AGREEMENT AND PLAN OF MERGER

 

                                   EXHIBIT 2.3

 

                          AGREEMENT AND PLAN OF MERGER

 

      This   Agreement and Plan of Merger   ("Agreement")   is entered into on this

___________ day of July 2005 (the   "Execution   Date"),   by and betweent   Reality

Wireless Networks, Inc., a Nevada corporation ("Reality "), Reality Acquisition,

Inc.,   a   Washington   corporation   ("Acquisition   Sub"),   and Arabian   Recab for

Trading   Co., a   corporation   duly   incorporated   under the laws of Saudi Arabia

("Arabian Recab").

 

                                    RECITALS

 

A. Reality wishes to merge with Arabian Recab the   ("Merger"),   on the terms and

conditions set forth in this Agreement; and

 

B. Upon   consummation of the Merger (defined in Section 1.2 below),   Acquisition

Sub shall merge with and into Arabian   Recab,   and Arabian   Recab shall become a

wholly-owned subsidiary of Reality; and

 

C.   Existing   owners of Arabian   Recab shall   receive   shares of common stock of

Reality as provided herein; and

 

D. All issued and outstanding Arabian Recab capital and ownership rights ("Recab

Rights")   (other than shares to be canceled in accordance   with Section   1.1(b))

shall be converted into fully paid and nonassessable shares of common stock, par

value   $0.001   per   share,   of   Reality   representing,   on   a   pro   rata   basis,

approximately   98% of the fully   diluted   number   of   shares of common   stock of

Reality to be issued and   outstanding   immediately   after   Closing (the "Reality

Shares").   As of the Effective   Time (defined in Section 1.2),   all   outstanding

Recab Rights shall no longer be outstanding and shall   automatically be canceled

and shall cease to exist, and each holder of an Recab Rights shall cease to have

any rights with respect thereto,   except the right to receive the portion of the

Reality Shares to be issued in   consideration   therefore in accordance with this

Agreement.

 

E. It is the   intent   of the   parties   that the   Merger   qualify   as a   tax-free

corporate   reorganization   under Section   [368(a)(2)(E)] of the Internal Revenue

Code of 1986, as amended (the "Code").

 

Accordingly, the parties hereby agree as follows:

 

1. MERGER.

 

1.1.   Effect on Capital Stock. As of the Effective Time, by virtue of the Merger

and without   any action on the part of the holder of any of Recab   Rights or any

shares of capital stock of Acquisition Sub:

 

 

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(a) Capital   Stock of   Acquisition   Sub.   Each issued and   outstanding   share of

capital stock of   Acquisition   Sub shall be converted into one share of Treasury

Stock of Arabian Recab.

 

(b) Cancellation of Treasury Stock of Arabian Recab owned by Arabian Recab. Each

share of Arabian   Recab that is owned by Arabian   Recab shall   automatically   be

cancelled and shall cease to exist, and no   consideration   shall be delivered or

deliverable in exchange therefore.

 

(c)   Conversion of the Recab   Rights.   All Recab Rights (other than shares to be

canceled in accordance   with Section   1.1(b)) shall be converted into fully paid

and   nonassessable   shares of common stock,   par value $0.001 per share,   of the

Reality   Shares   necessary to give effect to the   relative   ownership of Reality

Shares by Arabian   Recab Share holders   expressed   above in Recital D. As of the

Effective   Time, all the Recab Rights shall no longer be   outstanding   and shall

automatically   be   canceled   and   shall   cease to   exist,   and each   holder of a

certificate representing any such shares of Recab Rights shall cease to have any

rights   with   respect   thereto,   except the right to receive   the portion of the

Reality Shares to be issued in consideration therefore in accordance herewith.

 

1.2 Articles of Merger.   The Merger shall be   effectuated   at the Effective Time

pursuant to the Articles of Merger   ("Articles   of Merger")   filed in accordance

with   applicable   provisions   of Saudi   Arabia,   Washington   law and Nevada (the

"Applicable Law"). The Articles of Merger shall be filed together with any other

filings or recordings   required by the   Applicable   Law in   connection   with the

Merger as soon as   practicable   after the Closing   (as defined   below in Section

2.1).   The term   "Effective   Time" as used in this   Agreement   means the time at

which the Merger becomes   effective under the laws of Washington and shall occur

as soon as   practicable   following   the 20th day   after   Reality   's   filing   of

Schedule 14C in   definitive   form that has been approved by the   Securities   and

Exchange   Commission   (the "SEC"),   which shall be filed, in part, in connection

with   the   necessary   Reality   shareholder   approval,   of   this   Agreement,    in

definitive form (the "Schedule 14C," further described below").

 

1.3 Procedure. Each and all of the Recab Rights outstanding immediately prior to

the Effective Time shall, immediately after the Effective Time, be exchanged for

a certificate or certificates   evidencing   ownership of the applicable number of

the Reality   Shares.   At the Closing   (as   defined   below in Section   2.1) Recab

Rights shall cease to be   outstanding   and shall be converted into and exchanged

for the Reality Shares.   The Reality Shares   exchanged for Recab Rights shall be

referred to herein as the "Closing Shares".

 

1.4 Name Change. At the Effective Time, the articles of incorporation of Reality

shall be   amended   such   that the name   "Reality   , Inc."   shall   become   "Recab

International Inc."

 

2. CLOSING AND SUBSEQUENT CONDITIONS.

 

2.1 Date, Time and Place of Closing.   The Merger   contemplated by this Agreement

shall take place at a closing to be held at The Otto Law Group,   PLLC, and shall

be deemed   effective upon the execution of this Agreement (the   "Closing"),   and

shall   remain   subject to   completion   and   satisfaction   of certain   conditions

subsequent to the Closing (the "Conditions   Subsequent").   The date on which the

Closing occurs is referred to in this Agreement as the "Closing Date."

 

 

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2.2 Arabian Recab Conditions Subsequent.   Following the Closing and prior to the

Effective Time, unless otherwise stated herein,   Arabian Recab shall deliver the

following   documents   to   Reality   (collectively,   the   "Arabian   Recab   Closing

Documents"):

 

      2.2.1   Arabian   Recab   Share   Certificates.   Certificates,   or   equivalent

documentation thereof, representing all of Recab Rights;

 

      2.2.2   Articles of Merger.   The   Articles of Merger (to be prepared by the

Otto Law Group,   PLLC (the "OLG")) to be filed with the state of Washington and,

in   necessary,   under   applicable   provisions   under   the laws of Saudi   Arabia,

executed by Arabian Recab;

 

      2.2.3 Arabian Recab Officer's   Certificate.   A certificate (to be prepared

by the OLG with the   assistance of Arabian   Recab)) dated as of the Closing Date

executed   by a duly   authorized   officer of Arabian   Recab   certifying   that all

necessary actions have been taken by Arabian Recab's   shareholders and directors

to   authorize   the   transactions   contemplated   by this   Agreement   and that all

representations   and   warranties   made by Arabian   Recab in this   Agreement   are

complete and correct in all material   respects as of the Closing Date as if made

on the Closing Date;

 

      2.2.4 Resolutions.   Copies of signed resolutions of the board of directors

and the   shareholders of Arabian Recab approving the Merger with Acquisition Sub

and Arabian Recab Inc. and the execution by Arabian Recab of this Agreement;

 

      2.2.5 Appraisal Rights.In the event that shareholders of Arabian Recab are

entitled   to   "appraisal   rights"   pursuant   to the   laws   of   Saudi   Arabia   or

Washington   law,   copies of all   written   appraisal   notices   and forms   sent by

Arabian Recab to the   shareholders   of Arabian Recab as required by Saudi Arabia

or Washington law,   including any waiver of "appraisal   rights" by Arabian Recab

Shareholders;

 

      2.2.6   Other    Documents   and    Instruments.    Such   other   documents   and

instruments   as Reality 's counsel   may deem to be   necessary   or   advisable   to

effect the transactions contemplated by this Agreement.

 

2.3 Reality Closing Documents.   Following the Closing and prior to the Effective

Time,   Reality   shall   deliver or cause to be   delivered   to   Arabian   Recab the

following documents (collectively, the "Reality Closing Documents"):

 

      2.3.1 Articles and Certificate of Merger.   The Certificate of Merger to be

filed with the State of   Washington,   executed by Reality and   Acquisition   Sub,

respectively;

 

      2.3.2 Reality Share Certificates. Executed minutes of a special meeting of

the board of directors of Reality   authorizing the issuance of one or more stock

certificates in the name of each of Arabian Recab Shareholders representing such

Arabian Recab Shareholder's ownership of the Reality Shares;

 

 

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      2.3.3   Good   Standing   Certificate.   A   certificate   issued by the   Nevada

Secretary of State   indicating   that Reality is qualified   and in good   standing

within such jurisdiction and a certificate issued by the Washington Secretary of

State   indicating that the Reality   Acquisition,   Inc., is qualified and in good

standing within such jurisdiction;

 

      2.3.4   Reality   Officer's   Certificate.   A   certificate   dated   as of   the

Effective Time executed by a duly authorized   officer of Reality certifying that

all   necessary   actions have been taken by Reality 's officers and   directors to

authorize   the   transactions    contemplated   by   this   Agreement   and   that   all

representations   and   warranties   made by Reality in this Agreement are complete

and correct in all   material   respects as of the Closing   Date as if made on the

Closing Date;

 

      2.3.5 Resolutions.   Copies of signed resolutions of the board of directors

and documented evidence of shareholders of Reality approving the Merger with;

 

      2.3.6   Appraisal   Rights.In   the event that   shareholders   of Reality   are

entitled to   "appraisal   rights"   pursuant to Nevada law,   copies of all written

appraisal   notices and forms sent by Reality to the   shareholders   of Reality as

required by Nevada law;

 

      2.3.7 Such other   documents and instruments as Arabian Recab's counsel may

deem to be necessary or advisable   to effect the   transactions   contemplated   by

this   Agreement.

 

2.4 Schedule 14C. Upon   Execution of this   Agreement,   Reality shall prepare and

file with the SEC a Schedule   14C to   disclose   to   shareholder   approval of the

following:

 

      (1)    Reality 's authority to enter into, consummate,   and take all action

            necessary and proper to effect this Agreement;

 

      (2)    A reverse split of the issued and   outstanding   Reality common stock

            (the Reverse Split") such that the pre-Merger   Reality   shareholders

            shall retain a post Merger, post Reverse Split ownership interest of

            not less than two   percent   (2%) of the   merged   entity   immediately

            following the time at which the Reverse Split becomes effective.

 

2.5 Board of Directors. The parties hereto agree that Steve Careaga, the current

director of Reality , Inc., shall retain a seat on the board of Directors of the

merged entity for a period of not less than the time between the Effective   Time

and the next election of the board of directors of the merger entity. Any change

to the composition of the board of directors shall require the mutual   agreement

of both parties.

 

 

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3. REPRESENTATIONS AND WARRANTIES OF ARABIAN RECAB.

 

Arabian Recab   represents and warrants to Reality that the statements   contained

in this Section 3 are correct and   complete as of the date of this   Agreement in

all material respects.

 

3.1 Organization of Arabian Recab. Arabian Recab is Saudi Arabia duly organized,

validly   existing,   and in good   standing   under the laws of the   Saudi   Arabia.

Arabian   Recab has all the   requisite   power   and   authority   to own,   lease and

operate   all of its   properties   and   assets   and to   carry on its   business   as

currently   conducted   and as proposed   to be   conducted.   Arabian   Recab is duly

licensed   or   qualified   to   do   business   and   is   in   good   standing   in   each

jurisdiction   in which the   nature of the   business   conducted   by it makes such

licensing or   qualification   necessary   and where the failure to be so qualified

would, individually or in the aggregate, have a Material Adverse Effect upon it.

As used in this   Agreement,   the term "Material   Adverse Effect" with respect to

any   party,   shall   mean any change or effect   that is   reasonably   likely to be

materially adverse to the business, operations, properties, condition (financial

or otherwise), assets or liabilities of such party and such party's subsidiaries

taken as a whole.

 

3.2   Authorization.   Subject to the approval of its shareholders,   Arabian Recab

has full power and authority   (including   full corporate power and authority) to

execute and deliver this   Agreement and Arabian   Recab Closing   Documents and to

perform its obligations   hereunder and thereunder.   This Agreement   constitutes,

and Arabian Recab Closing   Documents will constitute,   valid and legally binding

obligations of Arabian Recab,   enforceable in accordance   with their   respective

terms and conditions.

 

3.3   Noncontravention.   Neither the execution and the delivery of this Agreement

or Arabian Recab Closing   Documents,   nor the   consummation of the   transactions

contemplated    hereby   or   thereby   by   Arabian   Recab,   will   (i)   violate   any

constitution,   statute, regulation,   rule, injunction,   judgment, order, decree,

ruling, charge, or other restriction of any government,   governmental agency, or

court to which   Arabian   Recab is subject or any   provision   of its   articles of

incorporation   or   bylaws,   or   (ii)   conflict   with,   result   in a   breach   of,

constitute a default under,   result in the   acceleration of, create in any party

the right to   accelerate,   terminate   modify,   or cancel,   or require any notice

under any agreement,   contract, lease, license, instrument, or other arrangement

to which Arabian Recab is a party or by which it is bound or to which any of its

assets is subject.   Arabian   Recab does not need to give any notice to, make any

filing with, or obtain any authorization, consent, or approval of any government

or governmental   agency in order for the parties to consummate the   transactions

contemplated by this Agreement.

 

3.4 Disclosure.   The representations and warranties   contained in this Section 3

do not   contain   any untrue   statement   of a material   fact or omit to state any

material   fact   necessary   in   order   to make   the   statements   and   information

contained in this Section 3 not misleading.

 

3.5   Capitalization.   The authorized   capital and ownership   rights   (previously

defined as the "Recab Rights") of Arabian Recab Inc., at the Closing Date, shall

consist of 47,200,000 Recab Rights.   All Recab Rights of Arabian Recab have been

duly authorized and validly issued, and are fully paid and nonassessable. All of

the   outstanding   Recab Rights (and options to purchase   such Recab   Rights) and

other outstanding   securities of Arabian Recab have been duly and validly issued

in compliance with the laws of Saudi Arabia. Except as set forth on Schedule 3.5

there are no outstanding or authorized subscriptions,   options,   warrants, plans

or,   except for this   Agreement and as   contemplated   by this   Agreement,   other

agreements or rights of any kind to purchase or otherwise   receive or be issued,

or securities or   obligations   of any kind   convertible   into, any Recab Rights,

ownership   interests   or other   securities   of Arabian   Recab,   and there are no

dividends (or similar rights) which have accrued or been declared but are unpaid

on the ownership rights of Arabian Recab. There are no outstanding or authorized

stock   appreciation,   phantom   stock or similar   rights with   respect to Arabian

Recab.   Recab   Rights are duly   authorized   and validly   issued,   fully paid and

nonassessable.   Recab Rights are not subject to any   preemptive   rights or other

similar restrictions.

 

 

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3.6 Tax Treatment. As of the date of this Agreement, Arabian Recab has no reason

to   believe   that   the   Merger,    in   its   entirety,    will   not   qualify   as   a

"reorganization" within the meaning of Section 368(a) of the Code.

 

3.7   Noncontravention.   Neither the execution and the delivery of this Agreement

or the Arabian Recab Closing Documents, nor the consummation of the transactions

contemplated    hereby   or   thereby,   by   Arabian   Recab   will   (i)   violate   any

constitution,   statute, regulation,   rule, injunction,   judgment, order, decree,

ruling, charge, or other restriction of any government,   governmental agency, or

court to which Arabian   Recab is subject,   or (ii)   conflict   with,   result in a

breach of, constitute a default under,   result in the acceleration of, create in

any party the right to accelerate,   terminate   modify, or cancel, or require any

notice under any   agreement,   contract,   lease,   license,   instrument,   or other

arrangement to which Arabian Recab is a party or by which Arabian Recab is bound

or to which   Arabian   Recab is subject.   Arabian Recab does not need to give any

notice   to,   make any filing   with,   or obtain any   authorization,   consent,   or

approval of any   government or   governmental   agency in order for the parties to

consummate the transactions contemplated by this Agreement.

 

3.8   Financial   Statements   and   Financial   Condition.   Each   of   the   financial

statements (the "Financial   Statements") submitted in connection with filing the

post-Merger   entities   consolidated   and   audited   financial   statements   to   be

included on a Form 8-K filed within 71 days   following   the filing of a Form 8-K

disclosing this Agreement   (such   documents,   to the extent   necessary to comply

with the Rules and   Regulations of the SEC,   deemed the "Reports")   with the SEC

shall be prepared   from,   and is in   accordance   with,   the books and records of

Arabian   Recab,    shall   comply   with   all   material   respects   with   applicable

accounting   requirements and with the published rules and regulations of the SEC

with respect   thereto,   and shall be prepared in accordance with U.S.   generally

accepted accounting   principles applied on a consistent basis during the periods

involved (except as may be indicated in the notes thereto) and fairly present in

all material respects the consolidated results of operations and cash flows (and

changes in   financial   position,   if any) of Arabian   Recab,   as at the   date(s)

thereof or for the period(s) presented therein.

 

3.9   Absence of Material   Change.   Following   the Closing   Date and prior to the

Effective Time, there have been no change in the business, operations, financial

condition or   liabilities   of Arabian   Recab as stated in the Reports that would

result in a Material Adverse Effect on Arabian Recab.

 

 

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3.10 Litigation.   Except as provided in the Reports and Financial Statements, or

otherwise   disclosed to Reality   prior to the Effective   Time on Schedule   3.10,

there   shall   have   been   actions,   suits,   claims,   inquiries,   proceedings   or

investigations   before   any court,   tribunal,   commission,   bureau,   regulatory,

administrative or governmental agency, arbitrator,   body or authority pending or

threatened against Arabian Recab which would reasonably be expected to result in

any   liabilities,   including   defense   costs,   in excess of $10,000   U.S. in the

aggregate.   Arabian   Recab is not the named   subject of any order,   judgment   or

decree and is not in default with respect to any such order, judgment or decree.

 

3.11 Taxes and Tax   Returns.   Except as provided   in the   Reports and   Financial

Statements,   or otherwise   disclosed   to Reality   prior to the   Effective   Time,

Arabian   Recab   has   timely   and    correctly    filed   tax   returns   and   reports

(collectively,   "Returns")   required by applicable   law to be filed   (including,

without   limitation,   estimated   tax   returns,   income tax   returns,   excise tax

returns, sales tax returns, use tax returns, property tax returns, franchise tax

returns,   information   returns   and   withholding,   employment   and   payroll   tax

returns) and all such returns were (at the time they were filed)   correct in all

material   respects,   and have paid all taxes,   levies,   license and registration

fees, charges or withholdings of any nature whatsoever reflected on such Returns

to be owed and which have   become due and   payable   except for any that is being

contested in good faith.

 

3.12 Compliance with Applicable Law.

 

      3.12.1 Arabian Recab holds all licenses, certificates, franchises, permits

and other   governmental   authorizations   ("Permits")   necessary   for the   lawful

conduct of its   business   and such   Permits   are in full force and   effect,   and

Arabian Recab is in all material respects complying therewith,   except where the

failure to possess or comply with such Permits would not have, in the aggregate,

a Material Adverse Effect on Arabian Recab.

 

      3.12.2   Arabian   Recab   is and   for   the   past   three   years   has   been in

compliance   with   all   foreign,    federal,    state   and   local   laws,   statutes,

ordinances,   rules, regulations and orders applicable to the operation,   conduct

or ownership of its business or properties except for any noncompliance which is

not reasonably   likely to have, in the aggregate,   a Material   Adverse Effect on

Arabian Recab.

 

3.13 Contracts and   Agreements.   Arabian Recab is not a party to or bound by any

commitment,   contract, agreement or other instrument which limits the freedom of

Arabian   Recab to compete in any line of business or with any person,   except to

the extent   disclosed on Schedule   3.13.   Arabian Recab is not in default on any

material contract, agreement or other instruments.

 

3.14 Affiliate Transactions.

 

 

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      3.14.1 Except as otherwise   disclosed on Schedule 3.14,   Arabian Recab has

not engaged in, and is not currently   obligated to engage in (whether in writing

or orally),   any   transaction   with any   Affiliated   Person (as   defined   below)

involving aggregate payments by or to Arabian Recab of $10,000 U.S. or more.

 

      3.14.2 For purposes of this Section 3.14, "Affiliated Person" means:

 

            (a) a director,   executive officer or Controlling Person (as defined

below) of Arabian Recab;

 

            (b) a spouse of a director,   executive officer or Controlling Person

of Arabian Recab;

 

            (c) a   member   of the   immediate   family   of a   director,   executive

officer,   or   Controlling   Person of Arabian Recab who has the same home as such

person;

 

            (d) any   corporation or   organization   (other than Arabian Recab) of

which a director,   executive officer or Controlling Person of Arabian Recab is a

chief executive officer, chief financial officer, or a person performing similar

functions or is a Controlling Person of such other corporation or organization;

 

      (e) any   trust   or   estate   in which a   director,   executive   officer,   or

Controlling   Person   of   Arabian   Recab   or the   spouse   of   such   person   has a

substantial   beneficial interest or as to which such person or his spouse serves

as trustee or in a similar fiduciary capacity; and

                      

      (f) for   purposes of this Section   3.14,   "Controlling   Person"   means any

person or entity which, either directly or indirectly, or acting in concert with

one or more other   persons or   entities   owns,   controls   or holds with power to

vote,   or holds   proxies   representing   ten   percent or more of the   outstanding

common stock or equity securities.

 

3.15 Limited Representations and Warranties.   Except for the representations and

warranties   of Reality   expressly   set forth in Section 4, Arabian Recab has not

relied upon any   representation   and warranty made by or on behalf of Reality in

making   its   determination   to enter   into this   Agreement   and   consummate   the

transactions contemplated by this Agreement.

 

3.16 Disclosure. No representation or warranty made by a Arabian Recab contained

in this   Agreement,   and no statement   contained in the   Schedules   delivered by

Arabian   Recab   hereunder,   contains any untrue   statement of a material fact or

omits   any   material   fact   necessary   in order to make a   statement   herein   or

therein, in light of the circumstances under which it is made, not misleading.

 

3.17 Title to Property.

 

      3.17.1 Real   Property.   Arabian   Recab does not own or lease,   directly or

indirectly,   any real   property,   except as   otherwise   disclosed   to Reality on

Schedule 3.17.1.

 

 

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      3.17.1   Environmental   Matters.   Arabian Recab does not have any financial

liability under any environmental laws except as otherwise   disclosed to Reality

on Schedule 3.17.2.

 

3.19 A