Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
by and among
KNIGHT ▇▇▇▇▇▇, INC.
KF MERGER SUB, INC.
CENTERSTAGING MUSICAL PRODUCTIONS, INC.
and
OTHER SIGNATORIES HERETO
Dated as of August 17, 2005
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August
17, 2005, is made and entered into by and among KNIGHT ▇▇▇▇▇▇, INC., a Delaware
corporation ("KF"), KF MERGER SUB, INC., a California corporation and direct,
wholly-owned subsidiary of KF ("Merger Sub"), CENTERSTAGING MUSICAL PRODUCTIONS,
INC., a California corporation ("CMPI"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇, and JAN PARENT (collectively, the "CMPI Shareholders"), OPUS
INTERNATIONAL, LLC, a Maryland limited liability company and principal
stockholder of KF ("Opus"), and ZIRK ▇▇▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇▇▇"), with reference
to the following facts:
RECITALS:
WHEREAS, after carrying out the transactions described in Section 1.1, the
respective boards of directors of KF, Merger Sub and CMPI deem it advisable and
in the best interests of their respective stockholders that Merger Sub merge
with and into CMPI (the "Merger") upon the terms and subject to the conditions
set forth herein; and
WHEREAS the respective boards of directors of KF, Merger Sub and CMPI have
approved the Merger; and
WHEREAS, as in inducement to the other parties to enter into this
Agreement and to consummate the Merger and the other transactions contemplated
herein, the parties hereto are willing to make certain representations and
warranties as set forth herein; and
WHEREAS, as a further inducement to CMPI and the CMPI Shareholders to
enter into this Agreement and to consummate the Merger, Opus and ▇▇▇▇▇▇▇▇▇▇▇ are
willing to provide indemnities against certain losses and liabilities, in each
case, on the terms and subject to the limitations set forth herein;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
PRE-CLOSING TRANSACTIONS AND THE MERGER
1.1 Conversion of KF Series A Preferred Shares
Opus and ▇▇▇▇▇▇▇▇▇▇▇ agree that, prior to the Closing Date, Opus shall
convert, or cause to be converted, in full, into shares of KF Common Stock (as
defined in Section 5.2) all of the outstanding shares of KF Series A Preferred
Stock (as defined in Section 5.2), such that no shares of KF Series A Preferred
Stock shall be issued or outstanding on the Closing Date. In connection with
such conversion, KF shall cause to be prepared, duly adopted by KF and filed
with the Secretary of State of the State of Delaware a certificate of
cancellation or retirement eliminating from KF's certificate of incorporation
any authorized shares of KF Series A Preferred Stock.
1.2 Opus Put Agreement
KF, Opus and ▇▇▇▇▇▇▇▇▇▇▇ agree that, prior to the Closing Date, KF and
Opus shall enter into an agreement, in form and content satisfactory to CMPI
(the "Put Agreement"), pursuant to which:
(a) Opus shall grant to KF the right, at KF's election, for a period of 12
months from the Closing Date to cause Opus to purchase from KF all of the
outstanding shares of capital stock of PayCell, Inc. owned by KF in exchange
for, and discharge of, any and all indebtedness and other amounts owed by KF to
Opus, ▇▇▇▇▇▇▇▇▇▇▇ or any of their respective affiliates or associates as of the
Closing Date, whether or not then due or payable, and any and all interest,
fees, charges and other amounts that may accrue on such indebtedness or other
amounts before or after the Closing Date (the "Opus Indebtedness");
(b) Opus shall agree that KF shall have no obligation to pay all or any
portion of any Opus Indebtedness prior to one year following the closing date,
regardless of whether such Opus Indebtedness requires payment prior to such
date; and
(c) ▇▇▇▇▇▇▇▇▇▇▇ shall guarantee the due and timely performance by Opus of
all of its obligations under the Put Agreement.
1.3 The Merger
Upon the terms and subject to the conditions hereof, at the Effective Time
(as defined in Section 1.4), Merger Sub shall merge with and into CMPI and the
separate corporate existence of Merger Sub shall thereupon cease, and CMPI shall
be the surviving corporation in the Merger (as such, the "Surviving
Corporation"). The Merger shall have the effects set forth in this Agreement and
in Chapter 11 of the California General Corporation Law (the "CGCL").
1.4 Effective Time of the Merger
The Merger shall become effective at or following the Closing (as defined
in Section 3.4) upon the filing with the respective Secretary of State of the
State of California of an agreement of merger (the "Agreement of Merger") in
accordance with the requirements of the CGCL (the "Effective Time").
1.5 Tax Treatment
The parties intend that the Merger qualify as to the CMPI Shareholders as
a reorganization under Section 368(a)(2)(E) of the Internal Revenue Code of
1986, as amended (the "Code"), and related sections and Treasury Regulations.
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ARTICLE 2
THE SURVIVING CORPORATION
2.1 Articles of Incorporation
The articles of incorporation of CMPI in effect immediately prior to the
Effective Time shall be the articles of incorporation of the Surviving
Corporation at and after the Effective Time, and thereafter may be amended in
accordance with the terms thereof and the CGCL.
2.2 Bylaws
The bylaws of CMPI in effect immediately prior to the Effective Time shall
be the bylaws of the Surviving Corporation at and after the Effective Time, and
thereafter may be amended in accordance with their terms and as provided by the
articles of incorporation of the Surviving Corporation and the CGCL.
2.3 Directors and Officers
At and after the Effective Time, the directors and officers of the
Surviving Corporation shall be the directors and officers of CMPI immediately
prior to the Effective Time, until their respective successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the articles of incorporation and bylaws of the
Surviving Corporation.
ARTICLE 3
CONVERSION OF SHARES
3.1 Conversion of Capital Stock
As of the Effective Time, by virtue of the Merger and without any action
on the part of the holders of any capital stock or other securities described
below:
(a) Each share of the common stock, no par value per share, of CMPI ("CMPI
Common Stock") issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for the right to receive 20,000 fully paid
and nonassessable shares of KF Common Stock (as defined in Section 5.2). The
number of shares of KF Common Stock to be so issued for each such share of CMPI
Common Stock is referred to herein as the "Exchange Ratio." All such CMPI Common
Stock, when so converted and exchanged, shall no longer be outstanding and shall
automatically be canceled and retired, and the holder of a certificate ("CMPI
Stock Certificate") that, immediately prior to the Effective Time, represented
outstanding shares of CMPI Common Stock shall cease to have any rights with
respect thereto, except the right to receive, upon the surrender of such CMPI
Stock Certificate, the shares of KF Common Stock (the "Merger Shares") to which
such holder is entitled pursuant to this Section 3.1(a). Until surrendered as
contemplated by Section 3.2(a), each CMPI Stock Certificate shall be deemed at
any time after the Effective Time to represent only the right to receive upon
such surrender the Merger Shares as provided herein.
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(b) Each outstanding option, warrant and other right (other than the
convertible promissory notes referred to in subparagraph (c), below) to
subscribe for, purchase or acquire CMPI Common Stock (each, a "CMPI Stock
Right") shall be assumed by KF and converted into an option, warrant or other
right to purchase the number of shares of KF Common Stock determined by
multiplying the number of shares of CMPI Common Stock purchasable under such
CMPI Stock Right by the Exchange Ratio (rounded to the nearest whole number of
shares of KF Common Stock) at an exercise price equal to the exercise price of
such CMPI Stock Right divided by the Exchange Ratio (rounded up to the nearest
whole cent) and otherwise on the same terms and conditions as those contained in
such CMPI Stock Right (each, a "Merger Stock Right").
(c) All outstanding convertible promissory notes of CMPI (the "CMPI
Convertible Notes") outstanding immediately prior to the Effective Time shall be
assumed by and become the direct, primary liabilities and obligations of KF and
shall be convertible into such number of shares of KF Common Stock determined in
accordance with the terms of such notes. All registration rights obligations of
CMPI to the holders of the CMPI Convertible Notes and the shareholders of CMPI
shall be assumed by and become the direct, primary obligations of KF.
(d) Notwithstanding the foregoing, if, between the date of this Agreement
and the Effective Time, the outstanding shares of KF Common Stock or the
outstanding shares of CMPI Common Stock shall have been changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares, the Exchange Ratio shall be correspondingly adjusted to reflect such
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
(e) Each share of the common stock, no par value, of Merger Sub (the
"Merger Sub Common Stock") issued and outstanding immediately prior to the
Effective Time shall automatically be converted into the same number of shares
of common stock of the Surviving Corporation, and shall, immediately after the
Merger, be the only shares of capital stock of the Surviving Corporation issued
and outstanding.
(f) Each share of each class and series of KF Common Stock issued and
outstanding immediately prior to the Effective Time shall remain outstanding and
shall not be affected by the Merger.
(g) All KF Common Stock issued upon the surrender of the CMPI Stock
Certificates in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such CMPI Stock
Certificates and the CMPI Common Stock formerly represented thereby; and from
and after the Effective Time there shall be no further registration of transfers
effected on the stock transfer books of the Surviving Corporation of shares of
the CMPI Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, CMPI Stock Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article 3.
3.2 Surrender and Payment
(a) At the Closing, KF shall issue and deliver to each holder of a CMPI
Stock Certificate that immediately prior to the Effective Time represented
outstanding CMPI Common Stock, the Merger Shares to which such holder is
entitled, in exchange for the holder's surrender for cancellation of such CMPI
Stock Certificate.
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(b) If any Merger Shares are to be issued to a Person (as hereinafter
defined) other than the registered holder of the CMPI Stock Certificates
surrendered in exchange therefor, it shall be a condition to such issuance that
the CMPI Stock Certificates so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person requesting such
issuance shall pay to KF any transfer or other taxes required as a result of
such issuance to a Person other than the registered holder or establish to the
satisfaction of the KF that such tax has been paid or is not applicable.
(c) For purposes of this Agreement, "Person" means an individual, a
corporation, a limited-liability company, a partnership, an association, a trust
or any other entity or organization, including a governmental or political
subdivision or any agency or instrumentality thereof.
(d) If any CMPI Stock Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such CMPI Stock Certificate to be lost, stolen or destroyed, KF will issue in
exchange for such lost, stolen or destroyed CMPI Stock Certificate the Merger
Shares deliverable in respect thereof pursuant to this Agreement. KF, in its
discretion, may require as a condition to such issuance that such Person also
agree to indemnify, defend and hold harmless KF and the Surviving Corporation
from and against any Liability (as hereinafter defined) to any Person with
respect to such lost, stolen or destroyed CMPI Stock Certificate. "Liabilities"
for purposes of this Agreement means any and all direct or indirect liabilities,
indebtedness, obligations, commitments, claims, deficiencies, expenses, deferred
income, guaranties or endorsements of any type, whether known, unknown, accrued,
absolute, contingent, matured or unmatured.
(e) At or after the Closing, upon the request of any holder of a CMPI
Stock Right, KF shall execute and deliver to such holder the Merger Stock Right
to which such holder is entitled under Section 3.1(b) in exchange for such
holder's surrender for cancellation of such CMPI Stock Right.
3.3 No Fractional Shares
No fractional share of KF Common Stock shall be issued in the Merger.
3.4 Closing
(a) The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of ▇▇▇▇ & ▇▇▇▇▇ Professional
Corporation, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, at
10:00 A.M., local time, as soon as is practicable following the date hereof as
of which all of the conditions set forth in Article 10 hereof shall have been
satisfied or waived, or at such other date and time as KF and CMPI shall
otherwise agree in writing (either such date, the "Closing Date").
(b) At the Closing, (i) KF and Merger Sub shall deliver the various
certificates, instruments, and documents referred to in subparagraph (c), below,
(ii) CMPI shall deliver the various certificates, instruments, and documents
referred to in subparagraph (d), below, (iii) CMPI and Merger Sub shall execute
and file the Agreement of Merger with the Secretary of State of the State of
California, and (v) the parties hereto shall undertake any other actions
provided for in this Section 3.4 in accordance with the terms of this Agreement.
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(c) At the Closing, KF or Merger Sub, as applicable, shall deliver the
following:
(i) KF shall issue and deliver the Merger Shares as provided in
Section 3.2(a); and
(ii) KF and Merger Sub shall furnish CMPI with:
(A) a certificate executed by the Secretary or an Assistant
Secretary of each of KF and Merger Sub certifying as of the date of
the Closing Date (1) a true and complete copy of the certificate of
incorporation or articles of incorporation, as the case may be, of
KF, Merger Sub, and each other Subsidiary (as defined in Section
4.1(c)) of KF, certified as of a recent date by the Secretary of the
State of the state of its incorporation or organization, and a true
and complete copy of the respective bylaws of KF and Merger Sub, as
certified by the Secretary or an Assistant Secretary of KF and
Merger Sub, as applicable, and (2) a true and complete copy of the
resolutions of the respective boards of directors of KF and Merger
Sub authorizing the execution, delivery, and performance of this
Agreement by KF and Merger Sub and the consummation of the
transactions contemplated hereby;
(B) a certificate of the Secretary of State of the State of
Delaware or other state of incorporation or organization, as
applicable, certifying the good standing of KF, Merger Sub, and each
other Subsidiary of KF in such state, in each case, dated within 10
days of the Closing Date; and
(C) such other documents and items to be delivered by KF or
Merger Sub at or before the Closing as called for herein.
(d) At the Closing, CMPI shall ▇▇▇▇▇▇▇ ▇▇ and Merger Sub with:
(i) a certificate executed by the Secretary or an Assistant
Secretary of CMPI certifying as of the date of the Closing Date (1) a true and
complete copy of the articles of incorporation of CMPI, certified as of a recent
date by the Secretary of State of the State of California, and a true and
complete copy of the bylaws of CMPI, certified by the Secretary or an Assistant
Secretary of CMPI, and (2) a true and complete copy of the resolutions of the
board of directors of CMPI authorizing the execution, delivery, and performance
of this Agreement and the consummation of the transactions contemplated hereby;
(ii) a certificate of the Secretary of State of the State of
California certifying the good standing of CMPI in such state, dated within 10
days of the Closing Date; and
(iii) such other documents and items to be delivered by CMPI at or
before the Closing as called for herein.
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(e) At the Closing, KF shall deliver to CMPI the resignation and release
agreements provided for in Section 8.8.
(f) At the Closing, Opus shall deliver to KF the following:
(i) the executed Put Agreement provided for in Section 1.2; and
(ii) the Escrowed Shares (as defined in Section 9.1) and stock
powers to be held pursuant to Article 9 hereof.
(g) At the Closing, KF shall execute and deliver to CMPI an
assumption agreement, in form and content satisfactory to CMPI, by which KF
assumes the CMPI Convertible Notes as contemplated in Section 3.1(c).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF CMPI
CMPI represents and warrants to KF that the statements contained in this
Article 4 are true and correct:
4.1 Organization and Qualification
(a) CMPI is a corporation duly organized, validly existing and in good
standing under the laws of the State of California, is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the character of CMPI's properties or the nature of its business makes
such qualification necessary, except in jurisdictions, if any, where the failure
to be so qualified would not result in a CMPI Material Adverse Effect (as
defined in subparagraph (c), below). CMPI has all requisite corporate or other
power and authority to own, use or lease its properties and to carry on its
business as it is now being conducted. CMPI has made available to KF a complete
and correct copy of its articles of incorporation and bylaws, each as amended to
date, and CMPI's articles of incorporation and bylaws as so delivered are in
full force and effect. CMPI is not in default in any respect in the performance,
observation or fulfillment of any provision of its articles of incorporation or
bylaws.
(b) For purposes of this Agreement, (i) a "CMPI Material Adverse Effect"
shall mean any event, circumstance, condition, development or occurrence
causing, resulting in or having (or with the passage of time likely to cause,
result in, or have) a material adverse effect on the financial condition,
business, assets, properties, prospects or results of operations of CMPI; and
(ii) "Subsidiary" shall mean, with respect to any party, any corporation or
other organization, whether incorporated or unincorporated, of which (x) at
least a majority of the securities or other interests having by their terms
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly beneficially owned or controlled by such party or by any
one or more of its subsidiaries, or by such party and one or more of its
subsidiaries, or (y) such party or any Subsidiary of such party is a general
partner of a partnership or a manager of a limited liability company.
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4.2 Capitalization
The authorized capital stock of CMPI consists of 3,000 shares of CMPI
Common Stock, of which no more than 2,124 shares will be issued and outstanding
as of the Closing Date and of which 1,850 shares are owned of record and
beneficially by the CMPI Shareholders. As of the Closing, there will be no
outstanding CMPI Stock Rights. As of the date of this Agreement, CMPI also has
CMPI Stock Rights entitling the holders to acquire an aggregate of 124 shares of
CMPI Common Stock. As of the Closing, there will be no outstanding Stock
Equivalents with respect to CMPI except for the CMPI Convertible Notes. For
purposes of this Agreement, the "Stock Equivalents" with respect to any Person
shall mean subscriptions, options, rights, warrants, convertible securities,
stock appreciation rights, phantom equity or other agreements or commitments
obligating such Person to issue, transfer, sell, redeem, repurchase or otherwise
sell, issue or acquire any shares of capital stock of such Person (or securities
exercisable for or convertible in capital stock of such Person.
4.3 Authority
CMPI has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by CMPI's
board of directors and the CMPI Shareholders, and no other corporate proceedings
on the part of CMPI are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by CMPI and, assuming the due authorization, execution
and delivery hereof and thereof by the other parties hereto, constitutes the
legal, valid and binding obligation of CMPI enforceable against CMPI in
accordance with its terms, except as such enforceability may be subject to the
effects of bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting the rights of creditors and of general principles of
equity (the "Enforceability Exception").
4.4 Consents and Approvals; No Violation
The execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and the performance by CMPI of its obligations
hereunder will not:
(a) conflict with any provision of CMPI's articles of incorporation or
bylaws;
(b) require any consent, waiver, approval, order, authorization or
permit of, or registration, filing with or notification to, (i) any governmental
or regulatory authority or agency (a "Governmental Authority"), except for
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), state securities or blue sky laws, and approvals that are
ministerial in nature and are customarily obtained from Governmental Authorities
after the Effective Time in connection with transactions of CMPI of the same
nature as are contemplated hereby ("Customary Post-Closing Consents") or (ii)
any third party other than a Governmental Authority, other than such
non-Governmental Authority third party consents, waivers, approvals, orders,
authorizations and permits that would not (x) result in a CMPI Material Adverse
Effect, (y) materially impair the ability of CMPI to perform its obligations
under this Agreement or (z) prevent the consummation of any of the transactions
contemplated by this Agreement;
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(c) result in any violation of or the breach of or constitute a default
(with notice or lapse of time or both) under, or give rise to any right of
termination, cancellation or acceleration or guaranteed payments or a loss of a
material benefit under, any of the terms, conditions or provisions of any note,
lease, mortgage, license, agreement or other instrument or obligation to which
CMPI or any of its Subsidiaries is a party or by which CMPI or any of its
Subsidiaries or any of their respective properties or assets may be bound,
except for such violations, breaches, defaults, or rights of termination,
cancellation or acceleration, or losses as to which requisite waivers or
consents have been obtained or which, individually or in the aggregate, would
not (i) result in a CMPI Material Adverse Effect, (ii) materially impair the
ability of CMPI or any of its Subsidiaries to perform its obligations under this
Agreement or (iii) prevent the consummation of any of the transactions
contemplated by this Agreement;
(d) violate the provisions of any order, writ, injunction, judgment,
decree, statute, rule or regulation applicable to CMPI or any of its
Subsidiaries;
(e) result in the creation of any lien, mortgage, pledge, security
interest, encumbrance, claim or change of any kind ("Lien," if singular, or
"Liens," if plural) upon any shares of capital stock or material assets of CMPI
or any of its Subsidiaries under any agreement or instrument to which CMPI or
any of its Subsidiaries is a party or by which CMPI or any of its Subsidiaries
or any of their materials assets is bound; or
(f) result in any holder of any securities of CMPI being entitled to
appraisal, dissenters' or similar rights.
4.5 Required Stockholder Vote or Consent
The only vote of the holders of any class or series of capital stock of
CMPI that will be necessary to consummate the Merger and the other transactions
contemplated by this Agreement is the approval of this Agreement by the CMPI
Shareholders.
4.6 Taxes
Except for matters that would not have a CMPI Material Adverse Effect,
CMPI has filed all material tax returns required by applicable law to be filed
by it and has paid or accrued all taxes shown as due thereon. CMPI has no
knowledge of a material tax deficiency which has been asserted or threatened
against CMPI.
4.7 Litigation
Except for matters that would not have a CMPI Material Adverse Effect,
there is no suit, claim, action, proceeding or investigation pending or, to
CMPI's knowledge, threatened against or directly affecting CMPI or any of the
directors or officers of CMPI in their capacity as such. Neither CMPI nor, to
its knowledge, any officer, director or employee of CMPI, has been permanently
or temporarily enjoined by any order, judgment or decree of any court or any
other Governmental Authority from engaging in or continuing any conduct or
practice in connection with the business, assets or properties of CMPI, nor, to
the knowledge of CMPI, is CMPI or any officer, director or employee of CMPI
under investigation by any Governmental Authority. There is not in existence any
order, judgment or decree of any court or other tribunal or other agency
enjoining or requiring CMPI to take any action of any kind with respect to its
business, assets or properties.
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4.8 Compliance with Applicable Laws
CMPI holds all material approvals, licenses, permits, registrations and
similar type authorizations necessary for the lawful conduct of its business, as
now conducted, and, to CMPI's knowledge, such business is not being, and CMPI
has not received any notice from any Governmental Authority or Person that any
such business has been or is being, conducted in violation of any law, ordinance
or regulation, including without limitation any law, ordinance or regulation
relating to occupational health and safety, except for possible violations which
either individually or in the aggregate have not resulted and would not result
in a CMPI Material Adverse Effect.
4.9 Insurance
CMPI currently has in place all policies of insurance which are reasonably
required in connection with the operation of the business of CMPI as currently
conducted in accordance with applicable laws and all agreements relating to
CMPI.
4.10 Permits
Immediately prior to the Effective Time, CMPI will hold all of the
permits, licenses, certificates, consents, approvals, entitlements, plans,
surveys, relocation plans, environmental impact reports and other authorizations
of Governmental Authorities ("Permits") required or necessary to own, operate,
use and maintain its properties and conduct its operations as presently
conducted, except for such Permits, the lack of which, individually or in the
aggregate, would not have a CMPI Material Adverse Effect.
4.11 Brokers
No broker, finder or investment banker is entitled to any brokerage,
finder's fee or other fee or commission payable by CMPI, or by KF on CMPI's
behalf, in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of CMPI except to the extent reflected in
the shares of CMPI Common Stock outstanding immediately prior to the Closing.
4.12 Accredited Investor Status.
Each holder of CMPI Common Stock immediately prior to the Closing acquired
their shares in a transactions exempt from registration under the Securities Act
and has represented that he or it is an "accredited investor" as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF KF
KF represents and warrants to CMPI as follows, except as disclosed in a
disclosure letter delivered by KF to CMPI as of the date hereof (the "KF
Disclosure Letter"):
5.1 Organization and Qualification
(a) KF is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the character of KF's properties or the nature of its business makes
such qualification necessary. Schedule 5.1 of the KF Disclosure Letter sets
forth a complete and correct copy of KF's certificate of incorporation and
bylaws, each as amended to date, and such certificate of incorporation and
bylaws are in full force and effect. KF is not in default in any respect in the
performance, observation or fulfillment of any provision of its certificate of
incorporation or bylaws.
(b) Except for PayCell, Inc., a California corporation ("PayCell"), and
Credit Pipe (Pty) Ltd., a South African corporation wholly owned by PayCell
Inc., KF has no Subsidiaries and does not own or hold any investment or other
interest in any Person. KF owns of record and beneficially 1,000 shares of the
common stock of PayCell, representing all of the issued and outstanding shares
of common stock of PayCell. There are no outstanding Stock Equivalents with
respect to PayCell or CreditPipe (Pty) Ltd. or with respect to the shares of
common stock of PayCell owned by KF (other than pursuant to the Put Agreement.
(c) Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. KF has made available
to the Company a complete and correct copy of its articles of incorporation and
bylaws, each as amended to date, and Merger Sub's articles of incorporation and
bylaws as so delivered are in full force and effect. Merger Sub is not in
default in any respect in the performance, observation or fulfillment of any
provision of its articles of incorporation or bylaws.
(d) Merger Sub is a direct, wholly-owned Subsidiary of KF, was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement and has not engaged in any business activities or conducted any
operations of any kind, entered into any agreement or arrangement with any
Person or entity, or incurred, directly or indirectly, any Liabilities, in each
case, except in connection with its incorporation, the negotiation of this
Agreement, the Merger and the transactions contemplated hereby.
5.2 Capitalization
The authorized capital stock of KF consists of 100,000,000 shares of
common stock, $0.0001 par value per share (the "KF Common Stock"), and 100
shares of Series A Preferred Stock, par value of $0.001 per share ("KF Series A
Preferred Stock"). As of the date of this Agreement, KF has issued and
outstanding 3,904,004 shares of KF Common Stock and 81 shares of KF Series A
Preferred Stock, which by their terms are convertible into 20,000 shares of KF
Common Stock per share of KF Series A Preferred Stock, or a total of 1,620,000
shares of KF Common Stock. Schedule 5.2 of the KF Disclosure Letter sets forth a
true and complete list as of the date hereof of all holders, and their holdings,
of KF Common Stock and KF Series A Preferred Stock. There are no outstanding
Stock Equivalents with respect to KF. The authorized capital stock of Merger Sub
consists of 100,000 shares of Merger Sub Common Stock, of which 100 shares are
outstanding and owned, of record and beneficially, by KF. There are no
outstanding Stock Equivalents of Merger Sub, and KF is not subject to any
subscriptions, options, rights, warrants, convertible securities or other
agreements or commitments obligating KF issue, transfer, sell, redeem,
repurchase or otherwise sell, issue or acquire any shares of Merger Sub Common
Stock. All outstanding shares of KF Common Stock, KF Series A Preferred Stock
and Merger Sub Common Stock are validly issued, fully paid and non-assessable,
and free of preemptive rights.
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5.3 Authority
(a) Each of KF and Merger Sub has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the respective board of directors of KF and Merger Sub,
and no other corporate proceedings on the part of KF and Merger Sub are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by KF and Merger Sub, and, assuming the due authorization, execution
and delivery hereof by the other parties hereto, constitutes the legal, valid,
and binding obligations of KF and Merger Sub enforceable against KF or Merger
Sub, as applicable, in accordance with its terms, except for the Enforceability
Exception.
(b) The Merger Shares have been duly and validly authorized for issuance
pursuant to the Merger and, when issued at the Closing, will be validly issued,
fully paid and non-assessable and free of any preemptive right. The Merger Stock
Rights have been duly authorized for issuance pursuant to the Merger, and when
issued at the Closing will be validly issued and free of any preemptive right.
5.4 Consents and Approvals; No Violation
The execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and the performance by each of KF and Merger
Sub of their respective obligations hereunder will not:
(a) conflict with any provision of the respective certificate or
articles of incorporation or bylaws of KF or Merger Sub;
(b) require any consent, waiver, approval, order, authorization or
permit of, or registration, filing with or notification to, (i) any Governmental
Authority, except for applicable requirements of the Securities Act, the
Exchange Act, state securities or blue sky laws and Customary Post-Closing
Consents or (ii) any third party other than a Governmental Authority, other than
such non-Governmental Authority third party consents, waivers, approvals,
orders, authorizations and permits that would not (x) materially impair the
ability of KF or any of its Subsidiaries to perform its obligations under this
Agreement or (y) prevent the consummation of any of the transactions
contemplated by this Agreement;
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(c) result in any violation of or the breach of or constitute a default
(with notice or lapse of time or both) under, or give rise to any right of
termination, cancellation or acceleration or guaranteed payments or a loss of a
material benefit under, any of the terms, conditions or provisions of any note,
lease, mortgage, license, agreement or other instrument or obligation to which
KF or any of its Subsidiaries is a party or by which KF or any of its
Subsidiaries or any of their respective properties or assets may be bound,
except for such violations, breaches, defaults, or rights of termination,
cancellation or acceleration, or losses as to which requisite waivers or
consents have been obtained or which, individually or in the aggregate, would
not (i) materially impair the ability of KF or any of its Subsidiaries to
perform its obligations under this Agreement or (ii) prevent the consummation of
any of the transactions contemplated by this Agreement;
(d) violate the provisions of any order, writ, injunction, judgment,
decree, statute, rule or regulation applicable to KF or any of its Subsidiaries;
(e) result in the creation of any Lien upon any properties or assets or
on any shares of capital stock of KF or its Subsidiaries under any agreement or
instrument to which KF or any of its Subsidiaries is a party or by which KF or
any of its Subsidiaries or any of their properties or assets is bound; or
(f) result in any holder of any securities of KF or any of its
Subsidiaries being entitled to appraisal, dissenters' or similar rights.
5.5 KF SEC Reports
KF filed with the Securities and Exchange Commission (the "SEC"), and has
heretofore made available to CMPI, true and complete copies of each form,
registration statement, report, schedule, proxy or information statement and
other document (including exhibits and amendments thereto), including without
limitation any annual reports to stockholders incorporated by reference in
certain of such reports, required to be filed by it or its predecessors with the
SEC since January 1, 2001 under the Securities Act or the Exchange Act
(collectively, the "KF SEC Reports"). As of the respective dates such KF SEC
Reports were filed or, if any such KF SEC Reports were amended, as of the date
such amendment was filed, to KF's and ▇▇▇▇▇▇'▇ knowledge, each of the KF SEC
Reports, including without limitation any financial statements or schedules
included therein, (a) complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
the applicable rules and regulations promulgated thereunder, and (b) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
5.6 Financial Statements
Each of the consolidated financial statements of KF contained in the KF
SEC Reports (including any related notes and schedules) (the "KF Financial
Statements") has been prepared from, and is in accordance with, the books and
records of KF and its consolidated Subsidiaries, complies in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, has been prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis (except as may be indicated in the notes thereto and subject, in the case
of quarterly financial statements, to normal and recurring year end adjustments)
and fairly presents, in conformity with GAAP applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of KF and its Subsidiaries as of the date thereof and the consolidated
results of operations and cash flows (and changes in financial position, if any)
of KF and its Subsidiaries for the periods presented therein (subject to normal
year end adjustments and the absence of financial footnotes in the case of any
unaudited interim financial statements).
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5.7 Absence of Undisclosed Liabilities
Except as described in the most recent of the KF SEC Reports, neither KF
nor any of its Subsidiaries has any Liabilities or obligations of any nature
(contingent or otherwise). As of the Closing Date, KF shall have no Liabilities
or other obligations other than its obligations under this Agreement.
5.8 Absence of Certain Changes
Except as disclosed in the KF SEC Reports or as contemplated by this
Agreement, (a) since its formation in April 2002, KF has conducted no business
and has had no operations other than its ownership of its wholly-owned
subsidiaries, PayCell, Inc., a California corporation, and Credit Pipe (Pty)
Ltd., a South African corporation, (b) there has not been any declaration,
setting aside or payment of any dividend or other distribution with respect to
any shares of capital stock of KF or any repurchase, redemption or other
acquisition by KF of any outstanding shares of capital stock or other securities
of, or other ownership interests in, KF or its Subsidiaries and (c) there has
not been any amendment of any term of any outstanding capital stock of KF or its
Subsidiaries.
5.9 Taxes
KF and each of its Subsidiaries have filed all material tax returns
required by applicable law to be filed by any of them and have paid or accrued
all taxes shown as due thereon. No material tax deficiency has been asserted or
threatened against KF or any of its Subsidiaries.
5.10 Litigation
There is no suit, claim, action, proceeding or investigation pending or,
to its knowledge, threatened against or directly affecting KF, or any of the
directors or officers of KF in their capacity as such. Neither KF nor any
officer, director or employee of KF has been permanently or temporarily enjoined
by any order, judgment or decree of any court or any other Governmental
Authority from engaging in or continuing any conduct or practice in connection
with the business, assets or properties of KF, nor, to its knowledge, is KF or
any officer, director or employee of KF or under investigation by any
Governmental Authority. There is not in existence any order, judgment or decree
of any court or other tribunal or other agency enjoining or requiring KF to take
any action of any kind with respect to its business, assets or properties.
5.11 Employee Benefit Plans
Neither KF nor any trade or business, whether or not incorporated, which
together with KF would be deemed a "single employee" within the meaning of
Section 414(b), (c) or (m) of the Code or Section 4001(b)(1) of ERISA has, or on
or before the Closing will have, sponsored, maintained or contributed to any
employee benefits, plan or arrangement (including, but not limited to, any plan
described in Section 3(3) of ERISA) written six years prior to the Effective
Time.
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5.12 Compliance with Applicable Laws
KF holds all Permits, if any, necessary for the lawful conduct of its
businesses, as now conducted, and such businesses are not being, and KF has not
received any notice from any Governmental Authority or Person that any such
business has been or is being, conducted in violation of any law, ordinance or
regulation, including without limitation any law, ordinance or regulation
relating to occupational health and safety
5.13 Insurance
KF and its Subsidiaries currently have in place the policies of insurance
described in Schedule 5.13 of the KF Disclosure Letter.
5.14 Employees
Schedule 5.14 of the KF Disclosure letter sets forth a true and complete
list of all directors, officers, and other employees of KF.
5.15 Permits
Immediately prior to the Effective Time and except for Customary
Post-Closing Consents, KF and its subsidiaries will hold all of the Permits
required or necessary to own, operate, use and maintain their respective
properties and conduct their respective operations as presently conducted.
5.16 Contracts
As of the Closing Date, KF will not be a party to any material contract,
lease, indenture, agreement, arrangement or understanding other than this
Agreement and the Put Agreement. The agreements listed in Schedule 5.16 have
been terminated or fully performed, and neither KF nor any Subsidiary has, or
will have, any further obligation, Liability or duty with respect to such
agreements.
5.17 Required Stockholder Vote or Consent
No vote or consent of the holders of any class or series of KF Stock is or
will be necessary to consummate the Merger and the other transactions
contemplated by this Agreement.
5.18 Brokers
No broker, finder or investment banker is entitled to any brokerage,
finder's fee or other fee or commission payable by KF or any of its Subsidiaries
or the Surviving corporations in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of KF or any of
its Subsidiaries.
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5.19 Issuance of the Securities
Upon the Effective Time, the KF Common Stock issued or issuable pursuant
to the Merger will be duly authorized and validly issued, fully paid and
nonassessable, free and clear of all Liens other than restrictions on transfer
provided for or referred to in this Agreement. Upon the Effective Time, KF shall
have duly reserved out of the authorized but unissued shares of KF Common Stock
such number of shares of KF Common Stock as are issuable upon conversion and
exercise, in full, of the CMPI Convertible Notes and the Merger Stock Rights.
5.20 ▇▇▇▇▇▇▇▇-▇▇▇▇▇; Internal Accounting Controls
KF is, or will be, in material compliance with all provisions of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 that are applicable to it as of the Closing Date. KF
and its Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. KF's certifying officers have
evaluated the effectiveness of its controls and procedures as of the date prior
to the filing date of the most recently filed periodic report under the Exchange
Act (such date, the "Evaluation Date"). KF presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in KF's internal controls (as such term is
defined in Item 307(b) of Regulation S-K under the Exchange Act) or, to KF's and
▇▇▇▇▇▇'▇ knowledge, in other factors that could significantly affect KF's
internal controls.
5.21 Registration Rights
Except as specifically provided or contemplated by this Agreement, no
Person has any right to cause KF to effect the registration under the Securities
Act of any securities of KF or its Subsidiaries.
5.22 Exchange Act Requirements
KF's Common Stock is registered pursuant to Section 12(g) of the Exchange
Act, and KF has taken no action designed to, or which to its knowledge is likely
to, have the effect of, terminating the registration of KF Common Stock under
the Exchange Act, nor has KF received any notification that the Commission is
contemplating terminating such registration.
5.23 Transactions with Affiliates and Employees
Except as set forth in the KF SEC Reports, none of the officers or
directors of KF and, to its knowledge, none of the employees of KF is presently
a party to any transaction with KF or any of its Subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to its
knowledge, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner, in each
case other than reimbursement for expenses incurred on behalf of KF.
16
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CMPI SHAREHOLDERS
The CMPI Shareholders, severally and not jointly, each represents and
warrant, to KF as follows:
6.1 Power and Authority Relative to this Transaction
Such CMPI Shareholder has full power and authority and has taken all
action necessary to permit it to execute and deliver and to carry out the terms
of this Agreement and all other documents or instruments required hereby. This
Agreement constitutes the legal, valid and binding obligation of such CMPI
Shareholder, enforceable in accordance with its terms, except for the
Enforceability Exception.
6.2 Accredited Investor
Such CMPI Shareholder is an "accredited investor" as that term is defined
in Rule 501 of Regulation D promulgated under the Securities Act.
6.3 Investment Representations
(a) Such CMPI Shareholder will acquire the KF Common Stock issuable
pursuant to the Merger for such CMPI Shareholder's own account for the purpose
of investment, and not with a view to distribution or resale thereof in
violation of the Securities Act and the rules and regulations promulgated
thereunder. Such CMPI Shareholder understands that none of the KF Common Stock
has been registered under the Securities Act or any other applicable securities
laws, and, therefore, cannot be resold unless they are subsequently registered
under the Securities Act and other applicable securities laws, or unless an
exemption from such registration is available. Such CMPI Shareholder agrees not
to resell or otherwise dispose of all or any part of the KF Common Stock, except
as permitted by law, including, without limitation, any regulations under the
Securities Act and other applicable securities laws. Such CMPI Shareholder
acknowledges that KF does not have any present intention and is under no
obligation to register the KF Common Stock under the Securities Act and other
applicable securities laws.
(b) Such CMPI Shareholder understands and agrees that all certificates
evidencing any of the KF Common Stock, whether upon initial issuance or upon any
transfer thereof, shall bear a legend, prominently stamped or printed thereon,
reading substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY OTHER SECURITIES
LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO DISTRIBUTION OR RESALE. SUCH SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933
OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT."
17
6.4 Access to Information
During the course of the transactions contemplated by this Agreement and
prior to the purchase of any KF Common Stock, such CMPI Shareholder has had the
opportunity to ask questions of and receive answers from representatives of KF
concerning the terms and conditions of the offering of the KF Common Stock, and
to obtain additional information, documents, records and books relative to KF
and an investment in KF.
6.5 Knowledge and Experience
Such CMPI Shareholder has sufficient knowledge and experience in business
and financial matters so as to enable such CMPI Shareholder to analyze and
evaluate the merits and risks of the investment contemplated hereby and is
capable of protecting its interest in connection with this transaction. Such
CMPI Shareholder is able to bear the economic risk of such investment, including
a complete loss of the investment.
ARTICLE 7
CONDUCT OF BUSINESS PENDING THE MERGER
7.1 Conduct of Business by the KF and CMPI Pending the Merger
From the date hereof until the Effective Time, unless KF and CMPI shall
otherwise agree in writing, and expect as otherwise contemplated by this
Agreement, KF and CMPI and their respective Subsidiaries shall conduct their
business in the ordinary course consistent with past practice. Except as
otherwise provided in this Agreement, and without limiting the generality of the
foregoing, from the date hereof until the Effective Time, without the written
consent of KF and CMPI, which consent shall not be unreasonably withheld:
(a) Neither KF nor CMPI will adopt or propose any change to their
respective certificate or articles of incorporation or bylaws;
(b) Other than payment and distribution of the SHC Share Dividend as
contemplated in Section 1.1, neither KF nor CMPI will (i) declare, set aside or
pay any dividend or other distribution with respect to any shares of capital
stock of the respective KF and CMPI, or (ii) repurchase, redeem or otherwise
acquire any outstanding shares of capital stock or other securities of, or other
ownership interests in, KF or CMPI, as the case may be;
(c) Neither KF nor CMPI will, nor permit any of its Subsidiaries to,
merge or consolidate with any other Person or acquire assets of any other Person
except in the ordinary course of business or pursuant to transactions among
wholly-owned subsidiaries of KF or CMPI, as the case may be;
18
(d) Neither KF nor CMPI will, nor permit any of its Subsidiaries to,
sell, lease, license or otherwise surrender, relinquish or dispose of any
material assets or properties except in the ordinary course of business;
(e) Neither KF nor CMPI will (i) issue any securities (whether through
the issuance or granting of options, warrants, rights or otherwise, (ii) enter
into any amendment of any term of any outstanding security of such company or of
any of its Subsidiaries, (iii) incur any indebtedness, except trade debt in the
ordinary course of business and debt pursuant to existing or previously
disclosed contemplated credit facilities or arrangements, (iv) increase in any
material respect compensation, bonus or other benefits payable to, or modify or
amend any employment agreements or severance agreements with, any executive
officer, or (v) enter into any settlement or consent with respect to any pending
litigation, other than settlements in the ordinary course of business or on
terms which are not otherwise materially adverse to such company and its
Subsidiaries taken as a whole;
(f) KF and CMPI will not change any method of accounting or accounting
practice by KF and CMPI or any of their Subsidiaries, except for any such change
required by GAAP;
(g) Neither KF nor CMPI will, nor permit any of its Subsidiaries to, (i)
take, or agree or commit to take, any action that would make any representation
and warranty of the respective company hereunder inaccurate in any material
respect at, or as of any time prior to, the Effective Time or (ii) omit, or
agree or commit to omit, to take any action necessary or appropriate to prevent
any such representation or warranty from being inaccurate in any material
respect at any such time; and
(h) Neither KF nor CMPI will, nor permit any of its Subsidiaries to,
agree or commit to do any of the foregoing.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Expenses
All Expenses (as hereinafter defined) incurred by KF, Opus and ▇▇▇▇▇▇▇▇▇▇▇
in connection with the negotiation and preparation of this Agreement, the Merger
and the other transactions contemplated hereby shall be borne solely and
entirely by Opus, and all such Expenses incurred by CMPI shall be borne solely
and entirely by it. "Expenses" as used in this Agreement shall include all
out-of-pocket expenses (including, without limitation, all reasonable fees and
expenses of counsel, accountants, investment bankers, experts and consultants to
a party hereto and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and all other matters related to the
consummation of the transactions contemplated hereby.
8.2 Cooperation
Subject to compliance with applicable law, from the date hereof until the
Effective Time, each of the parties hereto shall confer on a regular and
frequent basis with one or more representatives of the other parties to report
operational matters of materiality and the general status of ongoing operations
and shall promptly provide the other parties or their counsel with copies of all
filings made by such party with any Governmental Authority in connection with
this Agreement and the transactions contemplated hereby.
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8.3 Publicity
Neither the parties hereto nor any of their respective affiliates shall
issue or cause the publication of any press release or other announcement with
respect to the Merger, this Agreement or the other transactions contemplated
hereby without the prior consultation of the other parties, except as may be
required by law, and will use reasonable efforts to provide copies of such
release or other announcement to the other parties hereto, and give due
consideration to such comments as such other parties may have, prior to such
release.
8.4 Additional Actions
Subject to the terms and conditions of this Agreement, each of the parties
hereto agrees to use all reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations, or to remove any injunctions or other
impediments or delays, to consummate and make effective the Merger and the other
transactions contemplated by this Agreement.
8.5 Filings
Each party hereto shall make all filings required to be made by such party
in connection herewith or desirable to achieve the purposes contemplated hereby,
and shall cooperate as needed with respect to any such filing by any other party
hereto.
8.6 Consents
Each party hereto shall use all reasonable efforts to obtain all consents
necessary or advisable in connection with such party's obligations hereunder.
8.7 Notice of Certain Events
Each party to this Agreement shall promptly as reasonably practicable
notify the other parties hereto of:
(a) any notice or other communication from any Person alleging that the
consent of such Person (or other Person) is or may be required in connection
with the transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement; or
(c) any actions, suits, claims, investigations or proceedings commenced
or, to the best of such party's knowledge, threatened against, relating to or
involving or otherwise affecting such party or any of such party's Subsidiaries
which, if pending on the date of this Agreement, would have rendered untrue any
representation contained in Article 4, 5or 6, or which relate to the
consummation of the transactions contemplated by this Agreement.
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8.8 Resignations and Releases; Appointment of Directors and Officers
(a) Prior to the Closing Date, KF shall use its best efforts to obtain
from each of the directors, officers and employees of KF and each of its
Subsidiaries a written resignation and release agreement, in form and content
satisfactory to CMPI, by which each such Person agrees to resign from KF and the
Subsidiaries effective as of the Closing Date (or such later date that CMPI may
request) and to release KF, its Subsidiaries and their affiliates from any and
all Liabilities.
(b) At or before the Closing, KF shall use its best efforts to cause
▇▇▇▇▇ ▇▇▇▇▇▇ to be appointed as a director of KF as of the Closing Date and the
nominees of CMPI to be appointed as all of the officers of KF as of the
Effective Date.
8.9 Amendment and Assumption of Employment Agreements
Following the Closing, KF and CMPI shall enter into with each of the CMPI
Shareholders an appropriate amendment, in form and content satisfactory to the
CMPI Shareholders, by which KF shall become party to, and agree to employ the
CMPI Shareholders thereunder following the Closing, the respective amended and
restated employment agreements, each dated as of April 1, 2004 or as of November
1, 2004, between CMPI and each of the CMPI Shareholders.
8.10 Access and Information
Between the date hereof and the Closing Date, KF will permit CMPI and its
representatives and agents reasonable access to KF's books and records,
facilities, key personnel, customers, suppliers, independent accountants and
attorneys, as requested by CMPI. In the event this Agreement is terminated as
provided in Section 12.1, CMPI shall promptly return to KF any and all books,
records, documents and information of the Company, and all copies thereof,
furnished to CMPI by KF.
8.11 Competing Offers; Merger or Liquidiation
From the date hereof through the earlier to occur of (a) the termination
of this Agreement or (b) the Closing: (i) neither KF, Opus nor ▇▇▇▇▇▇▇▇▇▇▇
shall, directly or indirectly, through any officer, director, agent or otherwise
(1) encourage, solicit, respond to any solicitation or inquiry concerning,
initiate, engage, or participate in any discussions or negotiations with any
Person (other than CMPI) concerning any merger, consolidation, sale of material
assets, tender offer, recapitalization, purchase or accumulation of shares,
proxy solicitation or other business combination involving KF or any subsidiary
of KF or (2) provide any non-public information concerning the business,
properties or assets of KF to any Person (other than CMPI); (ii) KF, Opus and
▇▇▇▇▇▇▇▇▇▇▇ shall notify CMPI of, and shall disclose to CMPI all details of, any
inquiries after the date hereof of the nature described in clause (i) of this
sentence; and (iii) neither KF, Opus nor ▇▇▇▇▇▇▇▇▇▇▇ will not engage any broker,
financial advisor or other consultant on a basis which might provide such
broker, financial advisor or consultant with an incentive to initiate or
encourage proposals or offers from other parties with respect to KF, shares of
capital stock of KF or KF's assets or any interest therein.
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ARTICLE 9
ESCROW
9.1 Establishment of Escrow
At or before the Closing, Opus shall deliver to KF, acting on behalf of
the Indemnified Party (as defined in Section 11.2) as escrow agent (in such
capacity referred to herein as "Escrow Agent"), one or more stock certificates
representing 1,900,000 shares of KF Common Stock owned by it (the "Escrowed
Shares"), together with stock powers duly executed in blank with respect to the
Escrowed Shares. The stock certificate evidencing the Escrow Shares shall be
imprinted with a legend indicating that the Escrowed Shares are subject to this
Agreement, are not transferable while held in escrow. From and after the
Effective Date, the Escrowed Shares shall be available to satisfy any
indemnifiable Losses under Article 11. This Article 9shall not limit in any
manner the right of an Indemnified Party to be indemnified in cash (at its sole
election) rather than in Escrowed Shares, nor shall the amount of
indemnification under Article 11 or otherwise, be limited to the value of the
Escrowed Shares (whether or not an Indemnified Party elects to have delivered to
it a portion of the total indemnification amount in the form of the Escrowed
Shares).
9.2 Notice of Claims
If, in accordance with this Agreement, an Indemnified Party is entitled to
be indemnified under Article 11of this Agreement, the Surviving Corporation
shall promptly provide notice (the "Claim Notice") to the Indemnifying Party (as
defined in Section 11.2) setting forth such fact and stating the dollar amount
of damages claimed by the Indemnified Party (the "Recoverable Amount"). Ten days
following the date the Claim Notice is received, unless the Indemnified Party
waives its claim for indemnification in writing or comes to a different
settlement with the Indemnifying Party, the Indemnified Party shall then be
entitled to unencumbered ownership of a number of Escrowed Shares equal the
number of shares (rounded up to the nearest whole number) that, when multiplied
by the Average Closing Price, equals the Recoverable Amount. For the purposes of
this Section 9.2, the term "Average Closing Price" means the average of the
daily last sale prices for the shares of KF on the trading system on which KF's
shares are traded (such as the Pink Sheets trading system, the OTC Bulletin
Board, The Nasdaq Stock Market, or any exchange) for the 20 consecutive trading
days prior to the date on which the Claim Notice was received by the Escrow
Agent. Any such Escrowed Shares shall promptly be delivered by KF to the
Indemnified Party or its designees, as the Indemnified Party shall direct, free
and clear of the legend contemplated by Section 9.1. If less than all of the
Escrowed Shares are delivered to the Indemnified Party in accordance with this
paragraph, the Indemnified Party shall cause KF's transfer agent to deliver the
stock certificate(s) representing the remaining shares of the Escrowed Shares to
the Escrow Agent to be held in accordance with the terms of this Agreement.
9.3 Term; Expiration; Limits
(a) General. The term of escrow for the Escrowed Shares shall commence
on the Effective Time of the Merger and shall terminate upon the later of (i)
the second anniversary of the Effective Time or (ii) the date that any pending
disputes involving a Claim Notice filed under Section 9.2 shall have been
resolved.
22
(b) Expiration of Term. If, at the expiration of the escrow term
provided in Section 9.3(a) above, either (i) no Claim Notice has been delivered;
or (ii) any and all Claims Notices have been received and have been satisfied in
accordance with this Agreement, the Escrow Agent shall deliver to KF's transfer
agent the stock certificate(s) representing the remaining Escrowed Shares, if
any, with instructions to deliver certificates representing such remaining
Escrowed Shares to Opus. Any such delivery of KF Common Stock shall be of full
shares and any fractional portions shall be rounded to the nearest whole number
by the Escrow Agent so that the remaining Escrowed Shares held in escrow are
fully delivered to Opus.
(c) Non-Exclusivity. The rights of an Indemnified Party to make claims
against the Escrowed Shares pursuant to this Agreement shall be in addition to
any and all other available rights and remedies of an Indemnified Party under
this Agreement, at law or in equity. Nothing in this Agreement is intended to
limit, or shall restrict, the right of the Surviving Corporation to (i) make a
claim against the Indemnifying Party for monetary damages or any other remedies,
including equitable remedies (such as temporary restraining orders, injunctive
relief and specific performance), (ii) to seek indemnification in cash rather
than through the cancellation of the Escrowed Shares, nor (iii) seek
indemnification under this Agreement for an amount greater than the value of the
Escrowed Shares. Any such claim may be in addition to, or in lieu of, filing a
Claim Notice hereunder.
9.4 Dividends; Voting Rights
(a) The Escrow Agent shall not distribute any cash dividends or other
cash income with respect to the Escrowed Shares, but shall rather hold such
dividends/income until the Escrowed Shares are released from escrow. Any such
dividends/income received with respect to any share of the Escrowed Shares shall
be distributed by the Escrow Agent to the recipient of such share. By written
notice signed by Opus, Opus shall have the right to direct the Escrow Agent as
to the exercise of any voting rights with respect to Escrowed Shares then held
by the Escrow Agent, and the Escrow Agent shall comply with such directions if
received from Opus at least five days prior to the date of the meeting at which
such vote is to be taken, which meeting date shall be set forth in such
directions from Opus.
(b) In the event of any stock split, stock dividend or other similar
transaction with respect to KF Common Stock that becomes effective during the
term of this Agreement, the additional shares issued with respect to the
Escrowed Shares shall be added to the Escrowed Shares held in escrow and any
other references herein to a specific number of shares of KF Common Stock shall
be proportionately adjusted.
(c) If pursuant to a transaction (such as a merger or other acquisition
of KF), shares of KF Common Stock are converted (in whole or in part) into, or
are converted into the right to receive, cash or property other than shares of
capital stock issued by KF, then such cash or other property issued or issuable
with respect to the Escrowed Shares shall remain subject to the terms of this
Agreement.
9.5 Lock-up Agreement
Notwithstanding any other provisions in this Agreement to the contrary:
23
(a) From the date of this Agreement until the date two years from the
Closing Date (the "Lock-up Period"), each of Opus and ▇▇▇▇▇▇▇▇▇▇▇, individually
and not jointly, hereby agrees not to offer, sell, contract to sell, lend,
pledge, grant any option to purchase, make any short sale or otherwise dispose
of 2,660,000 shares of KF Common Stock held as of the date of Closing Date
(including the Escrowed Shares) (the "Restricted Shares"), without the prior
consent of the Board of Directors of KF, which consent may be granted or
withheld in its sole discretion. Notwithstanding the foregoing, prior to the end
of the Lock-up Period, Opus and ▇▇▇▇▇▇▇▇▇▇▇ in the aggregate may sell a number
of shares equal to the number of shares publicly sold by the CMPI Shareholders
during the Lock-up Period. The numbers of shares in this Section 9.5 shall be
appropriately adjusted to reflect any stock splits, reverse stock splits and
stock dividends of the KF Common Stock during the Lock-up Period.
(b) Each of Opus and ▇▇▇▇▇▇▇▇▇▇▇ also agrees (i) to the entry of stop
transfer instructions with the Company's transfer agent and registrar against
the transfer of the Restricted Shares except in compliance with the foregoing
restrictions and (ii) that KF shall imprint a legend on the back of each
certificate evidencing the Restricted Shares referencing the foregoing transfer
restriction.
(c) Opus and ▇▇▇▇▇▇▇▇▇▇▇ hereby acknowledge and agree, on their own
behalf and on behalf of any and all of their respective successors, assigns and
transferees, that they may be deemed to be "underwriters" (within the meaning of
federal securities laws) with respect to any sale or transfer of shares of KF
Common Stock following the Closing, and, consequently, that their shares of KF
Common Stock may not be eligible for sale at any time pursuant to Rule 144 under
the Securities Act. The parties agree that if, for this reason, any of the
shares of KF Common Stock owned by Opus or ▇▇▇▇▇▇▇▇▇▇▇ as of the Closing are not
eligible to be sold pursuant to Rule 144 under the Securities Act following the
expiration of the restrictions on transfer of such shares under this Section
9.5, KF shall promptly prepare and file under the Securities Act a registration
statement covering such shares of KF Common Stock and shall use its commercially
reasonable efforts to cause the registration statement to become effective and
to remain effective for at least a one-year period following the date of its
effectiveness. The parties agree that the registration statement also may cover
additional shares of KF Common Stock owned by other stockholders of KF in such
amounts as the Board of Directors of KF may determine in its discretion. In
connection with any such registration statement, Opus and ▇▇▇▇▇▇▇▇▇▇▇, or their
successor, assigns or transferees, as the case may be, shall enter into a
registration rights agreement that contains customary provisions covering such
matters as black-out periods and indemnification reasonably acceptable to KF.
ARTICLE 10
CONDITIONS TO CONSUMMATION OF THE MERGER
10.1 Conditions to the Obligation of Each Party
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) no action, suit or proceeding instituted by any Governmental
Authority shall be pending and no statute, rule or regulation and no injunction,
order, decree or judgment of any court or Governmental Authority of competent
jurisdiction shall be in effect, in each case which would prohibit, restrain,
enjoin or restrict the consummation of the Mergers;
24
(b) KF and CMPI shall have obtained such permits, authorizations,
consents, or approvals required to consummate the transactions contemplated
hereby; and
(c) KF and Opus shall have entered into the Put Agreement as
contemplated in Section 1.2.
10.2 Conditions to the Obligations of KF and Merger Sub
The obligations of KF and Merger Sub to effect the Merger are subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) CMPI shall have performed in all material respects its obligations
under this Agreement required to be performed by it at or prior to the Effective
Time, and the representations and warranties of CMPI contained in this
Agreement, to the extent qualified with respect to materiality shall be true and
correct in all respects, and to the extent not so qualified shall be true and
correct in all material respects, in each case, as of the date of this Agreement
and at and as of the Effective Time as if made at and as of such time, and KF
shall have received a certificate of the Chief Executive Officer and the Chief
Financial Officer of CMPI as to the satisfaction of this condition;
(b) all proceedings to be taken by CMPI in connection with the
transactions contemplated by this Agreement and all documents, instruments and
certificates to be delivered by CMPI in connection with the transactions
contemplated by this Agreement shall be reasonably satisfactory in form and
substance to KF and its counsel; and
(c) KF shall have received from ▇▇▇▇ & ▇▇▇▇▇ Professional Corporation,
counsel to CMPI, an opinion, dated the Closing Date, addressed to KF
substantially to the effects set forth on Exhibit 1 hereto.
10.3 Conditions to the Obligations of CMPI
The obligation of CMPI to effect the Merger is subject to the satisfaction
at or prior to the Effective Time of the following conditions:
(a) KF shall have performed in all material respects its obligations
under this Agreement required to be performed by it at or prior to the Effective
Time and the representations and warranties of KF contained in this Agreement,
to the extent qualified with respect to materiality shall be true and correct in
all respects, and to the extent not so qualified shall be true and correct in
all material respects, in each case as of the date of this Agreement and at and
as of the Effective Time as if made at and as of such time, and CMPI shall have
received a certificate of the Chief Executive Officer and the Chief Financial
Officer of KF as to the satisfaction of this condition;
(b) all of the outstanding shares of KF Series A Preferred Stock shall
have been converted, in full, and any authorized shares of KF Series A Preferred
Stock eliminated as contemplated in Section 1.2;
25
(c) KF shall have received and delivered to CMPI the resignations and
release agreements from each of its directors, officers and other employees, and
the nominees of CMPI shall have been duly appointed as all of the directors and
officers of KF, all as contemplated in Section 8.8;
(d) all proceedings to be taken by KF and Merger Sub, as the case may
be, in connection with the transactions contemplated by this Agreement and all
documents, instruments and certificates to be delivered by KF and Merger Sub, as
the case may be, in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory in form and substance to CMPI and its
counsel;
(e) CMPI shall have received from ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, counsel for KF and
Merger Sub, an opinion, dated the Closing Date, addressed to CMPI and the CMPI
Shareholders substantially to the effects set forth on Exhibit 2 hereto; and
(f) KF shall have duly filed with the SEC its Quarterly Report on Form
10-Q for the quarterly period ended June 30, 2005.
ARTICLE 11
SURVIVAL AND INDEMNIFICATION
11.1 Survival of Representations and Warranties
The representations and warranties of KF shall terminate as of the
Effective Time, and the representations and warranties of CMPI and the CMPI
Shareholders shall terminate one year following the Effective Time.
11.2 Indemnification
(a) From and after the Closing, Opus and ▇▇▇▇▇▇▇▇▇▇▇, jointly and
severally (as such, the "Indemnifying Party"), shall indemnify, reimburse,
defend and hold harmless the CMPI Shareholders (for the benefit of all CMPI
shareholders) and KF and their respective affiliates, successors or assigns
(each, an "Indemnified Party") for any and all direct or indirect claims,
losses, liabilities, damages (including special and consequential damages),
costs (including court costs) and expenses, including all reasonable attorneys'
and accountants' fees and expenses (hereinafter a "Loss" or "Losses"), arising
from or in connection with (i) any breach or inaccuracy of any representation or
warranty of KF, whether such breach or inaccuracy exists or is made on the date
of this Agreement or as of the Closing, and irrespective of the termination of
such representations and warranties as of the Effective Time; (ii) any breach of
or noncompliance by KF or Opus of or with any covenant or agreement contained in
this Agreement or in any other agreement or instrument delivered in connection
herewith, (iii) any and all Liabilities of KF or any of its Subsidiaries
existing on, or relating to periods prior to, the Closing; (iv) any and all
Liabilities arising or relating to the Merger, the Put Agreement, the conversion
of the KF Series A Preferred Stock or the other transactions contemplated in
this Agreement; and (v) any attempt (whether or not successful) by any Person to
cause or require any Indemnified Party to pay or discharge any Liability, or
alleged Liability, of KF or any of its Subsidiaries existing on or prior to the
Closing. If, by reason of the claim of any Person relating to any of the matters
subject to indemnification under this Section 11.2, an encumbrance, attachment,
garnishment or execution is placed upon any of the property or assets of any
Indemnified Party, the Indemnifying Party shall also, promptly upon demand,
furnish an indemnity bond satisfactory to the Indemnified Party to obtain the
prompt release of such encumbrance, attachment, garnishment or execution.
26
(b) The Indemnifying Party shall be entitled to defend any claim,
action, suit or proceeding made by any third party against an Indemnified Party
with counsel approved by the Indemnified Party, such approval not to be
unreasonably withheld; provided, however, that the Indemnified Party shall be
entitled to participate in such defense with counsel of its choice and at its
own expense and, if the Indemnifying Party does not provide a competent and
vigorous defense, then the Indemnified Party's participation shall be at the
expense of the Indemnifying Party. The Indemnified Party shall provide such
cooperation and access to its books, records and properties as the Indemnifying
Party shall reasonably request with respect to such matter; and the parties
shall cooperate with each other in order to ensure the proper and adequate
defense thereof. An Indemnifying Party shall not settle any claim subject to
indemnification hereunder without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld or delayed.
(c) With regard to claims of third parties for which indemnification is
payable hereunder, such indemnification shall be paid by the Indemnifying Party
(or amounts may be set off by the Indemnified Party) upon the earliest to occur
of: (i) the entry of a judgment against the Indemnified Party and the expiration
of any applicable appeal period, (ii) the entry of an unappealable judgment or
final appellate decision against the Indemnified Party, (iii) the settlement of
the claim, (iv) with respect to indemnities for tax liabilities, upon the
issuance of any final resolution by a taxation authority, or (v) with respect to
claims before any administrative or regulatory authority, when the Loss is
finally determined and not subject to further review or appeal; provided,
however, that the Indemnifying Party shall pay on the Indemnified Party's demand
any cost or expense reasonably incurred by the Indemnified Party in defending or
otherwise dealing with such claim.
(d) Subject to the provisions of Article 9 with respect to the Escrowed
Shares, to seek indemnification hereunder, an Indemnified Party shall notify the
Indemnifying Party of any claim for indemnification, specifying in reasonable
detail the nature of the Loss and the amount or an estimate of the amount
thereof. Nothing in this Article 11 shall limit or restrict in any way the
rights of an Indemnified Party under Article 9.
(e) Opus and ▇▇▇▇▇▇▇▇▇▇▇ waive, release and relinquish any right of
indemnification or contribution from KF or any of its Subsidiaries under
applicable law or any contract or agreement in connection with their respective
indemnification obligations under this Article 11.
ARTICLE 12
TERMINATION, AMENDMENT AND WAIVER
12.1 Termination
This Agreement may be terminated at any time prior to the Effective Time:
(a) by the mutual written consent of KF and CMPI;
27
(b) by either KF or CMPI if the Effective Time shall not have occurred
on or before August 17, 2005 (the "Termination Date"); provided, that the party
seeking to terminate this Agreement pursuant to this subparagraph (b) shall not
have breached in any material respect its obligations under this Agreement in
any manner that shall have proximately contributed to the failure to consummate
the Mergers on or before the Termination Date;
(c) by KF or CMPI if there has been a material breach by one of the
other parties of any representation, warranty, covenant or agreement set forth
in this Agreement which breach (if susceptible to cure) has not been cured in
all material respects within 20 business days following receipt by each party of
notice of such breach; or
(d) by KF or CMPI if there shall be any applicable law, rule or
regulation that makes consummation of the Merger illegal or if any judgment,
injunction, order or decree of a court or other Governmental Authority of
competent jurisdiction shall restrain or prohibit the consummation of the
Merger, and such judgment, injunction, order or decree shall become final and
nonappealable.
12.2 Effect of Termination
In the event of termination of the Agreement and the abandonment of the
Merger pursuant to this Article 12, all obligations of the parties shall
terminate, except the obligations of the parties pursuant to this Section 12.2
and except for the provisions of Sections 8.1 and 8.3; provided, however, that
nothing herein shall relieve any party from liability for any breach of this
Agreement.
ARTICLE 13
MISCELLANEOUS
13.1 Notices
All notices or communications hereunder shall be in writing (including
facsimile or similar writing) addressed as follows:
To KF or Merger Sub Knight ▇▇▇▇▇▇, Inc.
(until the Effective Time): ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
constitute notice hereunder) to: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
28
To CMPI: CenterStaging Musical Productions, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall no ▇▇▇▇ & ▇▇▇▇▇ Professional Corporation
constitute notice hereunder) to: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Any such notice or communication shall be deemed given (i) when made, if
made by hand delivery, and upon confirmation of receipt, if made by facsimile,
(ii) one business day after being deposited with a next-day courier, postage
prepaid, or (iii) three business days after being sent certified or registered
mail, return receipt requested, postage prepaid, in each case addressed as above
(or to such other address as such party may designate in writing from time to
time).
13.2 Separability
If any provision of this Agreement shall be declared to be invalid or
unenforceable, in whole or in part, such invalidity or unenforceability shall
not affect the remaining provisions hereof which shall remain in full force and
effect.
13.3 Assignment
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives, successors,
and assigns; provided, however, that neither this Agreement nor any rights
hereunder shall be assignable or otherwise subject to hypothecation and any
assignment in violation hereof shall be null and void.
13.4 Interpretation
The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
13.5 Counterparts
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same Agreement, and shall become effective when
one or more such counterparts have been signed by each of the parties and
delivered to each party.
13.6 Entire Agreement
This Agreement and the other documents and items referred to herein
represent the entire agreement of the parties with respect to the subject matter
hereof and shall supersede any and all previous contracts, arrangements or
understandings between the parties hereto with respect to the subject matter
hereof.
29
13.7 Governing Law
(a) This Agreement shall be construed, interpreted, and governed in
accordance with the laws of California, without reference to rules relating to
conflicts of law. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the County of Los
Angeles, California, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that is not personally subject to the
jurisdiction of any such court, or that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
13.8 Attorneys' Fees
If any action or proceeding, including an action for declaratory relief,
is brought to enforce or interpret any provision of this Agreement, the
prevailing party shall be entitled to recover reasonable attorneys' fees and
expenses from the other party, which fees and expenses shall be in addition to
any other relief, which may be awarded.
13.9 No Third Party Beneficiaries
Except as provided in Section 11.2, no Person other than the parties
hereto is an intended beneficiary of this Agreement or any portion hereof.
13.10 Amendments and Supplements
Prior to the Effective Time, this Agreement may be amended or supplemented
in writing by KF and CMPI with respect to any of the terms contained in this
Agreement, except as otherwise provided by law.
13.11 Extensions, Waivers, Etc.
At any time prior to the Effective Time, either party may:
(a) extend the time for the performance of any of the obligations or
acts of the other party;
30
(b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered pursuant hereto; or
(c) waive compliance with any of the agreements or conditions of the
other party contained herein.
Notwithstanding the foregoing, no failure or delay by any party hereto in
exercising any right hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right hereunder. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
31
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
KNIGHT ▇▇▇▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
KF MERGER SUB, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
CENTERSTAGING MUSICAL PRODUCTIONS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
OPUS INTERNATIONAL, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Member
/s/ ZIRK ▇▇▇▇▇▇▇▇▇▇▇
---------------------------------------
ZIRK ▇▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/ JAN PARENT
---------------------------------------
JAN PARENT
32
SCHEDULE 5.16
1. Convertible Promissory Note dated March 2, 2004 by KF for the benefit of
Progressive Lending (Nevada), LLC, a Nevada limited liability company
2. Operating Agreement of Progressive Lending (Nevada), LLC, a Nevada limited
liability company
3. Revolving Loan and Security Agreement dated February 4, 2004 between KF
and Progressive Lending, LLC, a Washington limited liability company
4. Option Agreement dated January 11, 2005 between KF and Opus International,
LLC
5. Registration Rights Agreement dated July 30, 2004 between KF and Messrs.
▇▇▇▇▇▇, Dixon, Knuff, ▇▇▇▇▇▇▇
6. Mortgage Services Agreement between KF and the Administrative General
Partner
7. Agreement among the Administrative General Partner, the Administrative
General Partner and Integrated Resources, Inc.
8. Amendment to Agreement dated as of June 20, 1990 among KF, the
Administrative General Partner, the Investment General Partner and
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇, P.C.
9. Note dated June 29, 1988 between Southern Inns Associates Limited
Partnership and KF
10. Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
between Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing between Southern Inns Associates Limited Partnership and KF
11. Mortgage, Assignment of Rents, Security Agreement and Fixture Filing
between Southern Inns Associates Limited Partnership and KF
12. Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
between Southern Inns Associates Limited Partnership and KF
13. Agreement And Plan of Merger Merging Resources Accrued Mortgage Investors
L.P.-Series 86 Into KFI Properties, L.P.
14. Agreement between Knight ▇▇▇▇▇▇, Inc. and Opus International, LLC Dated
July 23, 2004
15. Agreement between Knight ▇▇▇▇▇▇, Inc. Celtron International, Inc. and
PayCell, Inc. dated September 10, 2004
16. Acquisition agreement between Knight ▇▇▇▇▇▇, Inc. and PayCell, Inc. and
Celtron International, Inc., Orbtech Holdings Ltd. and CreditPipe (Pty)
Ltd., dated November 1, 2004
17. Amended and Restated Acquisition agreement between Knight ▇▇▇▇▇▇, PayCell,
and Celtron International, Inc., CreditPipe (Pty) Ltd., dated November 1,
2004
EXHIBIT 1
SAMPLE OPINION OF COUNSEL TO CMPI
(a) CMPI is validly existing as a corporation in good standing under the
laws of the State of California, with full corporate power and authority to own
and lease its properties and to conduct its business as currently conducted.
(b) CMPI has the corporate power and authority to execute and deliver
the Merger Agreement, to consummate the transactions contemplated thereby and to
perform its obligations thereunder. The execution and delivery by CMPI of the
Merger Agreement, and the consummation of the transactions contemplated thereby,
have been duly authorized by all necessary action of the Board of Directors and
the shareholders of CMPI.
(c) The execution, delivery and performance by CMPI of the Merger
Agreement, and the consummation of the transactions contemplated thereby, do not
and will not result in the violation of the provisions of the Articles of
Incorporation or Bylaws of CMPI.
EXHIBIT 2
SAMPLE OPINION OF COUNSEL TO KNIGHT ▇▇▇▇▇▇
(a) Each of KF and Merger Sub is validly existing as a corporation in
good standing under the laws of the state of its jurisdiction of incorporation,
with full corporate power and authority to own and lease its properties and to
conduct its business as currently conducted.
(b) Each of KF and Merger Sub has the corporate power and authority to
execute and deliver the Merger Agreement, to consummate the transactions
contemplated thereby and to perform its obligations thereunder. The execution
and delivery by each of KF and Merger Sub of the Merger Agreement, and the
consummation of the transactions contemplated thereby, have been duly authorized
by all necessary action of the respective Boards of Directors and the
shareholders of KF and Merger Sub.
(c) The execution, delivery and performance by each of KF and Merger Sub
of the Merger Agreement, and the consummation of the transactions contemplated
thereby, do not and will not result in the violation of the provisions of the
respective Certificate or Articles of Incorporation or Bylaws of KF and Merger
Sub.
(d) The authorized capital stock of KF consists of 100,000,000 shares of
Common Stock, of which, to my knowledge, 5,524,004 shares are issued and
outstanding. To my knowledge, there are no issued or outstanding shares of
Series A Preferred Stock of KF. All of the issued and outstanding shares of KF
Common Stock are duly authorized, validly issued, fully paid, nonassessable and
free of all preemptive rights.
(e) The Merger Shares have been duly authorized and, when issued as
provided in the Merger Agreement, will be validly issued, fully paid,
nonassessable and free of all preemptive rights.
(f) Each of KF and Opus has the corporate power and authority to execute
and deliver the Put Agreement, to consummate the transactions contemplated
thereby and to perform its obligations thereunder. The execution and delivery by
each of KF and Opus of the Put Agreement, and the consummation of the
transactions contemplated thereby, have been duly authorized by all necessary
action of the respective Boards of Directors and the shareholders of KF and
Merger Sub. The Put Agreement has been duly executed and delivered by KF and
Opus and is valid and binding obligation of each of them, enforceable against
each of them in accordance with its terms subject to the Enforceability
Exception.
AGREEMENT OF MERGER
OF KF MERGER SUB, INC.
INTO CENTERSTAGING MUSICAL PRODUCTIONS, INC.
This Agreement of Merger (this "Agreement") is entered into on August 17,
2005, between CenterStaging Musical Productions, Inc., a California corporation
(the "Surviving Corporation"), and KF Merger Sub, Inc., a California corporation
(the "Merging Corporation").
1. The Merging Corporation shall be merged (the "Merger") into the
Surviving Corporation. The effect of the Merger and the effective time of the
Merger shall be as prescribed by law.
2. At the effective time, each outstanding share of capital stock of
the Surviving Corporation (other than any "dissenting shares" within the meaning
of California Corporation Code Section 1300(b)) shall be converted into the
right to receive 20,000 shares of common stock, $0.001 par value per share, of
Knight ▇▇▇▇▇▇, Inc., a Delaware corporation and the parent corporation of the
Merging Corporation. The holders of any "dissenting shares" within the meaning
of California Corporations Code Section 1300(b) shall have, with respect to such
shares, the rights given them under the applicable California law.
3. At the effective time, each outstanding share of capital stock of
the Merging Corporation shall be converted into one share of common stock of the
Surviving Corporation.
4. The Articles of Incorporation of the Surviving Corporation shall be
the Articles of Incorporation of the Surviving Corporation.
IN WITNESS WHEREOF, the parties have executed this Agreement.
Date: August 17, 2005 KF MERGER SUB, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: President
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: Secretary
CENTERSTAGING MUSICAL
PRODUCTIONS, INC.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: President
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Its: Secretary
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ certifies that:
1. He is the President and the Secretary of KF Merger Sub, Inc., a
California corporation (the "Corporation").
2. The Agreement of Merger in the form attached was duly approved by
the board of directors and the shareholders of the Corporation.
3. There is only one class of shares of the Corporation, and the total
number of shares outstanding is 100. The number of shares voted in favor of the
Agreement of Merger equaled or exceeded the vote required. The percentage of
shares required to approve the Agreement of Merger was more than 50%. No vote of
the shareholders of Knight ▇▇▇▇▇▇, Inc., the Corporation's parent corporation,
was required in connection with the Agreement of Merger.
I further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this Certificate are true and correct
of my own knowledge.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
DATE: August 17, 2005 -----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary
-2-
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ certify that:
1. They are the President and the Secretary, respectively, of
CenterStaging Musical Productions, Inc., a California corporation (the
"Corporation").
2. The Agreement of Merger in the form attached was duly approved by
the board of directors and the shareholders of the Corporation.
3. There is only one class of shares of the Corporation, and the total
number of shares outstanding is 2,124. The number of shares voted in favor of
the Agreement of Merger equaled or exceeded the vote required. The percentage of
shares required to approve the Agreement of Merger was more than 50%.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this Certificate are true and correct
of our own knowledge.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
DATE: August 17, 2005 -----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, Secretary
-3-
