-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SlyTV1VBonY844j0qpxf1ld/XirCvWYat86+C0jdNUyx81oDoi90ZeXKwrRo7Jer M0rQD299wWbcI9CPRZ7wLw== 0001072613-05-000036.txt : 20050106 0001072613-05-000036.hdr.sgml : 20050106 20050106171259 ACCESSION NUMBER: 0001072613-05-000036 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20041231 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050106 DATE AS OF CHANGE: 20050106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLOBAL MATRECHS, INC. CENTRAL INDEX KEY: 0001021226 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 582153309 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-29204 FILM NUMBER: 05516372 BUSINESS ADDRESS: STREET 1: 90 GROVE STREET STREET 2: SUITE 202 CITY: RIDGEFIELD STATE: CT ZIP: 06877 BUSINESS PHONE: 203 431 8120 MAIL ADDRESS: STREET 1: 90 GROVE STREET STREET 2: SUITE 202 CITY: RIDGEFIELD STATE: CT ZIP: 06877 FORMER COMPANY: FORMER CONFORMED NAME: HOMECOM COMMUNICATIONS INC DATE OF NAME CHANGE: 19960820 8-K 1 form8-k_13187.txt FORM 8-K (DECEMBER 31, 2004) ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 --------- 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): December 31, 2004 GLOBAL MATRECHS, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Delaware 0-29204 58-2153309 - -------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 90 Grove Street, Suite 201 Ridgefield, Connecticut 06877 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (203) 431-6665 ------------------------ Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT On December 31, 2004, we entered into an Agreement and Plan of Merger with True To Form, Limited, TTF Acquisition Corp., our wholly owned subsidiary, and Mark J. Allen, the sole stockholder of True To Form. The merger agreement provides for our acquisition of True To Form through the merger of TTF Acquisition Corp. with and into True To Form, with True To Form being the surviving corporation and becoming our wholly owned subsidiary. Mr. Allen is a member of our board of directors. The terms of this agreement are further described in Item 2.01 of this current report and incorporated herein by reference. In connection with the merger agreement, on December 31, 2004 our wholly-owned subsidiary True To Form issued a secured note to Mr. Allen in the principal amount of $500,000. The note is payable over five years at an annual interest rate of 8%, with $100,000 of the principal amount of the note payable after one year and the remaining principal amount due at the end of the five years. The note is secured by all of the assets of True To Form under the terms of a Security Agreement by and between True To Form and Mr. Allen, entered into on December 31, 2004. In addition, we have: o guaranteed the note in full pursuant to the terms of a guaranty issued to Mr. Allen entered into on December 31, 2004, and o pledged as collateral to the note all of the common stock of True To Form in favor of Mr. Allen pursuant to the terms of a collateral pledge agreement entered into on December 31, 2004. The discussion in this current report is only a summary and is qualified in its entirety by reference to the merger agreement, the note, the security agreement, the guaranty and the collateral pledge agreement, which are included as Exhibits 2.1, 10.1, 10.2, 10.3 and 10.4, respectively, to this current report on Form 8-K and are incorporated by reference herein. ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS On December 31, 2004 we acquired True To Form, Limited pursuant to the terms of the merger agreement described in Item 1.01 of this current report. As a result of the merger, True To Form is now our wholly owned subsidiary. True To Form designs, develops, manufactures and sells specialty lighting products to targeted segments of the traditional lighting industry and has recently established a division that will focus on the homeland security market. True To Form markets "high-end" lighting and architectural products for both commercial and residential applications, including pendants, surface and ceiling luminaries, table and floor lamps, commercial down-lights, bath fixtures, and custom fixtures. True To Form has recently worked on projects for Wynn Design and Development, The Mandalay Bay Group and the Luxor Hotel. We acquired True To Form from its sole shareholder, Mark J. Allen, who is also a member of our board of directors. Mr. Allen will continue as the President of True To Form following the acquisition. The transaction was the result of arm's length negotiations and was unanimously approved by the disinterested directors of the Company. The consideration was determined on the basis of these negotiations and the advice of our financial advisor, who is not affiliated with us or Mr. Allen. -2- The consideration issued to Mr. Allen in the transaction consisted of: o the issuance by our subsidiary True To Form of the secured note described in Item 1.01 of this current report, and o our issuance to Mr. Allen of 10,000,000 shares of our common stock. The number of shares of common stock issued in the transaction is subject to adjustment, based on the price of our common stock and the revenues of the acquired business on December 31, 2006. In general, assuming that True To Form generates gross revenues of at least $3,000,000 for the twelve months ended December 31, 2006, the value of the shares issued in the transaction (based on the average closing price of the shares for the five trading days ended on or prior to December 31, 2006) will be at least $2.5 million but no more than $3.5 million. If the value is less than $2.5 million, we are obligated to issue additional shares or, at our option, make cash payments to make up the difference. If the value of the shares is greater than $3.5 million, any excess shares will be returned to us and retired or held as treasury stock. If True To Form does not meet the revenue target, the share consideration will be a minimum of $2.0 million and a maximum of $3.0 million. It is expected that we will also provide True To Form with an initial working capital loan of approximately $200,000 and will enter into an employment agreement with Mr. Allen. In connection with the transaction, we will also be issuing a warrant to our financial advisor in the amount of 2,000,000 shares of common stock at an exercise price of $0.03 per share. The merger agreement provides that until the secured note is paid in full, Mr. Allen has the right to designate a majority of the directors of True To Form. The merger agreement also provides Mr. Allen with limited registration rights related to the share consideration. The discussion in this current report is only a summary and is qualified in its entirety by reference to the merger agreement, the note, the security agreement, the guaranty and the collateral pledge agreement, which are included as Exhibits 2.1, 10.1, 10.2, 10.3 and 10.4, respectively, to this current report on Form 8-K and are incorporated by reference herein. ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT. As described in Item 1.01 of this current report, on December 31, 2004 our wholly owned subsidiary issued a secured note to Mr. Allen in the amount of $500,000. The description of the note and the related security agreement, guaranty and collateral pledge agreement contained in Item 1.01 of this current report are incorporated by reference herein. Mr. Allen is a member of our board of directors. As described in Item 2.01 of this current report, under certain circumstances we may be obligated to pay Mr. Allen additional consideration in connection with our acquisition of True To Form, which may, at our option, be in the form of cash or shares of our common stock. -3- ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES In connection with our acquisition of True To Form, on December 31, 2004 we issued Mr. Allen 10,000,000 shares of our common stock, as described in Item 2.01 of this current report. The offer and sale of these securities was made in reliance on Section 4(2) of the Securities Act of 1933, as amended, as a sale of securities not involving a public offering. In addition, under certain circumstances we may be obligated to pay Mr. Allen additional consideration in connection with the acquisition, which may, at our option, be in the form of cash or shares of our common stock. Mr. Allen is a member of our board of directors. As compensation for services related to our acquisition of True To Form, we will issue to Greenfield Capital Partners LLC a warrant to purchase up to 2,000,000 shares of our common stock at an exercise price per share of $.03. The warrant will expire on December 31, 2009. The offer and sale of these securities will be made in reliance on Section 4(2) of the Securities Act of 1933, as amended, as a sale of securities not involving a public offering. ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. We intend to file by amendment the required historical financial statements for True To Form not later than 71 days after the date that this Form 8-K must be filed. (b) PRO FORMA FINANCIAL INFORMATION. We intend to file by amendment the required pro forma financial information reflecting the acquisition of True To Form not later than 71 days after the date that this Form 8-K must be filed. (c) EXHIBITS. Number Title ------ ----- 2.1 Agreement and plan of merger 10.1 Secured note 10.2 Security agreement 10.3 Guaranty 10.4 Collateral pledge agreement -4- SIGNATURES ---------- Pursuant to the requirements 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. Global Matrechs, INC. Date: January 6, 2004 By: /s/ Michael Sheppard ----------------------------------- Michael Sheppard President, Chief Executive Officer, Chief Operating Officer and Acting Chief Financial Officer -5- EXHIBIT INDEX ------------- Number Title ------ ----- 2.1 Agreement and plan of merger 10.1 Secured note 10.2 Security agreement 10.3 Guaranty 10.4 Collateral pledge agreement -6- EX-2.1 2 exhibit2-1_13187.txt AGREEMENT AND PLAN OF MERGER EXHIBIT 2.1 ----------- AGREEMENT AND PLAN OF MERGER This Agreement AND PLAN OF MERGER (this "Agreement") is made and entered into as of December 31, 2004, by and among Global Matrechs, Inc., a Delaware corporation (the "Buyer"), TTF Acquisition Corp., a Massachusetts corporation and wholly-owned subsidiary of Buyer ("Merger Sub"), True To Form, Limited, a Massachusetts corporation (the "Company," with Merger Sub and the Company being hereinafter sometimes referred to collectively as the "Constituent Corporations") and Mark Allen (the "Shareholder"). W I T N E S S E T H WHEREAS, the Shareholder owns all of the issued and outstanding shares of capital stock of the Company (the "Shares"); WHEREAS, the Board of Directors of Buyer has approved and adopted this Agreement in accordance with the General Corporation Law of the State of Delaware, and the respective Boards of Directors of Merger Sub and the Company have approved and adopted this Agreement, and declared advisable this Agreement and the merger of Merger Sub with and into the Company (the "Merger") in accordance with the Massachusetts Business Corporation Act (the "MBCA"); WHEREAS, the Boards of Directors of Merger Sub and the Company have submitted this Agreement to their respective shareholders and recommended its adoption and approval; and WHEREAS, the shareholders of Merger Sub and the Company have each unanimously approved this Agreement and the transactions contemplated hereby; NOW THEREFORE, in consideration of the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE 1. THE MERGER 1.1 THE MERGER. On the terms and subject to the conditions of this Agreement and the applicable provisions of the MBCA, at the Effective Time, Merger Sub shall be merged with and into the Company, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation of the Merger. The corporation surviving the Merger shall be referred to herein as the "Surviving Corporation." 1.2 EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement, the parties hereto shall cause the Merger to be consummated by filing articles of merger, substantially in the form of Exhibit A (the "Articles of Merger"), with the Secretary of State of The Commonwealth of Massachusetts in accordance with the relevant provisions of the MBCA as soon as practicable on or after the Closing Date. The time of such filing, or such later time as the Buyer and the Company may hereafter agree in writing and specify in the Articles of Merger, shall be the "Effective Time." The closing of the Merger (the "Closing") shall take place simultaneously with the execution hereof, at the offices of Foley Hoag LLP, 155 Seaport Boulevard, Boston, Massachusetts (such date, or such later date as the parties may agree to, the "Closing Date"). 1.3 EFFECT OF THE MERGER. 1.3.1 At the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of the MBCA. Without limiting the generality of the foregoing, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation. 1.3.2 If, at any time after the Effective Time, the Surviving Corporation shall believe or be advised that any further assignments or assurances in law or any other acts are necessary or desirable (i) to vest, perfect or confirm in the Surviving Corporation title to or ownership or possession of any right, privilege, power, franchise, property or other asset of either Constituent Corporation acquired or to be acquired by reason of, or as a result of, the Merger or (ii) otherwise to carry out the purposes of this Agreement, then (A) each Constituent Corporation and its officers and directors shall be deemed to have granted hereby to the Surviving Corporation an irrevocable power of attorney to execute and deliver all proper assignments and assurances in law and to undertake all other acts necessary or proper to vest, perfect or confirm title to or ownership or possession of such rights, privileges, powers, franchises, properties or other assets in the Surviving Corporation and otherwise to carry out the purposes of this Agreement and (B) the officers and directors of the Surviving Corporation shall be deemed to be authorized fully to take any and all such actions in the name of either Constituent Corporation or otherwise. 1.4 ARTICLES OF ORGANIZATION AND BYLAWS. 1.4.1 The articles of organization of Merger Sub as in effect immediately prior to the Effective Time shall be the articles of organization of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law; provided, however, that the Articles of Merger may provide for such change in the name of the Surviving Corporation as the Buyer shall determine in its sole discretion. 1.4.2 The by-laws of Merger Sub as in effect immediately prior to the Effective Time shall be the by-laws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. 1.5 DIRECTORS AND OFFICERS. The initial directors of the Surviving Corporation shall be the Stockholder, the President of Buyer and a person designated by the Stockholder, until their respective successors are duly elected or appointed and qualified. The initial officers of the Surviving Corporation shall be the officers of Merger Sub immediately prior to the Effective Time until their respective successors are duly appointed; except that the initial President of the Surviving Corporation shall be the Shareholder, until his successor is duly appointed. 2 1.6 EFFECT ON CAPITAL STOCK. Subject to the terms and conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of the Buyer, Merger Sub, the Company or the holders of any of the following securities: 1.6.1 CONVERSION OF CAPITAL STOCK. At the Effective Time, each share of capital stock of the Company issued and outstanding immediately prior to the Effective Time will be canceled and extinguished and automatically converted into the right to receive a proportionate amount of the Merger Consideration payable pursuant to Section 1.7 below. 1.6.2 CAPITAL STOCK OF MERGER SUB. At the Effective Time, each share of common stock, par value $0.01 per share, of Merger Sub ("Merger Sub Common Stock") issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation. Following the Effective Time, each certificate evidencing ownership of shares of Merger Sub Common Stock shall evidence ownership of such shares of capital stock of the Surviving Corporation. 1.7 MERGER CONSIDERATION. The total consideration into which all of the Shares shall be converted (the "Merger Consideration") shall, subject to adjustment pursuant to Section 1.8 below, consist of (i) 10,000,000 shares (the "Share Consideration") of the common stock, par value $0.0001 per share, of the Buyer (the "Buyer Common Stock"), and (ii) a secured promissory note payable by the Surviving Corporation to the Shareholder in the principal amount of $500,000 in the form attached hereto as Exhibit B (the "Promissory Note"). 1.8 ADJUSTMENT TO MERGER CONSIDERATION. 1.8.1 DEFINITIONS. (a) The "24 Month Price" shall mean the average closing price of the Buyer Common Stock for the most recent five day trading period ending on the last trading day on or prior to December 31, 2006. (b) The "Revenue Target" shall mean the achievement by the Surviving Corporation, no later than December 31, 2006 of trailing twelve month gross revenues in the amount of at least $3,000,000, in accordance with United States generally accepted accounting principles ("GAAP") consistently applied. (c) The "Share Consideration Ceiling" shall mean (i) in the event that the Revenue Target is achieved, $3,500,000 and (ii) in all other cases, $3,000,000. (d) The "Share Consideration Floor" shall mean (i) in the event that the Revenue Target is achieved, $2,500,000 and (ii) in all other cases, $2,000,000. (e) The "Share Consideration Value" shall be the aggregate fair market value of the Share Consideration as of December 31, 2006, based on the 24 Month Price; provided, however, that, to the extent that the Shareholder has sold any of the shares that make up the Share Consideration, such shares shall be valued for purposes of determining 3 the Share Consideration Value at the greater of (i) the price per share that such shares have been sold for, and (ii) the 24 Month Price. 1.8.2 INCREASE IN SHARE CONSIDERATION. In the event that the Share Consideration Value shall be less than the applicable Share Consideration Floor, the Buyer shall pay to the Shareholder additional consideration in the amount of the difference between the applicable Share Consideration Floor and the Share Consideration Value (the "Additional Consideration"). The Additional Consideration shall be due and payable within 5 business days after December 31, 2006 and may, at Buyer's option, be paid in any combination of cash and shares of Buyer Common Stock (such shares of Buyer Common Stock to be valued based on the 24 Month Price). 1.8.3 DECREASE IN SHARE CONSIDERATION. In the event that the Share Consideration Value shall be greater than the applicable Share Consideration Ceiling, the Shareholder shall return to the Buyer, for no consideration, that number of shares of Buyer Common Stock equal in value (such shares of Buyer Common Stock to be valued based on the 24 Month Price) to the amount of the difference between the applicable Share Consideration Ceiling and the Share Consideration Value, pursuant to the terms of the Share Escrow Agreement in the form attached hereto as Exhibit C (the "Share Escrow Agreement"). 1.9 ADJUSTMENTS TO SHARE CONSIDERATION; ISSUANCE OF SHARE CONSIDERATION. The Share Consideration shall be appropriately adjusted to reflect fully the effect of any stock split, reverse stock split, stock dividend, reorganization, recapitalization or like change with respect to Buyer Common Stock occurring after the date hereof. The Share Consideration will be issued as of the Closing Date, however, the stock certificate representing the Share Consideration (i) shall be issued in the Shareholder's name within a reasonable time thereafter, and (ii) shall be held in escrow by the President of the Buyer pursuant to the terms of the Share Escrow Agreement, subject to Permitted Sales as defined below. Except for Permitted Sales, the Share Consideration may not be sold, transferred, pledged, hypothecated or otherwise disposed of prior to the distribution from escrow of the Share Consideration to the Shareholder pursuant to the terms of the Share Escrow Agreement, without the express written consent of the Buyer. Notwithstanding the foregoing, up to one-quarter of the Share Consideration may be sold after 12 months and up to an additional one-tenth of the Share Consideration may be sold after 18 months (collectively, "Permitted Sales") to the extent that (i) such sales comply with all applicable state and federal securities laws, (ii) such sales are for a price per share no less than $0.30, and (iii) the gross proceeds from such sales do not exceed $2,000,000. 1.10 TAX CONSEQUENCES. It is intended by the parties hereto that the Merger shall constitute a reorganization described in section 368 of the Code. The parties hereto adopt this Agreement as a "plan of reorganization" within the meaning of sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations. 4 ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER REGARDING THE COMPANY The Shareholder represents and warrants to the Buyer as follows: 2.1 ORGANIZATION; SUBSIDIARIES. 2.1.1 The Company and each of its subsidiaries (which subsidiaries are set forth on Schedule 2.1, the "Subsidiaries") (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (ii) has the corporate or other power and authority to own, lease and operate its assets and property and to carry on its business as now being conducted; and (iii) except as would not be material to the Company, is duly qualified or licensed to do business in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary. Each jurisdiction where the Company or the Subsidiaries is qualified to do business is listed on Schedule 2.1. 2.1.2 Other than the capital stock of the Subsidiaries, neither the Company nor the Subsidiaries owns any capital stock of, or any equity interest of any nature in, any corporation, partnership, joint venture arrangement or other business entity. Neither the Company nor any of the Subsidiaries has agreed or is obligated to make, or is bound by any written or oral agreement, contract, lease, instrument, note, option, warranty, purchase order, license, insurance policy, benefit plan or legally binding commitment or undertaking of any nature under which it is obligated to make any future investment in or capital contribution to any other entity. Neither the Company nor any of the Subsidiaries has, at any time, been a general partner of any general partnership, limited partnership or other entity. Schedule 2.1 indicates the jurisdiction of organization of each of the Subsidiaries and the Company's direct or indirect equity interest therein. 2.1.3 The Company has delivered or made available to Buyer a true and correct copy of the Articles of Incorporation and Bylaws of the Company and similar governing instruments of each of the Subsidiaries, each as amended to date (collectively, the "Company Charter Documents"), and each such instrument is in full force and effect. Neither the Company nor any of the Subsidiaries is in violation of any of the provisions of the Company Charter Documents. 2.1.4 The minute books of the Company and the Subsidiaries contain in all material respects records of all meetings and consents in lieu of meetings of each such company's board of directors (and any committees thereof, whether permanent or temporary) and shareholders since the date of its incorporation and are accurate in all material respects, and such records accurately reflect in all material respects all transactions referred to in such minutes and consents. The stock books of the Company and each Subsidiary accurately reflect record ownership of each such company's capital stock. The Buyer has been provided with a copy of or access to such minutes or consents and stock books. Schedule 2.1 sets forth a list of the directors and officers of the Company and each Subsidiary. 5 2.2 CAPITAL STOCK. 2.2.1 AUTHORIZED AND OUTSTANDING STOCK OF THE COMPANY. The authorized capital stock of the Company consists of 200,000 shares of common stock, no par value, of which 100 shares are issued and outstanding. The Shares constitute all of the issued and outstanding capital stock of the Company, and are held of record and beneficially owned by the Shareholder. The Shares have been duly authorized and validly issued, were not issued in violation of any person's preemptive rights, and are fully paid and nonassessable. 2.2.2 AUTHORIZED AND OUTSTANDING STOCK OF SUBSIDIARIES. All authorized and outstanding capital stock of each Subsidiary is as set forth on Schedule 2.2. All outstanding capital stock of each Subsidiary is held of record and beneficially owned by the Company. All shares of such capital stock have been duly authorized and validly issued, were not issued in violation of any person's preemptive rights, and are fully paid and nonassessable. 2.2.3 OPTIONS AND CONVERTIBLE SECURITIES OF THE COMPANY. There are no outstanding subscriptions, options, warrants, conversion rights or other rights, securities, agreements or commitments obligating the Company or any Subsidiary to issue, sell or otherwise dispose of shares of their capital stock, or any securities or obligations convertible into, or exercisable or exchangeable for, any shares of their capital stock. There are no voting trusts or other agreements or understandings to which the Company, any Subsidiary or the Shareholder is a party with respect to the Shares or any other equity securities of the Company or any Subsidiary, and the Company is not a party to or bound by any outstanding restrictions, options or other obligations, agreements or commitments to sell, repurchase, redeem or acquire any outstanding Shares or any other equity securities of the Company or any Subsidiary. 2.3 AUTHORITY FOR AGREEMENT; NONCONTRAVENTION. 2.3.1 AUTHORITY. The Company and the Shareholder each has the corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the board of directors of the Company and the Shareholder and no other corporate proceedings on the part of the Company or the Shareholder are necessary to authorize the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. This Agreement has been, and the other agreements contemplated hereby to be signed by the Company or the Shareholder at or before the Closing will have been, duly executed and delivered by the Company and the Shareholder, as the case may be, and constitute, or will at the time of their signing constitute, valid and binding obligations of the Company and the Shareholder, enforceable against them in accordance with their respective terms, subject to the qualifications that enforcement of the rights and remedies created hereby and thereby are subject to (a) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other laws of general application affecting the rights and remedies of creditors and (b) general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). 2.3.2 NO CONFLICT. Neither the execution and delivery of this Agreement by the Company and the Shareholder, nor the performance by the Company and the Shareholder of their respective obligations hereunder, nor the consummation by the Company and the 6 Shareholder of the transactions contemplated hereby will (a) conflict with or result in a violation of any provision of the Company Charter Documents or the governing instruments of the Shareholder, or (b) with or without the giving of notice or the lapse of time, or both, in any material way, conflict with, or result in any violation or breach of, or constitute a default under, or result in any right to accelerate or result in the creation of any Encumbrance pursuant to, or right of termination under, any provision of any note, mortgage, indenture, lease, instrument or other agreement, permit, concession, grant, franchise, license, judgment, order, decree, statute, ordinance, rule or regulation to which the Company, any Subsidiary or the Shareholder is a party or by which any of them or any of their respective assets or properties is bound or which is applicable to any of them or any of their respective assets or properties. Except for the filing of the Articles of Merger with the Secretary of State of The Commonwealth of Massachusetts, no authorization, consent or approval of, or filing with or notice to, any United States or foreign governmental or public body or authority, including without limitation any court, tribunal or similar body (each a "Governmental Entity") is necessary for the execution and delivery of this Agreement by the Company and the Shareholder or the consummation by the Company and the Shareholder of the transactions contemplated hereby. 2.4 FINANCIAL STATEMENTS. The Company has previously furnished the Buyer with accurate and complete copies of (a) the balance sheets of the Company as of December 31, 2003 and 2002 and the statements of operations and cash flows of the Company for the respective years then ended, and (b) the unaudited balance sheet of the Company as of November 30, 2004 and the unaudited statements of operations and cash flows of the Company for the three, six and nine months then ended. Collectively, the financial statements referred to in the immediately preceding sentence are sometimes referred to herein as the "Company Financial Statements" and the unaudited consolidated balance sheet of the Company as of November 30, 2004 is sometimes referred to herein as the "Company Balance Sheet". Each of the balance sheets included in the Company Financial Statements (including any related notes) fairly presents in all material respects the consolidated financial position of the Company as of its date, and the other statements included in the Company Financial Statements (including any related notes) fairly present in all material respects the consolidated results of operations of the Company for the periods therein set forth, in each case in accordance with GAAP consistently applied (except as otherwise stated therein). 2.5 ABSENCE OF MATERIAL ADVERSE CHANGES AND UNDISCLOSED LIABILITIES. 2.5.1 CHANGES. Since December 31, 2003, neither the Company nor any Subsidiary has suffered any Company Material Adverse Effect, nor, to the knowledge of the Company and the Shareholder, has there occurred or arisen any event, condition or state of facts of any character that could reasonably be expected to result in a Company Material Adverse Effect. 2.5.2 LIABILITIES. Except for ordinary course liabilities that would not be required to be recognized in financial statements or in footnotes thereto prepared in accordance with GAAP, the Company and the Subsidiaries have no Liabilities that are not reflected or provided for on, or disclosed in the notes to, the balance sheets included in the Company Financial Statements, except (i) Liabilities incurred in the ordinary course of business since the date of the Company Balance Sheet, none of which individually or in the aggregate has had or 7 could reasonably be expected to have a Company Material Adverse Effect and (ii) Liabilities expressly disclosed on the Schedules delivered hereunder. 2.6 TAX MATTERS. The Company and each Subsidiary have timely filed all tax returns and reports required by law. All tax returns and reports of the Company and each Subsidiary are true and correct in all material respects. The Company and each Subsidiary have paid all taxes and other assessments due, except those, if any, currently being contested by them in good faith. The unpaid Taxes of the Company and the Subsidiaries (A) do not exceed the reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Company Balance Sheet (rather than in any notes thereto) and (B) do not exceed that reserve as adjusted for the passage of time through the date of the Closing in accordance with the past custom and practice of the Company and the Subsidiaries in filing their Tax Returns. Neither the Company nor any Subsidiary has distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by section 355 or section 361 of the Internal Revenue Code of 1986, as amended ("Code"). 2.7 TITLE TO PROPERTIES. Neither the Company nor the Subsidiaries owns any interest in real property. Schedule 2.7 lists all real property leases to which the Company or the Subsidiaries is a party that require the Company or the Subsidiaries to make annual lease payments in excess of $10,000 and each amendment thereto that is in effect as of the date of this Agreement. All such leases are in full force and effect, are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing default or event of default (or event which with notice or lapse of time, or both, would constitute a default) that would give rise to a claim against the Company in excess of $10,000. Each of the Company and the Subsidiaries has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all of its tangible properties and assets, real, personal and mixed, used or held for use in its business, free and clear of any Encumbrances, except for Permitted Encumbrances. 2.8 INTELLECTUAL PROPERTY. Each of the Company and the Subsidiaries owns, or validly licenses or otherwise has the right to use (without any obligation to make any fixed or contingent payments, including royalty payments) all patents, patent applications, trademarks, trademark applications, registrations and other rights, trade names and trade dress, trade name rights, domain names, service marks, service mark rights, service names, copyrights, copyright applications and registrations, computer and electronic data processing programs and software and other proprietary property, and rights and interests used by the Company and the Subsidiaries in the conduct of their business (such rights, the "Company Intellectual Property Rights"), free and clear of all Encumbrances except for Permitted Encumbrances. No claims are pending or, to the knowledge of the Company and the Shareholder, threatened that the Company or the Subsidiaries are infringing the rights of any person with regard to any Intellectual Property Right. To the knowledge of the Company and the Shareholder, no person or persons are infringing the rights of the Company or the Subsidiaries with respect to any Intellectual Property Right. No claims are pending or, to the knowledge of the Company and the Shareholder, threatened with regard to the Company's or the Subsidiaries' ownership or use of any of its Intellectual Property Rights. To the knowledge of the Company and the Shareholder, no material trade secret of the Company or the Subsidiaries has been published or disclosed by the Company 8 or the Subsidiaries or by any other person to any person except pursuant to licenses or contracts requiring such other persons to keep such trade secrets confidential. 2.9 COMPLIANCE WITH LAWS. Each of the Company and the Subsidiaries is in compliance with all statutes, laws, ordinances, rules, regulations, judgments, orders and decrees of any Governmental Entity applicable to it, its properties or other assets or its business or operations (collectively, "Legal Provisions"), except for instances of noncompliance that individually or in the aggregate have not had and are not reasonably expected to have a Company Material Adverse Effect. Each of the Company and the Subsidiaries has in effect all approvals, authorizations, certificates, filings, franchises, licenses, notices, permits and rights of or with all Governmental Entities (collectively, "Company Permits"), necessary for it to own, lease or operate its properties and assets and to carry on its business and operations as presently conducted, except where the failure to have any such Company Permit individually or in the aggregate has not had and is not reasonably expected to have a Company Material Adverse Effect. There has occurred no default under, or violation of, any such Company Permit, except individually or in the aggregate as has not had and are not reasonably expected to have a Company Material Adverse Effect. The purchase and sale of the Shares and the transactions contemplated by this Agreement will not cause the revocation or cancellation of any Company Permit. No action, proceeding or investigation by any Governmental Entity with respect to the Company or the Subsidiaries or any of their respective properties or other assets under any Legal Provision, is pending or, to the knowledge of the Company and the Shareholder, threatened, nor is there, to the knowledge of the Company and the Shareholder, any reasonable basis for any such action, proceeding or investigation that alone or collectively, either upon initiation or with passage of time, would have a Company Material Adverse Effect. 2.10 LITIGATION. There are no claims, suits, actions and proceedings pending before any Governmental Entity or arbitrator to which the Company or any Subsidiary is a party. To the knowledge of the Company and the Shareholder, there are no claims, suits, actions or proceedings threatened against, relating to or affecting the Company or any Subsidiary, before any Governmental Entity or any arbitrator that seeks to restrain or enjoin the consummation of the transactions contemplated by this Agreement or which could reasonably be expected, either singularly or in the aggregate with all such claims, actions or proceedings, to have a Company Material Adverse Effect or have a material adverse effect on the ability of the parties hereto to consummate the transactions contemplated hereby nor, to the knowledge of the Company and the Shareholder, is there any reasonable basis therefor. 2.11 EMPLOYEE BENEFIT PLANS. Each employee benefit plan established or maintained, or to which contributions have been made, by the Company or any Subsidiary (a "Benefit Plan") conforms (and at all times has conformed) in all material respects to, and is being administered and operated (and has at all time been administered and operated) in material compliance with, the requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Code and all other applicable laws or governmental regulations. Except as set forth on Schedule 2.11, no Benefit Plan had an accumulated funding deficiency (as such term is defined in Section 302 of ERISA) as of the last day of the most recent fiscal year of such plan ended prior to the date hereof, and no material liability to the Pension Benefit Guaranty Corporation has been incurred with respect to any Benefit Plan by the Company or any of its Subsidiaries. All returns, reports and disclosure statements required to be made under ERISA and the Code with respect to each Benefit Plan have been timely filed or delivered. There has 9 not been any "Prohibited Transaction," as such term is defined in Section 4975 of the Code or Section 406 of ERISA, involving any Benefit Plan that could subject the Company to any material penalty or tax imposed under the Code or ERISA. 2.12 EMPLOYMENT MATTERS. Each of the Company and the Subsidiaries: (i) is in compliance in all material respects with all applicable foreign, federal, state and local laws, rules and regulations respecting employment, employment practices, immigration, terms and conditions of employment and wages and hours, in each case, with respect to Employees; (ii) has withheld all amounts required by law or by agreement to be withheld from the wages, salaries and other payments to Employees; (iii) has properly classified independent contractors for purposes of federal and applicable state tax laws, laws applicable to employee benefits and other applicable laws; (iv) is not liable for any arrears of wages or any Taxes or any penalty for failure to comply with any of the foregoing; and (v) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for Employees (other than routine payments to be made in the normal course of business and consistent with past practice). There are no pending, or, to the knowledge of the Company and the Shareholder, threatened claims or actions against the Company or the Subsidiaries under any workers compensation policy or long-term disability policy. To the knowledge of the Company and the Shareholder, no Employee has violated any employment contract, nondisclosure agreement or noncompetition agreement by which such Employee is bound. There are no controversies pending or, to the knowledge of the Company and the Shareholder, threatened, between the Company or any Subsidiary and any of their employees that would be reasonably likely to result in the Company or any Subsidiary incurring material liability. 2.13 ENVIRONMENTAL MATTERS. To the knowledge of the Company and the Shareholder, there has been no material failure by the Company or any Subsidiary to comply with all applicable requirements of any environmental laws relating to the Company or any Subsidiary, the Company operations (including those of any Subsidiary), and the Company's and any Subsidiary's manufacture, processing, distribution, use, treatment, generation, recycling, reuses, sale, storage, handling, transportation or disposal of any hazardous material and the Company and the Shareholder are not aware of any facts or circumstances which could materially impair such compliance with all applicable environmental laws. To the knowledge of the Company and the Shareholder, there is no fact or circumstance which could reasonably be anticipated to involve the Company or any Subsidiary in any environmental litigation or impose upon the Company or the Subsidiaries any material environmental liability. 2.14 CERTAIN AGREEMENTS. Except as set forth in Schedule 2.14 hereto, neither the Company nor any Subsidiary is a party to any written or oral contract not made in the ordinary course of business or any employment contract, guarantee of indebtedness or obligations of another, lease of real property, license or lease of any Intellectual Property Rights, agreement for the payment of compensation of money or in kind for future services, or any agreement or commitment for capital expenditures in excess of $10,000. Each agreement that is required to be disclosed on Schedule 2.14 shall be referred to herein as a "Company Contract". Each Company Contract is valid and in full force and effect. Except as set forth on Schedule 2.14, neither the Company nor any Subsidiary, nor to the knowledge of the Company and the Shareholder, any other party thereto, is in material breach, violation or 10 default under, and neither the Company nor any Subsidiary has received written notice alleging that it has materially breached, violated or defaulted under, any of the terms or conditions of any Company Contract in such a manner as would permit any other party thereto to cancel or terminate any such Company Contract, or would permit any other party to seek material damages or other remedies for any or all such alleged breaches, violations, or defaults. 2.15 BROKERS' AND FINDERS' FEES. The Company and the Subsidiaries have not incurred, nor will they incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby. 2.16 CONDITION AND SUFFICIENCY OF ASSETS. All of the machinery and equipment of the Company and the Subsidiaries (i) are in good working order (reasonable wear and tear excepted), (ii) have been and shall through the Closing be maintained in a manner consistent with the past maintenance practices of the Company and the Subsidiaries, and (iii) are usable in the ordinary course of business. The owned and leased assets of the Company and the Subsidiaries constitute all of the assets, other than the Company Intellectual Property Rights, necessary for or otherwise material to the operation of the Company's and the Subsidiaries' business as currently conducted. 2.17 INVESTMENT REPRESENTATIONS. The Shareholder understands that the Share Consideration will not have been registered under the Securities Act or qualified under the securities or "blue sky" laws of any jurisdiction. The Shareholder further understands that the Share Consideration will constitute "restricted securities" within the meaning of Rule 144 promulgated under the Securities Act and that, as such, the Share Consideration cannot be resold unless the Share Consideration is subsequently registered under the Securities Act or unless an exemption from the registration requirements thereof is available. The Shareholder is acquiring the Share Consideration for its own account for investment and not for, with a view to or in connection with any resale or distribution thereof in a manner that violates the Securities Act. The Shareholder by reason of its business and financial experience, and the business and financial experience of those persons retained by it to advise it with respect to its investment in the Share Consideration, has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of the prospective investment, and is able to bear the economic risk of such investment and is able to afford a complete loss of such investment. The Shareholder acknowledges that it has been granted the opportunity to ask questions of, and receive answers from, representatives of the Buyer concerning the Buyer and the Share Consideration and to obtain any additional information that it deems necessary to verify the accuracy of the answers it received from such representatives. The Shareholder has had an opportunity to review the Buyer's filings with the Securities and Exchange Commission. The Shareholder is an "accredited investor" within the meaning of Rule 501 promulgated under the Securities Act. For purposes of this Section 2.17, Share Consideration includes any shares of Buyer Common Stock issued as part of the Additional Consideration. 2.18 DISCLOSURE. None of the information furnished by the Company to the Buyer in this Agreement, the Schedules hereto, or in any certificate to be executed or delivered pursuant hereto by the Company or the Shareholder at or prior to the Closing, is, in any material respect, false or misleading or contains any misstatement of a material fact, or omits to state any material 11 fact required to be stated in order to make the statements herein or therein not misleading in light of the circumstances under which they were made. ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND MERGER SUB The Buyer and Merger Sub represent and warrant to the Shareholder as follows: 3.1 CORPORATE STATUS OF THE BUYER AND MERGER SUB. The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with the requisite corporate power to own, operate and lease its properties and to carry on its business as now being conducted. Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of The Commonwealth of Massachusetts, with the requisite corporate power to own, operate and lease its properties and to carry on its business as now being conducted. Except as would not have a Buyer Material Adverse Effect, the Buyer is duly qualified or licensed to do business in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary. 3.2 CAPITAL STOCK OF MERGER SUB. The authorized capitol stock of Merger Sub consists of 100 shares of Merger Sub Common Stock, of which 100 shares are issued and outstanding. All of the outstanding shares of Merger Sub Common Stock have been duly authorized and validly issued, were not issued in violation of any person's preemptive rights, are fully paid and nonassessable, and are owned of record and beneficially by the Buyer. 3.3 AUTHORITY FOR AGREEMENT; NONCONTRAVENTION. 3.3.1 AUTHORITY. Each of the Buyer and Merger Sub has the corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. No additional corporate proceedings on the part of the Buyer or Merger Sub are necessary to authorize the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. This Agreement has been, and the other agreements contemplated hereby to be signed by the Buyer and Merger Sub at or before the Closing will have been, duly executed and delivered by the Buyer and Merger Sub and constitute, or will at the time of their signing constitute, valid and binding obligations of the Buyer and Merger Sub enforceable against them in accordance with their respective terms, subject to the qualifications that enforcement of the rights and remedies created hereby and thereby are subject to (a) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and other laws of general application affecting the rights and remedies of creditors and (b) general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). The Share Consideration when issued to the Shareholder at the Closing will be duly authorized, validly issued, fully paid, nonassessable and free of all preemptive rights. 3.3.2 NO CONFLICT. Neither the execution and delivery of this Agreement by the Buyer or Merger Sub, nor the performance by the Buyer or Merger Sub of their obligations hereunder, nor the consummation by the Buyer or Merger Sub of the transactions contemplated hereby will (a) conflict with or result in a violation of any provision of the certificate of incorporation or bylaws of the Buyer or the articles of organization or bylaws of Merger Sub, or 12 (b) with or without the giving of notice or the lapse of time, or both, in any material way, conflict with, or result in any violation or breach of, or constitute a default under, or result in any right to accelerate or result in the creation of any Encumbrance pursuant to, or right of termination under, any provision of any note, mortgage, indenture, lease, instrument or other agreement, Permit, concession, grant, franchise, license, judgment, order, decree, statute, ordinance, rule or regulation to which the Buyer or Merger Sub is a party or by which the Buyer or Merger Sub or any of their assets or properties is bound or which is applicable to the Buyer or Merger Sub or any of their assets or properties. Except for the filing of the Articles of Merger with the Secretary of State of The Commonwealth of Massachusetts, no authorization, consent or approval of, or filing with or notice to, any Governmental Entity is necessary for the execution and delivery of this Agreement by the Buyer or Merger Sub or the consummation by the Buyer or Merger Sub of the transactions contemplated hereby. 3.4 SEC DOCUMENTS. 3.4.1 The Buyer has filed all required forms, reports and documents with the SEC since January 1, 2003 (collectively, the "Buyer SEC Reports"), all of which were prepared in all material respects in accordance with the Securities Act of 1933 and the Securities Exchange Act of 1934 (collectively, the "Securities Laws"). As of their respective dates, the Buyer SEC Reports (a) complied in all material respects with the applicable requirements of the Securities Laws and (b) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The representation in clause (b) of the preceding sentence does not apply to any misstatement or omission in any Buyer SEC Report filed prior to the date of this Agreement which was superseded by and corrected in a subsequent Buyer SEC Report filed prior to the date of this Agreement. Each of the consolidated balance sheets of the Buyer included in or incorporated by reference into the Buyer SEC Reports (including any related notes and schedules), as superseded by or corrected in a subsequent Buyer SEC Report filed prior to the date of this Agreement, fairly presents the consolidated financial position of the Buyer and its subsidiaries as of its date and each of the consolidated statements of income, retained earnings and cash flows of the Buyer included in or incorporated by reference into the Buyer SEC Reports (including any related notes and schedules), as superseded by or corrected in a subsequent Buyer SEC Report filed prior to the date of this Agreement, fairly presents the results of operations, retained earnings or cash flows, as the case may be, of the Buyer and its subsidiaries for the periods set forth therein, in each case in accordance with GAAP consistently applied during the periods involved except, in the case of unaudited statements, for the related notes and for normal year-end audit adjustments which will not be material in amount or effect. 3.4.2 Except as and to the extent set forth on the balance sheet of the Buyer as of September 30, 2004 included in the Buyer Form 10-Q for the quarter then ended or otherwise disclosed in the notes thereto, such Form 10-Q or any Form 8-K filed by the Buyer from September 30, 2004 to the date of this Agreement, the Buyer, as of the date of this Agreement, does not have any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) except for (i) liabilities or obligations incurred in the ordinary course of business consistent with past practice since September 30, 2004; (ii) liabilities and obligations incurred in connection with this Agreement and the transactions contemplated hereby; and (iii) liabilities and 13 obligations that individually or in the aggregate have not had or would not reasonably be expected to have a Buyer Material Adverse Effect. 3.5 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Buyer SEC Reports filed and publicly available prior to the date of this Agreement, there has not been, since December 31, 2003: (a) any declaration, setting aside or payment of any dividend or other distribution with respect to the Buyer's capital stock or securities; (b) any material change in the Buyer's accounting principles, practices or methods, except as required by GAAP; (c) any event or development that individually or together with any one or more other events or developments has had or would reasonably be expected to have a Buyer Material Adverse Effect; or (d) any event or development that would individually or together with any one or more other events or developments reasonably be expected to prevent or materially delay the Closing or the performance of this Agreement by the Buyer. 3.6 NO BROKER'S OR FINDER'S FEES. The Buyer and Merger Sub have not paid or become obligated to pay any fee or commission to any broker, finder, financial advisor or intermediary in connection with the transactions contemplated by this Agreement, except for Greenfield Capital Partners. ARTICLE 4. ADDITIONAL AGREEMENTS 4.1 RESIGNATION OF DIRECTORS AND OFFICERS. The Shareholder shall cause the directors and officers of the Company and the Subsidiaries to resign their positions effective at the Closing. 4.2 FURTHER ASSURANCES. At any time and from time to time after the Closing, the parties agree to cooperate with each other to execute and deliver such other documents, instruments of transfer or assignment, files, books and records, and to do all such further acts and things, as may be reasonably required to carry out the transactions contemplated hereby. The parties shall cooperate fully, as and to the extent reasonably requested by each other party, in connection with the filing of Tax Returns and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party's request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. 4.3 PUBLIC ANNOUNCEMENTS. No party to this Agreement shall issue any press release or make any public announcement relating to the subject matter of this Agreement without the prior written approval of the other parties; PROVIDED, HOWEVER, that any party may make any public disclosure it believes in good faith is required by applicable law or the rules and regulations of the Securities and Exchange Commission or any applicable stock exchange. 4.4 SECURITY AGREEMENT. At the Closing, the Buyer and the Shareholder shall enter into a Security Agreement in the form of Exhibit D attached hereto (the "Security Agreement"). 4.5 PLEDGE AGREEMENT. At the Closing, the Buyer and the Shareholder shall enter into a Pledge Agreement in the form of Exhibit E attached hereto (the "Pledge Agreement"). 14 4.6 EMPLOYMENT AGREEMENT. At the Closing, the Buyer and the Shareholder shall enter into an Employment Agreement in the form of Exhibit F attached hereto (the "Employment Agreement"). 4.7 ORDINARY COURSE. If the Closing does not occur on the date of this Agreement, between the date of this Agreement and the Closing the Company and the Subsidiaries shall carry on their business in the ordinary course consistent with prior practice, including the payment of all debts and taxes owed. 4.8 WORKING CAPITAL LOAN. At the Closing, the Buyer shall loan the Surviving Corporation $200,000 for working capital, pursuant to the terms of a promissory note in the form of Exhibit G attached hereto (the "Working Capital Note"). No more than 60% of such funds may be used by the Surviving Corporation to pay off loans outstanding prior to the Closing Date; the balance of such funds must be used for general working capital purposes. 4.9 ADMINISTRATION FEE. As of and following the Closing, the Buyer shall provide agreed upon administrative and other services to the Surviving Corporation, in return for which the Surviving Corporation shall pay to the Buyer an administration fee of $20,000 per year. In addition, the Surviving Corporation shall reimburse the Buyer for the salary and other expenses paid for by Buyer pursuant to the terms of the Employment Agreement and for any other fees or expenses the Buyer pays for the benefit of the Surviving Corporation. 4.10 BOARD OF DIRECTORS OF THE SURVIVING CORPORATION. Until such time as the amounts outstanding under the Promissory Note are satisfied in full, Buyer hereby agrees to vote the shares of the Surviving Corporation to (i) maintain the number of directors of the Surviving Corporation at three, and (ii) elect as directors of the Surviving Corporation (a) one individual designated by Buyer and (b) two individuals designated by the Stockholder (one of whom shall be the Stockholder). 4.11 "PIGGYBACK" REGISTRATION RIGHTS. If, on or after the first anniversary of this Agreement, Buyer, from time to time, chooses to register any of its securities under the Securities Act for sale to the public, whether for its own account or for the account of other security holders or both (except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Share Consideration for sale to the public), Buyer will use its reasonable efforts to cause one-quarter of the Share Consideration plus, if such registration statement occurs on or after July 1, 2006, an additional one-tenth of the Share Consideration, plus, if such registration statement occurs on or after January 1, 2007, any remaining Share Consideration (as applicable, the "Registrable Shares") to be included in the securities to be covered by the registration statement proposed to be filed by Buyer, provided, however, that if other investors of Buyer who hold registration rights are registering securities on such registration statement and object to the inclusion of the Registrable Shares in such registration statement, Buyer will not be obligated to include the Registrable Shares in such registration statement. In the event that any registration pursuant to this Section 4.11 shall be, in whole or in part, an underwritten public offering, the Registrable Shares to be included in such an underwriting may be reduced if and to the extent that the managing underwriter shall be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold by Buyer therein. Notwithstanding the foregoing provisions, Buyer may withdraw any registration statement referred to in this Section 4.11 without thereby incurring any liability to the 15 Shareholder. The foregoing securities will cease to be Registrable Securities if and when they (i) have been registered by Buyer under the Securities Act and either (A) disposed of pursuant to such registration statement or (B) such registration continues to be effective at the time of inquiry, (ii) have been sold, transferred, distributed or otherwise disposed of by the Shareholder (other than upon his death by will or in accordance with the laws of descent and distribution), or (iii) first become eligible for sale pursuant to Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"). It shall be a condition to Buyer's obligations under this paragraph that the Shareholder (i) shall have promptly taken all such actions as Buyer shall reasonably request in connection with the registration statement and (ii) shall have provided promptly (and in any event within seven business days) such information and other materials as Buyer or its counsel shall request in connection with the registration statement. The Shareholder represents, warrants and agrees that all such information provided by the Shareholder or on his behalf shall be true, complete and correct. The Shareholder shall comply with the Securities Act and any other laws, rules or regulations applicable to any disposition of Registrable Securities pursuant to a registration statement. Buyer shall pay all expenses incurred by it in complying with its obligations under this paragraph, including without limitation registration and filing fees, listing fees, printing expenses, messenger and delivery expenses, fees and expenses of Buyer's counsel, fees and expenses of Buyer's accountants, and the Buyer's internal expenses. The Shareholder shall pay all expenses incurred by him in connection with the disposition of the Registrable Securities, including without limitation any broker's fees or commissions, selling expenses, messenger and delivery expenses, and fees and expenses of any counsel retained by the Shareholder. All of Buyer's obligations under this paragraph shall terminate on the date on which all of the Registrable Securities may be sold at one time under Rule 144 under the Securities Act. The Shareholders rights under this paragraph are personal to him and non-transferable except by will or in accordance with the laws of descent and distribution. 4.12 AUDITED FINANCIAL STATEMENTS. Within 10 business days of the Closing, the Shareholder shall deliver to Buyer the balance sheets of the Company as of December 31, 2003 and December 31, 2002 and the statements of operations and cash flows of the Company for the years then ended, as audited by Sherb & Company LLP, the Company's certified public accountants whose report on such financial statements shall be unqualified. ARTICLE 5. CONDITIONS PRECEDENT 5.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY. The obligations of the parties hereto to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing of each of the following conditions: 5.1.1 NO ADVERSE PROCEEDINGS. No injunction or restraining or other order issued by a court of competent jurisdiction that prohibits or materially restricts the consummation of the transactions contemplated hereby shall be in effect (each party agreeing to use all reasonable efforts to have any injunction or other order immediately lifted), and no action or proceeding shall have been commenced or threatened in writing seeking any injunction or restraining or other order that seeks to prohibit, restrain, invalidate or set aside consummation of the transactions contemplated hereby. 16 5.1.2 ILLEGALITY. There shall not have been any action taken, and no statute, rule or regulation shall have been enacted, by any Government Entity that would prohibit or materially restrict the consummation of the transactions contemplated hereby. 5.2 CONDITIONS PRECEDENT TO OBLIGATION OF THE BUYER AND MERGER SUB. The obligation of the Buyer and Merger Sub to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment (unless waived in writing by the Buyer) at or prior to the Closing of each of the following additional conditions: 5.2.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Shareholder contained in this Agreement shall be true and correct in all material respects on and as of the Closing, except for changes contemplated by this Agreement and except for those representations and warranties which address matters only as of a particular date (which shall remain true and correct as of such date), with the same force and effect as if made on and as of the Closing; and the Shareholder shall have delivered to the Buyer a certificate to that effect, dated the date of the Closing and signed by the Shareholder. 5.2.2 AGREEMENTS AND COVENANTS. The Shareholder and the Company shall have performed in all material respects all of their agreements and covenants set forth herein that are required to be performed at or prior to the Closing; and the Shareholder shall have delivered to the Buyer a certificate to that effect, dated the date of the Closing and signed by the Shareholder. 5.2.3 RESIGNATIONS. The Buyer shall have received the written resignations of the directors and officers of the Company and the Subsidiaries as contemplated by Section 4.1 hereof. 5.2.4 CERTIFICATES AND STOCK POWERS. The Shareholder shall have delivered to the Buyer or its designee a stock certificate or certificates representing the Shares, duly endorsed in blank or accompanied by appropriate stock powers duly executed in blank, with all stock transfer taxes paid for. 5.2.5 SECURITY AGREEMENT. The Shareholder shall have executed and delivered to the Buyer the Security Agreement. 5.2.6 PLEDGE AGREEMENT. The Shareholder shall have executed and delivered to the Buyer the Pledge Agreement. 5.2.7 SHARE ESCROW AGREEMENT. The Shareholder shall have executed and delivered to the Buyer the Share Escrow Agreement, together with a fully executed and signature guaranteed blank stock power related to the Share Consideration. 5.2.8 EMPLOYMENT AGREEMENT. The Shareholder shall have executed and delivered to the Buyer the Employment Agreement. 5.2.9 ENCUMBRANCES. There shall be no Encumbrances on the assets of the Company and the Subsidiaries, other than Permitted Encumbrances. 17 5.3 CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDER. The obligation of the Company and the Shareholder to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment (unless waived by the Shareholder) at or prior to the Closing of the following additional conditions: 5.3.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Buyer contained in this Agreement shall be true and correct in all material respects on and as of the Closing, except for changes contemplated by this Agreement and except for those representations and warranties which address matters only as of a particular date (which shall remain true and correct as of such date), with the same force and effect as if made on and as of the Closing; and the Buyer shall have delivered to the Shareholder a certificate to that effect, dated the date of the Closing and signed by the Buyer. 5.3.2 AGREEMENTS AND COVENANTS. The Buyer shall have performed in all material respects all of its agreements and covenants set forth herein that are required to be performed at or prior to the Closing; and the Buyer shall have delivered to the Shareholder a certificate to that effect, dated the date of the Closing and signed by the Buyer. 5.3.3 SECURITY AGREEMENT. The Buyer shall have executed and delivered to the Shareholder the Security Agreement. 5.3.4 PLEDGE AGREEMENT. The Buyer shall have executed and delivered to the Shareholder the Pledge Agreement. 5.3.5 SHARE ESCROW AGREEMENT. The Buyer and the Buyer's President, as escrow agent, shall have executed and delivered to the Shareholder the Share Escrow Agreement. 5.3.6 EMPLOYMENT AGREEMENT. The Buyer shall have executed and delivered to the Shareholder the Employment Agreement. 5.3.7 WORKING CAPITAL NOTE. The Buyer shall have provided the Company with $200,000 in return for the Working Capital Note. 5.3.8 PROMISSORY NOTE. The Buyer shall have executed and delivered to the Shareholder the Promissory Note. ARTICLE 6. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION 6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made by any party in this Agreement or any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing and continue in full force and effect: (a) in the case of the representations and warranties contained in Sections 2.1, 2.2, 2.3, 2.6, 2.11, 3.1 and 3.3 (collectively, the "Long Term Warranties"), until 30 days after the expiration of the statute of limitations with respect to the matter to which the claim related and (b) in the case of any other representation or warranty contained in this Agreement (collectively, the "Short Term Warranties") until the second anniversary of the Closing Date. Each of the agreements and 18 covenants of the parties to this Agreement shall survive the Closing and continue in full force and effect until such agreement or covenant has been fully performed or satisfied. 6.2 INDEMNIFICATION BY SHAREHOLDER. Subject to the terms and conditions of this Article 6, the Shareholder hereby agrees (without any right of contribution from the Company or any right of indemnification against the Company) to indemnify, defend and hold harmless the Buyer and each of its subsidiaries (including without limitation the Company and the Subsidiaries) and each of their respective directors, officers, agents and affiliates (collectively, the "Buyer Indemnified Persons") from and against any loss, liability, damage, cost or expense (including costs and reasonable attorneys' fees and disbursements) (collectively, "Damages") suffered, incurred or paid by any Buyer Indemnified Person which would not have been suffered, incurred or paid if (a) all the representations and warranties of the Shareholder and the Company contained in this Agreement or in any certificate delivered by the Shareholder or the Company pursuant to this Agreement had been true, complete and correct, and (b) all the covenants and agreements of the Shareholder and the Company contained in this Agreement had been fully performed and fulfilled. With respect to any Buyer Indemnified Person other than Buyer, the Shareholder acknowledges and agrees that the Buyer is contracting on its own behalf and for such Buyer Indemnified Person and the Buyer shall obtain and hold the rights and benefits provided for in this Section 6.2 in trust for and on behalf of such Buyer Indemnified Person. "Damages" shall be determined by taking into account the actual amount of damage, loss, deficiency, cost or expense incurred or suffered by reason of the event or condition giving rise to the obligation to indemnify. In no event shall any Damages subject to indemnification hereunder include consequential, special or punitive damages, except to the extent such damages are part of any third-party claim. The indemnification provisions contained in this Article 6 shall be the sole remedy of the Buyer Indemnified Persons against the Shareholder for all Buyer Claims. The total liability of the Shareholder under this Article 6 for any and all Buyer Claims shall be limited to the Purchase Consideration; PROVIDED, HOWEVER, that such limitation shall not in any manner limit the liability or indemnification obligations of the Shareholder with respect to: (i) intentional fraud, or (ii) any breach of the covenants and agreements in this Agreement. 6.3 INDEMNIFICATION BY BUYER. Subject to the terms and conditions of this Article 6, the Buyer hereby agrees to indemnify, defend and hold harmless the Shareholder from and against any Damages suffered, incurred or paid by the Shareholder which would not have been suffered, incurred or paid if (a) all the representations and warranties of the Buyer contained in this Agreement or in any certificate delivered by the Buyer pursuant to this Agreement had been true, complete and correct, and (b) all the covenants and agreements of the Buyer contained in this Agreement had been fully performed and fulfilled (collectively, "Shareholder Claims"). The indemnification provisions contained in this Article 6 shall be the sole remedy of the Shareholder against the Buyer for all Shareholder Claims. The total liability of the Buyer under this Article 6 for any and all Shareholder Claims shall be limited to the Purchase Consideration; PROVIDED, HOWEVER, that such limitation shall not in any manner limit the liability or indemnification obligations of the Buyer with respect to: (i) intentional fraud, or (ii) any breach of the covenants and agreements in this Agreement. 19 ARTICLE 7. DEFINITIONS 7.1 CERTAIN MATTERS OF CONSTRUCTION. A reference to an Article, Section, Exhibit or Schedule shall mean an Article of, a Section in, or Exhibit or Schedule to, this Agreement unless otherwise expressly stated. The titles and headings herein are for reference purposes only and shall not in any manner limit the construction of this Agreement which shall be considered as a whole. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." 7.2 CERTAIN DEFINITIONS. As used herein, the following terms shall have the following meanings: 7.2.1 BUYER MATERIAL ADVERSE EFFECT: any materially adverse change in or effect on the business, prospects, operations, earnings, assets or financial condition of the Buyer and its subsidiaries, taken as a whole, except, in each case, for any such effect resulting from or arising out of (i) general economic, industry, political and similar conditions, (ii) changes or developments in financial or securities markets in general, or (iii) any change in the Buyer's stock price or trading volume, in and of itself. 7.2.2 COMPANY MATERIAL ADVERSE EFFECT: any materially adverse change in or effect on the business, prospects, operations, earnings, assets or financial condition of the Company and the Subsidiaries, taken as a whole, except for any such effect resulting from or arising out of general economic, industry, political and similar conditions. 7.2.3 ENCUMBRANCE: any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim, infringement, interference, option, right of first refusal, preemptive right, community property interest or restriction of any nature (including any restriction on the voting of any security, any restriction on the transfer of any security (other than restrictions on transfer under applicable securities laws) or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset). 7.2.4 INTELLECTUAL PROPERTY RIGHTS: patents, patent applications, trademarks, trademark applications, registrations and other rights, trade names and trade dress, trade name rights, domain names, service marks, service mark rights, service names, copyrights, copyright applications and registrations, technical information including engineering, production and other designs, drawings, specifications, formulae, technology, computer and electronic data processing programs and software, inventions, processes, trade secrets, know-how, confidential information and other proprietary property, and rights and interests. 7.2.5 LIABILITY: any liability or obligation of whatever kind or nature (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes. 20 7.2.6 PERMITTED ENCUMBRANCES: (a) liens for current taxes not yet due and payable or that are being contested in good faith, (b) liens that were incurred in the ordinary course of business, such as carriers', warehousemen's, landlords' and mechanics' liens and other similar liens arising in the ordinary course of business, (c) liens on personal property leased under operating leases, (d) liens, pledges or deposits incurred or made in connection with workmen's compensation, unemployment insurance and other social security benefits, or securing the performance of bids, tenders, leases, contracts (other than for the repayment of borrowed money), statutory obligations, progress payments, surety and appeal bonds and other obligations of like nature, in each case incurred in the ordinary course of business, (e) pledges of or liens on manufactured products as security for any drafts or bills of exchange drawn in connection with the importation of such manufactured products in the ordinary course of business, (f) liens under Article 2 of the Uniform Commercial Code that are special property interests in goods identified as goods to which a contract refers, (g) liens under Article 9 of the Uniform Commercial Code that are purchase money security interests, none of which are material in the aggregate or individually, and (i) such other encumbrances, if any, as are set forth on Schedule 7.2.6. 7.2.7 PERSON: an individual, a corporation, an association, a partnership, an estate, a trust and any other entity or organization. 7.2.8 TAX OR TAXES: any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any other Person. 7.2.9 TAX RETURN: any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. 7.2.10 TO THE KNOWLEDGE OF THE COMPANY AND THE SHAREHOLDER: the actual knowledge of Mark Allen, and the officers of the Company and each Subsidiary, in each case after making due inquiry with respect thereto. ARTICLE 8. MISCELLANEOUS 8.1 AMENDMENTS AND SUPPLEMENTS. This Agreement may not be amended, modified or supplemented by the parties hereto in any manner, except by an instrument in writing signed by all parties to this Agreement; PROVIDED, HOWEVER, that any amendment, modification or supplementation of sections 4.8 or 4.9 shall not require the consent, signature or approval of the Shareholder. 8.2 WAIVER. The terms and conditions of this Agreement may be waived only by a written instrument signed by the party waiving compliance. The failure of any party hereto to enforce at 21 any time any of the provisions of this Agreement shall in no way be construed to be a waiver of any such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of such party thereafter to enforce each and every such provision. No waiver of any breach of or non-compliance with this Agreement shall be held to be a waiver of any other or subsequent breach or non-compliance. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any party may otherwise have at law or in equity. 8.3 GOVERNING LAW. This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of the State of New York, without regard to its principles of conflicts of laws. 8.4 EXPENSES; CERTAIN TAXES AND FEES. Each party shall bear the expenses, costs and fees (including, without limitation, all expenses, costs, fees and disbursements of attorneys, consultants, investment bankers and other financing advisors, brokers and finders, and accountants) incurred by such party in connection with the negotiation, preparation or performance of this Agreement and the consummation by such party of the transactions contemplated hereby whether or not the transactions contemplated by this Agreement are consummated; PROVIDED, HOWEVER, that the Shareholder shall bear all such expenses, costs and fees so incurred by the Company and any Subsidiary. All transfer, documentary, sales, use, stamp, registration and other such Taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with consummation of the transactions contemplated by this Agreement shall be paid by the Shareholder when due, and the Shareholder will, at its own expense, file all necessary Tax Returns and other documentation with respect to all such Taxes, fees and charges, and, if required by applicable law, the Buyer will, and will cause its affiliates to, join in the execution of any such Tax Returns and other documentation. 8.5 NOTICE. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered by hand, sent by facsimile transmission with confirmation of receipt, sent via a reputable overnight courier service with confirmation of receipt requested, or mailed by registered or certified mail (postage prepaid and return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice), and shall be deemed given on the date on which delivered by hand or otherwise on the date of receipt as confirmed: To the Buyer: Global Matrechs, Inc. 90 Grove Street, Suite 201 Ridgefield, Connecticut 06877 Attn: Michael Sheppard Facsimile: (203) 431-8304 22 With a copy to: Foley Hoag LLP 155 Seaport Boulevard Boston, Massachusetts 02210 Attn: David A Broadwin, Esq. Facsimile: (617) 832-7000 To the Company or the Shareholder: Mark Allen 91 French Avenue Braintree, MA 02184 Facsimile: (781) 848-1175 With a copy to: Sam Krieger Krieger & Prager LLP 39 Broadway New York, NY 10006 Facsimile: (212 ) 363-2999 8.6 ENTIRE AGREEMENT. This Agreement and the documents and instruments and other agreements among the parties hereto as contemplated by or referred to herein constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. 8.7 BINDING EFFECT; ASSIGNABILITY. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This Agreement is not intended to confer upon any person other than the parties hereto and the Buyer Indemnified Persons (and such parties' and Buyer Indemnified Persons' respective successors and assigns) any rights or remedies hereunder, except as otherwise expressly provided herein. Except pursuant to a change of control of Buyer (whether by merger, a sale of substantially all of Buyer's assets, a sale of a majority of the outstanding Buyer Common Stock, or otherwise), neither this Agreement nor any of the rights and obligations of the parties hereunder shall be assigned or delegated, whether by operation of law or otherwise, without the written consent of all parties hereto. 8.8 VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, each of which shall remain in full force and effect. 8.9 COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which together shall constitute one and the same agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 23 IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of Merger to be executed as an agreement under seal as of the date first above written. GLOBAL MATRECHS, INC. By: /s/ Michael Sheppard ----------------------- Name: Michael Sheppard --------------------- Title: President -------------------- TTF ACQUISITION CORP. By: /s/ Michael Sheppard ----------------------- Name: Michael Sheppard --------------------- Title: President -------------------- TRUE TO FORM, LIMITED By: /s/ Mark J. Allen ----------------------- Name: Mark J. Allen --------------------- Title: President -------------------- MARK ALLEN /s/ Mark J. Allen --------------------------- 24 EX-10.1 3 exhibit10-1_13187.txt SECURED NOTE EXHIBIT 10.1 ------------ THIS NOTE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. U.S. $500,000.00 Original Issue Date: December 31, 2004 Holder: Mark J. Allen SECURED NOTE DUE DECEMBER 31, 2009 THIS SECURED NOTE is made by TRUE TO FORM, LIMITED, a Massachusetts corporation, having a principal place of business at 91 French Avenue, Braintree, MA 02184 (the "Company"). This Note was acquired by MARK J. ALLEN, residing at 39 Loring Drive, Norwell, Massachusetts 02061 (the "Holder") pursuant to the terms of that certain Agreement and Plan of Merger (the "Agreement") dated as of even date herewith, by and among the Company; Global Matrechs, Inc, a Delaware Corporation ("GMTH"); TTF Acquisition Corporation, a Massachusetts corporation and wholly owned subsidiary of the GMTH ("TTF"); and the Holder. Capitalized terms used but not otherwise defined herein, shall have the meaning ascribed to them in the Agreement. FOR VALUE RECEIVED, the Company promises to pay to the Holder or registered assigns, the principal sum of Five Hundred Thousand and 00/100 Dollars ($500,000.00), with interest at the rate of eight percent (8%) per annum (the "Base Rate") on the basis of a 365-day year payable, as follows: the Company shall pay accrued interest (but no principal) quarterly starting on April 1, 2005 and continuing on the 1st day of July 2005, October 2005, and January 2006 (each a "Payment Date" and collectively "Payment Dates"); pay $100,000 in principal on January 1, 2006 and all unpaid principal and accrued and unpaid interest shall be due and payable in full on December 31, 2009 (the "Maturity Date"). Upon the occurrence of an Event of Default, as defined herein, all amounts due hereunder shall bear interest at the rate of twelve percent (12%) per annum from the day an Event of Default occurs through and including the date of payment of any delinquent amount. This Note is subject to the following additional provisions: Section 1. Default. "Event of Default" wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body): (i) any default by the Company in the payment of principal or interest payable in respect of this Note, which default continues for a period of thirty (30) calendar days after the due date for such payment; Page 1 (ii) any failure to observe or perform any other material covenant, agreement or warranty contained in, or otherwise commit any material breach of, this Note, the Merger Agreement, the Collateral Pledge Agreement or the Security Agreement, and such failure or breach shall not have been remedied within thirty (30) days after the date on which reasonably detailed notice of such failure or breach shall have been given by the Holder or its successor; (iii) the Company shall commence a voluntary case under the United States Bankruptcy Code or insolvency laws as now or hereafter in effect or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the Company under the Bankruptcy Code and the petition is not controverted within thirty (30) days, or is not dismissed within sixty (60) days, after commencement of such involuntary case; or a "custodian" (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or any substantial part of the property of the Company or the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or there is commenced against the Company any such proceeding which remains undismissed for a period of sixty (60) days; or the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company suffers any appointment of any custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty (60) days; or the Company makes a general assignment for the benefit of creditors; or the Company shall fail to pay, or shall state that it is unable to pay its debts generally as they become due; the Company shall call a meeting of all of its creditors with a view to arranging a composition or adjustment of its debts; or the Company shall by any act or failure to act indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company for the purpose of effecting any of the foregoing; (iv) the Company or TTF shall default in any of its obligations under any mortgage, credit agreement or other facility, indenture, agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness of the Company or TTF or an amount exceeding Two Hundred Fifty Thousand Dollars ($250,000.00), whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable; (v) the Company shall be a party to any Change of Control Transaction (as defined in Section 5), shall agree to sell or dispose of all or in excess of 49% of its assets (based on book value calculation as reflected in the Company's most recent financial statements) in one or more transactions (whether or not such sale would constitute a Change of Control Transaction); (vi) the Company or TTF has entered against it by any court or other adjudicatory body of competent jurisdiction any judgment in an amount equal to at least Two Hundred Fifty Thousand Dollars ($250,000.00); or (vii) if at any time during the term of the Note, a majority of the Company's board of directors serving as of the Closing Date are involuntarily replaced other than pursuant to an annual meeting of the Company's stockholders. Section 2. Interest Rate Limitation. The parties intend to conform strictly to the applicable usury laws in effect from time to time during the term hereof. Accordingly, if any transaction Page 2 contemplated hereby would be usurious under such laws, then notwithstanding any other provision hereof: (i) the aggregate of all interest that is contracted for, charged, or received under this Agreement shall not exceed the maximum amount of interest allowed by applicable law (the "Highest Lawful Rate"), and any excess shall be promptly credited to the Company by the Holder (or, to the extent that such consideration shall have been paid, such excess shall be promptly refunded to the Company by the Holder); (ii) neither the Company nor any other Person now or hereafter liable hereunder shall be obligated to pay the amount of such interest to the extent that it is in excess of the Highest Lawful Rate; and (iii) the effective rate of interest shall be reduced to the Highest Lawful Rate. All sums paid, or agreed to be paid, to the Holder for the use, forbearance, and detention of the debt of the Company to the Holder shall, to the extent permitted by applicable law, be allocated throughout the full term of the Note until payment is made in full so that the actual rate of interest does not exceed the Highest Lawful Rate in effect at any particular time during the full term thereof. If at any time the rate of interest under the Note exceeds the Highest Lawful Rate, the rate of interest to accrue pursuant to this Agreement shall be limited, notwithstanding anything to the contrary in this Agreement, to the Highest Lawful Rate, but any subsequent reductions in the Base Rate shall not reduce the interest to accrue pursuant to this Agreement below the Highest Lawful Rate until the total amount of interest accrued equals the amount of interest that would have accrued if a varying rate per annum equal to the interest rate under the Note had at all times been in effect. If the total amount of interest paid or accrued pursuant to this Agreement under the foregoing provisions is less than the total amount of interest that would have accrued if a varying rate per annum equal to the interest rate under the Note had been in effect, then the Company agrees to pay to the Holder an amount equal to the difference between (x) the lesser of (A) the amount of interest that would have accrued if the Highest Lawful Rate had at all times been in effect, or (B) the amount of interest that would have accrued if a varying rate per annum equal to the interest rate under the Note had at all times been in effect, and (y) the amount of interest accrued in accordance with the other provisions of this Agreement. Section 3. Prepayment; Offset (a) Prepayment. The Company shall have the right to prepay this Note in whole or in part, provided, however, that no more than $300,000 in principal amount may be prepaid prior to July 1, 2006. (b) Notice of Prepayment. The Company shall give written notice at least five (5) Business Days, but not more than ten (10) Business Days, of any intention to prepay any portion of this Note prior to the Maturity Date pursuant to Section 4(a), above, to the Holder, which notice shall specify the date such prepayment will be made. Any such prepayment shall be applied to principal in inverse order of maturity but shall not affect the amount of each quarterly payment of principal and interest otherwise required hereunder. (c) Offset. At the election of the Company or GMTH, payment of this Note can be made by offset of obligations owed by the Shareholder pursuant to the terms of Article 6 of the Agreement upon agreement between GMTH and the Shareholder that a certain amount is due and payable to a Buyer Indemnified Party (as defined in the Merger Agreement) thereunder. Section 4. Definitions. For the purposes hereof, the following terms shall have the following meanings: "Business Day" means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close. Page 3 "Change of Control Transaction" means the occurrence of any of (i) an acquisition after the date hereof by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in excess of 49% of the voting securities of the Company in one or a series of related transactions, or (ii) the merger of the Company with or into another entity, consolidation or sale of all or substantially all of the assets of the Company in one or a series of related transactions, unless following such transaction, the holders of the Company's securities continue to hold at least 40% of the total voting securities of the entity surviving such transaction or series of transactions. The execution by the Company of an agreement to which the Company is a party or by which it is bound providing for any of the events set forth above in (i) or (ii) does not constitute the occurrence of the event until after the event in fact occurs. Section 5. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, interest and liquidated damages (if any) on, this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct obligation of the Company. Section 6. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company. Section 7. This Note shall be governed by and construed in accordance with the laws of the State of New York. Each of the parties consents to the exclusive jurisdiction of the federal courts or the state courts of the State of New York sitting in the Borough of Manhattan in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on FORUM NON COVENIENS, to the bringing of any such proceeding in such jurisdictions. To the extent determined by such court, the Company shall reimburse the Holder for any reasonable legal fees and disbursements incurred by the Holder in enforcement of or protection of any of its rights under this Note, The Pledge Agreement or the Security Agreement. THE COMPANY HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS NOTE. Section 8. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver must be in writing. Section 9. Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. Section 10. Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next calendar month, the preceding Business Day in the appropriate calendar month). Section 11. Security. The obligation of the Company for payment of principal, interest and Page 4 all other sums hereunder, in the event of default by the Company to perform hereunder, is secured by (a) a Security Agreement of the Debtor and (b) the pledge of certain securities by GMTH (the "Pledged Shares") under the terms and conditions of a Collateral Pledge Agreement, by reference made a part of the terms of this Note. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Page 5 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by an officer duly authorized for such purpose, as of the date first above indicated. TRUE TO FORM, LIMITED By: /s/ Michael Sheppard -------------------------------- Michael Sheppard, Treasurer Attest: By: ----------------------- Page 6 EX-10.2 4 exhibit10-2_13187.txt SECURITY AGREEMENT EXHIBIT 10.2 ------------ SECURITY AGREEMENT ------------------ This Security Agreement ("Agreement") dated as of December 31, 2004, by and between, True To Form, Limited, a Massachusetts corporation ("Debtor") and wholly owned subsidiary of Global Matrechs, Inc. a Delaware corporation ("GMTH") and Mark Allen ("Secured Party"). BACKGROUND ---------- A. Secured Party has extended credit to Debtor as evidenced by that certain Secured Note dated as of December 31, 2004 (as amended, restated, modified, or replaced from time to time, the "Note"), in connection with the merger of True To Form, Limited, a Massachusetts corporation and TTF Acquisition Corp. Capitalized terms used, but not defined herein, shall have the respective meanings set forth in the Note. As used herein, property shall mean all personal and real property of every kind and description (whether tangible or intangible) in which a person has any right, title or interest. B. Debtor desires to grant to Secured Party security interests in the property described herein to secure all of GMTH's and Debtors' obligations and undertakings to Secured Party under the Note. GMTH is the direct or indirect owner of all of the equity interest in Debtor. NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows: SECTION 1 - SECURITY INTEREST ----------------- 1.1 Description: As security for the payment of all obligations and undertakings of every kind or nature whatsoever of Debtor to Secured Party, whether now existing or hereafter incurred, matured or unmatured, direct or indirect, primary or secondary, related or unrelated or due or to become due, arising under the Note, and any extensions, modifications, substitutions, increases and renewals thereof, and substitutions therefor; the payment of all amounts advanced by Secured Party to preserve, protect, defend, and enforce its rights hereunder and in the following property in accordance with the terms of this Agreement; and the payment of all expenses incurred by Secured Party in connection therewith (collectively the "Obligations"), Debtor hereby assigns and grants to Secured Party a continuing lien on and security interest in, upon and to the following property (the "Collateral"): (a) Accounts, Contract Rights, Etc. - All of Debtor's now owned and hereafter acquired, created, or arising accounts, accounts receivable, notes receivable, contract rights, chattel paper, documents (including documents of title), instruments, letters of credit and goods; (b) Inventory - All of Debtor's now owned or hereafter acquired inventory of every nature and kind, wherever located; (c) General Intangibles - All of Debtor's now owned and hereafter acquired, created or arising general intangibles of every kind and description, including, but not limited, to all existing and future rights to commissions, customer lists, choses in action, claims, books, records, patents and patent applications, copyrights, trademarks, tradenames, tradestyles, trademark applications, blueprints, drawings, designs and plans, trade secrets, contracts, contract rights, license agreements, formulae, tax and any other types of refunds, returned and unearned insurance premiums, rights and claims under insurance policies including without limitation, credit insurance and key man life insurance policies, and computer information, software, records and data; (d) Equipment - All of Debtor's now owned and hereafter acquired equipment, including, without limitation, machinery, vehicles, furniture and fixtures, wherever located, and all replacements, parts, accessories, substitutions and additions thereto; (e) Deposit Accounts - All of Debtor's now existing and hereafter acquired or arising deposit accounts of every nature, wherever located, and all documents and records associated therewith; (f) Property in Secured Party's Possession - All property of Debtor, now or hereafter in Secured Party's possession; (g) Investment Property - All of Debtor's now owned or hereafter acquired investment property whether registered or unregistered; (h) Goods - All of Debtor's now owned or hereafter acquired goods; (i) Letter of Credit Rights - All of Debtor's now owned or hereafter, letter of credit rights; (j) Commercial Tort Claims - All of Debtor's commercial tort claims against any party arising prior to, on or after the date hereof; and (k) Proceeds - The proceeds (including, without limitation, insurance proceeds), whether cash or non-cash, of all of the foregoing. All terms defined in the Uniform Commercial Code as in effect in the State of Delaware from time to time (the "UCC") and used herein shall have the same definitions as specified in the UCC. However, if a term is defined in Article 9 of the UCC differently than in another Article of the UCC, the term has the meaning specified in Article 9. 1.2 Lien Documents: As Secured Party deems necessary, Debtor shall execute and deliver to Secured Party, or have executed and delivered (all in form and substance satisfactory to Secured Party), any agreements, documents, instruments and writings, required to evidence, perfect or protect Secured Party's lien and security interest in the Collateral required hereunder or as Secured Party may request from time to time. 1.3 Other Actions: (a) Secured Party is hereby authorized to file financing statements and amendments to financing statements without Debtor's signature in accordance with the UCC. Debtor hereby authorizes Secured Party to file all financing statements and amendments to financing statements describing the Collateral in any filing office as Secured Party, in its sole discretion may determine, including financing statements listing "All Assets" in the collateral description therein. Debtor agrees to comply with the requirements of all state and federal laws and requests of Secured Party in order for Secured Party to have and maintain a valid and perfected first security interest in the Collateral including, without 2 limitation, executing such documents as Secured Party may require to obtain control (as defined in the UCC) over all deposit accounts, letter of credit rights and investment property. (b) In addition to the foregoing, Debtor shall do anything further that may be reasonably required by Secured Party to secure Secured Party and effectuate the intentions and objects of this Agreement, including, without limitation, the execution and delivery of security agreements, contracts and any other documents required hereunder. At Secured Party's request, Debtor shall also immediately deliver (with execution by Debtor of all necessary documents or forms to reflect, implement or enforce the security interest of Secured Party described herein) to Secured Party all items of which Secured Party must receive possession to obtain a perfected security interest, including without limitation, all notes, stock powers, letters of credit, certificates and documents of title, chattel paper, warehouse receipts, instruments, and any other similar instruments constituting Collateral. 1.4 Filing Security Agreement: A carbon, photographic or other reproduction or other copy of this Agreement or of a financing statement is sufficient as and may be filed in lieu of a financing statement. 1.5 Power of Attorney: The officers of Secured Party or his representative is hereby irrevocably made, constituted and appointed the true and lawful attorney for Debtor (without requiring it to act as such) with full power of substitution to do the following: (a) if Debtor refuses or is unable for more than three (3) business days after being requested to do so, execute, in the name of Debtor, schedules, assignments, instruments, documents and statements that Debtor is obligated to give Secured Party hereunder or that are necessary to perfect (or continue to evidence the perfection of such security interest); and (c) during the continuance of any Event of Default, do such other and further acts and deeds in the name of Debtor that Secured Party, consistent with the requirements of the UCC, may reasonably deem necessary or desirable to enforce any Account or other Collateral or perfect Secured Party's security interest in the Collateral. SECTION 2 - [INTENTIONALLY DELETED] ----------------------- SECTION 3 - COVENANTS --------- 3.1 Debtor covenants that: (a) Payment of Taxes and Claims - Debtor shall pay, before they become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon Debtor's property after the date hereof, and (ii) all claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other Persons entitled to the benefit of statutory or common law liens or other encumbrances, which, if unpaid, would result in the imposition of a lien or other encumbrance upon its property; provided, however, that Debtor shall not be required to pay any such tax, assessment, charge, levy, claim or demand if the amount, applicability or validity thereof shall at the time be contested in good faith and by appropriate proceedings by Debtor, and if Debtor shall have set aside on its books adequate reserves in respect thereof, if so required in accordance with GAAP; which deferment of payment is permissible so long as no lien or other encumbrance 3 has been entered and Debtor's title to, and its right to use, its property are not materially adversely affected thereby. (b) Property - Debtor shall maintain its property in its current condition (normal wear and tear excepted) and make all necessary renewals, replacements, additions, betterments and improvements thereto and will pay and discharge when due the cost of repairs and maintenance to its property, and will pay all rentals when due for all real estate leased by Debtor. (c) Existence and Rights - Debtor shall do (or cause to be done) all things necessary to preserve and keep in full force and effect its existence, good standing, rights and franchises. Debtor shall maintain any and all licenses, permits, franchises or other governmental authorizations necessary to the ownership of its property or to the conduct of its businesses. (d) Issue Taxes - Debtor shall pay all taxes (other than taxes based upon or measured by any Secured Party's income or revenues or any personal property tax), if any, in connection with the recording of any lien documents. The obligations of Debtor hereunder shall survive the termination of this Agreement. (e) Sale of Property - Debtor shall not engage in any sale of all or substantially all of its assets, except pursuant to a reorganization or consolidation of Debtor with and into GMTH. (f) Liens and Encumbrances - Debtor shall not: (i) execute a negative pledge agreement with any Person covering any of its property or property of the Subsidiaries , or (ii) cause or permit or agree or consent to cause or permit in the future (upon the happening of a contingency or otherwise), its property or property of the Subsidiaries (including, without limitation, the Collateral), whether now owned or hereafter acquired, to be subject to a lien, security interest or other claim or encumbrance except for Permitted Liens. As used herein, "Permitted Liens" means: (x) liens securing taxes, assessments or governmental charges or levies or the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords, and other like persons, provided the payment thereof is not at the time required by Section 3.1(a); (y) liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance, social security and other like laws; and (z) those liens, security interests or other encumbrances existing as of the date hereof. (g) Other Agreements - Debtor shall not become or be a party to any contract or agreement which at the time of becoming a party to such contract or agreement materially impairs Debtor's ability to perform under this Agreement, or under any other instrument, agreement or document to which Debtor is a party or by which it is or may be bound. (h) Change of Location or Jurisdiction of Organization - Debtor agrees that it shall not change its name or jurisdiction of organization without ten (10) days' prior written notice to Secured Party and that if its principal place of business changes from that indicated on the signature page of this Agreement, Debtor will immediately notify the Secured Party in writing of the additions or changes to the locations of the Collateral. 4 SECTION 4 - DEFAULT ------- 4.1 Events of Default: The occurrence of an Event of Default (as defined in the Note) shall constitute an event of default ("Event of Default") hereunder and Secured Party shall thereupon have the option to declare Debtor in default under this Agreement, and declare all liabilities, indebtedness and obligations of Debtor to Secured Party under this Agreement and the Note, whether matured or contingent, immediately due and payable including, but not limited to, interest, principal, expenses, advances to protect Secured Party's position and all of Secured Party's rights hereunder and thereunder, all without demand, notice, presentment or protest or further action of any kind. 4.2 Rights and Remedies on Default: In addition to all other rights, options and remedies granted to Secured Party under this Agreement (each of which is also then exercisable by Secured Party), Secured Party may, upon the occurrence of an Event of Default, exercise any other rights granted to it under the UCC and any other applicable law, including, without limitation, the following rights and remedies: (a) the right to take possession of, send notices, and collect directly the Collateral, with or without judicial process (including, without limitation the right to notify the United States postal authority to redirect all mail addressed to Debtor to an address designated by Secured Party); (b) by its own means or with judicial assistance, enter Debtor's premises and take possession of the Collateral, or render it unusable, or dispose of the Collateral on such premises without any liability for rent, storage, utilities or other sums, and Debtor shall not resist or interfere with such action; or (c) require Debtor at Debtor's expense to assemble all or any part of the Collateral and make it available to Secured Party at any place designated by Secured Party. Debtor hereby agrees that a notice received by it at least ten (10) days before the time of any intended public sale or of the time after which any private sale or other disposition of the Collateral is to be made, shall be deemed to be reasonable notice of such sale or other disposition. If permitted by applicable law, any perishable inventory or Collateral which threatens to speedily decline in value or which is sold on a recognized market may be sold immediately by Secured Party without prior notice to Debtor. Debtor covenants and agrees not to interfere with or impose any obstacle to Secured Party's exercise of its rights and remedies with respect to the Collateral, after the occurrence of an Event of Default hereunder. To the extent that applicable law imposes duties on Secured Party to exercise remedies in a commercially reasonable manner, Debtor acknowledges and agrees that it is not commercially unreasonable for Secured Party (a) to fail to incur expenses reasonably deemed significant by the Secured Party to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (b) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies against account debtors or other persons obligated on Collateral or to remove liens, security interests or other encumbrances on or any adverse claims against Collateral, (d) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral 5 through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other persons, whether or not in the same business as Debtor, for expressions of interest in acquiring all or any portion of the Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature, (h) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties, (k) to purchase insurance or credit enhancements to insure Secured Party against risks of loss, collection or disposition of Collateral or to provide to Secured Party a guaranteed return from the collection or disposition of Collateral, or (l) to the extent deemed appropriate by Secured Party, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Secured Party in the collection or disposition of any of the Collateral. Debtor acknowledges that the purpose of this paragraph is to provide non-exhaustive indications of what actions or omissions by Secured Party would not be commercially unreasonable in Secured Party's exercise of remedies against the Collateral and that other actions or omissions by Secured Party shall not be deemed commercially unreasonable solely on account of not being indicated in this paragraph. Without limitation upon the foregoing, nothing contained in this paragraph shall be construed to grant any rights to Debtor or to impose any duties on Secured Party that would not have been granted or imposed by this Agreement or by applicable law in the absence of this paragraph. 4.3 Nature of Remedies: Secured Party shall have the right to proceed against all or any portion of the Collateral in any order and may apply such Collateral to the liabilities and obligations of Debtor to Secured Party in any order. All rights and remedies granted Secured Party hereunder and under any agreement referred to herein, or otherwise available at law or in equity, shall be deemed concurrent and cumulative, and not alternative remedies, and Secured Party may proceed with any number of remedies at the same time until all existing and future liabilities and obligations of Debtor to Secured Party, are satisfied in full. The exercise of any one right or remedy shall not be deemed a waiver or release of any other right or remedy, and Secured Party, upon the occurrence of an Event of Default, may proceed against Debtor, and/or the Collateral, at any time, under any agreement, with any available remedy and in any order. SECTION 5 - MISCELLANEOUS ------------- 5.1 Governing Law: This Agreement, and all related agreements and documents, and all matters arising hereunder or related hereto, shall be governed by and construed in accordance with the laws of the State of New York, without regard to its otherwise applicable principles of conflicts of laws. The provisions of this Agreement and other agreements and documents referred to herein are to be deemed severable, and the invalidity or unenforceability of any provision shall not affect or impair the remaining provisions which shall continue in full force and effect. 5.2 Waiver: (a) No omission or delay by Secured Party in exercising any right or power under this Agreement or any other document will impair such right or power or be construed to be a waiver of any default, or Event of Default or an acquiescence therein, and any single or partial exercise of any such right or power will not preclude other or further exercise thereof or the exercise of any other right, and 6 no waiver of Secured Party's rights hereunder will be valid unless in writing and signed by Secured Party, and then only to the extent specified. (b) Debtor releases Secured Party, its agents, administrators and executors, its officers, employees and agents, of and from any claims for loss or damage resulting from acts or conduct of any or all of them arising through the date hereof, unless caused solely by willful misconduct or gross negligence. 5.3 Modification: No modification hereof or any agreement referred to herein shall be binding or enforceable unless in writing and signed on behalf of the party against whom enforcement is sought. 5.4 Signatories: Each individual signatory hereto represents and warrants that he is duly authorized to execute this Agreement on behalf of his principal and that he executes the Agreement in such capacity and not as a party. 5.5 Successors and Assigns: All provisions herein shall inure to, become binding upon the successors, representatives, trustees, administrators, executors, heirs and assigns of the parties hereto. 5.6 Consent to Jurisdiction: Debtor irrevocably consents to the exclusive jurisdiction of the federal courts or the state courts of the State of New York sitting in the Borough of Manhattan in connection with any and all actions and proceedings whether arising hereunder or under any other agreement or undertaking and irrevocably agrees to service of process to the address of Debtor set forth herein by certified mail, return receipt requested. 5.7 WAIVER OF JURY TRIAL: DEBTOR AND SECURED PARTY HEREBY WAIVE ANY AND ALL RIGHTS ANY MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION COMMENCED BY OR AGAINST SECURED PARTY WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO. 5.8 No Marshalling. Secured Party shall not be required to marshal any present or future collateral security (including but not limited to this Agreement and the Collateral) for, or other assurances of payment of, the obligations (or any of them) secured hereunder or to resort to such collateral security or other assurances of payment in any particular order, and all of its rights hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising. To the extent that it lawfully may, Debtor hereby agrees that it will not invoke any law relating to the marshalling of collateral which might cause delay in or impede the enforcement of Secured Party's rights under this Agreement or under any other instrument creating or evidencing any of the obligations secured hereunder or under which any of such obligations is outstanding or by which any of such obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, Debtor hereby irrevocably waives the benefits of all such laws. 5.9 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered by hand, sent by facsimile transmission with confirmation of receipt, sent via a reputable overnight courier service with confirmation of receipt requested, or mailed by registered or certified mail (postage prepaid and return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like 7 notice), and shall be deemed given on the date on which delivered by hand or otherwise on the date of receipt as confirmed: To GMTH or the Debtor: True To Form, Limited 90 Grove Street, Suite 201 Ridgefield, Connecticut 06877 Attn: Michael Sheppard Facsimile: (203)431-8304 With a copy to: Foley Hoag LLP 155 Seaport Boulevard Boston, Massachusetts 02210 Attn: David A Broadwin, Esq. Facsimile: (617) 832-7000 To the Secured Party: Mark Allen 91 French Avenue Braintree, MA 02184 PH: 781.848.1174 FX: 781.848.1175 With a copy to: Samuel Krieger Krieger & Prager LLP 39 Broadway New York, NY 10006 Facsimile: (212 ) 363-2999 [SIGNATURES TO FOLLOW ON NEXT PAGE] 8 IN WITNESS WHEREOF, the undersigned parties have executed this Agreement the day and year first above written. TRUE TO FORM, LIMITED By: /s/ Michael Sheppard ------------------------------- Name/Title: Michael Sheppard, Treasurer Acknowledged and Accepted: /s/ Mark J. Allen - ------------------------------ Mark Allen GLOBAL MATRECHS, INC. By: /s/ Michael Sheppard ------------------------------------ Name/Title: Michael Sheppard, President 9 EX-10.3 5 exhibit10-3_13187.txt GUARANTY EXHIBIT 10.3 ------------ GUARANTY -------- THIS GUARANTY, made and entered into as of the 31st day of December, 2004, is by Global Matrechs, Inc. (the "Guarantor"), a Delaware corporation having a principal place of business at 90 Grove Street, Ridgefield Connecticut 06877 to Mark T. Allen, residing at 29 Loring Drive, Norwell, Massachusetts 02061, (together with with any legal representatives, heirs, successors and assigns to become holders of the hereinafter described Obligations referred to herein individually and collectively as the "Obligee"). W I T N E S S E T H: -------------------- WHEREAS,Obligee has extended credit to True To Form, Limited ("Debtor") as evidenced by that certain Secured Note dated as of December 31, 2004 (as amended, restated, modified, or replaced from time to time, the "Note"), in connection with the merger of True to Form, Limited , a Massachusetts corporation and TTF Acquisition Corp., a wholly owned subsidiary of Guarantor. To induce Obligee to extend credit to Debtor, Guarantor has agreed to guarantee the Obligations, as hereinafter defined and executes and delivers this Guarantee to Secured Party. All capitalized terms used herein and not otherwise defined shall have the same meanings assigned to such terms in the Note or the Security Agreement from Debtor to Obligee of even date herewith. WHEREAS, pursuant to the Agreement and Plan of Merger, the Guarantor has agreed to make certain other payments and perform certain obligations to the Obligee (together with the Note referred to herein collectively as the "Obligations"); and WHEREAS, in order to secure the Obligations, the Obligee is requiring the instant Guaranty by the Guarantor; and WHEREAS, the Guarantor expects to derive an advantage from the Obligee's deferral of the Merger Consideration and extension of credit to the Debtor and is therefore willing to enter into this Guaranty, NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, and in consideration of the premises as aforesaid, the Guarantor, intending to be legally bound, hereby agrees, guarantees and covenants as follows: 1. The Guarantor hereby absolutely and unconditionally guarantees (a) the full and prompt payment of all principal, interest and any other sum due and payable pursuant to the terms of the Obligations, (b) the due and punctual performance and observance of all the terms and conditions of the Obligations, and (c) to pay the costs of collection, including, without limitation, reasonable legal expenses and reasonable attorneys' fees, paid or incurred by the Obligee in collecting and/or enforcing the Obligations, whether at maturity or earlier by reason of acceleration or otherwise, as demanded by the Obligee and, in case of one or more extensions of time, or renewals or modifications, in whole or in part, of the Obligations, that the same will be promptly paid and/or performed when due and as required according to each such extension, renewal or modification, whether at maturity or earlier by reason of acceleration or otherwise. 2. This is a guaranty of payment and not of collection. The liability of the Guarantor on this Guaranty shall be direct and immediate and not conditioned or contingent upon the pursuit of any remedies against the Debtor, any other guarantor of all or part of the Obligations (or any other obligation of the Debtor) or any other person, nor upon the pursuit of any remedies against any collateral available to the Obligee. The Guarantor waives any right to require that an action be brought against the Debtor or any other person or to require that resort be had to any security or collateral available to the Obligee. Upon failure of the Guarantor to pay promptly all amounts due under this Guaranty upon demand, the Guarantor agrees to pay all reasonable legal and other costs and expenses, including, without limitation, reasonable attorneys' fees, paid or incurred by the Obligee in connection with the enforcement of this Guaranty. 3. The Guarantor agrees that whenever at any time or from time to time the Guarantor shall make any payment to the Obligee hereunder on account of any obligations guaranteed hereunder, the Guarantor shall notify the Obligee in writing that such payment is made under this Guaranty for such purpose. 4. The Obligee may assign this Guaranty or any of the Obligee's rights and powers hereunder and may assign and/or deliver to any such assignee any of the security for the Obligations and, in the event of such assignment, the assignee hereof or of such rights and powers, shall have the same rights and remedies as if originally named herein in place of the Obligee. 5. The Guarantor agrees and consents that the whole or any part of any security which may now or hereafter be held for the indebtedness of the Debtor may be exchanged, compromised, substituted or surrendered at any time or from time to time; that the time or place of payment of the debt of the Debtor secured hereby may be changed or extended, in whole or in part, to a time certain or otherwise, and may be renewed, modified, increased, decreased, or accelerated in whole or in part; that the Debtor may be granted indulgences generally; that any of the provisions of the Obligations or other instruments evidencing any indebtedness of the Debtor or any security therefor may be modified or waived; that any party liable for the payment thereof (including, without limitation, any other co-guarantor) may be granted indulgences or released, all without notice to or further assent by the Guarantor, who shall remain bound notwithstanding any exchange, compromise, surrender, extension, renewal, increase or decrease in indebtedness, acceleration, modification, indulgence or release. 6. Notice of acceptance of this Guaranty and of the incurring of any and all of the Obligations of the Debtor hereinbefore mentioned is hereby waived by the Guarantor. The Guarantor also hereby waives presentment, demand, protest, notice of protest and notice of dishonor of any Obligation guaranteed hereby. This Guaranty and all rights, obligations and liabilities arising hereunder shall be construed in accordance with the laws of the State of New York. For purposes of settling any disputes hereunder, the Obligee and the Guarantor hereby submit themselves to the jurisdiction of any court, federal or state, sitting in New York County, New York, and hereby further waive any and all objections as to the venue of any such court and hereby further waive trial by jury. 7. No set-off, counterclaim (except for such counterclaim which, unless asserted, is waived), reduction or diminution of any obligation (other than performance by the Guarantor in full of his obligation hereunder) shall be available to the Guarantor in any action brought by the Obligee against the Guarantor hereunder. 8. If any provision of this Guaranty shall be held to be invalid by any court of competent jurisdiction, the invalidity of such provision shall not affect any of the remaining provisions, and this Guaranty shall be enforced to the maximum extent permitted by law. 9. No omission or delay on the Obligee's part in exercising any right hereunder or in taking any action to collect or enforce payment of any Obligations guaranteed hereby shall constitute a waiver of any such right or release or affect the obligations of Guarantor hereunder. 10. This Guaranty shall bind the heirs, executors, adminis trators, successors and assigns of the Guarantor. So long as the Debtor's Obligations to the Obligee have not been paid in full, no payment by the Guarantor pursuant to the provisions hereof shall entitle the Guarantor, by subrogation to the right of the Obligee or otherwise, to any payment by the Debtor or out of the property of the Debtor. A subsequent guaranty by the Guarantor or any other guarantor of Debtor's Obligations guaranteed and secured hereby shall not be deemed to be in lieu of or to supersede or terminate this Guaranty unless agreed to in writing by the Obligee; and, in the event the Guarantor, or any other guarantors, have given to the Obligee a previous guaranty or guaranties, this Guaranty shall be construed to be an additional or supplementary guaranty, and not to be in lieu thereof or to terminate such previous guaranty or guaranties unless expressly so provided herein. 11. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered by hand, sent by facsimile transmission with confirmation of receipt, sent via a reputable overnight courier service with confirmation of receipt requested, or mailed by registered or certified mail (postage prepaid and return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice), and shall be deemed given on the date on which delivered by hand or otherwise on the date of receipt as confirmed: To the Guarantor: Global Matrechs, Inc. 90 Grove Street, Suite 201 Ridgefield, Connecticut 06877 Attn: Michael Sheppard Facsimile: (203) 431-8304 With a copy to: Foley Hoag LLP 155 Seaport Boulevard Boston, Massachusetts 02210 Attn: David A Broadwin, Esq. Facsimile: (617) 832-7000 To the Obligee: Mark Allen 91 French Avenue Braintree, MA 02184 PH: 781.848.1174 FX: 781.848.1175 With a copy to: Samuel Krieger Krieger & Prager LLP 39 Broadway New York, NY 10006 Facsimile: (212 ) 363-2999 IN WITNESS WHEREOF, the Guarantor has duly executed this Guaranty as of the 31st day of December, 2004 GLOBAL MATRECHS, INC. By: /s/ Michael Sheppard ---------------------------- Michael Sheppard, President EX-10.4 6 exhibit10-4_13187.txt COLLATERAL PLEDGE AGREEMENT EXHIBIT 10.4 ------------ COLLATERAL PLEDGE AGREEMENT --------------------------- This Collateral Pledge Agreement ("Agreement") dated as of December 31, 2004 is made by Global Matrechs, Inc., a Delaware corporation ("Pledgor") in favor of Mark Allen ("Secured Party"). BACKGROUND ---------- A. Secured Party has extended credit to True To Form, Limited ("Debtor") as evidenced by that certain Secured Note dated as of December 31, 2004 (as amended, restated, modified, or replaced from time to time, the "Note"), in connection with the merger of in connection with the merger of True to Form, Limited , a Massachusetts corporation and TTF Acquisition Corp., a wholly owned subsidiary of Pledgor. To induce Secured Party to extend credit to Debtor, Pledgor has guaranteed the Note and executes and delivers this Agreement to Secured Party. All capitalized terms used herein and not otherwise defined shall have the same meanings assigned to such terms in the Note or the Security Agreement, as hereinafter defined. B. This Agreement is given and is intended to provide additional security for the Obligations as defined in the Security Agreement of even date herewith among Debtor and Secured Party (the "Security Agreement"). NOW THEREFORE, for other good and sufficient consideration, the receipt of which is hereby acknowledged, Pledgor, intending to be legally bound hereby, covenants and agrees as follows: 1. Pledgor, for the purpose of granting a continuing lien and security interest to secure the Obligations, does hereby assign, pledge, hypothecate, deliver and set over to Secured Party, its successors and assigns, 100% of its interest in all of the shares of capital stock of Debtor , as more specified in Schedule I, whether now owned or hereafter acquired by Pledgor or in which Pledgor now or hereafter has any rights, options or warrants, together with all certificates representing such shares and all rights (but none of the obligations) under or arising out of the applicable organizational documents of such corporations, together with any additions, exchanges, replacements and substitutions therefor, dividends and distributions with respect thereto, and the proceeds thereof (collectively, the "Pledged Collateral"). 2. The pledge and security interest described herein shall continue in effect to secure all Obligations from time to time incurred or arising unless and until all Obligations have been indefeasibly paid and satisfied in full. 3. Pledgor, severally hereby represents and warrants that: (a) Except as pledged herein, Pledgor has not sold, assigned, transferred, pledged or granted any option or security interest in or otherwise hypothecated the Pledged Collateral in any manner whatsoever and the Pledged Collateral is pledged herewith free and clear of any and all liens, security interests, encumbrances, claims, pledges, restrictions, legends, and options, except for Permitted Liens, as defined in the Security Agreement. (b) Pledgor has the full power and authority to execute, deliver, and perform under this Agreement and to pledge the Pledged Collateral hereunder. (c) This Agreement constitutes the valid and binding obligation of Pledgor, enforceable in accordance with its terms, and the pledge of the Pledged Collateral referred to herein is not in violation of and shall not create any default under any agreement, undertaking or obligation of Pledgor. (d) Pledgor is pledging hereunder all of the Pledgor's interest and ownership in Debtor. (e) Contemporaneously with the execution hereof, Pledgor is delivering to Secured Party all certificates representing or evidencing the Pledged Collateral, accompanied by duly executed instruments of transfer or assignments in blank, to be held by Secured Party in accordance with the terms hereof. (f) The Secured Party is authorized to file such UCC financing statements as it may deem necessary to perfect the pledge anticipated hereby. 4. If an Event of Default (as defined in the Note) occurs, then Secured Party may, at its sole option, exercise from time to time with respect to the Pledged Collateral any and/or all rights and remedies available to it hereunder, under the Uniform Commercial Code as adopted in the State of Delaware ("UCC"), or otherwise available to it, at law or in equity, including, without limitation, the right to dispose of the Pledged Collateral at public or private sale(s) or other proceedings, and Pledgor agrees that, if permitted by law, Secured Party or its nominee may become the purchaser at any such sale(s). 5. (a) In addition to all other rights granted to Secured Party herein or otherwise available at law or in equity, Secured Party shall have the following rights, each of which may be exercised at Secured Party's sole discretion (but without any obligation to do so), at any time following the occurrence of an Event of Default under the Note, without further consent of Pledgor: (i) transfer the whole or any part of the Pledged Collateral into the name of itself or its nominee for the purpose of selling the same, or to conduct a sale of the Pledged Collateral pursuant to the UCC or pursuant to any other applicable law; (ii) vote the Pledged Collateral; (iii) notify the persons obligated on any of the Pledged Collateral to make payment to Secured Party of any amounts due or to become due thereon; and (iv) release, surrender or exchange any of the Pledged Collateral at any time, or to compromise any dispute with respect to the same. Secured Party may proceed against the Pledged Collateral, or any other collateral securing the Obligations, in any order, and against Pledgor and any other obligor, jointly and/or severally, in any order to satisfy the Obligations. Each Pledgor waives and releases any right to require Secured Party to first collect any of the Obligations secured hereby from any other collateral of Pledgor, any other Pledgor or any other party securing the Obligations under any theory of marshalling of assets, or otherwise. All rights and remedies of Secured Party are cumulative, not alternative. (b) Pledgor hereby irrevocably appoints Secured Party its attorney-in-fact, subject to the terms hereof, following the occurrence of an Event of Default under the Note, at Secured Party's option, (i) to effectuate the transfer of the Pledged Collateral on the books of the issuer thereof to the name of Secured Party or to the name of Secured Party's nominee, designee or 2 assignee; (ii) to endorse and collect checks payable to such Pledgor representing distributions or other payments on the Pledged Collateral; and (iii) to carry out the terms and provisions hereof. 6. The proceeds of any Pledged Collateral received by Secured Party at any time, whether from the sale of Pledged Collateral or otherwise, may be applied to or on account of the Obligations and in such order as Secured Party may elect. In addition, Secured Party may, in its discretion, apply any such proceeds to or on account of the payment of all costs, fees and expenses (including, without limitation, attorneys' fees) which may be incurred by Secured Party. 7. Pledgor recognizes that Secured Party may be unable to effect, or may effect only after such delay which would adversely affect the value that might be realized from the Pledged Collateral, a public sale of all or part of the Pledged Collateral by reason of certain prohibitions contained in the Securities Act of 1933, as amended ("Securities Act"), and may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof. Pledgor agrees that any such private sale may be at prices and on terms less favorable to Secured Party or the seller than if sold at public sales, and therefore recognizes and confirms that such private sales shall not be deemed to have been made in a commercially unreasonable manner solely because they were made privately. Pledgor agrees that Secured Party has no obligation to delay the sale of any such securities for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act. 8. In the event that any stock dividend, reclassification, readjustment or other change is made or declared in the capital structure of Debtor or any option included within the Pledged Collateral is exercised, any and all new, substituted or additional shares, or other securities, issued by reason of any such change or exercise, shall be delivered to and held by Secured Party under the terms hereof in the same manner as the Pledged Collateral originally pledged hereunder. No distribution may be paid to or retained by Pledgor unless expressly permitted in writing by the Note. 9. So long as no Event of Default has occurred under the Note, and, until Secured Party notifies Pledgor in writing of the exercise of its rights hereunder, Pledgor shall retain the sole right to vote the Pledged Collateral and exercise all rights of ownership with respect to all corporate questions for all purposes not inconsistent with the terms hereof. 10. Secured Party shall have no obligation to take any steps to preserve, protect or defend the rights of Pledgor or Secured Party in the Pledged Collateral against other parties. Secured Party shall have no obligation to sell or otherwise deal with the Pledged Collateral at any time for any reason, whether or not upon request of any Pledgor, and whether or not the value of the Pledged Collateral, in the opinion of Secured Party or Pledgor, is more or less than the aggregate amount of the Obligations secured hereby, and any such refusal or inaction by Secured Party shall not be deemed a breach of any duty which Secured Party may have under law to preserve the Pledged Collateral. Except as provided by applicable law, no duty, obligation or responsibility of any kind is intended to be delegated to or assumed by Secured Party at any time with respect to the Pledged Collateral. 3 11. To the extent Secured Party is required by law to give Pledgor prior notice of any public or private sale, or other disposition of the Pledged Collateral, Pledgor agrees that ten (10) days prior written notice to Pledgor shall be a commercially reasonable and sufficient notice of such sale or other intended disposition. 12. Pledgor shall indemnify, defend and hold harmless Secured Party from and against any and all claims, losses and liabilities resulting from any breach by Pledgor of Pledgor's, or any of their, representations and covenants under this Agreement. 13. Pledgor, in its capacity as a pledgor hereunder, hereby waives notice of (a) acceptance of this Agreement and (b) demand and default hereunder. 14. This Agreement shall remain in full force and effect and shall not be limited, impaired or otherwise affected in any way by reason of (a) any delay in making demand on Pledgor for, or delay in enforcing or failure to enforce, performance or payment of Pledgor's Obligations, (b) any failure, neglect or omission on Secured Party's part to perfect any lien upon, protect, exercise rights against, or realize on, any property of Pledgor or any other party securing the Obligations, (c) any failure to obtain, retain or preserve, or the lack of prior enforcement of, any rights against any person or persons (including Pledgor) or in any property, (d) the invalidity or unenforceability of any Obligations or rights in any collateral, (e) the existence of nonexistence of any defenses which may be available to Pledgor with respect to the Obligations, or (f) the commencement of any bankruptcy, reorganization, liquidation, dissolution or receivership proceeding or case filed by or against Pledgor. 15. Pledgor covenants and agrees that Pledgor shall not, without the prior written consent of Secured Party, sell, encumber or grant any lien, security interest or option on or with respect to any of the Pledged Collateral. 16. Pledgor hereby authorizes and instructs each issuer of the Pledged Collateral to comply with any instruction received by it from Secured Party in writing that (a) states that an Event of Default has occurred and (b) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from Pledgor, and Pledgor agrees that each such issuer shall be fully protected in so complying. 17. Any failure of or delay by Secured Party to exercise any right or remedy hereunder shall not be construed as a waiver of the right to exercise the same or any other right or remedy at any other time. 18. This Agreement constitutes the entire agreement between the parties hereto regarding the subject matter hereof and may be modified only by a written instrument signed by Pledgor and Secured Party. 19. This Agreement is made in and shall be governed by and construed in accordance with the laws of the State of New York, and the provisions hereof shall be deemed severable in the event of the invalidity of any provision. Pledgor irrevocably consents to the exclusive jurisdiction of the federal courts or the state courts of the State of New York sitting in the Borough of Manhattan 4 in connection with any and all actions and proceedings whether arising hereunder or under any other agreement or undertaking and irrevocably agrees to service of process to the address of Debtor set forth herein by certified mail, return receipt requested. 20. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered by hand, sent by facsimile transmission with confirmation of receipt, sent via a reputable overnight courier service with confirmation of receipt requested, or mailed by registered or certified mail (postage prepaid and return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice), and shall be deemed given on the date on which delivered by hand or otherwise on the date of receipt as confirmed: To the Pledgor: Global Matrechs, Inc. 90 Grove Street, Suite 201 Ridgefield, Connecticut 06877 Attn: Michael Sheppard Facsimile: (203) 431-8304 With a copy to: Foley Hoag LLP 155 Seaport Boulevard Boston, Massachusetts 02210 Attn: David A Broadwin, Esq. Facsimile: (617) 832-7000 To the Secured Party: Mark Allen 91 French Avenue Braintree, MA 02184 PH: 781.848.1174 FX: 781.848.1175 With a copy to: Samuel Krieger Krieger & Prager LLP 39 Broadway New York, NY 10006 Facsimile: (212 ) 363-2999 21. This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns. 5 22. PLEDGOR HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE NOTE, THE OBLIGATIONS OR THE PLEDGED COLLATERAL. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 6 Dated as of the date and year first set forth above. GLOBAL MATRECHS, INC. By: /s/ Michael Sheppard ------------------------ Name: Michael Sheppard Title: President Acknowledged and Accepted: /s/ Mark J. Allen - ----------------------- Mark Allen SCHEDULE I Security Number of Shares Certificate Number True To Form, Limited 100 1 Common Stock 7 -----END PRIVACY-ENHANCED MESSAGE-----