0001125282-01-502418.txt : 20011107
0001125282-01-502418.hdr.sgml : 20011107
ACCESSION NUMBER: 0001125282-01-502418
CONFORMED SUBMISSION TYPE: 8-K
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 20011023
ITEM INFORMATION: Acquisition or disposition of assets
ITEM INFORMATION: Financial statements and exhibits
FILED AS OF DATE: 20011102
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: SURGE COMPONENTS INC
CENTRAL INDEX KEY: 0000747540
STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065]
IRS NUMBER: 112602030
STATE OF INCORPORATION: NY
FISCAL YEAR END: 1130
FILING VALUES:
FORM TYPE: 8-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-14188
FILM NUMBER: 1774400
BUSINESS ADDRESS:
STREET 1: 1016 GRAND BLVD
CITY: DEER PARK
STATE: NY
ZIP: 11729
BUSINESS PHONE: 5165951818
MAIL ADDRESS:
STREET 1: SURGE COMPONENTS INC
STREET 2: 1016 GRAND BLVD
CITY: DEER PARK
STATE: NY
ZIP: 11729
8-K
1
b314552_8k.txt
CURRENT REPORT
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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):
October 23, 2001
SURGE COMPONENTS, INC.
(Exact name of registrant as specified in its charter)
New York 0-14188 11-2602030
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
95 E. Jefryn Blvd.
Deer Park, New York 11729
(Address of principal executive
offices including zip code)
(631) 595-1818
(Registrant's telephone number,
including area code)
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
On October 23, 2001, Surge Components, Inc. ("Surge") completed a stock
exchange transaction with David Bird, Adam J. Epstein, Chris Harano, Michael
Patchen and Thomas Taulli, such individuals being the former shareholders (the
"Shareholders") of MailEncrypt, Inc. ("MailEncrypt"), the company with whom
Surge had entered into an acquisition agreement, subject to rescission, on
November 16, 2000. Such acquisition agreement provided, among other things, that
if the shareholders of Surge did not approve the conversion into common stock of
Surge's Series B Preferred Stock issued in the MailEncrypt acquisition on or
before July 1, 2001, then the Shareholders had the option, exercisable through
August 15, 2001, to rescind the transaction and reacquire MailEncrypt from
Surge. The Shareholders did not exercise such option. However, Surge and the
Shareholders continued to negotiate the terms of such rescission subsequent to
August 15, culminating in a stock exchange transaction based substantially on
the rescission provisions set forth in the original acquisition agreement. The
rescission was completed pursuant to a Stock Exchange Agreement, dated as of
October 23, 2001 (the "Agreement"), among Surge and the Shareholders. Pursuant
to the Agreement, Surge exchanged 100 shares of common stock of MailEncrypt,
which represented all of the issued and outstanding capital stock of
MailEncrypt, for 182,139.797 shares of Series B Preferred Stock of Surge which
had been issued to the Shareholders in the MailEncrypt acquisition transaction.
Also, approximately $1.1 million of debt of MailEncrypt was exchanged for
7.31979 shares of MailEncrypt common stock, representing approximately 6.8% of
MailEncrypt, which was issued to Surge based substantially on the rescission
provisions set forth in the original acquisition agreement. Surge also made
payments of $30,000 to each of David Bird and Michael Patchen. In addition, for
a two year period commencing on the closing date, Surge has agreed not to
directly or indirectly engage in the electronic mail encryption business, except
that Surge may sell or provide electronic components to one or more companies
that are engaged in such business.
The description of the transaction contained herein is qualified in its
entirety by reference to the Agreement (Exhibit 2.1).
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Description
2.1 Stock Exchange Agreement, dated as of October 23, 2001, by and among
Surge Components, Inc. and David Bird, Adam J. Epstein, Chris Harano, Michael
Patchen and Thomas Taulli.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
SURGE COMPONENTS, INC.
(Registrant)
By: /s/ Ira Levy
-----------------------
Dated: November 1, 2001 Ira Levy, President
EXHIBIT INDEX
Exhibit No. Description
2.1 Stock Exchange Agreement, dated as of October 23, 2001, by and among
Surge Components, Inc. and David Bird, Adam J. Epstein, Chris Harano, Michael
Patchen and Thomas Taulli.
EX-2.1
3
b314552_ex2-1.txt
STOCK EXCHANGE AGREEMENT
Exhibit 2.1
STOCK EXCHANGE AGREEMENT
This STOCK EXCHANGE AGREEMENT, dated as of October 23, 2001 (this
"Agreement"), is by and among Surge Components, Inc., a New York corporation
("Surge"), and David Bird ("Bird"), Adam J. Epstein ("Epstein"), Chris Harano
("Harano"), Michael Patchen ("Patchen") and Thomas Taulli ("Taulli") (Bird,
Epstein, Harano, Patchen and Taulli being each individually referred to as a
"Shareholder" and collectively referred to as the "Shareholders").
RECITALS:
WHEREAS, the Shareholders collectively own an aggregate of
182,139.797 shares (each, a "Series B Preferred Share") of the Voting
Redeemable Convertible Series B Preferred Stock, par value $.001 per
share (the "Series B Preferred Stock"), of Surge, which Series B Shares
constitute all of the shares of Series B Preferred Stock issued and
outstanding as of the date of this Agreement; and
WHEREAS, Surge owns 100 shares (each, a "Company Common
Share") of the common stock, par value $.01 per share common stock (the
"Company Common Stock"), of MailEncrypt, Inc., a Delaware corporation
(the "Company"), which 100 Company Common Shares constitute all of the
shares of Company Common Stock issued and outstanding as of the date of
this Agreement; and
WHEREAS, the Shareholders desire to acquire from Surge the 100
Company Common Shares currently owned by Surge, upon the terms and
conditions set forth in this Agreement; and
WHEREAS, Surge desires to sell, assign and transfer to the
Shareholders the 100 Company Common Shares currently owned by Surge,
upon the terms and conditions set forth in this Agreement; and
WHEREAS, Surge desires to acquire from the Shareholders the
aggregate 182,139.797 Series B Preferred Shares currently owned by the
Shareholders, upon the terms and conditions set forth in this
Agreement; and
WHEREAS, the Shareholders desire to sell, assign and transfer
to Surge the aggregate 182,139.797 Series B Preferred Shares owned by
the Shareholders, upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties and covenants herein contained, and
other good and valuable consideration, the adequacy and receipt thereof is
hereby acknowledged, the parties hereto do hereby agree as set forth below.
ARTICLE I - THE PURCHASES AND SALES
1.1. Sale and Purchase of Company Common Shares. At the Closing (as
hereinafter defined), in accordance with the provisions of this Agreement and
applicable law, as consideration for the sale, assignment, transfer and
conveyance by the Shareholders of the aggregate 182,139.797 Series B Preferred
Shares in accordance with the provisions of section 1.2 below, Surge will sell,
assign, transfer and convey to the Shareholders, and the Shareholders will
purchase from Surge, the Company Common Shares as follows:
Number of
Company Common
Name of Shareholder Shares to Be Purchased
------------------- ----------------------
David Bird.................................. 35.35049
Adam J. Epstein............................. 20.46606
Chris Harano................................ 2.12102
Michael Patchen............................. 35.35049
Thomas Taulli............................... 6.71194
-----------
Total........... 100.00000
1.2. Sale and Purchase of Series B Preferred Shares. At the Closing, in
accordance with the provisions of this Agreement and applicable law, as
consideration for the sale, assignment, transfer and conveyance by Surge of the
100 Company Common Shares in accordance with the provisions of section 1.1
above, the Shareholders will sell, assign, transfer and convey to Surge, and
Surge will purchase from the Shareholders, the Series B Preferred Shares as
follows:
Number of
Series B Preferred
Name of Shareholder Shares to Be Sold
------------------- -----------------
David Bird....................................... 64,387.295
Adam J. Epstein.................................. 37,276.855
Chris Harano..................................... 3,863.238
Michael Patchen.................................. 64,387.295
Thomas Taulli.................................... 12,225.114
------------
Total............... 182,139.797
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF SURGE
Surge represents, warrants and acknowledges to and covenants and agrees
with the Shareholders as set forth in this Article II.
2.1. Corporate Status. Surge (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
(ii) has all necessary corporate power and authority to own, operate or lease
the properties and assets now owned, operated or leased by Surge and to carry on
the business of Surge, as it is now being conducted, and (iii) is duly licensed
or qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction wherein the character of the properties owned or
leased by Surge and/or the nature of the activities conducted by Surge makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified and in good standing would not prevent Surge from
performing any of its material obligations under this Agreement and would not
have a material adverse effect on the business, operations or financial
condition of Surge (a "Material Adverse Effect").
2.2. Authority of Agreement. Surge has the power and authority to
accept, execute and deliver this Agreement and to carry out its obligations
hereunder; and the execution, delivery and performance by Surge of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Surge and this
Agreement constitutes the valid and legally binding obligations of Surge
enforceable against Surge in accordance with its terms, except as the same may
be limited by bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally now or hereafter in effect and
subject to the application of equitable principles and the availability of
equitable remedies.
2.3. Consents and Approvals; No Conflict.
(a) The acceptance, execution and delivery of this Agreement
by Surge does not, and the performance by Surge of its obligations
hereunder will not, require any consent, approval, authorization or
other action by, or filing with or notification to, any governmental or
regulatory authority, except where the failure to obtain such consent,
approval, authorization or action, or to make such filing or
notification, would not prevent Surge from performing any of its
material obligations under this Agreement and would not have a Material
Adverse Effect.
(b) The acceptance, execution, delivery and performance of
this Agreement by Surge and the other agreements and documents to be
executed, delivered and performed by Surge pursuant hereto and the
consummation of the transactions contemplated hereby and thereby by
Surge do not and will not conflict with, violate or result in a breach
or termination of any provision of, or constitute a default under (or
event which with the giving of notice or lapse of time, or both, would
become a default under) the Certificate of Incorporation or By-laws of
Surge or, except as would not prevent Surge from performing any of its
material obligations under this Agreement and would not have a Material
Adverse Effect, any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award applicable to Surge or give
to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any lien or encumbrance
on any of the assets or properties of Surge pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument relating to such assets or properties to
which Surge is a party or by which any of such assets or properties is
bound.
2.4. Absence of Litigation. No claim, action, proceeding or
investigation is pending which seeks to delay or prevent the consummation of the
transactions contemplated hereby or which would be reasonably likely to
adversely affect Surge's ability to consummate the transactions contemplated
hereby.
2.5. Extent of Offering. Subject in part to the truth and accuracy of
the Shareholders' representations set forth in Article III of this Agreement,
the offer, sale, assignment, transfer and conveyance of the 100 Company Common
Shares as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and are exempt or Surge has complied with registration requirements of each
state where the Company Common Shares are offered or sold, and Surge will not
take any action hereafter that would cause the loss of such exemption or
registration.
2.6 Accuracy of Reports and Information. Surge is in full compliance,
to the extent applicable, with all reporting obligations under Section 12(b) or
12 (g), as applicable, of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
2.7. SEC Filings/Full Disclosure. None of Surge's filings with the
Securities and Exchange Commission (the "Commission") since December 1, 2000
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; Surge
has, since December 1, 2000, timely filed all requisite forms, reports and
exhibits thereto with the Commission; and Surge's Annual Report on Form 10-KSB
for the year ended November 30, 2000, Surge's Quarterly Report on Form 10-QSB
for the quarters ended February 28, 2001and May 31, 2001, and Surge's Current
Reports on Form 8-K (Date of Reports: November 16, 2000, November 27, 2000,
December 4, 2000, January 11, 2001, January 15, 2001, July 25, 2001, August 13,
2001 and September 27, 2001) filed by Surge with the Commission (collectively,
the "SEC Reports") did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
2.8. Governmental Consent, etc. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on the
part of Surge is required in connection with the valid execution and delivery of
this Agreement, or the offer, sale or transfer of the 100 Company Common Shares,
or the consummation of any other transaction contemplated hereby.
2.9. No Present Intent to Transfer. Surge is not a party or subject to
or bound by any contract, undertaking, agreement or arrangement with any person
to sell, transfer or pledge the Company Common Shares, other than pursuant to
this Agreement, the Merger Agreement and Plan of Reorganization, dated as of
November 13, 2000, among Surge, the Company (then known as Mail Acquisition
Corp.), MailEncrypt.com, Inc. and the Shareholders (the "Merger Agreement"), or
the Agreement, dated as of March 6, 2001 (the "March 2001 Agreement"), among
Surge, the Company and the Shareholders.
2.10. Access to Information. Surge has had access to such information
regarding the business and finances of the Company, and has been provided the
opportunity to discuss with the Company's management the business, affairs and
financial condition of the Company and such other matters with respect to the
Company as would concern a reasonable person considering the transactions
contemplated by this Agreement and/or concerned with the operation of the
Company including, without limitation, pursuant to a meeting and/or discussions
with management of the Company.
2.11. Finders. The Company is not obligated, absolutely or
contingently, to any person for financial advice, a finder's fee, brokerage
commission, or other similar payment in connection with the transactions
contemplated by this Agreement.
2.12. Ownership and Validity of the Sale of the Company Common Shares.
(a) Surge is the lawful owner of each of the 100 Company
Common Shares to be sold, assigned, transferred and conveyed to the
Shareholders pursuant to section 1.1 above and has the full right,
power, and authority to sell, assign, transfer and convey to the
Shareholders such 100 Company Common Shares in accordance with the
terms of this Agreement; and the sale, assignment, transfer and
conveyance of such 100 Company Common Shares in accordance with the
terms of this Agreement will transfer good, valid and marketable title
to such 100 Company Common Shares free and clear of all liens,
encumbrances, claims or rights of every kind and nature whatsoever.
(b) Each of the 100 Company Common Shares to be sold,
assigned, transferred and conveyed to the Shareholders pursuant to
section 1.1 above is owned by Surge free and clear of any and all
restrictions, liens, claims, or encumbrances or rights of third parties
of any nature whatsoever.
(c) There are no existing options, warrants, calls, or
commitments on the part of Seller of any character relating to any of
the 100 Company Common Shares to be sold, assigned, transferred and
conveyed to the Shareholders pursuant to section 1.1 above, other than
pursuant to this Agreement, the Merger Agreement and the March 2001
Agreement.
(d) To the knowledge of Surge, (i) the 100 Company Shares
represent all of the issued and outstanding equity securities of the
Company and (ii) there are no existing options, warrants, calls or
commitments on the part of the Company of any character relating to the
issuance or sale of additional equity securities of the Company, other
than pursuant to this Agreement and the Stockholders Agreement. For the
purposes of this Agreement, the term "knowledge of Surge" shall mean
the actual knowledge of the directors and executive officers of Surge,
other than Epstein.
2.13. No Company Contracts in Breach. To the knowledge of Surge, the
Company is not in material breach of any agreement or contract, whether oral or
written, with any bona fide third party.
2.14. Nature of Representations. No representation, warranty, or
agreement made by Surge in this Agreement, the exhibits hereto, any document
referred to herein, or other instrument or disclosure furnished by Surge as
required by this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary to make
any statement, representation, warranty, or agreement not misleading. Surge
knows of no material fact or condition adversely affecting the value of the
Company Common Stock, Series B Preferred Stock or the assets of the Company or
Surge, whether owned or leased, nor the business operations of the Company or
Surge which has not been disclosed in writing to the Shareholders; Surge agrees
to disclose to the Shareholders prior to or on the Closing Date any fact,
information, document, or notice which would have an adverse effect on any
statement, covenant, representation, warranty, or agreement contained in this
Agreement, or any exhibit, list, certificate, schedule, or other instrument
required by this Agreement.
2.15. No Other Representations, Warranties, Covenants or Agreements of
Surge. Except as set forth in this Agreement, or the documents referred to
herein, Surge has not made any representation, warranty, covenant or agreement
with respect to the matters contained herein.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholders, severally and not jointly, represent and warrant to
Surge as set forth in this Article III.
3.1. Status. Each of the Shareholders is an individual having the legal
capacity to execute, deliver and perform the Shareholder's obligations under
this Agreement.
3.2. Authorization. This Agreement constitutes the valid and legally
binding obligations of each of the Shareholders enforceable against each of the
Shareholders in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally now or hereafter in effect and subject to the
application of equitable principles and the availability of equitable remedies.
3.3. Consents and Approvals; No Conflict.
(a) The acceptance, execution and delivery of this Agreement
by each of the Shareholders does not, and the performance by each
Shareholder of the Shareholder's obligations hereunder will not,
require any consent, approval, authorization or other action by, or
filing with or notification to, any governmental or regulatory
authority, except where the failure to obtain such consent, approval,
authorization or action, or to make such filing or notification, would
not prevent the Shareholder from performing any of the Shareholder's
material obligations under this Agreement and would not have a Material
Adverse Effect.
(b) The acceptance, execution, delivery and performance of
this Agreement by each of the Shareholders and the other agreements and
documents to be executed, delivered and performed by each Shareholder
pursuant hereto and the consummation of the transactions contemplated
hereby and thereby by the Shareholder does not and will not conflict
with, violate or result in a breach or termination of any provision of,
or constitute a default under (or event which with the giving of notice
or lapse of time, or both, would become a default under) or, except as
would not prevent the Shareholder from performing any of the
Shareholder's obligations under this Agreement and would not have a
Material Adverse Effect, any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable to the
Shareholder or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any lien
or encumbrance on any of the assets or properties of the Shareholder
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument relating to such
assets or properties to which the Shareholder is a party or by which
any of such assets or properties is bound.
3.4. Absence of Litigation. No claim, action, proceeding or
investigation is pending which seeks to delay or prevent the consummation of the
transactions contemplated hereby or which would be reasonably likely to
adversely affect any of the Shareholders' ability to consummate the transactions
contemplated hereby or which would have a Material Adverse Effect.
3.5. Extent of Offering. Subject in part to the truth and accuracy of
Surge's representations set forth in Article II of this Agreement, the offer,
sale, assignment, transfer and conveyance of the aggregate 182,139.797 Series B
Preferred Shares as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act and are exempt or the
Shareholders have complied with registration requirements of each state where
the Series B Preferred Shares are offered or sold, and the Shareholders will not
take any action hereafter that would cause the loss of such exemption or
registration.
3.6 Receipt of Disclosures. Each of the Shareholders acknowledges
receipt of copies of the SEC Reports, and each Shareholder has read the SEC
Reports, including all exhibits thereto, and understands the contents thereof.
3.7. Governmental Consent, etc. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on the
part of any of the Shareholders is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or transfer of the
aggregate 182,139.797 Series B Preferred Shares, or the consummation of any
other transaction contemplated hereby.
3.8. No Present Intent to Transfer. None of the Shareholders is a party
or subject to nor bound by any contract, undertaking, agreement or arrangement
with any person to sell, transfer or pledge any of the Series B Preferred
Shares, other than pursuant to this Agreement or the March 2001 Agreement.
3.9. Access to Information. Each of the Shareholders has had access to
such information regarding the business and finances of Surge and the Company,
and has been provided the opportunity to discuss with Surge's and the Company's
management the business, affairs and financial condition of Surge and the
Company and such other matters with respect to Surge and the Company as would
concern a reasonable person considering the transactions contemplated by this
Agreement and/or concerned with the operation of Surge or the Company including,
without limitation, pursuant to a meeting and/or discussions with management of
Surge and the Company. It is hereby acknowledged that Bird, Epstein and Patchen
are directors and executive officers of the Company and that Epstein is an
executive officer and director of Surge.
3.10. Finders. None of the Shareholders is obligated, absolutely or
contingently, to any person for financial advice, a finder's fee, brokerage
commission, nor other similar payment in connection with the transactions
contemplated by this Agreement.
3.11. Ownership and Validity of the Sale of the Series B Preferred
Shares.
(a) Each of the Shareholders is the lawful owner of each of
the Series B Preferred Shares to be sold, assigned, transferred and
conveyed to Surge by the Shareholder pursuant to section 1.2 above and
has the full right, power, and authority to sell, assign, transfer and
convey to Surge such Series B Preferred Shares in accordance with the
terms of this Agreement; and the sale, assignment, transfer and
conveyance of such Series B Preferred Shares in accordance with the
terms of this Agreement will transfer good, valid and marketable title
to such Series B Preferred Shares free and clear of all liens,
encumbrances, claims or rights of every kind and nature whatsoever.
(b) Each of the 182,139.797 Series B Preferred Shares to be
sold, assigned, transferred and conveyed to Surge pursuant to section
1.2 above is owned by the Shareholders free and clear of any and all
restrictions, liens, claims, or encumbrances or rights of third parties
of any nature whatsoever.
(c) There are no existing options, warrants, calls, or
commitments on the part of any of the Shareholders of any character
relating to any of the 182,139.797 Series B Preferred Shares to be
sold, assigned, transferred and conveyed to Surge pursuant to section
1.2 above, other than pursuant to this Agreement, the Merger Agreement
and the March 2001 Agreement.
3.12. Investment Intent. Each Shareholder is acquiring the Company
Common Shares set forth opposite the Shareholder's name in section 1.1 above,
for the Shareholder's own account for investment and not with a view to the
resale or distribution thereof, except for sales, transfers, assignments,
conveyances or distributions made in accordance with the Securities Act or the
rules and regulations promulgated thereunder.
3.13. Company Common Stock Not To Be Registered Upon Acquisition. Each
of the Shareholders acknowledges that the Company Common Shares to be sold,
transferred and assigned to the Shareholder in accordance with section 1.1 above
will not be subject to an effective registration statement under the Securities
Act, nor will such Company Common Shares be registered or qualified under the
securities laws of any state and, accordingly, such Company Common Shares may be
deemed "restricted securities," and be subject to substantial restrictions on
their resale, assignment, transfer or other disposition under the provisions of
the Securities Act.
3.14. Sophistication of the Shareholders. Each Shareholder has
evaluated the merits and risks of acquiring the Company Common Shares to be
acquired by the Shareholder pursuant to section 1.1 above, and has such
knowledge and experience in financial and business matters that the Shareholder
is capable of evaluating the merits and risks of such acquisition, is aware of
and has considered the financial risks and financial hazards of acquiring such
Company Common Shares, and is able to bear the economic risk of acquiring such
Company Common Shares, including the possibility of a complete loss with respect
to such acquisition.
3.15. No Guarantees. It never has been represented, guaranteed or
warranted to any Shareholder by Surge, or any of Surge's officers, directors,
agents, representatives or employees, or any other person, expressly or by
implication, that:
(a) any gain will be realized by the Shareholder from the
Shareholder's investment in the Company Common Stock;
(b) there will be any approximate or exact length of time that
the Shareholder will be required to remain as a holder of the Company
Common Shares the Shareholder shall be acquiring pursuant to section
1.1 above;
(c) the past performance or experience on the part of the
Company, its predecessors or of any other person, will in any way
indicate any future results of the Company; or
(d) the 100 Company Common Shares are more or less valuable
than, or of equal value to, the 182,139.797 Series B Preferred Shares.
3.16. High Degree of Investment Risk. Each Shareholder acknowledges
that the acquisition of the Company Common Shares being acquired by the
Shareholder pursuant to section 1.1 involves a high degree of risk and may
result in a loss of the entire amount invested; that the 182,139.797 Series B
Preferred Shares may be more valuable than the 100 Company Common Shares; that
the Company has limited working capital and limited sources of financing
available; that the Company has not generated any revenues to date and that
there is no assurance that the Company's operations will be profitable in the
future.
3.17. No Pending Transaction. No Shareholder is aware of a pending or
currently anticipated transaction between the Company and any third party with
respect to the products and/or services of the Company.
3.18. No Representation as to Value. Each Shareholder acknowledges that
Surge makes no representations as to the condition or value of the property or
other assets owned by the Company or the value of the Company Common Shares to
be acquired by the Shareholder pursuant to section 1.1 above.
3.19. Nature of Representations. No representation, warranty, or
agreement made by the Shareholders in this Agreement, the exhibits hereto, any
document referred to herein, or other instrument or disclosure furnished by the
Shareholders as required by this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make any statement, representation, warranty, or agreement not
misleading. None of the Shareholders knows of any material fact or condition
adversely affecting the value of the Company Common Stock, Series B Preferred
Stock or the assets of Surge or the Company, whether owned or leased, or the
business operations of Surge or the Company which has not been disclosed to
Surge; each of the Shareholders agrees to disclose in writing to Surge prior to
or on the Closing Date any fact, information, document, or notice which would
have an adverse effect on any statement, covenant, representation, warranty, or
agreement contained in this Agreement, or any exhibit, list, certificate,
schedule, or other instrument required by this Agreement.
3.20. No Other Representations, Warranties, Covenants or Agreements of
the Shareholders. Except as set forth in this Agreement, or the documents
referred to herein, none of the Shareholders has made any representation,
warranty, covenant or agreement with respect to the matters contained herein.
ARTICLE IV - CONDITIONS TO OBLIGATIONS OF SURGE
The obligations of Surge under this Agreement are, at the option of
Surge, subject to the satisfaction at and prior to the Closing of the conditions
set forth in this Article IV.
4.1. Fulfillment of Covenants. All the terms, covenants and conditions
of this Agreement to be complied with and performed by the Shareholders on or
before the Closing shall have been duly complied with and performed, and there
shall have been delivered to Surge a certificate (the "Shareholders Covenants
Certificate") to such effect, dated the date (the "Closing Date") of the Closing
and signed by each Shareholders.
4.2. Accuracy of Representations and Warranties. All of the
representations and warranties made by the Shareholders in this Agreement shall
be true as of the Closing Date with the same force and effect as though such
representations and warranties had been made as of the Closing Date, and the
Shareholders shall have delivered to Surge a certificate (the "Shareholders
Representations and Warranties Certificate") to such effect, dated the Closing
Date and signed by each of the Shareholders.
4.3. No Litigation. There shall be no action, proceeding, investigation
or pending or actual litigation the purpose of which is to enjoin or may be to
enjoin the transactions contemplated by this Agreement or which would have the
effect, if successful, of imposing a material liability upon Surge, or any of
the officers or directors of Surge, because of or due to, in many respects, the
consummation of the transactions contemplated by this Agreement. There shall be
no action, proceeding, investigation or pending or actual litigation against or
with respect to the Company, the Shareholders, outstanding shares of the Series
B Preferred Stock which could, in any way, invalidate or damage this Agreement
or value of the assets which Surge is acquiring pursuant to this Agreement.
4.4. Delivery of the Series B Preferred Shares. Each of the
Shareholders shall deliver to Surge duly executed stock powers (the "Stock
Powers") selling, assigning, transferring and conveying all of the Series B
Preferred Shares owned by the Shareholder to Surge in accordance with section
1.2 above. Surge acknowledges that the certificates (the "Series B
Certificates") evidencing the 182,139.797 Series B Preferred Shares are in the
possession of Surge's counsel. Each of the Shareholders authorize and direct
that, at the Closing, each of the Stock Powers be attached to the respective
Series B Certificates and delivered to Surge.
4.5. Delivery of Debt Conversion Shares. The Company shall have issued
to Surge an aggregate of 7.31979 shares (the "Debt Conversion Shares") and
delivered to Surge a stock certificate (the "Debt Conversion Shares
Certificate") evidencing the ownership of the Debt Conversion Shares by Surge.
Each of the Debt Conversion Shares shall be deemed, in all respects, to be fully
paid, validly issued and non-assessable. All of the Debt Conversion Shares shall
be subject to a Stockholders Agreement, dated as of the Closing Date (the
"Stockholders Agreement"), among Surge, each of the Shareholders and the
Company, substantially in the form attached as Exhibit 4.5 to this Agreement.
The Stockholders Agreement shall provide for, among other things, the Debt
Conversion Shares being subject to anti-dilution protection (the "Anti-Dilution
Right") as provided in the Stockholders Agreement. In addition, the Company and
the Shareholders shall have the right, exercisable for a two year period, to
repurchase in whole, but not in part, the Debt Conversion Shares and all other
shares of Company Common Stock issued pursuant to the Anti-Dilution Right, at a
purchase price equal to $1,097,969.96, plus a premium on such amount calculated
at a rate of 12% per annum from the Closing Date through the date of such
repurchase.
4.6. Delivery of Stockholders Agreement. Each of the Shareholders and
the Company shall have executed and delivered to Surge the Stockholders
Agreement.
ARTICLE V - CONDITIONS TO OBLIGATIONS OF SHAREHOLDERS
The obligations of the Shareholders under this Agreement are, at the
option of Shareholders, acting unanimously, subject to the satisfaction at and
prior to the Closing of the conditions set forth in this Article V.
5.1. Fulfillment of Covenants. All the terms, covenants and conditions
of this Agreement to be complied with and performed by Surge on or before the
Closing shall have been duly complied with and performed, and there shall have
been delivered to the Shareholders a certificate (the "Surge Covenants
Certificate") to such effect, dated the Closing Date and signed by the President
of Surge.
5.2. Accuracy of Representations and Warranties. All of the
representations and warranties made by Surge in this Agreement shall be true as
of the Closing Date with the same force and effect as though such
representations and warranties had been made as of the Closing Date, and Surge
shall have delivered to the Shareholders a certificate (the "Surge
Representations and Warranties Certificate") to such effect, dated the Closing
Date and signed by the President of Surge.
5.3. No Litigation. There shall be no action, proceeding, investigation
or pending or actual litigation the purpose of which is to enjoin or may be to
enjoin the transactions contemplated by this Agreement or which would have the
effect, if successful, of imposing a material liability upon the Shareholders
because of or due to, in many respects, the consummation of the transactions
contemplated by this Agreement. There shall be no action, proceeding,
investigation or pending or actual litigation against or with respect to the
Company, the outstanding shares of the Company Common Stock which could, in any
way, invalidate or damage this Agreement or value of the assets which the
Shareholders are acquiring pursuant to this Agreement.
5.4. Delivery of the Series B Preferred Shares. Surge shall deliver to
the Shareholders the stock certificate evidencing the ownership of 100 Company
Common Shares by Surge, together with a duly executed stock power selling,
assigning, transferring and conveying all of such 100 Company Common Shares to
the Shareholder in accordance with the provisions set forth in section 1.1
above.
5.5. Payment of Additional Expenses. Surge shall deliver to the Company
or its representative, by certified check or wire transfer, the sum of
$12,761.13 (the "Reimbursement of Additional Expenses Amount").
5.6 Payments to Bird and Patchen. Surge shall deliver to each of Bird
and Patchen, or their representatives, by certified check or wire transfer, the
sum of $30,000, or $60,000 in aggregate (the "Bird and Patchen Payment Amount").
5.7. Delivery of Debt Instruments.
(a) Surge shall have delivered to the Company the following
original promissory notes (collectively, the "Original Promissory
Notes") of the Company, either directly or as the successor-in-interest
to MailEncrypt.com, Inc., each marked as canceled:
(i) a convertible promissory note, dated as of
February 16, 2000, payable to Surge and in the principal
amount of $750,000;
(ii) a convertible promissory note, dated as of
September 7, 2000, payable to Surge and in the principal
amount of $125,000; and
(iii) a secured promissory note, dated as of April 6,
2001, payable to Surge and in the principal amount of
$250,000, of which $150,208.83 in principal amount is
outstanding as of the date of this Agreement and of which the
Reimbursement of Additional Expenses Amount and Bird and
Patchen Payment Amount will be added to the principal amount
thereof prior to the Closing, to the extent paid in accordance
with sections 5.5 and 5.6 above.
(b) In connection with the delivery of the Original Promissory
Notes, Surge shall be deemed to have forgiven and waived all accrued
and unpaid interest on the principal amount evidenced by the Original
Promissory Notes.
(c) Surge shall have delivered to the Company termination
statements on Form UCC-3 (the "Forms UCC-3"), noting the termination of
Surge's security interest in certain of the assets of the Company as
such security interest was perfected by the filing of financing
statements on Form UCC-1 with the Secretary of State of California on
May 15, 2001 and with the Secretary of State of New York on May 15,
2001.
5.8. Delivery of Stockholders Agreement. Surge shall have executed and
delivered to the Shareholders the Stockholders Agreement.
5.9. Resignation of Ira Levy. Surge shall have delivered to the Company
the written resignation of Ira Levy as an officer and director of the Company,
to the extent Mr. Levy holds such positions.
5.10. Delivery of Corporate Records. Surge shall have delivered to the
Company the corporate minute book of the Company and all other corporate
documents in Surge's possession; it being hereby acknowledged by the
Shareholders that Bird and Patchen have operated the Company on a day-to-day
basis with limited involvement by Surge and Surge's directors and officers other
than Epstein.
ARTICLE VI - CLOSING
6.1. Closing Date. The consummation of the transactions contemplated by
this agreement shall take place at the offices of Mintz Levin Cohn Ferris
Glovsky and Popeo PC, located at 666 Third Avenue, New York, New York, at 10:00
a.m., local time, on October 23, 2001 (the "Closing Date"), or such other time
or place as shall be mutually agreed upon by the parties to this Agreement.
6.2. Deliveries by Surge at the Closing. At the Closing, Surge shall
deliver to Patchen, as representative of the Shareholders the following:
(a) the Surge Covenant Certificate, duly executed by the
President of Surge;
(b) the Surge Representations and Warranties Certificate,
duly executed by the President of Surge;
(c) the Company Common Shares Certificate, together with
a duly executed stock power selling, transferring, assigning and
conveying to the Shareholders the 100 Company Common Shares in
accordance with the provisions of section 1.1 above;
(d) the Original Promissory Notes, each marked as
canceled;
(e) the Forms UCC-3
(f) the Stockholders Agreement, duly executed by Surge;
(g) the Reimbursement of Additional Expenses Amount;
(h) the Bird and Patchen Payment Amount;
(i) the resignation of Ira Levy as an officer and
director of the Company, to the extent Mr. Levy holds such positions;
and
(j) the corporate minute book of the Company and all
other corporate documents in Surge's possession; it being hereby
acknowledged by the Shareholders that Bird and Patchen have operated
the Company on a day-to-day basis with limited involvement by Surge and
Surge's directors and officers other than Epstein.
6.3. Deliveries by the Shareholders at the Closing. At the Closing, the
Shareholders shall deliver to Surge the following:
(a) the Shareholders Covenants Certificate, duly executed
by each of the Shareholders;
(b) the Shareholders Representations and Warranties
Certificate, duly executed by each of the Shareholders;
(c) the duly executed stock powers of each of the
Shareholders selling, transferring, assigning and conveying to Surge
the aggregate 182,139.797 Series B Preferred Shares in accordance with
the provisions of section 1.2 above;
(d) the Debt Conversion Shares Stock Certificate; and
(e) the Stockholders Agreement, duly executed by each of
the Shareholders and the Company.
ARTICLE VII - ADDITIONAL AGREEMENTS
7.1. Exchange of Releases.
(a) As a material inducement to Surge to enter into this Agreement,
effective as of the Closing, each Shareholder and the Company waives, releases
and discharges Surge and Surge's subsidiaries, officers, directors,
shareholders, employees, agents, attorneys, representatives, subsidiaries,
servants, successors, insurers, affiliates and their successors and assigns,
from any and all manner of action, claims, liens, demands, liabilities, causes
of action, charges, complaints, suits (judicial, administrative or otherwise),
damages, debts, demands, obligations of any other nature, past or present, known
or unknown, whether in law or in equity, whether founded upon contract
(expressed or implied) (including, without limitation, the Merger Agreement,
March 2001 Agreement and all oral or written agreements with respect to the
operations and/or funding of the Company, the 100 Company Common Shares and the
182,139.797 Series B Preferred Shares), tort (including, but not limited to,
defamation), statute or regulation (federal, state or local), common law and/or
any other theory or basis, from the beginning of the world to the date hereof,
including, but not limited to, any claim that the Shareholder has asserted, now
asserts or could have asserted; provided, however, such waiver, release and
discharge excludes (i) any claim of fraud or (ii) any claim for the enforcement
of the terms and conditions of this Agreement and the Stockholders Agreement.
(b) As a material inducement to the Shareholders to enter into this
Agreement, effective as of the Closing, Surge waives, releases and discharges
each Shareholder (subject to the provisions of paragraph 7.1(d) with respect to
Epstein), and the Shareholder's employees, agents, attorneys, representatives,
servants, successors, insurers, affiliates and their successors and assigns,
from any and all manner of action, claims, liens, demands, liabilities, causes
of action, charges, complaints, suits (judicial, administrative or otherwise),
damages, debts, demands, obligations of any other nature, past or present, known
or unknown, whether in law or in equity, whether founded upon contract
(expressed or implied) (including, without limitation, the Merger Agreement,
March 2001 Agreement and all oral or written agreements with respect to the
operations and/or funding of the Company, the 100 Company Common Shares and the
182,139.797 Series B Preferred Shares), tort (including, but not limited to,
defamation), statute or regulation (federal, state or local), common law and/or
any other theory or basis, from the beginning of the world to the date hereof,
including, but not limited to, any claim Surge has asserted, now asserts or
could have asserted; provided, however, such waiver, release and discharge
excludes (i) any claim of fraud or (ii) any claim for the enforcement of the
terms and conditions of this Agreement and the Stockholders Agreement.
(c) As a material inducement to the Company to enter into this
Agreement, effective as of the Closing, Surge waives, releases and discharges
the Company and the Company's subsidiaries, officers, directors (subject to the
provisions of paragraph 7.1(d) with respect to Epstein), employees, agents,
attorneys, representatives, subsidiaries, servants, successors, insurers,
affiliates and their successors and assigns, from any and all manner of action,
claims, liens, demands, liabilities, causes of action, charges, complaints,
suits (judicial, administrative or otherwise), damages, debts, demands,
obligations of any other nature, past or present, known or unknown, whether in
law or in equity, whether founded upon contract (expressed or implied)
(including, without limitation, the Merger Agreement, March 2001 Agreement and
all oral or written agreements with respect to the operations and/or funding of
the Company), tort (including, but not limited to, defamation), statute or
regulation (federal, state or local), common law and/or any other theory or
basis, from the beginning of the world to the date hereof, including, but not
limited to, any claim that the Shareholder has asserted, now asserts or could
have asserted; provided, however, such waiver, release and discharge excludes
(i) any claim of fraud or (ii) any claim for the enforcement of the terms and
conditions of this Agreement and the Stockholders Agreement.
(d) Nothing in this Agreement, including, without limitation, the
provisions of paragraphs 7.1(b) and 7.1(c), shall be deemed to be a waiver,
release or discharge by Surge of Epstein, except in Epstein's sole capacity as a
holder of Series B Preferred Stock. It is hereby acknowledged and agreed that
any further release by Surge of Epstein, except as provided in the immediately
preceding sentence, is solely subject to the terms and provisions of the
Termination and Separation Agreement, dated as of June __, 2001, among Epstein,
Surge and Superus Holdings, Inc.
(e) It is understood and agreed by the parties hereto that the facts
and respective assumptions of law in contemplation of which this Agreement is
made may hereafter prove to be other than or different from those facts and
assumptions now known, made or believed by them to be true. Accordingly, the
parties hereto expressly accept and assume the risk of the facts and assumptions
to be so different, and agree that all terms of this Agreement shall be in all
respects effective and not subject to termination or revision by any such
difference in facts or assumptions of law.
(f) Each party to this Agreement acknowledges that such party (i) has
carefully read and fully understands all of the provisions of this Agreement,
(ii) is, through this Agreement, releasing specified parties from any and all
claims such party may have against them and being released from certain
potential liabilities by specified parties, (iii) knowingly and voluntarily
agrees to all of the terms set forth in this Agreement, (iv) knowingly and
voluntarily intends to be legally bound by this Agreement and (v) was advised
and hereby is advised in writing to consider the terms and provisions of this
Agreement and consult with an attorney of such party's own choice prior to
executing this Agreement.
7.2 Non-Disclosure.
(a) No party to this Agreement shall disclose or deliver to any third
party certain trade secrets or confidential or proprietary information
(collectively, "Trade Secrets") gained through their affiliations with the other
parties to this Agreement. Trade Secrets include, without limitation,
proprietary technologies, software programs and tools, financial information,
business plans, systems files, algorithms, file structures, customer lists,
supplier lists, internal program structures, options, documentation and data
developed by any of the other parties to this Agreement, or any subsidiary or
division thereof.
(b) If a party becomes legally compelled to disclose any Trade Secrets,
such party shall provide prompt written notice of such legal compulsion to the
appropriate other party to this Agreement so that such other party may seek a
protective order or other remedy or waive compliance with this Agreement. Each
party to this Agreement shall cooperate (without any cost or expense to such
party) with such other party in obtaining such protective order or other remedy
upon the request of such other party. If, in the absence of a protective order
or the receipt of a waiver hereunder, a party is nonetheless compelled to
disclose Trade Secrets to or at the direction of any tribunal or else stand
liable for contempt or suffer other censure or significant penalty, the party
may disclose such specifically requested Trade Secrets to or at the direction of
such tribunal.
(c) Each party to this Agreement agrees that any breach of this section
7.2 will cause such other party substantial and irreparable damages that would
not be quantifiable and, therefore, in the event of any such breach, in addition
to other remedies that may be available, each other party shall have the right
to seek specific performance and other injunctive and equitable relief.
7.3. Non-Disparagement.
(a) The parties hereto mutually agree not to publish, communicate or
disseminate any negative information as regards each other, or to make public
any information regarding this Agreement to suppliers, vendors and other
industry participants, or in any way to any other person, except that they may
disclose its contents and any financial information with respect to the party's
investments to their respective financial advisors, accountants and attorneys
and as required by law.
(b) The parties hereto each agree that any breach of this section 7.3
by a party will cause the other party substantial and irreparable damages that
would not be quantifiable and, therefore, in the event of any such breach, in
addition to other remedies that may be available, such other party shall have
the right to seek specific performance and other injunctive and equitable
relief.
(c) Each Shareholder and the Company acknowledge and agree that Surge
shall disclose this Agreement, the consummation of the transactions contemplated
by this Agreement and the effects and possible effect, if any, on Surge's
financial condition and results of operations of the consummation of the
transactions contemplated by this Agreement in filings to be made, in the sole
discretion of Surge in consultation with counsel, with the Securities and
Exchange Commission, including, without limitation, a Current Report on Form
8-K, Quarterly Reports on Form 10-QSB and Annual Reports on Form 10-KSB, and
shall include a copy of this Agreement as an exhibit to one or more of such
filings.
7.4. Termination of Bird and Patchen Agreements. Effective as of the
Closing, the Employment/Consulting Agreement, dated as of February 16, 2000,
between MailEncrypt.com, Inc. and David Bird, and the Employment/Consulting
Agreement, dated as of February 16, 2000, between MailEncrypt.com, Inc. and
Michael Patchen shall each be deemed terminated, null and void, in all respects
and that no further amounts shall be due or payable under such agreements.
7.5. Termination of March 2001 Agreement and All Other Agreements.
Effective as of the Closing, the March 2001 Agreement and all other agreements,
whether oral or written, among or between Surge, the Company and the
Shareholders with respect to the Company, the 100 Company Common Shares and the
182,139.797 Series B Preferred Shares shall be deemed terminated and null and
void.
7.6 Non-Compete. For a two year period commencing on the Closing Date,
Surge shall not directly or indirectly, engage in the electronic mail encryption
business, except that Surge may sell or provide electronic components to one or
more companies that are engaged in the electronic mail encryption business.
7.7. Survival. The provisions of this Article 7 shall survive the
Closing.
ARTICLE VIII - GENERAL
8.1. Payment of Expenses. Each party shall bear its own expenses with
respect to this Agreement and the transactions contemplated by this Agreement.
8.2. Representations and Warranties. Only statements contained in this
Agreement, any exhibit hereto, or any other document referred to herein, shall
be deemed to be representations and warranties hereunder. There are no implied
warranties of any nature.
8.3. Notices. All requests, demands, notices and other communications
required or otherwise given under this Agreement shall be sufficiently given if
(a) delivered by hand against written receipt therefor, (b) forwarded by
overnight courier requiring acknowledgment of receipt or (c) mailed by postage
prepaid, registered or certified mail, return receipt requested addressed, as
follows:
If to Bird, to: David Bird
Blueprint Networks, Inc.
1550 Veteran Avenue
Los Angeles, CA 90024
with a copy to: Brent A. Reinke, Esq.
Crosby, Heafey, Roach & May
2815 Townsgate Road, #205
West Lake Village, California 91361
If to Epstein, to: Adam J. Epstein
xxxxxxxxx
San Francisco, California 94114
If to Harano, to: Chris Harano
xxxxxxxxx
Balboa, CA
If to Patchen, to: Michael Patchen
Blueprint Networks, Inc.
1550 Veteran Avenue
Los Angeles, CA 90024
with a copy to: Brent A. Reinke, Esq.
Crosby, Heafey, Roach & May
2815 Townsgate Road, #205
West Lake Village, California 91361
If to Taulli, to: Thomas Taulli
xxxxxxxxxxx
Newport Beach, CA 92660
with a copy to: Brent A. Reinke, Esq.
Crosby, Heafey, Roach & May
2815 Townsgate Road, #205
West Lake Village, California 91361
If to Surge, to: Ira Levy, President
Surge Components, Inc.
95 East Jefryn Boulevard
Deer Park, New York 11729
with a copy to: Mintz Levin Cohn Ferris Glovsky
and Popeo P.C.
666 Third Avenue
New York, New York 10017
Attention: Kenneth Koch, Esq.
or, in the case of any of the parties hereto, at such other address as
such party shall have furnished in writing, in accordance with this
section 8.3, to the other parties hereto. Each such request, demand,
notice or other communication shall be deemed given (a) on the date of
delivery, if by hand, (b) on the first business day following the date
of delivery to an overnight courier, if by overnight courier, or (c)
three business days following mailing by registered or certified mail,
if by registered or certified mail.
8.4. Headings. The headings of article, sections and paragraphs in this
Agreement are inserted for convenience of reference only and are not intended to
affect the meaning or interpretation of this Agreement.
8.5. Counterparts. This Agreement may be executed in counterparts, and
when so executed each counterpart shall be deemed to be an original, and said
counterparts together shall constitute one and the same instrument.
8.6. Binding Nature. This Agreement shall be binding upon and inure to
the benefit of the parties hereto. Neither Surge nor any Shareholder may assign
or transfer any rights under this Agreement.
8.7. Waiver. The Shareholders, collectively, and/or Surge may, by
written notice to the other, (a) waive any of the conditions to their or its
obligations hereunder or extend the time for the performance of any of the
obligations or actions of the other, (b) waive any inaccuracies in the
representations of the other contained in this Agreement or in any documents
delivered pursuant to this Agreement, (c) waive compliance with any of the
covenants of the other contained in this Agreement, and (d) waive or modify
performance of any of the obligations of the other. No action taken pursuant to
this Agreement, including, without limitation, any investigation by or on behalf
of any party, shall be deemed to constitute a waiver by the party taking such
action or compliance with any representation, warranty, condition or agreement
contained herein. Waiver of the breach of any one or more provisions of this
Agreement shall not be deemed or construed to be a waiver of other breaches or
subsequent breaches of the same provisions.
8.8. Entirety of Agreement. This Agreement, including all exhibits,
attachments, and attachments to exhibits hereto and all certificates, letters,
and opinions referenced or called for herein, constitutes the entire agreement
among the parties and supersedes all prior oral or written proposals and
communications, including, without limitation, the Merger Agreement and Plan of
Reorganization, dated as of November 13, 2000 (the "Merger Agreement"), among
Surge, the Company, MailEncrypt.com, Inc. and the Shareholders; the March 2001
Agreement; and the letter of Surge to Epstein, dated May 22, 2001 (and all prior
drafts to such letter).
8.9. Other Agreements. All oral or written agreements heretofore made
between the parties hereto in contemplation of this Agreement are superseded by
this Agreement and are hereby terminated in their entirety.
8.10. Good Faith. Each of the parties hereto agrees that it shall act
in good faith in an attempt to cause all the conditions precedent and subsequent
to their respective obligations to be satisfied.
8.11. Amendment or Modification. The parties hereto may amend or modify
this Agreement, but only by a written instrument executed by all parties.
8.12. Applicable Law, Venue and Jurisdiction. This Agreement and the
rights, obligations and liabilities of the parties hereto shall be governed by
and construed and interpreted in accordance with the laws of the State of New
York without regard to the conflicts of laws principles thereof. The parties
hereto do hereby consent and submit to the venue and jurisdiction of the state
and federal courts sitting in the State of New York, County of Suffolk, as the
sole and exclusive forum for such matters of dispute between the parties,
service of any process may be made upon the other party in the same manner as
the giving of notices under section 8.3 of this Agreement.
8.13. Successors and Assigns: Holders and Third Parties as
Beneficiaries. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns.
8.14. Severability: Specific Enforcement. In the event that any one or
more of the provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal, or unenforceable for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law. Each
of the parties hereto acknowledge that the other party(ies) hereto would not
have an adequate remedy at law for money damages in the event that any of the
covenants or agreements of any other party in this Agreement were not performed
in accordance with its terms and therefore agrees that the other party(ies)
shall be entitled to specific enforcement of such covenants or agreements and to
injunctive and other equitable relief in addition to any other remedy to which
it may be entitled, at law or in equity.
8.15 Use of Certain Terms and References. The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement; the term "or" shall be deemed to include the term "and/or;" singular
or plural tenses shall be deemed to include the opposite whenever the context so
indicates or requires; and article, section, subsection, paragraph, clause,
schedule and exhibit references are to this Agreement unless otherwise
specified.
8.16. Legal, Tax and Accounting Advice. Epstein and Harano each hereby:
(a) acknowledge that Surge, the Company, Bird, Patchen and
Taulli have been represented by legal counsel in the negotiation and execution
of this Agreement;
(b) acknowledge that he has been advised to seek legal, tax
and accounting advice prior to executing this Agreement; and
(c) represents and warrants that he:
(i) understands the importance of this Agreement and
has read the entire contents of this Agreement carefully;
(ii) fully understands the provisions of this
Agreement;
(iii) has been advised and hereby is advised in
writing to consider the terms of this Agreement and consult with an
attorney and tax and accounting advisors of his own choosing prior to
executing this Agreement;
(iv) has determined that it is in his best interest
to enter into this Agreement;
(v) has not been influenced to sign this Agreement by
any statement or representation by Surge, the Company or any
Stockholder, or any party acting on behalf of any of the foregoing, not
contained in this Agreement;
(vi) knowingly and voluntarily agrees to all of the
terms set forth in this Agreement; and
(viii) knowingly and voluntarily intends to be
legally bound by this Agreement.
WITNESS the due execution of this Agreement by the parties hereto as of
the date first above written.
SHAREHOLDERS:
/s/ David Bird
-------------------------------------
David Bird
/s/ Adam J. Epstein
-------------------------------------
Adam J. Epstein
/s/ Chris Harano
-------------------------------------
Chris Harano
/s/ Michael Patchen
-------------------------------------
Michael Patchen
/s/ Thomas Taulli
-------------------------------------
Thomas Taulli
SURGE COMPONENTS, INC.
By: /s/ Ira Levy
-------------------------------
Ira Levy, President