AGREEMENT AND PLAN OF MERGER by and among MOBILEPRO CORP., KITE ACQUISITION CORP. AND KITE NETWORKS, INC. Dated as of January 31, 2005
AGREEMENT
AND PLAN OF MERGER
by
and among
KITE
ACQUISITION CORP.
AND
KITE
NETWORKS, INC.
Dated
as of January 31, 2005
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER,
dated
as of January 31, 2006 (this “Agreement”)
is
made by and among Mobilepro Corp., a Delaware corporation (“Parent”)
Kite
Acquisition Corp., a Mississippi corporation and direct wholly-owned subsidiary
of Parent (“Buyer”)
and
Kite
Networks, Inc., a Mississippi corporation (“Company”).
WHEREAS,
the
Board of Directors of Parent, Buyer and Company have determined that it is
in
the best interests of their respective companies and their stockholders to
consummate the business combination transaction provided for herein in which
the
Company will, subject to the terms and conditions set forth herein, merge with
and into the Buyer, with the Buyer being the surviving entity (the “Merger”);
and
WHEREAS,
the
parties desire to make certain representations, warranties and agreements in
connection with the Merger and also to prescribe certain conditions to the
Merger;
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants, warranties and
agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE
I
THE
MERGER
Section
1.1 The Merger.
Subject
to the terms and conditions of this Agreement, in accordance with the General
Corporation Law of the State of Mississippi (the “Mississippi
Law”),
upon
the execution of this Agreement and concurrent with the filing of the Articles
of Merger with the Secretary of State of the State of Mississippi (the
“Articles
of Merger”)
(in
accordance with the relevant provisions of Mississippi Law), the Company shall
merge with and into the Buyer. The separate corporate existence of Company
will
cease upon the filing of the Articles of Merger (the “Effective
Time”),
and
the Buyer will continue as the surviving company (hereinafter sometimes referred
to as the “Surviving
Company”)
in the
Merger. The Buyer, as the surviving company after the Merger, will be governed
by the laws of the State of Mississippi.
For
purposes of this Agreement, the date of the filing of the Certificate of Merger
and the execution of this Agreement shall be known as the “Closing
Date”
and
the
actions taken on such date and at such time, the “Closing.”
Section
1.2Effect
of the Merger; Closing.
At and
after the Effective Time, the Merger shall have the effects set forth in this
Agreement and the applicable provisions of Mississippi Law. At the Effective
Time all the property, rights, privileges, powers and franchises of the Company
and Buyer will vest in the Surviving Company, and all debts, liabilities and
duties of the Company and Buyer not paid by the Company at or before Closing
will become the debts, liabilities and duties of the Surviving
Company.
Section
1.3 Certificate of Incorporation.
At the
Effective Time, the Certificate of Incorporation of the Buyer with an amendment
to change the name to Kite Networks, Inc., as in effect immediately prior to
the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Company.
Section
1.4 Bylaws.
At the
Effective Time, the bylaws of the Buyer, as in effect immediately prior to
the
Effective Time, shall be the bylaws of the Surviving Company.
Section
1.5 Board of Directors and Officers.
The
directors and officers of the Company as in effect immediately prior to the
Effective Time shall remain the officers and directors of the Surviving Company
and each to hold office in accordance with the Certificate of Incorporation
and
bylaws of the Surviving Company, until their respective successors are duly
elected or appointed (as the case may be) and qualified.
Section
1.6 Conversion
of Capital Stock.
At the
Effective Time, by virtue of the Merger and without any action on the part
of
Parent, Buyer or the Company:
The
Company Stock (as defined in Section 2.2(a)) issued and outstanding immediately
prior to the Effective Time shall, as an aggregate whole and not on an
individual basis, be converted into and become the right to receive
13,500,000
fully
paid and nonassessable shares of
Parent
Common Stock (as defined in Section 3.2(a)) (the “Merger
Consideration”),
such
Merger Consideration subject to adjustment in accordance with Section 4.5 of
this Agreement.
(b) The
shares of Parent Common Stock issued as Merger Consideration will not have
been
registered and will be deemed to be “restricted securities” under federal
securities laws and may not be resold without registration under or exemption
from the Securities Act of 1933, as amended (the “Securities
Act”).
Each
certificate evidencing shares of Parent Common Stock to be issued as Merger
Consideration shall have the following legend:
THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION WITHOUT EXEMPTION UNDER THE
SECURITIES ACT OR AN OPINION OF LEGAL COUNSEL REASONABLY
ACCEPTABLE TO MOBILEPRO CORP. THAT SUCH REGISTRATION IS NOT
REQUIRED.
Section
1.7 General
Escrow Shares..
(a) General
Escrow Shares.
At the
Effective Time, Buyer shall withhold from the Merger Consideration Three Million
Three Hundred Seventy-Five Thousand (3,375,000) shares of Parent Common Stock
(the “General Escrow Shares”) which shall be allocated among the Company’s
shareholders pursuant to Exhibit
A.
Any
such General Escrow Shares will be delivered by Parent to ▇▇▇▇▇
▇.
▇▇▇▇, Esq.
(the
“Escrow Agent”), as escrow agent, to be held pursuant to the terms of the escrow
agreement (the “Escrow Agreement”), in a form attached hereto as Exhibit
B.
The
payment of any General Escrow Shares in satisfaction of any indemnification
obligations under ARTICLE VI shall be made on a pro rata basis pursuant to
Exhibit
A.
Escrow
Agent shall hold the General Escrow Shares until May 31, 2006 (the “General
Escrow Period”) as security for the Company indemnification obligations,
potential adjustments under Article IV and/or for Damages under ARTICLE
VI.
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(b)
Distributions
on General Escrow Shares.
Any
dividends or distributions payable in shares of Parent Common Stock or other
equity securities or issued upon a stock split made in respect of any General
Escrow Shares shall be considered General Escrow Shares hereunder.
(c)
Voting
of General Escrow Shares.
The
Company’s shareholders on whose behalf General Escrow Shares are held by Escrow
Agent shall be entitled to vote such shares. Buyer need not forward proxy
information, annual or other reports or other information with respect to the
General Escrow Shares to the Company’s shareholders to the extent such documents
or materials are otherwise furnished by Buyer with respect to other shares
of
Buyer Common Stock distributed to such holders pursuant to this Agreement.
(d)
Release
of General Escrow Shares.
As soon
as reasonably practicable (but in any event within ten (10) business days)
following the expiration of the General Escrow Period, Escrow Agent shall
release to the Company’s shareholders, at their respective addresses and in
accordance with Exhibit
A
all of
the remaining General Escrow Shares, if any, in excess of (i) any General Escrow
Shares delivered by Escrow Agent in satisfaction of Claims (as defined in
ARTICLE VI) for Damages (as defined in ARTICLE VI) by Buyer Indemnified Persons
(as defined ARTICLE VI), (ii) any General Escrow Shares returned to Parent
pursuant to adjustments under Article IV and (ii) any amount of General Escrow
Shares that is necessary to satisfy all unresolved, unsatisfied or disputed
Claims for Damages specified in any Notice of Claim (as defined in ARTICLE
VI)
delivered to the Shareholder Representative before the expiration of the General
Escrow Period. If any Claims are unresolved, unsatisfied or disputed as of
the
expiration of the General Escrow Period, then Escrow Agent shall retain
possession of that number of General Escrow Shares determined by dividing the
total maximum amount of Damages then being claimed by Buyer Indemnified Persons
in all such unresolved, unsatisfied or disputed Claims by $0.174, and as soon
as
reasonably practicable (but in any event within ten (10) business days)
following resolution of all such Claims, Escrow Agent shall release to the
Company’s shareholders, at their respective addresses and in accordance with
Exhibit
A
their
respective pro rata shares of the General Escrow Shares, all remaining General
Escrow Shares, if any, not required to satisfy such Claims. If the number of
General Escrow Shares to be distributed to any Company shareholder is not evenly
divisible by one, Buyer shall round to the nearest whole number.
(e)
No
Transfer or Encumbrance.
To the
extent permitted by applicable law, no General Escrow Shares or any beneficial
interest therein may be pledged, encumbered, sold, assigned or transferred
(including any transfer by operation of law), by Buyer or a shareholder of
the
Company or be taken or reached by any legal or equitable process in satisfaction
of any debt or other liability of Buyer or such Company shareholder or used
for
any reason, prior to (i) in the case of Buyer, the retention of General Escrow
Shares in satisfaction of a resolved Claim for Damages to address any
post-closing Merger Adjustment in accordance with this Agreement or (ii) in
the
case of the Company shareholders, the release by Escrow Agent to the Company
Shareholders of General Escrow Shares in accordance with this Agreement, except
that Company shareholders shall be entitled to assign their rights to the
General Escrow Shares by will, by the laws of intestacy or by other operation
of
law.
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(f)
No
Liability of the Escrow Agent.
In
holding and administering the General Escrow Shares, the Escrow Agent will
incur
no liability with respect to any action taken by it in reliance upon any written
notice, direction, instruction, consent, statement or other document believed
by
it to be genuine and to have been signed by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. or
Shareholder Representative (and shall have no responsibility to determine the
authenticity thereof), nor for any other action or inaction, except the Escrow
Agent’s own willful misconduct or gross negligence. In all questions arising
under this Agreement with respect to the General Escrow Shares, the Escrow
Agent
may rely on the advice of counsel, and the Escrow Agent will not be liable
to
anyone for anything done, omitted or suffered in good faith by the Escrow Agent
based on such advice, except for the Escrow Agent’s own willful misconduct or
gross negligence.
1.8 Surrender
of Shares; Stock
Transfer Books.
(a) At
the
Closing, the Stockholders will surrender to Buyer all issued and
outstanding
certificates representing the Company Stock,
which
shall be duly endorsed in blank, or accompanied by membership interest powers
duly endorsed in blank in proper form for transfer, with appropriate transfer
stamps, if any, affixed. Until so surrendered, such certificate(s), as an
aggregate whole and not on an individual basis, will represent solely the
right
to receive the Merger Consideration.
(a) At
the
Effective Time, the stock interest transfer books of the Company will be closed
and there will not be any further registration of transfers of any stock,
options or warrants thereafter on the records
of the
Company. If,
at or
after the Effective Time, certificates are presented to the Surviving Company
for transfer, they will be canceled and exchanged for Merger Consideration
as
provided in Section 1.6.
(c) In
the
event any certificate that has been lost, stolen or destroyed, upon the making
of an affidavit of that fact by a Stockholder, Parent will issue in exchange
for
such lost, stolen or destroyed certificate, the Merger Consideration deliverable
in respect thereof as determined in accordance with Section 1.6 if a Stockholder
will, as a condition precedent to the payment thereof indemnify the Surviving
Company in a manner reasonably satisfactory to it against any claim that
may be
made against the Surviving Company with respect to the certificate claimed
to
have been lost, stolen or destroyed.
Section 1.9 Dissenting
Shares.
The
Company Shareholders who have complied with all requirements for perfecting
stockholders’ rights to demand fair value as set forth in Sections 79-4-13.01 to
79-4-13.31 of the Mississippi Law, shall be entitled to their rights under
the
Mississippi Law with respect to such shares (the “Dissenting Shares ”) and the
Parent shall pay any and all costs or payments related to the Dissenting Shares
including any appraisal (if required by Mississippi Law), court costs,
attorney’s fees or payments made with respect thereto. Notwithstanding the
foregoing, nothing herein shall require Parent to pay any attorney’s fees of any
dissenting shareholder unless otherwise required by court order.
4
Section
1.10 Securities
Law Issues.
Parent
Common Stock to be issued in the Merger will be issued pursuant to an exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended
(the “Securities
Act”)
and/or
Rule 506 under Regulation D promulgated under the Securities Act and applicable
state securities laws.
ARTICLE
II
Representations
and Warranties of the Company
Except as set forth in the Company Disclosure Letter attached to this Agreement
(the “Company
Disclosure Letter”),
the
Company represents and warrants to Parent and Buyer as follows:
Section 2.1 Organization, Qualification and Corporation
Power.
The
Company (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has
the
requisite corporate power and authority to own, operate or lease its properties
and to carry on its business as is now being conducted and proposed to be
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not reasonably be expected
to
have, individually or in the aggregate, a Material Adverse Effect (as defined
below) on the Company, and (b) is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
other
than in such jurisdictions where the failure so to qualify or to be in good
standing would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. The Company has furnished
to Buyer true, correct and complete copies of its Articles of Incorporation
and
Bylaws.
For
purposes of this Agreement, the term “Material
Adverse Effect”
when
used in connection with an entity means any change, event, circumstance or
effect whether or not such change, event, circumstance or effect is caused
by or
arises in connection with a breach of a representation, warranty, covenant
or
agreement of such entity in this Agreement that is or is reasonably likely
to be
materially adverse to the business, assets (including intangible assets),
capitalization, financial condition, operations or results of operations,
employees or prospects of such entity taken as a whole with its subsidiaries,
except to the extent that any such change, event, circumstance or effect is
caused by or results from (i) changes in general economic conditions,
(ii) changes affecting the industry generally in which such entity operates
(provided that such changes do not affect such entity in a substantially
disproportionate manner) or (iii) changes in the trading prices for such
entity’s capital stock.
Section
2.2 Capitalization; Subsidiaries.
(a) The authorized capital stock of the Company consists of 500,000,000 shares
of common stock no par value, of which 10,000,000 share are issued and
outstanding (the “Company
Stock”)
and
are owed or record as set forth in Exhibit
A
and
50,000,000 shares of preferred stock no par value of which zero shares are
issued and outstanding. Oher than the Company Stock, there are no other classes,
series or types of equity for the Company. All issued and outstanding shares
of
Company Stock have been duly authorized and were validly issued, are fully
paid
and nonassessable, are not subject to any right of rescission, are not subject
to preemptive rights by statute, the Articles of Incorporation or the bylaws
of
the Company, or any agreement or document to which the Company is a party or
by
which it is bound and have been offered, issued, sold and delivered by the
Company in compliance with all registration or qualification requirements (or
applicable exemptions therefrom) of applicable federal and state securities
laws. The Company is not under any obligation to register under the Securities
Act any of its presently outstanding securities or any securities that may
be
subsequently issued. There is no liability for dividends accrued but unpaid
with
respect to the Company’s outstanding securities.
5
(b)
There are no existing (i) options, warrants, calls, preemptive rights,
subscriptions or other rights, convertible securities, agreements or commitments
of any character obligating the Company to issue, transfer or sell any units
of
membership interests or other equity interest in, the Company or securities
convertible into or exchangeable for such units of membership interests or
equity interests, (ii) contractual obligations of the Company to repurchase,
redeem or otherwise acquire any units of membership interest of the Company
or
(iii) voting trusts or similar agreements to which the Company is a party with
respect to the voting of the Company Stock.
(c) Except for an interest in Kite Broadband, LLC, the Company does not have
any
direct or indirect Subsidiaries or any interest, direct or indirect, in any
corporation, partnership, joint venture or other business entity.
For
purposes of this Agreement, the term “Subsidiary”
of
a
Person means any corporation or other legal entity of which such Person (either
alone or through or together with any other Subsidiary) owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders
of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity.
For
purposes of this Agreement, the term “Person”
shall
mean any individual, firm, corporation, partnership, limited liability company,
trust, joint venture, Governmental Entity or other entity.
Section 2.3 Reserved.
Section 2.4 Authority Relative to this Agreement.
The
Company has the necessary corporate power and authority to enter into this
Agreement and, subject to the filing of the Merger Certificate as required
by
Mississippi Law and approval of the stockholders as required by Mississippi
Law,
to carry out its obligations hereunder. The Company has the necessary
competency, power and authority to enter into this Agreement and carry out
the
obligations hereunder. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part
of the Company and subject to the approval of the stockholders and, subject
to
the filing of the Merger Certificate as required by Mississippi Law, no other
corporate proceeding is necessary for the execution and delivery of this
Agreement by the Company, the performance by the Company of its obligations
hereunder and the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company
and
subject to the approval of the stockholders and, assuming the due authorization,
execution and delivery of this Agreement by Parent and Buyer, constitutes
a
legal, valid and binding obligation of the Company and the Stockholders,
enforceable against each in accordance with its terms, except that the
enforceability hereof may be subject to (a) applicable bankruptcy, insolvency
or
other similar laws, now or hereinafter in effect, affecting creditors’ rights
generally, and (b) the general principles of equity (regardless of whether
enforceability is considered at a proceeding at law or in equity).
6
Section 2.5 No Conflict; Required Filings and
Consents.
(a) Except as set forth in Section 2.5(a) of the Company Disclosure Letter,
the execution and delivery of this Agreement by the Company does not, and the
consummation by the Company of the transactions contemplated hereby will not,
(i) conflict with or violate any law, court order, judgment or decree
applicable to the Company or by which any of its property is bound, (ii) violate
or conflict with the Articles of Incorporation or bylaws (or comparable
organizational documents) of the Company, or (iii) result in any breach of
or constitute a default (or an event which with notice or lapse of time of
both
would become a default) under, or give to others any rights of termination
or
cancellation of, or result in the creation of a Lien on any of the properties
or
assets of the Company pursuant to, any contract, instrument, Permit or license
to which the Company is a party or by which the Company or any of its property
is bound, except in the case of clauses (i) and (iii) for conflicts, violations,
breaches or defaults which, individually or in the aggregate, would not have
or
result in a Material Adverse Effect on the Company.
(b)
Except for the filing of the Merger Certificate and any applicable requirements,
if any, under “takeover” or “blue sky” laws of various states, the Company is
not required to submit any notice, report or other filing with any federal,
state or local or foreign government, political subdivision thereof, any court,
administrative, regulatory or other governmental agency, commission or authority
or any non-governmental United States or foreign self-regulatory agency,
commission or authority or any arbitral tribunal (each, a “Governmental
Entity”)
in
connection with the execution, delivery or performance of this Agreement or
the
consummation of the transactions contemplated hereby the failure of which to
submit would, individually or in the aggregate, have or result in a Material
Adverse Effect on the Company. No waiver, consent, approval or authorization
of
any Governmental Entity or any third party is required to be obtained or made
by
the Company in connection with its execution, delivery or performance of this
Agreement the failure of which to obtain or make, individually or in the
aggregate, would have or result in a Material Adverse Effect on the
Company.
Section 2.6 Reserved.
Section 2.7 Financial Statements; Debt.
(a)
Attached as Section 2.7(a) of the Company Disclosure Letter are the Company’s
unaudited balance sheets dated as of December 31, 2005 and 2004, income
statements and statement of cash flows for the years then ended and (all such
financial statements being collectively referred to herein as the “Company
Financial Statements”).
The
Company Financial Statements (a) agree with the books and records of the
Company, (b) fairly present in all material respects the financial condition
of
the Company at the date therein indicated and the results of operation for
the
period therein specified and (c) have been prepared in accordance with
GAAP
except that they are subject to year-end audit adjustments and do not contain
footnotes and are not restated for subsequent events.
7
(b) The Company has no material debt, liability or obligation of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due, that is not reflected or reserved against in the Company Financial
Statements or otherwise disclosed in the Company Disclosure Lettter that are
not
material in amount either individually or collectively.
Section
2.8 Absence of Certain Changes.
Except
as set forth in the Company Financial Statements or Section 2.8 of the
Company Disclosure Letter, since November 1, 2005, there has not been with
respect to the Company:
(a) any change in the financial condition, properties, assets, liabilities,
business or operations thereof which change by itself or in conjunction with
all
other such changes, whether or not arising in the ordinary course of business,
has had or will have a Material Adverse Effect thereon;
(b) any material loss of customers.
Set
forth on Section 2.8(b) of the Company Disclosure Letter is a true, correct
and
complete list of all customers lost in the preceding twelve (12) months,
including all revenue generated from any customer generating at least One
Thousand Dollars ($1,000) per month in revenue for the Company for the thirty
six (36) months preceding the date on which they were no longer
customers;
(c)
no notice of impending cancellation, or a material price increase, from any
Incumbent Local Exchange Carrier or other provider of data transmission
services;
(d) any contingent liability incurred thereby as guarantor or otherwise with
respect to the obligations of others;
(e) any mortgage, encumbrance or lien placed on any of the properties owned
by
Company;
(f) any material obligation or liability incurred thereby other than obligations
and liabilities incurred in the ordinary course of business;
(g)
any purchase or sale or other disposition, or any agreement or other arrangement
for the purchase, sale or other disposition, of any of the properties or assets
thereof other than in the ordinary course of business;
(h)
any damage, destruction or loss, whether or not covered by insurance, materially
and adversely affecting the properties, assets or business thereof;
(i) any declaration, setting aside or payment of any
dividend on, or the making of any other distribution in respect of, the
ownership interests thereof, any split, combination or recapitalization of
the
units of membership interests thereof or any direct or indirect redemption,
purchase or other acquisition of units of membership interests
thereof;
8
(j)
any labor dispute or claim of unfair labor practices, any change in the
compensation payable or to become payable to any of its officers, employees
or
agents, or any bonus payment or arrangement made to or with any of such
officers, employees or agents;
(k) any change with respect to the management, supervisory or other key
personnel thereof;
(l)
any payment or discharge of a material lien or liability thereof which lien
was
not either shown on the Company Financial Statements or incurred in the ordinary
course of business thereafter; or
(m) any obligation or liability incurred thereby to any of its officers,
directors, managers or stockholders or any loans or advances made thereby to
any
of its officers, directors, managers or stockholders except normal compensation
and expense allowances payable to officers.
Section
2.9 Tax Matters.
(a) The Company has timely filed all Tax Returns that it was required to file,
and all such Tax Returns were correct and complete in all material respects.
All
Tax liabilities of the Company for all taxable periods or portions thereof
ending on or prior to the Effective Time have been, or will be timely paid
or
are adequately reserved for in the Company Financial Statements, other than
such
Tax liabilities as are being or may be contested in good faith by the Company.
There are no ongoing federal, state, local or foreign audits or examination
of
any Tax Return of the Company. The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time other than
as
a result of filing of Tax Returns under extensions permitted under the IRS
Code,
and no such waiver or extension has been required with respect to a Tax
assessment or deficiency. No claim has ever been made by an authority in a
jurisdiction where the Company does not file Tax Returns that it is or may
be
subject to taxation by that jurisdiction. There are no Liens on any of the
assets of the Company that arose in connection with any failure (or alleged
failure) to pay any Tax.
(b) The Company has withheld or collected and paid or deposited in accordance
with law all Taxes required to have been withheld or collected and paid or
deposited by the Company in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third
party.
(c) There is no dispute or claim concerning any Tax liability of the Company
either (i) claimed or raised by any authority in writing or (ii) to the
Company’s Knowledge.
(d) For purposes of this Agreement:
(i) “Knowledge”
or
words of similar import means all information that is actually known, following
reasonable investigation (unless otherwise specified herein), and in the case
of
the Company, by ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, ▇▇.
(ii) “Taxes”
means
all taxes, charges, fees, levies or other similar assessments or liabilities,
including income, gross receipts, ad valorem, premium, value-added, excise,
real
property, personal property, sales, use, transfer, withholding, employment,
payroll and franchise taxes imposed by a Governmental Entity, and any interest,
fines, penalties, assessments or additions to tax resulting from, attributable
to or incurred in connection with any tax or any contest or dispute thereof,
and
any amounts of Taxes of a third Person that a Person or any Subsidiary of such
Person is liable to pay by law or otherwise; and
9
(iii) “Tax
Returns”
means
all reports, returns, declarations, statements or other information supplied
or
required to be supplied to a taxing authority in connection with Taxes including
any schedules, attachments or amendments thereto.
Section
2.10 Title to Properties.
Except
as set forth in the Company Financial Statements or Section 2.10 of the Company
Disclosure Letter, the Company has good and marketable title to all of its
assets free and clear of all liens, charges, restrictions or encumbrances (other
than for taxes not yet due and payable). All machinery and equipment included
in
such properties is in good condition and repair, normal wear and tear excepted,
and all leases of real or personal property to which the Company is a party
are
fully effective in accordance with their terms. The Company is not in violation
of any zoning, building, safety or environmental ordinance, regulation or
requirement or other law or regulation applicable to the operation of owned
or
leased properties (the violation of which would have a Material Adverse Effect
on its business), or has received any notice of violation with which it has
not
complied.
Section 2.11 Environmental Matters.
(a) During the period that the Company has leased or owned its properties or
owned or operated any facilities, to the Knowledge of the Company
there
have been no disposals, releases or threatened releases of Hazardous Materials
(as defined below) on, from or under such properties or facilities. The Company
has no Knowledge
of any
presence, disposals, releases or threatened releases of Hazardous Materials
on,
from or under any of such properties or facilities, which may have occurred
prior to the Company having taken possession of any of such properties or
facilities. For the purposes of this Agreement, the terms “disposal,”
“release,”
and
“threatened
release”
shall
have the definitions assigned thereto by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq.,
as amended (“CERCLA”).
For
the purposes of this Agreement “Hazardous
Materials”
shall
mean any hazardous or toxic substance, material or waste which is or becomes
prior to the Closing regulated under, or defined as a “hazardous substance,”
“pollutant,” “contaminant,” “toxic chemical,” “hazardous materials,” “toxic
substance” or “hazardous chemical” under (1) CERCLA; (2) any similar
federal, state or local law; or (3) regulations promulgated under any of
the above laws or statutes.
(b) To the Knowledge of Company none
of
the properties or facilities of the Company is in violation of any federal,
state or local law, ordinance, regulation or order relating to industrial
hygiene or to the environmental conditions on, under or about such properties
or
facilities, including, but not limited to, soil and ground water condition.
During the time that the Company has owned or leased its properties and
facilities, to the Company’s Knowledge,
no
third party, has used, generated, manufactured or stored on, under or about
such
properties or facilities or transported to or from such properties or facilities
any Hazardous Materials.
10
(c) During the time that the Company has owned or leased its properties and
facilities, there has been no litigation brought, to Company’s
Knowledge,
or
threatened against the Company by, or any settlement reached by the Company
with, any party or parties alleging the presence, disposal, release or
threatened release of any Hazardous Materials on, from or under any of such
properties or facilities.
Section
2.12 Intellectual Property.
(a) The term “Intellectual
Property”
means
any (i) patents, (ii) trademarks, service marks, trade names, brand names,
trade
dress, slogans, logos and internet domain names, (iii) inventions, discoveries,
ideas, processes, formulae, designs, models, industrial designs, know-how,
proprietary information, trade secrets, and confidential information (including
customer lists, training materials and related matters, research and marketing
and sales plans), whether or not patented or patentable, (iv) copyrights,
writings and other copyrightable works and works in progress, databases and
software, (v) all other intellectual property rights and foreign equivalent
or
counterpart rights and forms of protection of a similar or analogous nature
or
having similar effect in any jurisdiction throughout the world, (vi) all
registrations and applications for registration of any of the foregoing, (vii)
all common law trademarks and service marks used by the Company and (viii)
any
renewals, extensions, continuations, divisionals, reexaminations or reissues
or
equivalent or counterpart of any of the foregoing in any jurisdiction throughout
the world. The term “Company
IP”
means
any Intellectual Property used or held for use by the Company, in the conduct
of
their businesses as currently conducted and currently proposed to be conducted.
(b) Section 2.12(b) of the Company Disclosure Letter sets forth a true, correct
and complete list (including, the owner, title, registration or application
number and country of registration or application, as applicable) of all of
the
following Company IP: (i) registered trademarks, (ii) applications for trademark
registration, (iii) domain names, (iv) patents, (v) applications for
patents, (vi) registered copyrights (vii) applications for copyright
registration and (viii) licenses of all Intellectual Property (other than
off-the-shelf business productivity software that is the subject of a shrink
wrap or click wrap software license agreement (“Desktop
Software”))
to or
from the Company. The Company has delivered or made available to Buyer prior
to
the execution of this Agreement true, complete and correct copies of all
licenses of Company IP both to and from the Company, except Desktop
Software.
(c)
The Company IP set forth on Section 2.12(b) of the Company Disclosure Letter
constitutes all of the Intellectual Property used by and necessary for the
Company to operate its business as currently conducted and currently proposed
to
be conducted. The Company owns all legal and beneficial right, title and
interests in or the right to use the Company IP, and the Company has the valid,
sole and exclusive right to use, assign, transfer and license all such Company
IP for the life thereof for any purpose, free from (i) any Liens, and
(ii) any requirement of any past, present or future royalty payments,
license fees, charges or other payments, or conditions or restrictions
whatsoever.
11
(d) All patent, trademark, service ▇▇▇▇, copyright, patent and domain name
registrations or applications set forth on Section 2.12(b) of the Company
Disclosure Letter are in full force and effect and have not been abandoned,
dedicated, disclaimed or allowed to lapse for non-payment of fees or taxes
or
for any other reason.
(e)
None of the Company IP owned by the Company has been declared or adjudicated
invalid, null or void, unpatentable or unregistrable in any judicial or
administrative proceeding. To the Knowledge of the Company,
none of
the Company IP used (but not owned) by the Company has been declared or
adjudicated invalid, null or void, unpatentable or unregistrable in any judicial
or administrative proceeding.
(f) The Company has not received any written notices of, or has Knowledge
of,
any
infringement or misappropriation by or of, or conflict with, any third party
with respect to the Company IP or Intellectual Property owned by any third
party. To the Knowledge of Company,
the
Company has not infringed, misappropriated or otherwise violated or conflicted
with any Intellectual Property of any third party. The operation of the Company
does not, as currently conducted, infringe, misappropriate or otherwise violate
or conflict with the Intellectual Property of any third party.
(g) The transactions contemplated by this Agreement will not affect the right,
title and interest of the Company in and to the Company IP, and the Company
has
taken all commercially reasonable steps to maintain and protect the Company
IP
owned by the Company and, until the Effective Time, will continue to maintain
and protect such Company IP so as to not materially adversely affect the
validity or enforceability of such Company IP.
(h)
To the Knowledge of the Company, no officer, employee, director or manager
of
the Company is obligated under any contract (including any license, covenant
or
commitment of any nature) or other agreement, or subject to any judgment, decree
or order of any court or administrative agency, that would conflict or interfere
with the performance of such person’s duties as an officer, employee, director
or manager of the Company, the use of such person’s best efforts to promote the
interests of the Company or the Company’s business as conducted or as currently
proposed to be conducted by the Company. No prior employer of any current or
former employee of the Company has any right, title or interest in the Company
IP and to the Knowledge of the Company, no person or entity has any right,
title
or interest in any Company IP. It is not and will not be with respect to the
business as currently proposed to be conducted necessary for the Company to
use
any inventions of any of its employees made prior to their employment by the
Company.
Section 2.13 Material Agreements.
(a) Section 2.13 of the Company Disclosure Letter sets forth a true, correct
and
complete list of the following agreements (whether written or oral and including
all amendments thereto) to which the Company is a party or a beneficiary or
by
which the Company or any of its assets are bound (collectively, the
“Material
Agreements”):
(i) any real estate leases;
12
(ii)
any other agreement for the provision of services by the Company that have
accounted for revenues of more than Two Thousand Dollars ($2,000) during any
month since November 1, 2005;
(iii) any agreement creating, evidencing, securing, assuming, guaranteeing
or
otherwise relating to any debt for which the Company is liable or under which
it
has imposed (or may impose) a Lien on any of the assets, tangible or intangible,
of the Company;
(iv) any capital or operating leases or conditional sales agreements relating
to
personal property of the Company;
(v) any supply or manufacturing agreements or arrangements pursuant to which
the
Company is entitled or obligated to acquire any assets from a third party with
a
fair market value in excess of One Thousand Dollars ($1,000);
(vi) any insurance policies;
(vii)
any employment, consulting, noncompetition, or separation agreements or
arrangements;
(viii) any agreement with or for the benefit of the stockholders, officer,
director, manager or employee of the Company, or any Affiliate of the Company,
or any Person controlled by such individual or family member thereof;
(ix)
any license to which the Company is a party;
(x) any agreement in which the Company
has granted rights to license, sublicense or copy, “most favored nation” pricing
provisions or exclusive marketing or distribution rights relating to
any products
or territory or has agreed to purchase a minimum quantity of goods or services
or has agreed to purchase goods or services exclusively from a certain
party;
(xi) any written arrangement establishing a partnership or joint venture;
and
(xii) a list of all parties to any written arrangement concerning
confidentiality, non-disclosure or noncompetition;
(xiii) any
written arrangement under which the consequences of a default or termination
could have a Material Adverse Effect on the Company; and
(xiv) any
other
agreement or arrangement pursuant to which the Company or its Subsidiaries
could
be required to make or be entitled to receive aggregate payments in excess
of
Five Thousand Dollars ($5,000.00) or entered into outside of
the
ordinary course of business.
13
For
purposes of this Agreement, “Affiliate”
means
another Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, any
Person.
(b) The Company has delivered to or made available to Buyer a true, correct
and
complete copy of each Material Agreement and a written summary of each oral
Material Agreement. With respect to each Material Agreement:
(i) each Material Agreement is legal, valid, binding and enforceable and in
full
force and effect with respect to the Company and, to the Knowledge of the
Company,
the
written arrangement is legal, valid, binding and is enforceable and in full
force and effect with respect to each other party thereto (in each case except
as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting the
enforcement of creditor’s rights generally, and except that the availability of
equitable remedies, including specific performance, is subject to the discretion
of the court before which any proceeding therefor may be brought);
(ii)
subject to the third-party consents described in Section 2.5(a) of the
Company Disclosure Letter, each Material Agreement will continue to be legal,
valid, binding and enforceable and in full force and effect against the Company,
and to the Knowledge of the Company against
each other party thereto, immediately following the Closing in accordance with
the terms thereof (in each case except as enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws affecting the enforcement of creditor’s rights generally, and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought) as in effect prior to the Closing;
and
(iii) the Company is not in breach or default, and, to the Knowledge of the
Company,
no
other party thereto is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration, under any Material Agreement which
could have a Material Adverse Effect.
Section
2.14 Insurance.
(a) Section 2.14 of the Company Disclosure Letter sets forth a true, correct
and
complete list of each insurance policy (including fire, theft, casualty, general
liability, director and officer, workers compensation, business interruption,
environmental, product liability and automobile insurance policies and bond
and
surety arrangements) to which the Company is a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past year. Section
2.14 of the Company Disclosure Letter sets forth a true, correct and complete
list of each person or entity required to be listed as an additional insured
under each such policy. Each such policy shall be in full force and effect
until
such time as the period covered by any prepaid premiums has
expired.
14
(b) The Company is not in breach or default, and does not anticipate being
in
breach or default prior to the Closing (including with respect to the payment
of
premiums or the giving of notices) under any such policy, and, to the Knowledge
of Company,
no
event has occurred which, with notice or the lapse of time, would constitute
such a breach or default or permit termination, modification or acceleration,
under such policy; and the Company has not received any written notice or,
to
the Knowledge of the Company, oral notice, from the insurer disclaiming coverage
or reserving rights with respect to a particular claim or such policy in
general. The Company has not incurred any material loss, damage, expense or
liability covered by any such insurance policy for which it has not properly
asserted a claim under such policy.
Section
2.15 Litigation.
(a) Except as set forth in Section 2.15 of the Company Disclosure Letter there
are no claims, actions, suits, proceedings or investigations of any nature
pending or, to the Knowledge of the Company,
threatened against the Company or any properties or rights of the Company,
before any court, administrative, governmental or regulatory authority or body.
The Company is not subject to any order, judgment, injunction or
decree.
(b) There are no agreements or other documents or instruments settling any
material claim, complaint, action, suit or other proceeding against the Company.
Section 2.16 Employees; Labor Matters.
(a) Set forth on Section 2.16(a) of the Company Disclosure Letter is a true,
correct and complete list of all current employees of the Company, including
date of employment, current title and compensation (including commissions,
bonus
and other compensation), and date and amount of last increase in compensation.
None of the Company’s employees are members of a labor union. The Company is not
a party to any collective bargaining, union or labor agreements, contracts
or
other arrangements with any group of employees, labor union or employee
representative and to the Knowledge of the Company, there is no organization
effort currently being made by or on behalf of any labor union with respect
to
employees of the Company. The Company has not experienced, and to the Knowledge
of the Company, there is no basis for, any strike, grievances, claims of unfair
labor practices, material labor trouble, work stoppage, slow down or other
interference with or impairment of the business of Company.
(b)
To the Knowledge of the Company,
no
employee has any plans to terminate employment with the Company within six
months of the date hereof.
(c) The Company is in compliance in all material respects with all currently
applicable laws and regulations respecting wages, hours, occupational safety,
or
health, fair employment practices, and discrimination in employment terms and
conditions, and is not engaged in any unfair labor practice. There are no
pending claims against the Company under any workers compensation plan or policy
or for long term disability. There are no proceedings pending or, to the
Knowledge of the Company, threatened, between the Company and its
employees.
15
(d) Section 2.16(a) of the Company Disclosure Letter sets forth a true, correct
and complete list of Persons whose employment has been terminated by the Company
in the 90 days prior to Closing.
Section 2.17 Employee Benefits.
(a) Except as set forth in Section 2.17(a) of the Company Disclosure
Letter, neither the Company nor any predecessor in interest thereof has
maintained, or currently maintains, any Employee Benefit Plan. At no time has
the Company or any ERISA Affiliate been obligated to contribute to any
“multi-employer plan” (as defined in Section 4001(a)(3) of ERISA). Neither the
Company nor any predecessor in interest thereof has any liabilities or
obligations with respect to any Employee Benefit Plan.
(b) Section 2.17(b) of the Company Disclosure Letter discloses each:
(i) agreement with any director, executive officer or other key employee of
the Company, including (A) the benefits of which are contingent, or the terms
of
which are altered, upon the occurrence of a transaction involving the Company
of
the nature of any of the transactions contemplated by this Agreement, (B)
providing any term of employment or compensation guarantee or (C) providing
severance benefits or other benefits after the termination of employment of
such
director, executive officer or key employee; (ii) agreement, plan or arrangement
under which any person may receive payments from the Company that may be subject
to the tax imposed by Section 4999 of the Code or included in the
determination of such person’s “parachute payment” under Section 280G(b)(1) of
the Code; and (iii) agreement or plan binding the Company, including any option
plan, stock appreciation right plan, restricted stock plan, stock purchase
plan,
severance benefit plan, or any Employee Benefit Plan, any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on
the
basis of any of the transactions contemplated by this Agreement.
(c) For purposes of this Agreement:
(i) “Employee
Benefit Plan”
means
any “employee pension benefit plan” (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended), any “employee welfare
benefit plan” (as defined in Section 3(1) of ERISA), and any other written or
oral plan, agreement or arrangement involving direct or indirect compensation,
including insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, options, or other forms of incentive compensation or
post-retirement compensation; and
(ii) “ERISA
Affiliate”
means
any entity which is a member of (i) a controlled group of corporations (as
defined in Section 414(b) of the Code), (ii) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or (iii) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes the Company
or its Subsidiaries.
16
Section
2.18 Permits.
Section
2.18 of the Company Disclosure Letter sets forth a true, correct and complete
list of all material permits, licenses, registrations, certificates, orders
or
approvals from any Governmental Entity (including those issued or required
under
applicable export laws or regulations) (“Permits”)
issued
to or held by the Company. Such listed Permits are the only Permits that are
required for the Company to conduct their business as presently conducted.
Each
such Permit is in full force and effect and to the Knowledge of the
Company,
no
suspension or cancellation of such Permit is threatened and there is no basis
for believing that such Permit will not be renewable upon expiration. Each
such
Permit will continue in full force and effect following the
Closing.
Section
2.19 Real Property.
(i) Owned Real Property. The Company owns no real property.
(b) Leased Real Property. Section 2.19(b) of the Company Disclosure Letter
sets
forth a true and correct list of all real property leased or subleased to the
Company (the “Leased
Real Property”).
The
Company has made available to Buyer true and correct copies of such leases
and
subleases, each as amended to date. Except as set forth on Section 2.19(b)
of
the Company Disclosure Letter, with respect to each lease and sublease of Leased
Real Property each lease or sublease is in full force and effect in all material
respects and is valid and enforceable by Buyer or the Company in accordance
with
its terms, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium, receivership
and
similar laws affecting the enforcement of creditors’ rights generally and to
general equitable principles.
Section
2.20 Broker’s Fees.
Neither
the Company nor any of their Subsidiaries has any liability or
obligation
to pay
any fees or commissions to any broker, investment banking firm, finder or agent
with respect to the transactions contemplated by this Agreement.
Section 2.21 Books and Records.
(a) The books, records and accounts of the Company (a) are in all material
respects true, complete and correct, (b) have been maintained in accordance
with good business practices on a basis consistent with prior years,
(c) are stated in reasonable detail and accurately and fairly reflect the
transactions and dispositions of the assets of the Company, and
(d) accurately and fairly reflect the basis for the Company Financial
Statements.
(b)
The Company has devised and maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (a) transactions are
executed in accordance with management’s general or specific authorization;
(b) transactions are recorded as necessary (i) to permit preparation
of financial statements in conformity with generally accepted accounting
principles or any other criteria applicable to such statements, and (ii) to
maintain accountability for assets, and (c) the amount recorded for assets
on the books and records of the Company is compared with the existing assets
at
reasonable intervals and appropriate action is taken with respect to any
differences.
17
Section 2.22 Banking Relationships and Investments.
Section
2.22 of the Company Disclosure Letter sets forth sets forth a true, correct
and
complete list of each of the Company’s accounts, deposits, safe-deposit boxes or
borrowing relationships, factoring arrangements or other loan facilities or
relationships, including the names of all persons authorized to draw on those
accounts or deposits, or to borrow under loan facilities, or to obtain access
to
such boxes (the “Accounts”).
Section 2.22 of the Company Disclosure Letter sets forth a true, correct and
complete list of all certificates of deposit, debt or equity securities and
other investments owned, beneficially or of record, by the Company (the
“Investments”).
The
Company has good and legal title to all Investments.
Section
2.23 Prepaid Accounts.
Section
2.23 of the Company Disclosure Letter sets forth a true, correct and complete
list of each prepaid customer account serviced by the Company. This list shall
contain any customer who pays in advance more than one month.
Section 2.24 Disclosure.
No
representation or warranty by the Company contained in this Agreement, including
any statement contained in the Company Disclosure Letter or any document
delivered in connection herewith, knowingly contains any untrue statement of
a
material fact or knowingly omits to state any material fact necessary, in light
of the circumstances under which it was made, in order to make the statements
herein not misleading.
ARTICLE
III
Representations
and Warranties of Parent and Buyer
Except as set forth in the Buyer Disclosure Letter attached to this Agreement
(the “Buyer
Disclosure Letter”)
Parent
and Buyer, jointly and severally, represent and warrant to the Company and
the
Stockholders as follows:
Section
3.1 Organization, Qualification and Corporation
Power.
Each of
Parent and Buyer as of the Effective Time (a) is a corporation duly
organized, validly existing and in good standing under the Laws of the
jurisdiction in which it is organized and has the requisite corporate power
and
authority and any necessary governmental authority to own, operate or lease
the
properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted and proposed to be conducted, and
(b) is duly qualified as a foreign corporation to do business, and is in
good standing, in each other jurisdiction where the character of its properties
owned, operated or leased or the nature of its activities makes such
qualification necessary, except in the case of clause (b) for failures
which, when taken together with all other such failures, would not have a
Material Adverse Effect on Buyer.
Section
3.2 Capitalization.
(a) The authorized capital stock of Buyer consists of
1,500,000,000
shares
of common stock, $0.001 par value (the “Parent
Common Stock”),
20,035,425
shares
of preferred stock, $0.001 par value and 35,425 shares of Series A Convertible
Preferred Stock, $0.001 par value (the “Series
A Preferred Stock”).
As of
January
15, 2005
and the Effective Time, (i) 432,161,236
shares of Buyer Common Stock were issued and outstanding and 35,378 shares
of
Series A Preferred Stock were issued and outstanding and (ii) 30,000,000
shares
of Parent Common Stock were reserved for issuance under Buyer’s 2001 Equity
Performance
Plan.
All of the issued and outstanding shares of Parent Common Stock and Series
A
Preferred Stock (i) have been duly authorized and validly issued; (ii) are
fully
paid and nonassessable; (iii) are free and clear of all Liens; and (iv) are
free
of any other restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other ownership interests). The
certificates representing Parent Common Stock are in proper form for the
enforcement of the rights and limitations of rights pertaining to such Shares
which are set forth in Parent’s certificate of incorporation, as amended, and
bylaws. There are no declared or accrued but unpaid dividends with respect
to
any Parent Common Stock.
18
(b) The authorized capital stock of Buyer consists of 1,000 shares of common
stock, $0.001 par value (the “Buyer
Common Stock”),
of
which 1,000 shares were issued and outstanding. Buyer owns all of the issued
and
outstanding shares of Buyer common stock. Buyer owns all of the issued and
outstanding shares of Buyer Common Stock. All of the issued and outstanding
shares of Buyer Common Stock (i) have been duly authorized and validly issued;
(ii) are fully paid and nonassessable; (iii) are free and clear of all Liens;
and (iv) are free of any other restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
ownership interests).
Section 3.3 Authority Relative to this Agreement.
As of
the Effective Time each of Parent and Buyer has the necessary corporate power
and authority to enter into this Agreement and, subject to the filing of the
Certificate of Merger, to carry out its obligations hereunder. The execution
and
delivery of this Agreement by Parent and Buyer and the consummation by them
of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Buyer and, subject to the filing
of
the filing of the Certificate of Merger, no other corporate proceeding is
necessary for the execution and delivery of this Agreement by Parent and Buyer,
the performance by them of their respective obligations hereunder and the
consummation by them of the transactions contemplated hereby. This Agreement
has
been duly executed and delivered by the Parent and Buyer and, assuming the
due
authorization, execution and delivery of this Agreement by the Company,
constitutes a legal, valid and binding obligation of the Parent and Buyer,
enforceable against each in accordance with its terms, except that the
enforceability hereof may be subject to (a) applicable bankruptcy, insolvency
or
other similar laws, now or hereinafter in effect, affecting creditors’ rights
generally, and (b) the general principles of equity (regardless of whether
enforceability is considered at a proceeding at law or in equity).
Section 3.4 No Conflict; Required Filings and
Consents.
(a)
The execution and delivery of this Agreement by each of Parent and Buyer do
not,
and the consummation by each of them of the transactions contemplated hereby
will not, (i) conflict with or violate any law, court order, judgment or
decree applicable to either Buyer or the Parent or by which any of their
respective property is bound, (ii) violate or conflict with the certificate
of incorporation or bylaws (or comparable organizational documents) of either
Parent or Buyer, or (iii) result in any breach of, or constitute a default
(or an event which with notice or lapse of time of both would become a default)
under, or give to others any rights of termination or cancellation of, or result
in the creation of a Lien on any of the properties or assets of either Buyer
or
the Parent or any of their respective Subsidiaries pursuant to, any contract,
instrument, Permit or license to which either Buyer or the Parent or any of
their respective Subsidiaries is a party or by which either Buyer or the Parent
or any of their respective Subsidiaries or their respective property is bound,
except in the case of clauses (i) and (iii) for conflicts, violations, breaches
or defaults which, individually or in the aggregate, would not have or result
in
a Material Adverse Effect on Buyer or Parent.
19
(b) Except for the filing of the Certificate of Merger, and applicable
requirements, if any, under “takeover” or “blue sky” laws of various states,
Buyer or Parent are not required to submit any notice, report or other filing
with any Governmental Entity in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby the failure of which to submit would, individually or in
the
aggregate, have or result in a Material Adverse Effect on Buyer or Parent.
No
waiver, consent, approval or authorization of any Governmental Entity or any
third party is required to be obtained or made by Parent or Buyer in connection
with its execution, delivery or performance of this Agreement the failure of
which to obtain or make, individually or in the aggregate, would have or result
in a Material Adverse Effect on Buyer or Parent.
Section 3.5 SEC Reports.
Parent
has filed all forms, reports, schedules, registration statements, proxy
statements and other documents (including any document required to be filed
as
an exhibit thereto) required to be filed by Parent with the Securities and
Exchange Commission (“SEC”)
since
December 31, 2003. All such required forms, reports, schedules, registration
statements, proxy statements and other documents (including those that Buyer
may
file subsequent to the date hereof) are referred to herein as the “SEC
Reports.”
As
of
their respective dates, the SEC Reports (including any financial statements
or
schedules included or incorporated by reference therein) (i) were prepared
in
all material respects in accordance with the requirements of the Securities
Act
or the Securities Exchange Act of 1934 (the “Exchange
Act”),
as
the case may be, and the rules and regulations of the SEC thereunder applicable
to such SEC Reports and (ii) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on the
date
of such filing) contain any untrue statement of a material fact or omit to
state
a material fact required to be stated therein or necessary in order to make
the
statements therein, in light of the circumstances under which they were made,
not misleading. As of the date hereof, there has not been any Material Adverse
Effect with respect to Parent or Buyer that would require disclosure under
the
Securities Act.
Section 3.6 Broker’s Fees.
Neither
of Parent or Buyer has any liability or obligation to pay any fees or
commissions to any broker, investment banking firm, finder or agent with respect
to the transactions contemplated by this Agreement.
Section
3.7 Issuance of Merger Consideration.
All of
the Parent Common Stock to be issued as Merger Consideration has been duly
authorized and when issued in accordance with this Agreement shall be validly
issued, fully paid and non assessable.
20
ARTICLE
IV
Further
Covenants and Assurances
Section 4.1 Securities Laws.
(a) Parent, Buyer and the Company will take such steps as may be necessary
to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of Parent Common Stock in connection with the Merger.
The Company will use commercially reasonable efforts to assist Buyer as may
be
necessary to comply with such securities and blue sky laws.
(b)
So long as Parent or any successor entity has securities registered under
Securities Act or the Exchange Act, Parent or such successor entity will file
all reports required to be filed by it under the Securities Act and the Exchange
Act, all to the extent required pursuant to Rule 144 to enable stockholders
who
exchange Shares for Parent Common Stock pursuant to the terms of this Agreement
to sell Parent Common Stock pursuant to Rule 144 adopted by the Securities
and
Exchange Commission under the Securities Act (as such rule may be amended from
time to time) or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission.
Section 4.2 Public Announcements.
Parent,
Buyer and the Company will consult with each other before holding any press
conferences, analyst calls or other meetings or discussions and before issuing
any press release or other public announcements with respect to the transactions
contemplated by this Agreement, including the Merger. The parties will provide
each other the opportunity to review and comment upon any press release or
other
public announcement or statement with respect to the transactions contemplated
by this Agreement, including the Merger, and will not issue any such press
release or other public announcement or statement prior to such consultation,
except as may be required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange. The
parties agree that the initial press release or releases to be issued with
respect to the transactions contemplated by this Agreement will be mutually
agreed upon prior to the issuance thereof. In addition, the Company will consult
with Parent regarding communications with customers, stockholders and employees
relating to the transactions contemplated by this Agreement.
Section
4.3 Audited and Reviewed Financial Statements.
(a) Preparation of Audited and Reviewed Financial Statements.
At the
sole cost and expense of the Parent,
promptly after the Effective Time, the certified public accountant of Parent
shall
be
provided with access to the Books and Records and financial information of the
Company and shall audit the balance
sheets
as of December
31, 2005
and
2004,
and
the statements of income and cash flows for the years then ended(the
“Audited
Financial Statements”)
(and
shall review the balance sheet and statement of income and cash flows or the
period ending January 31, 2006) by May 15, 2006, the “Reviewed
Financial Statements”).
The
Audited and Reviewed Financial Statements shall (a) be prepared based on the
books and records
of the
Company, (b) fairly present the financial condition of the Company at the date
therein indicated and the results of operation for the period therein specified
and (c) be prepared in accordance with GAAP.
21
(b)
Dispute Resolution.
In the
event that ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. as representative for the stockholders of
the
Company (“Stockholder Representative”) disagrees with the accuracy of the
Audited or Reviewed Financial Statements, the Stockholder Representative shall
deliver a written notice of disagreement (“Dispute
Notice”)
within
fifteen (15) business days of its receipt of the Audited and Reviewed Financial
Statements (the “Review
Period”)
setting forth in reasonable detail the basis for such dispute. If the
Stockholder Representative does not deliver a Dispute Notice within the Review
Period, then the Audited Financial Statement shall be final and binding on
the
parties, effective as of the first business day following the Effective Time.
In
the event the Stockholder Representative delivers to Buyer a Dispute Notice
in a
timely manner, then Buyer and the Stockholder Representative shall attempt
in
good faith to resolve such dispute within ten business (10) days from the date
of the Dispute Notice. If Buyer and the Stockholder Representative cannot reach
an agreement within such ten business (10) day period (or such longer period
as
they may mutually agree), then the dispute shall be promptly referred to
mediation in accordance with the rules of the American Arbitration Association
(“AAA”)
should
the total amount in dispute
not exceed $120,000.00. In the event that the amount in dispute exceeds
$120,000.00, then in such event the dispute shall be submitted to arbitration
under the rules of the AAA governing commercial disputes. The arbitration shall
take place in the State of Mississippi
before a
single neutral arbitrator. The parties may conduct only essential discovery
prior to the hearing,
as
defined by the AAA arbitrator. The arbitrator shall issue a written decision,
which contains essential findings and conclusions on which the decision is
based. Judgment upon the determination or award rendered by the arbitrator
may
be entered in any court having jurisdiction thereof. Each party shall be
responsible for it own costs, fees and expenses associated with any mediation
and/or arbitration regardless of the outcome.
Section
4.4 Adjustment
of Merger Consideration.
The
Merger Consideration due
and
payable to the stockholders of the Company in accordance with Section 1.6 will
be adjusted
as follows:
(a) Adjustments
in Merger Consideration at Closing.
(i)
If the
Closing Balance Sheet (as defined in Section 5.1(h)) reveals a Working Capital
deficit, the Merger Consideration shall be reduced by one share for each $0.174
of Working Capital deficit on the Closing Balance Sheet.
(ii) If
the
Closing Balance Sheet reveals positive Working Capital, the Merger Consideration
shall be increased one share for each $0.174 of positive Working Capital shown
on the Closing Balance Sheet.
(iii) The
Merger
Consideration shall be increased one (1) share for each one (1) share of Parent
Common Stock owned by the Company at the Effective Time.
(b) Adjustments
in Merger Consideration After Closing.
(i) If
the
Audited or Reviewed Financial Statements reveal a Working Capital deficit in
excess of the Working Capital Deficit revealed on the Closing Balance Sheet,
the
Merger Consideration shall be further reduced by
one
share for each $0.174 of
additional
Working
Capital deficit revealed on the Audited or Reviewed Financial
Statements.
22
(ii) If
the
Audited or Reviewed Financial Statements reveals positive Working Capital more
than the positive Working Capital revealed on the Closing Balance Sheet and/or
inventory more than revealed on the Closing Balance Sheet, the Merger
Consideration shall be further increased by one share for each $0.174 of
additional Working Capital on the Audited or Reviewed Financial Statements.
(iii) The
Merger Consideration shall be increased for each (1) one share of Parent Common
Stock that the Company is entitled to receive post closing under that certain
Assignment of Limited Liability Company Interest /Release dated as of January
31, 2006.
For
purposes of this Agreement, positive or negative “Working
Capital”
shall
mean the difference between (x) the sum of the Company’s cash, wireless CPE
inventory and current receivables of 30 days or less plus prepaid expenses
and
(y) all of the Company’s liabilities, including any deferred revenues of the
Company, all determined in accordance with United States generally accepted
accounting principles applied on a consistent basis (“GAAP”).
It is
expressly understood and agreed that Working Capital shall not include any
shares of Parent Common Stock owned by the Company.
Section 4.5 Real Property Deliveries.
The
Company agrees that if, immediately prior to or at the Closing, or at any time
after the Effective Time, Buyer considers or is advised that any further deeds,
assignments or assurances are reasonably necessary or desirable to vest, perfect
or confirm in Buyer title to any property or rights of the Company, Buyer and
its proper officers and directors may execute and deliver all such proper deeds,
assignments and assurances and do all other things necessary or desirable to
vest, perfect or confirm title to such property or rights in Buyer and otherwise
to carry out the purpose of this Agreement, in the name of the Company or
otherwise.
Section 4.6 Termination of Related Party
Arrangements.
The
Company shall cause all Material Agreements described in Sections 2.13(a)(viii)
of the Company Disclosure Letter, other than those listed in Section 4.6 of
the
Company Disclosure Letter, to be terminated immediately prior to the Closing
with no further liability or obligation on the part of any party
thereto.
Section 4.7 Release.
(a)
Effective at the time of the Closing, the executive officers and directors
of
the Company shall execute a release agreement in the form of Exhibit
C
whereby
they each shall, without any further action, releases and forever discharges
the
Company and its officers, directors, managers, employees and Affiliates (other
than Parent and Buyer), from any and all liabilities, claims, obligations,
actions, causes of action, suits at law or in equity of whatever kind or nature,
debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, Material Agreements, controversies, promises, variances, trespasses,
judgments, verdicts, extents, executions, Liens, payments, damages, costs,
attorneys fees, expenses, and demands of any kind or nature, which the executive
officers or directors may have or may have had, known or unknown, from the
beginning of the world through and including the Closing Date, against the
Company or any of its officers, directors, managers, employees or affiliates
(other than Buyer or Parent).
23
(b) Notwithstanding the foregoing, nothing contained in clause (a) above shall
constitute a release by the executive officers or directors of the Company
for
claims against Buyer or Parent arising out of Buyer’s obligations under this
Agreement.
Section
4.8 Accounts and Investments.
At the
Closing (but in any event after the Effective Time), the Company will transfer
to the Buyer title, ownership and access rights to each of the Accounts and
Investments listed on Section 2.22 of the Company Disclosure Letter. Following
the Closing, the Company, each of its Affiliates, members, managers, agents
and
employees will have no rights whatsoever to each of the Accounts and Investments
listed on Section 2.22 of the Company Disclosure Letter.
Section 4.9 Further Assurances.
The
parties agree to execute and deliver all such other instruments and take all
such other action as any party may reasonably request from time to time, after
Closing and without payment of further consideration, in order to effectuate
the
transactions provided for herein.
Section
4.10 Post-Closing Tax Cooperation.
Following the Closing Date, Parent and Buyer, on the one hand, and the
Stockholder Representative on the other hand, shall cooperate fully with each
other to the extent reasonably requested by the other in connection with the
filing of Tax Returns and any audit, litigation, or other proceeding with
respect to Taxes or Tax Returns of or with respect to the Company.
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
Tax Return, filing audit, litigation or other proceeding, and making personnel
available on a mutually convenient basis to provide additional information
and
explanation of any material provided hereunder. The parties further agree,
upon
request by other, to use all reasonable efforts to obtain and provide any
certificate or other document from any governmental authority or any other
person as may be necessary to mitigate, reduce, or eliminate any Tax that could
be imposed with respect to the Company and the transactions contemplated hereby.
Further, each of the parties agree to provide, upon request of the other, any
and all information required to be reported pursuant to the Internal Revenue
Code and all Treasury Department Regulations promulgated
thereunder.
Section 4.11 Employment
Agreements.
The
Surviving Company shall offer employment agreements (on terms no less than
their
current employment arrangements and pursuant to the form attached hereto as
Exhibit
G)
to
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇, and shall use commercially reasonable
efforts to negotiate and execute these agreements prior to the Effective Time
which employment agreements shall be effective as of the Effective Time.
Section 4.12 No
Distributions.
The
Company acknowledges and agrees that is shall not distribute to its shareholders
any shares of Parent Common Stock that is receives as a result of its rights
under the operating agreement of Kite Broadband, LLC.
24
ARTICLE
V
Conditions
of Merger
Section
5.1 Conditions to Obligations of Parent and Buyer to Effect the
Merger.
The
obligations of Parent and Buyer to effect the Merger will be subject to the
satisfaction or waiver of the following conditions prior to the Effective Time:
(a) Representations and Warranties.
Those
representations and warranties of the Company set forth in this Agreement will
be true and correct in all material respects as of the Closing Date (except
to
the extent such representations and warranties expressly relate to a specific
date in which case such representations and warranties will be true and correct
as of such date). Buyer shall receive a certificate to such effect executed
by
the Company’s Chief Executive Officer.
(b)
Agreements and Covenants.
The
Company shall have performed in all material respects all obligations and
complied in all material respects with all agreements and covenants of the
Company required to be performed or complied with by it under this Agreement.
Buyer shall receive a certificate to such effect executed by the Company’s Chief
Executive Officer.
(c) Secretary Certificates.
Buyer
will have received from the corporate secretary of the Company a certificate
(i) certifying as to such entity’s Articles of Incorporation,
(ii) certifying as to such entity’s bylaws, (iii) certifying as to
such entity’s resolutions of its Board of Directors, (vi) certifying as to
such entity’s resolutions of its shareholders and (v) attesting to the
incumbency of such entity’s officers.
(d) Good Standing.
Buyer
will have received a certificate of the Secretary of State or other applicable
Governmental Authority certifying the good standing of the Company in its
jurisdiction of organization as of a date within seven days of the Closing
Date.
(e) Minute Books, Etc.
Buyer
will have received corporate records relating to the organization, ownership
and
maintenance of the Company.
(f)
Resignations.
Buyer
will have received written resignations, effective as of the Closing Date,
of
each of the officers of the Company from all manager positions and offices
with
the Company.
(g) Required Consents.
Any
consent, authorization, order or approval, in a form reasonably acceptable
to
Buyer, of (or filing or registration with) any third party identified by Buyer
on Schedule 5.1(g) will have been obtained or made.
(h) Closing Balance Sheet and Income Statement.
Buyer
will have received from the Company, a closing
balance sheet and income statement, dated as of January 31, 2006 which shall
be
attached hereto as Exhibit
D and
prepared in accordance with Section 2.7.
(i) Registration Rights Agreement.
The
parties will have executed and delivered the Registration Rights Agreement
providing for piggyback registration rights plus demand registration rights
commencing on the six (6) month anniversary of the Closing with respect to
the
Merger Consideration in the form attached hereto as Exhibit
E
(the
“Registration
Rights Agreement”).
25
Section 5.2 Conditions to Obligations of the Company to Effect the
Merger.
The
obligations of the Company to effect the Merger will be further subject to
the
satisfaction or waiver of the following conditions prior to the Effective
Time:
(a)
Representations and Warranties.
Those
representations and warranties of Parent and Buyer set forth in this Agreement
will be true and correct as of the Closing Date (except to the extent such
representations and warranties expressly relate to a specific date in which
case
such representations will be true and correct as of such date). The Company
shall receive a certificate to such effect executed by Buyer’s Chief Executive
Officer.
(b) Agreements and Covenants.
Parent
and Buyer shall have performed in all material respects all obligations and
complied in all material respects with all agreements and covenants of Buyer
required to be performed or complied with by them under this Agreement. The
Company shall receive a certificate to such effect executed by Buyer’s Chief
Executive Officer.
(c) Secretary Certificates.
The
Company will have received from the corporate secretary of each of Parent and
Buyer a certificate (i) certifying Parent’s Certificate of Incorporation,
Buyer’s Articles of Incorporation, (ii) certifying the bylaws of Buyer,
(iii) certifying the resolutions of the board of directors of Buyer and
(iv) certifying the resolutions of the stockholder of Buyer as
of a
date within seven days of the Closing Date
(d) Registration Rights Agreement.
The
parties will have executed and delivered the Registration Rights Agreement
providing for piggyback registration rights plus
demand registration rights commencing on the six (6) month anniversary of the
Closing
with
respect to the Merger Consideration in the form of Exhibit
E
attached
hereto.
(e)
Employment Agreement.
The
Parent, or one of its affiliates, shall have entered into an employment
agreement with ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. in the form of Exhibit
F
attached
hereto.
(f) Kite Broadband, LLC Acquisition.
The
acquisition of the remaining interest of Kite Broadband, LLC by the Parent
shall
have been consummated.
ARTICLE VI
Survival
and Indemnification
Section
6.1 Survival of Representations and Warranties.
The
representations and warranties of the Company, Parent and Buyer contained in
this Agreement or in any instrument delivered pursuant hereto will remain
operative and in full force and effect until the expiration of the General
Escrow Period at which time they shall automatically expire (the “Survival
Period”);
provided,
however,
that
such representations and warranties shall survive beyond their respective
periods with respect to any inaccuracy therein or breach thereof, notice of
which shall have been duly given within such applicable period in accordance
with Section 6.4, 6.5 or 6.6 hereof, as applicable. The covenants and agreements
(as opposed to the representations and warranties in Articles 2 of the
Company) of the parties contained in this Agreement or in any instrument
delivered pursuant hereto or in connection herewith will survive the Closing
and
will remain in full force and effect at all times after the
Closing.
26
Section 6.2 Indemnification of Parent and Buyer.
The
Company agrees to indemnify and hold harmless Parent and Buyer, and each of
their respective officers, directors, agents and employees, and each person,
if
any, who controls or may control Parent and Buyer within the meaning of the
Securities Act from and against any and all claims, demands, actions, causes
of
actions, losses, costs, damages, liabilities and expenses including, without
limitation, reasonable legal fees but net of any tax benefits derived by any
of
the foregoing and net of any recoveries or related proceeds from insurance
or
similar arrangements with third parties (hereinafter referred to as
“Damages”)
arising
out of any misrepresentation or breach of or default in connection with any
of
the representations, warranties and covenants given or made by the Company
in
this Agreement or any certificate, document or instrument delivered by or on
behalf of the Company pursuant hereto. The foregoing are collectively referred
to as the “Buyer
Indemnity Claims.”
Section 6.3 Indemnification of the Company.
Subject
to the limitations set forth in this Article VI, Parent and Buyer agree to
jointly
and severally indemnify and hold harmless the Company and its officers,
directors,
shareholders,
Subsidiaries
and
Affiliates,
managers, agents and employees, from and against any and all Damages
arising
out of any (a) misrepresentation or breach of or default in connection with
any of
the
representations, warranties and covenants given or made by Parent and Buyer
in
this Agreement or any certificate, document or instrument delivered by or on
behalf of Buyer pursuant hereto; and (b) post-Closing operation of Company
or Company’s business, including without limitation all debts, liabilities,
duties and other obligations of Company to the extent not required to be paid
or
satisfied by Company prior to the Closing pursuant to this Agreement. The
foregoing are collectively referred to as the “Company
and The Stockholders Indemnity Claims.” The
Company Indemnity Claims together with Buyer Indemnity Claims are collectively
referred to as the “Indemnity
Claims.”
Section
6.4 General Notice and Procedural Requirements for Indemnity
Claims.
Notwithstanding the foregoing, the party or person having the indemnity
obligation under this Article VI (the “Indemnifying
Party”),
shall
be obligated to indemnify and hold harmless the party or person entitled to
indemnity under this Article VI (the “Indemnified
Party”),
only
with respect to any Indemnity Claims of which the Indemnified Party notifies
with specificity the Indemnifying Party in accordance with Section 6.1 of this
Agreement and, if applicable, within the following time period: (i) with regard
to any representation or warranty under this Agreement, prior to the end of
the
Survival Period of such representation or warranty; or (ii) with regard to
any
covenant under this Agreement which by its terms expires, prior to the end
of
the survival period relating to such covenant.
Section 6.5 Notice and Procedural Requirements for Third Party
Claims.
If a
complaint, claim or legal action is brought by a third party (a “Third
Party Claim”)
as to
which an Indemnified Party is entitled to indemnification under Section 6.2
or 6.3 of the Agreement, and subject to the applicable Survival Period, the
Indemnified Party shall give written notice of such Third Party Claim to the
Indemnifying Party in accordance with Section 6.1 of this Agreement promptly
after the Indemnified Party receives notice thereof, which notice shall include
a copy of any letter, complaint or similar writing received by the Indemnified
Party; provided however, that any failure to provide or delay in providing
such
information shall not constitute a bar or defense to indemnification except
to
the extent the Indemnifying Party has been prejudiced thereby.
27
The
Indemnifying Party shall have the right to assume the defense of such Third
Party Claim with counsel reasonably satisfactory to the Indemnified Party.
After
notice from the Indemnifying Party to the Indemnified Party of the Indemnifying
Party’s election so to assume the defense of such Third Party Claim, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal
or
other expenses subsequently incurred by the Indemnified Party in connection
with
the defense of such Third Party Claim except as hereinafter provided. If the
Indemnifying Party elects to assume such defense and select counsel, the
Indemnified Party may participate in such defense through its own separate
counsel, but the fees and expenses of such counsel shall be borne by the
Indemnified Party unless: (i) otherwise specifically agreed by the Indemnifying
Party, or (ii) counsel selected by the Indemnifying Party determines that
because of a conflict of interest between the Indemnifying Party and the
Indemnified Party such counsel for the Indemnifying Party cannot adequately
represent both parties in conducting the defense of such action. In the event
the Indemnified Party maintains separate counsel because counsel selected by
the
Indemnifying Party has determined that such counsel cannot adequately represent
both parties because of a conflict of interest between the Indemnifying Party
and the Indemnified Party, then the Indemnifying Party shall not have the right
to direct the defense of such Third Party Claim on behalf of the Indemnified
Party.
The
failure of the Indemnifying Party to notify an Indemnified Party of its election
to defend such Third Party Claim within thirty (30) days after notice thereof
was given to the Indemnifying Party shall be deemed a waiver by the Indemnifying
Party of its rights to defend such Third Party Claim.
If
the
Indemnifying Party assumes the defense of a Third Party Claim, the obligations
of the Indemnifying Party shall include taking all steps necessary in the
defense of such Third Party Claim and holding the Indemnified Party harmless
from and against any and all Damages caused or arising out of any settlement
approved by the Indemnified Party or any judgment in connection with the claim
or litigation.
If
the
Indemnifying Party does not assume the defense of such Third Party Claim in
accordance with this Section, the Indemnified Party may defend against such
claim or litigation in such manner as it deems appropriate; provided, however,
that the Indemnified Party may not settle such Third Party Claim without the
prior written consent of the Indemnifying Party; provided that the Indemnifying
Party may not withhold such consent unless it has provided security of a type
and in an amount reasonably acceptable to the Indemnified Party for the payment
of its indemnification obligations with respect to such Third Party Claim.
The
Indemnifying Party shall promptly reimburse the Indemnified Party for the amount
of Damages caused or arising out of any judgment rendered with respect to such
Third Party Claim, and for all costs and expenses incurred by the Indemnified
Party in the defense of such claim.
28
The
Indemnifying Party may settle any Third Party Claim in its sole discretion
without the prior written consent of the Indemnified Party, provided that such
settlement involves only the payment of cash by the Indemnifying Party to the
claimant and does not impose any other obligation on the Indemnifying Party
or
any liability or obligation on the Indemnified Party.
Section 6.6 Notice and Procedural Requirements for Direct
Claims.
Any
claim for indemnification by an Indemnified Party on account of Damages which
do
not result from a Third Party Claim (a “Direct
Claim”)
shall
be asserted by giving the Indemnifying Party reasonably prompt notice thereof
in
accordance with Section 6.1 of this Agreement; provided, however, that any
failure to provide, or delay in providing, such notification shall not
constitute a bar or defense to indemnification except to the extent the
Indemnifying Party has been prejudiced thereby. After receiving notice of a
Direct Claim, the Indemnifying Party will have a period of thirty (30) days
within which to respond in writing to such Direct Claim. If the Indemnifying
Party rejects such claim or does not respond within such thirty (30) day period
(in which case the Indemnifying Party will be deemed to have accepted such
claim), and the Indemnified Party and Indemnifying Party shall have failed
to
resolve or compromise such Direct Claim within sixty (60) days of the date
of
rejection, then the Indemnifying Party must commence legal proceedings against
the Indemnifying Party within thirty (30) days.
Section 6.7 Maximum Liability; Sole Recourse.
Notwithstanding anything to the contrary herein, the Company’s indemnity
obligations shall only arise if and to the extent the amount of Damages exceeds
in the aggregate $15,000, and (a) in no event will the Company’s indemnity
obligations under this Article VI exceed the aggregate amount of the General
Escrow Shares remaining in escrow (which shall be Parent and Buyer’s sole source
of recovery for any Damages); and (b) Buyer’s sole and exclusive recourse
for any and all claims, losses, damages and expenses arising directly or
indirectly from this Agreement or the transactions contemplated hereby shall
be
for indemnification as provided in this Article VI. In no event will
Buyer’s indemnity obligations under this Article VI exceed the aggregate amount
of the
Merger Consideration.
ARTICLE
VII
TERMINATION
7.1 Termination.
This
Agreement may be terminated at any time prior to the Effective Date, whether
before or after approval by the shareholders of the Company:
(a) by
mutual
written consent of the parties, properly authorized by their respective Boards
of Directors;
(b) By
Parent
and Buyer (i) in the event that the transaction contemplated hereunder have
been
prohibited or enjoined by reason of any final judgment, decree or order entered
or issued by a court of competent jurisdiction in litigation or proceedings
involving either Parent, Buyer or the Company; (ii) in the event the conditions
precedent to Parent’s and Buyer’s obligation to close are not satisfied and
performed in full at or prior to June 30, 2006; (iii) in the event the Company
breaches or violates any material provision of this Agreement or fails to
perform any material covenant or agreement to be performed by the Company under
the terms of this Agreement and such breach, violation or failure is not cured
or waived by Parent prior to Closing.
29
(c) By
the
Company (i) in the event that the transactions contemplated hereunder have
been
prohibited or enjoined by reason of any final judgment, decree or order entered
or issued by a court of competent jurisdiction in litigation or proceedings
involving either Parent, Buyer or Seller; (ii) in the event the conditions
precedent to the Company’s obligation to close are not satisfied and performed
in full at or prior to June 30, 2006; or (iii) in the event Buyer or Parent
breaches or violates any material covenant or agreement to be performed by
the
Parent or Buyer under the terms of this Agreement, and such breach, violation
or
failure is not cured or waived by the Company prior to Closing.
(d) By
Parent, Buyer or the Company if the Closing hereunder shall not have taken
place
by June 30, 2006, or such later date as shall be agreed upon by an amendment
to
this Agreement; provided, however, that a party shall not have the right to
terminate under this Section 7.1(d) if the conditions precedent to such party’s
obligation to close have been satisfied and such party has failed or refused
to
close after being requested in writing to close by the other party.
(e) By
any
party hereto, if at the special meeting of shareholders to be called by Company,
this Agreement shall not have been approved by the affirmative vote of the
holders of at least a majority of the outstanding shares of the Company’s shares
voted at the special meeting of shareholders of the Company as called to approve
this Agreement;
(f) By
the
Company, in the event there are dissenting shareholders (i) constituting more
than five percent (5%) of the total issued and outstanding shares of the Company
or (ii) to whom payments would have to be made that would cause the merger
not
to qualify as a reorganization within the meaning of 368(a)(1)(A) by reason
of
Section 368(a)(2)(D) of the Internal Revenue Code of 1986 as amended (the
“Code”);
(g) by
any
party hereto if Closing shall not have occurred by June 30, 2006.
7.2 Effect
of Termination.
In the
event of termination of this Agreement by either the Parent, Buyer or Company
as
provided above, this Agreement shall forthwith become void and there shall
be no
further liability on the part of the Parent, Buyer or Company, or their
respective officers, directors or shareholders except for Sections 8.2 and
8.12
which shall survive the termination hereof.
30
ARTICLE
VIII
General
Provisions
Section
8.1 Notices.
All
notices and other communications given or made pursuant hereto will be in
writing and will be deemed to have been duly given or made (a) as of the
date delivered, if delivered personally or by overnight courier, (b) on the
third Business Day after deposit in the U.S. mail, if mailed by registered
or
certified mail (postage prepaid, return receipt requested), or (c) when
successfully transmitted by facsimile (with a confirming copy of such
communication to be sent as provided in clauses (a) or (b) above), and, in
each
case to the parties at the following addresses or facsimile number (or at such
other address for a party as will be specified by like notice, except that
notices of changes of address will be effective upon receipt):
(a) If to Parent or Buyer:
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention: ▇▇▇
▇.
▇▇▇▇▇▇, President and CEO
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
With a copy (which will not constitute notice) to:
▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, Esq.
▇▇▇
▇.
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
(b)
If to the Company or the Stockholders Representative:
▇▇▇
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
With a copy (which will not constitute notice) to:
▇▇▇▇▇▇▇
▇▇▇▇▇▇ Winter & Stennis, P.A.
▇▇▇
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇
▇▇▇
▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇ ▇. ▇▇▇▇▇▇. Esq.
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
For
purposes of this Agreement, a “Business Day” shall mean any day that is not a
Saturday, a Sunday or other day on which banking organizations in Washington,
D.C. are authorized or required by law to close.
Section
8.2 Expenses.
All
fees, costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby will be paid by the party incurring such fees,
costs and expenses.
Section
8.3 Amendment.
This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
31
Section
8.4 Entire
Agreement.
This
Agreement and the schedules and exhibits attached hereto, constitute the entire
agreement and supersede any and all other prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof.
Section
8.5 No
Third-Party Beneficiaries.
Except
for the parties hereto, this Agreement is not intended to confer upon any other
Person any rights or remedies hereunder.
Section
8.6 Assignment.
This
Agreement will not be assigned by operation of law or otherwise. This Agreement
will be binding upon, and will be enforceable by and inure to the benefit of
the
parties hereto and their respective successors and assigns.
Section
8.7 Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law, or public policy, all other conditions and
provisions of this Agreement will nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto will negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely
as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the maximum extent possible.
Section
8.8 Governing
Law.
This
Agreement will be governed by, and construed in accordance with, the
laws
of the
State of Mississippi
applicable to contracts executed in and to be performed entirely within
Mississippi.
Section
8.9 Headings;
Interpretation.
The
headings contained
in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement. Whenever the words “include,”
“includes”
or
“including”
are
used in this Agreement, they will be understood to be followed by the words
“without
limitation.”
Section
8.10 Construction.
In the
event of an ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the parties and no
presumption or burden of proof will arise favoring or disfavoring any party
by
virtue of the authorship of any provisions of this Agreement.
Section
8.11 Counterparts.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed will be
deemed to be an original but all of which will constitute one and the same
agreement.
Section
8.12 Confidentiality.
The
Company on the one hand and Buyer and Parent on the other hand each recognize
that they have received and will receive confidential information concerning
the
other during the course of the Merger negotiations and preparations.
Accordingly, Parent, Buyer
and
the Company each agree (a) to use its respective best efforts to prevent
the unauthorized disclosure of any confidential information concerning the
other
that was or is disclosed during the course of such negotiations and
preparations, and is clearly designated in writing as confidential at the time
of disclosure, and (b) to not make use of or permit to be used any such
confidential information other than for the purpose of effectuating the Merger
and related transactions. The obligations of this section will not apply to
information that (i) is or becomes part of the public domain, (ii) is
disclosed by the disclosing party to third parties without restrictions on
disclosure, (iii) is received by the receiving party from a third party
without breach of a nondisclosure obligation to the other party or (iv) is
required to be disclosed by law.
32
Section
8.13 Appointment
of Shareholder Representative.
Each of
the shareholders of the Company by acceptance of the Merger Consideration each
hereby appoints ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. to act on his/her/its behalf as
Shareholder Representative as provided in this Agreement and the Escrow
Agreement.
*
*
*
33
IN
WITNESS WHEREOF,
Parent,
Buyer and the Company have executed this Agreement as of the date first written
above.
| By: | /s/ ▇▇▇ ▇. ▇▇▇▇▇▇ |
Name: ▇▇▇
▇.
▇▇▇▇▇▇
Title: President
and CEO
KITE
ACQUISITION CORP.
|
By:
|
/s/ ▇▇▇
▇. ▇▇▇▇▇▇
|
Name: ▇▇▇
▇.
▇▇▇▇▇▇
Title:
President
and CEO
KITE
NETWORKS, INC.
|
By:
|
/s/ ▇▇▇▇▇
▇ ▇▇▇▇▇▇▇▇,
▇▇.
|
Title: CEO
[Signature
Page to Agreement and Plan of Merger]
EXHIBIT
A
COMPANY
SHAREHOLDERS
|
Shareholder
Name
|
Shares
Owned
|
%
Owned
|
|
|
||
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Partners, LP
|
6,922
|
0.07%
|
|
▇▇▇▇▇▇▇
▇▇▇▇▇ Media & Comm Group, LLC
|
2,465,008
|
24.65%
|
|
▇▇▇▇▇▇▇
▇▇▇▇▇ Illumination Fund, LLC
|
98,070
|
0.98%
|
|
Southern
Farm Bureau Life Insurance Company
|
3,050,000
|
30.50%
|
|
▇▇▇▇▇▇▇
Wireless, LLC
|
1,100,000
|
11.00%
|
|
▇▇▇▇
▇▇▇
|
4,441
|
0.04%
|
|
Pacific
Infinity
|
198,849
|
1.99%
|
|
▇▇▇▇▇
▇▇▇▇▇
|
113,555
|
1.14%
|
|
▇▇▇▇▇▇
▇▇▇▇
|
100,000
|
1.00%
|
|
▇▇▇▇▇
▇▇▇
|
91,122
|
0.91%
|
|
▇▇▇
▇▇▇▇
|
51,846
|
0.52%
|
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇
|
96,568
|
0.97%
|
|
▇▇▇▇
▇▇▇▇
|
718,619
|
7.19%
|
|
▇▇▇▇▇▇
▇▇▇▇
|
8,474
|
0.08%
|
|
▇▇▇▇▇
▇▇▇▇▇▇▇, SEP ▇▇▇
|
2,421
|
0.02%
|
|
▇▇▇▇
▇▇▇▇▇
|
2,306
|
0.02%
|
|
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
2,306
|
0.02%
|
|
▇▇▇▇
▇▇▇▇▇▇▇▇
|
1,210
|
0.01%
|
|
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
1,153
|
0.01%
|
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
|
1,130
|
0.01%
|
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, ▇▇.
|
534,788
|
5.35%
|
|
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
|
96,216
|
0.96%
|
|
▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
|
265,028
|
2.65%
|
|
▇▇▇▇▇
▇▇▇▇
|
223,688
|
2.24%
|
|
▇▇▇▇
▇▇▇▇▇▇
|
77,813
|
0.78%
|
|
▇▇▇
▇▇▇▇▇▇
|
8,906
|
0.09%
|
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
77,813
|
0.78%
|
|
▇▇▇▇
▇▇▇▇▇
|
77,813
|
0.78%
|
|
▇▇▇▇▇
O'Rear
|
68,438
|
0.68%
|
|
▇▇▇▇▇▇
▇▇▇▇▇▇
|
72,375
|
0.72%
|
|
▇▇▇▇▇
▇▇▇▇▇▇
|
1,496
|
0.01%
|
|
▇▇▇
▇▇▇▇
|
295
|
0.00%
|
|
▇▇▇▇▇
▇▇▇▇▇▇
|
589
|
0.01%
|
|
▇▇▇
▇▇▇▇▇
|
236
|
0.00%
|
|
▇▇▇▇▇▇▇▇
▇▇▇▇▇
|
3,535
|
0.04%
|
|
▇▇▇▇
▇▇▇▇▇▇
|
943
|
0.01%
|
|
▇▇▇▇▇
▇▇▇▇
|
55,120
|
0.55%
|
|
▇▇▇▇
▇▇▇▇▇▇▇
|
55,125
|
0.55%
|
|
▇▇▇▇
▇▇▇▇▇▇▇▇
|
11,813
|
0.12%
|
|
▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
112,219
|
1.12%
|
|
▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
112,219
|
1.12%
|
|
▇▇▇▇▇
▇▇▇▇▇
|
11,813
|
0.12%
|
|
▇▇▇▇▇▇
▇▇▇▇▇▇
|
5,906
|
0.06%
|
|
▇▇▇▇▇
▇▇▇▇▇▇
|
11,813
|
0.12%
|
|
|
10,000,000
|
100.00%
|
EXHIBIT
B
ESCROW
AGREEMENT
2
EXHIBIT
C
RELEASE
AGREEMENT
3
EXHIBIT
D
CLOSING
BALANCE SHEET AND INCOME STATEMENT
4
EXHIBIT
E
REGISTRATION
RIGHTS AGREEMENT
EXHIBIT
F
EMPLOYMENT
AGREEMENT