__________________________________________________________________
AGREEMENT OF MERGER
AND
PLAN OF
REORGANIZATION
among
RELIABILITY
INCORPORATED
RELIABILITY - MEDALLION, INC.,
MEDALLION ELECTRIC
ACQUISITION CORPORATION, and
Linda R. Katz, Branden A. Ferrari, Ariel Imas, Alex Kreger, Charles
G. Masters, RHK Midtown Partners, LLC, Mark Spoor, and James
Tolan
March __,
2007
__________________________________________________________________
TABLE OF CONTENTS
Page
1.
The Merger. *
1.1. Merger
*
1.2. Effective
Time *
1.3. Articles of
Incorporation, By-laws, Directors and Officers.
*
1.4. Assets and
Liabilities *
1.5. Manner and
Basis of Converting Shares.
*
1.6. Surrender
and Exchange of Certificates *
1.7. Parent
Common Stock *
1.8. Parent
Capital Contribution
*
1.9. Additional
Parent Shares
*
2.
Representations and Warranties of the Company
*
2.1.
Organization, Standing, Subsidiaries, Etc.
*
2.2.
Qualification *
2.3.
Capitalization of the Company *
2.4.
Indebtedness *
2.5. Company
Shareholders *
2.6. Corporate
Acts and Proceedings
*
2.7. Compliance
with Laws and Instruments *
2.8. Binding
Obligations
*
2.9. Broker's
and Finder's Fees
*
2.10. Financial Statements
*
2.11. Absence of Undisclosed
Liabilities
*
2.12. Changes
*
2.13. Schedule of Assets
and Contracts
*
2.14. Employees
*
2.15. Tax Returns and Audits
*
2.16. Employee Benefit Plans;
ERISA
*
2.17. Title to Property
and Encumbrances *
2.18. Litigation
*
2.19. Interested Party
Transactions *
2.20. Obligations to or by
Shareholders
*
2.21. No Trading
*
2.22. Representations by
Shareholders
*
2.23. Disclosure
*
3.
Representations and Warranties of Parent and Acquisition Corp
*
3.1.
Organization and Standing
*
3.2. Corporate
Authority *
3.3. Broker's
and Finder's Fees
*
3.4.
Capitalization of Parent *
3.5. Acquisition
Corp
*
3.6. Validity of
Shares
*
3.7. SEC
Reporting and Compliance
*
3.8. Financial
Statements *
3.9.
Governmental Consents
*
3.10. Compliance with Laws
and Other Instruments *
3.11. Binding Obligations
*
3.12. Absence of Undisclosed
Liabilities
*
3.13. Parent Contracts.
*
3.14. Changes
*
3.15. Tax Returns and Audits
*
3.16. Employee Benefit Plans;
ERISA
*
3.17. Litigation
*
3.18. Interested Party
Transactions *
3.19. Questionable Payments
*
3.20. Obligations to or by
Stockholders
*
3.21. Employees
*
3.22. No General Solicitation
*
3.23. Records
*
3.24. Disclosure
*
3.25. Title to Property
and Encumbrances *
3.26. Insurance Coverage
*
3.27. Environmental Matters.
*
4.
Covenants of the Shareholders and the Company.
*
4.1.
Shareholders *
4.2. Company
*
5.
Conduct of Businesses Pending the Merger. *
5.1. Conduct of
Business by the Company Pending the Merger
*
5.2. Conduct of
Business by Parent and Acquisition Corp. Pending the Merger
*
5.3. Conduct of
Business by Parent and Company Pending Release Date *
6.
Additional Agreements. *
6.1. Access and
Information
*
6.2. Additional
Agreements *
6.3. Publicity
*
6.4. Appointment
of Directors
*
6.5. Listing
*
6.6. Sale or
ReFinancing of the North Carolina Property *
6.7. Escrow of
Parent Shares
*
6.8. New Equity
Financing
*
6.9. Voting
Agreement
*
7.
Conditions of Parties' Obligations.
*
7.1. Company
Obligations
*
7.2. Parent and
Acquisition Corp. Obligations
*
8.
Survival of Representations and Warranties
*
9.
Amendment *
10.
Definitions
*
11.
Closing *
11.1. Parent Deliveries
*
11.2. Company and Shareholder
Deliveries
*
11.3. Acquisition
*
12.
Termination Prior to Closing. *
12.1. Termination of
Agreement
*
12.2. Termination of
Obligations
*
13.
Miscellaneous. *
13.1. Notices
*
13.2. Entire Agreement
*
13.3. Expenses
*
13.4. Time *
13.5. Severability
*
13.6. Successors and Assigns
*
13.7. No Third Parties
Benefited
*
13.8. Counterparts
*
13.9. Governing Law *
13.10. Headings
*
13.11. Neutral Construction *
LIST OF EXHIBITS
Exhibits
A
Articles of Merger
B
Directors and Officers of Surviving Company
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
THIS AGREEMENT OF MERGER AND PLAN OF REORGANIZATION is made and
entered into on March ___, 2007, by and among RELIABILITY
INCORPORATED, a Texas corporation (" Parent "),
RELIABILITY-MEDALLION, INC., a Florida corporation ("
Acquisition Corp. "), which is a wholly-owned subsidiary of
Parent, MEDALLION ELECTRIC ACQUISITION CORPORATION, a Florida
corporation (herein referred to as the " Company " or "
Surviving Corporation ") and, solely with respect to
Sections 2.3, 2.8, 2.22, 4.1, 6.7 and 6.9, Linda R. Katz, Branden
A. Ferrari, Ariel Imas, Alex Kreger, Charles G. Masters, RHK
Midtown Partners, LLC, a Florida limited liability company, Mark
Spoor, and James Tolan, all of the shareholders of the Company ("
Shareholders ").
W I T N E S S E T
H :
WHEREAS, the Board of Directors of each of Acquisition Corp.,
Parent and the Company have each determined that it is fair to and
in the best interests of their respective corporations and
stockholders for Acquisition Corp. to be merged with and into the
Company (the " Merger ") upon the terms and subject to the
conditions set forth herein;
WHEREAS, the Board of Directors of Acquisition Corp. and the
Board of Directors of the Company has approved the Merger in
accordance with the Florida Business Corporation Act (the "
FBCA "), and upon the terms and subject to the conditions
set forth herein and in the Articles of Merger (the " Articles
of Merger ") attached as Exhibit A hereto; and the
Board of Directors of Parent also has approved this Agreement and
the Articles of Merger;
WHEREAS, the Shareholders have approved, by written consent
pursuant to the FBCA, this Agreement and the Articles of Merger and
the transactions contemplated and described hereby and thereby,
including, without limitation, the Merger, and Parent, as the sole
shareholder of Acquisition Corp., has approved this Agreement, the
Articles of Merger and the transactions contemplated and described
hereby and thereby, including, without limitation, the Merger;
and
WHEREAS, the Company has entered into an Agreement for the
Purchase and Sale of Capital Stock dated December 22, 2006, as
amended (the " Purchase Agreement "), which grants the
Company the right to acquire 100% of the issued and outstanding
capital stock of Medallion Electric, Inc., a Florida corporation ("
Medallion Electric "); and
WHEREAS, upon completion of the transactions contemplated
herein, the Company will complete the acquisition of Medallion
Electric (the " Acquisition ").
NOW, THEREFORE, in consideration of the mutual agreements and
covenants hereinafter set forth, the parties hereto agree as
follows:
-
-
The Merger .
-
-
Merger . Subject to the terms
and conditions of this Agreement and the Articles of Merger,
Acquisition Corp. shall be merged with and into the Company in
accordance with Section 607 et seq. of the FBCA. At the
Effective Time (as hereinafter defined), the separate legal
existence of Acquisition Corp. shall cease, and the Company shall
be the surviving corporation in the Merger (sometimes hereinafter
referred to as the " Surviving Corporation ") and
shall continue its corporate existence under the laws of the State
of Florida under the name Medallion Electric Acquisition
Corporation.
-
Effective
Time. The Merger shall become effective on the date and
at the time the Articles of Merger is filed with the Department of
State of the State of Florida. The time at which the Merger shall
become effective as aforesaid is referred to hereinafter as the "
Effective Time ," and the filing of the Articles of Merger
as set forth in the first sentence of this Section 1.2 shall
occur concurrently with the Acquisition.
-
Articles of Incorporation, By-laws,
Directors and Officers .
-
-
The Articles of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation from and after the
Effective Time until further amended in accordance with applicable
law.
-
The By-laws of the Company, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation
from and after the Effective Time until amended in accordance with
applicable law, the Articles of Incorporation and such
By-laws.
-
The directors and executive officers listed in
Exhibit B hereto shall be the directors and executive
officers of the Surviving Corporation, and each shall hold his
respective office or offices from and after the Effective Time
until his successor shall have been elected and shall have
qualified in accordance with applicable law, or as otherwise
provided in the Articles of Incorporation or By-laws of the
Surviving Corporation.
-
Assets and Liabilities . At
the Effective Time, the Surviving Corporation shall possess all the
rights, privileges, powers and franchises of a public as well as of
a private nature, and be subject to all the restrictions,
disabilities and duties of each of Acquisition Corp and the Company
(collectively, the " Constituent Corporations "); and all
the rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and
mixed, and all debts due to any of the constituent corporations on
whatever account, as well for stock subscriptions as all other
things in action or belonging to each of the Constituent
Corporations, shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises, and all and
every other interest shall be thereafter as effectively the
property of the Surviving Corporation as they were of the several
and respective constituent corporations, and the title to any real
estate vested by deed or otherwise in either of the such
Constituent Corporations shall not revert or be in any way impaired
by the Merger; but all rights of creditors and all liens upon any
property of any of the Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities and duties of the
Constituent Corporations shall thenceforth attach to the Surviving
Corporation, and may be enforced against it to the same extent as
if said debts, liabilities and duties had been incurred or
contracted by it.
-
Manner
and Basis of Converting Shares .
-
-
At the Effective Time:
-
-
each share of common stock, par value $.001 per share, of
Acquisition Corp. that shall be outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the
right to receive one (1) share of common stock, par value
$.001 per share, of the Surviving Corporation, so that at the
Effective Time, Parent shall be the holder of all of the issued and
outstanding shares of the Surviving Corporation;
-
the shares of common stock, par value $.001 per share, of the
Company (the " Company Common Stock "), which shares at the
Closing will constitute all of the issued and outstanding shares of
capital stock of the Company, shall, by virtue of the Merger and
without any action on the part of the holders thereof, be converted
into the right to receive shares of Parent Common Stock a the rate
of 570 shares of Parent Common Stock for each share Company Common
Stock, for an aggregate of 2,850,000 shares of Parent Common Stock
(the " Parent Shares "). The Parent Shares shall be held in
escrow pursuant to the Depository Agreement-Escrow described in
Section 6.7 (the " Escrow Agreement ") and the Parent
Shares shall be voted pursuant to the Voting Agreement described in
Section 6.9 (the " Voting Agreement ").
-
After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation
of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time.
-
Surrender and Exchange of
Certificates . Promptly after the Effective Time and upon
(i) surrender of a certificate or certificates representing
shares of Company Common Stock that were outstanding immediately
prior to the Effective Time or an affidavit and indemnification in
form reasonably acceptable to counsel for the Parent stating that a
Shareholder has lost his certificate or certificates or that such
have been destroyed and (ii) delivery of a Letter of
Transmittal (as described in Section 4.1 hereof), Parent shall
issue to each record holder of the Company Common Stock
surrendering such certificate or certificates and Letter of
Transmittal, a certificate or certificates registered in the name
of such Shareholder representing the number of shares of Parent
Common Stock that such Shareholder shall be entitled to receive as
set forth in Section 1.5(a)(ii) hereof; provided, such
shares of Parent Common Stock shall be held in escrow pursuant to
the Escrow Agreement and voted pursuant to the Voting
Agreement.
-
Parent
Common Stock . Parent agrees that it will cause the
Parent Common Stock into which the Company Common Stock is
converted at the Effective Time pursuant to
Section 1.5(a)(ii) to be available for such purpose.
-
Parent Capital Contribution . On the
Closing Date, Parent shall capitalize the Surviving Corporation,
via wire transfer pursuant to written instructions delivered by the
Company to Parent, with $750,000, of which $500,000 shall be used
to pay the closing payment due under the Purchase Agreement with
Medallion Electric; the balance will be used to provide working
capital for Medallion Electric and a portion, not to exceed
$150,000, may be used to pay the expenses referenced in Section
6.8 , as determined by Alex Katz, as authorized representative
of the Company and the Shareholders.
-
Additional Parent Shares .
Parent acknowledges that Company has committed to pay 150,000
shares of Parent Common Stock to Ronald Masaracchio and Brian
D'Souza as additional consideration in the Acquisition and agrees
to issue such shares on the consummation of the Merger and the
Acquisition. Such additional shares shall herein also be referred
to as Parent Shares.
-
Representations and Warranties of the Company. Except
as set forth in the Company Disclosure Statement delivered to
the Parent, the Company represents and warrants to Parent and
Acquisition Corp., and each Shareholder, solely as to Sections 2.3,
2.8 and 2.22 hereby represent and warrant, severally and not
jointly to Parent and Acquisition Corp., as follows:
-
-
Organization, Standing, Subsidiaries,
Etc .
-
-
The Company is a corporation duly organized and existing in good
standing under the laws of the State of Florida, and has all
requisite power and authority (corporate and other) to carry on its
business, to own or lease its properties and assets, to enter into
the Merger Documents and to carry out the transactions contemplated
hereby and thereby. Copies of the Articles of Incorporation
and By-laws of the Company are set forth in
Schedule 2.1 to the Company Disclosure
Statement and are true and complete and have not been amended
or repealed.
-
The Company has no subsidiaries or direct or indirect interest (by
way of stock ownership or otherwise) in any firm, corporation,
limited liability company, partnership, association or business,
other than the contractual right to complete the Acquisition.
-
Qualification . The Company is
duly qualified to conduct business as a foreign corporation and is
in good standing in each jurisdiction wherein the nature of its
activities or its properties owned or leased makes such
qualification necessary, except where the failure to be so
qualified could not reasonably be expected to have an adverse
effect on the condition (financial or otherwise), properties,
assets, liabilities, business operations or results of operations
or prospects of the Company (the "Condition of the Company").
Schedule 2.2 to the Company Disclosure
Statement sets forth a list of the jurisdictions in which the
Company is so qualified to conduct business.
-
Capitalization of the Company .
The authorized capital stock of the Company consists of 7500
shares of Company Common Stock, and the Company has no authority to
issue any other capital stock. There are 5,000 shares of
Company Common Stock issued and outstanding, and such shares are
duly authorized, validly issued, fully paid and non-assessable, and
none of such shares have been issued in violation of the
preemptive rights of any person. The offer, issuance and sale
of the shares of Company Common Stock were (a) exempt from the
registration and prospectus delivery requirements of the Securities
Act, or (b) registered or qualified under the registration or
qualification requirements of all applicable state securities laws
and (c) accomplished in conformity with all other applicable
securities laws. None of such shares of Company Common Stock
are subject to a right of withdrawal or a right of rescission under
any federal or state securities or blue sky law. The Company has no
outstanding options, rights or commitments to issue Company Common
Stock or other Equity Securities of the Company, and there are no
outstanding securities convertible or exercisable into or
exchangeable for Company Common Stock or other Equity Securities of
the Company.
-
Indebtedness . The Company has
no Indebtedness except as disclosed on the Balance Sheet or on
Schedule 2.12 to the Company Disclosure
Statement.
-
Company
Shareholders . Schedule 2.5 to the Company
Disclosure Statement contains a true and complete list of the names
and addresses of the record and beneficial owners of all of the
outstanding shares of Company Common Stock and other Equity
Security of the Company, together with the number and percentage
(on a fully-diluted basis) of securities held. There is no
voting trust, agreement or arrangement among any of the beneficial
holders of Company Stock affecting the nomination or election of
directors or the exercise of the voting rights of Company Common
Stock.
-
Corporate Acts and Proceedings .
The execution, delivery and performance of this Agreement and
the Articles of Merger (together, the " Merger
Documents ") have been duly authorized by the Board of
Directors of the Company and have been approved by the requisite
vote of the Shareholders, and all of the corporate acts and other
proceedings required for the due and valid authorization,
execution, delivery and performance of the Merger Documents and the
consummation of the Merger have been validly and appropriately
taken, except for the filing referred to in
Section 1.2.
-
Compliance with Laws and Instruments
. The business, products and operations of the Company have
been and are being conducted in compliance in all material respects
with all applicable laws, rules and regulations. The
execution, delivery and performance by the Company of the Merger
Documents and the execution, delivery and performance of the Merger
Agreements, the Escrow Agreement and the Voting Agreement by the
Shareholders, and the consummation by the Company of the
transactions contemplated by this Agreement: (a) will not
require any authorization, consent or approval of, or filing or
registration with, any court or governmental agency or
instrumentality, except such as shall have been obtained prior to
the Closing, (b) will not cause the Company to violate or
contravene (i) any provision of law, (ii) any rule or
regulation of any agency or government, (iii) any order,
judgment or decree of any court, or (iv) any provision of the
Articles of Incorporation or By-laws of the Company, (c) will
not violate or be in conflict with, result in a breach of or
constitute (with or without notice or lapse of time, or both) a
default under, any indenture, loan or credit agreement, deed of
trust, mortgage, security agreement or other contract, agreement or
instrument to which the Company is a party or by which the Company
or any of its properties is bound or affected, and (d) will
not result in the creation or imposition of any Lien upon any
property or asset of the Company. The Company is not in
violation of, or (with or without notice or lapse of time, or both)
in default under, any term or provision of its Articles of
Incorporation or By-laws or of any indenture, loan or credit
agreement, deed of trust, mortgage, security agreement or any other
agreement or instrument to which the Company is a party or by which
the Company or any of its properties is bound or affected.
-
Binding Obligations . The
Merger Documents, the Voting Agreement, the Escrow Agreement and
this Agreement, when executed, constitute the legal, valid and
binding obligations of the Company and each of the Shareholders and
are enforceable against the Company and each Shareholder in
accordance with their respective terms, except as such enforcement
is limited by bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights generally and by
general principles of equity.
-
Broker's
and Finder's Fees . No Person has, or as a result of the
transactions contemplated or described herein will have, any right
or valid claim against the Company, Parent, Acquisition Corp. or
any Shareholder for any commission, fee or other compensation as a
finder or broker, or in any similar capacity, except as disclosed
in Schedule 2.9 to the Company Disclosure
Statement.
-
Financial Statements .
Schedule 2.10 to the Company Disclosure
Statement contains (a) the Company's audited balance
sheet (the " Balance Sheet ") as of December 31, 2006
(the " Balance Sheet Date "), and the audited statements of
operations, stockholders' (deficiency) equity and cash flows
for the year ended December 31, 2006, and (b) the
Company's unaudited balance sheets for the two months ended
February 28, 2007, and the unaudited statements of operations,
stockholders' (deficiency) equity and cash flows for the two
months ended February 28, 2007 (the " Financial
Statements "). Such financial statements (i) are in
accordance with the books and records of the Company,
(ii) present fairly in all material respects the financial
condition of the Company at the dates therein specified and the
results of its operations and changes in financial position for the
periods therein specified and (iii) have been prepared in
accordance with generally accepted accounting principles ("
GAAP ") applied on a basis consistent with prior accounting
periods.
-
Absence of Undisclosed Liabilities .
The Company has no obligation or liability (whether accrued,
absolute, contingent, liquidated or otherwise, whether due or to
become due), arising out of any transaction entered into at or
prior to the Closing, except (a) as disclosed in
Schedule 2.11 and/or Schedule 2.12 to the
Company Disclosure Statement, (b) to the extent set forth on
or reserved against in the Balance Sheet or the Notes to the
Financial Statements, and (c) by the specific terms of any
written agreement, document or arrangement identified in
Schedule 2.13 to the Company Disclosure Statement.
-
Changes . Since the Balance Sheet Date, except as
disclosed in Schedule 2.12 to the Company Disclosure
Statement, the Company has not (a) incurred any debts,
obligations or liabilities, absolute, accrued, contingent or
otherwise, whether due or to become due, except for fees, expenses
and liabilities incurred in connection with the Merger, the
Acquisition, and related transactions not to exceed $805,000,
(b) discharged or satisfied any Liens other than those
securing, or paid any obligation or liability other than, current
liabilities shown on the Balance Sheet and current liabilities
incurred since the Balance Sheet Date, in each case in the usual
and ordinary course of business, (c) mortgaged, pledged or
subjected to Lien any of its assets, tangible or intangible,
(d) sold, transferred or leased any of its assets,
(e) cancelled or compromised any debt or claim, or waived or
released any right, (f) issued or sold any shares of capital
stock, bonds, notes, debentures or other securities or granted any
options (including employee stock options), warrants or other
rights with respect thereto, (g) declared or paid any dividends on
or made any other distributions with respect to, or purchased or
redeemed, any of its outstanding capital stock, (h) suffered or
experienced any change in, or condition affecting, the financial
condition of the Company, (i) made any change in the
accounting principles, methods or practices followed by it or
depreciation or amortization policies or rates theretofore adopted,
(j) made or permitted any amendment or termination of any contract,
agreement or license to which it is a party, (k) suffered any loss
not reflected in the Balance Sheet or its statement of income for
the year ended on the Balance Sheet Date, or (l) entered into any
agreement, or otherwise obligated itself, to do any of the
foregoing.
-
Schedule of Assets and
Contracts . Attached to the Company Disclosure
Statement as Schedules 2.13(a) through
2.13(c) are various schedules listing assets and
contracts of the Company, as described herein.
-
-
The Company does not own or lease any
real property and never has.
-
Except as expressly set forth in this Agreement, the Balance Sheet
or the Notes thereto, or as disclosed in
Schedule 2.13(b) to the Company Disclosure
Statement, the Company is not a party to any written or oral
agreement. Except as disclosed in Schedule 2.13(b) to
the Company Disclosure Statement, the Company is not a party to or
otherwise barred by any written or oral (a) agreement for the
purchase of fixed assets or for the purchase of materials, supplies
or equipment, (b) agreement for the employment of any officer,
director, individual employee or other Person or any agreement with
any Person for consulting services, (c) bonus, pension, profit
sharing, retirement, stock purchase, stock option, deferred
compensation, medical, hospitalization or life insurance or similar
plan, contract or understanding with respect to any or all of the
employees of the Company or any other Person, (d) indenture,
loan or credit agreement, note agreement, deed of trust, mortgage,
security agreement, promissory note or other agreement or
instrument relating to or evidencing Indebtedness for Borrowed
Money or subjecting any asset or property of the Company to any
Lien or evidencing any Indebtedness, (e) guaranty of any
Indebtedness, (f) lease or agreement under which the Company
is lessee of or holds or operates any property, real or personal,
owned by any other Person, (g) lease or agreement under which the
Company is lessor or permits any Person to hold or operate any
property, real or personal, owned or controlled by the Company, (h)
agreement granting any preemptive right, right of first refusal or
similar right to any Person, (i) agreement or arrangement with
any Affiliate or any "associate" (as such term is defined in
Rule 405 under the Securities Act) of the Company or any
present or former officer, director or stockholder of the Company,
(j) agreement obligating the Company to pay any royalty or similar
charge for the use or exploitation of any tangible or intangible
property, (k) covenant not to compete or other restriction on its
ability to conduct a business or engage in any other activity, or
(l) agreement to register securities under the Securities Act.
Except as disclosed in Schedule 2.13(b) to the Company
Disclosure Statement, none of the agreements, contracts, leases,
instruments or other documents or arrangements listed in such
Schedule 2.13(b) requires the consent of any of the
parties thereto other than the Company to permit the contract,
agreement, lease, instrument or other document or arrangement to
remain effective following consummation of the Merger and the
transactions contemplated hereby.
-
Schedule 2.13(c) to the Company Disclosure
Statement contains a true and complete list and description of
each bank account, savings account, other deposit relationship and
safety deposit box of the Company, including the name of the bank
or other depository, the account number and the names of the
individuals having signature or other withdrawal authority with
respect thereto.
-
The Company has furnished to Parent and Acquisition Corp. true and
complete copies of all agreements and other documents and a
description of all applicable oral agreements disclosed or referred
to in Schedules 2.13(a), (b) and (c) to the
Company Disclosure Statement, as well as any additional agreements
or documents requested by Parent or Acquisition Corp. The Company
has performed all obligations required to be performed by it to
date and is not in default in any respect under any of the
contracts, agreements, leases, documents, commitments or other
arrangements to which it is a party or by which it or any of its
property is otherwise bound or affected.
-
Employees. Schedule 2.14
to the Company Disclosure Statement lists all officers,
directors or employees of the Company and agreements or
arrangements with any such persons, and payments made to such
persons since December 1, 2006, and outstanding debts or
obligations to such persons and loans to and from such
persons.
-
Tax
Returns and Audits . All required federal, state and
local Tax Returns of the Company have been accurately prepared and
duly and timely filed, and all federal, state and local Taxes
required to be paid with respect to the periods covered by such
returns have been paid. The Company is not and has not been
delinquent in the payment of any Tax. The Company has not had
a Tax deficiency proposed or assessed against it and has not
executed a waiver of any statute of limitations on the assessment
or collection of any Tax. None of the Company's federal
income tax returns nor any state or local income or franchise tax
returns has been audited by governmental authorities. The
reserves for Taxes reflected on the Balance Sheet are and will be
sufficient for the payment of all unpaid Taxes payable by the
Company as of the Balance Sheet Date. Since the Balance Sheet
Date, the Company has made adequate provisions on its books of
account for all Taxes with respect to its business, properties and
operations for such period. The Company has withheld or
collected from each payment made to each of its employees the
amount of all taxes (including, but not limited to, federal, state
and local income taxes, Federal Insurance Contribution Act taxes
and Federal Unemployment Tax Act taxes) required to be withheld or
collected therefrom, and has paid the same to the proper Tax
receiving officers or authorized depositaries. There are no
federal, state, local or foreign audits, actions, suits,
proceedings, investigations, claims or administrative proceedings
relating to Taxes or any Tax Returns of the Company now pending,
and the Company has not received any notice of any proposed audits,
investigations, claims or administrative proceedings relating to
Taxes or any Tax Returns. The Company is not obligated to
make a payment, or is a party to an agreement that under certain
circumstances could obligate it to make a payment, that would not
be deductible under Section 280G of the Code. The
Company has not agreed nor is required to make any adjustments
under Section 481(a) of the Code (or any similar
provision of state, local and foreign law) by reason of a change in
accounting method or otherwise for any Tax period for which the
applicable statute of limitations has not yet expired. The
Company (i) is not a party to, is bound by or has any
obligation under, any Tax sharing agreement, Tax indemnification
agreement or similar contract or arrangement, whether written or
unwritten (collectively, " Ta x Sharing Agreements
"), or (ii) does not have any potential liability or
obligation to any person as a result of, or pursuant to, any such
Tax Sharing Agreements. The Company is a "C" corporation for
federal tax purposes and is an accrual tax payor.
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Employee Benefit Plans; ERISA .
Except as disclosed in Schedule 2.16 to the
Company Disclosure Statement, there are no "employee benefit plans"
(within the meaning of Section 3(3) of the
ERISA) nor any other employee benefit or fringe benefit
arrangements, practices, contracts, policies or programs of every
type other than programs merely involving the regular payment of
wages, commissions, or bonuses established, maintained or
contributed to by the Company, whether written or unwritten and
whether or not funded. The plans listed in such
Schedule 2.16 are hereinafter referred to as the "
Employee Benefit Plans ."
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All current and prior material documents, including all amendments
thereto, with respect to each Employee Benefit Plan have been given
to Parent and Acquisition Corp. or their advisors.
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To the knowledge of the Company, all Employee Benefit Plans are in
material compliance with the applicable requirements of ERISA, the
Internal Revenue Code of 1986, as amended (the " Code ") and
any other applicable state, federal or foreign law.
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There are no pending claims or lawsuits which have been asserted or
instituted against any Employee Benefit Plan, the assets of any of
the trusts or funds under the Employee Benefit Plans, the plan
sponsor or the plan administrator of any of the Employee Benefit
Plans or against any fiduciary of an Employee Benefit Plan with
respect to the operation of such plan, nor does the Company have
any knowledge of any incident, transaction, occurrence or
circumstance which might reasonably be expected to form the basis
of any such claim or lawsuit.
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There is no pending or, to the knowledge of the Company,
contemplated investigation, or pending or possible enforcement
action by the Pension Benefit Guaranty Corporation, the Department
of Labor, the Internal Revenue Service or any other government
agency with respect to any Employee Benefit Plan and the Company
has no knowledge of any incident, transaction, occurrence or
circumstance which might reasonably be expected to trigger such an
investigation or enforcement action.
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No actual or, to the knowledge of the Company, contingent liability
exists with respect to the funding of any Employee Benefit Plan or
for any other expense or obligation of any Employee Benefit Plan,
except as disclosed on the Financial Statements of the
Company.
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No events have occurred or are
reasonably expected to occur with respect to any Employee Benefit
Plan that would cause a material change in the costs of providing
benefits under such Employee Benefit Plan or would cause a material
change in the cost of providing for other liabilities of such
Employee Benefit Plan.
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Title to Property and
Encumbrances . The Company has good, valid and
indefeasible title to all properties and assets used in the conduct
of its business (except for property held under valid and
subsisting leases which are in full force and effect and which are
not in default) free of all Liens and other encumbrances, except
Permitted Liens and such ordinary and customary imperfections of
title, restrictions and encumbrances as could not reasonably be
expected to, individually or in the aggregate, materially detract
from the value of the property or assets or materially impair the
use made thereof by the Company in its business. Without limiting
the generality of the foregoing, the Company has good and
indefeasible title to all of its properties and assets reflected in
the Balance Sheet, except for property held under valid and
subsisting leases which are in full force and effect and which are
not in default.
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Litigation . There is no legal
action, suit, arbitration or other legal, administrative or other
governmental proceeding pending or, to the best knowledge of the
Company, threatened against or affecting the Company or its
properties, assets or business. The Company is not in default
with respect to any order, writ, judgment, injunction, decree,
determination or award of any court or any governmental agency or
instrumentality or arbitration authority.
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Interested Party Transactions . No officer, director
or stockholder of the Company or any Affiliate or "associate" (as
such term is defined in Rule 405 under the Securities Act) of
any such Person or the Company has or has had, either directly or
indirectly, (a) an interest in any Person that
(i) furnishes or sells services or products that are furnished
or sold or are proposed to be furnished or sold by the Company or
(ii) purchases from or sells or furnishes to the Company any
goods or services, or (b) a beneficial interest in any
contract or agreement to which the Company is a party or by which
it may be bound or affected, except as a direct employee, as shown
on Schedule 2.14 to the Company Disclosure Statement.
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Obligations to or by Shareholders .
Except as disclosed in Schedule 2.20 , to the
Company Disclosure Statement, the Company has no liability or
obligation or commitment to any Shareholder or any Affiliate or
"associate" (as such term is defined in Rule 405 under the
Securities Act) of any Shareholder, nor does any Shareholder or any
such Affiliate or associate have any liability, obligation or
commitment to the Company.
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No Trading . The Company has not
purchased or sold any Parent Common Stock since November 1,
2006 and will not buy or sell any such shares after the date hereof
except in compliance with all applicable laws, including the rules
and regulations of the Commission.
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Representations by Shareholders .
Each Shareholder represents and warrants for himself that he is
acquiring the Parent Common Stock for his own account for
investment and not with a view toward resale or redistribution in a
manner which would require registration under the Securities Act,
and none of the Parent Common Stock is being acquired to cover
short sale positions. Each Shareholder represents that he is an
"accredited investor" as defined in Regulation D, and has such
knowledge and experience in financial and business matters to be
capable of evaluating the merits and risks of accepting the Parent
Common Stock in exchange for the Company Stock. Each Shareholder
acknowledges that the shares of Parent Common Stock to be received
in the Merger are not registered and may not be sold unless
registered under the Securities Act and applicable state securities
laws or exempted therefrom. Each Shareholder acknowledges that the
shares of Parent Common Stock will bear a restrictive legend and
that a "stop transfer" order will be placed against the shares.
Each Shareholder represents that he has adequate means of providing
for his current needs and possible personal contingencies, and has
no need, and anticipates no need in the foreseeable future, to sell
or transfer the shares of Parent Common Stock which he will receive
in the Merger. In voting for the Merger, he has carefully evaluated
his financial resources and investment position and the risks
associated with an investment in the Parent Common Stock and is
able to bear the economic risks of this investment and,
consequently, without limiting the generality of the foregoing, he
is able to hold the shares of Parent Common Stock for an indefinite
period of time and has a sufficient net worth to sustain a loss of
his entire investment in such shares in the event such loss should
occur. Each Shareholder represents that it has been called to his
attention by those individuals with whom he has dealt in connection
with the Merger, that there are contingencies provided for in
Section 6.7 below relating to the full vesting of the shares of
Parent Common Stock which involves a high degree of risk which may
result in the loss of the total amount of shares. Each Shareholders
acknowledges that he has received no representations from the
Parent, or its affiliates, or employees or agents, except as stated
in this Agreement. Each Shareholder represents that he is now a
bona fide resident of the state set forth on the signature page to
his Investor Questionnaire and the address and social security
number set forth therein are his true and correct residence and
social security number. Each Shareholder represents that he has not
purchased or sold any Parent Common Stock since November 1, 2006,
and will not buy or sell any such shares until ten days after
Closing. Each Shareholder represents that he will not buy or sell
Parent Company Stock, including the shares received in the Merger,
except in compliance with all applicable laws including the rules
and regulations of the Commission.
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Disclosure . There is no fact relating to the Company
that the Company has not disclosed to Parent and Acquisition Corp.
in writing which has had or is currently having a material and
adverse effect nor, insofar as the Company or any Shareholder can
now foresee, will materially and adversely affect, the Condition of
the Company. No representation or warranty by the Company or
any Shareholder herein and no information disclosed in the Company
Disclosure Statement by the Company or the Shareholder
contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements contained herein
or therein not misleading.
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Representations and Warranties of Parent
and Acquisition Corp . Except as set forth in the Parent
Disclosure Statement delivered to the Company, Parent and
Acquisition Corp. jointly and severally represent and warrant to
the Company as follows:
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Organization and Standing .
Parent is a corporation duly organized and existing in good
standing under the laws of the State of Texas. Acquisition Corp. is
a corporation duly organized and existing in good standing under
the laws of the State of Florida. Parent and Acquisition Corp. have
heretofore delivered to the Company complete and correct copies of
their respective Articles of Incorporation and Bylaws as now in
effect. Acquisition Corp. is not qualified to conduct
business as a foreign corporation in any other state. Parent
is qualified as a foreign corporation to do business in North
Carolina. Parent and Acquisition Corp. have full corporate power
and authority to carry on their respective businesses as they are
now being conducted and as now proposed to be conducted and to own
or lease their respective properties and assets. Neither
Parent nor Acquisition Corp. has any subsidiaries (except Parent's
ownership of Acquisition Corp. and Reliability Singapore Pte Ltd.)
or direct or indirect interest (by way of stock ownership or
otherwise) in any firm, corporation, limited liability
company, partnership, association or business. Parent owns
all of the issued and outstanding capital stock of Acquisition
Corp. free and clear of all Liens, and Acquisition Corp. has no
outstanding options, warrants or rights to purchase capital stock
or other Equity Securities of Acquisition Corp., other than the
capital stock owned by Parent. Unless the content otherwise
requires, all references in this Section 3 to the "Parent"
shall be treated as being a reference to the Parent and Acquisition
Corp. taken together as one enterprise.
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Corporate Authority . Each of
Parent and/or Acquisition Corp. (as the case may be) has full
corporate power and authority to enter into the Merger Documents
and the other agreements to be made pursuant to the Merger
Documents, and to carry out the transactions contemplated hereby
and thereby. All corporate acts and proceedings required for the
authorization, execution, delivery and performance of the Merger
Documents and such other agreements and documents by Parent and/or
Acquisition Corp. (as the case may be) have been duly and
validly taken or will have been so taken prior to the Closing.
Each of the Merger Documents constitutes a legal, valid and
binding obligation of Parent and/or Acquisition Corp. (as the case
may be), each enforceable against them in accordance with their
respective terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by general principles of
equity.
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Broker's and Finder's Fees .
No person, firm, corporation or other entity is entitled by
reason of any act or omission of Parent or Acquisition Corp. to any
broker's or finder's fees, commission or other similar compensation
with respect to the execution and delivery of this Agreement or the
Articles of Merger, or with respect to the consummation of the
transactions contemplated hereby or thereby, except as disclosed in
Schedule 3.3 to the Parent Disclosure
Statement.
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Capitalization of Parent . The authorized capital
stock of Parent consists of 20,000,000 shares of Common Stock, no
par value (the "Parent Common Stock"), of which not more than
6,335,965 shares will be, prior to the Effective Time, issued and
outstanding. The Parent has no preferred stock authorized or
outstanding. Except as disclosed in Schedule 3.4 to the
Parent Disclosure Statement, Parent has no outstanding options,
rights or commitments to issue shares of Parent Common Stock or any
other Equity Security of Parent, and there are no outstanding
securities convertible or exercisable into or exchangeable for
shares of Parent Common Stock or any other Equity Security of
Parent. There are no outstanding options, rights, or
commitments to issue any shares of capital stock or Equity
Securities of Acquisition Corp. or securities convertible into
capital stock or Equity Securities of Acquisition Corp. To the
knowledge of Parent, there is no voting trust, agreement or
arrangement among any of the beneficial holders of Parent Common
Stock affecting the nomination or election of directors or the
exercise of the voting rights of Parent Common Stock. All
outstanding shares of the capital stock of Parent are validly
issued and outstanding, fully paid and non-assessable, none of such
shares have been issued in violation of the preemptive rights of
any person, and all were issued in transactions that were
(A) exempt from the registration and prospectus delivery
requirements of the Securities Act, or (B) registered or
qualified under the registration or qualification requirements of
all applicable state securities laws and (C) accomplished in
conformity with all other applicable securities laws.
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Acquisition Corp . Acquisition
Corp. is a wholly-owned subsidiary of Parent that was formed
specifically for the purpose of the Merger and has not conducted
any business or acquired any property, and will not conduct any
business or acquire any property prior to the Closing Date, except
as approved by the Company in preparation for and otherwise in
connection with the transactions contemplated by this Agreement,
the Articles of Merger and the other agreements to be made pursuant
to or in connection with this Agreement and the Articles of
Merger.
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Validity of Shares . The
3,000,000 shares of Parent Common Stock to be issued at the Closing
pursuant to Section 1.5(a)(ii) and Section 1.9 hereof
shall be duly and validly issued, and upon consummation of the
Qualified Private Placement(s) under Section 6.7 for $2,000,000 net
to the Parent, all as defined and described in such section, fully
paid and non-assessable. Based in part on the representations and
warranties of the Shareholders as contemplated by Sections 3
at 4 hereof and assuming the accuracy thereof, the issuance of the
Parent Common Stock upon the Merger pursuant to
Section 1.5(a)(ii) will be exempt from the registration
and prospectus delivery requirements of the Securities Act and from
the qualification or registration requirements of any applicable
state blue sky or securities laws.
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SEC Reporting and Compliance .
Parent filed a registration statement on Form S-1
(No. 2-90034) under the Securities Act which became
effective on May 8, 1984. Since that date, Parent has
timely filed with the Commission all registration statements,
periodic reports and other forms and reports required to be filed
pursuant to the Exchange Act. Parent has not filed with the
Commission a certificate on Form 15 pursuant to Rule 12h-3 of
the Exchange Act.
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Parent has delivered to the Company true
and complete copies of the reports (collectively, the " Parent
SEC Documents ") filed by the Parent with the Commission in
2006. The Parent SEC Documents, as of their respective dates,
complied in all material respects with the requirements of the
Securities Act or Exchange Act and the rules and regulations of the
Commission promulgated thereunder and did not contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not
misleading.
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As of the date hereof, Parent has not filed, and nothing has
occurred with respect to which Parent would be required to file,
any report on Form 8-K since January 1, 2007. Prior to
and until the Closing, Parent will provide to the Company copies of
any and all documents, reports, amendments and supplements filed by
Parent with the Commission or delivered to the stockholders of
Parent.
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Parent is not an investment company within the meaning of
Section 3 of the Investment Company Act.
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The shares of Parent Common Stock are quoted on the Pink Sheets
under the symbol "REAL.pk."
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Between the date hereof and the Closing Date, Parent shall continue
to satisfy the filing requirements of the Exchange Act.
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Financial Statements . The
balance sheets, and statements of income, changes in financial
position and stockholders' equity contained in the Parent SEC
Documents (the " Parent Financial Statements ")
(i) have been prepared in accordance with GAAP applied on a
basis consistent with prior periods (and, in the case of unaudited
financial information, on a basis consistent with year-end audits),
(ii) are in accordance with the books and records of the
Parent, and (iii) present fairly in all material respects the
financial condition of the Parent at the dates therein specified
and the results of its operations and changes in financial position
for the periods therein specified. Schedule 3.8 to the
Parent Disclosure Statement contains an unaudited balance sheet as
of December 31, 2006 and February 28, 2007 (collectively the
"Parent Balance Sheet"). The Parent Balance Sheet has been prepared
in accordance with GAAP applied on a basis consistent with prior
periods from the books and records of the Parent and presents
fairly in all material respects the financial condition of the
Parent at the dates specified therein.
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Governmental Consents . All material consents,
approvals, orders, or authorizations of, or registrations,
qualifications, designations, declarations, or filings with any
federal or state governmental authority on the part of Parent or
Acquisition Corp. required in connection with the consummation of
the Merger shall have been obtained prior to, and be effective as
of, the Closing.
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Compliance with Laws and Other
Instruments . The execution, delivery and performance by
Parent and/or Acquisition Corp. of this Agreement, the Articles of
Merger and the other agreements to be made by Parent or Acquisition
Corp. pursuant to or in connection with this Agreement or the
Articles of Merger and the consummation by Parent and/or
Acquisition Corp. of the transactions contemplated by the Merger
Documents will not cause Parent and/or Acquisition Corp. to violate
or contravene (i) any provision of law, (ii) any rule or
regulation of any agency or government, (iii) any order,
judgment or decree of any court, or (iv) any provision of
their respective certificates of incorporation or bylaws as amended
and in effect on and as of the Closing Date and will not violate or
be in conflict with, result in a breach of or constitute (with or
without notice or lapse of time, or both) a default under any
indenture, loan or credit agreement, deed of trust, mortgage,
security agreement or other agreement or contract to which Parent
or Acquisition Corp. is a party or by which Parent and/or
Acquisition Corp. or any of their respective properties are bound
or affected, and (v) will not result in the creation or
imposition of any material Lien upon any property or asset of
Parent or Acquisition Corp. except as contemplated herein.
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Binding Obligations . The
Merger Documents constitute the legal, valid and binding
obligations of the Parent and Acquisition Corp., and are
enforceable against the Parent and Acquisition Corp., in accordance
with their respective terms, except as such enforcement is limited
by bankruptcy
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