• SEC Filings

Reliability Incorporated (OTCMKTS:RLBY) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement

Merger Agreement

On September 18, 2019 (the “Effective Date”), Reliability Incorporated (the “Company”), and The Maslow Media Group, Inc. (“Maslow”), a Virginia Corporation, Jeffrey E. Eberwein (“Mr. Eberwein”), Naveen Doki (“Mr. Doki”), Silvija Valleru (“Ms. Valleru”), and R-M Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”) entered into a Merger Agreement (the “Merger Agreement”). The Merger Agreement provides for, among other things, a business combination whereby Merger Sub will merge with and into Maslow, with Maslow as the surviving entity (the “Merger”). As a result of the Merger, the separate corporate existence of Merger Sub will cease and Maslow will continue as the surviving corporation and a wholly-owned subsidiary of the Company.

The Company’s principal office is in the same physical office as Mr. Eberwein. Mr. Eberwein is the Chief Executive Officer of Lone Star Value Management, LLC, the investment manager of Lone Star Value Investors, LP which beneficially owns 20.1% of the Company’s issued and outstanding common stock and Lone Star Value Co-Invest I, LP which beneficially owns 40.1% of the Company’s issued and outstanding common stock. Hannah Bible, the Company’s Chief Executive Officer, is an employee of Lone Star Value Management, LLC, and the members of the Board of Directors of the Company are members of Mr. Eberwein’s family, or are employee’s under Mr. Eberwein’s management; thus, the Merger Agreement and Merger were not approved by an independent board of directors, and the Merger Agreement is a transaction with a related party of the Company, Mr. Eberwein.

Both Mr. Doki and Ms. Valleru own a significant amount of the shares of Maslow Common Stock, owning respectively at least 50% and 10% of the shares. Prior to the Effective Time it is expected that Maslow will issue additional shares of Maslow Common Stock and the shareholders of Malow may transfer certain shares of Maslow Common Stock to other parties. Such issuances and transfers will not increase the total amount of shares of Reliability Common Stock that will be issued at the Effective Time.

The closing of the Merger Agreement will occur upon the satisfaction of the terms of the Merger Agreement (the “Closing”). At the Closing, the parties will cause the Merger to be consummated by filing a Statement of Merger with the Secretary of State of Virginia. At the date and time the Statement of Merger is filed with the Secretary of State of Virginia, the Merger will be effective (the “Effective Time”). At the Effective Time, all of the shares of Maslow common stock (the “Maslow Common Stock”) issued and outstanding immediately prior to the Effective Time will be converted into a number of shares of common stock, no par value per share, of the Company (the “Reliability Common Stock”) constituting 94% of the total issued and outstanding shares of Reliability Common Stock at such time (the “Merger Consideration”). It is expected that the Merger Consideration will be comprised of approximately 282,000,000 shares of Reliability Common Stock. At the Effective Time, Maslow will become a wholly owned subsidiary of the Company.

The Merger Agreement also contemplates a change in the composition of the Board at the Closing. to the terms of the Merger Agreement, at the Closing, Mr. Doki, Ms. Valleru, Shirisha Janumpally, and Mark Speck are expected to serve on the Board, and one current member of the Board will remain. All officers of the Company as of immediately prior to the Closing will also resign and will be replaced by officers as selected by the newly constituted Board.

Following the Closing, the Company may undertake such actions as necessary to re-domesticate the Company or change its name as determined by the Board of Directors of the Company at that time.

Closing Conditions

The Merger is subject to various customary closing conditions, including, but not limited to, (i) approval under Texas law, (ii) the absence of any order, injunction, statute, rule, regulation or decree prohibiting, precluding, restraining, enjoining or making illegal the consummation of the Merger, (iii) the accuracy of the representations and warranties of each party, (iv) performance, in all material respects, of all obligations and compliance with, in all material respects, agreements and covenants to be performed or complied with by each party, and (v) the completion of reasonable due diligence by Maslow.

In addition, as a condition to the Closing, (i) subject to certain limited exceptions the Company agreed to convert all of the issued and outstanding liabilities and debts of the Company as of immediately prior to the Closing into shares of Reliability Common Stock, and (ii) Maslow agreed to provide to the Company audited financial statements for Maslow and related auditor reports for each of the two most recently ended fiscal years and unaudited statements for any other required interim periods, as well as pay the Company for expenses incurred in pursuit of the consummation of the Merger, subject to certain limitations.

The Merger is expected to occur prior to October 31, 2019. However the Closing of the Merger is subject to the satisfaction of customary conditions found within the Merger Agreement and no guarantee can be made as to the likelihood of the Closing occurring or the time of the Closing of the Merger.

 

Covenants, Representations, and Warranties

The parties to the Merger Agreement, except for items disclosed within the disclosure schedules provided by Maslow and the Company, have made customary representations, warranties and covenants in the Merger Agreement, including but not limited to, as to Maslow and the Company, (i) authority to enter into the Merger Agreement, (ii) confirmation of financials, (iii) absence of certain adverse events, (iv) disclosure of material contracts, (v) confirmation of title to assets, (vi) lack of legal proceedings and (vii) tax liabilities.

Termination Rights

 

The Merger Agreement contains certain termination rights for both the Company and Maslow. The Merger Agreement may be terminated:

 The foregoing description of the Piggyback Registration Rights Agreement and the Company’s obligations therein does not purport to be complete and is qualified in its entirety by reference to the full text of the Piggyback Registration Rights Agreement, a copy of which is attached hereto as Exhibit 10.2 and incorporated herein by reference.

Lock Up Agreement

Upon the Closing of the Merger, each of Mr. Eberwein and any shareholder of Maslow who has more than ten (10%) beneficial ownership of Maslow Common Stock immediately prior the Closing will enter into a lock-up agreement (“Lock Up Agreement”) restricting their transfer and sale of the shares of Reliability Common Stock received at the Effective Time for a period of 12 months thereafter. Both Mr. Doki and Ms. Valleru are expected to beneficially own more than 10% of the Reliability Common Stock; and thus will remain restricted in their ability to generally transfer the shares. The Lock Up Agreement does not restrict, among other types of transfers, transfers of Reliability Common Stock as (i) a bona fide gift, (ii) to any trust, partnership, limited liability company of the holder or the immediate family of the holder, (iii) to any beneficiary of the holder to a will, or (iv) to the Company by way of a repurchase or redemption.

 The foregoing description of the Lock-Up Agreement and the Company’s obligations therein does not purport to be complete and is qualified in its entirety by reference to the full text of the Lock-Up Agreement, a copy of which is attached hereto as Exhibit 10.3 and incorporated herein by reference.

Forward-Looking Statements

The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions.  Certain statements in this report are forward-looking statements and are made to the safe harbor provisions of the Securities Litigation Reform Act of 1995, as amended.  These forward-looking statements reflect, among other things, the Company’s current expectations, plans, strategies, and anticipated financial results.  There are a number of risks, uncertainties, and conditions that may cause the Company’s actual results to differ materially from those expressed or implied by these forward-looking statements.  These risks and uncertainties include the Company’s ability to complete the Merger and successfully integrate Maslow’s operations and realize the synergies from the Merger, as well as a number of factors related to the Company’s business and that of Maslow, including economic and financial market conditions generally and economic conditions in the Company’s and Maslow’s markets; various risks to preferred stockholders of not receiving dividends and risks to the Company’s ability to pursue growth opportunities if the Company continues to pay dividends according to the terms of the Company Preferred Stock; various risks to the price and volatility of the Company’s Preferred Stock; changes in the valuation of pension plan assets; the substantial amount of debt and the Company’s ability to repay or refinance it or incur additional debt in the future; the Company’s need for a significant amount of cash to service and repay the debt and to pay dividends on the Company Preferred Stock; restrictions contained in the debt agreements that limit the discretion of management in operating the

business; regulatory changes, including changes to reimbursement policies, development and introduction of new technologies and intense competition in the healthcare industry; risks associated with the Company’s possible pursuit of acquisitions; system failures; losses significant contracts; disruptions in the relationship with third party vendors; losses of key management personnel and the inability to attract and retain highly qualified management and personnel in the future; changes in the extensive governmental legislation and regulations governing healthcare providers and the provision of healthcare services; high costs of regulatory compliance; the competitive impact of legislation and regulatory changes in the healthcare industry; and liability and compliance costs regarding environmental regulations.  A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements are discussed in more detail in the Company’s filings with the SEC, including their reports on Form 10-K and Form 10-Q.  Many of these circumstances are beyond the Company’s ability to control or predict.  Moreover, forward-looking statements necessarily involve assumptions on the Company’s part.  These forward-looking statements generally are identified by the words “believe”, “expect”, “anticipate”, “estimate”, “project”, “intend”, “plan”, “should”, “may”, “will”, “would”, “will be”, “will continue” or similar expressions.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company and its subsidiaries to be different from those expressed or implied in the forward-looking statements.  All forward-looking statements attributable to us or persons acting on the Company’s behalf are expressly qualified in their entirety by the cautionary statements that appear throughout this report. Furthermore, forward-looking statements speak only as of the date they are made.  Except as required under the federal securities laws or the rules and regulations of the SEC, we disclaim any intention or obligation to update or revise publicly any forward-looking statements.  You should not place undue reliance on forward-looking statements.

RELIABILITY INC Exhibit
EX-10 2 ex10_1.htm     Exhibit 10.1           Merger Agreement   By and Among   Reliability Incorporated,…
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About Reliability Incorporated (OTCMKTS:RLBY)

Reliability Incorporated is a shell company. The Company has no operating activities. The Company intends to look for acquisitions or identify a merger partner or other business combination. The Company intends to focus its search on target businesses located within the United States. The Company has no source of revenue.