act (Ontario) which
would or does affect the Purchased Shares in any manner whatsoever nor is there
any application threatened or pending under the Family Law Act by any of the
Vendors.
3.33 ASSETS SUFFICIENT FOR CONDUCT OF CABLE SYSTEMS BUSINESS AND CABLE
------------------------------------------------------------------
SYSTEMS USA BUSINESS
- --------------------
(a) Cable Systems Assets constitute all of the assets and
properties required for the operation of Cable System's
business as it is presently operated; and
(b) The assets of Cable Systems USA constitute all of the assets
and properties required for the operation of Cable Systems
USA's Business at it is presently operated.
3.34 BROKER
Other than the business brokering agreement was entered into by
Cable Systems in September 1998, neither the Vendors, Cable Systems nor Cable
Systems USA have entered into any brokerage or similar agreement. The herein
Agreement and the transactions contemplated herein are being completed as a
result of the September 1998 brokering agreement. The business broker or finder
is entitled to a brokerage fee or other commission based on the business
brokering agreement, such commission or fee as outlined in the brokering
agreement to be paid by Cable Systems.
3.35 CRIMINAL CODE
Neither Cable Systems nor any director, officer or shareholder of
Cable Systems has been
<PAGE>
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found guilty of any offence under the Criminal Code (Canada).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Vendors as
follows:
4.1 ORGANIZATION AND VALID EXISTENCE
The Purchaser is a corporation duly incorporated and organized and
is validly existing under the laws of the State of Nevada and has all necessary
corporate power, authority and capacity to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereunder have
been or by the Closing Date will be duly authorized by all necessary corporate
action on the part of the Purchaser.
4.2 ENFORCEABILITY OF OBLIGATIONS
This Agreement constitutes a valid and binding obligation of the
Purchaser enforceable against it in accordance with its terms, subject, however,
to limitations with respect to enforcement imposed by law in connection with
bankruptcy or similar proceedings and to the extent that equitable remedies such
as specific performance and injunction are in the discretion of the court from
which they are sought. THE PURCHASER SPECIFICALLY WARRANTS THAT IT HAS THE
FINANCIAL RESOURCES AND ABILITY TO COMPLETE THE PURCHASE CONTEMPLATED BY THIS
AGREEMENT.
4.3 ABSENCE OF CONFLICTING AGREEMENTS
The Purchaser is not a party to, bound or affected by or subject
to any indenture, mortgage, lease, agreement, instrument, charter or by-law
provision, statute, regulation, order, judgment, decree or law which would be
violated, contravened or breached by, or under which any default would occur, as
a result of the execution and delivery of this Agreement or the consummation of
any of the transactions provided for herein.
4.4 RESIDENCE OF THE PURCHASER
The Purchaser is a non-Canadian within the meaning of the
INVESTMENT CANADA ACT. This transaction is exempt from the operation of the
statue because the Purchase Price is less than One Hundred Million
($100,000,000.00) Dollars.
<PAGE>
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4.5 LITIGATION
There is no suit, action, litigation, arbitration proceeding or
governmental proceeding, including appeals and applications for review, in
progress, pending or, to the best of the knowledge, information and belief
(after due enquiry) of the senior officers of the Purchaser, threatened against
or involving the Purchaser or any judgment, decree, injunction, rule or order of
any Court, governmental department, commission, agency, instrumentality or
arbitrator which, in any such case, might adversely affect the ability of the
Purchaser to enter into this Agreement or to consummate the transactions
contemplated hereby. The Purchaser is not aware of any existing ground on which
any such action, suit or proceeding may be commenced with any reasonable
likelihood of success.
4.6 KEY EMPLOYEE AGREEMENTS
The Purchaser shall, prior to the Closing Date, negotiate
employment agreements with the Key Employees of Cable Systems and the
Subsidiaries of Cable Systems. Such agreements shall be executed on or before
the Closing Date.
4.7 EMPLOYEE STOCK OPTIONS
The Purchaser is authorized to issue to the employees of Cable
Systems and the Subsidiaries of Cable Systems 100,000 Stock Options, exercisable
after Closing at a strike price of $2.50 per each option, to be divided between
the employees of Cable Systems and the Subsidiaries of Cable Systems in a manner
to be determined. Neither the options, nor the shares issued upon exercise of
these options have been registered under United States securities laws. The
employees shall be entitled to exercise a maximum of one-third of the Stock
Options in each of the three years following the Closing Date. In the event that
the Purchaser assigns this Agreement in accordance with Section 10.6 hereto, the
Permitted Assignee shall be authorized to and shall issue to the employees of
Cable Systems and its Subsidiaries 120,000 Stock Options as above with a strike
price of $2.50 per each option.
4.8 DUE DILIGENCE
Following the execution of this Agreement, the Purchaser shall
conduct its due diligence subject to the following limitations. The Purchaser
shall not copy any of the Vendor's or Cable Systems' or Cable Systems USA's
private documents without prior written consent of the appropriate party. All
examinations of documents shall take place at the offices of Cable Systems in
Markham, Ontario, or such other place as the parties may agree to, all under
supervision of Cable Systems' personnel. In the event that this Agreement is not
completed for any reason whatsoever, the Purchaser shall not use the information
about the Vendors to compete with Cable Systems or Cable Systems USA, nor shall
the Purchaser solicit the employment of any employee or subcontractor of Cable
Systems or Cable Systems USA or otherwise interfere in the business of Cable
Systems or Cable Systems USA
<PAGE>
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ARTICLE 5
CONDITIONS PRECEDENT TO THE PERFORMANCE
BY THE PURCHASER OF ITS OBLIGATIONS UNDER THIS AGREEMENT
The obligations of the Purchaser to complete the purchase of the
Purchased Shares hereunder shall be subject to the satisfaction of, or
compliance with, in all material respects, at or before the Closing Time, each
of the following conditions precedent (each of which is hereby acknowledged to
be inserted for the exclusive benefit of the Purchaser any may be waived by it
in whole or in part);
5.1 TRUTH AND ACCURACY OF REPRESENTATIONS OF VENDOR AT THE CLOSING
TIME
All of the representations and warranties of each of the Vendors,
Cable Systems and Cable Systems USA made in or pursuant to this Agreement,
including, without limitation, the representations and warranties made and set
forth in Article 3 hereof, shall be materially true and correct as at the
Closing Time and with the same effect as if made at and as of the Closing Time
(except as such representations and warranties may be affected by the occurrence
of events or transactions expressly contemplated and permitted hereby or by
transactions in the ordinary and normal course of business), and the Purchaser
shall have received a certificate from the President or other person exercising
the functions of chief executive officer of each of the Vendors, Cable Systems
and Cable Systems USA and a certificate from the Vendors confirming, to the best
of his knowledge, information and belief (after due enquiry) the truth and
correctness of the representations and warranties of each of Cable Systems,
Cable Systems USA and each of the Vendors.
5.2 PERFORMANCE OF OBLIGATIONS
Each of Cable Systems, Cable Systems USA and each of the Vendors
shall have performed or complied with, in all respects, the Vendors, Cable
Systems and Cable Systems USA, all of its obligations, covenants and agreements
hereunder.
5.3 RECEIPT OF CLOSING DOCUMENTATION
All documentation relating to the due authorization and completion
of the sale and purchase hereunder of the Purchased Shares and all actions and
proceedings taken on or prior to the Closing in connection with the performance
by any of Cable Systems, Cable Systems USA or the Vendors of their obligations
under this Agreement shall be satisfactory to the Purchaser and the Purchaser's
counsel, acting reasonably, and the Purchaser shall have received copies of all
such documentation or other evidence as it may reasonably request in order to
establish the consummation of the transactions contemplated hereby and the
taking of all corporate proceedings in connection therewith in compliance with
these conditions, in form (as to certification and otherwise) and substance
satisfactory to the Purchaser and the Purchaser's Counsel.
<PAGE>
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5.4 NO FIRE DAMAGE
No substantial damage by fire or other hazard to the Assets of
Cable Systems shall have occurred from the Effective Date to the Closing Date
which is not adequately insured against or which has caused a cessation of
business for more than seven (7) days if insured against.
5.5 LITIGATION
On the Closing Date, there shall be no litigation, governmental
investigation or proceeding pending or threatened for the purpose of enjoining
or preventing the consummation of any of the transactions contemplated by this
Agreement or otherwise claiming that such consummation is improper.
5.6 MATERIAL CHANGE
Since the Effective Date there shall have been no:
(a) Nothing shall have occurred that has or could cause a
Material Adverse Effect;
(b) Material loss or damage not covered by insurance to any of
the Assets of Cable Systems and the Subsidiaries of Cable
Systems.
5.7 DUE DILIGENCE REVIEW
The Purchaser shall no later than 55 days after the Effective Date
have completed their due diligence review having been satisfied with the results
of its investigation and review of the business, operations, assets,
liabilities, result of operations, cash flows, conditions (financial and
otherwise) and prospects of, and other matters relating to Cable Systems and the
Subsidiaries of Cable Systems, delivered to the Vendors' Counsel a certificate
evidencing the Purchaser's satisfaction.
5.8 CERTIFICATES
The Vendors shall have delivered to the Purchaser share
certificates representing all of the Purchased Shares, which share certificates
shall have been duly endorsed in blank for transfer or accompanied by duly
executed stock powers.
5.9 KEY EMPLOYEES
The Key Employees shall have entered into the Employment
Agreements referred to in Section 4.6 herein.
<PAGE>
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ARTICLE 6
CONDITIONS PRECEDENT TO THE PERFORMANCE BY
THE VENDORS OF THE OBLIGATIONS UNDER THIS AGREEMENT
The obligations of the Vendors to complete the sale of the
Purchased Shares hereunder shall be subject to the satisfaction of or compliance
with, at or before the Closing Time, each of the following conditions precedent
(each of which is hereby acknowledged to be inserted for the exclusive benefit
of the Vendors and may be waived by each of them in whole or in part);
6.1 TRUTH AND ACCURACY OF REPRESENTATIONS OF PURCHASER AT CLOSING TIME
All of the representations and warranties of the Purchaser made in
or pursuant to this Agreement, including without limitation the representations
and warranties made by the Purchaser and set forth in Article 4 hereof, shall be
true and correct as at the Closing Time and with the same effect as if made at
and as of the Closing Time and the Vendors shall each have received a
certificate from a duly authorized senior officer of the Purchaser confirming,
to the best of his knowledge, information and belief (after due enquiry), the
truth and correctness of the representations and warranties of the Purchaser
contained herein;
6.2 PERFORMANCE OF OBLIGATIONS
The Purchaser shall have performed or complied with, in all
respects, all of its obligations, covenants and agreements hereunder.
6.3 RECEIPT OF CLOSING DOCUMENTATION
All documentation relating to the due authorization and completion
of the sale and purchase hereunder of the Purchased Shares and all actions and
proceedings taken on or prior to the Closing in connection with the performance
by the Purchaser of its obligations under this Agreement shall be satisfactory
to the Vendors and Vendor's Counsel and the Vendors shall have received copies
of all such documentation or other evidence as they may reasonably request in
order to establish the consummation of the transactions contemplated hereby and
the taking of all corporate proceedings in connection therewith in compliance
with these conditions, in form (as to certification and otherwise) and substance
satisfactory to the Vendors and Vendors' Counsel.
6.4 LITIGATION
On the Closing Date, there shall be no litigation, governmental
investigation or proceeding pending or threatened for the purposes of enjoining
or presenting the consummation of any of the transactions contemplated by this
Agreement or otherwise claiming that such consummation is improper.
<PAGE>
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6.5 SATISFACTION WITH DUE DILIGENCE
No later than 55 days after the Effective Date, the Purchaser
shall deliver to the Vendors' Counsel a certificate evidencing the Purchaser's
completion of their due diligence review and the Purchaser's satisfaction with
the same.
6.6 RELEASE OF PERSONAL GUARANTEES
On or before the Closing Date, the Vendors shall be released from
any and all guarantees of indebtedness or other obligations of third parties or
any other commitment by which Cable Systems or the Subsidiaries of Cable Systems
are, or are contingently, responsible for such indebtedness or other obligation.
6.7 KEY EMPLOYEES UNDER CONTRACT
On the Closing Date, the Key Employees of Cable Systems and the
Subsidiaries of Cable Systems shall have executed employment agreements with the
Purchaser satisfactory to the parties thereto.
6.8 ISSUANCE OF STOCK OPTIONS
On the Closing Date, the Purchaser or the Permitted Assignee shall
deliver to the Key Employees the Stock Options described in Section 4.7.
ARTICLE 7
OTHER COVENANTS OF THE PARTIES
7.1 FROM OFFER TO CLOSING DATE
During the period from the date of the Effective Date to the
Closing Time, Cable Systems and the Subsidiaries of Cable Systems shall:
(a) except as otherwise contemplated or permitted by this
Agreement, conducted their respective businesses in the
ordinary and normal course thereof and have not, without the
prior written consent of the Purchaser, entered into any
transaction which if effected before the date of this
Agreement, would constitute a material breach of the
representations, warranties or agreements contained herein;
(b) continued in force all existing policies of insurance
presently maintained by Cable Systems and the Subsidiaries
of Cable Systems;
<PAGE>
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(c) complied with all Applicable laws affecting the operation of
the Business and the Cable Systems Business and paid all
required Taxes and tax installments;
(d) not, without the prior written consent of the Purchaser
taken any of the actions, done any of the things or
performed any of the acts described in paragraphs (a)(i) to
(x) inclusive and paragraphs (b)(i) to (x) inclusive of
Section 3.11.
7.2 ACTIONS TO SATISFY CLOSING CONDITIONS
Each of the Parties hereby agrees to take all such actions as are
within its power to control, and to use its best efforts to cause other actions
to be taken which are not within its power to control, so as to ensure
compliance with any conditions set forth herein which are for the benefit of any
other Party.
7.3 TERMINATION FOR CAUSE
In the event of a material issue, which arises following the
execution of this Agreement, but prior to the Closing Date, the parties shall
take all reasonable actions to remedy the issue and close the transaction,
including, without limitation, making use of the dispute resolution procedure
set out in Article 9 hereof. Neither party shall terminate this Agreement
without first attempting, in good faith, to remedy any material issue. In the
event any party wishes to terminate this Agreement for cause, following attempts
to remedy the issue, such party shall notify all other parties in writing as to
the nature of the issue and the reason for termination prior to terminating this
Agreement.
ARTICLE 8
SURVIVAL AND REMEDY: INDEMNIFICATION
8.1 SURVIVAL
All representations and warranties of the parties hereto shall
survive the Closing and shall expire as of 11:59 p.m. Eastern Standard time on
the date which is ninety days after the Closing Date.
8.2 INDEMNIFICATION BY VENDORS
The Vendors, Cable Systems and Cable Systems USA agree to
indemnify the Purchaser
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and agree to hold it harmless from any Losses incurred or suffered by the
Purchaser arising from any breach of or any inaccuracy in any representation or
warranty made by the Vendors, Cable Systems and Cable Systems USA pursuant to
this Agreement and any breach of or failure by the Vendors, Cable Systems and
Cable Systems USA to perform any covenant or obligation of the Vendors, Cable
Systems and Cable Systems USA set out in this Agreement.
8.3 INDEMNIFICATION BY PURCHASER
The Purchaser agrees to indemnify the Vendors, Cable Systems and
Cable Systems USA against and agrees to hold them harmless from any Losses
incurred and suffered by any of the Vendors, Cable Systems and Cable Systems USA
or any of their respective Affiliates (or any combination thereof) arising from
any breach of or any inaccuracy in any representation or warranty made by the
Purchaser pursuant to this Agreement and any breach of or failure by the
Purchaser to perform any covenant or obligation of the Purchaser set out in this
Agreement.
8.4 NOTICE OF CLAIMS: ASSUMPTION OF DEFENSE
The indemnified party shall give prompt notice to the indemnifying
party in accordance with the terms of Section 10.4 of the assertion of any claim
or the commencement of any suit proceeding by any party in respect of which
indemnity may be sought hereunder, specifying with reasonable particularity the
basis therefore and giving the indemnifying party such information with respect
thereto as the indemnifying party may reasonably request (but the giving of such
notice shall not be conditioned precedent to indemnification hereunder). The
indemnifying party may, at its own expense:
(a) participate in; and
(b) upon notice to the indemnified party and the indemnifying
party's written agreement that the indemnified party is
entitled to indemnification pursuant to Section 8.2 or
Section 8.3 for Losses arising out of such claim, suit,
action or proceeding, at any time during the course of any
such claim, suit, action or proceeding, assume the defense
thereof; provided that:
(i) the indemnifying party's counsel is reasonably satisfactory
to the indemnified party;
(ii) the indemnifying party shall thereafter consult with the
indemnified party upon the indemnified party's reasonable
request for consultation from time to time with respect to
such claim, suit, action or proceeding; and
(iii) in the case of a claim arisin from a breach of the
warranties contained in Section 3.9 hereof for which the
Vendors, Cable Systems and Cable Systems USA have, pursuant
to this section 8.4 assumed the defense
<PAGE>
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thereof, if the action of the Vendors, Cable Systems and
Cable Systems USA may adversely affect the Purchaser or
Cable Systems tax obligations for periods ending after the
Closing Date, none of the Vendors, Cable Systems and Cable
Systems USA shall enter into a settlement agreement, file
and amended tax return or seek a refund of Taxes with
respect to the operations of Cable Systems without the prior
written consent of the Purchaser, which consent shall not be
unreasonably withheld. If the indemnifying party assumes
such defense, the indemnified party shall have the right
(but not the duty) to participate in the defense thereof and
to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party. Whether or not
the indemnifying party chooses to defend or prosecute any
such claim, suit, action or proceeding, all of the Parties
hereto shall cooperate in the defense or prosecution
thereof.
8.5 SETTLEMENT OR COMPROMISE
Any settlement or compromise made or caused to be made by the
indemnified party or the indemnifying party, as the case may be, of any such
claim, suit, action or proceeding of the kind referred to in Section 8.4 shall
also be binding upon the indemnifying party or the indemnified party, as the
case may be, in the same manner as if a final judgment or decree was entered by
a court of competent jurisdiction in the amount of such settlement or
compromise. No party shall settle or compromise any claim, suit, action or
proceeding without the prior written consent of the other parties hereto, which
consent shall not be unreasonably withheld.
8.6 FAILURE OF INDEMNIFYING PARTY TO ACT
In the event the indemnifying party does not elect to assume the
defense of any claim, suit, action or proceeding, then any failure of the
indemnified party to defend or to participate in the defense of any such claim,
suit, action or proceeding or to cause same to be done, shall not relieve the
indemnifying party of its obligations hereunder, provided that the indemnified
party gives the indemnifying party at least thirty (30) days' notice of its
proposed intention not to defend or participate and affords the indemnifying
party the opportunity to assume the defense thereof.
8.7 PAYMENT OF INDEMNIFYING PARTY
Contemporaneously with any compromise or settlement the
indemnifying party shall pay or cause to be paid to the indemnified party or as
they may direct, the amount owing under this indemnity with respect to such
matter being provided further that:
(a) the indemnifying party shall provide further security to the
indemnified party in respect of any cost of damages arising
in connection with any litigation; and
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(b) the indemnifying party shall agree to reimburse the
indemnified party promptly in respect of all out of pocket
expenses incurred by indemnified party in connection with
such litigation or pending litigation.
8.8 LIMITATION RE INDEMNIFICATION BY THE VENDORS, CABLE SYSTEMS AND
---------------------------------------------------------------
CABLE SYSTEMS USA
- -----------------
Notwithstanding anything contained in Section 8.2 hereof, the
Vendors, Cable Systems and Cable Systems USA shall only be required to pay to
the Purchaser, an amount in respect of Losses for indemnification under the
Section 8.2 to the extent by which the amount of such Losses exceeds, in the
aggregate, $25,000.
ARTICLE 9
DISPUTE RESOLUTION
9.1 NEGOTIATION - Subject to the provisions of this Agreement, the Vendors and
the Purchaser will attempt to resolve any controversy relating to the Agreement
by negotiation between representatives of the parties who have authority to
settle the controversy. The disputing Party will give the other Parties written
notice of the dispute. Within five (5) business days of receiving such notice,
the receiving Parties will submit to the other Parties a written response. The
notice and response shall not exceed three (3) pages. The representatives shall
meet at a mutually acceptable time and place within five (5) business days of
the date of the responding Party's notice.
9.2 MEDIATION
If the matter has not been resolved within five (5) business days
of the responding Party's notice, or if either Party will not meet, the dispute
will be submitted to mediation as set out below. The mediator will have no power
to bind the Parties. The mediation will be confidential. The mediation process
will be conducted as follows:
(a) SELECTION OF MEDIATOR - The Vendors and the Purchaser will
have three (3) business days from the end of the time for
negotiation to agree upon a mutually acceptable mediator
(the "Mediator"). If no Mediator has been selected within
that time, the Vendors and the Purchaser agree jointly to
request that Cable System's financial advisors supply,
within two (2) business days, a list of three (3) potential
mediators. Within two (2) business days of receipt of the
list, Vendors and Purchaser will independently rank the
proposed candidates, will simultaneously exchange rankings,
and will agree to select as the Mediator the individual
receiving the highest combined ranking who is available. If
either Party does not rank and provide a copy of the ranking
to the other Party, the Party who does rank will be able to
select the Mediator from the list;
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(b) TIME AND PLACE FOR MEDIATION - In consultation with the
Mediator, the Vendors and the Purchaser will designate a
mutually convenient time and place for the mediation (and
unless circumstances require otherwise, the date should be
no later than five (5) business days after the selection of
the Mediator);
(c) SUMMARY OF VIEWS - Two (2) days prior to the mediation, each
Party will deliver to the Mediator and to the other Parties
a written summary of its views of the dispute, such summary
not to exceed three (3) pages;
(d) FEES OF MEDIATOR - The fees of the Mediator will be shared
equally by Vendor and Purchaser; and
(e) TERMINATION OF PROCEDURE - The Vendors and the Purchaser
agree to participate in the mediation for at least four (4)
hours (unless terminated earlier by the Mediator). After
that time, either the Vendors or the Purchaser may leave the
mediation at any time. If the mediation does not yield a
settlement, the Vendors and the Purchaser agree not to take
any action (other than good faith attempts to negotiate a
settlement to the dispute) prior to the conclusion of a five
(5) day post-mediation period that commences on the day
after the conclusion of the mediation process.
9.3 ARBITRATION
After the expiry of the five (5) day moratorium period referred to
in the paragraph above, if either Party will not participate in the mediation,
the dispute will be finally settled by arbitration in accordance with the
provisions of the ARBITRATION ACT, R.S.O. 1990, c. A-24, as amended from time to
time. The following rules will apply to the arbitration:
(a) APPOINTMENT OF ARBITRATOR - The arbitration tribunal will
consist of one arbitrator (the "Arbitrator"). The Vendors
and the Purchaser will have five (5) business days from the
end of the five (5) day post-mediation period to agree on
the Arbitrator. If they cannot agree, either Party may
request that Cable System's financial advisors supply,
within two (2) business days a list of five (5) qualified
arbitrators. Within two (2) business days of the receipt of
the list, the Vendors and the Purchaser will independently
rank the proposed arbitrators, will simultaneously exchange
rankings, and will agree to select as the Arbitrator the
individual receiving the highest combined ranking who is
available. If either Party does not rank and provide a copy
of the ranking to the other party, the Party who does rank
will be able to select the Arbitrator;
(b) RULES OF ARBITRATION - The Vendors and the Purchaser shall
agree, in consultation with the Arbitrator, on the rules for
the arbitration. Absent agreement to the
<PAGE>
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contrary, the following rules, designed to save time and
expense for the Parties, will apply:
(i) Pleadings shall be exchanged within twenty (20) days of the
selection of the Arbitrator, and shall be no more than five
(5) pages in length;
(ii) Each Party shall provide to the other access to any
documents in their possession which may be relevant to the
arbitration. Each Party shall also provide to the other two
(2) days before the arbitration hearing, lists and copies of
the documents that the Party intends to rely on at the
arbitration;
(iii) Each Party shall be entitled to oral discovery of the other
Party if it deems it appropriate. Any questions refused
shall be put to the Arbitrator for the Arbitrator's
determination as to whether the questions are appropriate
and relevant. Oral discovery shall take place within thirty
(30) days of the delivery of the conclusion of the exchange
of pleadings;
(iv) The arbitration shall take place within three (3) months of
the selection of the Arbitrator;
(v) At the Arbitration hearing, opening argument will be limited
to one half hour per party;
(vi) Each Party may produce up to two witnesses for direct
examination. The total time permitted for direct examination
(whether one or two witnesses is produced) will be two
hours. Total time for cross-examination will also be two
hours for each Party;
(vii) All evidence is admissible and its weight will be determined
by the Arbitrator;
(viii) Each Party may introduce any of its 15 documents;
(ix) Closing argument will be limited to (1) one hour for each
Party; and
(x) The Arbitrator shall be instructed to produce a decision
within seven (7) calendar days of the conclusion of the
arbitration, and written reasons within one (1) month of the
arbitration.
(c) The arbitration will be conducted in English and will take
place in the Town of Markham;
(d) The arbitration awards will be given in writing and will be
final, not subject to
<PAGE>
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any appeal, and will deal with the question of costs of
the arbitration. In the award of costs, the Arbitrator may
consider each Party's efforts to make any settlement
offer. If either Party refuses to participate in the
negotiation or mediation, there will be a presumption that
costs on a solicitor and client basis will be awarded
against the Party refusing to participate, regardless of
the outcome of the arbitration;
(e) Judgement upon the arbitration award may be entered into any
court having jurisdiction, or application may be made to
such court for judicial recognition of the award; and
(f) The Arbitrator will not award punitive or special damages.
9.4 LIMITED PROCEDURE FOR SETTLING DISPUTES
The Parties hereto mutually agree that the procedure specified in
the Agreement are the only procedures available for the resolution of any
controversies or disputes arising out of or relating to this Part, or the
breach, termination or validity of it, or any other related agreement between
the Vendors and the Purchaser. If any Party attempts to have issues resolved in
court that should property be resolved pursuant to this Part, the Parties agree
that this section can be used to stay any such proceedings. However, before or
during the time that the Vendor and the Purchaser follow these procedures,
either one can go to the appropriate court to get an injunction if the party
reasonably believes that such a step is necessary to avoid irreparable damage or
harm. Even if any Party takes such action, the Parties will continue to
participate in good faith in the procedures set out in this Part.
ARTICLE 10
OTHER MATTERS
10.1 POWER OF ATTORNEY
The Vendors, or any of them, may act by Attorney. Power of
Attorney shall be given to Joseph Melanson. The Attorney, Melanson, shall, upon
request, produce a copy of the Power of Attorney authorizing him to sign all
documents including this Agreement, on behalf of the Vendors. Each Vendor shall,
unless unable to act on his/her or its own behalf, execute the share transfer in
favour of the Purchaser herein.
10.2 EXPENSES
The Purchaser shall pay all taxes, assessments, charges and fees,
imposed by Canada or any province or political subdivision thereof required to
be paid in connection with the transfer and sale of the Purchased Shares.
<PAGE>
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10.3 TIME
Time shall be of the essence hereof.
10.4 NOTICES
Any notice, direction or other document required to be given
hereunder or for the purposes hereof (hereinafter in this Section 9.3 called a
"notice") to any Party shall be in writing and shall be sufficiently given if
delivered personally, or if sent by prepaid registered mail or if transmitted by
facsimile or other form of recorded communication tested prior to transmission
to such Party:
(a) in the case of a notice to the Vendors at:
195 Riviera Drive, Unit 2
Markham, Ontario L3R 5J6
with a facsimile number of (905) 477-7270
Attention: as applicable
with a copy to the Vendors' Counsel at:
Nichols & Associate
51 Main Street Markham North
Markham, Ontario
L3P 1X7
with a facsimile number of (905) 294-9883
Attention: Graham J. Nichols
(b) in the case of a notice to the Purchaser at:
263 King Street 2nd Floor
Charleston, SC 29401
with a facsimile number of (843) 973-4594
Attention: Timothy R. Karnes
<PAGE>
-38-
with a copy to the Purchaser's Counsel at:
Gersten, Savage & Kaplowitz, LLP
101 East 52nd Street, New York, New York
10022-6018
with a facsimile number of (212) 980-5192
Attention: Jay Kaplowitz (212) 752-9700
or at such other address as the Party to whom such writing is to be given shall
have last notified the Party giving the same in the manner provided in this
section. Any notice delivered to the Party to whom it is addressed as
hereinbefore provided shall be deemed to have been given and received on the day
it is so delivered at such address, provided that if such day is not a Business
Day then the notice shall be deemed to have been given and received on the first
Business Day next following such day. Any notice mailed as aforesaid shall be
deemed to have been given and received on the fifth Business Day following the
date of its mailing. Any notice transmitted by facsimile or other form of
recorded communication shall be deemed given and received on the first Business
Day after its transmission. Failure to transmit timely or adequate notice to
Vendor's Counsel or to Purchaser's Counsel, as the case may be, shall not
invalidate, nullify or otherwise detrimentally affect the provision of same to a
Party.
10.5 AMENDMENT
This Agreement may be amended, modified or supplemented but only
in writing signed by all of the Parties hereto.
10.6 ASSIGNMENT
Neither this Agreement nor any rights or obligations hereunder
shall be assignable by any Party without the prior written consent of the other
Parties hereto; provided that the Purchaser shall be entitled to assign this
Agreement to the Permitted Assignee. In the event that this Agreement is
assigned to the Permitted Assignee, the Permitted Assignee shall execute an
Addendum to this Agreement confirming its terms and the obligations of the
Permitted Assignee to be bound thereto prior to the Permitted Assignee being
entitled to the benefit of this Agreement hereof.
10.7 TAX MATTERS
The Vendors and Purchaser shall treat and report the transactions
contemplated by this Agreement in all respects consistently for the purposes of
the Canadian Tax Act and any other federal, provincial, state, territorial,
regional, municipal, local or foreign taxing statute. The Parties hereto shall
not take any actions or positions inconsistent with the obligations set forth
herein.
<PAGE>
-39-
10.8 FURTHER ASSURANCES
The Parties hereto shall with reasonable diligence do all such
things and provide all such reasonable assurances as may be required to
consummate the transactions contemplated hereby, and each Party shall provide
such further documents or instruments required by any other Party as may be
reasonably necessary or desirable to effect the purpose of this Agreement and
carry out its provisions, whether before or after the Closing.
10.9 SEVERABILITY
If any covenant or provision of this Agreement is prohibited in
whole or in part in any jurisdiction, such covenant or provision shall, as to
such jurisdiction, be ineffective to the extent of such jurisdiction without
invalidating the remaining covenants and provisions hereof and shall, as to such
jurisdiction, be deemed to be severed from this Agreement to the extent of such
prohibition.
10.10 COUNTERPARTS
This Agreement may be executed by the Parties in separate
counterparts each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
10.11 PUBLIC NOTICES
Except for disclosures required by Applicable Law, all public
notices to third parties and all other publicity concerning the transactions
contemplated herein shall be jointly planned and coordinated by the Vendors and
the Purchaser and no Party shall act unilaterally in this regard without the
prior approval of every other Party, such approval not to be unreasonably
withheld.
IN WITNESS WHEREOF the Parties have hereunto duly executed this
Agreement.
SIGNED, SEALED AND DELIVERED )
In the Presence of: ) INTERNET CABLE CORPORATION
)
)
) PER:____________________________
) A.S.O.
)
)
) ----------------------------
) EUGENE HARBIN
)
)
<PAGE>
-40-
) ----------------------------
) JOSEPH MELANSON
)
)
) 1291973 ONTARIO LIMITED
)
)
) PER:________________________
) A.S.O.
)
) ONTARIO CABLE AND
) CONTRACTING INCORPORATED
)
)
) PER:________________________
) A.S.O.
)
) RUPEL HOLDINGS INC.
)
)
) PER:________________________
) A.S.O.
)
) RYVON FUTURE INC.
)
)
) PER:________________________
) A.S.O.
)
)
) ----------------------------
) VONDA THOMPSON
)
)
) ------------------------
) JOSEPH MELANSON, IN TRUST
)
) CABLE SYSTEMS TECHNICAL
) SERVICES INC.
)
)
) PER:________________________
) A.S.O.
<PAGE>
-41-
SCHEDULE 2.1
LIST OF SHAREHOLDERS
Ryvon Future Inc. 114 Common Shares
Eugene Harbin 98 Common Shares
Rupel Holdings Inc. 26 Common Shares
Ontario Cable and Contracting Inc. 103 Common Shares
1291973 Ontario Limited 98 Common Shares
Joseph Melanson 114 Common Shares
Vonda Thompson 114 Common Shares
Ryvon Future Inc., in trust 25 Common Shares
Barry Bonham 50 Class "A" Preference Shares
<PAGE>
-42-
SCHEDULE 2.3(C)
OUTSTANDING SHAREHOLDER LOANS TO CABLE SYSTEMS AND THE SUBSIDIARIES OF
CABLE SYSTEMS
(i) Fifty thousand Canadian dollars (CAN$50,000.00) to Cable Systems by Barry
Bonham, represented by all issued and outstanding Class A Preference Shares of
Cable Systems;
<PAGE>
-43-
SCHEDULE 2.3(D)
PERSONAL GUARANTEES OF THE DEBTS AND OTHER OBLIGATIONS OF CABLE SYSTEMS AND THE
SUBSIDIARIES OF CABLE SYSTEMS
(i) personal guarantees by Joseph Melanson, Eugene Harbin and Barry Bonham of
the debts and obligations of Cable Systems and the Subsidiaries of Cable Systems
to the Canadian Imperial Bank of Commerce (CIBC);
(ii) personal guarantees by Joseph Melanson, Eugene Harbin and Barry Bonham of
the debts and obligations of Cable Systems and the Subsidiaries of Cable Systems
to the Business Development Bank of Canada (BDC); and
(iii) personal guarantees by Joseph Melanson, Eugene Harbin and Barry Bonham of
the debts and obligations of Cable Systems and the Subsidiaries of Cable Systems
to the Bank of Nova Scotia;
<PAGE>
-44-
SCHEDULE 3.1
COPY OF ARTICLES OF INCORPORATION
Cable Systems Technical Services, Inc. (Deleware)
Cable Systems Technical Services Inc. (Ontario)
Articles of Amendment to Ontario Corporation
<PAGE>
-45-
SCHEDULE 3.2
OBLIGATIONS
NONE
<PAGE>
-46-
SCHEDULE 3.5
SUBSIDIARIES
Name: Cable Systems Technical Services Inc.
Jurisdiction of Incorporation: State of Delaware
Issued Shares Cable Systems Technical Services
Inc. (Ontario) 700 Common Shares
Paul Gillingham 100 Common Shares
Charles Sienkiewicz 100 Common Shares
Optional Shares: None
<PAGE>
-47-
SCHEDULE 3.6
CAPITALIZATION
(iii) CABLE SYSTEMS TECHNICAL SERVICES INC. (Ontario)
-------------------------------------
TYPE OF SHARES AND AUTHORIZED NUMBER NO. OF SHARES ISSUED
------------------------------------ --------------------
Unlimited Common Shares 692 Common Shares
10,000 Class "A" Preference Shares 50 Class "A" Preference
10,000 Class "B" Preference Shares None
(iv) CABLE SYSTEMS TECHNICAL SERVICES INC. (U.S.A.)
-------------------------------------
TYPE OF SHARES AND AUTHORIZED NUMBER
3,000 Common Shares 900 Common Shares
<PAGE>
-48-
SCHEDULE 3.8
UNDISCLOSED LIABILITIES
NONE
<PAGE>
-49-
SCHEDULE 3.11
UNUSUAL TRANSACTIONS
NONE
<PAGE>
-50-
SCHEDULE 3.12
LEASED EQUIPMENT
<PAGE>
-51-
SCHEDULE 3.18
EMPLOYMENT CONTRACTS
NONE
<PAGE>
-52-
SCHEDULE 3.21
GUARANTEES
Cable Systems and Cable Systems USA have guaranteed the results and actions of
their subcontractors in their day to day roles on behalf of both companies to
the customers of Cable Systems and Cable Systems USA.
<PAGE>
-53-
SCHEDULE 3.22
LITIGATION
NONE
<PAGE>
-54-
SCHEDULE 3.23
EMPLOYEES OFFICES HELD
Joseph Melanson Director; President, C.E.O and Treasurer
Barry Bonham
Tom Smith
Eugene Harbin Director and Secretary
Blaine Burnie
<PAGE>
-55-
SCHEDULE 3.26
VEHICULAR EQUIPMENT
<PAGE>
-56-
SCHEDULE 3.28
CORPORATE RECORDS
NONE
<PAGE>
-57-
SCHEDULE 4.6
KEY EMPLOYEES
Joseph Melanson - President and CEO
Barry Bonham - Vice President, Engineering
Eugene Harbin - Secretary and Director
AGREEMENT AND PLAN OF MERGER
----------------------------
This Agreement and Plan of Merger ("Agreement") is made as of the
8thday of October, 1999, by and among Internet Cable Corporation, a Nevada
corporation ("Parent") with a place of business at 263 King Street, 2nd Floor,
Charleston, South Carolina 29401; ICC Acquisition Corp., a Delaw11are
corporation and a wholly-owned subsidiary of Parent ("Subsidiary") whose address
is 1209 Orange Street, Wilmington, Delaware 19801, CAD Consultants, Inc., a New
Jersey corporation ("CAD") with a place of business at 322 Route 46W,
Parsippany, New Jersey 07054; and Craig Lerman individually as the sole
shareholder of CAD ("Shareholder") who resides at 82 Ridge Drive, Livingston,
New Jersey 07039. Parent, Subsidiary, CAD and Shareholder are referred to
individually as a "Party" and collectively as the "Parties."
PREAMBLE
WHEREAS, upon the terms and subject to the conditions of this Agreement
and in accordance with the New Jersey Business Corporation Act ("New Jersey
Law"), Subsidiary will be merged with and into CAD (the "Merger"); and
WHEREAS, this Agreement constitutes a plan of merger pursuant to
Section 368 of the Internal Revenue Code of 1986, as amended.
NOW THEREFORE, in consideration of the mutual promises set forth herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Parties agree as follows:
ARTICLE 1
THE MERGER
(a) THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with New Jersey Law, at the Effective Time
(as herein defined) Subsidiary shall be merged with and into CAD, the separate
existence of Subsidiary shall cease and CAD shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
(b) CONSUMMATION OF THE MERGER. Subject to the satisfaction of the
conditions set forth in Article 7 herein (the "Closing Conditions"), the
consummation of the Merger will take place as promptly as practicable after the
satisfaction or waiver of the Closing Conditions. The closing (the "Closing")
shall be held at the offices Gersten, Savage & Kaplowitz, LLP, 101 East 52nd
Street, New York, New York 10022 within ninety (90) days from the execution of
this Agreement, unless such other time and place is agreed to in writing by the
Parties hereto. The date on which the Closing occurs is the "Closing Date."
1
<PAGE>
(c) EFFECTIVE TIME. As promptly as practicable after the Closing, the
Parties shall cause the Merger to be consummated by filing, and the Merger shall
become effective immediately upon the filing, of (i) a certificate of merger
with the Secretary of State of the State of New Jersey (the "NJ Merger
Certificate") in substantially the form annexed hereto as Exhibit 1, executed in
accordance with the relevant provisions of New Jersey Law; and (ii) a
certificate of merger with the Secretary of State of the State of Delaware (the
"DE Merger Certificate") annexed hereto as Exhibit 2, executed in accordance
with the relevant provisions of the General Corporation Law of the State of
Delaware. The NJ Merger Certificate and the DE Merger Certificate are
collectively referred to as the "Merger Certificates." The date and time of such
filings are referred to as the "Effective Time." The date on which the Effective
Time occurs is referred to as the "Effective Date."
(d) EFFECT OF THE MERGER. At and after the Effective Time, the Merger
shall be effective as provided in the applicable provisions of New Jersey Law.
The corporate existence of CAD, as the Surviving Corporation, with all of its
purposes and powers, shall continue unaffected and unimpaired by the Merger,
and, as the Surviving Corporation, it shall be governed by the laws of the State
of New Jersey and succeed to all rights, assets, liabilities and obligations of
Subsidiary in accordance with New Jersey Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, except as otherwise
provided herein, all the property, rights, privileges, powers and franchises of
CAD and Subsidiary shall vest in the Surviving Corporation, and all debts,
liabilities and duties of CAD and Subsidiary shall become the debts, liabilities
and duties of the Surviving Corporation. The separate existence and corporate
organization of Subsidiary shall cease at the Effective Time and thereafter
Subsidiary and CAD shall be a single corporate entity, to wit, CAD.
(e) CERTIFICATE OF INCORPORATION; BY-LAWS. At and after the Effective
Time, the Certificate of Incorporation and By-Laws of CAD, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation, except that, as provided
in the Certificate of Merger, paragraph 4(a) of CAD's Certificate of
Incorporation shall be amended to read as follows:
"(a) The total number of shares of capital stock which the corporation
is authorized to issue is 1,000 shares, all of which shall be shares of
Common Stock and shall have a par value of $.01 per share."
(f) DIRECTORS AND OFFICERS. At and after the Effective Time, the
directors and officers of the Surviving Corporation shall be the individuals
named in Exhibit 3 hereto, until their respective successors shall have been
duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Certificate of Incorporation and
By-Laws of the Surviving Corporation.
2
<PAGE>
(g) FURTHER ACTIONS. If at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further assignment
or assurances or any other things are necessary or desirable to vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation, the title to any
property or right of Subsidiary acquired or to be acquired by reason of or as a
result of the Merger, Subsidiary and its officers and directors in office
immediately prior to the Effective Time shall and will execute and deliver all
such proper deeds, assignments and assurances and do all things necessary and
proper to vest, perfect or confirm title to such property or rights in the
Surviving Corporation and otherwise carry out the purpose of this Agreement, and
the officers of the Surviving Corporation are fully authorized in the name of
Subsidiary or otherwise to take any and all such action with the same effect as
if such persons were officers of Subsidiary.
ARTICLE 2
PURCHASE AND SALE
(a) SALE OF SHARES. At the Closing, Shareholder shall sell all of his
one-hundred (100) shares of CAD common stock, no par value per share, ("CAD
Shares") to Parent and shall deliver to Parent stock certificates representing
such CAD Shares, duly endorsed in blank or with duly executed stock powers
attached, in proper transfer, with all signatures guaranteed and with
appropriate transfer stamps, if any, affixed at the expense of Shareholder, free
and clear of any lien or other encumbrance.
(b) CONSIDERATION FOR THE SHARES. At the Closing in consideration for
the CAD Shares, Parent shall: (i) issue four-hundred-fifty-thousand (450,000)
shares of common stock, $.001 par value per share, of Parent ("ICC Shares") to
Shareholder; and (ii) pay Shareholder one-hundred-
seventy-seven-thousand-five-hundred United States dollars (US$177,500.00) less
the aggregate dollar amount Total Liabilities exceeds Total Assets as of the
Closing Date. Total Assets and Total Liabilities are defined in Article 4(t) of
this Agreement.
ARTICLE 3
DELIVERIES BY THE PARTIES; CERTAIN DEFINITIONS
(a) DELIVERIES BY THE PARTIES. It shall be a condition to obligations
of Parent and Subsidiary to close that, at the Closing, CAD and Shareholder
shall have delivered or caused to be delivered to Parent the closing documents
listed in Article 7 herein. It shall be a condition to the obligations of CAD
and Shareholder to close that, at the Closing, Parent and Subsidiary shall have
delivered or caused to be delivered to CAD and Shareholder the closing documents
listed in Article 7 herein.
(b) FURTHER ASSURANCES. At or after the Closing, CAD, Shareholder,
Parent and Subsidiary shall prepare, execute, and deliver such further
instruments of conveyance, sale, assignment or transfer, and shall take or cause
to be taken such other or further action, as any Party shall reasonably request
of any other Party at any time or from time to time in order to consummate, in
any other manner, the terms and provisions of this Agreement.
2
<PAGE>
(c) CERTAIN DEFINED TERMS. In this Agreement:
(i) Any reference to any event, change, condition or effect being
"material" with respect to any entity or group of entities means any material
event, change, condition or effect related to the financial condition,
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of such entity or group of entities. Any
agreement, instrument, lease, note, debenture, indenture, action, proceeding,
inquiry or investigation shall be deemed to be material if disclosure thereof
would be required pursuant to the Securities Act of 1933, as amended (the
"Securities Act").
(ii) Any reference to a "Material Adverse Effect" with respect to
any entity or group of entities shall be broadly construed to mean any event,
change or effect that is materially adverse to the financial condition,
properties, assets, liabilities, business, operations or results of operations
of such entity or group of entities.
(iii) Any reference to a Party's "knowledge" means the actual
knowledge of such Party's executive officers and management.
(iv) Any reference to "Tax" (and, with correlative meaning, "Taxes"
and "Taxable") means:
(A) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll employment, excise, severance, stamp, occupation,
property, environmental or windfall profit tax, custom, duty or other tax
governmental fee or other like assessment or charge of any kind whatsoever
together with any interest or any penalty, addition to tax or additional amount
imposed by any governmental entity (a "Tax Authority") responsible for the
imposition of any such tax (domestic or foreign), and
(B) any liability for the payment of any amounts of the type
described in clause (A) of this Article 3(c)(iv) as a result of being a member
of an affiliated, consolidated, combined or unitary group for any Taxable
period, and
(C) any liability for the payment of any amounts of the type
described in clauses (A) or (B) of this Article 3(c)(iv) as a result of any
express or implied obligation to indemnify any other person.
(v) "Tax Return" shall mean any return, statement, report or form
including, without limitation, estimated Tax returns and reports, withholding
Tax returns and reports and information reports and returns required to be filed
with respect to Taxes.
4
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF CAD AND SHAREHOLDER
Except as set forth in the Schedules to this Agreement, disclosure in
any one of which shall apply to any and all representations and warranties made
in this Agreement, and except as otherwise disclosed in writing to Parent, CAD
and Shareholder hereby jointly and severally represent and warrant to Parent and
Subsidiary as follows:
(a) ORGANIZATION, STANDING, AND POWER. CAD is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey and has full corporate power and authority to conduct its business as
presently conducted by it and to enter into and perform this Agreement and to
carry out the transactions contemplated by this Agreement. CAD is duly qualified
to do business as a foreign corporation doing business in the each state in
which it owns or leases real property and where the failure to be so qualified
and in good standing would have a Material Adverse Effect. CAD does not own any
shares of capital stock of any corporation and it does not have any other
ownership interest in any partnership (general or limited), limited liability
company or other entity, whether foreign or domestic (collectively, such
ownership interests including capital stock, "Equity Interests" and each an
"Equity Interest").
(b) CAPITALIZATION.
(i) The authorized capital stock of CAD consists of
two-thousand-five- hundred (2,500) shares of common stock, no par value per
share ("CAD Common Stock"). As of the date of this Agreement, there are
one-hundred (100) issued and outstanding shares of CAD Common Stock and
two-thousand-four-hundred (2,400) shares of CAD Common Stock held as treasury
shares. No shares of the capital stock of CAD have been reserved for issuance to
any person, and there are no outstanding rights, warrants, options or agreements
for the purchase of capital stock from CAD except as provided in this Agreement.
No person is entitled to any preemptive or similar right with respect to the
issuance of any capital stock of CAD. The outstanding shares of CAD Common Stock
are validly issued, fully paid, non-assessable, and have been issued in
compliance with all state and Federal securities laws.
(c) AUTHORITY FOR AGREEMENT. The execution, delivery, and performance
of this Agreement by CAD has been duly authorized by all necessary corporate
action, and this Agreement constitutes the valid and binding obligation of CAD
enforceable against it in accordance with its terms, except as enforceability
may be affected by bankruptcy, insolvency or other laws of general application
affecting the enforcement of creditors' rights. The execution and consummation
of the transactions contemplated by this Agreement and compliance with its
provisions by CAD will not violate any provision of law and will not conflict
with or result in any breach of any of the terms, conditions, or provisions of,
or constitute a default under, CAD's Certificate of Incorporation or By- Laws
or, in any material respect, any indenture, lease, loan agreement or other
agreement instrument to which CAD is a party or by which it or any of its
properties are bound, or any decree, judgment, order, statute, rule or
regulation applicable to CAD except for the Replacement Promissory Note
discussed in Schedule 4(e) attached hereto and except to the extent that any
breach or violation of any of the foregoing shall not constitute or result in a
Material Adverse Effect.
5
<PAGE>
(d) GOVERNMENTAL CONSENT. Except as required by the Securities Act and
state securities commissions or as otherwise expressly provided in this
Agreement, no material consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
governmental authority is required on the part of CAD in connection with the
execution and delivery of this Agreement, or the consummation of the
transactions contemplated by this Agreement.
(e) FINANCIAL STATEMENTS.
(i) CAD has furnished to Parent a true, correct and complete copy of
CAD's unaudited balance sheet and accompanying income statement and statement of
cash flow as of June 30, 1999 (the "CAD Unaudited Financial Statements"), CAD's
audited balance sheet and the accompanying income statement and statement of
cash flow for the fiscal year ended December 31, 1998 (the "CAD Audited
Financial Statements"), as well as audited financial statements for the two (2)
fiscal years prior to 1998. Except as set forth in Schedule 4(e) hereto and/or
as otherwise disclosed in writing to Parent, the CAD Unaudited Financial
Statements and the CAD Audited Financial Statements fairly present the
consolidated financial condition of CAD and the results of its operations and
cash flows as of the dates thereof, and have been prepared in accordance with
United States generally accepted accounting principles consistently applied. The
CAD Unaudited Financial Statements and the CAD Audited Financial Statements
include all adjustments necessary to present fairly the information for such
period.
(ii) To the knowledge of CAD, except as disclosed in the CAD
Unaudited Financial Statements and the CAD Audited Financial Statement, there
has been no Material Adverse Change in the financial condition, operations or
business of CAD since June 30, 1999.
(iii) Except as set forth in Schedule 4(e) hereto or as otherwise
disclosed in the CAD Unaudited Financial Statements and the CAD Audited
Financial Statements, CAD does not have any material liabilities, contingent or
otherwise, liability for taxes, or commitments extending for over one (1) year
and requiring the expenditure of more than one-hundred-fifty- thousand United
States dollars (US$150,000) in the aggregate.
(f) LITIGATION. Except as disclosed in Schedule 4(f) to this Agreement
and in the CAD Unaudited Financial Statements and the CAD Audited Financial
Statements, CAD has not received notice of any material action, suit or
proceeding, or governmental inquiry or investigation, pending or threatened
against CAD, which, would have a materially adverse effect upon CAD's financial
position or results of operations.
6
<PAGE>
(g) INTERESTED PARTY TRANSACTIONS. CAD is not indebted to any officer
or director of CAD (except for compensation and reimbursement of expenses
incurred in the ordinary course of business), and no such person is indebted to
CAD, except as set forth in Schedule 4(g) to this Agreement or as otherwise
disclosed in the Cad Unaudited Financial Statements.
(h) TITLE TO PROPERTIES; LIENS. CAD does not own any real property
except as disclosed in Schedule 4(h) to this Agreement. All of the assets of CAD
are free and clear of all liens, security interests, charges and encumbrances,
except (i) as disclosed in Schedule 4(h) to this Agreement, (ii) liens for
current taxes not yet due and payable, (iii) liens in favor of any lessor with
respect to capital lease obligations disclosed in Schedule 4(h) to this
Agreement, (iv) such imperfections of title or zoning restrictions, easements or
encumbrances, if any, as do not materially interfere with the present use of
such property or assets, and (v) liens which arise by operation of law.
(i) MATERIAL CONTRACTS. Except for: (i) contracts with clients and
other contracts executed by CAD in the ordinary course of business; (ii)
employment agreements with officers; and (iii) other material contracts which
are listed on Schedule 4(i) to this Agreement, CAD is not a party to or bound by
any material indenture, lease, license, loan agreement, other agreement or other
instrument.
(j) COMPLIANCE. CAD is not in violation of any material term or
provision of its Certificate of Incorporation or By-Laws, or any material term
of any instrument, indenture, loan agreement, other agreement, judgment, decree,
order, statute, rule or regulation applicable to CAD where the failure of
compliance would have a Material Adverse Effect. To the knowledge of CAD and
Shareholder, CAD has complied in all material respects with all laws and
regulations applicable to its business, except as otherwise disclosed in writing
to Parent.
(k) LABOR RELATIONS. CAD is not a party to any collective bargaining
agreement and, to CAD's and Shareholder's knowledge, no organizational efforts
are presently being made with respect to any of its employees. To CAD's and
Shareholder's knowledge, CAD has complied in all material respects with all
applicable laws [including, but not limited to, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")], and regulations relating to
employment matters including, but not limited to, those relating to wages,
hours, discrimination and payment of social security and similar taxes.
(l) TAX RETURNS AND PAYMENT. CAD has filed all material Tax Returns
required by it and have paid all Taxes shown thereon to be due, except as
reflected in the CAD Unaudited Financial Statements and the CAD Audited
Financial Statements and except for Taxes being contested in good faith. Except
as disclosed in the CAD Unaudited Financial Statements and the CAD Audited
Financial Statements, there is no material claim for Taxes that is a lien
against the property of CAD other than liens for taxes not yet due and payable.
CAD has not received notification of any audit of any Tax Return of CAD being
conducted or pending by a Tax Authority where an adverse determination could
have a Material Adverse Effect, no extension or waiver of the statute of
limitations on the assessment of any taxes has been granted by CAD which is
currently in effect, and CAD is not a party to any agreement, contract or
arrangement with any Tax Authority, which may result in the payment of any
material amount in excess of the amount reflected on the CAD Unaudited Financial
Statements and the CAD Audited Financial Statements.
7
<PAGE>
(m) INTELLECTUAL PROPERTY. CAD has title to all material patents,
trademarks or trade secrets and computer software, or adequate licenses and
rights to use patents, trademarks, copyrights, trade names or trade secrets and
computer software of others necessary to the conduct of its business. The
business of CAD is being carried on without known conflicts with patents,
licenses, trademarks, copyrights, trade names and trade secrets of others and,
to CAD's and Shareholder's knowledge, no other persons are conducting their
businesses in conflict with patents, licenses, trademarks, copyrights, trade
names and trade secrets used by CAD.
(n) ENVIRONMENTAL MATTERS. To the knowledge of CAD and Shareholder: (i)
CAD has obtained all material permits and licenses which are required in
connection with its business under all applicable laws and regulations relating
to pollution or protection of the environment (the "Environmental Laws") and is
in material compliance therewith; (ii) CAD has at all times conducted its
business in material compliance with all Environmental Laws and CAD has not
received any written notice of any past, present or future events, conditions or
circumstances, which would interfere with or prevent material compliance or
continued material compliance with any Environmental Laws or which form the
basis of any material claim, demand or investigation, based on or related to
CAD's business or other activities; (iii) there is no civil, criminal or
administrative action or proceeding pending or threatened against CAD, arising
under any Environmental Laws; and (iv) there do not exist, and at no time since
CAD acquired any premises leased or used by it, have there existed any
conditions that CAD and Shareholder believe would require remediation by CAD
under any Environmental Laws.
(o) OPERATION SINCE THE BALANCE SHEET DATE. Since June 30, 1999, except
as contemplated by this Agreement or the CAD Unaudited Financial Statements,
CAD:
(i) has operated its business substantially as it was operated prior
to that date and only in the ordinary course;
(ii) has not declared or otherwise become liable with respect to any
dividend or distribution of cash, assets or capital stock;
(iii) has maintained or kept current its books, accounts, records,
payroll, and filings in the usual and ordinary course of business, consistent in
all material respects with past practice; and
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(iv) has not made any capital expenditure, commitment or investment
other than in the ordinary course of business.
(p) EMPLOYMENT AGREEMENTS. Schedule 4(p) to this Agreement lists each
employment agreement between CAD and any director, officer or employee of CAD
and copies of all such agreements have been provided to Parent prior to the date
hereof. Except as provided in such employment agreements, all other employees of
CAD are terminable at will without expense or liability to CAD. Except as
provided in such employment agreements listed on Schedule 4(p) attached hereto,
all other employees of CAD are employees "at will."
(q) WARRANTY CLAIMS. To CAD's and Shareholder's knowledge, there are no
pending or threatened material claims against CAD for any work performed for any
client, including but not limited to, any services rendered under any
warranties.
(r) BROKERS' AND FINDERS' FEES. CAD has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
(s) BOARD APPROVAL. The Board of Directors of CAD has approved this
Agreement, subject to Stockholder approval.
(t) ASSETS AND LIABILITIES. As of June 30, 1999 as reflected in the CAD
Unaudited Financial Statements, the aggregate assets of CAD (the "Total Assets")
shall be equal to or greater than the aggregate liabilities of CAD, excluding
approximately four-hundred-fifty-thousand United States dollars (US$450,000.00)
owed to Shareholder and Richard Dvorin in the aggregate (the "Total
Liabilities").
(u) FULL DISCLOSURE. The CAD Unaudited Financial Statements and the CAD
Audited Financial Statements and the representations and warranties of CAD and
Shareholder contained in this Agreement, taken together, do not contain any
untrue statement of a material fact, or omit to state a material fact required
to be stated herein or therein or necessary to make the statements herein or
therein, in the light of the circumstances under which they were made, not
misleading.
(v) SURVIVAL. Each of the foregoing representations, warranties and
covenants shall survive the Closing for a period of two (2) years.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY
Except as set forth in the Schedules to this Agreement, disclosure in
any one of which shall apply to any and all representations and warranties made
in this Agreement, and except as otherwise disclosed in writing to CAD and
Shareholder, Parent and Subsidiary hereby jointly and severally represent and
warrant to CAD and Shareholder as follows:
(a) ORGANIZATION, STANDING, AND POWER. Parent and Subsidiary are
corporations duly organized, validly existing and in good standing under the
laws of the State of Nevada and the State of Delaware, respectively, and each of
Parent and Subsidiary has full corporate power and authority to conduct its
business as presently conducted by it and to enter into and perform this
Agreement and to carry out the transactions contemplated by this Agreement. Each
of Parent and Subsidiary is duly qualified to do business as a foreign
corporation doing business in each state in which it owns or leases real
property and where the failure to be so qualified and in good standing would
have a Material Adverse Effect. Parent has no subsidiaries except for
Subsidiary. Parent does not own any Equity Interests other than the shares of
capital stock of Subsidiary. Subsidiary does not own any Equity Interest in any
other entity.
(b) CAPITALIZATION.
(i) The authorized capital stock of Parent consists of
fifty-five-million (55,000,000) shares of common stock, $.001 par value per
share ("ICC Common Stock") and five- million (5,000,000) shares of preferred
stock, $.001 par value per share ("ICC Preferred Stock"). As of September 23,
1999, there were seven-million-seven-hundred-six-thousand-three-hundred-
sixty-one (7,706,361) issued and outstanding shares of ICC Common Stock and no
issued or outstanding shares of ICC Preferred Stock. Except for
three-million-eight-hundred-sixty-three- thousand (3,863,000) shares of ICC
Common Stock reserved for issuance, consisting of two-million (2,000,000) shares
of ICC Common Stock reserved for issuance upon exercise of options available for
grant under the 1999 Stock Option Plan of which eight-hundred-ninety-thousand
(890,000) of such options have been granted and
one-million-eight-hundred-sixty-three-thousand (1,863,000) shares of ICC Common
Stock reserved for issuance upon exercise of warrants, no shares of capital
stock of Parent have been reserved for issuance to any person, and there are no
other outstanding rights, warrants, options or agreements for the purchase of
capital stock from Parent except as provided in this Agreement. No person is
entitled to any preemptive or similar right with respect to the issuance of any
capital stock of Parent. The outstanding shares of ICC Common Stock are validly
issued, fully paid, non-assessable, and have been issued in compliance with all
Federal and state securities laws.
(ii) The authorized capital stock of Subsidiary consists of
one-thousand (1,000) shares of common stock ("Subsidiary Stock"). As of the date
hereof, there were one- thousand (1,000) issued and outstanding shares of
Subsidiary Stock, all of which are owned by Parent. No shares of Subsidiary
Stock have been reserved for issuance to any person, and there are no other
outstanding rights, warrants, options or agreements for the purchase of capital
stock from Subsidiary. No person is entitled to any preemptive or similar right
with respect to the issuance of any capital stock of Subsidiary. The outstanding
shares of Subsidiary Stock are validly issued, fully paid, non-assessable, and
have been issued in compliance with all state and Federal securities laws.
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(c) AUTHORITY FOR AGREEMENT. The execution, delivery and performance of
this Agreement by Parent and Subsidiary has been duly authorized by all
necessary corporate action, and this Agreement constitutes a valid and binding
obligation of Parent and Subsidiary enforceable against them in accordance with
its terms, except as enforceability may be affected by bankruptcy, insolvency or
other laws of general application affecting the enforcement of creditors'
rights. The execution and consummation of the transactions contemplated by this
Agreement and compliance with its provisions by Parent and Subsidiary will not
violate any provision of law and will not conflict with or result in any breach
of any of the terms, conditions, or provisions of, or constitute a default
under, their Certificates of Incorporation or their By-Laws or, in any material
respect, any indenture, lease, loan agreement or other agreement instrument to
which Parent or Subsidiary is a party or by which they or any of their
properties are bound, or any decree, judgment, order, statute, rule or
regulation applicable to Parent or Subsidiary except to the extent that any
breach or violation of any of the foregoing shall not constitute or result in a
Material Adverse Effect.
(d) ISSUANCE OF ICC SECURITIES. The shares of ICC Common Stock issuable
to Shareholder pursuant to this Agreement have been duly authorized and reserved
for issuance, and, when issued pursuant to this Agreement, will be duly and
validly authorized and issued, fully paid and non-assessable and not subject to
any preemptive rights or other rights of stockholders of Parent.
(e) GOVERNMENTAL CONSENT. Except as required by the Securities Act and
state securities commissions or as otherwise expressly provided in this
Agreement, no material consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
governmental authority is required on the part of Parent or Subsidiary in
connection with the execution and delivery of this Agreement, or the
consummation of the transactions contemplated by this Agreement.
(f) SEC DOCUMENTS; FINANCIAL STATEMENTS.
(i) Parent has furnished to CAD and Shareholder a true, correct and
complete copy of each statement, report, and other document filed with the SEC
by Parent since December 31, 1998, and Parent will furnish CAD and Shareholder a
true, correct and complete copy of any additional documents filed with the SEC
by Parent prior to the time of Closing. The documents filed by Parent with the
SEC or delivered to Parent pursuant to this Agreement are referred to as the
"ICC SEC Documents." Parent shall use its best efforts to file all statements,
reports and other documents with the SEC on an ongoing basis, to satisfy the
public information condition set forth in Rule 144(c) promulgated under the
Securities Act.
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(ii) Parent's and Subsidiary's balance sheet for the years ended
June 30, 1998 and 1997 and their statements of operations, stockholders' equity
and cash flows for the years then ended, together with the related notes (the
"Parent Audited Financial Statements"), have been audited by Durland & Company,
CPAs, P.A and restated by Alpren & Green, Certified Public Accountants. Parent's
and Subsidiary's unaudited consolidated balance sheets at June 30, 1999 and
their unaudited consolidated statements of operations and cash flows for the
period then ended and the related notes (the "Parent Unaudited Financial
Statements") have been delivered to CAD and Shareholder in the Form 10-KSB of
Parent attached as Exhibit 7 to this Agreement. The Parent Audited Financial
Statements and the Parent Unaudited Financial Statements (collectively, the "ICC
Financial Statements") fairly present the financial condition of Parent and
Subsidiary as of the balance sheet dates and the results of their operations and
cash flows for the periods ended on such balance sheet dates in accordance with
United States generally accepted accounting principles consistently applied. The
Parent Unaudited Financial Statements include all adjustments (which include
only normal recurring adjustments) necessary to present fairly the information
for such period.
(iii) To the knowledge of Parent, except as disclosed in the ICC
Financial Statements and the ICC SEC Documents, there has been no Material
Adverse Change in the financial condition, operations or businesses of Parent or
Subsidiary since June 30, 1999.
(g) LITIGATION. Except as disclosed in the ICC SEC Documents and the
ICC Financial Statements, Parent and Subsidiary have not received notice of any
material action, suit or proceeding, or governmental inquiry or investigation,
pending or threatened against Parent or Subsidiary, which, if adversely
determined, would have a Materially Adverse Effect upon Parent's financial
position or results of operations.
(h) INTERESTED PARTY TRANSACTIONS. Parent and Subsidiary are not
indebted to any officer or director of Parent or Subsidiary (except for
compensation and reimbursement of expenses), and no such person is indebted to
Parent or Subsidiary, except as disclosed in the ICC SEC Documents or the ICC
Financial Statements or Schedule 5(h) to this Agreement.
(i) TITLE TO PROPERTIES; LIENS. Neither Parent nor Subsidiary owns any
real property. All of the assets of Parent and Subsidiary, except those disposed
of in the ordinary course of business, are free and clear of all liens, security
interests, charges and encumbrances, except (i) as disclosed on the ICC
Financial Statements or the ICC SEC Documents, (ii) liens for current taxes not
yet due and payable, (iii) liens in favor of any lessor with respect to capital
lease obligations disclosed on Schedule 5(i) to this Agreement, (iv) such
imperfections of title or zoning restrictions, easements or encumbrances, if
any, as do not materially interfere with the present use of such property or
assets, and (iv) liens which arise by operation of law.
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(j) MATERIAL CONTRACTS. Except for (i) exhibits to the ICC SEC
Documents, (ii) contracts with clients and other contracts executed in the
ordinary course of business, (iii) employment agreements with officers not
required to be filed with the SEC, and (iii) other material contracts which are
listed on Schedule 5(j) to this Agreement, neither Parent nor Subsidiary is a
party to or bound by any material indenture, lease, license, loan agreement or
other agreement or instrument.
(k) COMPLIANCE. Neither Parent nor Subsidiary is in violation of any
material term or provision of their Certificates of Incorporation or their
By-Laws, or of any material term of any instrument, indenture, loan agreement,
other agreement, judgment, decree, order, statute, rule or regulation applicable
to Parent or Subsidiary where, to the knowledge of Parent, the failure of
compliance would have a Material Adverse Effect. To the knowledge of Parent,
both Parent and Subsidiary have complied in all material respects with all laws
and regulations applicable to their businesses, except as otherwise disclosed in
writing to CAD and Shareholder.
(l) LABOR RELATIONS. Neither Parent nor Subsidiary is a party to any
collective bargaining agreement and, to Parent's knowledge, no organizational
efforts are presently being made with respect to any of their employees. To
Parent's knowledge, Parent and Subsidiary have complied in all material respects
with all applicable laws including, but not limited to, ERISA and regulations
relating to employment matters including, but not limited to, those relating to
wages, hours, discrimination and payment of social security and similar taxes.
(m) TAX RETURNS AND PAYMENT. Parent and Subsidiary have filed all
material Tax Returns required by them and have paid all Taxes shown thereon to
be due, except as reflected in the ICC Financial Statements and except for Taxes
being contested in good faith. There is no material claim for Taxes that is a
lien against the property of Parent or Subsidiary other than liens for taxes not
yet due and payable. Parent and Subsidiary have not received notification of any
audit of any Tax Return of Parent or Subsidiary being conducted or pending by a
Tax Authority where an adverse determination could have a Material Adverse
Effect, no extension or waiver of the statute of limitations on the assessment
of any taxes has been granted by Parent or Subsidiary which is currently in
effect, and Parent and Subsidiary is not a party to any agreement, contract or
arrangement with any Tax Authority, which to Parent's knowledge may result in
the payment of any material amount in excess of the amount reflected on the ICC
Financial Statements.
(n) INTELLECTUAL PROPERTY. Parent and Subsidiary have good title to all
material patents, trademarks, trade secrets, or adequate licenses and rights to
use patents, trademarks, copyrights, trade names and trade secrets of others
necessary to the conduct of their businesses. The businesses of Parent and
Subsidiary are being carried on without known conflicts with patents, licenses,
trademarks, copyrights, trade names and trade secrets of others and, to Parent's
knowledge, no other persons are conducting their businesses in conflict with
patents, licenses, trademarks, copyrights, trade names and trade secrets used by
Parent and Subsidiary.
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(o) ENVIRONMENTAL MATTERS. To the knowledge of Parent: (i) Parent and
Subsidiary have obtained all material permits and licenses which are required in
connection with their businesses under all applicable Environmental Laws and are
in material compliance therewith; (ii) Parent and Subsidiary have at all times
conducted their businesses in material compliance with all Environmental Laws
and neither Parent nor Subsidiary has received any written notice of any past,
present or future events, conditions or circumstances, which would interfere
with or prevent material compliance or continued material compliance with any
Environmental Laws or which form the basis of any material claim, demand or
investigation, based on or related to Parent's or Subsidiary's business or other
activities; (iii) there is no civil, criminal or administrative action or
proceeding pending or threatened against Parent and/or Subsidiary, arising under
any Environmental Laws; and (iv) there do not exist, and at no time since Parent
and Subsidiary acquired any premises leased or used by them (the "Subject
Premises"), have there existed any conditions that Parent believes would require
remediation by Parent or Subsidiary under any Environmental Laws.
(p) OPERATION SINCE THE BALANCE SHEET DATE. Since June 30, 1999, except
as contemplated by this Agreement, Parent and Subsidiary:
(i) have operated their businesses substantially as they were
operated prior to that date and only in the ordinary course;
(ii) have not declared or otherwise become liable with respect to
any dividend or distribution of cash, assets or capital stock, except for the
issuance of shares of ICC Common Stock upon exercise of stock options;
(iii) have maintained or kept current their books, accounts,
records, payroll, and filings in the usual and ordinary course of business,
consistent in all material respects with past practice; and
(iv) have not made any capital expenditure, commitment or investment
other than in the ordinary course of business.
(q) EMPLOYMENT AGREEMENTS. Schedule 5(q) to this Agreement lists each
employment agreement between Parent or Subsidiary and any director, officer or
employee of Parent and Subsidiary and copies of all such agreements have been
provided to CAD and Shareholder prior to the date hereof. Except as provided in
such employment agreements, all other employees of Parent and Subsidiary are
terminable at will without expense or liability to Parent.
(r) WARRANTY CLAIMS. To Parent's knowledge, there are no pending or
threatened material claims against Parent or Subsidiary for any work performed
by any of them for any client, including, but not limited to, any services
rendered under any warranties.
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(s) BROKERS' AND FINDERS' FEES. Neither Parent nor Subsidiary has
incurred, nor will either of them incur, directly or indirectly, any liability
for brokerage or finders' fees or agents' commissions or investment bankers'
fees or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
(t) BOARD APPROVAL. The Board of Directors of Parent has approved this
Agreement.
(u) FULL DISCLOSURE. The ICC SEC Documents, the ICC Financial
Statements, and the representations and warranties of Parent and Subsidiary
contained in this Agreement, taken together, do not contain any untrue statement
of a material fact, or omit to state a material fact required to be stated
herein or therein or necessary to make the statements herein or therein, in the
light of the circumstances under which they were made, not misleading.
(v) SURVIVAL. Each of the foregoing representations, warranties and
covenants shall survive the Closing for a period of two (2) years.
ARTICLE 6
REGISTRATION STATEMENT
(a) FILING OF REGISTRATION STATEMENT. As soon as practical after the
execution of this Agreement, Parent shall use its best efforts to prepare and
file with the SEC a registration statement (the "Registration Statement") on the
appropriate form covering the shares of ICC Common Stock issuable to Shareholder
pursuant to Article 2(b) of this Agreement and shall use its best efforts to
have such Registration Statement declared effective by the SEC.
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(b) MUTUAL COOPERATION. CAD and Shareholder shall provide to Parent
and its counsel all documents, filings and any other relevant material that
shall assist in the filing of the Registration Statement. CAD and Shareholder
represent that all material contained in the Registration Statement that relates
to CAD and shareholder will be correct in all material respects and will not
contain any untrue statement of a material fact, or omit to state any material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which made, not misleading. Parent shall seek to file
the Registration Statement with the SEC and shall use its best efforts to have
the Registration Statement declared effective by the SEC as promptly as
possible.
ARTICLE 7
CONDITIONS TO CLOSING
(a) CONDITIONS PRECEDENT TO CAD'S, SHAREHOLDER'S, PARENT'S AND
SUBSIDIARY'S OBLIGATIONS. The obligations of CAD, Shareholder, Parent and
Subsidiary as provided in Articles 1 and 2 herein shall be subject to each of
the following conditions precedent, unless waived in writing by CAD, Shareholder
and Parent:
(i) CONSENTS, APPROVALS. Parent, Subsidiary and CAD shall have
obtained all consents and approvals of their respective Boards of Directors, and
all material consents, including any consents and waivers by the Parties'
respective lenders an other third parties if necessary, to the consummation of
the transaction contemplated by this Agreement shall have been obtained. In
addition, CAD shall have obtained all consents and approvals of Shareholder.
(ii) ABSENCE OF CERTAIN LITIGATION. No action or proceeding shall be
threatened or pending before any governmental entity or authority which, in the
reasonable opinion of counsel for CAD, Shareholder or Parent, is likely to
result in a restraint, prohibition or the obtaining of damages or other relief
in connection with this Agreement or the consummation of the Merger.
(iii) EMPLOYMENT AGREEMENT. Parent shall have entered into an
employment agreement (the "Employment Agreement") with Shareholder in
substantially the form of Exhibit 4 to this Agreement.
(b) CONDITIONS PRECEDENT TO PARENT'S AND SUBSIDIARY'S OBLIGATIONS. The
obligations of Parent and Subsidiary as provided in Articles 1 and 2 herein
shall be subject to each of the following conditions precedent, unless waived by
Parent:
(i) REPRESENTATIONS AND WARRANTIES. The representations and
warranties by CAD and Shareholder in Article 4 herein shall be true and accurate
in all material respects on and as of the Closing Date with the same force and
effect as though such representations and warranties had been made at and as of
the Closing Date, except to the extent that any changes therein are specifically
contemplated by this Agreement.
(ii) PERFORMANCE. CAD and Shareholder shall have performed and
complied in all material respect with all agreements to be performed or complied
with by them pursuant to this Agreement prior to or at the Closing.
(iii) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to Parent and its counsel, and Parent and its
counsel shall have received all such counterpart originals (or certified or
other copies) of such documents as they may reasonably request.
(iv) OPINION OF CAD'S COUNSEL. Parent shall have received from
counsel of CAD, an opinion, dated the Closing Date, as to the matters set forth
in Exhibit 5 to this Agreement.
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(v) AUDITOR'S COMFORT LETTER. Parent shall have received from Meisel
Tuter & Lewis, CPAs, a letter relating to the independence of such firm and
CAD's audited and unaudited financial statements included in the Registration
Statement, which letter shall be reasonably satisfactory in form and substance
to Parent and its counsel.
(vi) RESIGNATIONS. CAD shall have delivered the resignations of each
of its directors and officers.
(vii) MATERIAL CHANGES; DUE DILIGENCE. Since the date of this
Agreement, there shall not have been any material adverse change in the
financial condition, business, assets or operations of CAD, taken as a whole,
except as contemplated by this Agreement, the CAD Unaudited Financial Statements
and the CAD Audited Financial Statements.
(viii) COMPLIANCE CERTIFICATE. CAD shall have delivered to Parent
the certificate of its president, chief executive officer or chief financial
officer as to the matters set forth in Articles 4(a) and 4(b)(i) and (b)(ii) and
4(c) and 4(t) of this Agreement.
(ix) LOCK-UP AGREEMENT. Shareholder shall have executed a lock-up
agreement satisfactory to Parent and its counsel pursuant to which Shareholder
will agree not to publicly sell any of the shares of ICC Common Stock issued to
him in the Merger until twelve (12) months from the Closing Date.
(x) WAIVER OF DISSENTERS RIGHTS. Shareholder shall waive his right
to dissent in connection with the Merger.
(c) CONDITIONS PRECEDENT TO CAD'S AND SHAREHOLDER'S
OBLIGATIONS. The obligation of CAD and Shareholder on the Closing Date as
provided in Articles 1 and 2 hereof shall be subject to the satisfaction, on or
prior to the Closing Date, of the following conditions precedent, unless waived
by CAD and Shareholder:
(i) REPRESENTATIONS AND WARRANTIES. The representations and
warranties by Parent and Subsidiary in Article 5 herein shall be true and
accurate in all material respects on and as of the Closing Date with the same
force and effect as though such representations and warranties had been made at
and as of the Closing Date, except to the extent that any changes therein are
specifically contemplated by this Agreement.
(ii) PERFORMANCE. Parent and Subsidiary shall have performed and
complied in all material respect with all agreements to be performed or complied
with by them pursuant to this Agreement prior to or at the Closing.
(iii) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to CAD, Shareholder and their counsel, and
CAD and Shareholder and their counsel shall have received all such counterpart
originals (or certified or other copies) of such documents as they may
reasonably request.
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(iv) OPINION OF PARENT'S COUNSEL. CAD and Shareholder shall have
received from counsel of Parent, an opinion, dated the Closing Date, as to the
applicable matters set forth in Exhibit 6 to this Agreement.
(v) MATERIAL CHANGES; DUE DILIGENCE. Since the date of this
Agreement, there shall not have been any material adverse change in the
consolidated financial condition, business, assets or operations of Parent and
Subsidiary, taken as a whole, except as contemplated by this Agreement, the ICC
Financial Statements and the ICC SEC Documents.
(vi) COMPLIANCE CERTIFICATE. Parent shall have delivered to CAD and
Shareholder the certificate of its president, chief executive officer or chief
financial officer as to the matters set forth in Articles 5(a) and 5(b)(i) and
(b)(2) and 5(c) of this Agreement.
(vii) ELECTION OF OFFICER OF PARENT AND DIRECTOR OF SURVIVING
CORPORATION. Shareholder shall have been elected, as of the Effective Date, to
serve as an Executive Vice President of Parent and as a Director of the
Surviving Corporation.
(viii) CONSUMMATION OF ACQUISITION. Parent shall have consummated
the proposed acquisition of one-hundred percent (100%) of the outstanding
capital stock of Cable Systems Technical Services Inc. prior to or at the
Closing.
(ix) SATISFACTION OF LOANS. Upon the Closing, Parent and Subsidiary
shall have either: (i) paid in full the outstanding loans made by Richard Dvorin
and First Union National Bank to CAD and Shareholder, respectively; but in no
event shall the liability of Parent and Subsidiary for the payment of such loans
exceed four-hundred-fifty-thousand dollars ($450,000.00); or (ii) obtained a
release from both Richard Dvorin and First Union National Bank whereby each
shall release Shareholder from all personal liability arising out of the
respective loans.
ARTICLE 8
COVENANTS
(a) COVENANTS OF CAD AND SHAREHOLDER. CAD and Shareholder covenants
and agrees that, during the period from the date of this Agreement until the
Closing Date, CAD and Shareholder shall conduct its business as presently
operated and solely in the ordinary course, and consistent with such operation,
and, in connection therewith, without the written consent of Parent:
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(i) shall not amend its Certificate of Incorporation or By-laws
except as contemplated by this Agreement;
(ii) shall not pay or agree to pay to any employee, officer or
director compensation that is in excess of the current compensation level of
such employee, officer or director other than salary increases or payments made
in the ordinary course of business or as otherwise provided in any employment
contract in effect on the date of this Agreement, except for the repayment of
twenty-nine-thousand United States dollars (US$29,000.00) to Shareholder;
(iii) shall not merge or consolidate with any other entity or
acquire or agree to acquire any other entity (subject to the fiduciary duty of
the directors of CAD);
(iv) shall not sell, transfer, or otherwise dispose of any assets
required for the operation of its business except in the ordinary course of
business consistent with past practices;
(v) shall not create, incur, assume, or guarantee any indebtedness
for money borrowed except in the ordinary course of business, or create or
suffer to exist any mortgage, lien or other encumbrance on any of their assets,
except those in existence on the date hereof or those granted pursuant to
agreements in effect on the date of this Agreement;
(vi) shall not make any capital expenditure or series of capital
expenditures except in the ordinary course of business;
(vii) shall not declare or pay any dividends on or make any
distribution of any kind with respect to their capital stock;
(viii) shall maintain its facilities, assets and properties in
reasonable repair, order and condition, reasonable wear and tear excepted, and
to notify Parent immediately in the event of any material loss or damage to any
of its material assets;
(ix) shall maintain in full force and effect all present insurance
coverage of the types and in the amounts as are in effect as of the date of this
Agreement;
(x) shall seek to preserve its present employees, reputations and
business organizations and their relationships with their clients and others
having business dealings with it;
(xi) shall not issue any additional shares of the capital stock or
take any action affecting the capitalization of CAD;
(xii) shall use commercially reasonable efforts to comply with and
not be in default or violation under any law, regulation, decree or order
applicable to its business, operations or assets where such violation would have
a Material Adverse Effect.
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(xiii) shall not grant any severance or termination pay to any of
its directors, officers or any other employees, other than pursuant to
agreements in effect on the date of this Agreement or as otherwise disclosed in
the documents delivered pursuant to this Agreement.
(xiv) shall not, other than in the ordinary course of business, make
or change any material election in respect of Taxes, or adopt or change any
accounting method in respect of Taxes;
(xv) shall not terminate or waive any right of substantial value
other than in the ordinary course of business;
(xvi) shall not enter into any material contract or commitment other
than in the ordinary course of business;
(b) TAX MATTERS. The Parties shall use their best efforts to comply
with the provisions of Section 368 of the Internal Revenue Code of 1986.
(c) EXECUTION OF EMPLOYMENT AGREEMENT. At or prior to the Closing,
Parent shall execute the Employment Agreement described in Article 7(a)(ix).
(d) ACKNOWLEDGMENT OF PARENT AND SUBSIDIARY OF CORPORATE STATUS OF CAD.
Parent and Subsidiary agree and acknowledge that, CAD is and shall remain a S
Corporation as defined by Section 1361 of the Internal Revenue Code and a cash
basis taxpayer until the Closing and as of the Closing, the financial books and
records of CAD will be closed and all of the income or losses attributable to
CAD for the period up until the Closing will be allocated to Shareholder and CAD
shall file both a Federal and state income tax return for the period ended on
the date of Closing.
(e) ASSIGNMENT OF ROYALTIES. Effective upon the Closing Date, CAD,
Parent and Subsidiary hereby assign to Shareholder the right to receive all
royalties or other payments heretofore or hereafter due and payable to CAD and
Shareholder for work completed, up to and as of the date of the execution of
this Agreement, by CAD and Shareholder for Sydson's, Inc. Saniquest, Inc. and
Cygnus, Inc. CAD shall have no right or claim in or to any interest in
Saniquest, Inc., said interest being the personal property of Shareholder. Any
services hereafter performed by CAD for such companies shall be on a fee for
service basis.
(f) GOVERNMENTAL CONSENT. Parent and Subsidiary shall use its best
efforts to obtain all necessary consents, approvals, orders and authorizations
required by the Securities Act and/or the state securities commissions.
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ARTICLE 9
TERMINATION
(a) TERMINATION DUE TO CONDITIONS PRECEDENT.
(i) Parent and Subsidiary may terminate this Agreement in the event
that any of the conditions to closing set forth in Articles 7(a) or (b) to this
Agreement shall not have been satisfied by November 30, 1999.
(ii) CAD and Shareholder may terminate this Agreement in the event
that any of the conditions to closing set forth in Articles 7(a) or (c) to this
Agreement shall not have been satisfied by November 30, 1999.
(b) TERMINATION BY MUTUAL CONSENT. At any time prior to the Closing,
this Agreement may be terminated by the written consent of Parent, CAD and
Shareholder.
(c) TERMINATION BY CAD AND SHAREHOLDER. CAD and Shareholder may
terminate this Agreement and the Merger will be unwound if Parent's proposed
acquisition of Cable Systems Technical Services Inc. is not consummated within
one-hundred-twenty (120) days of the Closing Date.
(d) METHOD OF TERMINATION.
(i) Parent may terminate this Agreement at any time prior to the
Closing Date by delivery of written notice to CAD and Shareholder in the event
of a material breach by CAD or Shareholder or a failure by CAD or Shareholder to
perform any material obligation on its part to be performed or a material breach
by CAD or Shareholder of their representations and warranties contained in
Article 4 of this Agreement, and such breach or failure continues for a period
of fifteen (15) business days following the giving of notice; provided, however,
that if any such breach or failure cannot be cured during such fifteen (15)
business day period, Parent may not terminate this Agreement, provided that CAD
or Shareholder shall have commenced its efforts to cure such breach and shall be
diligently pursuing such cure.
(ii) CAD or Shareholder may terminate this Agreement at any time
prior to the Closing Date by delivery of written notice to Parent in the event
of a material breach by Parent or Subsidiary or a failure by Parent or
Subsidiary to perform any material obligation on its part to be performed or a
material breach by Parent or Subsidiary of its representations and warranties
contained in Article 5 of this Agreement, and such breach or failure continues
for a period of fifteen (15) business days following the giving of notice;
provided, however, that if any such breach or failure cannot be cured during
such fifteen (15) business day period, CAD or Shareholder may not terminate this
Agreement, provided that Parent shall have commenced its efforts to cure such
breach and shall be diligently pursuing such cure.
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ARTICLE 10
CONFIDENTIALITY; NON-SOLICITATION
(a) CONFIDENTIALITY. Parent and Subsidiary, on the one hand, and CAD
and Shareholder on the other hand, will keep confidential all information and
documents obtained from the other which is expressly marked as confidential
(except for any information disclosed to the public pursuant to a press release
authorized by the parties) and in the event the Closing does not occur will
promptly return such documents and all copies of such documents and all notes
and other evidence thereof, including material stored on a computer, and will
not use such information for its own advantage, except to the extent that (i)
the information must be disclosed by law, (ii) the information becomes publicly
available by reason other than disclosure by the party subject to the
confidentiality obligation, (iii) the information is independently developed,
(iv) the information is obtained from another source not obligated to keep such
information confidential, or (v) the information is already publicly known or
known to the receiving party when disclosed.
(b) NON-SOLICITATION. During the period from the date of this Agreement
until the consummation or termination of this Agreement or the Merger and, in
the event of the termination of this Agreement or the Merger for any reason,
during the two (2) year period following the date of such termination, neither
Party shall, without the consent of the other Party, directly or indirectly (i)
solicit the employment or engagement, as an employee or consultant, any
restricted employee or encourage any restricted employee to leave the employment
of the other Party or any subsidiary of the other Party or (ii) solicit the
restricted clients, as hereinafter defined. A restricted employee shall mean any
person who is employed by the other Party or any of its subsidiaries on the date
of such termination or within six (6) months prior to the date of this
Agreement. The restricted clients shall mean all clients of the other Party or
any of its subsidiaries who were clients during the period from August 1, 1998
to the date of such termination.
ARTICLE 11
INDEMNIFICATION
(a) INDEMNIFICATION.
(i) INDEMNIFICATION. Shareholder hereby agrees to indemnify and hold
harmless Parent and the Surviving Corporation, and Parent hereby agrees to
indemnify and hold harmless the Shareholder, from and against all losses,
liabilities, costs, damages, obligations, suits, proceedings, demands,
judgments, claims and expenses, including reasonable attorneys' fees
("Damages"), incurred by the indemnified Party resulting from, arising out of,
or connected with any damage or deficiency resulting from the material breach of
any representation or warranty in this Agreement or any instrument furnished to
the indemnified Party hereunder, any material misrepresentation or omission,
material breach of warranty, material nonfulfillment of any agreement or
covenant on the part of the indemnifying Party under this Agreement or from any
misrepresentation in or omission from any certificate, document or other
instrument furnished to the indemnified Party hereunder.
22
<PAGE>
(ii) NOTICE; CONTROL OF DEFENSE; PAYMENTS. If any event shall occur
which may result in indemnification hereunder, the indemnified Party or Parties
agree(s) to give the indemnifying Party or Parties prompt written notice
thereof. If such event involves a claim by a third party, the indemnifying Party
or Parties shall have the right at its or their sole expense to control and
assume the defense of the matter giving rise to such indemnification with
counsel reasonably satisfactory to the indemnified Party or Parties and to
compromise or settle any such matter, provided that such compromise or
settlement entirely and unconditionally releases the indemnified Party or
Parties from all liability with respect thereto. If the indemnifying Party or
Parties shall assume the defense of the indemnified Party or Parties, the
indemnified Party or Parties shall have the right to participate in such defense
but only at its or their own expense and the indemnifying Party or Parties shall
not be obligated to pay the fees of counsel to the indemnified Party or Parties
incurred after such assumption. If the indemnifying Party or Parties do not
assume the defense of such matter within a reasonable time after notice thereof,
the indemnified Party or Parties may defend, settle and/or compromise such
matter for the account and the expense of the indemnifying Party or Parties. All
amounts payable by any indemnitor as detailed in this Article 11 shall be paid
in U.S. Dollars; PROVIDED, HOWEVER, that Shareholder may satisfy any obligation
to make payments pursuant to this Article 11, in whole or in part, at
Shareholder's option, by delivering to Parent in lieu of cash ICC Common Stock
equal in value to such amounts payable under this Article 11. For purposes of
this Article 11(a)(ii), the value of ICC Common Stock shall be calculated using
the valuation of ICC Common Stock as of the Closing Date (the "Closing Date
Valuation").
(b) LIMITATIONS ON INDEMNIFICATION.
(i) Neither Shareholder, on the one hand, nor the Surviving
Corporation or Parent, on the other hand, shall be entitled to be indemnified
pursuant to this Article 11 unless and until the aggregate of all Damages
incurred by Shareholder, on the one hand, or the Surviving Corporation or
Parent, on the other hand, exceeds twenty-five-thousand United States dollars
(US$25,000.00).
(ii) The maximum liability of Shareholder, on the one hand, or
Parent and the Surviving Corporation, on the other hand, shall not exceed
three-million United States dollars (US$3,000,000.00) in the aggregate.
(iii) The obligations of the Parties pursuant to this Article 11
shall terminate after eighteen (18) months from the Closing Date (the
"Termination Date"), and no Party shall be liable, following the Termination
Date (except in connection with claims brought in good faith prior to the
Termination Date), to indemnify or hold harmless another Party from or against
any Damages arising from or in connection with this Agreement or any
certificate, document or other instrument furnished hereunder, regardless of
whether such Damages arise prior to the Termination Date.
23
<PAGE>
ARTICLE 12
MISCELLANEOUS
(a) EXPENSES. Parent shall bear its own costs incurred in
negotiating this Agreement and consummating the transactions contemplated
hereby. On the Closing Date or upon the termination of this Agreement, whichever
is first to occur, Parent shall pay to CAD up to thirty- thousand United States
dollars (US$30,000.00) of CAD's and Shareholder's expenses incurred in
connection with the negotiation and execution of this Agreement and/or the
consummation of the transactions contemplated hereby.
(b) TERMINATION OF COVENANTS, REPRESENTATIONS, AND WARRANTIES. All
covenants, representations and warranties contained herein or made in connection
with the transactions contemplated hereby shall survive the Closing for a period
of two (2) years.
(c) NOTICES. All notices, requests, consents and other
communications herein shall be in writing and shall be mailed by first class or
certified mail, postage prepaid, or personally delivered or sent by an overnight
courier service which obtains evidence of delivery to the Party and its counsel
as follows:
If to Parent and Subsidiary: Internet Cable Corporation
263 King Street, 2nd Floor
Charleston, South Carolina 29401
Attention: Timothy R. Karnes, President
with a copy to: Gersten, Savage & Kaplowitz, LLP
101 East 52nd Street, 9th Floor
New York, New York 10022
Attention: Christopher J. Kelly, Esq.
If to CAD: Cad Consultants, Inc.
322 Route 46W
Parsippany, New Jersey 07054
Attention: Craig Lerman, President
with a copy to: Hellring Lindeman Goldstein & Siegal,
LLP
One Gateway Center
Newark, New Jersey 07102-5386
Attention: Judah I. Elstein, Esq.
24
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If to Shareholder: Craig Lerman
82 Ridge Drive
Livingston, New Jersey 07039
with a copy to: Hellring Lindeman Goldstein & Siegal,
LLP
One Gateway Center
Newark, New Jersey 07102-5386
Attention: Judah I. Elstein, Esq.
(d) ENTIRE AGREEMENT; MODIFICATIONS; WAIVER. This Agreement and the
documents and other agreements specifically referred to herein constitute the
final, exclusive and complete understanding of the Parties with respect to the
subject matter hereof and supersede any and all prior agreements,
understandings, discussions and letters of intent with respect thereto. No
amendment or modification of this Agreement and no waiver of any provision or
condition hereof or granting of any consent contemplated hereby, shall be valid
unless it is in writing, expressly refers to this Agreement and states that it
is an amendment, modification or waiver and signed by all Parties, in the case
of an amendment or modification, or the Party granting the waiver, in the case
of a waiver. No waiver by any Party of any term or condition of this Agreement,
in any one or more instances, shall be deemed or construed as a waiver of the
same term or condition or any other term or condition of this Agreement on any
future occasion.
(e) SUCCESSORS AND ASSIGNS. All of the terms of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successor and assigns of the Parties hereto; provided, that no Party may assign
this Agreement or any of its rights under this Agreement without the written
consent of the other Party.
(f) EXECUTION AND COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute one
instrument.
(g) GOVERNING LAW AND SEVERABILITY. Except to the extent that New
Jersey Law is mandatorily applicable to the Merger, this Agreement shall be
governed by the laws of the State of New York as applied to agreements entered
into and to be performed in such state. If any provision of this Agreement or
any application thereof is held to be unenforceable, the remainder of the
Agreement and any application of such provision shall not be affected thereby
and to the extent permitted by law, there shall be substituted for the
provisions held unenforceable, provisions which shall, as nearly as possible,
have the same economic effect as the provisions held unenforceable.
(h) PUBLICITY. Except for disclosure required by law, the timing and
content of any announcements and press releases made prior to the Closing
concerning the transactions contemplated by this Agreement shall be determined
by joint consultation of the Parties.
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<PAGE>
(i) CAPTIONS. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provisions of this Agreement.
(j) SCHEDULES AND EXHIBITS. All of the schedules and exhibits to this
Agreement are hereby incorporated in this Agreement and shall be deemed and
construed to be a part of this Agreement for all purposes.
{SIGNATURES ON THE FOLLOWING PAGE]
26
<PAGE>
IN WITNESS WHEREOF, each Party executed this Agreement as of
the date first above written.
INTERNET CABLE CORPORATION
By:____________________________
Timothy R. Karnes
President
ICC ACQUISITION CORP.
By:_____________________________
Timothy R. Karnes
President
CAD CONSULTANTS, INC.
By:___________________________
Craig Lerman
President
By:____________________________
Craig Lerman, Individually
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<PAGE>
EXHIBIT 1
CERTIFICATE OF MERGER - NEW JERSEY
CERTIFICATE OF MERGER
OF
CAD CONSULTANTS, INC.
A NEW JERSEY CORPORATION
AND
ICC ACQUISITION CORP.
A DELAWARE CORPORATION
Pursuant to Section 14A:10-7 of the New Jersey Business Corporation
Act, the undersigned corporations execute and accept the following Certificate
of Merger:
FIRST: A Plan of Merger (a copy of which is annexed hereto) was
approved by the stockholders and directors of the undersigned corporations on
November __, 1999 in the manner prescribed by the New Jersey Business
Corporation Act and the General Corporation Law of Delaware.
SECOND: As prescribed in the Plan of Merger, ICC Acquisition Corp., a
Delaware Corporation, shall be merged with and into CAD Consultants, Inc., a New
Jersey Corporation, and the surviving corporation shall be CAD Consultants,
Inc., a New Jersey corporation.
THIRD: As to each of the corporations, the only outstanding stock is
common stock, the shares of which are entitled to vote for and against the Plan
of Merger, in the amounts as follows:
NAME OF CORPORATION SHARES OUTSTANDING
------------------- ------------------
ICC Acquisition Corp. 1,000
A Delaware Corporation
CAD Consultants, Inc. 100
A New Jersey Corporation
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<PAGE>
FOURTH: The total number of shares voted for and against the Plan of
Merger are as follows:
NAME OF CORPORATION COMMON STOCK VOTED
------------------- ------------------
FOR AGAINST
--- -------
ICC Acquisition Corp. 1,000 0
A Delaware Corporation
CAD Consultants, Inc. 100 0
A New Jersey Corporation
FIFTH: ICC Acquisition Corp., a Delaware Corporation, has complied with
the applicable provisions of the laws of the State of Delaware.
SIXTH: Pursuant to Section 14A:10-4.1(2) of the New Jersey Business
Corporation Act, the Merger is to become effective upon the filing of this
Certificate with the Secretary of State of New Jersey.
ICC ACQUISITION CORP.
A Delaware Corporation
By:____________________________
Timothy R. Karnes, President
CAD CONSULTANTS, INC.
A New Jersey Corporation
By:____________________________
Craig Lerman, President
Dated: November _____, 1999
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<PAGE>
PLAN OF MERGER
--------------
FIRST: ICC Acquisition Corp., a corporation organized under the laws of
the State of Delaware, shall merge with and into CAD Consultants, Inc., Inc., a
corporation organized under the laws of the State of New Jersey. Upon the
effective date of the merger, CAD Consultants, Inc., Inc. shall be the surviving
corporation, which shall continue to exist pursuant to the provisions of the New
Jersey Business Corporation Act. The separate existence of ICC Acquisition Corp.
shall cease upon said effective date.
SECOND: Upon the effective date of the merger, all of the issued and
outstanding shares of ICC Acquisition Corp. shall be canceled and each share of
common stock of CAD Consultants, Inc., the surviving corporation, shall remain
in full force and effect.
THIRD: The Certificate of Incorporation of CAD Consultants, Inc. shall
be the Certificate of Incorporation of the corporation surviving the merger,
except that Article Third of the Certificate of Incorporation of CAD
Consultants, Inc. shall be amended to read as follows:
"THIRD: The total number of shares of capital stock which this
corporation is authorized to issue is 1,000 shares, all of
which shall be shares of Common Stock and shall have a par
value of $.01 per share."
FOURTH: The By-Laws of CAD Consultants, Inc. shall be the By-Laws of
the corporation surviving the merger.
FIFTH: The officers of each corporation party to the merger shall be
and hereby are authorized to do all acts and things necessary and proper to
effect the merger.
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<PAGE>
EXHIBIT 2
CERTIFICATE OF MERGER - DELAWARE
CERTIFICATE OF MERGER
OF
ICC ACQUISITION CORP.
AND
CAD CONSULTANTS, INC.
It is hereby certified that:
1. The constituent business corporations participating in the merger
herein certified are:
(a) ICC Acquisition Corp., which is incorporated under the laws of
the State of Delaware ("ICC"); and
(b) CAD Consultants, Inc., which is incorporated under the laws of
the State of New Jersey ("CAD").
2. An Agreement and Plan of Merger has been approved, adopted,
certified, executed and acknowledged by each of the aforesaid constituent
corporations in accordance with the provisions of subsection (c) of Section 252
of the Delaware General Corporation Law, to wit, by ICC in the same manner as is
provided in Section 251 of the Delaware General Corporation Law and by CAD in
accordance with the laws of the State of New Jersey.
3. The surviving corporation in the merger herein certified is CAD,
which will continue its existence as said surviving corporation under its
present name upon the effective date of said merger pursuant to the provisions
of the laws of the State of New Jersey.
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<PAGE>
4. The Amended Certificate of Incorporation of CAD is to be amended and
in the form attached as EXHIBIT A hereto.
5. An executed copy of the Agreement and Plan of Merger between the
aforesaid constituent corporations is on file at the principal place of business
of the aforesaid surviving corporation, the address of which is as follows: CAD
Consultants, c/o Internet Cable Corporation, 263 King Street, 2nd Floor,
Charleston, South Carolina 29401.
6. A copy of the aforesaid Agreement and Plan of Merger will be
furnished by the aforesaid surviving corporation, on request, and without cost,
to any shareholder of each of the aforesaid constituent corporations.
7. The aforesaid surviving corporation does hereby agree that it may be
served with process in the State of Delaware in any proceeding for enforcement
of any obligation of ICC, as well as for enforcement of any obligation of said
surviving corporation arising from the merger herein certified, including any
suit or other proceeding to enforce the right, if any, of any shareholder of ICC
as determined in appraisal proceedings pursuant to the provisions of Section 262
of the Delaware General Corporation Law; does hereby irrevocably appoint the
Secretary of State of the State of Delaware as its agent to accept service of
process in any such suit or other proceedings; and does hereby specify the
following as the address to which a copy of such process shall be mailed by the
Secretary of State of the State of Delaware.
Executed this ___ day of November, 1999.
ICC ACQUISITION CORP.,
a Delaware corporation
By: _________________________
Timothy R. Karnes
President
CAD CONSULTANTS, INC.,
a New Jersey corporation
By: _________________________
Craig Lerman
President
32
<PAGE>
EXHIBIT 3
LIST OF OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
OFFICERS:
- --------
Timothy R. Karnes - President
J. Robert Jones - Secretary and Chief Technical Officer
Lisa B. Safford - Treasurer
DIRECTORS:
- ---------
Timothy R. Karnes - Chairman
Craig Lerman - Director
Lisa B. Safford - Director
J. Robert Jones - Director
33
<PAGE>
EXHIBIT 4
FORM OF EMPLOYMENT AGREEMENT BETWEEN PARENT AND SHAREHOLDER
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into, as of this 8th
day of October 1999, by and between Craig Lerman an individual resident of the
State of New Jersey ("Employee"), and Internet Cable Corporation, a Nevada
corporation ("Employer") with its principal place of business at 263 King
Street, Second Floor, Charleston, South Carolina 29401.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Employer desires to employ Employee, and Employee desires to
be employed by Employer, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
SECTION 1. EMPLOYMENT.
--------- ----------
Subject to the terms hereof, Employer hereby employs Employee, and
Employee hereby accepts such employment. Employee will serve in the capacity of
President - CAD Division of Employer and will have duties and responsibilities
customarily assigned to a person with such title. Employee hereby agrees that,
throughout his period of employment, he shall devote his business time,
attention, knowledge and skills, diligently in the furtherance of the business
of the Employer and of its subsidiaries and affiliates, shall perform his duties
consistent with his position with Employer and shall observe and carry out such
rules and regulations, policies and directions as Employer may from time to time
establish to the extent consistent herewith. During the term of this Agreement,
Employee shall do such traveling as may be reasonably required of him in the
performance of his duties on behalf of Employer.
SECTION 2. TERM OF EMPLOYMENT.
--------- ------------------
2.1 The term of Employee's employment hereunder (the "Initial Term")
shall be from the date of the execution hereof and expire at the earlier of (a)
the third anniversary of the date of this Agreement or (b) the occurrence of any
of the following events:
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<PAGE>
(i) The death or total disability of (i) Employee (total disability
meaning the failure to substantially perform his normal required
services hereunder for a period of six (6) consecutive months during
any consecutive twelve (12) month period during the term hereof, as
determined by an independent medical doctor jointly chosen by the
Employee and the Employer, by reason of mental or physical
disability; or
(ii) The termination by Employer of Employee's employment hereunder,
upon seven (7) days prior written notice to Employee, which
termination shall be for "Cause", as determined by the Board of
Directors of Employer in accordance with the terms hereof. For
purposes of this Agreement, "Cause" for termination of Employee's
employment shall exist (V) if Employee is convicted of, pleads
guilty to, or confesses to any felony or any act of fraud,
misappropriation or embezzlement with regard to Employer, (W) if
Employee has engaged in a dishonest act to the material damage or
prejudice of Employer or an affiliate of Employer, or in conduct or
activities materially damaging to the property, business, or
reputation of Employer or an affiliate of Employer, (X) if Employee
violates any of the provisions contained in Section 4 of this
Agreement, after receiving thirty (30) days written notice from
Employer specifically outlining the alleged violations by the
Employee of Section 4 hereof and Employee has not cured the alleged
violations within thirty (30) days of receipt of written notice by
the Employer; (Y) Employee willfully breaches or habitually neglects
the duties he is required to perform hereunder, or performs such
duties in a negligent manner, after receiving thirty (30) days
written notice from Employer specifically outlining the violations
of this Section and Employee has not cured the alleged violations of
this Section within thirty (30) days of receipt of written notice by
Employer.
(iii) If Employer shall not have consummated the proposed merger
withCAD Consultants, Inc. by November 30, 1999.
2.2 SUCCESSIVE TERMS. After the Initial Term, this Agreement shall
continue upon a year-to-year basis (the "Successive Terms"; together with the
Initial Term, the "Term") unless terminated by either the Employer or the
Employee upon ninety (90) days written notice to the other prior to the end of
the Initial Term or the then Successive Term.
SECTION 3. COMPENSATION.
--------- ------------
3.1 TERM OF EMPLOYMENT. Employer will provide Employee with the
following salary, expense reimbursement and additional employee benefits during
the term of employment hereunder:
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<PAGE>
(a) SALARY. During the Initial Term, Employee will be paid a salary
(the "Salary"), that shall be no less than two-hundred-thousand
United States dollars (US$200,000.00) per annum, less deductions and
withholdings required by applicable law. Thereafter, and during the
Successive Terms, Employee will be paid a salary (the "Successive
Terms Salary") determined in good faith negotiations between
Employer and Employee. The Salary and Successive Terms Salary shall
be paid to Employee in equal monthly installments (or on such more
frequent basis as other executives of Employer are compensated).
(b) DISCRETIONARY BONUS. The Board of Directors may, from time to time,
award the Employee a discretionary bonus based upon such factors as
the Board deems appropriate. The Employee shall have no entitlement
to such a discretionary bonus until and unless so awarded by the
Board.
(c) VACATION. Employee shall be entitled to receive four (4) weeks paid
vacation during each year of employment upon dates agreed upon by
Employer.
(c) EXPENSES. Employer shall reimburse Employee within thirty (30) days
of its receipt of a reimbursement report with supporting receipts
from the Employee, for all reasonable and necessary expenses
incurred by Employee at the request of and on behalf of Employer.
(d) BENEFIT PLANS. Employee shall have the option of participating in
such medical, dental, disability, hospitalization, life insurance,
stock option and other benefit plans (such as pension and profit
sharing plans) as Employer maintains from time to time for the
benefit of other full-time employees of Employer, on the terms and
subject to the conditions set forth in such plans.
(e) STOCK COMPENSATION. Upon the execution hereof, Employer shall issue
to Employee a qualified statutory incentive plan option pursuant to
the 1999 Stock Option Plan of Employer to purchase
one-hundred-fifty-five-thousand (155,000) shares of Employer's
common stock at an exercise price of five United States dollars
fifty cents (US$5.50) per share, pursuant to the Incentive Stock
Option Agreement annexed hereto. The term of such option shall be
for a period of five (5) years from the execution of this Agreement.
The option shall vest according to the following schedule: (i)
thirty-eight- thousand-seven-hundred-fifty (38,750) shares upon the
first anniversary of the date of this Agreement; (ii)
thirty-eight-thousand-seven-hundred-fifty (38,750) shares upon the
second anniversary of the date of this Agreement; and (iii)
seventy-seven-thousand-five-hundred (77,500) shares upon the third
anniversary of the date of this Agreement.
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<PAGE>
(f) AUTOMOBILE ALLOWANCE. During the Term Employer shall pay Employee
seven-hundred United States dollars (US$700.00) per month as an
allowance for the use of Employee's automobile. In lieu of such
allowance, Employer may furnish, or lease, an automobile mutually
acceptable to both Employer and Employee for Employee's use.
Employer shall pay all expenses charged to Employee in connection
with Employee's return of a leased automobile.
3.2 EFFECT OF TERMINATION. Upon the termination of the employment of
Employee hereunder for Cause, Employee shall be entitled to all compensation and
benefits earned or accrued under Section 3.1 as of the effective date of
termination. Upon the termination of this Agreement during the first thirty (30)
months of the Initial Term or the then Successive Term, as the case may be, for
any reason other than for Cause, Employee shall be entitled to receive all
compensation and benefits provided in Section 3.1 through the end of the Initial
Term or the then Successive Term, as the case may be. Upon the termination of
this Agreement during the last six (6) months of the Initial Term or the then
Successive Term, as the case may be, for any reason other than for Cause,
Employee shall be entitled to receive all compensation and benefits earned or
accrued under Section 3.1 as of the effective date of termination plus an amount
equal to six (6) months Salary. Upon the termination of the employment of
Employee pursuant to Section 2.1(iii) of this Agreement, Employee shall be
obligated to repay to Employer all compensation and benefits earned under
Section 3.1 as of the effective date of termination.
SECTION 4. NONSOLICITATION.
--------- ---------------
4.1 DEFINITIONS. For the purposes of this Section 4, the following
definitions shall apply.
(a) "Confidential Information" means any confidential, proprietary
business information or data belonging to or pertaining to Employer
that does not constitute a "Trade Secret" (as hereinafter defined)
and that is not generally known by or available through legal means
to the public, including, but not limited to, information regarding
the Employer's customers or actively sought prospective customers,
acquisition targets, suppliers, manufacturers and distributors
gained by Employee as a result of his employment with Employer.
(b) "Customer" means actual customers or actively sought prospective
customers of Employer.
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(c) "Trade Secrets" means information or data of or about Employer,
including but not limited to technical or non-technical data,
formulas, patterns, compilations, programs, devices, methods,
techniques, drawings, processes, financial data, financial plans,
products plans, or lists of actual or potential customers, clients,
distributees or licensees, information concerning or Employer's
finances, services, staff, contemplated acquisitions, marketing
investigations and surveys, that are not generally known to, and/or
are not readily ascertainable by proper means by, other persons.
(d) "Work Product" means any and all work product property, data
documentation or information of any kind prepared, conceived,
discovered, developed or created by Employee for Employer or its
affiliates' clients or customers for utilization in Employer's
business, not generally known by or not readily ascertainable by
proper means by other persons who can obtain economic value from
their disclosure or use.
4.2 TRADE NAME AND CONFIDENTIAL INFORMATION.
(a) Employee hereby agrees that a all times during the Term and
thereafter:
(i) Employee shall not, directly or by assisting others own, manage,
operate, join, control or participate in the ownership, management,
operation or control of, or be connected in any manner with, any
business conducted under any corporate or trade name of Employer or
name confusingly similar thereto, without the prior written consent
of Employer;
(ii) Employee shall hold i confidence all Trade Secrets and all
Confidential Information and will not, either directly or
indirectly, use, sell, lend, lease, distribute, license, give,
transfer, assign, show, disclose, disseminate, reproduce, copy,
appropriate or otherwise communicate any Trade Secrets or
Confidential Information, without the prior written consent of
Employer; and
(iii) During the Term Employee shall immediately notify Employer of any
unauthorized disclosure or use of any Trade Secrets or Confidential
Information of which Employee becomes aware, Employee shall assist
Employer, to the extent necessary, in the procurement or any
protection of Employer's rights to or in any o the Trade Secrets or
Confidential Information.
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(b) Upon the request of Employer, Employee shall deliver to Employer
all memoranda, notes, records, manuals and other documents,
including all copies of such materials and all documentation
prepared or produced in connection therewith, pertaining to the
performance of Employee's services hereunder or Employer's business
or containing Trade Secrets or Confidential Information, whether
made or complied by Employee or furnished to Employee from another
source by virtue of Employee's employment with Employer.
(c) To the greatest extent possible, all Work Product shall be deemed
to be "work made for hire" (as defined in the Copyright Act, 17
U.S.C.A. Section 101 ET SEQ., as amended) and owned exclusively by
Employer. Employee hereby unconditionally and irrevocably transfers
and assigns to Employer all rights, title and interest Employee may
have in or to any and all Work Product, including, without
limitation, all patents, copyrights, trademarks, service marks and
other intellectual property rights arising out of the Work Product.
Employee agrees to execute and deliver to Employer any transfers,
assignments, documents or other instruments which Employer may deem
necessary or appropriate to vest complete title and ownership of any
and all such Work Product, and all rights therein, exclusively in
Employer.
4.3 NONSOLICITATION AND NONCOMPETE. Employee hereby agrees that
Employee will not, during the Term and for a period of one (1) year following
the Term, either directly or indirectly, alone or in conjunction with any other
party:
(a) solicit, divert or appropriat or attempt to solicit, divert or
appropriate, any Customer for the purpose of providing the Customer
with services or products competitive with those offered by Employer
during the Term; or
(b) solicit or attempt to solicit any officer, director, employee,
consultant, contractor, agent, lessor, lessee, licensor, licensee,
supplier or any shareholder of Employer or other personnel of
Employer or any of its affiliates or subsidiaries to terminate,
alter or lessen that party's affiliation with Employer or such
affiliate or subsidiary or to violate the terms of any agreement or
understanding between such employee, consultant, contractor or other
person and Employer; or
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(c) engage in, as owner, stockholder, employee, partner, agent,
representative or otherwise, or have an interest in (except for
ownership of publicly trade securities representing not more than
five percent (5%) of the outstanding voting shares), any business,
firm, corporation or other entity in direct competition with the
business of Employer. Notwithstanding the foregoing, upon the
conclusion of the Initial Term or any Successive Term, if this
Agreement is not renewed for a Successive Term upon terms mutually
acceptable to Employee and Employer, Employee may be engaged solely
as an employee or consultant in any business, firm, corporation or
other entity in direct competition with the business of Employer.
Nothing contained in this Section 4 shall prohibit Employee from
acquiring not more than five percent (5%) of any competitor of Employer whose
common stock is publicly traded on a national securities exchange or in the
over-the-counter market or from acquiring any percentage of any company which is
non-competitive with Employer.
SECTION 5. MISCELLANEOUS.
--------- -------------
5.1 SEVERABILITY. The covenants in this Agreement shall be construed as
covenants independent of one another and as obligations distinct from any other
contract between Employee and Employer. Any claim that Employee may have against
Employer shall not constitute a defense to enforcement by Employer of this
Agreement.
5.2 SURVIVAL OF OBLIGATIONS. The covenants in Section 4 of this
Agreement shall survive termination of Employee's employment for the period set
forth therein.
5.3 NOTICES. Any notice or other document to be given hereunder by any
party hereto to any other party hereto shall be in writing and delivered in
person or by courier, by telecopy transmission or sent by any express mail
service, postage or fees prepaid at the following addresses:
EMPLOYER: Internet Cable Corporation
--------
263 King Street, Second Floor
Charleston, South Carolina 29401
Telephone: (843) 722-8007
Facsimile: (843) 873-4594
Attention: Timothy R. Karnes, President
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WITH A
COPY TO: Gersten, Savage & Kaplowitz, LLP
-------
101 East 52nd Street
New York, New York 10022
Telephone: (212) 752-9700
Facsimile: (212) 813-9768
Attention: Christopher J. Kelly, Esq.
EMPLOYEE: Craig Lerman
--------
82 Ridge Drive
Livingston, New Jersey 07039
Telephone: (973) 994-7310
WITH A
COPY TO: Hellring Lindeman Goldstein & Siegal, LLP
-------
One Gateway Center
Newark, New Jersey 07102-5386
Telephone: (973) 621-9020
Facsimile: (973) 621-7406
Attention: Judah I. Elstein, Esq.
or at such other address or number for a party as shall be specified by like
notice. Any notice which is delivered in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or its agent.
5.4 BINDING EFFECT. This Agreement inures to the benefit of, and is
binding upon, Employer and their respective successors and assigns, and
Employee, together with Employee's executor, administrator, personal
representative, heirs, and legatees.
5.5 ENTIRE AGREEMENT. This Agreement is intended by the parties hereto
to be the final expression of their agreement with respect to the subject matter
hereof and is the complete and exclusive statement of the terms thereof,
notwithstanding any representations, statements or agreements to the contrary
heretofore made. This Agreement supersedes and terminates all prior employment
and compensation agreements, arrangements and understandings between or among
Employer and Employee. This Agreement may be modified only by a written
instrument signed by all of the parties hereto.
5.6 GOVERNING LAW. This Agreement shall be deemed to be made in, and in
all respects shall be interpreted, construed, and governed by and in accordance
with, the laws of the State of New York. No provision of this Agreement shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority or by any board of arbitrators
by reason of such party or its counsel having or being deemed to have structured
or drafted such provision.
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5.7 HEADINGS. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.8 SPECIFIC PERFORMANCE. Each party hereto hereby agrees that any
remedy at law for any breach of the provisions contained in this Agreement shall
be inadequate and that the other parties hereto shall be entitled to specific
performance and any other appropriate injunctive relief in addition to any other
remedy such party might have under this Agreement or at law or in equity.
5.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
INTERNET CABLE CORPORATION
By:__________________________
Name: Timothy R. Karnes
Title: President
By:___________________________
Craig Lerman
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NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SHARES ISSUABLE
UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"1933 ACT") OR THE SECURITIES LAWS OF ANY STATE. NEITHER THE SECURITIES
REPRESENTED HEREBY MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED NOR
MAY THE SHARES BE ISSUED UPON EXERCISE UNLESS SUCH SECURITIES AND SHARES ARE
REGISTERED UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH SALE,
TRANSFER, PLEDGE OR ISSUANCE IS EXEMPT FROM REGISTRATION.
INTERNET CABLE CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT (the "Agreement"), is made as of
the 8th day of October 1999 by and between Internet Cable Corporation, a Nevada
corporation (the "Company"), and Craig Lerman ("Optionee").
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R E C I T A L
Pursuant to the 1999 Stock Option Plan (the "Plan") of the Company, the
Board of Directors of the Company or a committee to which administration of the
Plan is delegated by the Board of Directors (in either case, the
"Administrator") has authorized the granting to Optionee of an incentive stock
option to purchase the number of shares of Common Stock of the Company specified
in Paragraph 1 hereof, at the price specified therein, such option to be for the
term and upon the terms and conditions hereinafter stated.
A G R E E M E N T
NOW, THEREFORE, in consideration of the promises and of the
undertakings of the parties hereto contained herein, it is hereby agreed:
1. Number of Shares; Option Price. Pursuant to said action of the
Administrator, the Company hereby grants to Optionee the option ("Option") to
purchase, upon and subject to the terms and conditions of the Plan,
One-Hundred-Fifty-Five-Thousand (155,000) shares of Common Stock of the Company
("Shares") at the price of $5.50 per share.
2. Term. This Option shall expire on the day before the fifth
anniversary (fifth anniversary if Optionee owns more than 10% of the voting
stock of the Company or an Affiliate of the Company on the date of this
Agreement) of the date hereof (the "Expiration Date") unless such Option shall
have been terminated prior to that date in accordance with the provisions of the
Plan or this Agreement. The term "Affiliate" as used herein shall have the
meaning as set forth in the Plan.
3. Shares Subject to Exercise. Shares subject to exercise shall be 25%
of such Shares on and after the first anniversary of the date hereof, 25% of
such Shares on and after the second anniversary of the date hereof and 50% of
such Shares on and after the third anniversary of the date hereof. All Shares
shall thereafter remain subject to exercise for the term specified in Paragraph
2 hereof, provided that Optionee is then and has continuously been in the employ
of the Company, or its Affiliate, subject, however, to the provisions of
Paragraph 6 hereof.
4. Method and Time of Exercise. The Option may be exercised by written
notice delivered to the Company at its principal executive office stating the
number of shares with respect to which the Option is being exercised, together
with:
(A) a check or money order made payable to the Company in the amount
of the exercise price and any withholding tax, as provided under Paragraph 5
hereof; or
(B) if expressly authorized in writing by the Administrator, in its
sole discretion, at the time of the Option exercise, the tender to the Company
of shares of the Company's Common Stock owned by Optionee having a fair market
value, as determined by the Administrator, not less than the exercise price,
plus the amount of applicable federal, state and local withholding taxes.
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Not less than 100 shares may be purchased at any one time unless the number
purchased is the total number purchasable under such Option at the time. Only
whole shares may be purchased.
5. Tax Withholding. In the event that this Option shall lose its
qualification as an incentive stock option, as a condition to exercise of this
Option, the Company may require Optionee to pay over to the Company all
applicable federal, state and local taxes which the Company is required to
withhold with respect to the exercise of this Option. At the discretion of the
Administrator and upon the request of Optionee, the minimum statutory
withholding tax requirements may be satisfied by the withholding of shares of
Common Stock of the Company otherwise issuable to Optionee upon the exercise of
this Option.
6. Exercise on Termination of Employment. If for any reason other than
death or permanent and total disability, Optionee ceases to be employed by the
Company or any of its Affiliates (such event being called a "Termination"), this
Option (to the extent then exercisable) may be exercised in whole or in part at
any time within three months of the date of such Termination, but in no event
after the Expiration Date; provided, however, that if such exercise of this
Option would result in liability for Optionee under Section 16(b) of the
Securities Exchange Act of 1934, then such three-month period automatically
shall be extended until the tenth day following the last date upon which
Optionee has any liability under Section 16(b), but in no event after the
Expiration Date. If Optionee dies or becomes permanently and totally disabled
(as defined in the Plan) while employed by the Company or an Affiliate or within
the period that this Option remains exercisable after Termination, this Option
(to the extent then exercisable) may be exercised, in whole or in part, by
Optionee, by Optionee's personal representative or by the person to whom this
Option is transferred by devise or the laws of descent and distribution, at any
time within six months after the death or six months after the permanent and
total disability of Optionee, but in no event after the Expiration Date. In the
event this Option is treated as a nonqualified stock option, then and to that
extent, "employment" would include service as a director or as a consultant. For
purposes of this Paragraph 6, Optionee's employment shall not be deemed to
terminate by reason of sick leave, military leave or other leave of absence
approved by the Administrator, if the period of any such leave does not exceed
90 days or, if longer, if Optionee's right to reemployment by the Company or any
Affiliate is guaranteed either contractually or by statute.
7. Nontransferability. This Option may not be assigned or transferred
except by will, qualified domestic relations order or by the laws of descent and
distribution, and may be exercised only by Optionee during his lifetime and
after his death, by his personal representative or by the person entitled
thereto under his will or the laws of intestate succession.
8. Optionee Not a Shareholder. Optionee shall have no rights as a
shareholder with respect to the Common Stock of the Company covered by this
Option until the date of issuance of a stock certificate or stock certificates
to him upon exercise of this Option. No adjustment will be made for dividends or
other rights for which the record date is prior to the date such stock
certificate or certificates are issued.
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9. No Right to Employment. Nothing in the Option granted hereby shall
interfere with or limit in any way the right of the Company or of any of its
Affiliates to terminate Optionee's employment or consulting at any time, nor
confer upon Optionee any right to continue in the employ of, or consult with,
the Company or any of its Affiliates.
10. Modification and Termination. The rights of Optionee are subject to
modification and termination in certain events as provided in Sections 6.1 and
6.3 of the Plan.
11. Restrictions on Sale of Shares. Optionee represents and agrees
that, upon his exercise of this Option, in whole or in part, unless there is in
effect at that time under the Securities Act of 1933 a registration statement
relating to the Shares issued to him, he will acquire the Shares issuable upon
exercise of this Option for the purpose of investment and not with a view to
their resale or further distribution, and that upon each exercise thereof he
shall furnish to the Company a written statement to such effect, satisfactory to
the Company in form and substance. Optionee agrees that any certificates issued
upon exercise of this Option may bear a legend indicating that their
transferability is restricted in accordance with applicable state or federal
securities law. Any person or persons entitled to exercise this Option under the
provisions of Paragraphs 5 and 6 hereof shall, upon each exercise of this Option
under circumstances in which Optionee would be required to furnish such a
written statement, also furnish to the Company a written statement to the same
effect, satisfactory to the Company in form and substance.
12. Plan Governs. This Agreement and the Option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan, as it may be construed
by the Administrator. It is intended that this Option shall qualify as an
incentive stock option as defined by Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and this Agreement shall be construed in a manner
which will enable this Option to be so qualified. Optionee hereby acknowledges
receipt of a copy of the Plan.
13. Notices. All notices to the Company shall be addressed to the Chief
Financial Officer at the principal executive office of the Company, and all
notices to Optionee shall be addressed to Optionee at the address of Optionee on
file with the Company or its subsidiary, or to such other address as either may
designate to the other in writing. A notice shall be deemed to be duly given if
and when enclosed in a properly addressed sealed envelope deposited, postage
prepaid, with the United States Postal Service. In lieu of giving notice by mail
as aforesaid, written notices under this Agreement may be given by personal
delivery to Optionee or to the Treasurer (as the case may be).
14. Sale or Other Disposition. Optionee understands that, under current
law, beneficial tax treatment resulting from the exercise of this Option will be
available only if certain requirements of the Code are satisfied, including
without limitation, the requirement that no disposition of Shares acquired
pursuant to exercise of this Option be made within two years from the grant date
or within one year after the transfer of Shares to him or her. If Optionee at
any time contemplates the disposition (whether by sale, gift, exchange, or other
form of transfer) of any such Shares, he or she will first notify the Company in
writing of such proposed disposition and cooperate with the Company in complying
with all applicable requirements of law, which, in the judgment of the Company,
must be satisfied prior to such disposition. In addition to the foregoing,
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Optionee hereby agrees that before Optionee disposes (whether by sale, exchange,
gift, or otherwise) of any Shares acquired by exercise of this Option within two
years of the grant date or within one year after the transfer of such Shares to
Optionee upon exercise of this Option, Optionee shall promptly notify the
Company in writing of the date and terms of the proposed disposition and shall
provide such other information regarding the Option as the Company may
reasonably require immediately before such disposition. Said written notice
shall state the date of such proposed disposition, and the type and amount of
the consideration to be received for such Shares by Optionee in connection
therewith. In the event of any such disposition, the Company shall have the
right to require Optionee to immediately pay the Company the amount of taxes (if
any) which the Company is required to withhold under federal and/or state law as
a result of the granting or exercise of the Option and the disposition of the
Shares.
[SIGNATURE ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
INTERNET CABLE CORPORATION
By : _______________________
Name: Timothy R. Karnes
Title:President
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EXHIBIT 5
OPINION OF CAD'S COUNSEL
November , 1999
Internet Cable Corporation
[Address]
Gentlemen:
We have acted as counsel to CAD Consultants, Inc., a New Jersey
corporation ("CAD"), in connection with the preparation, execution and delivery
of the Agreement and Plan of Merger dated as of September __, 1999 ("Merger
Agreement") by and among Internet Cable Corporation, a Nevada corporation, ICC
Acquisition Corp., a Delaware corporation (together "ICC"), CAD and CAD's sole
shareholder Craig Lerman ("Shareholder"). This opinion is rendered to you
pursuant to Article 7(b)(iv) of the Merger Agreement.
In connection with this opinion, we have examined and are familiar with
the Merger Agreement and the documents delivered pursuant thereto and have taken
such additional steps and reviewed such additional documents and matters as we
may have deemed necessary in order to render our opinion.
The opinions set forth below are subject to the following
qualifications:
(a) We have assumed the genuineness of all signatures, the legal
capacity and competency of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to the originals of all documents
submitted to us as copies and the authenticity of the originals of all such
documents. We have also assumed the accuracy of the factual matters contained in
the documents we have examined.
(b) We have assumed that ICC has all requisite power and authority and
has taken all necessary corporate action to execute, deliver and perform the
Merger Agreement and the Merger Certificate and all documents and agreements
executed in connection therewith to which ICC is a party and to effect the
transactions contemplated thereby and that performance by ICC of the Merger
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Agreement and such other documents will not violate applicable law and is the
binding obligation of ICC.
(c) We have assumed the due execution and delivery for value of the
Merger Agreement by ICC and each of the other documents delivered in connection
therewith by the parties thereto.
(d) We have relied (to the extent we have no contrary knowledge),
without investigation, as to matters of fact upon certificates furnished by
officers or the representatives of CAD whose positions and authority would
reasonably require them to have knowledge of the facts verified, and/or upon
certificates, affidavits, oaths and declarations of public officials (and in
this regard have assumed that any such certificate, affidavit, oath or
declaration given or dated earlier than the date of this opinion letter has
remained accurate as far as is relevant to the opinions set forth herein, from
such earlier date to the date hereof) and/or upon search reports by recognized
search companies.
(e) We have not made a special examination of any law other than the
corporate law of the State of New Jersey, and the federal law of the United
States. We particularly state that we are not admitted to practice in the States
of Nevada and Delaware and have no expertise in the corporate law of the States
of Nevada and Delaware. Accordingly, in connection with the rendering of this
opinion, we express no opinion as to the laws of any state, or as to any matter
subject to such laws, other than the corporate law of the State of New Jersey
and the federal law of the United States. We also do not render any opinion as
to the applicability of antitrust laws.
(f) Our opinion is limited to matters expressly set forth herein and no
opinion is to be implied or inferred beyond the matters expressly so stated.
(g) The opinions expressed herein are subject to the qualifications
that the enforceability of the documents may be limited by bankruptcy,
moratorium, insolvency, fraudulent conveyance, reorganization and other laws of
general application relating to or affecting the enforcement of creditors'
rights and by the application of equitable principles whether in a suit at law
or in equity.
(h) For the purposes of this opinion, the phrase "to our knowledge", or
similar phrase, means the conscious awareness of facts by the attorneys in our
office who have rendered substantive legal services to CAD in connection with
the transactions contemplated in the Merger Agreement.
Based upon and subject to the foregoing and to the other limitations
and qualifications set forth herein, we are of the opinion that:
3. CAD (a) is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey; and (b) to our
knowledge, based upon a certificate of an officer of CAD, is duly
qualified as foreign corporation to do or transact business in, and is
in good standing under the laws of, each jurisdiction in which the
ownership or lease of its
50
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properties or the conduct of its business requires such qualification,
except for jurisdictions in which failure by it to so qualify would not
have a material adverse effect on its business or operations.
4. CAD has the requisite power and authority: (a) to own or lease and to
operate its properties and to conduct its business as currently
operated and conducted; and (b) to execute, deliver and enter into, to
incur and perform its obligations under the Merger Agreement to which
it is a party or signatory.
5. The Merger Agreement to which CAD is a party or signatory, the
transactions provided for therein and CAD's execution, delivery and
entry into, incurrence and performance of its obligations under the
Merger Agreement: (a) have been duly and validly authorized and
approved by all necessary corporate and shareholder action; (b) do not
and will not violate, conflict with or result in a violation or breach
of, accelerate any performance required by CAD under, or create or
impose any lien, security interest or other encumbrance on CAD's
properties or assets by reason of the terms of (i) its Certificates of
Incorporation or Bylaws; (ii) any law, rule or regulation of any
governmental authority applicable to any of or by or to which CAD or
its properties are bound or subject; or (iii) to the best of our
knowledge, based upon a certificate of an officer of CAD, any order,
writ, judgment, injunction or decree of any court or any other
governmental authority, or any indenture, mortgage, deed of trust,
lease, security agreement or any other instrument or agreement to which
CAD is a party or subject or by which CAD or its properties are bound,
except for the replacement Promissory Note described in Schedule 4(e)
to the Merger Agreement; and (c) do not and will not require any
consent, license, authorization, waiver, approval, withholding of
disapproval, filing with any court, governmental authority or other
Person not already obtained or filed as of the date hereof.
6. To our knowledge, based upon a certificate of an officer of CAD, as of
the date hereof, CAD's (i) authorized capital stock, (ii) issued
capital stock, (iii) outstanding capital stock, (iv) par value per
share, and (v) the beneficial ownership of said outstanding shares, are
as set forth in Article 4(b)(i) to the Merger Agreement.
7. Upon the filing and acceptance of the Certificates of Merger by the
Secretary of State of the State of Delaware and the Secretary of State
of the State of New Jersey, the Merger shall be effected.
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The opinions expressed herein are furnished for your benefit, and they
may not be relied upon by, quoted from or delivered to any other person other
than your legal counsel in this matter without our prior written consent. This
opinion speaks only as to the date hereof and is limited to present statutes,
laws and regulations and to the facts as they currently exist, and we assumed no
obligation to update or supplement this opinion.
Very truly yours,
HELLRING LINDEMAN GOLDSTEIN & SIEGAL LLP
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EXHIBIT 6
OPINION OF PARENT'S COUNSEL
November___, 1999
Craig Lerman, President
CAD Consultants, Inc.
322 Route 46W
Parsippany, New Jersey 07054
Dear Mr Lerman:
We have acted as counsel to both Internet Cable Corporation, a Nevada
corporation ("ICC") and ICC Acquisition Corp., a Delaware corporation ("IAC")
(ICC and IAC are collectively referred to as the "Companies"), in connection
with the preparation, execution and delivery of the Agreement and Plan of Merger
dated as of October 8, 1999 ("Merger Agreement") by and among the Companies, CAD
Consulting, Inc., a New Jersey corporation ("CAD") and CAD's sole shareholder,
Craig Lerman ("Shareholder"). This opinion is rendered to you pursuant to
Article 7(c)(iv) of the Merger Agreement. Capitalized terms used herein and not
otherwise defined will have the respective meanings ascribed to them in the
Merger Agreement.
In connection with this opinion, we have examined and are familiar with
the Merger Agreement and the documents delivered pursuant thereto and have taken
such additional steps and reviewed such additional documents and matters as we
may have deemed necessary in order to render our opinion.
The opinions set forth below are subject to the following
qualifications:
(a) We have assumed the genuineness of all signatures, the legal
capacity and competency of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to the originals of all documents
submitted to us as copies and the authenticity of the originals of all such
documents. We have also assumed the accuracy of the factual matters contained in
the documents we have examined.
(b) We have assumed that CAD has all requisite power and authority and
has taken all necessary corporate action to execute, deliver and perform the
Merger Agreement and the Merger Certificate and all documents and agreements
executed in connection therewith to which CAD is a party and to effect the
transactions contemplated thereby and that performance by CAD of the
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Merger Agreement and such other documents will not violate applicable law and is
the binding obligation of CAD.
(c) We have assumed the due execution and delivery for value of the
Merger Agreement by CAD and each of the other documents delivered in connection
therewith by the parties thereto.
(d) We have relied (to the extent we have no contrary knowledge),
without investigation, as to matters of fact upon certificates furnished by
officers or the representatives of the Companies whose positions and authority
would reasonably require them to have knowledge of the facts verified, and/or
upon certificates, affidavits, oaths and declarations of public officials (and
in this regard have assumed that any such certificate, affidavit, oath or
declaration given or dated earlier than the date of this opinion letter has
remained accurate as far as is relevant to the opinions set forth herein, from
such earlier date to the date hereof) and/or upon search reports by recognized
search companies.
(e) We have not made a special examination of any law other than the
corporate law of the State of New Jersey, the corporate law of the State of
Delaware, the corporate law of the State of Nevada, and the federal law of the
United States. We particularly state that we are not admitted to practice in the
States of Nevada and New Jersey and have no expertise in the corporate law of
the States of Nevada and New Jersey. Accordingly, in connection with the
rendering of this opinion, we express no opinion as to the laws of any state, or
as to any matter subject to such laws, other than the corporate law of the State
of Delaware and the federal law of the United States. We also do not render any
opinion as to the applicability of antitrust laws.
(f) Our opinion is limited to matters expressly set forth herein and no
opinion is to be implied or inferred beyond the matters expressly so stated.
(g) The opinions expressed herein are subject to the qualifications
that the enforceability of the documents may be limited by bankruptcy,
moratorium, insolvency, fraudulent conveyance, reorganization and other laws of
general application relating to or affecting the enforcement of creditors'
rights and by the application of equitable principles whether in a suit at law
or in equity.
(h) For the purposes of this opinion, the phrase "to our knowledge", or
similar phrase, means the conscious awareness of facts by the attorneys in our
office who have rendered substantive legal services to the Companies in
connection with the transactions contemplated in the Merger Agreement.
Based upon and subject to the foregoing and to the other limitations
and qualifications set forth herein, we are of the opinion that:
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1. The Companies: (a) are corporations duly organized, validly existing
and in good standing under the laws of the States of Nevada and Delaware; and
(b) are duly qualified as foreign corporations to do or transact business in,
and are in good standing under the laws of, each jurisdiction in which the
ownership or lease of their respective properties or the conduct of their
respective businesses requires such qualification, except for jurisdictions in
which failure by them to so qualify would not have a material adverse effect on
their businesses or operations.
2. The Companies have the requisite power and authority: (a) to own or
lease and pledge or grant a security interest in their assets and properties and
to operate their properties and to conduct their businesses as currently
operated and conducted; and (b) to execute, deliver and enter into, to incur and
perform their respective obligations under the Merger Agreement to which they
are a party or signatory.
3. The Merger Agreement to which The Companies are a party or
signatory, the transactions provided for therein and the Companies' execution,
delivery and entry into, incurrence and performance of each of their respective
obligations under the Merger Agreement to which they are a party or signatory:
(a) have been duly and validly authorized and approved by all necessary
corporate action; (b) do not and will not violate, conflict with or result in a
violation or breach of, accelerate any performance required by the Companies
under, or create or impose any lien, security interest or other encumbrance on
the Companies' properties or assets by reason of the terms of (i) their
Certificates of Incorporation or Bylaws; (ii) any law, rule or regulation of any
governmental authority applicable to any of or by or to which the Companies or
their properties are bound or subject; or (iii) to the best of our knowledge,
after due inquiry, any order, writ, judgment, injunction or decree of any court
or any other governmental authority, or any indenture, mortgage, deed of trust,
lease, security agreement or any other instrument or agreement to which the
Companies are a party or subject or by which the Companies or their properties
are bound; and (c) do not and will not require any consent, license,
authorization, waiver, approval, withholding of disapproval, filing with any
court, governmental authority or other Person not already obtained or filed as
of the date hereof.
4. As of the date hereof, the Companies' (i) authorized capital stock,
(ii) issued capital stock, (iii) outstanding capital stock, (iv) par value per
share, and (v) the beneficial ownership of said outstanding shares, solely based
on our review of the corporate records of the Companies, are as set forth in
Article 5(b)(i) and (ii) to the Merger Agreement.
5. Upon the filing and acceptance of the Certificates of Merger by the
Secretary of State of the State of Delaware and the Secretary of State of the
State of New Jersey, the Merger shall be effected.
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The opinions expressed herein are furnished for your benefit, and they
may not be relied upon by, quoted from or delivered to any other person other
than your legal counsel in this matter without our prior written consent. This
opinion speaks only as to the date hereof and is limited to present statutes,
laws and regulations and to the facts as they currently exist, and we assumed no
obligation to update or supplement this opinion.
Very truly yours,
GERSTEN, SAVAGE & KAPLOWITZ, LLP
By:_________________________________
56
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EXHIBIT 7
PARENT'S FORM 10-KSB
57
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SCHEDULE 4(E)
CAD - EXCEPTIONS TO GENERAL FINANCIAL POSITION; LIST OF MATERIAL LIABILITIES
1. Employment Agreement with Ronald Dobrzynski dated
-------------------------.
2. Lease dated February 8, 1995 with Dubrow Management Corp. Relating to
premises located at 322 Route 46 West, Parsippany, New Jersey, as amended
by First Modification and Extension of Lease dated February 20, 1998.
3. Replacement Promissory Note dated as of August 1, 1999 in favor of Richard
Dvorin in the principal amount of $366,700.
1
56
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SCHEDULE 4(F)
CAD - LIST OF LEGAL PROCEEDINGS
None.
57
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SCHEDULE 4(G)
CAD - LIST OF INTERESTED PARTY TRANSACTIONS
CAD is indebted to Craig Lerman, officer, director and shareholder of CAD, in
the aggregate amount of approximately $441,700 as of August 1, 1999.
58
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SCHEDULE 4(H)
CAD - TITLE TO PROPERTY AND LIENS
Pursuant to a certain Security Agreement dated as of August 1, 1999 (a copy of
which has been furnished to Parent), Richard Dvorin has been granted a security
interest in substantially all of the assets of CAD, and in all of the CAD stock
owned by Craig Lerman.
59
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SCHEDULE 4(I)
CAD - LIST OF MATERIAL CONTRACTS
1. See agreements / instruments disclosed on Schedule 4 (e).
2. Letter Agreement dated November 2, 1995 with Cygnus, Inc. regarding Bidet
Toilet Seat project.
3. Representative Agreement dated August 11, 1994 with DC Technologies Inc.
4. Representation Agreement with Siber Sales.
60
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SCHEDULE 4(P)
CAD - LIST OF EMPLOYMENT AGREEMENT
See Item 1 on Schedule 4(e).
61
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SCHEDULE 5(H)
PARENT AND SUBSIDIARY - LIST OF INTERESTED PARTY TRANSACTIONS
The following is a list and a brief description of the Interested Party
Transactions of Parent:
1. Michael L. Jones, a former Director of the Parent, is the Chief
Executive Officer and a forty-five percent (45%) stockholder of Carolina
Communications Networks, Inc. ("CCN"). Parent has entered into an agreement with
CCN pursuant to which CCN acts as Parent's independent marketing agent for
Parent's excess bandwidth in Charleston and Columbia, South Carolina. The
agreement was entered into before Mr. Jones became a Director of Parent.
2. On July 12, 1999, Timothy R. Karnes, Parent's President, loaned
ten-thousand United States dollars (US$25,000.00) to Parent. In consideration of
such loan, Parent issued a promissory note to Mr. Karnes pursuant to which Mr.
Karnes will be paid ten percent (10%) simple interest.
3. On July 12, 1999, Hovey Aiken, III, a former Director of Parent,
loaned ninety- thousand United States dollars (US$90,000.00) to Parent. In
consideration of such loan, Parent issued a promissory note pursuant to which
Mr. Aiken will be paid ten percent (10%) simple interest. There are no
Interested Party Transactions involving Subsidiary.
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SCHEDULE 5(I)
PARENT AND SUBSIDIARY - TITLE TO PROPERTY AND LIENS
Neither Parent nor Subsidiary owns any real property . Parent has title to all
of its computer equipment. There are no outstanding liens on the property of
Parent or Subsidiary.
Parent leases office space at 263 King Street, 2nd Floor, Charleston, South
Carolina pursuant to a three (3) year lease. Such lease was entered into on
October 28, 1998 and expires on November 30, 2000. Parent pays monthly rent of
two-thousand United States dollars (US$2,000.00) per month.
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SCHEDULE 5(J)
PARENT AND SUBSIDIARY - LIST OF MATERIAL CONTRACTS
1. LEASE: Parent leases office space at 263 King Street, 2nd Floor, Charleston,
South Carolina pursuant to a three (3) year lease. Such lease was entered into
on October 28, 1998 and expires on November 30, 2000. Parent pays monthly rent
of two-thousand United States dollars (US$2,000.00) per month
2. CABLE SYSTEMS TECHNICAL SERVICES, INC.: On July 8, 1999, Parent entered into
a share purchase agreement with all of the stockholders of Cable Systems
Technical Services, Inc., an Ontario corporation ("TSI"). The share purchase
agreement provides for the acquisition by Parent of all of the outstanding
shares of common stock of TSI, with the result that TSI will become a
wholly-owned subsidiary of Parent. The price for the shares of TSI common stock
is three-million- nine-hundred-thousand United States dollars (US$3,900,000.00)
and seventy-five-thousand (75,000) common stock purchase options exercisable at
a price of two United States dollars fifty cents (US$2.50) per share for a
period of two (2) years.
3. US CABLE OF COASTAL-TEXAS, L.P.: On November 21, 1997 Parent entered into a
revenue sharing agreement with US Cable Coastal-Texas, L.P. doing business as US
Cable Coastal Properties, Inc. ("US Cable") whereby Parent will provide its
Internet access service to US Cable's cable system which serves the Wild Dunes
residential community in the Charleston, South Carolina metropolitan area.
4. LEASE: Parent leases office space at 263 King Street, 2nd Floor, Charleston,
South Carolina pursuant to a three (3) year lease. Such lease was entered into
on October 28, 1998 and expires on November 30, 2000. Parent pays monthly rent
of two-thousand United States dollars (US$2,000.00) per month.
5. SHANGRI-LA VACATION & EXCHANGE: On March 24, 1999, Parent entered into an
agreement with Shangri-La Vacation & Exchange pursuant to which Parent will
provide high-speed Internet access via cable modem to up to sixty-five (65)
hotels and resorts throughout China.
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6. INTERMARK ASSOCIATES V, LLC: On February 5, 1999, Parent and Intermark
Associates V, LLC ("Intermark") entered into a ten (10) year agreement pursuant
to which Parent will install, own and operate a cable television plant, provide
a Point of Presence, as well as, other broadband services at the Keswick
Apartment located in Columbia, South Carolina. Parent is permitted to charge
cable television fees competitive with Time Warner Cable, in addition to access
fees. Parent is obligated to pay Intermark ten percent (10%) of the gross
revenues generated under the agreement.
SCHEDULE 5(Q)
PARENT AND SUBSIDIARY - LIST OF EMPLOYMENT AGREEMENTS
Parent and Subsidiary are not party to any employment agreements.
65
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into, as of this
11thday of November 1999 ("Effective Date"), by and between Joseph Melanson an
individual resident of the Province of Ontario ("Employee"), and Internet Cable
Corporation, a Nevada corporation ("Employer") with its principal place of
business at 263 King Street, Second Floor, Charleston, South Carolina 29401.
W I T N E S S E T H
WHEREAS, Employer desires to employ Employee, and Employee desires to
be employed by Employer, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
SECTION 1.EMPLOYMENT. Subject to the terms hereof, Employer hereby
employs Employee, and Employee hereby accepts such employment. Employee will
serve in the capacity of President - Cable Systems Technical Services Division
of Employer and will have duties and responsibilities customarily assigned to a
person with such title. Employee hereby agrees that, throughout his period of
employment, he shall devote his business time, attention, knowledge and skills,
diligently in the furtherance of the business of the Employer and of its
subsidiaries and affiliates, shall perform his duties consistent with his
position with Employer and shall observe and carry out such rules and
regulations, policies and directions as Employer may from time to time establish
to the extent consistent herewith. During the term of this Agreement, Employee
shall do such traveling as may be reasonably required of him in the performance
of his duties on behalf of Employer. Employee shall report directly to the Chief
Executive Officer of Employer
SECTION 2.TERM OF EMPLOYMENT.
2.1 The term of Employee's employment hereunder (the "Initial Term")
shall be from the Effective Date and expire at the earlier of (a) the third
anniversary of the date of this Agreement or (b) the occurrence of any of the
following events:
(i) The death or total disability of Employee (total disability
meaning the failure to substantially perform his normal required
services hereunder for a period of six (6) consecutive months
during any consecutive twelve (12) month period during the term
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hereof, as determined by an independent medical doctor jointly
chosen by the Employee and the Employer, by reason of mental or
physical disability; or
(ii) The termination by Employer of Employee's employment hereunder,
upon seven (7) days prior written notice to Employee, which
termination shall be for "Cause", as determined by the Board of
Directors of Employer in accordance with the terms hereof. For
purposes of this Agreement, "Cause" for termination of
Employee's employment shall exist (V) if Employee is convicted
of, pleads guilty to, or confesses to any felony or any act of
fraud, misappropriation or embezzlement with regard to Employer,
(W) if Employee has engaged in a dishonest act to the material
damage or prejudice of Employer or an affiliate of Employer, or
in conduct or activities materially damaging to the property,
business, or reputation of Employer or an affiliate of Employer,
(X) if Employee violates any of the provisions contained in
Section 4 of this Agreement, after receiving thirty (30) days
written notice from Employer specifically outlining the alleged
violations by the Employee of Section 4 hereof and Employee has
not cured the alleged violations within thirty (30) days of
receipt of written notice by the Employer; (Y) Employee
willfully breaches or habitually and recklessly neglects the
duties he is required to perform hereunder, or performs such
duties in a grossly negligent manner, after receiving thirty
(30) days written notice from Employer specifically outlining
the violations of this Section and Employee has not cured the
alleged violations of this Section within thirty (30) days of
receipt of written notice by Employer.
2.2 SUCCESSIVE TERMS. After the Initial Term, this Agreement shall
continue upon a year-to-year basis (the "Successive Terms"; together with the
Initial Term, the "Term") unless terminated by either the Employer or the
Employee upon ninety (90) days written notice to the other prior to the end of
the Initial Term or the then Successive Term.
SECTION 3.COMPENSATION.
3.1 TERM OF EMPLOYMENT. Employer will provide Employee with the
following salary, expense reimbursement and additional employee benefits during
the term of employment hereunder:
(a) SALARY. During the Initial Term, Employee will be paid a salary
(the "Salary"), that shall be no less than
two-hundred-fifty-thousand United States dollars (US$250,000.00)
per annum, less deductions and withholdings required by
applicable law. Thereafter, and during the Successive Terms,
Employee will be paid a salary of not less than
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two-hundred-fifty-thousand United States dollars (US$250,000)
(the "Successive Terms Salary") determined in good faith
negotiations between Employer and Employee. The Salary and
Successive Terms Salary shall be paid to Employee in equal
monthly installments (or on such more frequent basis as other
executives of Employer are compensated).
(B) PERFORMANCE BONUS.
(i) Subject to Employer's and Employee's discussions, Employer shall
reserve as an equity performance bonus, shares of Employer's
common stock, no par value per share (the "Shares") , which
shall be available for issuance to Employee as follows:
(1) In the event Employer's pre-tax earnings (which shall be
calculated as follows: gross revenues - cost of sales -
salary, general and administrative expenses) in Employee's
first year of employment exceed the mutually agreed upon
target, Employer shall issue to Employee a mutually agreed
upon number of Shares.
(ii) Employee shall be entitled to receive a monetary performance
bonus as follows:
(1) In the event Employer's pre-tax earnings (which shall be
calculated as follows: gross revenues - cost of sales -
salary, general and administrative expenses) in Employee's
first year of employment exceed the mutually agreed upon
target, Employer shall pay to Employee a bonus in the
amount to mutually agreed upon.
(iii) The determination of whether Employer has achieved a certain
level of pre-tax earnings in any year for the purposes of this
section shall be made by the certified public accountant
regularly retained or employed by Employer with ninety (90) days
after the end of each calendar year, and shall be conclusive on
Employer and Employee.
(iv) The parties' good faith and fair dealing is a material term of
this Agreement, particularly with regard to future negotiations
to define the performance bonuses identified in this section.
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Notwithstanding any provision to the contrary contained herein. Employee shall
not be eligible to any performance bonus for any year during which Employee is
not employed by Employer pursuant to this Agreement.
(d) VACATION. Employee shall be entitled to receive five (5) weeks
paid vacation during each year of employment upon dates to be
taken at such times and in such periods as shall not interfere
with the duties required to be rendered by Employee hereunder.
(e) EXPENSES. Employer shall reimburse Employee within thirty (30)
days of its receipt of a reimbursement report with supporting
receipts from the Employee, for all reasonable and necessary
expenses incurred by Employee in performing services hereunder,
including without limitation, all expenses of travel and living
expenses when away from home on business at the request of or in
the service of Employer; use of country club membership; and
automobile allowance.
(f) BENEFIT PLANS. Employee shall have the option of participating
in such medical, dental, disability, hospitalization, life
insurance, stock option and other benefit plans (such as pension
and profit sharing plans) as Employer maintains from time to
time for the benefit of other full-time employees of Employer,
on the terms and subject to the conditions set forth in such
plans.
(g) STOCK COMPENSATION. This Agreement confirms the parties'
pre-existing agreement that, Employer shall issue to Employee an
option to purchase seven-hundred-thousand (700,000) Shares at an
exercise price of fsix United States dollars and twelve and
one-half cents (US$6.125) per share. The term of such option
shall be for a period of five (5) years from the Effective Date.
The option shall vest according to the following schedule: (i)
one-hundred-seventy-five-thousand (175,000) Shares on the
Effective Date; (ii) one-hundred-seventy-five-thousand (175,000)
Shares on November 11, 2000 (iii)
one-hundred-seventy-five-thousand (175,000) Shares on November
11, 2001; and (iv) one-hundred-seventy-five-thousand (175,000)
Shares on November 11, 2002.
However, vesting shall be accelerated in full in the event of
death, disability, involuntary termination without Cause (as
defined in Section 2.1(ii) above); the termination of employment
with Employer's consent; the filing of a voluntary or
involuntary bankruptcy by Employer; or upon the sale, pledge or
distribution of Employer's assets defined as follows: (W) the
sale of forty-five percent (45%) or more of Employer's assets;
(X) the entry into an agreement covering over fifteen (15%) of
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the voting common stock to a related party, as defined in
Section 12 of the Securities Act of 1933, as amended, without
Employee's written consent, which will not be unreasonably
withheld; or (Y) a recapitalization of Employer after six (6)
months from the date of the execution of this Agreement; or (Z)
a split of any manner in Employer's voting common stock.
(h) AUTOMOBILE ALLOWANCE. During the Term, Employer shall pay
Employee seven-hundred-fifty United States dollars (US$750.00)
per month as an allowance for the use of Employee's automobile.
In lieu of such allowance, Employer may furnish, or lease, an
automobile mutually acceptable to both Employer and Employee for
Employee's use.
3.2 EFFECT OF TERMINATION. Upon the termination of the employment of
Employee hereunder for Cause, Employee shall be entitled to all compensation and
benefits earned or accrued under Section 3.1 as of the effective date of
termination. Upon the termination of this Agreement during the first thirty (30)
months of the Initial Term or the then Successive Term, as the case may be, for
any reason other than for Cause, Employee shall be entitled to receive all
compensation and benefits provided in Section 3.1 through the end of the Initial
Term or the then Successive Term, as the case may be. Upon the termination of
this Agreement during the last six (6) months of the Initial Term or the then
Successive Term, as the case may be, for any reason other than for Cause,
Employee shall be entitled to receive all compensation and benefits earned or
accrued under Section 3.1 as of the effective date of termination plus an amount
equal to six (6) months Salary and continuation of benefits for six (6) months.
SECTION 4. NONSOLICITATION.
4.1 DEFINITIONS. For the purposes of this Section 4, the following
definitions shall apply.
(a) "Confidential Information" means any confidential, proprietary
business information or data belonging to or pertaining to
Employer that does not constitute a "Trade Secret" (as
hereinafter defined) and that is not generally known by or
available through legal means to the public, including, but not
limited to, information regarding the Employer's customers or
actively sought prospective customers, acquisition targets,
suppliers, manufacturers and distributors gained by Employee as
a result of his employment with Employer.
(b) "Customer" means actual customers or actively sought prospective
customers of Employer.
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(c) "Trade Secrets" means information or data of or about Employer,
including but not limited to technical or non-technical data,
formulas, patterns, compilations, programs, devices, methods,
techniques, drawings, processes, financial data, financial
plans, products plans, or lists of actual or potential
customers, clients, distributees or licensees, information
concerning or Employer's finances, services, staff, contemplated
acquisitions, marketing investigations and surveys, that are not
generally known to, and/or are not readily ascertainable by
proper means by, other persons.
(d) "Work Product" means any and all work product property, data
documentation or information of any kind prepared, conceived,
discovered, developed or created by Employee for Employer or its
affiliates' clients or customers for utilization in Employer's
business, not generally known by or not readily ascertainable by
proper means by other persons who can obtain economic value from
their disclosure or use.
4.2 TRADE NAME AND CONFIDENTIAL INFORMATION.
(a) Employee hereby agrees that at all times during the Term and
thereafter:
(i) Employee shall not, directly or by assisting others own,
manage, operate, join, control or participate in the
ownership, management, operation or control of, or be
connected in any manner with, any business conducted under
any corporate or trade name of Employer or name confusingly
similar thereto, without the prior written consent of
Employer;
(ii) Employee shall hold in confidence all Trade Secrets and all
Confidential Information and will not, either directly or
indirectly, use, sell, lend, lease, distribute, license,
give, transfer, assign, show, disclose, disseminate,
reproduce, copy, appropriate or otherwise communicate any
Trade Secrets or Confidential Information, without the
prior written consent of Employer; and
(iii) During the Term Employee shall immediately notify Employer
of any unauthorized disclosure or use of any Trade Secrets
or Confidential Information of which Employee becomes
aware, Employee shall assist Employer, to the extent
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necessary, in the procurement or any protection of
Employer's rights to or in any of the Trade Secrets or
Confidential Information.
(b) Upon the request of Employer, Employee shall deliver to Employer
all memoranda, notes, records, manuals and other documents,
including all copies of such materials and all documentation
prepared or produced in connection therewith, pertaining to the
performance of Employee's services hereunder or Employer's
business or containing Trade Secrets or Confidential
Information, whether made or complied by Employee or furnished
to Employee from another source by virtue of Employee's
employment with Employer.
(c) To the greatest extent possible, all Work Product shall be
deemed to be "work made for hire" (as defined in the Copyright
Act, 17 U.S.C.A. Section 101 et seq., as amended) and owned
exclusively by Employer. Employee hereby unconditionally
and irrevocably transfers and assigns to Employer all rights,
title and interest Employee may have in or to any and all Work
Product, including, without limitation, all patents, copyrights,
trademarks, service marks and other intellectual property rights
arising out of the Work Product. Employee agrees to execute and
deliver to Employer any transfers, assignments, documents or
other instruments which Employer may deem necessary or
appropriate to vest complete title and ownership of any and all
such Work Product, and all rights therein, exclusively in
Employer.
4.3 NONSOLICITATION AND NONCOMPETE. Employee hereby agrees that
Employee will not, during the Term and for a period of one (1) year following
the Term, either directly or indirectly, alone or in conjunction with any other
party, on the North American continent:
(a) solicit, divert or appropriate or attempt to solicit, divert or
appropriate, any Customer for the purpose of providing the
Customer with services or products competitive with those
offered by Employer during the Term; or
(b) solicit or attempt to solicit any officer, director, employee,
consultant, contractor, agent, lessor, lessee, licensor,
licensee, supplier or any shareholder of Employer or other
personnel of Employer or any of its affiliates or subsidiaries
to terminate, alter or lessen that party's affiliation with
Employer or such affiliate or subsidiary or to violate the terms
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of any agreement or understanding between such employee,
consultant, contractor or other person and Employer; or
(c) engage in, as owner, stockholder, employee, partner, agent,
representative or otherwise, or have an interest in (except for
ownership of publicly trade securities representing not more
than five percent (5%) of the outstanding voting shares), any
business, firm, corporation or other entity in direct
competition with the business of Employer.
(i) Upon the conclusion of the Initial Term, if this Agreement
is not renewed for a Successive Term, Employee may be
engaged solely as an employee in any business, firm,
corporation or other entity in direct competition with the
business of Employer.
Nothing contained in this Section 4 shall prohibit Employee from
acquiring not more than five percent (5%) of any competitor of Employer whose
common stock is publicly traded on a national securities exchange or in the
over-the-counter market or from acquiring any percentage of any company which is
non-competitive with Employer.
SECTION 5.MISCELLANEOUS.
5.1 SEVERABILITY. The covenants in this Agreement shall be construed
as covenants independent of one another and as obligations distinct from any
other contract between Employee and Employer. Any claim that Employee may have
against Employer shall not constitute a defense to enforcement by Employer of
this Agreement.
5.2 SURVIVAL OF OBLIGATIONS. The covenants in Section 4 of this
Agreement shall survive termination of Employee's employment for the period set
forth therein.
5.3 NOTICES. Any notice or other document to be given hereunder by
any party hereto to any other party hereto shall be in writing and delivered in
person or by courier, by telecopy transmission or sent by any express mail
service, postage or fees prepaid at the following addresses:
EMPLOYER: Internet Cable Corporation
-------- 263 King Street, Second Floor
Charleston, South Carolina 29401
Telephone: (843) 722-8007
Facsimile: (843) 873-4594
Attention: Secretary
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WITH A
COPY TO: Gersten, Savage & Kaplowitz, LLP
------- 101 East 52nd Street
New York, New York 10022
Telephone: (212) 752-9700
Facsimile: (212) 813-9768
Attention: Christopher J. Kelly, Esq.
EMPLOYEE: Joseph Melanson
-------- 9 Grenfell Crescent
Markham, Ontario, Canada L39 1S6
or at such other address or number for a party as shall be specified by like
notice. Any notice which is delivered in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or its agent.
5.4 BINDING EFFECT. This Agreement inures to the benefit of, and is
binding upon, Employer and their respective successors and assigns, and
Employee, together with Employee's executor, administrator, personal
representative, heirs, and legatees.
5.5 ENTIRE AGREEMENT. This Agreement is intended by the parties
hereto to be the final expression of their agreement with respect to the subject
matter hereof and is the complete and exclusive statement of the terms thereof,
notwithstanding any representations, statements or agreements to the contrary
heretofore made. This Agreement supersedes and terminates all prior employment
and compensation agreements, arrangements and understandings between or among
Employer, Employer's Management and Employee. This Agreement may be modified
only by a written instrument signed by all of the parties hereto.
5.6 ARBITRATION. Any claim or controversy arising out of or relating
to the formation, interpretation and enforcement of this Agreement or any breach
thereof, shall be settled by arbitration, in accordance with the ten current
rules of the American Arbitration before a panel of three (3) arbitrators. Any
such arbitration shall take place in Philadelphia, Pennsylvania. Judgement upon
the written award rendered by a majority of the arbitrators may be entered in
the court having jurisdiction thereof. The written decision of the majority of
the arbitrators shall be valid, binding and final, and shall be a condition
precedent to any legal action that any party may contemplate against the other,
except to compel arbitration pursuant hereto.
5.7 GOVERNING LAW. This Agreement shall be deemed to be made in, and
in all respects shall be interpreted, construed, and governed by and in
accordance with, the laws of the Commonwealth of Pennsylvania. No provision of
this Agreement shall be construed against or interpreted to the disadvantage of
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any party hereto by any court or other governmental or judicial authority or by
any board of arbitrators by reason of such party or its counsel having or being
deemed to have structured or drafted such provision.
5.8 ATTACHMENT. Except as required by law, the right to receive
payments under this Agreement shall not be subject to attachment, sale, pledge,
encumbrance, charge, levy or similar process or assignment, and any attempt to
do so shall be null and void.
5.9 HEADINGS. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.10 SPECIFIC PERFORMANCE. Each party hereto hereby agrees that any
remedy at law for any breach of the provisions contained in this Agreement shall
be inadequate and that the other parties hereto shall be entitled to specific
performance and any other appropriate injunctive relief in addition to any other
remedy such party might have under this Agreement or at law or in equity.
5.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the _____day of December, 1999.
INTERNET CABLE CORPORATION
By:__________________________
Name: Michael F. Mulholland
Title: Chief Executive Officer
By:___________________________
Joseph Melanson
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into, as of this 8th
day of October 1999 (the "Effective Date"), by and between Craig Lerman an
individual resident of the State of New Jersey ("Employee"), and Internet Cable
Corporation, a Nevada corporation ("Employer") with its principal place of
business at 263 King Street, Second Floor, Charleston, South Carolina 29401.
W I T N E S S E T H
WHEREAS, Employer desires to employ Employee, and Employee desires to
be employed by Employer, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
SECTION 1.EMPLOYMENT.
Subject to the terms hereof, Employer hereby employs Employee, and
Employee hereby accepts such employment. Employee will serve in the capacity of
President - CAD Consultants Division of Employer and will have duties and
responsibilities customarily assigned to a person with such title. Employee
hereby agrees that, throughout his period of employment, he shall devote his
business time, attention, knowledge and skills, diligently in the furtherance of
the business of the Employer and of its subsidiaries and affiliates, shall
perform his duties consistent with his position with Employer and shall observe
and carry out such rules and regulations, policies and directions as Employer
may from time to time establish to the extent consistent herewith. During the
term of this Agreement, Employee shall do such traveling as may be reasonably
required of him in the performance of his duties on behalf of Employer. Employee
shall report directly to the Chief Operating Officer of Employer.
SECTION 2.TERM OF EMPLOYMENT.
2.1 The term of Employee's employment hereunder (the "Initial Term")
shall be from the Effective Date and expire at the earlier of (a) the third
anniversary of the date of this Agreement or (b) the occurrence of any of the
following events:
<PAGE>
(i) The death or total disability of Employee (total disability
meaning the failure to substantially perform his normal required
services hereunder for a period of six (6) consecutive months
during any consecutive twelve (12) month period during the term
hereof, as determined by an independent medical doctor jointly
chosen by the Employee and the Employer, by reason of mental or
physical disability; or
(ii) The termination by Employer of Employee's employment hereunder,
upon seven (7) days prior written notice to Employee, which
termination shall be for "Cause", as determined by the Board of
Directors of Employer in accordance with the terms hereof. For
purposes of this Agreement, ACause" for termination of
Employee's employment shall exist (V) if Employee is convicted
of, pleads guilty to, or confesses to any felony or any act of
fraud, misappropriation or embezzlement with regard to Employer,
(W) if Employee has engaged in a dishonest act to the material
damage or prejudice of Employer or an affiliate of Employer, or
in conduct or activities materially damaging to the property,
business, or reputation of Employer or an affiliate of Employer,
(X) if Employee violates any of the provisions contained in
Section 4 of this Agreement, after receiving thirty (30) days
written notice from Employer specifically outlining the alleged
violations by the Employee of Section 4 hereof and Employee has
not cured the alleged violations within thirty (30) days of
receipt of written notice by the Employer; (Y) Employee
willfully breaches or habitually neglects the duties he is
required to perform hereunder, or performs such duties in a
negligent manner, after receiving thirty (30) days written
notice from Employer specifically outlining the violations of
this Section and Employee has not cured the alleged violations
of this Section within thirty (30) days of receipt of written
notice by Employer.
(iii) Termination by Employee of Employee's employment hereunder,
upon thirty (30) days' written notice to the Employer given
within ninety (90) days following the occurrence of any of the
following events:
(1) Employer acts to materially reduce Employee's duties and
responsibilities hereunder;
(2) A reduction in Employee's rate of compensation or material
reduction in Employee's other benefits; or
(3) A material breach of this Agreement by the Employer, which
is not cured within thirty (30) days of written notice of
such breach by Employer.
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<PAGE>
2.2 SUCCESSIVE TERMS. After the Initial Term, this Agreement shall
continue upon a year-to-year basis (the "Successive Terms"; together with the
Initial Term, the "Term") unless terminated by either the Employer or the
Employee upon ninety (90) days written notice to the other prior to the end of
the Initial Term or the then Successive Term.
SECTION 3.COMPENSATION.
3.1 TERM OF EMPLOYMENT. Employer will provide Employee with the
following salary, expense reimbursement and additional employee benefits during
the term of employment hereunder:
(a) SALARY. During the Initial Term, Employee will be paid a
salary (the "Salary"), that shall be no less than
two-hundred-thousand United States dollars (US$200,000.00)
per annum, less deductions and withholdings required by
applicable law. Thereafter, and during the Successive
Terms, Employee will be paid a salary (the "Successive
Terms Salary") determined in good faith negotiations
between Employer and Employee. The Salary and Successive
Terms Salary shall be paid to Employee in equal monthly
installments (or on such more frequent basis as other
executives of Employer are compensated).
(b) DISCRETIONARY BONUS. The Board of Directors may, from time
to time, award the Employee a discretionary bonus based
upon such factors as the Board deems appropriate. The
Employee shall have no entitlement to such a discretionary
bonus until and unless so awarded by the Board.
(c) VACATION. Employee shall be entitled to receive four (4)
weeks paid vacation during each year of employment upon
dates agreed upon by Employer.
(d) EXPENSES. Employer shall reimburse Employee within thirty
(30) days of its receipt of a reimbursement report with
supporting receipts from the Employee, for all reasonable
and necessary expenses incurred by Employee at the request
of and on behalf of Employer.
(e) BENEFIT PLANS. Employee shall have the option of
participating in such medical, dental, disability,
hospitalization, life insurance, stock option and other
benefit plans (such as pension and profit sharing plans) as
Employer maintains from time to time for the benefit of
other full-time employees of Employer, on the terms and
subject to the conditions set forth in such plans.
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<PAGE>
(f) STOCK COMPENSATION. On the Effective Date, Employer shall
issue to Employee an option to purchase
two-hundred-thousand (200,000) shares of Employer's common
stock at an exercise price of five United States dollars
and fifty cents (US$5.50) per share. The term of such
option shall be for a period of five (5) years from the
Effective Date. The option shall vest according to the
following schedule: (i) fifty-thousand (50,000) shares on
the Effective date; (ii) fifty-thousand (50,000) shares on
October 8, 2000; and (iii) fifty-thousand (50,000) shares
on October 8, 2001; and (iv) fifty-thousand (50,000) shares
on October 8, 2002.
However, vesting shall be accelerated in full in the event
of death, disability, involuntary termination without Cause
(as defined in Section 2.1(ii) above); the termination of
employment with Employer's consent; the filing of a
voluntary or involuntary bankruptcy; or upon the sale,
pledge or distribution of Employer's assets defined as
follows: (W) the sale of forty-five percent (45%) or more
of Employer's assets; (X) the entry into an agreement
covering over fifteen (15%) of the voting common stock to a
related party, as defined in Section 12 of the Securities
Act of 1933, as amended, without Employee's written
consent, which will not be unreasonably withheld; or (Y) a
recapitalization of Employer; or (Z) a split of any manner
in Employer's voting common stock.
(f) AUTOMOBILE ALLOWANCE. During the Term, Employer shall pay
Employee seven-hundred United States dollars (US$700.00)
per month as an allowance for the use of Employee's
automobile. In lieu of such allowance, Employer may
furnish, or lease, an automobile mutually acceptable to
both Employer and Employee for Employee's use. Employer
shall pay all expenses charged to Employee in connection
with Employee's return of a leased automobile.
3.2 EFFECT OF TERMINATION. Upon the termination of the
employment of Employee hereunder for Cause, Employee shall be entitled to all
compensation and benefits earned or accrued under Section 3.1 as of the
effective date of termination. Upon the termination of this Agreement during the
first thirty (30) months of the Initial Term or the then Successive Term, as the
case may be, for any reason other than for Cause, Employee shall be entitled to
receive all compensation and benefits provided in Section 3.1 through the end of
the Initial Term or the then Successive Term, as the case may be. Upon the
termination of this Agreement during the last six (6) months of the Initial Term
or the then Successive Term, as the case may be, for any reason other than for
Cause, Employee shall be entitled to receive all compensation and benefits
earned or accrued under Section 3.1 as of the effective date of termination plus
an amount equal to six (6) months Salary.
SECTION 4.NONSOLICITATION.
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<PAGE>
4.1 DEFINITIONS. For the purposes of this Section 4, the following
definitions shall apply.
(a) "Confidential Information" means any confidential,
proprietary business information or data belonging to or
pertaining to Employer that does not constitute a "Trade
Secret" (as hereinafter defined) and that is not generally
known by or available through legal means to the public,
including, but not limited to, information regarding the
Employer's customers or actively sought prospective
customers, acquisition targets, suppliers, manufacturers
and distributors gained by Employee as a result of his
employment with Employer.
(b) "Customer" means actual customers or actively sought
prospective customers of Employer.
(c) "Trade Secrets" means information or data of or about
Employer, including but not limited to technical or
non-technical data, formulas, patterns, compilations,
programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, products plans,
or lists of actual or potential customers, clients,
distributees or licensees, information concerning or
Employer's finances, services, staff, contemplated
acquisitions, marketing investigations and surveys, that
are not generally known to, and/or are not readily
ascertainable by proper means by, other persons.
(d) "Work Product" means any and all work product property,
data documentation or information of any kind prepared,
conceived, discovered, developed or created by Employee for
Employer or its affiliates' clients or customers for
utilization in Employer=s business, not generally known by
or not readily ascertainable by proper means by other
persons who can obtain economic value from their disclosure
or use.
4.2 TRADE NAME AND CONFIDENTIAL INFORMATION.
(a) Employee hereby agrees that at all times during the Term
and thereafter:
(i) Employee shall not, directly or by assisting others
own, manage, operate, join, control or participate in
the ownership, management, operation or control of, or
be connected in any manner with, any business
conducted under any corporate or trade name of
Employer or name confusingly similar thereto, without
the prior written consent of Employer;
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<PAGE>
(ii) Employee shall hold in confidence all Trade Secrets
and all Confidential Information and will not, either
directly or indirectly, use, sell, lend, lease,
distribute, license, give, transfer, assign, show,
disclose, disseminate, reproduce, copy, appropriate or
otherwise communicate any Trade Secrets or
Confidential Information, without the prior written
consent of Employer; and
(iii) During the Term Employee shall immediately notify
Employer of any unauthorized disclosure or use of any
Trade Secrets or Confidential Information of which
Employee becomes aware, Employee shall assist
Employer, to the extent necessary, in the procurement
or any protection of Employer's rights to or in any of
the Trade Secrets or Confidential Information.
(b) Upon the request of Employer, Employee shall deliver to
Employer all memoranda, notes, records, manuals and other
documents, including all copies of such materials and all
documentation prepared or produced in connection therewith,
pertaining to the performance of Employee's services
hereunder or Employer's business or containing Trade
Secrets or Confidential Information, whether made or
complied by Employee or furnished to Employee from another
source by virtue of Employee's employment with Employer.
(c) To the greatest extent possible, all Work Product shall be
deemed to be "work made for hire" (as defined in the
Copyright Act, 17 U.S.C.A. Section 101 et seq., as amended)
and owned exclusively by Employer. Employee hereby
unconditionally and irrevocably transfers and assigns to
Employer all rights, title and interest Employee may have
in or to any and all Work Product, including, without
limitation, all patents, copyrights, trademarks, service
marks and other intellectual property rights arising out of
the Work Product. Employee agrees to execute and deliver to
Employer any transfers, assignments, documents or other
instruments which Employer may deem necessary or
appropriate to vest complete title and ownership of any and
all such Work Product, and all rights therein, exclusively
in Employer.
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<PAGE>
4.3 NONSOLICITATION AND NONCOMPETE. Employee hereby agrees that
Employee will not, during the Term and for a period of one (1) year following
the Term, either directly or indirectly, alone or in conjunction with any other
party, on the North American continent:
(a) solicit, divert or appropriate or attempt to solicit,
divert or appropriate, any Customer for the purpose of
providing the Customer with services or products
competitive with those offered by Employer during the Term;
or
(b) solicit or attempt to solicit any officer, director,
employee, consultant, contractor, agent, lessor, lessee,
licensor, licensee, supplier or any shareholder of Employer
or other personnel of Employer or any of its affiliates or
subsidiaries to terminate, alter or lessen that party's
affiliation with Employer or such affiliate or subsidiary
or to violate the terms of any agreement or understanding
between such employee, consultant, contractor or other
person and Employer; or
(c) engage in, as owner, stockholder, employee, partner, agent,
representative or otherwise, or have an interest in (except
for ownership of publicly trade securities representing not
more than five percent (5%) of the outstanding voting
shares), any business, firm, corporation or other entity in
direct competition with the business of Employer.
(i) Upon the conclusion of the Initial Term, if this
Agreement is not renewed for a Successive Term,
Employee may be engaged solely as an employee in any
business, firm, corporation or other entity in direct
competition with the business of Employer.
Nothing contained in this Section 4 shall prohibit Employee from
acquiring not more than five percent (5%) of any competitor of Employer whose
common stock is publicly traded on a national securities exchange or in the
over-the-counter market or from acquiring any percentage of any company which is
non-competitive with Employer.
SECTION 5.MISCELLANEOUS.
5.1 SEVERABILITY. The covenants in this Agreement shall be construed
as covenants independent of one another and as obligations distinct from any
other contract between Employee and Employer. Any claim that Employee may have
against Employer shall not constitute a defense to enforcement by Employer of
this Agreement.
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<PAGE>
5.2 SURVIVAL OF OBLIGATIONS. The covenants in Section 4 of this
Agreement shall survive termination of Employee's employment for the period set
forth therein.
5.3 NOTICES. Any notice or other document to be given hereunder by
any party hereto to any other party hereto shall be in writing and delivered in
person or by courier, by telecopy transmission or sent by any express mail
service, postage or fees prepaid at the following addresses:
EMPLOYER: Internet Cable Corporation
-------- 263 King Street, Second Floor
Charleston, South Carolina 29401
Telephone: (843) 722-8007
Facsimile: (843) 873-4594
Attention: Secretary
WITH A
COPY TO: Gersten, Savage & Kaplowitz, LLP
------- 101 East 52nd Street
New York, New York 10022
Telephone: (212) 752-9700
Facsimile: (212) 813-9768
Attention: Christopher J. Kelly, Esq.
EMPLOYEE: Craig Lerman
-------- 83 Ridge Drive
Livingston, New Jersey 07039
Telephone:
Facsimile:
WITH A
COPY TO: Hellring Lindeman Goldstein & Siefal, LLP
------- One Gateway Center
Newark, New Jersey 07102-5386
Telephone: (973) 621-9020
Facsimile: (973) 621-7406
Attention: Judah I. Elstein, Esq.
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<PAGE>
or at such other address or number for a party as shall be specified by like
notice. Any notice which is delivered in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or its agent.
5.4 BINDING EFFECT. This Agreement inures to the benefit of, and is
binding upon, Employer and their respective successors and assigns, and
Employee, together with Employee's executor, administrator, personal
representative, heirs, and legatees.
5.5 ENTIRE AGREEMENT. This Agreement is intended by the parties
hereto to be the final expression of their agreement with respect to the subject
matter hereof and is the complete and exclusive statement of the terms thereof,
notwithstanding any representations, statements or agreements to the contrary
heretofore made. This Agreement supersedes and terminates all prior employment
and compensation agreements, arrangements and understandings between or among
Employer and Employee. This Agreement may be modified only by a written
instrument signed by all of the parties hereto.
5.6 GOVERNING LAW. This Agreement shall be deemed to be made in, and
in all respects shall be interpreted, construed, and governed by and in
accordance with, the laws of the State of Pennsylvania. No provision of this
Agreement shall be construed against or interpreted to the disadvantage of any
party hereto by any court or other governmental or judicial authority or by any
board of arbitrators by reason of such party or its counsel having or being
deemed to have structured or drafted such provision.
5.7 HEADINGS. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.8 SPECIFIC PERFORMANCE. Each party hereto hereby agrees that any
remedy at law for any breach of the provisions contained in this Agreement shall
be inadequate and that the other parties hereto shall be entitled to specific
performance and any other appropriate injunctive relief in addition to any other
remedy such party might have under this Agreement or at law or in equity.
5.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
[SIGNATURES ON THE FOLLOWING PAGE]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the ____ day of December, 1999.
INTERNET CABLE CORPORATION
By:__________________________
Name: Michael F. Mulholland
Title: Chief Executive Officer
By:___________________________
Craig Lerman
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into, as of this
31stday of August 1999 ("Effective Date"), by and between Michael F. Mulholland
an individual resident of the State of Pennsylvania ("Employee"), and Internet
Cable Corporation, a Nevada corporation ("Employer") with its principal place of
business at 263 King Street, Second Floor, Charleston, South Carolina 29401.
W I T N E S S E T H
WHEREAS, Employer desires to employ Employee, and Employee desires to
be employed by Employer, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
SECTION 1.EMPLOYMENT.
1.1 Subject to the terms hereof, Employer hereby employs Employee,
and Employee hereby accepts such employment. Employee will serve in the capacity
of Chief Executive Officer and President of Employer and will have duties and
responsibilities customarily assigned to a person with such title. Employee
hereby agrees that, throughout his period of employment, he shall devote his
business time, attention, knowledge and skills, diligently in the furtherance of
the business of the Employer and of its subsidiaries and affiliates, shall
perform his duties consistent with his position with Employer and shall observe
and carry out such rules and regulations, policies and directions as Employer
may from time to time establish to the extent consistent herewith. During the
term of this Agreement, Employee shall do such traveling as may be reasonably
required of him in the performance of his duties on behalf of Employer.
1.2 The principal offices of Employer will be located in the West
Chester, Pennsylvania are with appropriate secretarial support at Employer's
expense.
SECTION 2.TERM OF EMPLOYMENT.
2.1 The term of Employee's employment hereunder (the "Initial Term")
shall be from the Effective Date and expire at the earlier of (a) the third
anniversary of the date of this Agreement or (b) the occurrence of any of the
following events:
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<PAGE>
(i) The death or total disability of Employee (total disability
meaning the failure to substantially perform his normal required
services hereunder for a period of six (6) consecutive months
during any consecutive twelve (12) month period during the term
hereof, as determined by an independent medical doctor jointly
chosen by the Employee and the Employer, by reason of mental or
physical disability; or
(ii) The termination by Employer of Employee's employment hereunder,
upon seven (7) days prior written notice to Employee, which
termination shall be for "Cause", as determined by the Board of
Directors of Employer in accordance with the terms hereof. For
purposes of this Agreement, "Cause" for termination of
Employee's employment shall exist (V) if Employee is convicted
of, pleads guilty to, or confesses to any felony or any act of
fraud, misappropriation or embezzlement with regard to Employer,
(W) if Employee has engaged in a dishonest act to the material
damage or prejudice of Employer or an affiliate of Employer, or
in conduct or activities materially damaging to the property,
business, or reputation of Employer or an affiliate of Employer,
(X) if Employee violates any of the provisions contained in
Section 4 of this Agreement, after receiving thirty (30) days
written notice from Employer specifically outlining the alleged
violations by the Employee of Section 4 hereof and Employee has
not cured the alleged violations within thirty (30) days of
receipt of written notice by the Employer; (Y) Employee
willfully breaches or habitually and recklessly neglects the
duties he is required to perform hereunder, or performs such
duties in a grossly negligent manner, after receiving thirty
(30) days written notice from Employer specifically outlining
the violations of this Section and Employee has not cured the
alleged violations of this Section within thirty (30) days of
receipt of written notice by Employer.
2.2 SUCCESSIVE TERMS. After the Initial Term, this Agreement shall
continue upon a year-to-year basis (the "Successive Terms"; together with the
Initial Term, the "Term") unless terminated by either the Employer or the
Employee upon ninety (90) days written notice to the other prior to the end of
the Initial Term or the then Successive Term.
SECTION 3.COMPENSATION.
3.1 TERM OF EMPLOYMENT. Employer will provide Employee with the
following salary, expense reimbursement and additional employee benefits during
the term of employment hereunder:
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<PAGE>
(a) SALARY. During the Initial Term, Employee will be paid a salary
(the "Salary"), that shall be no less than
three-hundred-thousand United States dollars (US$300,000.00) per
annum, less deductions and withholdings required by applicable
law. Thereafter, and during the Successive Terms, Employee will
be paid a salary of not less than three-hundred-thousand United
States dollars (US$300,000) (the "Successive Terms Salary")
determined in good faith negotiations between Employer and
Employee. The Salary and Successive Terms Salary shall be paid
to Employee in equal monthly installments (or on such more
frequent basis as other executives of Employer are compensated).
(b) COMPENSATION FOR SERVICES PROVIDED. From September 1, 1999 to
the date of this Agreement, Employee has served as a Consultant
of Employer. Upon the execution of this Agreement, Employer will
tender a check payable to Employee in the amount of
eighty-thousand United States dollars (US$80,000) representing
the balance of compensation due to Employee for his services as
a Consultant.
(c) PERFORMANCE BONUS.
(i) Subject to Employer's and Employee's discussions, Employer
shall reserve as an equity performance bonus, shares of
Employer's common stock, no par value per share (the
"Shares") , which shall be available for issuance to
Employee as follows:
(1) In the event Employer's pre-tax earnings (which shall
be calculated as follows: gross revenues - cost of
sales - salary, general and administrative expenses)
in Employee's first year of employment exceed the
mutually agreed upon target, Employer shall issue to
Employee a mutually agreed upon number of Shares.
(ii) Employee shall be entitled to receive a monetary
performance bonus as follows:
(1) In the event Employer's pre-tax earnings (which shall
be calculated as follows: gross revenues - cost of
sales - salary, general and administrative expenses)
in Employee's first year of employment exceed the
mutually agreed upon target, Employer shall pay to
Employee a bonus in the amount to mutually agreed
upon.
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<PAGE>
(iii) The determination of whether Employer has achieved a
certain level of pre-tax earnings in any year for the
purposes of this section shall be made by the certified
public accountant regularly retained or employed by
Employer with ninety (90) days after the end of each
calendar year, and shall be conclusive on Employer and
Employee.
(iv) The parties' good faith and fair dealing is a material term
of this Agreement, particularly with regard to future
negotiations to define the performance bonuses identified
in this section.
Notwithstanding any provision to the contrary contained herein. Employee shall
not be eligible to any performance bonus for any year during which Employee is
not employed by Employer pursuant to this Agreement.
(d) VACATION. Employee shall be entitled to receive six (6) weeks
paid vacation during each year of employment upon dates to be
taken at such times and in such periods as shall not interfere
with the duties required to be rendered by Employee hereunder.
(e) EXPENSES. Employer shall reimburse Employee within thirty (30)
days of its receipt of a reimbursement report with supporting
receipts from the Employee, for all reasonable and necessary
expenses incurred by Employee in performing services hereunder,
including without limitation, all expenses of travel and living
expenses when away from home on business at the request of or in
the service of Employer; use of country club membership; and
automobile allowance.
(f) BENEFIT PLANS. Employee shall have the option of participating
in such medical, dental, disability, hospitalization, life
insurance, stock option and other benefit plans (such as pension
and profit sharing plans) as Employer maintains from time to
time for the benefit of other full-time employees of Employer,
on the terms and subject to the conditions set forth in such
plans.
(g) STOCK COMPENSATION. This Agreement confirms the parties'
pre-exisiting agreement that, Employer shall issue to Employee
an option to purchase one-million-five-hundred-thousand
(1,500,000) Share at an exercise price of four United States
dollars and sixty-two and one-half cents (US$4.625) per share.
The term of such option shall be for a period of five (5) years
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<PAGE>
from the Effective Date. The option shall vest according to the
following schedule: (i) three-hundred-seventy-five-thousand
(375,000) Shares on the Effective Date; (ii)
three-hundred-seventy-five-thousand (375,000) Shares on August
31, 2000 (iii) three-hundred-seventy-five-thousand (375,000)
Shares on August 31, 2001; and (iv)
three-hundred-seventy-five-thousand (375,000) Shares on August
31, 2002.
However, vesting shall be accelerated in full in the event of
death, disability, involuntary termination without Cause (as
defined in Section 2.1(ii) above); the termination of employment
with Employer's consent; the filing of a voluntary or
involuntary bankruptcy; or upon the sale, pledge or distribution
of Employer's assets defined as follows: (W) the sale of
forty-five percent (45%) or more of Employer's assets; (X) the
entry into an agreement covering over fifteen (15%) of the
voting common stock to a related party, as defined in Section 12
of the Securities Act of 1933, as amended, without Employee's
written consent, which will not be unreasonably withheld; or (Y)
a recapitalization of Employer; or (Z) a split of any manner in
Employer's voting common stock.
(h) AUTOMOBILE ALLOWANCE. During the Term, Employer shall pay
Employee nine-hundred United States dollars (US$900.00) per
month as an allowance for the use of Employee's automobile. In
lieu of such allowance, Employer may furnish, or lease, an
automobile mutually acceptable to both Employer and Employee for
Employee's use.
3.2 EFFECT OF TERMINATION. Upon the termination of the employment of
Employee hereunder for Cause, Employee shall be entitled to all compensation and
benefits earned or accrued under Section 3.1 as of the effective date of
termination. Upon the termination of this Agreement during the first thirty (30)
months of the Initial Term or the then Successive Term, as the case may be, for
any reason other than for Cause, Employee shall be entitled to receive all
compensation and benefits provided in Section 3.1 through the end of the Initial
Term or the then Successive Term, as the case may be. Upon the termination of
this Agreement during the last six (6) months of the Initial Term or the then
Successive Term, as the case may be, for any reason other than for Cause,
Employee shall be entitled to receive all compensation and benefits earned or
accrued under Section 3.1 as of the effective date of termination plus an amount
equal to six (6) months Salary and continuation of benefits for six (6) months.
SECTION 4.NONSOLICITATION.
4.1 DEFINITIONS. For the purposes of this Section 4, the following
definitions shall apply.
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(a) "Confidential Information" means any confidential, proprietary
business information or data belonging to or pertaining to
Employer that does not constitute a "Trade Secret" (as
hereinafter defined) and that is not generally known by or
available through legal means to the public, including, but not
limited to, information regarding the Employer's customers or
actively sought prospective customers, acquisition targets,
suppliers, manufacturers and distributors gained by Employee as
a result of his employment with Employer.
(b) "Customer" means actual customers or actively sought prospective
customers of Employer.
(c) "Trade Secrets" means information or data of or about Employer,
including but not limited to technical or non-technical data,
formulas, patterns, compilations, programs, devices, methods,
techniques, drawings, processes, financial data, financial
plans, products plans, or lists of actual or potential
customers, clients, distributees or licensees, information
concerning or Employer's finances, services, staff, contemplated
acquisitions, marketing investigations and surveys, that are not
generally known to, and/or are not readily ascertainable by
proper means by, other persons.
(d) "Work Product" means any and all work product property, data
documentation or information of any kind prepared, conceived,
discovered, developed or created by Employee for Employer or its
affiliates' clients or customers for utilization in Employer's
business, not generally known by or not readily ascertainable by
proper means by other persons who can obtain economic value from
their disclosure or use.
4.2 TRADE NAME AND CONFIDENTIAL INFORMATION.
(a) Employee hereby agrees that at all times during the Term
and thereafter:
(i) Employee shall not, directly or by assisting others
own, manage, operate, join, control or participate in
the ownership, management, operation or control of, or
be connected in any manner with, any business
conducted under any corporate or trade name of
Employer or name confusingly similar thereto, without
the prior written consent of Employer;
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(ii) Employee shall hold in confidence all Trade Secrets
and all Confidential Information and will not, either
directly or indirectly, use, sell, lend, lease,
distribute, license, give, transfer, assign, show,
disclose, disseminate, reproduce, copy, appropriate or
otherwise communicate any Trade Secrets or
Confidential Information, without the prior written
consent of Employer; and
(iii) During the Term Employee shall immediately notify
Employer of any unauthorized disclosure or use of any
Trade Secrets or Confidential Information of which
Employee becomes aware, Employee shall assist
Employer, to the extent necessary, in the procurement
or any protection of Employer's rights to or in any of
the Trade Secrets or Confidential Information.
(b) Upon the request of Employer, Employee shall deliver to
Employer all memoranda, notes, records, manuals and other
documents, including all copies of such materials and all
documentation prepared or produced in connection therewith,
pertaining to the performance of Employee's services
hereunder or Employer's business or containing Trade
Secrets or Confidential Information, whether made or
complied by Employee or furnished to Employee from another
source by virtue of Employee's employment with Employer.
(c) To the greatest extent possible, all Work Product shall be
deemed to be "work made for hire" (as defined in the
Copyright Act, 17 U.S.C.A. Section 101 ET SEQ., as amended)
and owned exclusively by Employer. Employee hereby
unconditionally and irrevocably transfers and assigns to
Employer all rights, title and interest Employee may have
in or to any and all Work Product, including, without
limitation, all patents, copyrights, trademarks, service
marks and other intellectual property rights arising out of
the Work Product. Employee agrees to execute and deliver to
Employer any transfers, assignments, documents or other
instruments which Employer may deem necessary or
appropriate to vest complete title and ownership of any and
all such Work Product, and all rights therein, exclusively
in Employer.
4.3 NONSOLICITATION AND NONCOMPETE. Employee hereby agrees that
Employee will not, during the Term and for a period of one (1) year following
the Term, either directly or indirectly, alone or in conjunction with any other
party, on the North American continent:
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(a) solicit, divert or appropriate or attempt to solicit,
divert or appropriate, any Customer for the purpose of
providing the Customer with services or products
competitive with those offered by Employer during the Term;
or
(b) solicit or attempt to solicit any officer, director,
employee, consultant, contractor, agent, lessor, lessee,
licensor, licensee, supplier or any shareholder of Employer
or other personnel of Employer or any of its affiliates or
subsidiaries to terminate, alter or lessen that party's
affiliation with Employer or such affiliate or subsidiary
or to violate the terms of any agreement or understanding
between such employee, consultant, contractor or other
person and Employer; or
(c) engage in, as owner, stockholder, employee, partner, agent,
representative or otherwise, or have an interest in (except
for ownership of publicly trade securities representing not
more than five percent (5%) of the outstanding voting
shares), any business, firm, corporation or other entity in
direct competition with the business of Employer.
(i) Upon the conclusion of the Initial Term, if this
Agreement is not renewed for a Successive Term,
Employee may be engaged solely as an employee in any
business, firm, corporation or other entity in direct
competition with the business of Employer.
Nothing contained in this Section 4 shall prohibit Employee from
acquiring not more than five percent (5%) of any competitor of Employer whose
common stock is publicly traded on a national securities exchange or in the
over-the-counter market or from acquiring any percentage of any company which is
non-competitive with Employer.
SECTION 5.MISCELLANEOUS.
5.1 SEVERABILITY. The covenants in this Agreement shall be construed
as covenants independent of one another and as obligations distinct from any
other contract between Employee and Employer. Any claim that Employee may have
against Employer shall not constitute a defense to enforcement by Employer of
this Agreement.
5.2 SURVIVAL OF OBLIGATIONS. The covenants in Section 4 of this
Agreement shall survive termination of Employee's employment for the period set
forth therein.
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5.3 NOTICES. Any notice or other document to be given hereunder by
any party hereto to any other party hereto shall be in writing and delivered in
person or by courier, by telecopy transmission or sent by any express mail
service, postage or fees prepaid at the following addresses:
EMPLOYER: Internet Cable Corporation
-------- 263 King Street, Second Floor
Charleston, South Carolina 29401
Telephone: (843) 722-8007
Facsimile: (843) 873-4594
Attention: Secretary
WITH A
COPY TO: Gersten, Savage & Kaplowitz, LLP
------- 101 East 52nd Street
New York, New York 10022
Telephone: (212) 752-9700
Facsimile: (212) 813-9768
Attention: Christopher J. Kelly, Esq.
EMPLOYEE: Michael F. Mulholland
-------- 2 Bittersweet Drive
West Chester, Pennsylvania 19382-7056
Telephone: (610) 793-3951
Facsimile: (610) 793-9386
or at such other address or number for a party as shall be specified by like
notice. Any notice which is delivered in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or its agent.
5.4 BINDING EFFECT. This Agreement inures to the benefit of, and is
binding upon, Employer and their respective successors and assigns, and
Employee, together with Employee's executor, administrator, personal
representative, heirs, and legatees.
5.5 ENTIRE AGREEMENT. This Agreement is intended by the parties
hereto to be the final expression of their agreement with respect to the subject
matter hereof and is the complete and exclusive statement of the terms thereof,
notwithstanding any representations, statements or agreements to the contrary
heretofore made. This Agreement supersedes and terminates all prior employment
and compensation agreements, arrangements and understandings between or among
Employer, Employer's Management and Employee. This Agreement may be modified
only by a written instrument signed by all of the parties hereto.
5.6 ARBITRATION. Any claim or controversy arising out of or relating
to the formation, interpretation and enforcement of this Agreement or any breach
thereof, shall be settled by arbitration, in accordance with the ten current
rules of the American Arbitration before a panel of three (3) arbitrators. Any
such arbitration shall take place in Philadelphia, Pennsylvania. Judgement upon
the written award rendered by a majority of the arbitrators may be entered in
the court having jurisdiction thereof. The written decision of the majority of
the arbitrators shall be valid, binding and final, and shall be a condition
precedent to any legal action that any party may contemplate against the other,
except to compel arbitration pursuant hereto.
5.7 GOVERNING LAW. This Agreement shall be deemed to be made in, and
in all respects shall be interpreted, construed, and governed by and in
accordance with, the laws of the Commonwealth of Pennsylvania. No provision of
this Agreement shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority or by
any board of arbitrators by reason of such party or its counsel having or being
deemed to have structured or drafted such provision.
5.8 ATTACHMENT. Except as required by law, the right to receive
payments under this Agreement shall not be subject to attachment, sale, pledge,
encumbrance, charge, levy or similar process or assignment, and any attempt to
do so shall be null and void.
5.9 HEADINGS. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.10 SPECIFIC PERFORMANCE. Each party hereto hereby agrees that any
remedy at law for any breach of the provisions contained in this Agreement shall
be inadequate and that the other parties hereto shall be entitled to specific
performance and any other appropriate injunctive relief in addition to any other
remedy such party might have under this Agreement or at law or in equity.
5.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the _____day of December, 1999.
INTERNET CABLE CORPORATION
By:__________________________
Name: Timothy R. Karnes
Title: President
By:___________________________
Michael F. Mulholland
